OREANDA-NEWS. June 20, 2014. BG Group shipped its first LNG cargo to Japan in 2005. It was a new market for us at that time, when our main business was in the Atlantic Basin.

Our business in the Pacific has grown dramatically since then, such that by the end of 2013, BG Group had shipped more than 300 LNG cargoes to Japan. To reflect this growing importance, we opened a representative office in Tokyo in February, 2013. I joined BG Group at that time as the first General Manager of the Japan office, after spending around thirty years at Mitsubishi Corporation, a leading Japanese trading house.

The growth in trade mirrored the emergence of a different operating model. In the beginning, we dealt mainly with Japanese trading houses to market our LNG to Japan. In the aftermath of the Fukushima disaster in 2011, and reflecting the growing role of LNG in Japan’s energy mix, many Japanese end-users and trading houses sought to purchase LNG from the USA, which meant that having a local office in Japan offered BG Group a significant competitive advantage, not least in being able to sit down with customers regularly and discuss how we could help meet this demand through closer, face-to-face communications.

Japan started importing LNG in 1969, and since then it has played an important role in the country’s energy mix for power generation and city gas applications, with LNG’s current share in the primary energy mix at around 20%, up from 13% before the Fukushima incident.

Even before the earthquake and subsequent tsunami so tragically impacted the Fukushima nuclear plant in March 2011, Japan was the largest importer of LNG in the world receiving around 68 million metric tonnes per annum (mtpa). We had seen previous demand spikes in Japan following the earthquake in 2007, but as each one of Japan’s 54 nuclear units halted operations after the 2011 tragedy, the country’s LNG demand grew by a further 25%, taking the total to 88 mtpa.

This meant that Japan urgently needed to purchase a sizable volume of extra LNG to make up for its lost nuclear generation capacity.

BG Group was one of the global LNG players who were best able to help in the aftermath of the disaster, offering LNG supplies and making use of our flexible portfolio to divert LNG cargoes from their original destinations in the Atlantic Basin. These diversions were implemented by our large LNG fleet enabling us to deliver supplies to Japan when suddenly they were most needed. As BG Group had already been supplying LNG to the Japanese market through mid-term and short-term contracts as well as spot transactions, we were able to build on and enhance our existing relationships to target supplies to where they were most needed.

There are certain restrictions and constraints on delivering LNG cargoes in Japan, such as the calorific value of gas, cargo size, and ship-to-shore compatibility. BG Group has been able to satisfy all these requirements using our LNG portfolio and by maintaining close working relationships with our customers to ensure the safe and responsible delivery of gas.

We established our office in Shinbashi, Tokyo to make it easier to communicate closely with our LNG customers and stakeholders in Japan and to support BG Group’s LNG trading and marketing as well as oil marketing.

The Japanese market has been able to source extra LNG volumes to meet the growing demand, but there are still lots of challenges and opportunities in the market.

I would like to touch upon the challenges of Japan’s energy market under the current extraordinary circumstances and how BG Group is trying to contribute to the future energy mix in my next blog.

Katsumi Kuroda, Vice President & General Manager, Japan Office, BG Group.