Japanese utilities seek long-term LNG supply as existing contracts near expiration: sources

Japanese utilities have returned to the long-term LNG market to secure replacement volumes for contracts nearing expiration and to meet anticipated demand growth, according to sources familiar with the matter.

Saibu Gas and Hokkaido Electric have secured long-term LNG supply contracts, while Chugoku Electric is negotiating with potential suppliers, the sources said.

Saibu Gas has signed a 10-year agreement to buy two LNG cargoes a year from 2028, equating to 130,000 metric tons/year, following negotiations that began in 2025, a source familiar with the matter said.

Another source familiar with the matter said that Tokyo Gas is the seller to Saibu Gas. Both companies declined to comment on the matter when contacted by Platts, part of S&P Global Energy.

The majority of Japan's existing long-term LNG contracts are linked to the country's crude import prices published by the Ministry of Finance, while newer contracts starting in 2027 tend to be indexed to Brent, since Brent-linked LNG is easier to hedge.

Saibu Gas's 450,000 metric tons/year Malaysia LNG Satu contract is set to expire in 2028 after a 15-year term, followed later that year by the expiration of its 65,000 mt/year Sakhalin 2 LNG contract after 14 years, according to data from the state-owned resource security agency Japan Organization for Metals and Energy Security, or JOGMEC. Additionally, the company's 300,000 mt/year portfolio contract with Tokyo Gas is scheduled to expire in 2029 after a 16-year term, JOGMEC data showed.

Hokkaido Electric signed a contract at the end of May or early June to purchase one LNG cargo a year for six years from 2030, totaling 65,000 mt/year, according to three sources familiar with the matter.

Hokkaido Electric declined to comment on the matter.

The utility continues to see demand growth from industrial customers switching from coal to LNG. "Our company evaluates that, in addition to the ongoing energy transition, gas demand in Hokkaido will further increase due to rising energy demand," Hokkaido Electric said in January 2026.

Hokkaido Electric's 130,000 mt/year Malaysia LNG contract is set to expire in 2028 after a 10-year term, while its 200,000 mt/year portfolio contract with Kansai Electric is also scheduled to expire that year following a 10-year term, according to JOGMEC data.

Meanwhile, Chugoku Electric has been in talks with potential suppliers for a 10-year LNG contract starting in 2031 to replace certain expiring supply agreements, according to two sources familiar with the matter.

The contract is expected to be indexed to Brent, with Chugoku Electric seeking four to six LNG cargoes annually, or 260,000 mt/year to 390,000 mt/year, the two sources said.

Chugoku Electric declined to comment on the matter July 14.

Chugoku Electric's 260,000 mt/year LNG contract with TotalEnergies is scheduled to expire in 2036 after a 17-year term, JOGMEC data showed.

Pricing outlook

Industry sources said current pricing discussions for long-term LNG contracts beyond 2030, at a 12%-12.5% slope to Brent crude oil, are broadly in line with levels seen over the past one to two years and remain largely unaffected by the Middle East war that erupted in February 2026.

Market expectations of increased LNG supply from new projects in the US and Middle East have weighed on sentiment, while higher costs for materials used to build LNG facilities have supported longer-term price expectations, according to industry sources.

"I do not think the long-term market after 2030 is strong. It could be weaker, as supply may exceed demand," a Japanese gas utility source said. "Maybe the market for 2027-28 is still stronger and impacted by the Middle East issue."

However, some construction delays could reduce the oversupply in the late 2020s, according to S&P Global Energy CERA analysts.

Platts assessed the August JKM -- the benchmark price for LNG cargoes delivered to Northeast Asia -- at $20.191/million British thermal units on July 15, up 3.9% day over day.