Japan and the International Market for LNG

The 1973 energy crisis has had an enormous impact on the interpretation of the role of energy in economic growth and the stability of national economies. Japan was profoundly affected because it depends on energy imports for approximately 92% of its domestic requirements. Like many industrial nations, Japan responded to the energy crisis by looking for alternative fuels. One of the central components of the Japanese strategy was the increasing use of liquefied natural gas (LNG). This analysis covers: 1. the characteristics of LNG, 2. historical trade, 3. the impact of increased energy demand, 4. Japan's difficulty in assessing future energy demands, and 5. the future of Japanese demand for LNG. The analysis takes into account pricing trends since 1970 on a British thermal unit (Btu) equivalency basis. Results show that major uncertainties characterize the long-term LNG markets in the Pacific Rim. While Japan will honor its current contractual commitments, it will not guarantee a stable market for LNG over the longer term.