Take-or-Pay under Japanese energy policy

• Published in: Energy policy Vol. 31; no. 13; pp. 1327 - 1337
• Main Author: Namikawa, Ryoichi
• Format: Journal Article
• Language: English
• Published: Oxford Elsevier Ltd 01.10.2003; Elsevier; Elsevier Science Ltd
• Series: Energy Policy
• Subjects: Alliances; Applied sciences; Economic data; Energy; Energy economics; Energy policy; Energy security policy; Exact sciences and technology; Fossil fuels and derived products; Gas; General, economic and professional studies; Japan; Liquefied natural gas; Liquefied natural gas (LNG); Natural gas; Policy studies; Studies; Take-or-Pay; Asia; Japan; Energy security policy; Take-or-Pay; Liquefied natural gas (LNG); Import; LNG; Reliability of supply; Energy policy; Specification; Contract; Case history
• DOI: 10.1016/S0301-4215(02)00193-3
• ISSN: 0301-4215

Japan has tried to increase the import of liquefied natural gas (LNG) because of the nation's fragile energy supply structure. In Japan, almost all LNG is imported under long-term contracts with a Take-or-Pay clause, although buyers assume considerable risk under such a clause. This paper tries to determine why the Take-or-Pay clause has been retained in LNG import contracts in Japan, focusing on the relation between Take-or-Pay and energy security policy. It is found that the government has not pursued a consistent, consecutive policy on Take-or-Pay under the changing energy situation after oil crises. On the one hand, the government has accepted Take-or-Pay because it secures a stable supply of LNG, but on the other hand, it has tried to scrap Take-or-Pay in order to reduce buyers’ risk. Furthermore, it was not until the middle/late 1990s that the government implemented deregulation. It is concluded that the government's energy security policy has played an important role in keeping Take-or-Pay in Japan.