Japan’s probe into whether the resale restrictions in most of its liquefied natural gas contracts violate fair trade laws may lead to the renegotiation of more than $600 billion worth of deals that run until almost the middle of the century. The world’s biggest buyer of the fuel has agreements for at least 1.46 billion metric tons of supply between next year and 2040, according to Bloomberg New Energy Finance. Removing contracts that either don’t bar resale or originate in countries that traditionally don’t restrict reselling leaves about 1.03 billion tons linked to agreements that may include the limitation, worth 66.6 trillion yen ($628 billion) at last year’s average price. The country’s Fair Trade Commission is in the preliminary stage of investigating if so-called destination clauses impede competition laws, and its finding may be announced as early as this year, Bloomberg News reported last week. Existing contracts may be renegotiated if the restrictions are found to be in violation, as happened last decade in Europe, according to BMI Research. “Every contract, one by one, would have to be inspected to see if the JFTC’s findings apply,” said Hiroshi Hashimoto, a senior analyst with the Institute of Energy Economics, Japan. “That may turn out to be a difficult task.” The European Commission decided in October 2004 the clauses restricted competition. Japan may need to resolve any contractual disputes after the decision via government-level negotiations, as was done in Europe, because many of the suppliers are state-owned companies, said Yoshizumi Tojo, a professor of law at Rikkyo University in Tokyo. Bargaining Power “Japan could stop the JFTC’s specific query into a contract in return for getting a compromise from a supplier that they remove the clause,” said Tojo. The contracts are being reviewed as the bargaining power of LNG buyers strengthens amid a global glut and may accelerate the shift by Japanese LNG buyers from traditional importers into international sellers. The country is forecast to have a surplus of 12.2 billion cubic meters of LNG in 2017, 8.1 billion in 2018 and 8.6 billion in 2019, according to a February report from BMI Research. “If destination clauses are found to be illegal, it will give Japanese buyers more bargaining power to renegotiate existing contracts for flexibility,” said Lu Wang, an analyst at Bloomberg Intelligence. Supply Contracts Barriers to re-shipping LNG will still exist even if destination restrictions are ended. Many sellers, such as Qatar, have their own LNG tanker fleets and have contracts structured so that the buyers only take possession of the fuel once its been delivered. That means the buyer would have to pay for the added cost of reloading and reshipping fuel it wants to resell. “The added costs of reload have to be supported by wide regional price spreads,” Trevor Sikorski, an analyst with London-based Energy Aspects Ltd. said by e-mail. “That’s something you don’t really have at the moment.” To estimate the volume of Japanese supply bought via long-term deals with destination clauses, Bloomberg News stripped out 435.5 million tons from the country’s contracts listed in BNEF’s global LNG database that either don’t include a destination clause or originate from the U.S., which traditionally has no export restrictions. The remainder—from countries including Australia, Brunei, Indonesia, Malaysia, Papua New Guinea, Qatar and Russia—account for about 70 percent of Japan’s total 1.463 billion tons of supply. BNEF’s database includes more than 150 contracts. Each contract is negotiated separately and certain details of individual LNG supply deals—including destination restrictions and pricing—are typically not publicly available. Asian spot prices for LNG have slumped more than 60 percent since September 2014 amid new supplies from Australia and the U.S. Japan paid about 64,838 yen per metric LNG ton last year, according to the Ministry of Finance.