Top LNG buyer JERA, EDF start up JV to expand spot, short-term trade

4/18/2019

JERA Global Markets, a newly formed joint venture by Japanese and French partners, is looking to expand into short-term contracts and spot trading of liquefied natural gas (LNG) to third parties, its chief executive told Reuters.

Japan’s JERA Co, the world’s biggest buyer of LNG, and EDF Trading (EDFT), a wholly owned subsidiary of French utility Electricite de France, formally launched the trading joint venture earlier this month. JERA Global Markets, renamed from an earlier partnership between the two, JERA Trading, will handle LNG as well as the previous coal and freight business.

JERA itself is a joint venture between Japanese utilities Tokyo Electric Power and Chubu Electric Power.

JERA was formed in 2015 to purchase fuel to meet domestic power demand in Japan, but with the new joint venture, it is looking to step up trading and potentially sell LNG to growth markets in Asia such as India and China, said JERA Global Market’s chief executive Kazunori Kasai.

“Our vision is to become world leader in seaborne energy trading, meaning both coal and LNG ... Because we (already) have the flow, we can build our business around that,” he said.

The newly formed company will handle spot and short-term LNG trading for contracts of up to four to five years, Kasai said. Its mandate will be to better manage the import of coal and LNG into Japan as well as to trade both commodities.

Employing about 250 people globally, JERA Global Market’s hires include Alex Baileff, previously head of coal at Vitol, and Sarah Behbehani, former head of short-term LNG trading at Royal Dutch Shell.

JERA imports about 35 million tonnes of LNG annually, of which about 7 million tonnes is set aside for spot and short-term contracts, Kasai told Reuters.

It will be JERA Global Market’s job to trade and manage that volume. The joint venture has also acquired about 3 million to 4 million tonnes of LNG a year from EDFT’s portfolio, giving it about 10 million tonnes a year of “tradable” volumes.

“As a starting point, that’s a good (size),” Kasai said.

JERA Global could also grow its annual tradable volume by about 1 million to 2 million tonnes over the next few years as its Japanese parent renews contracts and pushes for more flexible terms on destination clauses, he said.

JERA needs flexible contracts to adjust to Japan’s volatile LNG demand amid uncertainties over the restart of nuclear plants and the growth of renewable power generation.

JERA Global Markets - 67 percent owned by JERA and 33 percent by EDFT - also plans to increase its hedging activities, and Kasai said EDFT can impart its trading knowledge from the perspective of a utility.

“We are not doing trading just for money’s sake and just taking risk is not our interest as we are a utility,” he said.

Reporting by Jessica Jaganathan; Editing by Tom Hogue