Gas Processing is Produced by Gulf Publishing Company

Your source for technology information for the gas processing industry


Japan's JERA in talks for LNG contract with no destination limits

TOKYO (Reuters) — Japan's JERA Co, the world's biggest importer of LNG, is set to sign a new LNG contract soon that would be free of destination restrictions as it looks to secure volumes to replace some expiring long-term deals, its top official said on Wednesday.

JERA has been pushing to drop the so-called destination clause in long-term contracts that limits where a cargo can be delivered, after Japan's Fair Trade Commission (FTC) ruled that such restrictions are anti-competitive.

Faced with that ruling, sellers of long-term LNG have been willing to remove the destination clauses, President Yuji Kakimi said in an interview at the Reuters Global Commodities Summit.

He added that JERA has made progress in talks with existing long-term LNG sellers to revise clauses that would require splitting the profits from reselling LNG cargoes between JERA and the original seller.

Talks on the new term contract come as JERA faces the expiry of long-term contracts with Malaysia, Abu Dhabi and Qatar in 2018, 2019 and 2021 respectively, each with annual volumes of around 4 MMt.

JERA, a joint venture between Tokyo Electric Power and Chubu Electric Power, takes in around 35 MMtpy of LNG.

Those contracts, which industry sources have said include destination restrictions, are not to be renewed automatically, Kakimi said at the Summit, held at the Reuters office in Tokyo.

He said for the moment JERA's supply contracts closely match its demand.

"But some time ahead, there is some room (for new LNG) and we are in talks with some select sellers and expect to have a deal soon that is free of destination clauses," he said.

He did not reveal the seller, volume or term of the contract under discussion, which would be JERA's first since the Fair Trade Commission's ruling.

JERA plans to cut the volume of gas it buys under long-term contracts by 42% by 2030 from current levels, Kakimi told Reuters last year.

He said sellers of LNG from older projects who want to sign new contracts can afford to be more flexible in their offers than proposed new LNG projects that need to lock in long-term deals to secure financing for their multi-billion dollar plans.

"Existing sellers (of long-term LNG), who have recouped their investments, can make various proposals to buyers not limited to long-term but also mid-term and short-term. We would like to see a wide range of proposals from them," Kakimi said.

"There are sellers that truly need long-term contracts, and it is a natural course to take to dedicate the long-term portion of our LNG purchases to those sellers."

COAL NEGOTIATIONS

Kakimi expects that JERA's annual coal price negotiations will also become tougher as upstream assets have become concentrated in fewer hands. He pointed to Glencore's recent purchase of Yancoal's Hunter Valley, Australia, assets as an example of a company with a dominant presence in coal mining, particularly high-quality coal.

"As is true with LNG, upstream assets in coal are seeing oligopolization," he said. "It is true that the negotiations would become more difficult for buyers."

To reduce the concerns about high prices for coal purchases, JERA's parent companies are turning toward using a more diverse range of coal, including lower quality coal with less heat content, he said.

"Our parent firms used to rely on high-quality mines for 70% to 80% of total in the past, but now the ratio has declined to around 30% to 40%," he said.

JERA's parent companies consume about 20 MMt of coal annually.

Reporting by Osamu Tsukimori; Additional reporting by Yuka Obayashi, Kentaro Hamada and Aaron Sheldrick; Editing by Christian Schmollinger


Copyright © 2016. All market data is provided by Barchart Market Data Solutions. Futures: at least 10 minute delayed. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

                                  Cmegroupicon                                     Icelogo

FEATURED COLUMNS

Editorial comment
-Adrienne Blume
The ongoing development of shale gas resources in the US has spurred infrastructure construction for both natural gas processing capacity and LNG export terminals.
Regional focus
-Eugene Gerden
Russian natural gas monopoly Gazprom is strengthening its presence in the gas market of the Middle East through the planned construction of an 11-metric-MMtpy–12-metric-MMtpy LNG plant in Iran.


ADIP ULTRA: ADIP-X Reimagined

View on Demand

Shell Global Solutions International BV (Shell) is launching the improved process technology ADIP ULTRA, for cost-effective removal of CO2 down to <50ppmv. The ADIP ULTRA process is applicable in gas plants, LNG, pre-NGL, refinery HMUs and gasification syngas.
Why attend?
•Discover how looking back at decades of ADIP and ADIP-X operational experience has led to the cost effective ADIP ULTRA process
•Understand how Shell’s new absorption column internals can further enhance process performance
•Learn how Shell is a reliable partner of choice who helps you get the most out of your unit
•An opportunity to ask questions to Shell’s technical experts

May 9, 2017 9am UTC

View on Demand

 

Please read our Term and Conditions, Cookies Policy, and Privacy Policy before using the site. All material subject to strictly enforced copyright laws.
© 2015 Gulf Publishing Company.