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Japan's prices for spot LNG cargoes fall to lowest since 2016

The price Japanese utilities paid for spot cargoes of liquefied natural gas (LNG) last month were at their lowest in more than three years, data from the trade ministry showed. 

The price for spot LNG shipped to Japan in July fell to an average of $4.70 per million British thermal units (mmBtu), the lowest since May 2016, when the price was $4.10/mmBtu, data from the Ministry of Economy, Trade and Industry showed.

The July price was the third lowest for monthly spot cargoes since METI began compiling the data in March 2014 and was down from $5.50/mmBtu in June.

The drop in spot LNG prices LNG-AS is helping Japan’s utilities cut costs but their overall import price in June was much higher, at $9.14/mmBtu, because most of their fuel purchases are done via contracts linked to oil prices.

The spot market decline is pushing utilities in Japan to be more aggressive in price reviews built into these traditional long-term contracts, Reuters reported this week.

The tougher stance marks a shift for Japanese utilities, which have long favoured stability of supply over price, partly because they have been able to pass on costs to consumers, but are now facing competition from new entrants.

Tokyo Gas, Hokkaido Electric Power, Tohoku Electric Power, Kyushu Electric Power and Hokuriku Electric Power have all said they are looking at ways to take advantage of cheaper spot LNG.

But the utilities are also limited in the number of spot cargoes they can take because most of their supply is met via the take-or-pay, long-term contracts.

METI surveys spot LNG cargoes bought by Japanese utilities and other importers, but only publishes a price if there is a minimum of two eligible cargoes reported by buyers.

Reporting by Aaron Sheldrick; Editing by Tom Hogue, REUTERS


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FEATURED COLUMNS

Editorial Comment: The Future of FLNG: Less is More?
-Adrienne Blume
Global LNG export capacity is expected to increase by 45% between 2017 and 2022, to more than 400 metric MMtpy, with 90% of the new capacity coming from sanctioned projects in the U.S. and Australia. By 2050, this capacity is anticipated to exceed 700 MMtpy. Regasification capacity is anticipated to increase even more sharply.
Executive Viewpoint: Back to production: Where we’re going, we don’t need pipelines
-Mark Casaday
What if a cost-effective way existed to extract and distribute natural gas, regardless of proximity to pipeline, and bring those assets back to production? What if the industry went in a direction that did not need pipelines? For those looking to monetize unproductive natural gas assets or bring unproductive wells back to production, it would be revolutionary.
Regional Focus:Australia to boost LNG exports despite domestic gas shortage
-Eugene Gerden
Australia is planning further increases in LNG production and exports over the next decade, despite quickly depleting reserves and a looming supply shortage in the domestic market.


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