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Japan's Tokyo Gas wants to revise LNG supply contracts

TOKYO (Reuters) — Japan's Tokyo Gas, the biggest city-gas supplier in the world's largest importer of LNG, is in talks to renew supply contracts and will push to revise terms to get more flexibility and cut prices, a senior official said on Thursday.

Tokyo Gas Lng Resized
Photo Courtesy of Tokyo Gas.

The push for easier terms, a major concern among Japanese utilities after the Fukushima nuclear disaster 6 yr ago led to a surge in LNG imports and drove prices higher, got a boost when the country's anti-trust regulator last month ruled restrictions in supply contracts were anti-competitive.

"We have re-negotiations under way, including price review," said Takashi Higo, senior general manager at the gas resources department of Tokyo Gas.

"There will be tough negotiations (with suppliers) and it will take a lot of time," he added, speaking to reporters at an energy conference.

The decision by Japan's Fair Trade Commission to rule that so-called destination clauses that restrict resale of LNG cargoes are anti-competitive is likely to lead to more trading by buyers in Japan and could prompt challenges to similar restrictions elsewhere in Asia.

Asian LNG buyers have long complained that having destination clauses in LNG contracts unfairly restricts trading of the fuel at times when it would make more economic sense for buyers to on-sell supplies to other markets.

"I 100% agree with the decision of Japan's Fair Trade Commission," International Energy Agency's chief economist, Laszlo Varro, said on Thursday at the same conference. "Destination restrictions are restricting markets."

Higo said Tokyo Gas has 12 supply contracts and it is reviewing their terms to decide what action to take.

Tokyo Gas has long-term LNG supply deals with Qatargas I, Brunei LNG, Malaysia LNG Dua, Russia's Sakhalin LNG, as well as with Australia's Withnell Bay, Darwin, Pluto, Queensland Curtis LNG and Gorgon projects.

Its earliest contract, with Qatargas, expires in 2021. The latest one, with Gorgon, expires in 2039.

Reporting by Osamu Tsukimori and Aaron Sheldrick in Tokyo; Writing by Henning Gloystein; Editing by Richard Pullin and Joseph Radford

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