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Japanese NatGas Utility Strikes Second-Hand LNG Deal

Shizuoka Gas Co. and Shell Eastern Trading (Pte) Ltd. have struck a liquefied natural gas (LNG) sale and purchase agreement (SPA) that will utilize the export capability recently added to the Shimizu LNG Terminal. It's another move toward increasing LNG supply flexibility and trading capabilities by the Japanese utility.

"Shizuoka Gas has been seeking further utilizations of Shimizu LNG terminal to achieve the reduction of LNG cost in the newly deregulated gas market," Shizuoka said last Friday. "As one of our initiatives, we converted Shimizu LNG Terminal into a bidirectional terminal by adding reloading facilities in April of this year."

The agreement with Shell is the company's first binding contract to supply LNG from the terminal.

Established in 1910, Shizuoka is one of the 211 city gas distributors in Japan. It serves 300,000 customers in 10 municipalities between Tokyo and Nagoya along the Pacific Coast near Mount Fuji. It began importing LNG in 1996 via affiliate Shimizu LNG Co.

The company said it will continue to pursue "...reduction of LNG cost by increasing transaction volumes at Shimizu LNG Terminal and taking advantage of liquidity in [the] expanding global LNG market."

Separately late last month, major Japanese LNG buyer JERA Co. Inc. announced an SPA with EDF Trading Ltd. that will allow it to offload about 1.5 million tonnes of LNG (see Daily GPIMay 27). JERA said the agreement will allow it to respond to fluctuation in demand for LNG, as well as allow it to expand its LNG trading business.

Last December, Shizuoka and JERA announced a heads of agreement (HOA) for an LNG SPA. "This HOA is a portfolio contract for five years beginning in 2022 in which JERA is the seller and the LNG price is not linked to crude oil but to the U.S. natural gas market index," Shizuoka said at the time.

LNG from JERA is to be supplied to the Shimizu terminal. The agreement would allow Shizuoka to divert cargoes to other destinations in order to adjust its supply and demand balance, Shizuoka said at the time. "Shizuoka Gas considers this HOA will contribute to enhancing the flexibility of Shizuoka Gas's LNG procurement portfolio and the diversification of Shizuoka Gas's LNG price indices." Shizuoka has not yet announced an SPA stemming from the HOA with JERA.

When it announced an LNG SPA with Mitsubishi Corp. earlier this month, Japan's Toho Gas Co. Ltd. emphasized the cargo destination flexibility aspect of the agreement (see Daily GPIJune 9).

Last week in Houston, a Poten & Partners executive described a near-term global LNG market that will be oversupplied and in which increasing contracting flexibility is expected (see Daily GPIJune 10).

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