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Major LNG Buyers Join Forces For Better, More Flexible Terms

Three top global liquefied natural gas (LNG) buyers have agreed to cooperate in the “joint procurement of LNG” as global LNG consumers continue to seek more flexible contract terms and favorable prices.

Japan’s JERA Co. Inc., Korea Gas Corp. and China’s CNOOC Gas and Power Trading & Marketing Ltd. have signed a memorandum of understanding under which they will “discuss opportunities for mutual collaboration in the LNG business.” Besides procurement, the partners intend to consider participation in upstream projects as well as cooperation in LNG shipping and storage.

Recently, JERA spoke up in support of Alberta-based Veresen Inc. Jordan Cove LNG project in Oregon.

“LNG demand fluctuates widely depending on economic conditions and energy policy in each country. JERA believes that in order to cope with such fluctuation it is essential to develop the business environment through means such as accommodation schemes between buyers,” it said.

LNG buyers have been pursuing the right to resell cargos to third parties in a global LNG market that has been oversupplied of late and also one in which cargos are becoming increasingly fungible. While long-term supply contracts are necessary to underpin development of costly liquefaction and export terminals, the LNG market has been seeing an increase in spot trading. Buyers want more flexibility.

“JERA also expects the MOU to provide a platform for sharing views on issues related to traditional LNG business practices, such as destination restrictions, and will help in investigating ways to gain even greater flexibility in procurement,” it said.

Earlier this year JERA took delivery of its first LNG cargo produced in the contiguous United States at the Joetsu LNG Terminal of Chubu Electric Power Co. It was the first Lower 48 U.S. LNG cargo to be delivered to Japan, the company said.

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