Top LNG buy­ers form al­liance to se­cure flex­i­ble con­tracts

New Straits Times - - Business -

SEOUL/TOKYO: The world’s big­gest liq­ue­fied nat­u­ral gas (LNG) buy­ers are club­bing to­gether to se­cure more flex­i­ble sup­ply con­tracts in a move that fur­ther shifts power to buy­ers.

Korea Gas Corp (Ko­gas) said yes­ter­day it had signed a me­moran­dum of understanding with Ja­pan’s JERA and China Na­tional Off­shore Oil Corp to ex­change in­for­ma­tion and “co­op­er­ate in the joint pro­cure­ment of LNG”.

Ja­pan, China and South Korea are the world’s big­gest LNG im­porters, ac­count­ing for about 55 per cent of global pur­chases, ac­cord­ing to data from en­ergy con­sul­tancy Wood Macken­zie.

The coun­tries’ big­gest re­spec­tive buy­ers are join­ing to­gether to ex­tract con­ces­sions from pro­duc­ers that would give them sup­ply flex­i­bil­ity, such as hav­ing the right to re-sell im­ports to third par­ties, some­thing they are not al­lowed to do un­der des­ti­na­tion re­stric­tions.

“We have cre­ated a plat­form to share, dis­cuss and solve our com­mon is­sues such as tra­di­tional LNG busi­ness prac­tices, in­clud­ing des­ti­na­tion re­stric­tions,” said JERA spokesman At­suo Sawaki.

The un­usual al­liance of three buy­ers across three coun­tries will pres­sure ex­porters like Qatar, Aus­tralia and Malaysia, who pre­fer to have clients locked into fixed sup­ply con­tracts that oblige buy­ers to take fixed amounts of monthly vol­umes ir­re­spec­tive of de­mand, with no right to re-sell un­needed sup­plies to other end-users. Reuters

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