(Repeats story published earlier with no changes to text.)
By Henning Gloystein
SINGAPORE, June 12 Qatar's isolation by other
Arab nations has dealt a strong hand to Japanese utilities in
talks reviewing long-term gas contracts with the top LNG
exporter, likely accelerating a shift to a more openly traded
global market for the fuel.
If Japan gets its way in the periodic contract review, the
world's biggest buyer of LNG would have to import more
short-notice supplies from producers such as the United States,
another step away from rigid deals that run for decades towards
a more active spot market.
At stake for Qatar are 7.2 million tonnes of annual
liquefied natural gas (LNG) sold in contracts that expire in
2021. The $2.8 billion a year in gas mostly goes to Japan's
JERA, a joint venture between Tokyo Electric and Chubu
Electric that is the world's single biggest LNG buyer.
"Since the crisis emerged, the Japanese are sure not to
renew all contracts and they will push very hard to get more
flexible terms," said an advisor on LNG contracts, speaking on
condition of anonymity due to the sensitivity of ongoing
Qatar and Japan as seller and buyer will each account for
nearly a third of 300 million tonnes to be shipped this year in
500 tankers. Any change in how volumes trade between them is
sure to jolt an industry where practices in place since the
1970s are already being challenged.
In some ways the situation is similar to what happened in
Europe between 2008 and 2014, when amid an economic crisis and
tensions between Europe and Russia, European utilities
renegotiated gas purchase terms, freeing up more supplies for
Three deals between Japan and Qatar are under a periodic
review, three sources with knowledge of the matter said,
potentially allowing for some adjustments, and the buyers may
also only partially renew the contracts when they expire.
An official with a Japanese buyer would not comment on
individual contracts, but said purchase agreements were
typically reviewed every five years.
That fits with the deals under discussion, which will expire
in 2021 and were signed in 1997/1998 and in 2012.
Qatar Petroleum was not available for comment.
LNG volumes grew to 260 million tonnes last year from 250
million tonnes in 2015, produced by around a dozen countries,
with more than half coming from Qatar, Australia and Malaysia.
Thirty-nine countries imported LNG in 2016, up by four from
the previous year, with 70 percent of world consumption in Asia.
Facing competition from new producers, Qatar talked tough
with Japan ahead of the contract reviews, warning buyers not to
demand too many changes, or Japanese companies could be squeezed
out of their stakes in Qatar's LNG projects.
But the tables have turned since Arab nations including
Saudi Arabia, Egypt, and the United Arab Emirates (UAE) cut ties
with Doha, boycotting its trade and weakening Qatar's
Cheniere, the only U.S. company to export LNG so
far, is offering its supplies as an alternative.
"This dispute is a timely reminder of the value of the
diversity and flexibility of supply that destination–free U.S.
exports bring to individual buyers," said Cheniere spokesman
Unlike other exporters, Cheniere allows its buyers to
The Qatar crisis "will further encourage international LNG
buyers to include more American LNG ... for reliability
reasons," said Kent Bayazitoglu, director of market analytics at
Gelber & Associates in Houston.
MORE TRADE: SURVEY
This all comes as a growing number of producers and
importers are joined by more commodity houses that trade LNG.
Supplies are outpacing demand, leaving a lot of LNG stranded
without takers and pulling down Asian LNG spot prices LNG-AS
by over 70 percent since 2014 to below $6 per million British
Trying to bring their LNG to the market, producers including
Australia's Woodside Petroleum and Royal Dutch Shell
have said they will grant greater contract flexibility.
Spot LNG trading made up 18 percent of supplies in 2016, up
from 15 percent a year before, according to the International
Group of Liquefied Natural Gas Importers.
In an informal Reuters survey, a majority of more than 30
industry experts expected at least 25 percent of Asian LNG
volumes to be traded in the spot market by the end of next year.
And if Japan wins concessions from Qatar, this share could rise
faster, traders said.
Preparing for this, trading houses are beefing up their LNG
Top commodities traders Vitol and Glencore
have both said this year that they expect more spot
trading over the next 18-24 months.
Vitol says its physical LNG trading volumes will rise from 3
million tonnes in 2016 to 4.5 million tonnes this year.
Japanese trading houses, eyeing the changes being driven by
the country's utilities, are also preparing for more spot trade.
"We are going to reinforce our LNG team at our energy
trading unit in Singapore as LNG spot trading is on the rise,"
Hiroyuki Kato, executive vice president of Mitsui & Co Ltd
said last week.
(Reporting by Henning Gloystein; Additional reporting by Scott
DiSavino in NEW YORK, Mark Tay in SINGAPORE, and Aizhu Chen in
BEIJING; Editing by Tom Hogue)