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By Osamu Tsukimori
TOKYO, Oct 11 (Reuters) - Japan’s JERA Co, the world’s biggest importer of liquefied natural gas (LNG), is set to sign a new LNG contract soon that would be free of destination restrictions as it looks to secure volumes to replace some expiring long-term deals, its top official said on Wednesday.
JERA has been pushing to drop the so-called destination clause in long-term contracts that limits where a cargo can be delivered, after Japan’s Fair Trade Commision (FTC) ruled that such restrictions are anti-competitive.
Faced with that ruling, sellers of long-term LNG have been willing to remove the destination clauses, President Yuji Kakimi said in an interview at the Reuters Global Commodities Summit.
Talks on the new term contract come as JERA faces the expiry of long-term contracts with Malaysia, Abu Dhabi and Qatar in 2018, 2019 and 2021 respectively, each with annual volumes of around 4 million tonnes.
Those contracts, which industry sources have said include destination restrictions, are not to be renewed automatically, Kakimi said at the Summit, held at the Reuters office in Tokyo.
He said for the moment JERA’s long term supply contracts closely match its demand.
“But some time ahead, there is some room (for new LNG) and we are in talks with some select sellers and expect to have a deal soon that is free of destination clauses,” he said.
He did not reveal the seller, volume or term of the contract under discussion, which would be JERA’s first since the Fair Trade Commission’s ruling.
JERA plans to cut the volume of gas it buys under long-term contracts by 42 percent by 2030 from current levels, Kakimi told Reuters last year.
He said sellers of LNG from older projects who want to sign new contracts can afford to be more flexible in their offers than proposed new LNG projects that need to lock in long-term deals to secure financing for their multi-billion dollar plans.
“Existing sellers (of long-term LNG), who have recouped their investments, can make various proposals to buyers not limited to long-term but also mid-term and short-term. We would like to see a wide range of proposals from them,” Kakimi said.
“There are sellers that truly need long-term contracts, and it is a natural course to take to dedicate the long-term portion of our LNG purchases to those sellers.”
Follow Reuters Summits on Twitter @Reuters_Summits (Reporting by Osamu Tsukimori)