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LNG giant renegotiates contracts

According to Reuters, JERA has made a move to gain more flexibility by renegotiating some of its contracts with suppliers that contain destination clauses.

JERA Managing Executive Officer Sunao Nakamura said as the supply-demand balance relaxed over the past five years, particularly with new supplies from Australia and the US, buyers have had better chances of getting what they want.

“We have been asking sellers to scrap the destination clauses from the current contracts and some of them have accepted our request,” said Mr Nakamura.

In 2017, Japan’s Fair Trade Commission ruled that the destination restrictions preventing the reselling of contracted LNG cargoes breach competition rules.

Following this decision, Japanese LNG importers have signed new term contracts without the clauses; however, it is rare that LNG buyers confirm that they are able to eliminate the clauses from existing contracts.

Typically, Japanese buyers obtain LNG through long-term contracts yet JERA has increased spot purchases and short-term contracts that cover less than four years.

“With growing uncertainly of energy demand in Japan due to unexpected weather patterns and increasing use of renewable energy, we can’t make commitment without flexibility,” said Mr Nakamura.

JERA is a joint venture between Tokyo Electric Power and Chubu Electric Power Co.

For more information visit the JERA website.

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