• 45 mins Aramco In Talks With Chinese Petrochemical Producers
  • 2 hours Federal Judge Grants Go-Ahead On Keystone XL Lawsuit
  • 3 hours Maduro Names Chavez’ Cousin As Citgo Boss
  • 10 hours Bidding Action Heats Up In UK’s Continental Shelf
  • 15 hours Keystone Pipeline Restart Still Unknown
  • 19 hours UK Offers North Sea Oil Producers Tax Relief To Boost Investment
  • 21 hours Iraq Wants To Build Gas Pipeline To Kuwait In Blow To Shell
  • 23 hours Trader Trafigura Raises Share Of Oil Purchases From State Firms
  • 1 day German Energy Group Uniper Rejects $9B Finnish Takeover Bid
  • 1 day Total Could Lose Big If It Pulls Out Of South Pars Deal
  • 1 day Dakota Watchdog Warns It Could Revoke Keystone XL Approval
  • 2 days Oil Prices Rise After API Reports Major Crude Draw
  • 2 days Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 2 days Gazprom Speaks Out Against OPEC Production Cut Extension
  • 2 days Statoil Looks To Lighter Oil To Boost Profitability
  • 2 days Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 2 days Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 2 days Whitefish Energy Suspends Work In Puerto Rico
  • 2 days U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 3 days Thanksgiving Gas Prices At 3-Year High
  • 3 days Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 3 days South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 3 days Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 3 days Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 3 days Iraq Steps In To Offset Falling Venezuela Oil Production
  • 3 days ConocoPhillips Sets Price Ceiling For New Projects
  • 6 days Shell Oil Trading Head Steps Down After 29 Years
  • 6 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 6 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 6 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 6 days Venezuela Officially In Default
  • 6 days Iran Prepares To Export LNG To Boost Trade Relations
  • 6 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 6 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 7 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 7 days Rosneft Announces Completion Of World’s Longest Well
  • 7 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 7 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 7 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 7 days Santos Admits It Rejected $7.2B Takeover Bid

The World’s Largest LNG Buyer Just Completely Reshaped The Market

LNG

Very big development in the natural gas world this week. With the world’s top purchasing nation firing a shot at producers and sellers globally.

That’s Japan — home to some of the world’s biggest buyers of liquefied natural gas (LNG), including the world’s #1 consuming firm, Jera.

And authorities here aren’t happy about the way LNG contracts have been run up until now.

Here’s the crux: historically, many LNG purchase agreements included so-called “destination clauses”. Stipulating that LNG buyers had to use the supply in a single, stated export destination.

That meant that LNG purchasers in Japan had to use their cargos in Japan. Even if it turned out they had too much supply, they couldn’t re-sell their LNG on the global market to reduce the surplus.

But the Japanese Fair Trade Commission said Wednesday that won’t fly anymore. With the trade body saying destination clauses probably violate anti-monopoly rules — and therefore will be outlawed in any future purchasing contracts for Japanese buyers.

Japanese firms are now bound by this ruling. Meaning they will have political capital to refuse LNG producers’ requests to include destination clauses in contracts going forward.

This is likely to be a contentious issue. With big suppliers like Qatar having used destination clauses to keep control over their selling power in the global LNG market.

But it’s likely Japanese purchasers will get their way — given both their clout in the industry, and the current depressed state of LNG prices due to ever-increasing competition from producers (just this week, South Korea signed another major contract for LNG supply from the U.S.).

That will mean Japanese firms will be free to re-sell any unused cargos on the global market. Meaning even more competition on the supply side, likely with a dampening effect on prices. It’s also a sign of the continued evolution of the global LNG industry and its supply chain — watch for reaction from sellers, and for new contracts coming down the pipe over the coming months.

Here’s to a sea change.

By Dave Forest

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Jesze on July 01 2017 said:
    This will only be a good thing for consumers and some sellers alike and hopefully it catches on. Gone are the days of tight supply from few suppliers. LNG needs a major overhaul in the way it's bought and sold. Contracts now need to be shorter and less obtuse. That's certainly the future sand it's happening already.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News