Tokyo Gas wins destination flexibility from new Malaysia LNG purchase

Tokyo

TOKYO Gas said on Wednesday that it has signed a heads of agreement to buy long-term liquefied natural gas (LNG) from a unit of Malaysian state oil firm Petronas with flexible destination clauses that are in line with the Japanese anti-trust body's ruling last year.

The shorter duration and smaller volumes in the new deal, along with changes to the so-called destination clauses that restrict where the cargoes can be sold, highlight the changes that have occurred in the LNG market in the past few years.

Buyers have gained the upper hand as growth in new supplies, mainly from Australia and the United States, has exceeded demand and depressed prices.

The deal would be Tokyo Gas's first long-term deal since the Japan Fair Trade Commission's (JFTC) ruling last June that declared the destination clauses to be anti-competitive.

Industry sources said Tokyo Gas could divert the volumes for resale under the new deal, but a company spokesman said he could not comment on details of the destination arrangements.

The company's president-elect, Takashi Uchida, said in January that the company would reduce the volumes of Malaysian LNG after the current 15-year contract in which it is buying 2.6 million tonnes per year expires in March.

The company, which has been procuring LNG from Malaysia's Satu Project since 1983, would buy Malaysian LNG for up to 13 more years. Procurement volumes would be up to 500,000 tonnes per year in the first six years and up to 900,000 tonnes per year in the remaining years, it added.

Tokyo Gas has three long-term contracts with Malaysia and the contract that expires this month is the one with the biggest purchase volumes. The other two contracts with volumes of 340,000 tonnes and 900,000 tonnes per year will expire in 2024 and 2025 respectively, the company spokesman said. REUTERS