Japan's Jera sets up Singapore unit to modernise terms for LNG contracts

[TOKYO] Jera, Japan's biggest buyer of liquefied natural gas (LNG), said on Friday (Apr 1) it has set up a subsidiary in Singapore to negotiate more flexible long term contracts with LNG suppliers, which will enable it to divert more cargoes swiftly to the spot market.

Japan's biggest power generator has around 30 long-term contracts for LNG, with a total volume of about 25 million tonnes a year, according to a Jera spokesperson, although total trading volume is about 40 million tonnes.

"As some of the contracts were signed in early 2000s, even those without destination clauses have conditions that are not in line with the trading standards of short-term or spot markets, which have developed rapidly over the past 5-10 years," the spokesperson said.

Under the current long-term contracts, it is not clearly defined by when buyers and sellers need to notify a change in cargo or destination, he said.

By creating a dedicated team to negotiate price reviews for long term contracts, Jera aims to also speed up what is usually a lengthy process, he added.

Its fully-owned subsidiary, Jera LNG Portfolio Strategy Pte Ltd, will be responsible for negotiating with global producers over terms and conditions and prices in the existing long-term LNG sales and purchase agreements.

The new company, headed by managing director Takuya Suzuki who was part of Jera's fuel procurement team in Tokyo, will hire about 10 staff initially including negotiation and legal experts and analysts, with a plan to expand the number to about 20, the spokesperson said.

Jera is a joint venture between Tokyo Electric Power (TEPCO) and Chubu Electric Power. REUTERS