Japan’s Jera and South Korea’s Kogas, the world’s largest LNG buyers, have signed a memorandum of understanding to strengthen their strategic relationship and cooperate in LNG supply.
Under this memorandum, for the sake of securing supply stability of LNG, the two firms agreed to discuss opportunities for mutual collaboration in the LNG business including LNG swaps, trading, ship optimization, and market view exchange, according to a statement by Jera.
“Russia’s invasion of Ukraine has created a severe energy environment, such as the reduction of pipeline gas supply to Europe, and the uncertainty regarding global energy supply is drastically increasing,” the joint venture of Tepco and Chubu Electric said.
In responding to these circumstances, the two firms, which are among the largest buyers in the global LNG market, will strengthen their strategic relationship and consider developing schemes of cooperation regarding their LNG supply and demand, to enhance stable energy supply in Japan and Korea, Jera noted.
As a long-term matter, there is an acceleration of the energy transition to a carbon-neutral future.
LNG will play an even more important role as transition energy not only in Europe but also in Asia, Jera said.
In order to ensure a stable energy supply in Japan, Jera added it will continue to work together with LNG buyers and other leading companies both within and outside Japan such as Kogas as it seeks to enhance procurement capabilities.
LNG prices surged last year
This is not the first time for these two firms to sign an LNG collaboration deal.
Back in March 2017, Jera, Kogas, and CNOOC signed a memorandum of understanding to work on joint procurement of LNG, joint participation in upstream projects, and cooperation relating to LNG shipping and storage.
However, the spot LNG market has changed completely last year as high demand and prices attracted a huge number of cargoes, mostly from the US, to Europe.
Spot LNG prices surged last year to record highs but they dropped this year and the JKM for May settled on Friday at $12.625/MMBtu.
Japan was the largest LNG importer last year, despite a 3.1 percent drop year-on-year, while the country’s 2022 LNG import bill increased by 97.5 percent when compared to the year before.
Jera received loans last year from the state-owned Japan Bank for International Cooperation (JBIC) and private sector financial institutions to help it fund LNG purchases.
On the other hand, South Korean LNG imports rose slightly to about 46.3 million tons of LNG in 2022 as prices surged.
Kogas currently operates four large LNG terminals in South Korea and these include Incheon, Pyeongtaek, Tongyeong, and Samcheok. The firm has a small-scale regasification terminal at the Aewol port on Jeju island as well and is building a large terminal in Dangjin.