Report: Japan’s Jera will not renew Qatari LNG contract

Japan’s liquefied natural gas trading giant Jera has reportedly said that it would not renew a long-term LNG supply contract it has with Qatargas, a unit of QatarEnergy.

Both Reuters and Platts reported that Jera’s president Satoshi Onoda said this during an online press conference on Thursday.

Reuters said the contract, which expires next month, includes volumes from the Qatargas 1 project. Jera buys 5.5 million tonnes per year from the project via long-term contracts, including a 25-year deal signed between Chubu Electric and Qatargas in 1997.

Jera is a joint venture of Tepco and Chubu Electric.

“Currently we are not considering contracting [with Qatar] because we find it extremely difficult to extend the existing large contracts timing-wise,” Platts reported Onoda as saying during the conference.

Onoda said the company’s issues with renewing were “due to developments in the global LNG markets, the progress of decarbonization, and the changing position of LNG in Japan because of liberalization of power and gas, among other factors, in the country.”

Enough supply to meet domestic demand

JERA, however, does not plan to give up all of its long-term LNG supply contracts, Onoda said, adding that its decisions would be based on an overall assessment of contractual terms and the situation when contracts come up for renewal, according to Platts.

In the case of the Qatari contracts, “we had no choice but to give it up this time because there was a mismatch in conditions between the Qatari side and what we had requested,” Onoda said.

Asked to comment on alternative supply to replace the Qatari supply, he said that Jera had secured enough supply to meet its domestic demand.

Jera still sees Qatar as an “important gas producing country” as the company still has other LNG supply contracts with it, Onoda said, adding that the company is also in talks with the Middle Eastern supplier on other projects including on ammonia and hydrogen, Platts reported.

Buying spot LNG

Jera is also buying spot LNG volumes in order to secure additional winter supply.

According to a previous report by Platts, Takashi Noguchi, executive officer and head of the JERA optimization department’s strategy group, said the firm had purchased 2 million mt of spot LNG for the winter period from November to March 2022.

The joint venture of Tepco and Chubu Electric plans to make additional LNG procurements “appropriately” should there be changes in its supply-demand outlook beyond January, Platts reported.

This comes at a time when spot LNG prices broke several records.

Platts said last month that the JKM for November had reached $56.326/MMBtu, the highest level for the LNG benchmark for Asian spot LNG since Platts launched it in early 2009.

The price declined in the meantime but it continues to trade above $35/MMBtu.

Diverting LNG cargoes

In order to secure high levels of LNG inventories in Japan, Jera said this week it may divert some of its US LNG volumes bound for European LNG terminals to Japan when domestic demand increases.

“Leveraging Jeragm’s global business flow across Europe, the US, and Asia enables Jera to flexibly procure additional LNG,” the firm said.

Jera has recently agreed to buy a 25.7 percent stake in Freeport LNG Development from US-based Global Infrastructure Partners.

A unit of Jera, would pay about $2.5 billion to take the stake in the firm which operates the Freeport LNG export plant in Texas.

Jera already owns 25 percent of Freeport LNG Train 1 and purchases and transports 2.32 mtpa of LNG for use in Japan and other importing countries.

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