The world's biggest LNG buyers are clubbing together in an attempt to secure more flexible supply contracts in their negotiations with producers. Flexibility is becoming critical for many LNG buyers, as the rise of solar capacity makes consumption of LNG more seasonal.
Kogas signed a memorandum of understanding in mid-March with Japan's JERA and CNOOC to exchange information and "cooperate in the joint procurement of LNG." Between them they dominate LNG imports into northeast Asia, the world’s biggest market - where the bulk goes to gas-fired power generation.
Kogas is the world’s second biggest LNG buyer behind Jera, which is a joint venture between Chubu Electric Power and Tokyo Electric Power. CNOOC is China’s biggest importer.
"We have created a platform to share, discuss and solve our common issues such as traditional LNG business practices, including destination restrictions," JERA spokesman Atsuo Sawaki said.
Concessions sought include the right to re-sell imports to third parties, which would involve removal of longstanding destination clauses, as well as a reduction in the price link with crude and more flexibility over offtake volumes.
Lee Seung-hoon, Kogas CEO, told Reuters that his company was looking for flexible LNG contracts. "Through this MOU deal, Korean, Chinese and Japanese LNG buyers are expected to play an active role in the LNG market," he said.
The supply/demand balance in the LNG market over the next few years is expected to favour buyers, as a flood of new supplies hits the market, mostly from Australia and the US.