June 6, 2024

Japan’s Jera in discussions with Qatar for long-term LNG supplies

Japan’s largest utility Jera is in discussions with Qatar for long-term LNG supplies, after deciding not to renew contracts totalling over 5 mtpa of LNG with state-owned QatarEnergy that expired in 2021.

“It is quite important for us to be in discussion with every (LNG) seller in the world so that we can have a good portfolio,” Hitoshi Nishizawa, Senior Vice President of Jera’s LNG Division said today during a panel session at the Japan Energy Summit and Exhibition in Tokyo. “Qatar is a very important seller not only to Japan or Jera but to the overall global LNG industry. And, actually we are in discussions with the Qataris.”

Nishizawa declined to comment further on Jera’s discussions with Qatar.

Jera still has a long-term contract with QatarEnergy for 0.7 mtpa, which expires in 2028. Of its three expired contracts, it signed one totalling 2 mtpa together with other Japanese utilities including Toho Gas, Tohoku Electric, Tokyo Gas, Osaka Gas, Kansai Electric and Chugoku Electric. It signed the other two deals, totalling 5 mtpa, on its own with QatarEnergy. Tohoku Electric is the only other Japanese utility that has a long-term supply contract with QatarEnergy. Its deal for 0.18 mtpa ends in 2030

Market participants attributed Jera’s decision to not extend its sizable LNG contracts with Qatar to uncertainty about its long-term LNG demand given its commitment to achieving net-zero emissions from its power plants by 2050 and dissatisfaction with QatarEnergy over a lack of flexibility in contract terms relating to areas such as duration and destination restrictions.

Jera’s discussions with Qatar underscore its recognition of the importance of long-term LNG supplies in providing energy security, stability and affordability, particularly in the wake of Russia’s invasion of Ukraine in 2022.

“Long-term procurement of LNG is a very important thing, it’s obvious from our experience that after the invasion of Ukraine the overall energy price increased in Europe, where their gas price is dependent on the spot market and, in comparison, our situation in Japan, where the majority of our gas is from long-term procurement,” Nishizawa said. “We reconsider our idea and now we believe having LNG in a long-term manner is very important.”

LNG remains a strategic area of focus for Jera and the firm has a target of handling 35 mtpa, given it is one of the largest players in the LNG value chain, Nishzawa said. The target represents about 8.5% of global LNG imports in 2023, based on Kpler data.

“Even after the invasion of Ukraine, LNG has been required to play an important role in providing the energy security function, which is stability, and at low cost, which is affordability,” Nishizawa said “So Jera has been working on strengthening the value chain and diversifying our portfolio in terms of procurement and sales flows … and also optimising LNG flows at the global level.”

Nevertheless, Nishizawa acknowledges that for Japanese utilities “it has been difficult to make a commitment in a long-term manner as we did before.” With Japan’s “stagnant economy, liberalization of the power market and the inroads that renewables have made, we can no longer expect a great increase in demand in the future,” he added.

According to Kpler data, receipts from Qatar constituted about 9.07 mt, or about 12% of Japan’s total LNG imports of 75.12 mt in 2021. Last year, Qatar supplied Japan with 2.88 mt of LNG, accounting for about 4.3% of Japan’s total imports of 67.08 mt.

Qatar is developing its massive North Field LNG expansion project, which will boost its production capacity to 142 mtpa by 2030 from 77 mtpa currently, and said last month that it expects to sign more LNG deals this year. The expansion project comprises the 32 mtpa North Field East and 16 mtpa North Field South projects that are scheduled to come online by 2026 and the 16 mtpa North Field West project.

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