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Osaka Gas plans resales of 3 million t of LNG by 2020

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Reuters are reporting that Japan’s Osaka Gas plans to raise its resales of LNG to third parties to 3 million tpy by 2020, a move that would create more liquidity to Asia’s emerging natural gas markets.

Most Asian LNG is supplied under fixed term contracts that include destination clauses that do not allow an importer to re-sell cargoes. But amid an abundance of supply that has emerged over the last two years, LNG producers have come under increasing pressure to allow the fuel to be traded more freely.

Osaka Gas started reselling LNG in 2006 as one of a few buyers able to do so, and it has been pushing to increase its resale volumes. It sold 1.1 million t of LNG to third parties in the year ended 31 March 2017.

That marks an increase from an initial resale target of 2.5 million tpy.

Resale volumes are set to expand as producers like Malaysia’s Petronas bow to buyer pressure to change existing contracts, and also because of the emergence of new supplies, including from Freeport LNG in the US, which will be offering cargoes from early 2018 without destination clauses.

Osaka Gas is one of two Japanese companies that have signed a 20-year liquefaction tolling agreement to process about 2.3 million t of LNG a year each from Freeport’s first unit. The other is Chubu Electric, which has passed its Freeport offtake to the JERA Co joint venture it has with Tokyo Electric Power.

Honjo said Osaka Gas has not yet set specific volumes of Freeport LNG to be brought into Japan, but it expects the ratio of destination-free LNG volumes in its overall portfolio to double to around 40% in 2020, up from 20% now.

Osaka Gas currently has a fleet of eight LNG tankers and said it plans to add at least one more by about 2020.

This will help raise the ratio of LNG volumes that Osaka Gas transports on its own vessels to 70% by 2020/21, up from about 50% in the year ended 31 March.

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