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India and Japan to team up in search for more flexible LNG deals

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According to Reuters, India will work with Japan to make long-term LNG import deals more affordable for price-sensitive consumers.

The reported agreement will help GAIL India Ltd swap a part of its 5.8 million t of LNG booked with firms from the US with that of Japan’s contracted volumes in Asia and elsewhere.

This activity forms part of a growing trend as the world’s biggest LNG buyers, all in Asia, are increasingly clubbing together to secure more flexible supply contracts – shifting power to importers from exporters in an overstocked market.

Such an alliance puts pressure on exporters such as Qatar, Australia and Malaysia who prefer to have clients locked into fixed supply contracts that run for decades. Under these contracts importers have been contracted to purchase fixed monthly volumes of LNG, irrespective of demand and with no right to re-sell surplus supplies to other consumers.

“Without joining any club, we would like to work with other major consumers to promote a flexible and open LNG market,” Sunjay Sudhir, joint secretary for international cooperation in India’s federal oil ministry,said.

India’s cabinet on Wednesday approved the signing of a Memorandum of Cooperation with Japan that it said would help to diversify gas supplies, strengthen energy security and lead to more competitive prices. Under the arrangement, the two countries will try to get more flexibility in LNG contracts and abolish the Destination Restriction Clause, which prevents them from re-selling imports to third parties.

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