Qatar Petroleum gets tough with Japan

Qatar faces growing competition from a tide of new LNG from sources including Australia.

That has increased confidence in buyers as they look for lower prices and more control via shorter contracts and the rights to divert or resell unwanted cargoes.

In Japan, Qatar Petroleum, which owns producers Qatargas and Rasgas, relies on customers led by JERA, a joint venture between Tokyo Electric and Chubu Electric.

Annual supplies of 7.2 million t of gas expiring in 2021 worth some US$2.8 billion, or 10% of QP's output are at stake in the current contract negotiations with Japan.

Highlighting the depth of Qatar's ties to Japan, Marubeni Corp and Mitsui & Co each own 7.5% stakes in the three-train Qatargas I project.

Mitsui also holds a 1.5% stake in Qatargas 3.

Supply renewal talks may impact Japanese ownership stakes in Qatar's LNG projects.

Losing its foothold in Japan would force QP to seek sales among less creditworthy buyers in Africa, the Middle East and south Asia which are riskier to deal with.

Its status in Japan is already under threat, with its market share falling 17% last year while Australia's increased by 20%.

One advantage Qatar still possesses is as the lowest cost producer it can undercut on prices.

Japanese importers value longstanding business ties with Qatar and are unlikely to drop deals altogether, but the utilities are insistent on introducing more buyer-friendly terms.

Reducing volumes, shortening deals from the current 25 years, and aligning pricing formulas with market conditions will also be important.

Qatar could also be forced to offer contractual devices like those offered by some producers in Australia which protect buyers from oil price spikes.

Aside from Australia, Qatar faces an unlikely source of competition for Japanese market share from Nigeria.

Sources say the world's fourth-biggest LNG producer is courting Japan's city gas companies, power utilities and trading houses as many of its own supply deals with Europe wind down in 2021 – 2023.

Up to eight million t of annual LNG output from Nigeria is coming off contract at that time and Japanese buyers are being targeted.

Nigeria has LNG projects that are fully depreciated, allowing them to offer more flexible terms such as diversion rights and shorter contracts.

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/31052017/qatar-petroleum-gets-tough-with-japan/