Japanese utilities look to index some LNG imports to U.S. gas prices
(Platts; June 1) - Japanese utilities are weighing the option of indexing the price of a portion of their LNG purchases from North America to gas-price benchmarks such as Henry Hub, rather than solely to crude oil, a Japanese government official told Platts May 31 in Calgary. "It is still in the early days but this is likely to be a trend, with our utility firms preferring the Henry Hub as part of a portfolio of prices," said Hirohide Hirai, director of Petroleum and Natural Gas at the Ministry of Economy, Trade and Industry.
The change would be for risk mitigation of not depending solely on oil-linked prices, and also for securing a cheaper price, he said. "We would be open to new forms of pricing and, as a suggestion, Japanese utilities could think of indexing to the Henry Hub 5 to 10 percent of their North American LNG purchases." Hirai is part of a Japanese delegation in Calgary to launch an energy policy dialogue on how Japan's investments could be accelerated in unconventional oil and gas developments in Alberta and B.C.
Challenges posed by the remoteness of Canadian LNG export projects, particularly the lack of an existing pipeline system, is unlikely to get in the way of the planned ventures, he said. "We are not planning to invest in pipeline facilities, but all the deficiencies will have to be overcome if Canada wants to compete with U.S. LNG projects," Hirai said. "One advantage for Canadian projects is the support they have from the government for exporting LNG. The U.S. government is still not clear on its export policy."