Osaka Gas wants LNG contracts linked to natural gas prices

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January 22, 2013

(Platts; Jan. 21) - Japan's second-largest city gas utility, Osaka Gas, hopes to buy LNG linked to gas prices and with no destination restrictions as part of its effort to diversify the price benchmarks it uses as well as increase flexibility in its LNG contracts, a senior company official said Jan. 21.The effort to introduce gas benchmarks for LNG contracts comes at a time when a number of Japanese utilities have stated their intention to introduce gas benchmarks instead of oil-linked prices to lower rising LNG import costs.

"Our aim is not just about increasing the number of contracts linked with gas prices," Koichiro Age, general manager of the new contract team in the LNG trading department, said in an interview with Platts. "What we are trying to do is to introduce alternative pricing benchmarks ... [that will enable us] to negotiate prices of the current contracts more equally. "In addition to its efforts to diversify its price benchmarks for its LNG, Osaka Gas is also weighing ways to increase its flexibility in its LNG contracts.

"Currently, we do not have much volume flexibility in our LNG contracts," Age said. "This means we will have to take our committed LNG volumes no matter what happens in our business environment." Osaka Gas' efforts to increase its flexibility come as the company tackles the problem of forecasting demand and supply during Japan's ongoing review of its energy portfolio. Meanwhile, Osaka Gas is in talks with the Anadarko-led Mozambique project to buy LNG from the country's first LNG plant, Age said. 

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