Monday, December 2, 2013

LNG and Gas Market Developments

With Japan's nuclear reactor fleet shut, much of the focus on reliable, affordable generation over the decades required to transition away from nuclear will be on LNG.  The press is full of reports of developments in Japan relating to new gas-fired generation, changes in the gas markets, and liberalization efforts.  Japan pays $15-20 per MMBTU for its LNG upon import, whereas gas trades for 20-25% of that price within the U.S.A.  A crucial item for Japanese energy policy is thus to obtain cheaper, diversified sources of LNG supply.  A few reports:

November 8.  Tokyo commodities exchange announces a plan for LNG commodities trading market, to support the move away from oil-linked long term pricing structures -- currently over 80% of Japanese LNG is purchased based upon 10~20 year oil-price-linked agreements.  This is the first step to a futures market in LNG in Japan.

November 13.  TEPCO announces it is considering outsourcing some fuel procurement activities to reduce its LNG acquisition costs.

November 28.  Tokyo, Osaka and Toho Gas companies announce support for full retail price liberalization and competitive schemes.

November 28.  Japanese shipbuilders have a huge increase in orders for LNG tankers -- 90 ships on order now for delivery by 2020.

November 29.  The Tokyo commodities exchange reports negotiations with the CME (Chicago Mercantile Exchange) for a business tie-up in the area of LNG trading.

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