By MARI IWATA
Japan and India agreed Monday to set up a
multilateral group of liquefied natural gas buyers to push for
lower prices for the fuel, and they plan to ask other importers
to join them.
Asian countries, the biggest buyers of seaborne LNG,
sometimes pay five or six times more for the deep-chilled gas
than do consumers of piped gas in North America, where prices
have plunged due to growing availability on the back of a boom
in production of the fuel from shale deposits.
In some cases, heavy energy import bills in Asia are being
further inflated as a result of weakening currencies.
"LNG prices in Asia are substantially higher than those of
other major consuming regions such as Europe and North America," the two
countries said in a joint statement signed by Japan's Minister
of Economy, Trade and Industry Toshimitsu Motegi and India's Minister for Petroleum and
Natural Gas Veerappa Moily in Tokyo.
"Many contracts include inflexible conditions such as
destination clauses," and "it is essential to review current
business practices that would hinder market liquidity," the two
They plan to ask fellow importers, such as South Korea and
Singapore, at an LNG conference being held in Tokyo on Tuesday
to join the new grouping. The conference will also include
senior officials from producer countries including Australia,
Indonesia, Qatar and Nigeria.
Most LNG sold in Asia is bought under long-term contracts
linked to crude-oil prices. Oil-linked prices have stayed much
higher than piped-gas prices in recent years, and Japan has
been prominent among countries calling for more flexible and
spot-based pricing, possibly linked to US gas prices.
Several Asian countries have already agreed to import LNG from
North America, and deliveries could start within two years.
The main gas exporters already have their own association,
the Gas Exporting Countries Forum, which includes Qatar and
Russia among its members, although it has up to now acted
mostly as a discussion group.
However in July, Russian President Vladimir Putin urged the
group's 13 members to join forces and defend traditional
long-term oil-linked gas contracts in the face of the growing
popularity of spot-market pricing.
Speaking at a meeting of the organization, Mr. Putin said
forsaking the oil-linked pricing system "may undermine the
energy security of gas importers."
Mr. Putin said in a reference to booming North American
shale gas output that the increased supply is "not a reason for
rejecting long-term contracts, or take-or-pay principles."
LNG prices have soared in Asia this summer, and utilities in
South Korea and Japan increased purchases due to unusually high
temperatures, rising above $18/MMBtu compared with around
$3/MMBtu in North America.
India in particular is under pressure, as the slide in the
value of the rupee has caused a big rise in the cost of its
dollar-denominated energy imports. In late August, India's oil
minister said that Prime Minister Manmohan Singh had asked him
to work out a plan to cut the oil import bill by $25
"[Asian] LNG prices are roughly 30% higher than North
American gas prices even after factoring in the costs of
liquefaction and transportation," said Hiromichi Moriyama,
director of the industry ministry's International Energy
Japan is the world's largest LNG buyer, with its imports
having risen over the past two years due to the Fukushima
Daiichi disaster in March 2011, which resulted in the closure
of most of its nuclear reactors. India is ramping up LNG purchases to
help meet its own energy shortfall.
"North American projects will start shipping LNG as
early as 2015. If their prices are lower, we may not buy
expensive LNG," said Ryo Minami, who heads up the oil and
natural gas department at the industry ministry.
Dow Jones Newswires