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Tokyo Gas to begin LNG trading to cut import costs

04.03.2014  | 

Tokyo Gas Company, Japan’s third-biggest buyer of liquefied natural gas (LNG), plans to start trading the fuel before 2017 to boost flexibility in shipments and reduce import costs

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By TSUYOSHI INAJIMA and YUJI OKADA
Bloomberg

Tokyo Gas Co., Japan’s third-biggest buyer of liquefied natural gas (LNG), plans to start trading the fuel before 2017 to boost flexibility in shipments and reduce import costs, the company’s new president said.

The company has increased the number of workers at its Houston office, according to Michiaki Hirose, who begins his appointment this week.

Tokyo Gas, Japan’s biggest city-gas distributor, may resell LNG cargoes to customers in Asia and Europe, he said in an interview.

Japanese utilities are under pressure to cut fuel spending as the country imports more LNG for power generation after the Fukushima earthquake and tsunami in March 2011 forced nuclear plants to be shut.

The option to resell LNG will allow Tokyo Gas to commit to buying larger volumes, favoring the company in price negotiations, said Hirose, who was previously an executive vice president.

Tokyo Gas, which currently doesn’t have experience in physical LNG trading, may begin the new business before the US starts exports from about 2017, Hirose said.

Tokyo Gas plans to buy 1.4 million metric tons/year (tpy) of LNG from the Cove Point plant in Maryland, it said in September. The Dominion Resources project has Energy Department approval to ship to nations that don’t have free-trade agreements with the US, including Japan.

With increased sources of LNG supply, it has become easier for buyers to secure flexible terms with sellers such as Australia and countries in the Middle East, according to Hirose. These terms include contracts without destination clauses that restrict the resale of cargoes.

Japan imported 87.49 million tons of LNG last year, up 25% from 2010 before the Fukushima disaster, Finance Ministry data shows. The country’s bill for LNG more than doubled to about 7 trillion yen ($67.8 billion) in that period as the local currency weakened.



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