Japan 'unlikely' to buy on LNG spot market

Japan is unlikely to purchase further cargoes of LNG on the spot market this winter, according to Akio Nomura, chairman of Osaka Gas Co. Ltd. and the Japan Gas Association.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Nov. 12 -- Japan is unlikely to purchase further cargoes of LNG on the spot market this winter, according to Akio Nomura, chairman of Osaka Gas Co. Ltd. and the Japan Gas Association.

"I do not foresee further spot purchases unless the electricity market experiences dramatic changes," Nomura told reporters on the sidelines of the Gas Information Exchange for the Western Pacific (GASEX) 2008 conference in Hanoi.

Nomura added that such a change might be something like a nuclear plant outage, but otherwise, in the longer term, Japan's demand for gas is likely to fall given the impact of the financial crisis on the economy.

"We have not yet seen the direct impact from the crisis as well as wide variations in oil prices and LNG prices," he said. "However, although we have not yet seen the impact, over the long term we will see it."

LNG consultants Waterborne confirmed the downturn, estimating recently that Japan imported 5.85 million tonnes of LNG in October, a slight fall from official data showing 5.869 million tonnes imported in September.

Osaka power plant sale
Separately, Nomura also said Osaka Gas is in talks to sell a stake in one of its electric power plants to Oman in return for stable supplies of LNG.

"We haven't reached any specific decisions yet but the point is to reach stable [LNG] supplies. If getting stable supplies requires selling a specific stake, then that's something we may have to do," Nomura said.

The discussions for a minority stake in its subsidiary Senboku Natural Gas Power Generation Co. were part of general business discussions with its potential suppliers, said Nomura.

Osaka Gas expects Senboku's four units, each with 277-277.5 Mw of capacity (for a combined total of 1,109 Mw), to come online between April and November 2009.

Osaka establishes LNG buyer
In August, Osaka Gas announced plans to set up two new companies in November to operate the Senboku natural gas power plant. While one of them will operate the facility, the other one, called Senboku Power Fuel Co., will buy LNG for its operations.

"We have separated the companies to clarify the accounts for receipts and disbursements," said an official of Osaka Gas, which buys 7.3 million tonnes/year of LNG from 10 countries.

Last month, Osaka Gas and Marubeni Corp. said they would spend $470-537 million to take an 80.1% stake in a gas and pipeline operating unit of APA Group.

The two Japanese firms will jointly operate gas pipelines, power generation plants and processing plants in Australia with APA through the investment in its wholly owned unit GasNet Australia Investment Ltd.

Contact Eric Watkins at hippalus@yahoo.com.

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