Tokyo Gas is working to build a geographically and contractually diverse liquefied natural gas to withstand market volatility, but securing flexible supply remains a challenge because it is in high demand from both buyers and sellers, a senior executive said.
“Sellers are becoming more like portfolio players – they want to optimise their supply. And as a buyer, we like to optimize our assets. Everyone is on the same page,” said Yumiko Yao, General Manager for LNG at Japan’s top city-gas supplier, speaking on the sidelines of the Gastech conference in Milan.
Buyers globally are seeking flexible LNG supply options as conflict between major political powers worldwide causes price volatility and market uncertainty.
In Japan, the world’s second-largest LNG importer, demand is expected to rise due to increasing power requirements from data centres. However, questions remain over the country’s ability to meet carbon neutrality targets and the pace of restarting nuclear plants, leaving demand projections uncertain.
Yao added that diversification in geography and price index is important, with Tokyo Gas seeking destination-free cargoes, or some control over the volumes it receives.
“We are communicating with several project owners at the moment, and some of the discussions are advancing,” Yao said, declining to identify which companies Tokyo Gas is speaking to as talks are confidential.
Last month, Reuters reported that Tokyo Gas was in discussions with Venture Global to purchase 1 million metric tons per year of LNG from the company’s CP2 export facility for 20 years.
Reuters earlier this year also reported that Tokyo Gas, along with JERA and Saudi Aramco-backed MidOcean Energy, held talks with Australia’s Woodside Energy for stakes in its Louisiana LNG plant.
Yao said that while Tokyo Gas is primarily focused on securing offtake agreements, it is open to equity stakes in projects if it aligns with its supply strategy.
Yao said that political risks and weather patterns remain the biggest challenges facing the LNG market, and that Tokyo Gas would have to consult the Japanese government if it wanted Russian LNG in its portfolio should Russia’s war in Ukraine end.
“We have to consider, and we have to consult our government too, because it’s such a sensitive matter. We have to see what the circumstances are in the world, geopolitical risks, and of course, consult these with the government.”
(Reporting by Emily Chow; additional reporting by Marwa Rashad and Francesca Landini; Editing by Louise Heavens)