Bloomberg: Japan’s Chubu to Increase LNG Portfolio Contracts to Cut Costs

Chubu Electric Power Co., Japan’s second-biggest purchaser of liquefied natural gas, plans to increase its use of a type of LNG contract that allows buyers more flexible terms and competitive prices.

The Nagoya-based utility will get a quarter of its LNG through so-called portfolio contracts by the early 2020s, up from about 15 percent now, Hiroki Sato, the general manager of the fuels department, said in an interview.

Chubu is attempting to diversify its purchases amid rising supply from producers including Australia and Russia and as North America is poised to become a major exporting region. Buyers benefit from the contracts because they offer cheaper, stable supplies from multiple sources while sellers can choose cargoes from among global assets to maximize profits, Sato said.

“Sellers, particularly oil and gas majors, want to do a portfolio contract because they can optimize their operations to increase profits,” Sato said in an interview at Chubu’s Tokyo office on June 12. “We, in return, want to have economic LNG and more flexible terms.” MORE