• Natural Gas News

    Jera Slashes Abu Dhabi LNG Offtake


The world's biggest LNG buyer is slashing the volume and duration of its LNG offtake from one of its biggest suppliers.

by: Dalga Khatinoglu, Mark Smedley

Posted in:

NGW News Alert, Natural Gas & LNG News, Asia/Oceania, Middle East, Corporate, Import/Export, News By Country, Japan, United Arab Emirates

Jera Slashes Abu Dhabi LNG Offtake

Japan's Jera said August 7 it has initialed a three-year offtake agreement with Abu Dhabi Gas Liquefaction Company (Adnoc LNG) starting April 2019 for about 0.5mn metric tons/yr.

Jera - the world's largest LNG buyer - made no reference to its existing contract with Adnoc LNG for 4.7mn mt/yr which consequently looks set to expire next year, after a run of 35 years since 1984.

Under the new memorandum of agreement (MoA), Jera said it intends to buy up to eight cargoes per year (about up to 0.5mn mt/yr) between April 2019 and March 2022 on a 'delivered ex ship' basis; it added that the new MoA is in line with the Japan Fair Trade Commission ruling, issued in June 2017. The ramp-down of volume can be seen as Japan flexing its muscle in a much more competitive market, after decades when it was obliged to buy from mostly Mideast-based ventures managed by majors and priced off oil-indices, which were particularly expensive during the period after the Fukushima disaster.

It will be a sore disappointment for Adnoc LNG, established in 1973 and majority-owned by Abu Dhabi National Oil Company (Adnoc) with 70%, alongside Mitsui 15%, BP 10% and Total 5%. A total of 5.59mn mt was imported from Adnoc LNG in 2017, according to latest data from the International Group of LNG Importers (GIIGNL), of which the lion's share of 4.68mn mt went to Japan.

Without a replacement contract, Adnoc and its affiliate may increasingly need to sell on the spot LNG market, or step up pipeline sales to regional neighbours instead such as Dubai.

“Jera will continue to focus on building and maintaining an optimal LNG procurement portfolio that enables economical and competitive procurement, as well as flexibility to respond to changes in the business environment”, said Jera's statement. Despite the hints, NGW has yet to receive a definitive confirmation from Jera, or Adnoc LNG, that the 35-year contract will lapse.

Jera is a 50-50% LNG joint venture of Tokyo Electric and Chubu Electric set up in 2015. Only July 3 2018, Jera said it and EDF Trading signed binding agreements to form an LNG optimisation and trading joint venture; this will involve Jera and EDFT's LNG optimisation and trading activities being merged into Jera Trading (Jerat), to be owned 66.67% by Jera and 33.33% by French EDF's wholly-owned EDFT.