Reuters: Japan's Mega Utility Merger to Boost LNG "Buyer Power"

The combination of two Japanese utilities to form the world's biggest liquefied natural gas importer will give Asian buyers greater muscle to press producers for more flexible contracts and potentially deepen a new era of weaker prices.

Tokyo Electric Power Co (Tepco) and Chubu Electric Power Co plan a joint venture from April that would gradually include fuel procurement, investment in gas assets and a potential union of their fossil fuel power plants.

Together they will account for about 16 percent of global LNG purchases, overtaking leader South Korean utility Kogas, helping them push for increased contract flexibility as Japan seeks to revamp the way LNG is sold after years of soaring costs.

More chances to renegotiate prices and diversified pricing contracts could ultimately lead to even lower prices, currently close to five-year lows, and cut profitability for big suppliers in Australia and elsewhere.

"In the longer term, Japan wants to restructure gas pricing, especially in the wake of the Fukushima disaster, and this move goes some way to achieving that," said Tom O'Sullivan, founder of independent energy consultant Mathyos Japan. MORE