Platts: Japan's Chubu Electric eyes new LNG sources for supply security

Japan's Chubu Electric plans to diversify its LNG supply sources from the current tilt toward Qatar in its bid to increase flexibility and security, Hiroki Sato, general manager of the fuels department and head of trading, said in an interview recently.

"We want to reduce the long-term contract portion and include short- and mid-term contracts in the portfolio by also keeping room for spot purchases," Sato said last week. "We want to be a portfolio player."

A balanced portfolio would help the company hedge against market fluctuations and it would also offer opportunities for trading, he said. "This will allow us to pursue optimization when we want to step up and exercise trading functions." 

Japanese power and gas utilities buy LNG mainly through long-term contracts, which are mostly linked to oil prices. High oil prices have been putting pressure on the companies as a result. 

In fiscal 2012-2013, running from April to March, long-term contracts accounted for 88% and 70% of LNG procurements by gas and power utilities respectively, according to data from the Ministry of Industry, Trade and Economy.

Chubu Electric, a key LNG importer, currently buys about 14 million mt/year, almost 60% of which comes from Qatar, Sato said. The utility is now looking at North America, the Asia Pacific and Russia, as well as the Middle East and Africa for LNG supplies, he added. MORE