Anxious Qatar Charms Japanese Clients

Correction: an earlier version of this story said Jera had contracted to buy LNG from EDF Trading from mid-2018. In fact, Jera is the supplier to EDFT.

Qatar Petroleum CEO and Qatargas chairman Saad Sherida al-Kaabi is rounding off a three-day charm offensive in Tokyo October 13 with a reception for Japanese partners, clients and contracting companies.

But there's worry behind the Qatari charm: 7mn metric tons/yr of long-term Qatargas supply contracts remain up for renewal or expiry in 2021, of which 4mn mt/yr alone with Chubu Electric, according to the 'GIIGNL' report published in the past six months. That 7mn mt/yr equates to half the Qatari LNG imported by Japan last year.

Moreover, unlike in the late 1990s when many of these contracts were signed, QP’s LNG supply ventures Qatargas and RasGas now face stiff competition especially from US but also Australian and portfolio LNG suppliers ready to offer shorter-term contracts, often based on non-oil-indexed pricing. 

QP showed flexibility on supply – but obduracy on pricing – when Japan had to increase LNG imports in the wake of the 2011 Fukushima disaster and nationwide nuclear plant shutdowns. That still rankles in Japan where its customers had to pay up to $19-$22/mn Btu for some cargoes in 2011-13 on the back of high oil prices and tight LNG availability, as buyers in Japan had hoped for a special rapport in their trading relationship with Qatar.

Now the world LNG market is glutted. Spot LNG imported to Japan from all origins last month cost on average $5.70/mn Btu, according to preliminary data in Japan’s ministry of economy, trade and industry’s latest monthly bulletin. Those Japanese buyers who still want to retain oil indexation will still be pressing for it on a lower price curve; other buyers want a basket of pricing that includes US Henry Hub or European gas indices like NBP or TTF.

QP President and CEO Saad Sherida al-Kaabi  (Photo credit: Qatar Petroleum/LinkedIn)

QP said October 13 that al-Kaabi had meetings scheduled with chairmen, president and top executives of Chubu Electric, Jera, Mitsui, Marubeni, Chiyoda Corporation, Idemitsu, Cosmo Oil and LNG Japan. It would also include Tepco, Kansai Electric, and Tohuku Electric – all clients of Qatargas or RasGas – as well as Japanese banks and LNG fleet owners. Jera is the trading joint venture of Tokyo Electric (Tepco) and Chubu Electric. 

“The visit is part of an annual tradition that connects QP and Qatargas with a wide spectrum of clients and partners in Japan,” said QP.

Japan stayed by far the world’s largest LNG importer in 2015 at 85.05mn mt, of which 14.64mn mt was from Qatar, according to the latest International LNG Importers Group (GIIGNL) annual report.

Mark Smedley