Japan to be LNG trading hub

Japan hopes to become an international trading hub for LNG by the early 2020s, the world's biggest importer of the fuel announced as part of a message delivered to the energy ministers of G7 industrial nations.

In an attempt to play a role in creating a global LNG market, Japan will open access to receiving terminals and beef up large-scale LNG storage facilities to make active LNG trading possible, the country's trade ministry said.

Global LNG buyers, including the two biggest, Japan and South Korea, have long said that the LNG market needs to be more flexible in terms of breaking the pricing link to crude oil benchmarks and in doing away with the single-destination clauses that are part of most long-term supply contracts.

Japan, which buys about one-third of global LNG shipments, is trying to cut fuel costs and gain more control over prices, after the shutdown of the country's nuclear plants in the wake of the 2011 Fukushima disaster pushed demand for gas to record levels.

In a joint statement at the end of the meeting, the G7 ministers said they supported moves in the direction of creating LNG trading hubs to improve market transparency and liquidity.
"Relaxing destination clauses in LNG contracts, encouraging market development of price indices reflecting LNG supply and demand, and continued dialogue among stakeholders are crucial to achieve this," the joint statement said.

Japan's Tokyo Commodity Exchange in 2014 opened an over-the-counter LNG trading system.
Japan and the CME Group last year also said they would join forces to develop a Japan-based LNG contract to help break the decades-long reliance on oil-link pricing, foster spot trade and establish a benchmark answerable to regional fundamentals.

(Source: Reuters - Reporting by Osamu Tsukimori; editing by Tom Hogue.)

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