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Buyers seek cuts and delays from Australian LNG supplier Ichthys

TOKYO (Reuters) - Some Japanese buyers are seeking delays in shipment or volume cuts under their long-term contracts from the Ichthys liquefied natural gas (LNG) project in Australia amid slumping spot LNG prices, Inpex Corp's senior executive said.

An inexorable decline in spot market prices for LNG is driving some buyers in Japan and China to request delays in term cargoes, while others are looking to utilise so-called downward quantity tolerances (DQT) to lower the volumes they take under their term contracts from LNG sellers, industry sources have told Reuters earlier this year.

"We are getting those requests as spot LNG market prices are lower than term contract prices," Inpex's Senior Managing Executive Officer Masahiro Murayama said when asked if Japanese buyers are asking for cargo delays or volume cuts from Ichthys.

"(Buyers) have a right to ask to raise or reduce quantity within a certain range agreed under the long-term contracts," Murayama told an earnings news conference.

"It does not mean that we will lose all quantity, but some adjustments such as increasing or cutting quantity have been made," he said.

DQTs are standard provisions allowing buyers to purchase less LNG than their full annual contract quantity, without incurring penalties.

The decline in LNG spot market prices is also pushing utilities in Japan to be more aggressive in price reviews built into traditional long-term contracts linked to oil prices, lawyers and analysts said.

Long-term LNG contracts are typically priced against Brent oil prices which are currently at about $10 per million British thermal units (mmBtu) compared with spot cargoes at about $4 per mmBtu. <LNG-AS>

Murayama said Ichthys is running at around 80% of full capacity, with 24 cargos being shipped in April to June despite a 15- to 20-day maintenance during May.

Inpex, Japan's biggest oil and gas explorer, expects Ichthys to ship about seven to eight cargoes a month this year and the project is forecast to contribute 65 billion yen ($612 million) to its group profit for the nine-month earnings this year through Dec. 31, against its earlier prediction of 60 billion yen.

Murayama said LNG spot market has been weighed down by worries about weakening demand and slowing global economy.

"We may see some delays in final investment decisions in new LNG projects given the current market environment," he said

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