French energy giant and LNG player Total signed a short-term contract for the supply of LNG with JERA, a joint venture between Japanese utilities Tepco and Chubu Electric.
The deal shows the company’s preparedness to offer flexible contract terms to its traditional buyers, Philippe Sauquet , Total’s president for gas, renewable and power said in an interview with Reuters.
Under the agreement, JERA will buy six cargoes, totaling about 400,000 tons of liquefied natural gas. Four cargoes will be linked to the oil-indexed formula while two cargoes will be based on the spot prices that are currently below US$6 per mmBtu.
Sauquet noted that current market conditions have given the advantage to LNG buyers, especially in Japan and South Korea in negotiating more flexible contract terms. For Japanese power utilities, flexible contracts are especially important due to uncertainty over demand in the future which is related to the uncertainty over the restart of nuclear power production.
The shorter-term contract with JERA is part of Total’s strategy to expand into new markets in order to secure customers that will underpin the development of LNG projects currently under construction.
Speaking of the market conditions, Sauquet added that despite the new volumes hitting the market, the year 2017 could be similar to the previous year, however, the oversupply in 2018 and 2019 is inevitable.
LNG World News Staff