Tohoku Electric purchases six cargoes of LNG from BP in short-term deal

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An illuminated BP logo is seen at a gas station in Gateshead, Britain September 23, 2021. REUTERS / Lee Smith / File Photo

TOKYO, Oct. 19 (Reuters) – Japan’s Tohoku Electric Power (9506.T) has signed a contract with BP (BP.L) for six cargoes of liquefied natural gas (LNG), two business sources told Reuters, avoiding to pay record prices in the spot market for short-term supplies.

The cargoes will be delivered in the first half of next year and are priced at 20% Brent crude, the sources said, translating to around $ 17 per million British thermal units (mmBtu) at current prices.

That’s less than half of the going Asian spot price of $ 38.50 / mmBtu, a record as an energy crisis engulfs much of the northern hemisphere, causing oil to rebound and pushing prices up. from coal to historic highs. Read more

“They should be happy with this price,” said one of the business sources, who requested anonymity.

A spokesperson for Tohoku Electric said the utility would not discuss its fuel sourcing strategy. BP did not immediately respond to a request for comment.

Japanese LNG buyers have said they will target short-term supply agreements when they need to supplement long-term contract cargoes of super-chilled fuel.

Last winter, they frantically competed with Chinese and South Korean buyers for cargoes in a tight market as freezing conditions hit the region for weeks, sending Japanese electricity prices to world records. Read more

This winter, the regional crisis is expected to play out globally as Europe struggles for gas supplies, benchmark prices in the United States hit roughly seven-year highs, and economic growth continues to rise. China is held back by power shortages. Read more

The Tohoku deal also highlights the absence of Japanese buyers in the spot market, as they rely on long-term LNG supply contracts, which averaged just over 10 mmBtu in August, according to official trade figures.

LNG inventories in Japan are also seasonally above average, but with electricity prices rising in recent weeks, Tokyo-based executives and traders are concerned about another winter of high prices and the threat of power outages. Read more

Reporting by Aaron Sheldrick, Marwa Rashad, Jessica Jaganathan and Yuka Obayashi; Editing by Steve Orlofsky

Our standards: Thomson Reuters Trust Principles.


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