Russian LNG Rush gives Japan strong bargaining chip

Thursday, June 13, 2013

Japan, the world’s top importer of liquefied natural gas, has its best opportunity to bargain for lower prices since it started buying the power-plant fuel 44 years ago. One reason is Russia.

OAO Gazprom (GAZP), OAO Rosneft (ROSN) and OAO Novatek (NVTK) plan to build more than 50 million metric tons of LNG capacity in the next decade. That’s 58 percent of the record 86.9 million tons Japan bought last fiscal year after the 2011 nuclear disaster in Fukushima idled all but two of its atomic reactors.

Even if Russia doesn’t build all those plants, Japan will start LNG imports from Inpex Corp. (1605)’s $34 billion project in Australia in 2017 -- the same time as shipments may start from U.S. and Canadian shale gas. Cargoes from Mozambique will set sail in 2018. Japan, South Korea and China are the world’s top three importers of LNG.

The surge in supply will give buyers more say in price talks, according to Evergreen, Colorado-based research company Bentek Energy LLC. It will “increase Japan’s bargaining power on new contracts and on renegotiating existing ones,” Javier Diaz, an analyst with Bentek, said by e-mail.

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