Japan imported its first cargo of liquefied natural gas (LNG) from China in July as utilities from the world’s biggest buyer of the fuel seek out new suppliers and try to lower costs amid tough competition at home.
The shipment illustrates the increasing flexibility of the Asian LNG market.
China has become the world’s second-largest LNG buyer amid a surge in domestic gas usage.
However, the country has started to re-export shipments amid a lull in summer gas consumption and Japanese buyers are scooping up the cargoes to reduce their fuel expenses.
The cargo of 70,560 tonnes of LNG was shipped from the Hainan LNG Terminal, which is operated by state-owned CNOOC Ltd, to Chita near Nagoya, where Toho Gas jointly operates an LNG terminal with JERA, according to a source familiar with the matter.
It was delivered at $5.68 per million British thermal units (mmBtu), below Japan’s average import cost of $9.50 per mmBtu for LNG during July, according to Ministry of Finance data released on Thursday.
Toho Gas declined to comment when contacted by Reuters. CNOOC did not immediate reply for a request for comment.
A search through Japan’s official trade statistics show it is the first LNG cargo from China since 1988, when the Japanese government started publishing import and export figures.
Prices for spot LNG in Asia have sunk to near record lows in recent weeks as a wave of new supply from the United States and Australia comes onto the market.
The decline in spot market prices for liquefied natural gas (LNG) is pushing Japanese utilities in Japan to be more aggressive in price reviews built into traditional long-term contracts linked to oil prices.
They are also buying more LNG on the spot market as part of this shift in approach.
Japanese utilities have previously favoured stability of supply over price, partly because they could pass on the costs to consumers.
The liberalisation of Japan’s energy markets means the old guard gas and electric utilities are losing customers to new entrants and they are trying to cut costs.
With summer temperatures peaking, Japanese electric utilities have also been rushing to replenish stocks of the fuel to use to generate power for air conditioning.
Hokuriku Electric has bought a spot LNG cargo for delivery in November while Hokkaido Electric is seeking a cargo for delivery the same month, industry sources told Reuters this week.