LNG buyers call for more flexible supply to adapt to variable power demand

Japan and other top liquefied natural gas (LNG) buyers are calling for more supply flexibility in order to adapt to variable power demand, industry executives said on Tuesday. LNG suppliers such as Qatar prefer long-term contracts with buyers that can last decades to secure financing for what can be multi-billion dollar projects.

However, in recent years with more producers entering the global market, buyers are seeking shorter-term contracts with flexibility to resell cargoes when their demand is low.

"What we are looking for is flexibility in both our long- and short-term contracts in order to manage the uncertainties we face," Jonathan Westby, senior vice president of LNG at Japan's JERA Global Markets, which handles 40 million metric tonnes of LNG annually, told an industry conference.

He said the company faces an increasingly variable and less predictable customer load, and buys and sells LNG depending on the weather and nuclear power availability.

The outlook for Japan's LNG demand is falling due to nuclear reactor restarts and more renewable energy, but the pace of decline is uncertain.

Nuclear power accounted for nine per cent of Japan's power generation mix last year.

Japan shut all 54 of its reactors after a powerful 2011 earthquake and tsunami triggered a meltdown at the Fukushima nuclear plant. Japan now runs 11 nuclear reactors, with restarts contributing to an eight per cent fall in LNG imports last year to the lowest in 14 years.

In top LNG importer China, power demand fluctuates between summer and winter and by region, said Zhang Yaoyu, global head of LNG and new energies at state-run PetroChina International.

"Unfortunately in China, we live in an environment where there are huge supply and demand imbalances," he said.

"So the world has more of a need for intermediaries to manage the risk between what producers want and what buyers want."