JERA strikes ADNOC deal

09 August 2018, Week 31, Issue 530

Japan’s JERA venture has signed a memorandum of agreement (MoA) with ADNOC LNG, it announced on August 7. The Japanese company said it had agreed to purchase up to eight cargoes of LNG from the Abu Dhabi producer for three years, beginning in 2019. 

Crucially, the deal is “in line with the Japan Fair Trade Commission ruling, issued in June 2017”, the statement said. The commission’s ruling found that new LNG contracts should not have destination clauses, restricting where buyers could deliver gas. 

In October 2017, JERA announced a deal with Malaysia LNG for the purchase of 2.5 million tpy of LNG for three years, starting in 2018. At the time, the company said it believed the destination clause included in this contract was in line with the June 2017 finding. 

Commenting on its deal with ADNOC LNG, JERA said the flexibility would “contribute to its ability not only to respond to fluctuations in LNG demand, but also to optimise its LNG operations”. The Japanese unit, which is backed 50:50 by TEPCO Fuel and Power and Chubu Electric Power, said it would continue working to build an LNG portfolio that was both economical and flexible. 

Supplies from Abu Dhabi have been going to JERA under a 15-year contract, for 4.7 million tpy, which is due to expire in 2019, according to the International Group of LNG Importers (GIIGNL). JERA also has a long-term contract with Qatar, which is due to expire in 2021.  

JERA has struck a number of deals to work with other LNG buyers, most recently forming a joint venture with EDF Trading. Part of the rationale for the deal with EDF was the increasing variability of demand in Japan, it said, with Europe providing a “key balancing market for excess global LNG”. 

As of July 2016, JERA had long-term deals covering 35 million tpy but it intends to reduce these to 15 million tpy by 2030. The shortfall will be covered by shorter-term deals – such as the one with ADNOC – and spot cargoes. It has also raised the possibility of acquiring equity LNG through upstream investments. 

In April 2017, JERA struck a deal with the Dubai Supply Authority (DUSUP) on co-operation in the LNG business. Dubai receives LNG via a floating storage and regasification unit (FSRU) at Jebel Ali.

Edited by

Ed Reed


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