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Japan's Osaka Gas chief says existing LNG spot market may be sufficient

Osaka Gas President Hiroshi Ozaki said Thursday that the current system for spot LNG trading might be sufficient going forward if the utility can increase its freedom to trade by having more contracts without destination restrictions.

Osaka Gas is the second-largest gas utility in Japan.

"We can continue our practice [of spot LNG trade] even if we do not have the [spot] market as a system," Ozaki told a press briefing in Tokyo. "There is no spot market as a system today, but there are frequent trades between sellers and buyers, among Japanese power and gas utilities and even in East Asia."

However, Ozaki said another way spot LNG trades could be done is by establishing trading and clearance systems. But he added this process could take some time, giving him a preference for the current practice over possible creation of a trading and clearing system.

Ozaki's comments come after the Tokyo Commodity Exchange announced November 8 its plans to launch an over-the-counter market for LNG as part of a joint venture with Ginga Petroleum.

The joint venture, Ginga Energy Japan, will be set up by the end of this year to operate new LNG and oil products OTC markets in Japan.

But an exchange spokeswoman said last week that with liquidity around LNG trading still low, oil products would likely be launched first, around March or April. There was no clear timeframe given for LNG.

While the exchange is planning to provide both physical and swap products for LNG trading, the pricing, specifications and the units used within the OTC market have not been decided, according to the spokeswoman.

Once the market has been launched, TOCOM is expected to call on trading houses, as well as domestic power and gas companies, to encourage trade on the OTC market, while Ginga Energy Japan will act as a broker.

Ginga Petroleum will have a 60% stake in the new JV, with TOCOM holding the remainder, the spokeswoman said.
Source: Platts