Tokyo Commodity Exchange and S&P Global Platts have signed a memorandum of understanding to cooperate on developing benchmark prices for Japan's domestic oil products and LNG in Asia, the companies said Tuesday.
Under the MoU, Tocom and Platts will work together to accelerate the development of derivatives products based on such prices with the aim of enhancing risk management and market transparency, the companies said.
"We believe that our joint efforts based on this MoU to develop LNG and domestic oil refined product markets will bring great benefit to players in these markets," Tocom President and CEO Takamichi Hamada said in a statement.
Following the MoU, Tocom will consider in detail whether to use Platts' Japan oil products assessments for its planned launch on May 8, 2017 of new balance-month waterborne and truck contracts for gasoline, gasoil and kerosene, a Tocom official said.
The announcement came after Platts re-launched on April 25, 2016, new domestic oil products price assessments after a gap of nearly 11 years, starting with spot waterborne price assessments.
Platts will next launch Japanese spot truck rack oil products price assessments on December 12.
"As Japan moves towards increased energy market liberalization, we have invested to launch new price assessments that meet the specific needs of the Japanese market," Platts President Martin Fraenkel said in a statement.
"We look forward to announcing complimentary products and services with Tocom aimed at enhancing price transparency and market efficiency," he added.
In the statement, Hamada said: "For LNG in particular, we believe that developing a mechanism by which the trades at JOE [Japan OTC Exchange]'s planned physically deliverable market are reflected in Platts' assessment, will lead to the 'creation of a proper price discovery mechanism' by 'adding spot trading functions' to JOE's market."
He said the move is in line with the Ministry of Economy, Trade and Industry's proposed LNG market strategy.
Following the MoU, JOE plans to launch a new online physical market platform on April 1, 2017, under which transactions would be reflected in Platts' JKM spot LNG assessments, the Tocom official said.
Platts' Editorial Director of LNG & Nuclear Shelley Kerr confirmed that Platts could consider JOE's reported transactions for its JKM LNG assessments if deals are in line with its assessment methodology.
Currently JOE, in which Tocom has a 40% stake with the balance held by Ginga Energy Japan, will be wholly owned by the exchange by next April, the official added.
