Power and gas utility buyers of LNG in Japan are looking to diversify their LNG price indexation to mitigate risk and uncertainty over the effect energy deregulation will have on downstream demand and pricing, a Japanese official said Tuesday at the LNG Supplies for Asian Markets 2016 Conference in Singapore.
Limited sales growth going forward and the prospect of fresh competition with the liberalization of the retail gas and power markets have increased uncertainty and affected the way utilities view their LNG procurement.
"Japanese utility companies want to procure more LNG on flexible terms, duration and volumes," director, Oil and Gas Division of Japan's Ministry of Economy, Trade and Industry, Yuki Sadamitsu, said.
"Also utilities want to diversify their price indices, not only JCC (Japan Crude Cocktail). They prefer a combination of JLC (Japan LNG Cocktail) or JKM (Japan Korea Marker) or gas hub prices," Sadamitsu added.
The Japanese government aims to fully liberalize the retail electricity market in April 2016, and retail gas markets in 2017.
The country's energy market reform, the first comprehensive power and gas market reform in 60 years, is aimed at improving supply security, increasing competition and reducing electricity costs following the Fukushima disaster in 2011.
