Japan's Shizuoka Gas closes LNG term contract deal at a high 12% to Brent: sources

Japan's Shizuoka Gas has signed a term contract to buy LNG for seven years starting in April 2027 at a high 12% slope to Brent crude oil, multiple Asian LNG traders said in the week ended Dec. 12.

The company, based in central Japan, has been negotiating with potential sellers to buy five cargoes a year, the sources said, adding that the contract was on a DES basis.

The company was not immediately available for comment on the matter. A source close to the matter confirmed the term contract but did not share the price or seller details.

Some of the company's term contracts are set to expire in the coming years, and the company is seeking a new contract, according to a source close to the matter.

Shizuoka Gas will see its Malaysia LNG Dua contract of 330,000 mt/year expire in 2026, a portfolio contract of 70,000 mt/year with JERA in 2027, the Prelude FLNG contract of 70,000 mt/year in 2027, and the North West Shelf contract of 130,000 mt/year in 2028, according to data from the Japan Organization for Metals and Energy Security.

The company also signed a binding long-term LNG supply and purchase agreement with Australia's Santos to buy LNG from Santos' portfolio in December 2024, reported previously by Platts, part of S&P Global Energy. The long-term SPA will supply 350,000-400,000 mt/year of LNG at plateau, the company said. The contract term is 12 years, commencing in 2032 on delivered ex-ship terms, it added.

Japanese power and gas utilities are increasingly using Brent crude as a benchmark for long-term LNG contracts instead of the Japan Custom Cleared crude oil price, which was commonly used historically, Platts reported May 8.

New term contracts are being linked to Brent crude oil prices rather than JCC—the average price of imported crude oil in Japan, published monthly by the Ministry of Finance—principally because of the ease of hedging for Brent crude oil compared to hedging JCC. The shift comes amid a growing need for Japanese utilities to hedge as they become more involved in spot trading.