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INPEX, Kyushu Electric, PTT trading arm to optimize LNG operations during emergency

Highlights

Move follows experience of LNG shortages last winter

Companies consider LNG reloads, swaps, spot purchase in emergency

Emergency supply network possible between Japan, Thailand, Australia

Japan's INPEX, Kyushu Electric and Thailand's PTT International Trading have agreed to cooperate in optimizing each company's LNG cargo, fleet and tank operations to ensure their LNG supplies in the times of emergency.

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Under a memorandum of understanding, signed Oct. 19 by the three companies, the parties have agreed to jointly consider LNG spot cargo procurements and swap cargoes, as well as using LNG reload and storage facilities in Japan and Thailand to optimize their LNG stocks during emergency, an INPEX spokesperson said.

The companies will also look at accepting partners' LNG cargoes at their import terminals for swaps and reloads, as well as jointly operating their tanker fleets among other possibilities in the event of emergency, the spokesperson said.

The move is a response to the experience of last winter, when Japanese power utilities and energy companies faced a shortage of LNG during extreme cold spells, which have promoted Japanese companies to better prepare for contingencies ahead of the winter demand season this year.

Supplementary framework

For the Japanese companies, such an emergency LNG supply framework might function as a supplementary one because Thailand does not have seasonal boosts in power demand as in Japan's summer and winter, a Kyushu Electric spokesperson said.

For Kyushu Electric, which imports a large amount of LNG from Australia, having such an emergency framework could work as a triangular supply network between Japan, Thailand and Australia, a source familiar with the matter said.

Thailand's national oil company PTT, meanwhile, has been working to develop its regional LNG hub services in a move that will see the Southeast Asian country compete with regional rivals like Malaysia, Indonesia and Singapore.

Southeast Asia's LNG importers and exporters are gradually building LNG redistribution capabilities that allow full-sized shipments to be split into smaller parcels to supply downstream buyers in the region.

Japan already has a precedent for importing LNG from Thailand, after receiving 60,647 mt last February, according to the Ministry of Finance data.

Australia is by far Japan's largest LNG supplier. Japan imported 17.96 million mt of LNG from Australia over January-August, accounting for 35% of the country's total LNG imports, according to MOF data.

Currently, the INPEX-operated Ichthys LNG project in Australia sells about 300,000 mt/year of LNG to Kyushu Electric, according to INPEX, which is the operator with a 66.245% stake. The project has the capacity to produce about 8.9 million mt/year of LNG.

INPEX has an LNG storage capacity of 360,000 kl at its Naoetsu import terminal in the northwestern Japan, with Kyushu Electric having a 460,000 kl and 480,000 kl LNG storage capacity each at Oita and Tobata import terminals in the southwestern Japan. PTT also has a 640,000 kl LNG storage capacity at the Map Ta Phut terminal in Thailand.