Thursday, January 10, 2008

Japan LNG Prices From Australia, Brunei Jump to Records on Oil

By Dinakar Sethuraman and Shigeru Sato


Jan. 11 (Bloomberg) -- Japan paid record prices for liquefied natural gas in November from Australia, Brunei, Malaysia and Indonesia to meet soaring demand after a nuclear power plant was shut for safety checks.

The world's largest LNG buyer imported 5.57 million metric tons in November at a cost of as much as $9.17 a million British thermal units, according to data from LNG Japan Corp., calculated from Japan's customs statistics. Brunei led price increases, earning 38 percent more than a month earlier.

Japan's LNG costs rose as crude oil benchmarks jumped to records and an accident at Tokyo Electric Power Co.'s Kashiwazaki Kariwa nuclear power plant prompted increased output from gas- fired power plants. LNG projects in Australia, Malaysia and Brunei are renegotiating prices with Japanese utilities under multiyear contracts that allow for periodic reviews.

``LNG prices will perhaps continue heading north or hover at currently high level for years ahead as long as crude oil strength is sustainable,'' said Shigeki Matsumoto, an energy analyst at Nomura Securities Co. in Tokyo.

LNG prices in Asia are typically linked to a measure of Japan's crude oil import costs, known as the Japan Crude Cocktail, based on data published by the Ministry of Finance. LNG pricing formulas linked to the JCC may include a floor and a ceiling to manage price volatility. In November, the JCC rose to $81.19 a barrel, a gain of 6.5 percent from October and 36 percent from a year earlier.

Annual Growth

Japan's LNG imports may rise by 8 percent a year, or about twice the average annual growth of the fuel in the last five years, because of a slowdown in nuclear-fired generators, Bernstein Research said in a report in November. Imports of LNG by Japan rose 12 percent in November from a year ago, according to LNG Japan, an energy trading joint venture of Sumitomo Corp. and Sojitz Corp.

Indonesia, Malaysia, Brunei and Australia, which fetched record prices from Japan in November, accounted for 65 percent of supplies in November. Prices of LNG from Brunei climbed to $8.48 a million British thermal units in November, from $6.14 in October, according to LNG Japan.

Tokyo Electric Power, Tokyo Gas Co. and Osaka Gas Co. will pay more for LNG from Brunei than the price set by the current contract until they conclude price-review talks, an official involved in Brunei's LNG project said, asking not to be identified because of company rules.

Japan's price for Australian LNG jumped to $9.02 a million British thermal units in November, from $8.63 in October and $6.49 in September, according to the data from LNG Japan available on Bloomberg. That's a jump of 33 percent in October and 4.5 percent in November.

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