Published
By Myrna M. Velasco
Lisbon, Portugal – The
pricing index for liquefied natural gas (LNG) in the Asian market, that may
also cover the widely anticipated gas industry reset in the Philippines, will
remain oil-indexed until year 2030, according to the region’s major industry
players.
As noted by Hiroki
Sato, senior executive vice president and chief fuel transactions officer of
Japanese firm JERA Co., Inc. at the World LNG Summit here, “after 2020 or 2030,
it (oil indexation for gas markets) might still be mainstream in the Asian
market.”
Amid the flourishing
Henry Hub index in the global gas market that some Asian LNG players have also
shifted to, he noted that oil indexation in the region has remained high at
roughly 80 percent to date.
“Even if it will
decrease to 50 percent, that would still be a big market,” he said, emphasizing
that the pricing shift for most in the Asian gas market may move at
considerably slow pace.
Presently, he stressed
that “there are some contradictions – pros and cons presented – but the goal is
to eventually introduce an Asian or Japan index…or several kinds of indices
might be a suitable situation.”
Sato expounded that the
Asian market had grown comfortable with oil-linked gas because they deem such
to be a “transparent” pricing system, hence, moving away from that practice
will take a lot of preparation and ‘soul searching’ for gas players in the
Asian market.
Kunio Nohata, executive
director of Tokyo Gas Co. Ltd., indicated that “apart from indexation, we want
to have Asian market hub pricing… at the end of the day, we will have our
market price, but it will take time. Gradually, very gradually, it will
change.”
In gas sale and
purchase contracts, it was similarly noted that Japan is the only market in
Asia that adheres currently to a “review clause,” with most in the region still
not getting into that contracting paradigm.
Tokyo Gas is among the
Japanese companies long hinted by the Philippine government having that
interest to invest in the planned LNG facilities to satiate the country’s gas
needs post-Malampaya.
It is worth noting that
the Malampaya gas feeding into more than 3,000 megawatts of power capacity in
the Philippines had also been oil-indexed, specifically to a basket of crudes,
as stipulated in the gas sale and purchase agreements (GSPAs) with power plant
off-takers (gas buyers).
In the regulatory
framework that was penned by the Philippine Department of Energy (DOE), gas
pricing has not been particularized apart from indicating that it shall follow
“market” movements.
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