x Abu Dhabi, UAE Thursday 20 July 2017

Japanese gas client to push Abu Dhabi for better deal

The Japanese utility that buys most of Abu Dhabi's gas exports will push to change the terms of supply contracts.

The Japanese utility that buys most of Abu Dhabi's gas exports will push to change the terms of supply contracts to its advantage, the company said, underscoring the increasing primacy of buyers in the global gas market. A year ago, Abu Dhabi, Qatar and other gas exporters were the ones looking to renegotiate contacts to try to get higher prices, but a collapse in global gas demand and an excess of supply have given Asian buyers the upper hand. Officials at Tokyo Electric Power Company (TEPCO) - which buys at least 4.1 million tonnes of Liquefied Natural Gas (LNG) annually from Abu Dhabi Gas Liquefaction, a subsidiary of Abu Dhabi National Oil Company (ADNOC) - told Dow Jones on Monday that they wanted new contract terms that offered them the option to adjust contract volumes and resell unneeded gas. Takao Arai, the managing director for fuel purchases at TEPCO, said: "We will be seeking more flexible contracts." Mr Arai did not specify which suppliers would be targeted, but ADNOC is the utility's second-largest suppler after Malaysia. Global demand for LNG is not expected to return to last summer's levels before the middle of next decade. Robert Oushoorn [CK], a gas expert at Booz and Company, the management consultancy, said: "One of the features that buyers like to have in the contracts is more flexibility. The question, of course, is how far these buyers can actually push that." If LNG exporters are squeezed too tightly by Asian buyers, Mr Oushoorn said, it would create an incentive for them to co-ordinate output, much like OPEC regulates oil production. cstanton@thenational.ae