Japan and India partner to cut LNG cost

Will establish an LNG importers’ group.

Japan and India said the LNG importers’ group will attempt to reduce the so-called “Asian premium” and diversify their import sources.

“The LNG prices in Asia are substantially higher than those of other major consuming regions such as Europe and North America,” said Toshimitsu Motegi, Japan’s Minister of Economy, Trade and Industry, Japan and M. Veerappa Moily, India’s Minister for Petroleum and Natural Gas, in a joint statement.

Japan is the world’s biggest importer of LNG. It increased imports of LNG by 12% in 2011 and another 11% in 2012 following the Fukishima nuclear disaster. Japan spent US$60 billion on LNG imports in 2012, a figure that’s expected to rise to US$72.1 billion this year.

India’s LNG imports are expected to rise 19% this year. Both countries are struggling with higher fuel imports especially due to their weakening currencies.

“Even as the position of natural gas as an alternative fuel for oil is fading and the rationality for such price formation is less clear compared to past, the majority of LNG contracts in the Asia Pacific market are long term with a pricing formula that is linked to the oil price,” they contended.

Asian LNG importers such as Japan and China paid as much as US$15.75 per million British thermal unit this month, compared to US$2.97 paid by LNG buyers in U.S. Gulf Coast and US$9.79 by British consumers.

“Japan and India, as major LNG consuming countries in Asia, will work together towards the development of a market environment that would enable effective, stable and globally competitive LNG procurement.”