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Natural Gas India and Japan to Study Pricing of LNG in Asia Pacific Market

| Editor: Dominik Stephan

Te governments of India and Japan announced a cooperation to examine the high prices for natural gas for customers in Asia...

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India and Japan want to work together to examine gas prices in Asia
India and Japan want to work together to examine gas prices in Asia
(Picture: PROCESS)

New Delhi/India – India's Minister of Petroleum and Natural Gas Dr M Veerappa Moily and Japan's Minister for Economy, Trade and Industry, Toshimitsu Motegi have signed the Joint Statement on the Japan and India LNG joint study on pricing in the Asia Pacific Market. In the bilateral meeting that preceded the signing ceremony, both ministers agreed that the joint statement was an important step towards working on rationalizing of LNG prices in Asia Pacific.

The text of the joint statement signed is as follows:

  • I. Japan and India share the recognitions on the current LNG market situation as below.
  • i. The LNG prices in Asia are substantially higher than those of other major consuming regions such as Europe and North America. (This is called ‘the Asian premium’.)
  • ii. 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. Since the prices of individual contracts signed on a bilateral basis are confidential, there are no reliable price indices that accurately reflect the LNG supply and demand balance in the region at this point.
  • iii. Many contracts include inflexible conditions such as destination clause, which further the market illiquidity in the Asia Pacific region.
  • II. Accordingly, Japan and India shared recognition of the following points.
  • 1. 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. Forming a transparent and globally competitive LNG price in the Asia Pacific market serves the common interests of Japan and India.
  • 2. For both LNG producers and consumers, the LNG price should be at mutually acceptable level, considering the sustainability of the LNG market.
  • 3. Procuring LNG from more diversified suppliers and/or regions will lead to the increase of market connectivity and price convergence among regions, which should result in more competitive pricing of LNG.
  • 4. It is essential to review current business practices that would hinder market liquidity.
  • 5. In order to further share the analysis and best practices from multiple initiatives and studies on LNG markets

Japan and India support the launch of a Multilateral Joint Study Group on LNG, including energy research institutes in LNG consuming countries.

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