Japanese buyer JERA will not renew long-term contract with QatarEnergy including Train 1 at Ras Laffan

Friday, 26 November 2021
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JERA Co. Inc., the largest Japanese LNG buyer and power assets holder, has stated it would not be renewing long-term supply contracts for volumes from projects at Ras Laffan in Qatar amounting to 5.5 million tonnes per annum.

The contracts with Qatar are expiring at the end of the year. The deals were originally signed in 1997 and 1998 for the Qatargas 1 project.

JERA had inherited most of its worldwide contracts from Tokyo Electric Power Co. and Chubu Electric when the JERA joint venture was set up.

“Currently we are not considering contracting because we find it extremely difficult to extend the existing large contracts timing-wise,” JERA President Satoshi Onoda said of the Qatari long-term deals during a virtual conference.

The JERA President emphasized that the Tokyo-based company did not have a plan to give up all of its long-term LNG supply contracts.

Long-term portfolio

These sale and purchases agreements span liquefaction plants in Australia such as Wheatstone LNG, Darwin LNG, the FLNG Prelude plant as well as projects in Indonesia, Malaysia, Brunei and Papua New Guinea.

The Japanese company also receives cargoes from the Freeport export plant in Texas and could focus on more US volumes, as well as in the short-term spot LNG when needed.

In mid-November 2021, JERA s purchased a significant stake in Freeport LNG at Quintana Island in Texas and will invest in expansions as part of a plan to be able to direct cargoes to Japan even when global supplies are tight.

The Japanese company’s US subsidiary JERA Americas Inc., concluded a securities purchase agreement with infrastructure fund Global Infrastructure Partners to acquire around a 25.7 percent interest in Freeport for $2.5 billion.

For this transaction, JERA appointed US investment bank Goldman Sachs as its exclusive financial advisor.

The Freeport plant is located in Brazoria County, south of Houston, and is run by Chief Executive Michael Smith, an energy entrepreneur who developed the plant with almost 15 million tonnes per annum of LNG capacity.

It has use-or-pay liquefaction tolling agreements for most of the output from the three Trains with customers including JERA as well as Japanese utility Osaka Gas and European-based companies, UK major BP and German utility Uniper.

JERA noted that, together with Freeport LNG, the Japanese company has already contributed to the stable operation of Train 1 of the Freeport liquefaction project through its participation in that subsidiary.

JERA plans to work with Freeport to advance new LNG projects including production capacity expansion and the development of Train 4.

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