Japan has formally launched a study on the listing of an LNG futures contract on the Tokyo Commodity Exchange to help companies hedge the cost of rising cargo prices.
Japan's LNG imports before the earthquake and Fukushima nuclear disaster in March 2011 cost 3.5 trillion yen ($44 billion) per annum, but the amount is projected to reach 6 trillion yen ($75.5Bln) this year.
The aim of the study is to come up with a solution to give utilities and city-gas companies a derivative regulated by Japan to hedge future cargo purchases and LNG prices.
The LNG futures trading plan for the Tokyo Commodity Exchange was first raised by Economy Minister Yukio Edano two months ago.
Japan pays the highest prices in the world for its LNG because its long-term contracts come from an era when they were linked to the oil price, now at more than $100 per barrel.
LNG producers and project developers are striving to retain the oil linkage because of the huge costs of developing liquefaction projects and feed-gas supplies for terms of up to 25 years.
A derivative traded in Tokyo would give the Japanese LNG buyers the opportunity to try and lock in some price relief through hedging.
The world's first cleared LNG energy financial derivative swap was only traded in July this year, based on a September price of $13.90 per million British thermal units.
The contract was brokered over the CME Direct trading platform and was cleared by CME Europe.
The New York Mercantile Exchange also provides trading in a East Asia Index Swap futures contract for open outcry trading, having received approval from the Commodity Futures Trading Commission.
