October 5, 2017 / 9:37 AM / 2 years ago

Tokyo Gas will not accept destination clauses in new LNG contracts - president

TOKYO, Oct 5 (Reuters) - Tokyo Gas Co, Japan’s biggest city gas supplier, will not accept new contracts for long-term purchases of liquefied natural gas (LNG) that contain clauses that restrict where the gas can be sold, the company’s president said on Thursday.

“We have no intention of signing new contracts unless the destinations are free,” Tokyo Gas President Michiaki Hirose said during a briefing on its midterm business plans.

Hirose’s comments follow the decision by Japan’s Fair Trade Commission that the so-called destination clauses that restrict the resale of LNG cargoes are anti-competitive. Since the ruling, Japan’s gas importers have been pushing to either revise their contracts or have vowed not to sign new contracts containing the clauses.

Tokyo Gas is in talks to renew its supply contracts and will wave the FTC ruling at sellers during its negotiations like the old Imperial flag, he said.

The company is Japan’s second-biggest LNG importer, taking in 14 million tonnes per year, after Jera Co, the LNG buying joint venture of Tokyo Electric Power Co (Tepco) and Chubu Electric.

The company is also considering raising its share of LNG purchased under short-term contracts or in the spot market to 20 percent to 30 percent of its demand from a small amount currently to better respond to volatility, he said.

Tokyo Gas may triple its power generation capacity to 5 gigawatts (GW) in the 2020s to meet rising power sales, said Hirose. As part of that, the company may build at least one large-scale fossil fuel-fired power plant in Ibaraki prefecture, east of Tokyo.

It currently has power generation capacity of 1.6 GW.

The company expects to win 1 million retail power accounts by the end of October, Hirose said. Tokyo Gas was the biggest winner of new retail power customers after Japan liberalised its power sector in April 2016, breaking the control of regional utilities.

The company on Thursday raised its target for retail accounts by 200,000 to 2.2 million accounts by 2020. That would be about 10 percent of the market in Tepco’s home market.

The company also plans to raise the share of midstream and downstream businesses in its overseas energy portfolios, especially in Southeast Asia where natural gas demand and LNG imports are expected to grow strongly. (Reporting by Osamu Tsukimori; Editing by Christian Schmollinger)

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