Japan's Shizuoka Gas signs deal with China's Clean Energy to supply LNG

SINGAPORE (Reuters) - Japanese city gas supplier Shizuoka Gas Co has signed a binding agreement with China’s Clean Energy to deliver liquefied natural gas (LNG) from its Shimizu terminal in western Japan, the company said on Wednesday.

Shizuoka Gas will transport the LNG through so-called ISO tank containers, typically pressurized tubes that hold the LNG in its super-chilled state and correspond in size to standard shipping containers to allow movement by truck, rail and container ship.

While some Japanese companies currently distribute LNG domestically via ISO tanks, this is the first term deal for a Japanese buyer to sell LNG overseas via ISO containers, said Edmund Siau, an analyst at energy consultancy FGE.

In Japan, only Shizuoka Gas currently has the capability to re-export fuel by re-loading LNG onto ships.

Under the agreement, Shizuoka Gas will supply 1,600 metric tonnes of LNG a year for a period of three years from 2019 to 2021 to Clean Energy, a fully owned subsidiary of China’s Dalian Inteh Holdings Co, it added.

Shizuoka Gas said it has been seeking further utilisation of the terminal since 2017 when it first sold gas from the reloading facility.

LNG supplied from Shizuoka will be delivered to Taishan Gas Group and Rizhao Public Transport Group in China through Clean Energy and Ants Energy as an LNG selling company under Dalian Inteh Holdings, the statement said.

Transporting LNG via ISO tanks is usually done on trucks for small-scale distribution and currently still occurs within markets such as China and Japan, FGE’s Siau said.

Though limited, there has also been some long-distance sea borne trade, such as FortisBC’s shipments from Canada to China, he added.

“As some buyers are facing an over-supplied situation, they are looking for diversion or reselling cargoes and China is one of the potential markets, though China’s demand is weak at this moment,” said a LNG trader familiar with the Japanese market.

An LNG cargo last loaded from Japan for China in November 2017, Refinitiv Eikon shiptracking data showed.

Reporting by Jessica Jaganathan; editing by Christian Schmollinger