Osaka Gas to Expand LNG Trading

Japan's Osaka Gas (OSGSF) Co said this week it plans to expand its liquefied natural gas (LNGLF) (LNG) trading activity as it adjusts to a market that has shifted from being undersupplied to a glut within the last two years.

The utility said as part of the trading expansion it would try to sell LNG it does not need when it sees short-term opportunities, as well as set up long-term sales agreements with other buyers of the fuel.

A surplus has emerged in global LNG production, especially in supplies from Australia, while at the same time demand from top buyers Japan, South Korea and China has stalled.

Osaka Gas - which has a minority stake of 1.25 percent in Chevron (CVX)'s Gorgon project in Australia - has already sold long-term contract cargoes from there to Okinawa Electric Power , and may in future sell off LNG it has contracted from a project in the United States, company officials said.

"Gorgon's contract is on an FOB (free-on-board) basis, so we can market the cargoes if there are customers who are interested," Masayuki Inoue, Osaka Gas general manager of corporate strategy told Reuters on Thursday.

"If, for example, it were very cold in winter in South Korea, we could resell the cargoes on the spot market," he said.

With the advent of 130 million tonnes of LNG capacity in Australia and North America by 2020, producers such as Woodside Petroleum (WOPEF) and Chevron, and buyers such as Japanese utilities, have expanded trading teams to handle excess cargo flows and navigate a more open market.

The oversupply is giving buyers the upper hand with producers in demanding more flexibility, such as in allowing the resale of contracted cargoes on the spot market, and has also given traditional importers like power utilities an incentive to invest in trading desks.

Osaka Gas is contracted to buy 1.38 million tonnes of LNG a year from the Gorgon project when it reaches full capacity. The gas plant, which shipped its first commercial cargo in March, was shut down early this month temporarily due to technical problems and may not restart for up to two months.

Osaka Gas has commitments to take too much LNG term supplies compared with projected demand in the short to medium term, President Takehiro Honjo said separately during a Thursday luncheon with reporters, declining to give detailed figures.

In Japan, the world's biggest importer of LNG, other buyers also have plenty of supplies.

Osaka Gas, Japan's second-biggest city gas supplier, will also consider reselling destination-free cargoes from other projects as well, including the U.S. Freeport LNG project set to start up in 2018, Inoue said.

Reporting by Osamu Tsukimori