JERA to integrate EDF Trading's LNG business into JV
TOKYO—Japan's JERA Co., a fuel purchasing JV of Tokyo Electric Power and Chubu Electric Power, has agreed with French utility EDF's trading arm to expand an existing cooperation into LNG.
Their basic agreement on LNG would combine the French company's LNG business into JERA's standing trading venture with EDF Trading for coal and freight, which commenced in April.
The deal with EDF Trading, which trades around 3 metric MMtpy–5 metric MMtpy of LNG, allows JERA to have EDF Trading's access to European LNG and gas markets.
JERA is the world's biggest LNG buyer, with intake of around 35 metric MMtpy.
It is critical that JERA has the flexibility to adjust to volatile LNG demand in the mid- to long-term in Japan amid the uncertainties over the restart of nuclear plants and the growth of renewable power in Japan, said Izumi Kai, JERA general manager of the trading business development unit.
The two would collaborate on LNG business under JERA Trading for their parent companies, Kai said.
Japan's LNG demand is likely to fall below 70 metric MMtpy by around 2030, after the country imported more than 83 metric MMtpy last year, the government said.
"There is too big an uncertainty in LNG demand for us to be able to adjust only through flexibility in existing contracts, and we would like to respond well to the challenge through the deal with EDF Trading," Kai said.
"We were not looking for a partner that has large volumes, but a partner that has the know-how and experience to carry out various trading operations," he said.
The combination would allow JERA to share EDF Trading's access to 15 LNG terminals in Europe that connect to six European gas hubs in Great Britain, France, the Netherlands, Belgium and Spain, Kai said.
The deal would also help JERA sell LNG offtake to global markets from the US Gulf Coast's Freeport project, which is expected to start operations as early as October 2018.
JERA would also be able to hedge various risks, such as fluctuating gas prices and currencies, as well as help JERA to buy feedstock gas and power for the Freeport project using EDF Trading's extensive expertise in the US.
JERA expects to complete the LNG integration in the second half of 2018, he said.
The coal and freight venture between the two is 67% owned by JERA and 33% owned by EDF Trading.
(Reporting by Osamu Tsukimori; editing by Tom Hogue and Jane Merriman)
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