Osaka Gas to secure more LNG than usual in FY23/24 amid tight global supply

Japan's Osaka Gas Co Ltd plans to secure more liquefied natural gas (LNG) than usual in the financial year starting in April to ensure a stable supply of the fuel as global supply is expected to stay tight, its president said on Wednesday.

The city gas provider is one of the country's major buyers of the super-chilled fuel.

Spot LNG prices soared last year in the wake of Russia's invasion of Ukraine as European buyers sought large volumes to replace Russian pipeline natural gas, though they have trended lower since mid-December due to a milder than usual European winter.

"Still, we see a risk of the prices surging again sometime in the next financial year amid tight global supply as Europe moves further away from Russian gas," Osaka Gas President Masataka Fujiwara told reporters.

Also, there could be supply disruptions due to problems, like the fire at the U.S. Freeport LNG facility and a pipeline leak at Malaysia LNG last year, he said.

In the past, when spot prices were lower, Osaka Gas used to take a slightly short position and bought extra supply from the spot market in the event of a shortage. But it now plans to be in a slightly long position due to the higher prices and the risk of supply disruption.

"We made a procurement plan with a margin as causing a supply shortage is the worst thing," Fujiwara said.

LNG buyers can exercise a contract clause, known as Upward Quantity Tolerance (UQT), which is typically a flexibility embedded in long-term contracts where buyers are able to request about 5% to 10% extra volumes.

Osaka Gas plans to take an advantage of the flexibility.

The LNG contract that Osaka Gas, JERA and Tokyo Gas have signed to buy a combined 3.4 million tonnes per year from Brunei for 10 years from April 2013 is due to expire this month.

Osaka Gas declined to comment on whether it would extend the contract. (Reporting by Yuka Obayashi Editing by Mark Potter)

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