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Tohoku Electric buys six LNG cargoes from BP in short-term deal

Tohoku Electric buys six LNG cargoes from BP in short-term deal
Tohoku Electric buys six LNG cargoes from BP in short-term deal   -   Copyright  Thomson Reuters 2021   -  
By Reuters

<div> <p>By Aaron Sheldrick and Marwa Rashad</p> <p><span class="caps">TOKYO</span> – Japan’s Tohoku Electric Power has signed a contract with BP for six cargoes of liquefied natural gas (<span class="caps">LNG</span>), two trading sources told Reuters, avoiding paying record high prices on the spot market for short-term supplies.</p> <p>The cargoes will be delivered in the first half of next year and are priced at 20% of Brent crude, the sources said, translating to about $17 per million British thermal units (mmBtu) at current prices.</p> <p>That is less than half the prevailing spot price in Asia of $38.50/mmBtu, a record high as an energy crisis engulfs much of the Northern Hemisphere, driving a rally in oil and pushing coal prices to historic highs. [O/R]</p> <p>“They should be happy with that price,” said one of the trading sources, who spoke on condition of anonymity.</p> <p>A Tohoku Electric spokesperson said the utility would not discuss its fuel procurement strategy. BP did not immediately respond to a request for comment.</p> <p>Japanese <span class="caps">LNG</span> buyers have said they would target short-term supply agreements when they need to top up long-term contractual cargoes of the superchilled fuel.</p> <p>Last winter they frantically competed with Chinese and South Korean buyers for cargoes in a tight spot market as freezing conditions hit the region for weeks on end, sending Japanese electricity prices to global records.</p> <p>This winter the regional crunch looks set to be played out on a global scale as Europe struggles for gas supplies, benchmark prices in the United States are around seven-year highs and economic growth in China is squeezed by power shortages.</p> <p>Tohoku’s deal also underlines the absence of Japanese buyers in the spot market as they rely on long-term contract supplies of <span class="caps">LNG</span>, where the average price was just over $10 mmBtu in August, according to official trade figures.</p> <p><span class="caps">LNG</span> inventories in Japan are also seasonally above average, but with electricity prices rising in recent weeks, Tokyo-based executives and traders say they are concerned about another winter of high prices and the threat of blackouts. </p> <p/> </div>