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Korea, China and Japan to Go Ahead with Formation of LNG Buyer Alliance

Korea, China, and Japan are discussing a launch of LNG buyers’ club.

Korea, China, and Japan, which import half of all LNG in the world, will launch an LNG buyers’ club.

KOGAS of Korea, CNOOC of China and JERA of Japan recently signed an MOU on LNG business cooperation. “Korean, Chinese and Japanese firms with big buying power will build partnership to enhance their negotiation power in purchasing LNG,” said an official of KOGAS. “We understand that the Korean government is having discussions on this matter.”

A government official said, “If the three countries take the first step towards cooperation, the Korean government will also try to persuade China, which has relatively weak cooperative relations with Korea.”

Korea, China and Japan import 55.54% of total LNG in the world. But the absence of this cooperation has weakened their negotiation power. As a consequence, the terms of purchase were relatively unfavorable compared to LNG exporting countries. But if the three countries are allied, things will change. The global LNG market can be transformed from a supplier’s market to a buyer’s market. Korea, China and Japan mainly import LNG from Qatar, Australia and Malaysia among others.

As environments surrounding the LNG market recently changed friendly to Korea, China and Japan, the three nations began to strike back. After the US shale gas came out, oil prices with a significant impact on LNG prices, fell, and LNG production increased in Australia among other countries, oversupply weakened LNG suppliers’ voices. An era of the oligopoly of LNG is coming to an end.

Prices also fell. In 2015, LNG spot prices in East Asia were half compared to the previous year. Conversely, exporting countries are now in a position to negotiate deals with companies in major consumption countries to sell LNG.

Of course, LNG exporting countries’ checks are reckoned with. Qatar, the world’s largest exporter of LNG, is particularly sensitive. A senior official at Qatar Petroleum Corp. said in a recent interview with Reuters, “LNG is currently being oversupplied but when the market cycle change, LNG exporting countries will regret their actions.

The Original Posted by Michael Herh/Business Korea