JERA, a joint venture between Tokyo Electric and Chubu Electric, contacted LNG sellers after Japan's Fair Trade Commission ruled a fortnight ago that clauses in free-on-board LNG sale and purchase agreements that restrict resale of LNG were likely to be anticompetitive.
"We have already taken action to approach sellers," JERA senior executive vice president Hiroki Sato told Reuters.
"We still need further discussions on details, but it looks like this would be accepted."
JERA, which has 0.417% equity in Chevron Corporation's Gorgon project, imports 40 million tonnes of LNG per annum in total, including about 35MMtpa under long-term contracts.
JERA and other Japanese buyers are also looking to change their contracts.
These include the country's biggest city-gas buyer Tokyo Gas -involved in Gorgon, ConocoPhillips' Bayu-Undan and Darwin LNG projects, Woodside Petroleum's Pluto, Shell's Queensland Curtis LNG and Inpex's Ichthys - which said that it would seek more flexibility in its new contracts.
Chevron signed a number of sales and purchase agreements with buyers for Gorgon gas including SK LNG Trading (4.15MMtpa), Osaka Gas (1.375MMtpa), Tokyo Gas (1.1MMtpa), JERA (1.44MMtpa), Kyushu Electric and JX Nippon Oil and Energy (300,000tpa each) and GS Caltex of South Korea (250,000tpa).
Sato, who negotiated Asia's first destination-free contract in 2000 when he was with Chubu Electric, said sellers could ask buyers to make concessions in return for removing destination restrictions.
"That includes a request to raise prices; but FTC takes a legal approach and it's not commercial," he said.
"So if there were sellers to make that demand, they do not understand FTC's guidance at all."
Wood Mackenzie's Perth-based Australasia lead oil and gas analyst Saul Kavonic told Energy News that Australia was likely to be most exposed to the potential impact of that decision as it has a large amount of LNG FOB contracts sold into Japan.
However, the firm does not expect the decision is likely to severely impact existing contracts, but it will impact future contracts once the existing contracts roll off.
Japan appears to be going down a similar route to Europe did in 2004, when the European Commission ruled that destination clauses infringe competition.
That led to clauses being reviewed in a number of gas and LNG supply arrangements, supporting greater flexibility.
Kavonic says that while the market obsesses about current impacts for LNG projects, the longer term consequences for buyers may have been overlooked in the FTC's announcement.
He said the move could give buyers greater leverage to negotiate more favourable terms during the current market glut.
"However in the longer term, when the market tightens, a prohibition on destination restriction clauses or clauses allowing profit sharing for cargo diversions, may result in LNG sellers becoming less amenable to providing volume flexibility in their contracts, lest it provide buyers with free options to arbitrage with the spot market," he said.
"There is no free lunch here, and longer term, when market tightens again, buyers may be less able to secure volume flexibility as a result of this decision, meaning buyers will bear a greater burden to optimise their supply in the spot market to meet their operational requirements."
Last week Tokyo Gas, Japan's biggest city-gas supplier, confirmed it was in talks to renew supply contracts and will push to revise terms to get more flexibility and cut prices.
It has 12 supply contracts and it is reviewing their terms to decide what action to take.
Tokyo Gas has long-term LNG supply deals with Qatargas I, Brunei LNG, Malaysia LNG Dua, Russia's Sakhalin LNG, as well as with Australia's Withnell Bay, Darwin, Pluto, QCLNG and Gorgon projects.
Its earliest contract, with Qatargas, expires in 2021. The latest one, with Gorgon, expires in 2039.
