The West

Amid increased tensions between proponents of LNG projects and their buyers, one of Japan's captains of industry says he cannot envisage the oil and gas industry rushing to follow iron ore by axing its traditional long-life pricing mechanism in favour a transparent spot-price regime.

But Inpex president Toshiaki Kitamura, who has the benefit of being both a supplier and buyer of LNG, would not rule out an eventual shift "in the very long run" to an overarching spot price mechanism.

"In Japan or in Asian energy markets we don't at this moment have any transparent pricing for spot so we don't have that basis for making a spot price," he said yesterday on the sidelines of the APPEA conference.

Mr Kitamura - whose com- pany is behind Japan's biggest investment in Australia, the $US34 billion Ichthys project which will be capable of meeting about 7 per cent of Japan's gas imports demand - would not be drawn on whether his view was shared by Japan's utilities which underpin much of the $200 billion in LNG developments in Australia.

But his caution was mirrored by International Gas Union president Jerome Ferrier, who said spot prices for LNG buyers were not the guaranteed panacea to high gas prices.

"People think the spot price drives the long-term market price down," Mr Ferrier said.

"It's important to keep in mind that the spot market is about a market of lower prices, it is the flexibility, in terms of diversifying your supplies and in terms of arbitrage opportunities and in terms of security of supply in times of a crisis."

The price of spot LNG cargoes has traded above $US18 per million British thermal units, compared with a Henry Hub price for domestic gas in the US that remains about $US4/mBtu.

The disparity has been the reason Japan's corporates, which combined buy more LNG than any other country, have been arguing for a pricing shift.

There are sections of the industry that look at what happened with iron ore, though the driver was on the side of suppliers, not buyers.

The move has largely benefited suppliers but continues to frustrate buyers.

A counter argument to the spot price push is that Japan Inc's push for lower prices does not factor in Australia's history of long-term reliable production.

The West Australian

Latest News From The West

Roy Hill boss Barry Fitzgerald says the iron ore producer will be looking to recruit another 500-600 mineworkers over the next 18 months as the company ramps up its Pilbara operations.

The teenager alleged to have been the main methamphetamine supplier to Northam has been released from prison to live in a hostel in Perth, despite a magistrate expressing her shock at the …

Colin Barnett has provided strong endorsement of the WACA’s plans to redevelop its ground to complement the new Perth Stadium despite saying that no request for funding has been received by the …

Perth’s deputy lord mayor James Limnios last night called for free parking on Langley Park for up to 2000 cars in the second half of this month in a bid to attract more shoppers to the city.

WA has scored another major sporting coup with a blockbuster rugby union Bledisloe Cup clash between the Wallabies and All Blacks to be played at the new Perth Stadium.

Popular videos

Our Picks

Follow Us

More from The West