REGIONAL LNG: Japan LNG buyers seek price cut from North West Shelf

Noting generous terms for Chinese buyers, Osaka Gas Co. Ltd. Tuesday said Japanese utilities might want a price cut of up to 15 percent from Australia's North West Shelf liquefied natural gas operation, Dow Jones reported Tuesday.

Speaking at the South East Asia Australia Offshore Conference in Darwin, Osaka general manager Yasuo Ryoki said Japanese buyers will be looking for lower prices from the Shelf after reports the Australians offered a cut price to Chinese buyers as part of a A$25 billion LNG supply deal there last year.

"There will be a discussion to decide the difference of the price (with China)," Yasuo Ryoki said in response to a question.

Asked the likely extent of the price fall, Ryoki said it was difficult to predict, but suggested a figure of around 15 percent. That is in line with some analyst expectations for a 10 percent to 20 percent fall.

The North West Shelf partners, led by Australia's Woodside Petroleum Ltd. , are in the process of renegotiating long term sales contracts with Japanese buyers that are up for renewal in 2008.

In addition to the China deal, Ryoki said that Russia's Sakhalin LNG project is aggressively marketing its gas in Japan "so there will be some reduction in the price."

A further weight on prices is the deregulation of the Japanese power sector that is putting increased competitive pressure on the utilities, which can be expected to be passed onto LNG suppliers, he said.

Sakhalin Energy Investment Co., a joint venture between Royal Dutch/Shell Group , Mitsui & Co. and Mitsubishi Corp. plans this summer to begin construction of two LNG plants at the port of Prigorodnoye in southern Sakhalin.

The North West Shelf is an equal six-way joint venture comprising Woodside, BHP Billiton , Shell, ChevronTexaco , BP Plc , and Japan Australia LNG, itself an equal joint venture between Japan's Mitsubishi Corp. and Mitsui & Co.(*)