Chubu buys LNG from Malaysian firm

Chubu buys LNG from Malaysian firm

Chubu Electric Power Co. on Wednesday signed a contract with Malaysia LNG to purchase liquefied natural gas on a spot basis, the first Japanese company to do so, the Nihon Keizai Shimbun reported in its Thursday morning edition, citing sources close to the deal.

Power utilities and gas companies in Japan usually sign at least 20-year LNG-procurement agreements. Chubu aims to cut its purchase costs through the spot contract, which will enable it to buy only the amount of LNG it requires whenever necessary.

Under the deal, Chubu will likely buy LNG in 60,000-ton units, expecting the LNG price per ton to be similar to that in a long- term contract.

The agreement should lead to lower power-generation costs, by securing a stable supply of LNG and removing the need to increase power generation using higher-priced fuel oil when LNG is in short supply, the sources noted.

The new deal is also aimed at mitigating the risk of disruption in LNG supply. Chubu currently holds long-term contracts with LNG suppliers in Qatar, Indonesia and Australia.

Malaysia LNG is a joint venture between the state-run oil company Petronas, Mitsubishi Corp. and others.

The company, which produces about 15 million tons of natural gas a year, has long-term contracts with Tokyo Electric Power Co. and Kansai Electric Power Co.-- Dow Jones