Pradhan courts Japan for building LNG facilities

India and Japan today discussed frameworks of greater cooperation in building LNG infrastructure in India and elsewhere in Asia, Oil Minister Dharmendra Pradhan said.

After a meeting with Japan's Trade Minister Hiroshige Seko, Pradhan said the two nations discussed possibilities for joint venture energy projects in Asia and Africa.

"Met Mr. @SekoHiroshige, METI, Japan. Discussed about greater synergies between India & Japan in areas of mutual interest specially in oil & gas. Explored opportunities to establish a global LNG market reflecting true LNG demand & supply," he said in a tweet.

The two also discussed frameworks for "greater cooperation in building LNG infrastructure in India and Asia".

"Discussed abolition of destination restriction clause & reliable LNG spot price to achieve destination flexibility & cargo swapping between India & Japan," he said.

Most of long-term contracts for supply of liquefied natural gas (LNG) are currently restricted by Destination Restriction Clause, which prevents buyers from re-selling imports to third parties.

Japan, the world's largest LNG importer, and India, which is the fourth biggest importer, have been pushing for more flexible supply contracts. They want suppliers like Qatar and Australia to move away from being locked into fixed supply contracts that run for decades and make buyers take fixed amounts on monthly volumes irrespective of demand, with no right to re-sell surplus supplies to other users.

Last October, India's Cabinet approved signing of a Memorandum of Cooperation with Japan to help diversify gas supplies, strengthen energy security and lead to more competitive prices.

"Dwelled on India's concrete plans of transforming into a gas based economy. Explored Opportunities for Japanese investments in India's gas infrastructure & SPR Program. Discussed possibilities of JV projects in the energy sector in Asia & Africa," Pradhan said in another tweet.

He also asked the Japanese minister for "technical collaborations, technology transfers, increased investments and greater cooperation" to enhance India's skill ecosystem.

That pact followed Japanese Fair Trade Commission's June 2017 ruling that all new contracts for liquefied natural gas (LNG) must not contain restrictions on the resale of cargoes after it completed a formal investigation into the destination clauses.

LNG buyers have been for years urging the need for more flexible LNG contracts, especially when it comes to destination clauses that restrict them from reselling or swapping cargoes.