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Tokyo Commodity Exchange moves lower LNG prices.

| TOKYO, Nov 8 (KUNA) -- The Tokyo Commodity Exchange plans to tie up with a Singapore company this fiscal year to create an over-the-counter market for liquefied natural gas (LNG), a major Japanese business daily reported Friday.

The exchange operator, Tokyo Commodity Exchange Inc., will call on trading houses as well as power and gas companies to trade on the planned market, according to the Nikkei Shimbun. The move is aimed at setting a benchmark LNG price that reflects the actual LNG supply-demand balance, the daily said.

The Tokyo Commodity Exchange and the Singapore-based Ginga Petroleum Pte Ltd. will set up a new company to operate the LNG market, the report said, adding that it will be the first step toward an LNG futures market, which Japan's Ministry of Economy, Trade and Industry has been pushing for.

Japan, the world's largest LNG importer by volume, currently purchases LNG at prices about four times higher than those in the US. Lowering LNG procurement costs is one of the ministry's top priorities, and the ministry plans to list LNG futures on the new market in fiscal 2014.

Ginga will likely have a 60 percent stake in the new company; the Tokyo Commodity Exchange will hold the remainder. The new company will also act as a broker that encourages trading among market participants.

Ginga engages in brokering services for petroleum products in Singapore. Currently, Japan buys about 80 percent of its LNG imports through a system that grossly distorts LNG prices on the high side.

The prices Japan pays are based on 10 to 20-year contracts linked to crude oil prices. In the US and UK, which have abundant sources of natural gas, LNG prices are determined by the overall natural gas market.

While Japan's LNG import prices have been high - they follow crude oil prices - US natural gas prices have dropped on growing shale gas output and other factors. (end) KUNA 081108 Nov 13NNNN

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Publication:Kuwait News Agency (KUNA)
Geographic Code:9JAPA
Date:Nov 8, 2013
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