Taiwan wants flexible LNG contracts, minister says

Buyers want take-or-pay conditions in contracts to be eased and fewer restrictions on where LNG cargoes can be delivered, Chen said yesterday at the South East Asia Australia Offshore Conference in Darwin, Australia.

Taiwan’s demand for LNG is forecast to rise 5 percent to 8 million metric tons this year, increasing to 10.5 million tons in 2010 and to 16 million tons in 2020. LNG meets more than 90 percent of gas demand in Taiwan, Asia’s third-largest buyer of the fuel. Power producers account for about 75 percent of the island’s gas consumption.

“Introducing greater competition in the trade of LNG will help to improve the long-term security of supply as well as create wider access to LNG sources,” Chen said. “A key element to achieving these reforms would be providing LNG contracts with more flexibility.”

Investment risks faced by sellers could be reduced by the use of forward contracts, futures and options, Chen said.

“These tools will be necessary to deepen the LNG market and contribute to its long term success,” he said.

CPC Corp., Taiwan’s only natural gas importer, has long-term purchase agreements for 5.6 million tons a year of LNG from Indonesia and Malaysia. A 25-year contract with Ras Laffan Liquefied Natural Gas Co., known as RasGas, for as much as 3 million tons a year, will start in 2008.

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