Engie SA may participate in Japan’s recently fully liberalised ¥18tn ($163bn) power market as LNG suppliers seek new revenue streams amid a price crash.
The Courbevoie, France-based company that was formerly GDF Suez partnered last year with Japan’s second-biggest utility, Kansai Electric Power Co, to swap liquefied natural gas cargoes, and also supplies fuel to Tohoku Electric Power Co. LNG prices have plunged about 70% over the past 19 months amid a global supply glut.
“Engie is carefully monitoring the opening of energy markets in Japan, and is at the beginning of its consideration,” said Patricia Marie, a spokeswoman for Engie. “We could consider entering the electricity and gas trading markets with local partners as the industry’s liberalisation progresses.”
Japan liberalised its retail power market last month and will open its natural gas market to new entrants in April 2017. The nation is aiming by March to list power futures on the Tokyo Commodity Exchange, and will start test trading with more than 10 companies as early as May 30.
LNG producers including Total, Woodside Petroleum are seeking to invest more in downstream activities like regasification terminals, pipelines and power plants to boost demand. Total’s full integration makes it resilient and it may invest in an independent power plant, chief executive officer Patrick Pouyanne said last month.
Japan must convince domestic utilities and retailers to become regular buyers and sellers of electricity contracts in order to increase liquidity and attract foreign investors into the market, said Andrew Koscharsky, director of energy at RCMA Group, which trades electricity contracts in Asia. If that’s done, Japan’s power market might be the next avenue of growth for large LNG producers.
The country’s power market was valued at about 18tn yen in the year ending March 2015, according to Japan’s Ministry of Economy, Trade and Industry.