Japan’s JERA and France’s EDF sign deal to create LNG trading giant

Japan’s LNG importing giant Jera and France’s EDF have signed a basic agreement to integrate their liquefied natural gas trading operations, which could potentially create a leader in the market.

The non-binding agreement follows integration in April of EDF’s coal and freight trading business into JERA Trading, which is 67-percent owned by JERA and the rest by EDF Trading.

With demand for LNG in Japan becoming increasingly variable and difficult to predict and the ramp up in US LNG liquefaction, Europe has become a key balancing market for excess global LNG, JERA, the joint venture between Japanese utilities Chubu Electric Power and Tokyo Electric Power, noted in a statement.

As a result, JERA and EDF Trading “believe that there is significant room for optimising LNG on a global basis, establishing a more liquid market, and over time developing a clear pricing signal for LNG in Asia,” the statement said.

Both companies have significant positions in the LNG market.

JERA has been focusing on developing flexible LNG supply sources and creating new LNG demand globally. EDF Trading has a third party LNG trading business and access to the European LNG and gas markets to enable the unloading, reloading and storage of LNG in-tank, and is one of the largest financial JKM traders in the market.

“By bringing together their resources, the companies will be in a better position to respond to uncertainties of LNG demand in Japan and Europe and supply JERA and EDF’s wider global portfolio, to optimise their operations and improve the competitiveness of LNG in the market, as well as supporting the development of deeper, more liquid LNG markets,” the statement said.

Subject to signing a binding deal, JERA and EDF Trading would combine their LNG trading activities through JERA Trading, and JERAT would become the exclusive LNG optimiser for JERA and the EDF Group, managing their collective short-term optimisation activity in the LNG markets.

Following the transaction, JERAT would become one of the largest utility-owned seaborne energy optimisers, with activities in the LNG, coal and freight markets spanning Asia, the Pacific and the Atlantic Basins.

Around 300 people will be involved in the energy optimisation activities with offices in Japan, Singapore, the UK, the United States and the Netherlands.

As part of the transaction, JERA and EDF Trading are also in talks to collaborate on gas and power supplies for JERA’s US liquefaction position at the Freeport LNG terminal.

Talks will continue towards a final agreement which is expected to be reached in 2018, according to JERA.