Japanese importers of liquefied natural gas may have to pay an extra $3.5 billion to suppliers after fuel prices rose more than expected over the past four years, according to an official involved in the contract talks.
Tokyo Electric Power Co. set aside $371 million to cover the higher costs for the year ending March 31. Osaka Gas Co. spokesman Toru Kinukawa said the utility may owe money to suppliers.
Australia's North West Shelf LNG venture is negotiating higher prices with customers, operator Woodside Petroleum Ltd. said.
Fuel costs already exceed limits set in gas contracts, said the official, who asked not to be named because of confidentiality agreements.
The price for Japan's LNG imports is rising at its fastest pace in at least eight years, according to data compiled by Bloomberg. The estimated increase would be 38 percent of last year's profits for Japan's biggest utilities.
"These companies will have to pay," said Cecile Jovene, head of the natural gas group at Facts Inc., whose 50 clients include most of the top 10 oil companies, said in a telephone interview from Singapore. "The pricing situation is not improving."
LNG, natural gas that has been chilled into liquid for transport by ship, is typically linked to the average cost of a barrel of oil imported by Japan, known as the Japan Crude Cocktail. The benchmark was at $90.66 a barrel in December. Japan is the world's biggest importer of LNG.
"The sellers are taking a hard line against us," Tepco Managing Director Masaru Takei said Jan. 30. "LNG supplies are tight."
Royal Dutch Shell PLC, Exxon Mobil Corp. and partners in Australia, Abu Dhabi, Brunei, Qatar and Malaysia are Japan's biggest suppliers.