Cabinet clears pact with Japan for setting up flexible LNG market

NEW DELHI: The Union cabinet has approved signing of an agreement with Japan to enable swapping of liquefied natural gas ( LNG) supplies from overseas so as to save on transportation costs, and to build a gas trading platform in the country.

“The memorandum of cooperation (MoC) provides a framework to cooperate in facilitating flexibility in LNG contracts, abolition of Destination Restriction Clause and also explore possibilities of cooperation in establishing reliable LNG spot price indices, reflecting true LNG demand and supply,” an official statement said on Wednesday.

Japan is the biggest importer of LNG while India is the fourth largest importer. Supplies can be swapped between India and Japan from sources that are closer to each country, thereby helping the two countries save on transportation cost, oil minister Dharmendra Pradhan said, illustrating how India can offer its share of supplies from Australia to Japan and in turn take the latter’s share of supplies from Qatar. MoC will pave way for such agreements in the future. At present, there is no such agreement.