Japan's Inpex to make Singapore a hub for trading

SINGAPORE/TOKYO - Japan's top oil and gas explorer Inpex Corp has set up an office in Singapore to market its rising output of crude and condensate and trade liquefied natural gas (LNG), sources said.

The Singapore trading office will provide Inpex, which traditionally sells its output into Japan, with access to a bigger pool of buyers and sellers beyond its home market where oil demand is shrinking.

Inpex's move is part of a growing trend of oil and gas producers taking a more active marketing approach by selling products directly to consumers.

Trading company Mitsui & Co and refiner TonenGeneral moved their oil trading functions to Asian oil hub Singapore from Japan last year.

Inpex is readying for a jump in production in the next few years, mainly from a multi-billion dollar LNG and condensate project in Australia. It is also expanding its LNG network in Japan to meet rising power generation demand.

The company expects its oil and gas production to jump more than two-thirds to around 700,000 barrels of oil equivalent per day (boepd) when the Australian Ichthys project starts up in late 2016, from 408,000 boepd in the year ended in March.

With a trading post in Singapore, it could be easier for Inpex to buy LNG to feed its new receiving terminal until Ichthys starts up, said Reiji Ogino, senior analyst at Mitsubishi UFJ Morgan Stanley Securities.

"Inpex has emerged as an importer with the start-up of the Naoetsu LNG receiving terminal this month," he said. "Spot (trading) is not the (company's) first priority, but this has widened its choices."

The Naoetsu terminal in Niigata prefecture in northwestern Japan has two LNG tanks, each with storage capacity of 180,000 kilolitres, and has capacity to receive and regas about 1.5 million tonnes per annum of LNG.

Inpex spokesman Tetsuji Yoshimine declined to comment. Inpex owns more than 60 per cent of the Ichthys LNG complex which can produce 8.4 million tpy of LNG, 1.6 million tpy of liquefied petroleum gas and about 100,000 barrels per day (bpd) of condensate at its peak, the company said on its website.

Falling oil demand

Japan is expected to use less oil in the future due to improving fuel efficiency, population decline and a drive toward renewable energy.

The country's oil product demand is projected to fall by an average 1.9 per cent annually through 2030-31, the government's energy committee under the Ministry of Economy, Trade and Industry said last year.

Other than Ichthys, Inpex has a 7.56 per cent stake in Kazakhstan's giant Kashagan oilfield although output was halted this year due to a pipeline leak and a restart date remained unclear.

The upstream explorer has equity share of crude and condensate from Abu Dhabi, Indonesia, Australia and East Timor. It started selling Angolan Nemba crude this year.

Inpex has targeted doubling its output to 1 million boepd by 2020-2025. The company is also partnering China's CNOOC and JGC Corp in Aurora LNG, one of several proposed LNG terminals on Canada's west coast.