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Gulf Energy Considers JKM-Linked LNG Contract with 20-30 cents/MMBtu Discount

Thailand’s Gulf Energy is considering a contract for seven LNG cargoes per year for 2025-2026. Current offers are linked to JKM with a spread of 20-30 cents/MMBtu, in line with other similar Thai contracts.

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Gulf Energy Considers JKM-Linked LNG Contract with 20-30 cents/MMBtu Discount

Thailand’s Gulf Energy is currently evaluating a liquefied natural gas (LNG) contract for seven cargoes per year for 2025-2026, with offers linked to the JKM (Japan-Korea Marker) and a spread of 20 to 30 cents/MMBtu compared to the reference index, according to sources close to S&P Global Commodity Insights.

The offers, valid for two weeks, will allow Gulf Energy to choose a final supplier by mid-October. The company aims to finalize this acquisition through bilateral negotiations, the sources said.

Potential Volume Expansion

Gulf Energy is considering securing more volumes than the initially planned seven cargoes if the proposed prices prove competitive. The cargoes will be delivered to the Map Ta Phut LNG Terminal and will be supplied to both Gulf Energy and Hin Kong Power, a joint venture in which Gulf Energy holds a 49% stake.

Currently, Gulf Energy has not yet begun its own LNG imports, despite obtaining a license in 2020 to import 300,000 metric tons of LNG per year. In February 2024, Gulf Energy announced the arrival of the first cargo imported by Hin Kong Power, under a contract with Gunvor, which supplies approximately 0.5 million metric tons of LNG per year on a DES (Delivered Ex Ship) basis.

Alignment with Pricing Practices

The Southeast Asia Marker (SEAM), which reflects the price of LNG cargoes delivered to Thailand, was estimated at $12.725/MMBtu for November as of October 9, with a discount of 20.5 cents/MMBtu compared to the JKM. The monthly spread between JKM and SEAM generally ranges between 20 and 30 cents/MMBtu, consistent with current practices in the Thai market.

Recent Thai agreements confirm that JKM remains the preferred pricing reference for short-term contracts in the country. In September 2023, Gunvor signed a contract with Hin Kong Power, also based on the JKM index. Similarly, the Electricity Generating Authority of Thailand (EGAT) awarded an LNG supply tender in June 2024 for the period 2025-2027 to Gunvor Singapore Pte. Ltd on a JKM basis at JKM minus 25-30 cents/MMBtu.

Another contract awarded by EGAT in 2023, covering 1.2 million metric tons of LNG for the period 2024-2027, was signed with BP and PetroChina at prices showing significant discounts compared to the JKM, according to multiple market sources.

Spot market purchases by Thai buyers are often made either on a fixed price basis or based on JKM. The Energy Policy and Planning Office, part of the Thai Ministry of Energy, has recommended that LNG procurement for short-term and spot contracts with a duration of less than five years not exceed the JKM price adjusted by a constant value, the amount of which has not yet been disclosed. However, market sources believe that this value could fluctuate according to market conditions.

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