* LNG buyers have better chances to get what they want
* Increased spot purchases and short-term contracts
* Not directly affected by rising tension in Middle East
By Yuka Obayashi
TOKYO, Sept 20 (Reuters) - JERA, the world's biggest buyer of liquefied natural gas (LNG), has renegotiated some of its contracts with suppliers to drop clauses that restrict where the cargoes can be sold, in a move to gain more flexibility, an executive told Reuters
Japan's Fair Trade Commission (JFTC) in 2017 ruled that destination restrictions that prevent the reselling of contracted LNG cargoes breach competition rules.
Since the ruling, Japanese LNG importers have signed new term contracts without the clauses but it is rare that an LNG buyer has confirmed that it was able to eliminate the clauses from the existing contracts.
"We have been asking sellers to scrap the destination clauses from the current contracts and some of them have accepted our request," Sunao Nakamura, JERA's managing executive officer, told Reuters in an interview on Thursday.
Buyers have gained the upper hand as growth in new supplies, mainly from Australia and the United States, has exceeded demand.
"Since the supply-demand balance has relaxed compared with 5-6 years ago, buyers have better chances to get what they want," Nakamura said.
Though Japanese buyers get LNG mostly through long-term contracts, JERA, a joint venture between Tokyo Electric Power and Chubu Electric Power Co, has increased spot purchases and short-term contracts that cover less than 4 years.
New term contracts also use different types of price formula, including a LNG spot price index or a gas price index in Europe, he said.
"With growing uncertainty of energy demand in Japan due to unexpected weather patterns and increasing use of renewable energy, we can't make commitment without flexibility," he said.
An inexorable decline in spot market prices for LNG this year has pushed Japanese utilities to be more aggressive in price reviews built into traditional long-term contracts linked to oil prices.
According to reports, Japan's second-biggest city-gas company, Osaka Gas, is in arbitration with Exxon Mobil's PNG LNG project in Papua New Guinea after failing to get a reduction in prices during a price review.
JERA is not currently in arbitration with any supplier, Nakamura said.
Growing tension in the Middle East has raised concerns over energy security in Japan which heavily relies on the area for oil.
JERA, which buys about 20% of its LNG from Qatar and United Arab Emirates, has not been directly affected by the rise in tensions in the Middle East after the attacks on Saudi Arabia's oil facilities last week, Nakamura said. "But we will need to carefully watch oil prices as LNG prices in a big portion of our contracts are linked to oil indices," he said.
Reporting by Yuka Obayashi; Editing by Kim Coghill