OREANDA-NEWS. April 14, 2014. In a move that is being seen as a step forward for making an Asian gas buyers' club, state-run gas supplier GAIL (India) Ltd has signed an initial pact with Japan's Chubu Electric Power Co. to explore the possibility of jointly procuring liquified natural gas (LNG).

The two companies signed a memorandum of understanding for the purpose in Seoul, where GAIL Chairman and Managing Director B.C. Tripathi is attending the Gastech Conference.

Tripathi said in a statement that Asian buyers are paying a premium for LNG even though the region is the biggest importer of the fuel.

There is enormous potential for gas demand in Asia, he added.

GAIL and Chubu may also explore cooperation in other areas such as shipping, a GAIL spokesman told BUSINESS TODAY on Monday. An integrated approach will allow the two big LNG importers to source the fuel on competitive terms, he said.

India and Japan are looking to form an Asian alliance - along with China, Taiwan and South Korea as partners - of LNG importers.

Many energy industry observers feel such an alliance would be a non-starter, but the MoU could boost the possibility of such a tie-up.

Japan is the world's biggest LNG importer, followed by South Korea.

India is also increasing its capacity to import gas. By 2017, India is likely to surpass South Korea as the world's secondlargest consumer of LNG.

Asian buyers are concerned over the international price of gas, which is now largely de-linked from crude oil prices. Asian buyers pay far more than customers in the US, where the shale gas boom has pushed prices of natural gas sharply lower.

The GAIL spokesman stressed that the aim of such efforts is to put Asian companies in a better position on the negotiation table.

Subsequently, this could lead to an independent benchmark for pricing of gas in the region. He added that there is a need to develop synergy among Asian countries by laying cross-border pipelines to bring gas from central Asia.