Sakhalin Energy, which produces liquefied natural gas and oil in Russia, wants to raise long-term contract prices to Asia, a move that could push energy prices higher in Japan and South Korea, Bloomberg News reported on Tuesday.

The discussions with customers in North Asia began late last year as part of a regular price review conducted every five years, Bloomberg News reported, citing people with knowledge of the matter.

The buyers have not accepted the proposal for higher rates yet, even as Sakhalin Energy sees a tighter gas market now compared with when the previous review was held, the people said to Bloomberg News, asking not to be named because the information was private.

The report said Sakhalin Energy is requesting long-term LNG prices in the range of 14% link to Brent oil, a common practice for contracts of the super-chilled fuel, according to the people. Contract prices are currently in the 13% range, they added.

Sakhalin did not immediately respond to a Reuters request for comment.

Sakhalin Energy’s Sakhalin-2 operating company was transformed into a Russian entity via a presidential decree amid Western sanctions against Moscow over its actions in Ukraine.

Apart from Gazprom GAZP.MM, Japanese companies Mitsui 8031.T and Mitsubishi 8058.T also have stakes in the project, jointly owning 22.5%.

The Sakhalin-2 LNG export plant supplied nearly 10% of Japan’s LNG needs last year, and has not been targeted by Western sanctions due in part to the need to ensure energy security, Bloomberg reported.

The move comes amid a broader pattern of declining long-term LNG contract prices.

With the beginning of new projects in the U.S. and Qatar, the market is anticipated to be oversupplied as early as next year, forcing suppliers to lower prices in order to lock in clients.
Source: Reuters (Reporting by Anjana Anil in Bengaluru, Editing by Louise Heavens)