UPDATE 1-Japan's JERA to integrate EDF Trading's LNG business into joint venture

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TOKYO, Dec 14 (Reuters) - Japan's JERA Co, a fuel purchasing joint venture of Tokyo Electric Power and Chubu Electric Power, has agreed with French utility EDF's trading arm to expand their existing cooperation into liquefied natural gas (LNG).

Their basic agreement on LNG would combine the French firm's LNG business into JERA's standing trading venture with EDF Trading (EDFT) for coal and freight that was kicked off in April this year.

"JERA and EDFT believe that there is significant room for optimizing LNG on a global basis, establishing a more liquid market, and over time developing a clear pricing signal for LNG in Asia," JERA said in a statement.

The deal with EDFT, which annually trades around 3 million to 5 million tonnes of LNG, allows JERA to have EDF Trading's access to European LNG and gas markets.

JERA is the world's biggest LNG buyer with annual intake of around 35 million tonnes.

It's critical that JERA have the flexibility to adjust to volatile LNG demand in the mid- to long-term in Japan amid the uncertainties over the restart of nuclear plants and the growth of renewable power in Japan, said Izumi Kai, JERA general manager of the trading business development unit.

The new agreement between the two would allow the firms to collaborate on LNG business under JERA Trading for their parent firms, he said.

JERA expects to reach a final agreement on the LNG venture next year, with the completion of the integration in the second half of 2018, Kai said.

The coal and freight venture between the two is 67 percent owned by JERA and 33 percent by EDFT.

(Reporting by Osamu Tsukimori; Editing by Tom Hogue)