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UPDATE 1-Japan's JERA signs three-year LNG purchase contract with Malaysia

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(Adds comments from company, details)

TOKYO, Oct 25 (Reuters) - JERA Co, Japan's biggest liquefied natural gas (LNG) buyer, said on Wednesday it signed a three-year LNG purchase agreement with a subsidiary of Malaysian state energy company Petroliam Nasional Bhd (Petronas) starting in 2018.

JERA, the fuel purchasing joint venture between Tokyo Electric Power and Chubu Electric Power , will buy 2.5 million tonnes per year (tpy) of LNG from Petronas subsidiary Malaysia LNG Sdn Bhd starting in April of next year, the company said in a statement announcing the so-called heads of agreement.

The deal is JERA's first since the Japan Fair Trade Commission's (JFTC) ruling in June that declared destination restrictions, which limit where a LNG cargo can be sold, to be anti-competitive. This deal with Malaysia LNG is "in line" with the commission's ruling, JERA said in the statement. "JERA believes this will contribute to its ability not only to respond to uncertainties in LNG demand, but also to put JERA in position to optimize its LNG operations," the company said.

The Japanese firm's existing 15-year long-term contract for 4.8 million tpy of LNG with the firm expires next March.

The LNG will be sold as either delivered ex-ship (DES), where the buyer takes the cargo at an agreed destination, or on a free-on-board (FOB) basis, where the buyer takes the cargo once it is loaded onto a ship, JERA said. The JFTC's June decision said having a destination clause in a FOB contract is "likely to be in violation" of the nation's Antimonopoly Act, while having the clause in a DES contract and requiring a seller's consent is not problematic in itself.

But, the regulator said that if the seller rebuffs a buyer's request for diversion out of necessity and reasonableness, such a refusal is likely to be in violation of the law.

(Reporting by Osamu Tsukimori; Editing by Sherry Jacob-Phillips and Christian Schmollinger)

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