Mitsubishi Corp. (8058), Japan’s biggest commodity supplier, rose the most in four months in Tokyo trading after buying a stake in a Canadian gas field that may hold enough fuel to sustain Asia’s No. 2 economy for 37 years.
The shares jumped 4.8 percent, the largest gain since Oct. 27, to close at 1,970 yen. The benchmark Nikkei 225 Stock Average increased 1.1 percent.
Mitsubishi agreed to pay Encana Corp. (ECA) C$1.45 billion ($1.46 billion) for 40 percent of Cutbank Ridge, the Japanese company’s second shale gas asset in Canada, and will further invest the same amount over five years to develop the area. The field covers 409,000 net acres of the undeveloped Montney shale formation, and is estimated to hold 130 trillion cubic feet of gas resources, Calgary-based Encana said Feb. 17.
“With the acquisition of additional natural gas resources, Mitsubishi will accelerate LNG studies” to allow the export of the fuel to Asia, the Tokyo-based company said in a statement.
Mitsubishi is already developing the Cordova Embayment project in British Columbia, leading the first shale gas project by Japanese gas and power utilities in Canada. Korea Gas Corp. (036460) in June joined the project, operated by Penn West Petroleum Ltd.
Cordova Embayment and Cutbank Ridge, which straddles the provinces of British Columbia and Alberta, can provide feedstock for Mitsubishi’s ambition to export liquefied natural gas to Japan and other Asian nations, the company said. Mitsubishi plans to have a liquefaction plant and export terminal ready for export to Asia from 2018, the Nikkei said Jan. 18, without saying where it got the information.
Japan, which relies on overseas gas for almost all of its needs in the fuel, imported 99 billion cubic meters, or 3.5 trillion cubic feet, in 2010, according to the International Energy Agency.
The total “recoverable” resources from Cutbank Ridge exceed 35 trillion cubic feet, according to Mitsubishi. Daily output can reach 3 billion cubic feet in the next decade, and the project can produce gas for more than 50 years, it said.
Securing investment from Mitsubishi eight months after PetroChina Co. (857) walked away from the deal allows Encana to fund development of the 635,000 net acres in British Columbia and Alberta. The Canadian company announced $3.5 billion in asset sales last year and started to look for partners to share costs after gas prices in North America declined.
The Mitsubishi transaction is expected to close this week, Encana Chief Executive Officer Randy Eresman said on a conference call Feb. 17.
Barclays Capital is acting as Mitsubishi’s financial adviser on the deal, while Bennett Jones LLP is providing legal advice.
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