Japan, the world’s biggest importer of liquefied natural gas, is in talks to start shipping the fuel from the continental U.S. after the Fukushima disaster last year shut most of the country’s nuclear power plants.
Japan is seeking to buy part of the combined 30 million metric tons a year of LNG to be shipped from Cameron in Louisiana, Cove Point in Maryland and Freeport in Texas, Hisayoshi Ando, director general of natural resources and fuel at the trade ministry, said in an interview.
LNG imports have risen as only two of Japan’s 54 reactors are operating after the March 11 earthquake and tsunami triggered the worst atomic disaster since Chernobyl. Increased U.S. gas output from shale formations drove prices to a 10-year low and led owners of LNG import terminals to consider exports.
“Japan is facing an unprecedented crisis,” Ando said, referring to the possibility of all of the nation’s nuclear reactors being closed by May for safety checks. “We are asking the U.S. to consider our circumstances,” and allow Japan to import from terminals from the U.S. mainland.
Japan’s senior vice minister of trade and industry, Seishu Makino, asked U.S. Energy Secretary Steven Chu in September to increase LNG exports, Akinobu Yoshikawa, deputy manager for the ministry’s petroleum and natural gas Division said Sept. 14.
Korea Gas Corp. (036460), GAIL India Ltd. and BG Group Plc (BG/) won contracts to buy LNG from Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana, set to be the first LNG exporter in the continental U.S. Japanese utilities lost out to them, Ando said.
Exports from the Freeport project may start as early as 2016, Freeport LNG Development LP said in December.
Japan imports LNG mostly from Southeast Asia, Australia and Qatar, according to data from the Ministry of Finance. Cargoes directed to Japan from the U.S. were about 310,000 tons last year, or 0.4 percent of incoming shipments.
Tokyo Electric Corp. and Tokyo Gas Co. had a joint deal to buy LNG from a plant in Alaska owned by ConocoPhillips and Marathon Oil Corp. The contract, signed in 1969, expired in March 2011, Tokyo Electric’s spokesman Ryo Shimizu and Tokyo Gas spokesman Takeshi Ujiie said Sept. 14, declining to say whether the companies still buy spot cargoes from the project.
“The impact will be big” if Japan gets approval to import LNG from the continental U.S., Tetsuya Tomita, deputy general manager of environmental resources and energy at Mizuho Research Institute, said Feb. 28 by telephone. Costs would be about half of current levels, including freight, he said.
Gas futures in New York were at $2.616 per million British thermal units at the close of floor trading Feb. 29. That compares with Japan’s LNG import price of $16.66 per million BTU as of Dec. 31, inclusive of freight costs, according to data compiled by Bloomberg.
Importing LNG from the U.S. will be cheaper than the current prices paid by Japan, according to Ando.
Metals, Rare Earths
Japan’s LNG imports surged 20 percent in 2011 and will likely rise 7.1 percent this year to 89 million tons, according to an estimate by the Institute of Energy Economics, Japan.
LNG is gas chilled to liquid form by cooling it to minus 260 degrees Fahrenheit (minus 162 Celsius) for shipment by tanker to destinations not serviced by pipelines.
Under a five-year plan to acquire global resources including LNG and metals, Japan is urging carmakers and other manufacturers to invest in overseas projects to secure supplies of raw materials, Ando said.
The government will identify natural resources that Japan particularly needs as well as supplying countries under the acquisition plan to be drafted in the spring of 2012, the Ministry of Economy, Trade and Industry said Dec. 20.
Japanese producers of cars, consumer electronics and steel rely on trading companies, such as Mitsubishi Corp. (8058) and Mitsui & Co., to source metals and other natural resources through supply contracts.
China’s tightening of export controls on rare earths, vital to the making of electric cars and smartphones, has also fueled concerns over foreign supplies and highlighted global dependence on Chinese shipments.
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