Tokyo Electric Power Co. (9501), Japan’s biggest buyer of LNG, is considering purchases of the fuel from natural gas export projects being developed on the West Coast of North America, said three people with knowledge of the matter.
The utility, known as Tepco, is looking at West Coast projects because liquefied natural gas supplies wouldn’t need to pass through the Panama Canal en route to Asia, two of the people said. That would reduce toll fees and shipping times, according to the people, who asked not to be identified because they aren’t authorized to speak to the media.
Hiroshi Itagaki, a Tokyo-based spokesman for Tepco, declined to comment on the company’s potential LNG purchases.
“There is no doubt LNG from West Coast projects would be highly competitive,” Junzo Tamamizu, the managing partner of Clavis Energy Partners LLC, a Tokyo-based consulting and advisory firm, said in a phone interview today. “That’s why Asian players would be naturally interested in the projects.”
Oregon LNG estimates shipments from its facility to Tokyo will be $2 per million British thermal unit cheaper than cargoes from the U.S. Gulf Coast, CEO Peter Hansen said in October. Spot cargoes sold into Northeast Asia last week were priced about $13.30 per million Btu, according to data published by Energy Intelligence Group.
Japan imported a record 87.49 million metric tons of liquefied natural gas last year to supply the world’s third-biggest economy after the Fukushima disaster in 2011 prompted the shutdown of all the nation’s nuclear plants. Tepco intends to buy as much as 10 million tons a year of lean, or low-energy LNG from projects such as those fed by North American shale gas.
The utility agreed to buy a total of 1.2 million tons a year from Sempra Energy’s Cameron LNG facility in Louisiana on the U.S. Gulf Coast through Mitsubishi Corp. and Mitsui & Co., Itagaki said. Tepco is in talks with Mitsui to buy more gas from the project, he said.
Cameron LNG is scheduled to begin liquefying gas in late 2017 and will be fully operational by 2018, according to San Diego-based Sempra, which owns 50.2 percent of the facility