Osaka Gas in Talks With Dominion, Sempra, Freeport for LNG

Osaka Gas Co., Japan’s second-biggest city gas distributor, is in talks to import liquefied natural gas from U.S.-based Dominion Resources Inc., Sempra Energy and Freeport LNG LLC.

The company may invest in planned LNG-export plants in Maryland, Louisiana and Texas and natural gas fields near the facilities, Tetsushi Ikuta, general manager of the utility’s energy resources and international business development, said in an interview. He declined to give the cost of the investments.

Japan is increasing LNG imports after the Fukushima nuclear disaster forced the shutdown of atomic power plants and increased its reliance on gas-fired generators. U.S. prices have collapsed amid a supply glut fostered by the development of technology to tap natural gas trapped in shale rock.

“Two or three years ago, we were planning to increase our stakes in existing LNG projects mainly in Australia to achieve the 1.5 million tons target,” said Ikuta. “Now, we think some portion would come from North America.”

Osaka Gas plans to buy more stakes in LNG projects to increase the volume it owns to 1.5 million tons per year by the end of fiscal 2020 from 100,000 tons, the company said in its long-term business plan.

The company is also in talks with BG Group Plc and Gas Natural SDG SA to purchase a portion of supplies they agreed to buy from Cheniere Energy Partners LP’s planned LNG export terminal at Sabine Pass in Louisiana, Ikuta said.

Increasing Imports

Japan’s LNG imports surged 20 percent in 2011 and may rise 7.1 percent this year to 89 million metric tons, according to an estimate by the Institute of Energy Economics, Japan. The country, already the world’s biggest liquefied gas importer, is seeking to import part of the combined 30 million tons that U.S. companies are seeking approval to export.

LNG is natural gas that is cooled to a liquid for transport by ship to markets not connected by pipelines. The fuel is received at import terminals and converted back to a gas so it can be piped to users.

The Sabine Pass LNG terminal would start exports in 2015 or 2016, according to the construction schedule. BG plans to buy 5.5 million tons a year from Sabine Pass while Spain’s Gas Natural will purchase 3.5 million tons annually.

Investment Decision

Osaka Gas and its partners may reach a final investment decision on the Sunrise and Evans Shoall LNG projects in Australia within two to three years, Ikuta said. The company holds a 10 percent stake in each.

Osaka’s ownership of LNG as per equity holdings from the two projects may be between 400,000 tons and 500,000 tons per year, helping the company meet the 1.5 million ton volume target by the year ending March 2021, Ikuta said.

The company plans to use project finance to raise as much as 150 billion yen ($1.8 billion) to pay its share of the development costs, Ikuta said.

Osaka Gas isn’t in talks with Woodside Petroleum Ltd. to buy a stake in the Browse project in Australia, Ikuta said, reiterating the company’s earlier comment.

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