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Japan May Lower LNG Costs 10% by Importing U.S. Fuel, IEEJ Says

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Feb. 5 (Bloomberg) -- Japan may cut its liquefied natural gas bill 10 percent by importing less-expensive supplies of the fuel from the U.S., a government energy adviser said.

The country, the world’s largest LNG user, may purchase the fuel at $9 per million British thermal units, creating savings of 600 billion yen ($6.49 billion), Akira Yanagisawa, senior economist from the Institute of Energy Economics, Japan, a Tokyo-based research group known as IEEJ, said in a report posted on its website. Prices of the gas to Northeast Asia rose to $19 per million Btu, the World Gas Intelligence, an energy research company, said Jan. 30.

LNG has replaced nuclear power as Japan’s primary fuel for power generation after the March 2011 earthquake and tsunami led the government to shut the country’s reactors. It paid 6 trillion yen, twice as much as the year before, for a record high 87.3 million metric tons of gas imports in 2012, according to customs data.

“Plans to import inexpensive LNG are gathering much attention as a breakthrough to lower LNG import prices,” Yanagisawa said. “Japan should maximize its benefits by using U.S. LNG imports as leverage to gain advantageous terms for other LNG imports as well, thereby pushing import prices down.”

Supplies from the U.S. would cost $9 per million Btu after adding $3 for liquefaction and $2 for shipping to $4 for the price of the fuel, Yanagisawa said, citing statistics from the International Energy Agency.

Gas futures for March delivery traded at $3.329 per million Btu in electronic trading today on the New York Mercantile Exchange at 2:05 p.m. Singapore time.

Cheniere Energy’s Sabine Pass LNG facility in Louisiana is the only project that has approval from the Department of Energy to export LNG to countries like Japan that have no free trade agreement with the U.S., according to the DOE’s website.

To contact the reporter on this story: Chou Hui Hong in Singapore at chong43@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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