Abe Says Japan, Canada Agree to Cooperate on Natural Gas

Prime Minister Shinzo Abe said Japan and Canada have agreed to cooperate more closely on shipments of natural gas as the country seeks new energy supplies after the Fukushima nuclear disaster.

Abe, speaking yesterday to reporters in Ottawa at a joint press conference with Prime Minister Stephen Harper, said Canada is a stable source of energy and can provide gas at competitive prices. Abe said the two countries will hold “ministerial level consultations,” without providing details.

“The importation volume of natural gas is increasing and the prices remain high,” Abe said. “Canada, endowed with rich energy resources including natural gas, has a very high potential in the context of energy cooperation.”

Japan, which relied on nuclear power for about a quarter of its energy needs before the Fukushima disaster, is without atomic power again after the nation’s last operating reactor shut on Sept. 15 for regular maintenance. To compensate, the nation’s utilities have increased purchases of traditional fossil fuels.

Japan paid an average price of $15.74 per million British thermal units for liquefied natural gas in July, according to data from LNG Japan Corp. That compares with an average of about $3.64 for U.S. natural gas futures traded in New York.

Japan, the world’s biggest LNG buyer, imports almost all its energy. Canada is the world’s fifth largest producer of natural gas, the country’s Natural Resources Minister Joe Oliver said this month.

Largest Importer

“While there are many areas for increased growth in our trade and investment relationship, the one that came up most frequently is obviously energy,” Harper said. “We have special assets to offer there and obviously Japan is the largest single importer of energy products.”

Harper said the two sides have also made progress in free trade negotiations. Japan and Canada additionally agreed in principle on a treaty governing logistics support between the two countries’ armed forces, which will be effective anywhere in the world, Harper’s office said in a press statement.

Abe was scheduled to travel to New York late yesterday, where he was due to meet French President Francois Hollande. He will meet United Nations Secretary-General Ban Ki-Moon later today.

Exxon Mobil Corp., the world’s largest energy company by market value, asked Canada in June for permission to export 30 million metric tons of LNG a year from the nation’s westernmost province of British Columbia.

Gas Pipelines

Royal Dutch Shell Plc, Chevron Corp., BG Group Plc and Cnooc Ltd. are among the other international energy companies proposing or considering LNG export projects in western Canada, including pipelines across British Columbia’s mountains to link gas supplies in shale formations to Pacific Coast facilities.

Four proposed terminals are targeted to start operations before 2020, including three for which the Canadian government has already awarded export licenses.

Canada will probably only see one terminal built by 2020 and another two by 2025, according to Calgary-based investment bank Peters & Co. Challenges include labor shortages, the “significant capital” needed, the stores of gas required to support terminals as well as the difficulty in securing government approvals and maintaining positive relationships with native communities in the area.

Global LNG demand is poised to rise 67 percent from 2012 to 400 million tons a year by 2020, analysts at Peters & Co. said in a Sept. 4 research note.

The British Columbia government has also pledged to raise as much as C$260 billion ($253 billion) in tax revenues from the industry to reduce debt at a rate and structure that Premier Christy Clark has yet to publicly outline.

Japanese companies involved in potential Canadian LNG export projects include Japan Petroleum Exploration Co. or Japex, Mitsubishi Corp., Inpex Corp. and Idemitsu Kosan Co.

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