Japan continues drive for LNG

By Eric Watkins

LOS ANGELES, May 1 – Still reeling from the shock of last year’s nuclear meltdown in Fukushima, Japan continues to seek additional supplies of liquefied natural gas as the best alternative means to fuel the nation’s power generators.

In the latest deal, Woodside Petroleum Ltd. said it has accepted an offer from Japan Australia LNG (MIMI Browse) Pty Ltd (MIMI) to purchase a minority portion of Woodside’s equity in the proposed Browse LNG Development for $2 billion.

Woodside said the sale involves MIMI – a joint venture of Mitsui & Co and Mitsubishi Corp – taking 16% interest in the East Browse joint venture and 8% interest in the West Browse joint venture.

Not least, Woodside also accepted an offer from MIMI for a long-term sales and purchase agreement for around 1.5 million tonnes of LNG a year from the Browse development subject to completion of the equity offer.

PRICE IS CONFIDENTIAL

“The price agreed by the parties is confidential, but is in line with traditional Asian pricing for conventional LNG projects,” Woodside said.

Woodside’s announcement coincided with report that Bank of Tokyo-Mitsubishi UFJ will arrange a syndicated loan of $170 million for a maritime shipping firm backed by the Brunei government.

The loan will be one of the biggest facilities arranged by a Japanese bank in line with Islamic financial principles, which prohibit the payment of interest. In lieu of interest, the lenders will collect leasing fees.

Under the loan agreement, the consortium of Bank of Tokyo-Mitsubishi UFJ, Bank Islam Brunei Darussalam, HSBC Holdings Plc and Sumitomo Mitsui Banking Corp. will finance the deal through a special-purpose company that will be established to buy and lease LNG carriers to Brunei Gas Carriers.

NEW SHIPPING FIRM

The shipping firm, 80% owned by the government of Brunei, plans to buy large LNG vessels in line with efforts to export more LNG to Japan as announced in March when Mitsubishi Corp. said it would expand facilities at Brunei LNG Sdn Bhd.

The firm, a joint venture between Mitsubishi, Royal Dutch Shell, and the government of Brunei, produces seven million metric tons a year of LNG, with six million tons supplied to Tokyo Electric Power Co., Tokyo Gas Co. and Osaka Gas Co.

The stakeholders in Brunei LNG Sdn Bhd plan to invest around 64 billion yen through 2018 to increase storage volume by 60%, with the aim of boosting shipment capacity to address emergencies and other contingent situations.

With the facility upgrades, Mitsubishi said it aims to ensure a steady supply of LNG for the Japanese market.

Meanwhile, in an effort to diversify sources and keep the price of LNG down, Japan’s government has settled on a plan to create a public-private conference of nations that produce and consume LNG.

FUEL BILL RISES 60%

The government envisions energy ministers of LNG importing and exporting nations participating in the conference, along with firms such as Tokyo Gas Co., Tokyo Electric Power Co., ExxonMobil Corp. and Russia’s state-owned OAO Gazprom.

Due to the closure of most nuclear power plants in Japan following the Fukushima disaster, the country’s five major power utilities were expected to see their total fuel bill reach roughly 5.15 trillion yen in fiscal 2011, a whopping 60% jump on the year (WWE, Apr 12, 2012).

Chubu Electric Power Co, Tokyo Electric Power Co, Kansai Electric Power Co., Tohoku Electric Power Co. and Kyushu Electric Power Co. own a combined 41 nuclear reactors, with only one of them operating at the moment.

© Glamma Productions Inc 2012

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About Eric Watkins

Eric Watkins is a consultant specializing in oil diplomacy. A former journalist, Mr. Watkins's work has appeared in numerous leading publications including The Wall Street Journal, The Economist, The Financial Times, and specialist media such as Oil & Gas Journal, Middle East Economic Survey (MEES), and Lloyd's List.
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