Home > News
  print button email button

Saturday, Sep. 29, 2012

Chubu Electric plans U.S. LNG drive

Kyodo

NAGOYA — Chubu Electric Power Co. is stepping up its drive to secure cheap and stable supplies of liquefied natural gas from the United States.

Gas prices have been declining since the mid-2000s in the United States because the shale gas revolution has made vast amounts of gas available that were previously off limits to commercial production.

But through the new drilling process known as fracking, it has become possible to extract gas embedded in the country's abundant shale rock formations, driving down the cost of importing LNG from U.S. companies to around 60 percent compared with suppliers in the Middle East, Chubu Electric officials said.

Natural gas has emerged as a key alternative for Japan since all of its power companies were forced to shut down their nuclear reactors in the aftermath of the Fukushima disaster.

Utilities have stepped up LNG imports for their thermal power stations, which are running at high capacity nationwide to offset the loss of atomic power generation.

On July 31, Chubu Electric signed a liquefaction deal with a subsidiary of Freeport LNG Development L.P., which runs an LNG terminal in Texas. Osaka Gas Co. is also party to the agreement.

Under the deal, Chubu Electric will receive 2.2 million tons of LNG per year, equivalent to around 20 percent of its annual procurement needs.

If domestic companies succeed in establishing a business model based on the procurement and liquefaction of gas in the U.S. for Japan, they may be able to seize the initiative from suppliers who have been mercilessly driving up prices.

Utilities and other corporate customers in Japan currently import LNG rather than buying natural gas pumped in via pipelines.

Until now, global energy giants and other power companies in gas-producing countries have controlled the entire process from producing and liquefying the gas to exporting it overseas.

The rise in crude oil prices over recent years has additionally impacted gas users, particularly the emerging energy-hungry economies in Asia, because the price of the LNG they purchase has traditionally been linked to the cost of oil — a regional difference Japan is looking to rectify.

Chubu Electric hopes the agreement with the Freeport subsidiary will serve as a bargaining chip in future price negotiations with gas suppliers.

Under the deal, American exports of LNG to Japan are scheduled to commence in 2017, though the plan is not yet set in stone. And even before shipments can begin, Chubu Electric must obtain authorization from the U.S. government.

Washington decides on a case-by-case basis whether to allow the export of domestically produced gas to countries with which it has not concluded free-trade agreements.

Yuji Kakimi, an executive officer at Chubu Electric, stressed the importance of the Freeport LNG deal, describing it as "a new step" in efforts to enhance the nation's energy procurement program.

"We want to create a new chapter in the history" of Japan's energy industry, Kakimi said.



Back to Top

About us |  Work for us |  Contact us |  Privacy policy |  Link policy |  Registration FAQ
Advertise in japantimes.co.jp.
This site has been optimized for modern browsers. Please make sure that Javascript is enabled in your browser's preferences.
The Japan Times Ltd. All rights reserved.