Tokyo: Japan hopes to start buying liquefied natural gas (LNG) from the United States (US) after a project there starts exporting LNG in 2015, as the country looks to secure a steady supply amid growing demand for the fuel, a trade ministry official said on Wednesday.
Japan’s demand for natural gas is expected to rise for years to come, with its LNG imports climbing at a record pace this year as utilities ramp up gas-fired generation to offset a drop in nuclear utilisation following the Fukushima crisis.
Seishu Makino, a senior vice trade minister, met with US energy secretary Steven Chu, on Tuesday, and requested approval for imports by Japanese firms. “Japan conveyed the expectation that exports of LNG from the US to Japan can contribute to a stable supply, to which the US expressed a certain understanding,” the official told reporters.
The official said one project, the Sabine Pass terminal, has won approval to export LNG and is expected to start production and exports in 2015. Two other projects are now seeking approval. One of them is the Freeport LNG receiving and regasification terminal, in which Japan’s number two natural gas distributor Osaka Gas Co has a stake.
The official declined to give an outlook for how much Japan LNG would like to import from the US.
The Nikkei business daily reported on Wednesday that Japanese power and gas utilities would initially import 2 million to 3 million tonnes of LNG a year, while the trade ministry estimates US shipments could eventually make up 10% of Japan’s LNG imports.
Gas extracted from shale rock formations will be liquefied in Texas and Louisiana. The LNG will then be shipped to Japan via the Panama Canal, the Nikkei said.
Some Japanese companies have expressed hopes for US exports of LNG.
Osaka Gas sees the United States as a promising shale gas exporter.
“Japan can be a destination when an expansion of the Panama Canal in 2014 allows large LNG carriers to get through the canal,” Kenji Kawamoto, an executive officer in charge of overseas business development at Osaka Gas, told Reuters last week.
Sumitomo Corp , Japan’s third-largest trading firm, is eyeing more upstream investment opportunities in US shale gas and is looking to pick up shale oil assets there, as it sees those markets growing, a senior official told Reuters in July.
The Sumitomo official said obstacles to exporting US shale gas, such as US export regulations and the cost of establishing facilities to liquefy gas for export, could be reduced as some US LNG import facilities are looking to become export facilities to sell surplus gas supplies.
Mounting public concerns over nuclear safety after the Fukushima Daiichi radiation crisis have made it difficult since the 11 March earthquake to restart reactors once they shut for routine maintenance, forcing utilities to tap fossil fuels to make up for lost nuclear power generation.
Japan’s 10 regional power firms used a record 4.81 million tonnes of liquefied natural gas in August to help offset a record low nuclear utilisation rate.
LNG imports this year are set to jump 12.2% to 78.6 million tonnes, exceeding the record of 70 million tonnes in 2010.
Japan’s top three sources of LNG imports are Malaysia, Australia and Indonesia, although it recently resumed imports of LNG from Norway for the first time since 2008.