Japan was poised to hold ministerial
talks with both Canada and the US on
the possibility of importing their LNG,
Platts learned as IGR went to press.
The Japan-Canada prime ministerial
summit was due to take place March 25,
a few days after the Alberta government
hosted an unconventional gas seminar
in Tokyo. It attracted more than 200
delegates from the private and the public
Japanese LNG buyers are weighing
options to import shale-gas based LNG
from Canada with the hope of importing it
on a pricing basis linked to Henry Hub or
to other gas benchmarks, instead of using more traditional -- and generally so far
more expensive -- links to oil benchmarks
such as the Japan Customs Cleared crude
oil price, according to industry sources.
For Japanese buyers, possible
Canadian LNG supplies are attractive as
the supplies would come from a country
with no geopolitical risks and a shorter
voyage time -- setting out from British
Columbia -- rather than the Middle East,
industry sources said. Voyages between
Kitimat and Tokyo Bay are about 9-10
days, while it takes some 20 days from
the Middle East to Japan. Shipping routes
there are also relatively undisturbed. And on March 29, Japan's trade minister Yukio Edano is expected to meet visiting US energy secretary Steven
Chu, when Tokyo is expected to continue lobbying the US
for a waiver that would allow future US LNG exports to the
world's largest importer, sources said. At present, the only
US LNG to Japan comes from the tiny Kenai plant, whose
future is uncertain as the available reserves are dwindling.
These talks will come just two weeks after the two
countries held a senior bilateral talks on the sidelines of
the International Energy Forum in Kuwait.
Washington has already informed Japan of its
awareness of Japan's need to secure more liquefied
natural gas supplies and that it was studying the
possibility of LNG exports, once it has assessed the
potential impact on domestic gas prices (IGR 693/9).
Japan has been importing higher volumes of LNG since
the Fukushima nuclear disaster a year ago and subsequent
nuclear outages in the country.
Japanese LNG buyers have not been actively
seeking potential LNG supplies from the US because of
uncertainties over whether US legislation would allow
exports of LNG and if a waiver would apply to countries
that do not have a free trade agreement with the US,
industry sources say.
Two projects to liquefy Canadian gas for export to
Asia, totaling some 18 million mt/year, are nearing the
point where final investment decisions may be taken. And
in the US, much more volume -- over 90 million mt/year --
is at stake. Eight companies are seeking permission from
DOE to export domestic gas as LNG. The companies,
which want to tap into higher gas prices in Asia and
Europe, must also win approval from the Federal Energy
Regulatory Commission to build the liquefaction and other
facilities necessary for exports.
(This article originally appeared in the March 26, 2012, issue of Platts International Gas Report.)