Japan calls for LNG summit

Japan is pressing its case as a buyer of LNG from North America.

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 sectors.

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 Japan calls for LNG summits 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 (see analysis inside).

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, totalling 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 

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