By SELINA WILLIAMS
LONDON -- Tokyo Gas is in talks to acquire a stake of up to
10% in BG Groups flagship $20 billion Australian
liquefied natural gas project, a deal which would
guarantee vital new energy supplies for Japan, a senior
executive from the Japanese company said Tuesday.
The deal includes the purchase of 1 million tpy of LNG from
the Australian project, which is under development,
giving a vital boost to gas supplies that have been under extra
pressure since Japan decided to shut down almost all of its
nuclear power plants in the wake of the Fukushima meltdown.
It also offers UK-based BG Group a way to defray some of the
soaring costs of LNG development, which increased by more than
a third in May due to the rising cost of labor and raw
materials in the booming Australian economy.
The transaction should be announced very soon, said Tokyo
Gas representative director and executive vice president,
Shigeru Muraki, on the sidelines of the Gastech conference in
Japan is in need of additional natural gas supplies to fuel
power plants that are filling the gap left by the shutdown of
its nuclear reactors. Almost all of the country's reactors were
shut down after a large earthquake and tsunami caused partial
meltdowns and radiation leaks at the Fukushima plant in
Some nuclear power plants have since restarted, but last
month the Japanese government said it seeks an end to nuclear
power by 2040. For this reason, Japan is expected to have
significantly higher natural gas demand into the long term.
Japan imported nearly 80 million tons of LNG in 2011, a 13%
increase over 2010, said BG Group CEO Frank Chapman in a speech
at the Gastech conference. Imports next year could approach 90
million tons, close to Japan's maximum import capacity, he
BG Group representatives declined to comment.
BG Group has been seeking partners for the Queensland Curtis
LNG plant since at least March, and was hoping to raise around
$2 billion from the sale, a person familiar with the matter
told The Wall Street Journal.
The project will extract natural gas
from coal seams in Queensland, transport it around 540
kilometers to the coast of Queensland, and cool and liquefy it
for export. The facility, on Curtis Island near the city of
Gladstone, will produce 8.5 million tpy of LNG starting in
BG has found plenty of customers for the gas in Asia, but
has also suffered from significant labor and raw material cost
overruns due to the strength of the Australian dollar.
In May, the company unexpectedly increased the budget for
the plant to $20.4 billion, from $15 billion previously, making
it one of BG's most expensive developments.
Dow Jones Newswires