By SELINA WILLIAMS
LONDON -- Tokyo Gas is in talks to acquire a stake of up to
10% in BG Groups flagship $20 billion Australian
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
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 2011.
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 said.
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 2014.
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