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Japan's Tepco to import US liquefied petroleum gas from Enterprise Products

02.27.2013  | 

Enterprise processed a company record of 707,000 bbl, or 60,800 tons, a day of NGLs in the fourth quarter. Enterprise is putting the finishing touches on nearly doubling its propane-export capacity to 7.5 million bbl/month, which it says will bring its LPG export sales to more than Saudi Arabia.

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By BEN LEFEBVRE and HIROYUKI KACHI

Tokyo Electric Power Co. said Wednesday it will import 200,000 tons of liquefied petroleum gas from US-based Enterprise Products Partners over the next three years, a sign that the US shale revolution is reaching past oil and natural gas.

Tokyo Electric, known as Tepco, this year will begin importing LPG from the US for the first time as it tries to diversify its sources for fuel supply, the company said.

Tepco is in need of less costly fuel to operate its thermal power plant, due to a greater dependency on fuel imports after the nuclear disaster at its Fukushima Daiichi nuclear plant caused a shutdown of the nation's reactors.

Drilling innovations such as hydraulic fracturing, or fracking, has created a boom in US energy production from formerly unproductive shale formations. Although most attention has been paid to the oil and natural gas found in the shale, the US is also becoming a major source for low-cost LPG and other natural-gas liquids, the cocktail of chemicals found alongside oil and gas.

"We can expect high-cost efficiency with US-produced LPG," Tepco said in announcing the deal.

LPG is chemically similar to propane and can be burned as a fuel or used as a raw material for plastics.

The companies didn't disclose the total cost of the deal. The LPG price would be linked to Mont Belvieu propane prices, Tepco said. The Mont Belvieu propane price was $36.62/bbl Monday, down from $51.99/bbl a year ago.

Tepco would use the LPG at its Anegasaki thermal power plant in Chiba prefecture, where it already imports LPG from Australia and the Middle East, the company said.

Enterprise, a major NGL supplier, processed a company record of 707,000 bbl, or 60,800 tons, a day of NGLs in the fourth quarter. The Houston-based company is putting the finishing touches on nearly doubling its propane-export capacity to 7.5 million bbl/month, which it says will bring its LPG export sales to more than those for Saudi Arabia.

The deal's three-year term bodes well for US NGL suppliers, who may be starting to gain more attention from foreign buyers looking for lower prices, said Raymond James analyst Darren Horowitz.

"This tells you that (Tepco executives are) convinced that they have supply assurance for a lower-price LPG for a longer amount of time than they could have found elsewhere," Mr. Horowitz said.


Dow Jones Newswires



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