Sumitomo, Tokyo Gas Secure U.S. LNG From Dominion for Japan

Bloomberg News

By Yuriy Humber on April 27, 2012

 

Sumitomo Corp. (8053), Japan’s third- largest trading house, and Tokyo Gas Co. (9531) secured a supply contract from the U.S., where natural gas trades for a fraction of the price in Asia.

Sumitomo and Tokyo Gas agreed to buy 2.3 million metric tons of liquefied natural gas annually for 20 years from Dominion Resources Inc. (D) (D)’s Cove Point project, the trading house said today in a statement. Dominion, which needs U.S. approval to sell to Japan, plans to build and start operating the Cove Point plant in 2017. Dominion, based in Richmond, Virginia, will liquefy the gas from Sumitomo’s assets in the northeast of the U.S.

“If the project is finally agreed, Sumitomo will be able to establish a natural gas and LNG value chain in the U.S.” stretching from extraction to export, Sumitomo said.

Japanese traders, led by Mitsubishi Corp. (8058)’s $6 billion outlay on an Encana Corp. (ECA) shale project announced in February, are stepping up purchases of U.S. and Canadian natural gas assets as they seek to export the fuel in the form of LNG to Asia. The 40-year-old oil-linked price mechanism for Asian LNG means buyers in the region, which accounts for more than 60 percent of global demand, are paying nine times more for gas than U.S. domestic users.

 

http://www.businessweek.com/news/2012-04-26/sumitomo-tokyo-gas-secu...

 

 

 

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Replies to This Discussion

Permalink Reply by Parkdota on April 27, 2012 at 6:44

Very good indeed.  Now they just have to pray the Fed lets it happen.

Permalink Reply by Krkyoldhag on April 27, 2012 at 6:48

won't let it happen...code word was "crucify" the oil and gas industry...can't be giving them a market..

any market would help the industry  but afraid politics will block any gain O& G can make

guess we will see..

Permalink Reply by essay on April 27, 2012 at 9:13

interesting.  so would this gas then be shipped through the newly widened panama canal via tanker?

Permalink Reply by Les Bamburg on April 27, 2012 at 11:56

Essay, likely yes if targeted for the Asia market.

Permalink Reply by Les Bamburg on April 29, 2012 at 14:53

Sesport, since Sumitomo is a trading house it is unclear if their target market is limited to Asia or may include other areas such as Europe and South America.  Tokyo Gas would likely plan to market their share of LNG solely to Japan.  

Permalink Reply by Hopeful About Natural Gas on April 29, 2012 at 19:30

Japan is racing to get away from nuclear power because of the tsunami. I can see how they will look for every option to import natgas.  It's their best alternative to nukes for power until solar and renewables can really come on.

Permalink Reply by Sierra Tango on April 30, 2012 at 4:35

For what possible reason would Dominion need to secure permission from the U.S. government to sell LNG to Japan?

Permalink Reply by Les Bamburg on April 30, 2012 at 4:49

Sierra. exports of natural gas, including LNG, require authorization from the Department of Energy.

Permalink Reply by Eli on April 30, 2012 at 13:37

You watch,  the Obama clan and most politicians will jump on the band wagon with the Anti Big Oil movement and hold American hydrocarbon hostage - They will make a claim that it is right to NOT allow export of natural gas,  for strategic and sovereign safety reasons - and effectively keep domestic natural gas cheap - and get lots of votes.

Any politician who has the guts to stand up and allow a company to sell its product ( natural gas ) will have a tough time getting re elected.

Not looking good for gas prices.

Permalink Reply by Ed on April 30, 2012 at 16:44

Conoco shipped LNG for over 40 years from its Alaska LNG Plant at Cook Inlet Area to Japan up until last year when they mothballed the plant due to low prices. I don't think  authorization from the Feds will be a problem.

Permalink Reply by Les Bamburg on April 30, 2012 at 16:54

Ed, Alaska was a whole different situation since it was isolated from the rest of the US and only had access to the Japanese natural gas market when developed. 

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