* Firms in talks to buy up to 2.3 mln TPY of Cove Point LNG
from 2017
* Sumitomo to source natural gas from Marcellus project
By Osamu Tsukimori
TOKYO, April 27 (Reuters) – Japanese trading house Sumitomo
Corp and Tokyo Gas Co Ltd said on Friday that
they will hold talks with Dominion Resources Inc to import
up to 2.3 million tonnes of liquefied natural gas (LNG) per year
for 20 years from 2017.
Tokyo has been negotiating with Washington since last year
to allow more shale gas projects to export LNG to Japan, the
world’s top importer, which hopes to receive cost-efficient LNG
via the Panama Canal as early as in 2015.
Still reeling from the Fukushima nuclear crisis that has
idled all but one of its 50 reactors amid public safety
concerns, Japan has rapidly increased LNG purchases, with
imports growing 17.9 percent to a record 83.2 million tonnes in
the fiscal year ended March 31.
Sumitomo said it had signed a preliminary agreement with
Dominion Resources that would lead to the right to buy LNG
produced at a 5-million-tonne-per-year gas liquefaction facility
to be built by Dominion at the Cove Point project in Maryland,
and that Tokyo Gas would join Sumitomo when a formal contract
was signed.
The Japanese companies added that they were considering
sourcing feedstock from the Marcellus shale gas project in which
Sumitomo is participating.
If the project receives formal U.S government approval in
2017, its shipments to Japan will likely be priced at less than
$10/mmBtu, said Kunio Nohata, senior general manager of gas
resources department at Tokyo Gas, well below current Asian
prices at around $17/mmBtu.
The LNG output could be exported to anywhere in the world,
he added.
Record North American natural gas production is prompting
companies to consider export plans to tap thirsty markets in
Europe and Asia.
Three projects in Louisiana – the Sabine Pass, Lake Charles
and Cameron LNG projects – and the Cove Point project have
applied for construction and export licenses, seeking long-term
deals predominantly with buyers in Asia.
The wash of domestic shale gas hitting U.S. markets has sent
domestic gas prices plummeting, but concern that the fledgling
movement to export LNG – natural gas cooled to a liquid for
transport overseas – could drive up U.S. prices has drawn
opposition from consumer groups.
