Japan firms, Tepco eye $4.4 billion stake in Australia LNG project

TOKYO Wed May 16, 2012 3:45am EDT

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TOKYO (Reuters) - A group of Japanese firms is in talks to pay $4.4 billion for a stake in Australia's Wheatstone gas field that had been set aside for bailed-out nuclear operator Tepco, as the country looks to shore up long-term energy supplies.

Tokyo Electric Power Co (Tepco) (9501.T), which is now under state control following last year's earthquake and tsunami that devastated its Fukushima nuclear plant, had planned to buy the stake to secure additional supplies of liquefied natural gas.

Amid concern that Chinese and other foreign companies could snatch the deal from cash-strapped Tepco, the utility asked trading house Mitsubishi Corp (8058.T) and shipping company Nippon Yusen KK (9101.T) to step in, the Nikkei business daily reported on Wednesday.

Nippon Yusen confirmed on Wednesday it was in talks with Mitsubishi and Tepco to buy a stake in the project, but said no decision had been made. A TEPCO spokesman said talks on Wheatstone stake were ongoing.

"Energy resources are a lifeline for Japan and important, so it is very meaningful for us to be involved in the talks," the Nippon Yusen spokesman said.

The companies were looking at paying $4.4 billion for the stake, a person with direct knowledge of the matter told Reuters. He declined to be named because the negotiations were not public.

Japan's government would take part in the deal through state-owned Japan Oil, Gas and Metals National Corp (JOGMEC), the Nikkei said, while the Japan Bank for International Cooperation (JBIC) and private banks would contribute about $3.3 billion in financing.

State-owned JBIC was also lined up to invest $1.1 billion and receive non-voting preference shares in a special purpose company being set up by the investors, the newspaper said.

ENERGY SECURITY WORRY

Japanese utilities are driving natural gas prices higher as they scour the world for fuel to power thermal plants with all of the nation's 50 nuclear reactors shut down amid safety fears following the radiation crisis at Fukushima.

Tepco and Japan's other utilities burned 4.56 million tonnes of LNG gas in April, up 33 percent from a year ago and a record for the month, an industry association said on Wednesday.

Although the long-term future of the reactors has not been decided, Japanese leaders have said the country should scale back its reliance on nuclear power, meaning it will need to secure extra supplies of energy from other sources.

The Wheatstone LNG project off the coast of western Australia, operated by Chevron Australia (CVX.N), is expected to produce 8.9 million tonnes of gas a year from late 2016. Chevron plans eventually to expand production at the $29 billion project to 25 million tonnes per annum.

TEPCO has secured rights to purchase 3.1 million tonnes of LNG, and said in 2009 that it planned to take an 11.25 percent equity stake in Wheatstone, which would give it access to about a further 1 million tonnes a year.

"It is true that we are in talks with JOGMEC, Mitsubishi Corp and Nippon Yusen on the joint acquisition of a stake in Wheatstone, but we like to refrain from commenting on the details of the negotiations," a Tepco spokesman said.

A JBIC spokesman said the company had been approached about a possible investment and loan for Wheatstone, while Chevron said talks with Wheatstone customers were ongoing. Mitsubishi confirmed it was in talks but declined further comment.

Japan's Tohoku Electric (9506.T) and Chubu Electric Power Co (9502.T) have signed preliminary agreements with Chevron to each take 1 million tonnes of LNG a year from Wheatstone for 20 years.

Chubu on Wednesday also agreed to buy a 0.735 percent stake in Australia's Ichthys LNG project from majority stakeholder Inpex Corp (1605.T).

Japan's government agreed to a 1 trillion yen bailout of Tepco last week. Tepco, which posted an annual loss of almost $10 billion, said in a business reorganization plan submitted to the government that it would invest more in upstream energy projects.

($1 = 80.1100 Japanese yen)

(Additional reporting by Sunayan Bhattacherjee, Kentaro Hamada, Risa Maeda and Rebekah Kebede; Writing by Aaron Sheldrick; Editing by Richard Pullin)

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