Sumitomo to sell 2.3 mln T U.S. shale gas to two Japan buyers

TOKYO, April 1 Mon Apr 1, 2013 4:19am EDT

TOKYO, April 1 (Reuters) - Japanese trading house Sumitomo Corp said on Monday it has agreed to take 2.3 million tonnes per year of liquefied natural gas (LNG) from the Cove Point project in the United States and sell the purchased fuel to two users in Japan.

The agreement depends on the terminal getting export approval from the U.S. government because Tokyo and Washington don't have a free trade agreement.

Japanese Prime Minister Shinzo Abe in February lobbied U.S. President Barack Obama for access to American shale gas, which is cheaper than LNG sold into Asia at prices linked to oil. Japan, the world's biggest LNG importer, has increased use of the fuel after the Fukushima nuclear crisis in 2011 shut down most of the nation's nuclear power plants.

Tokyo Gas Co, Japan's biggest city gas supplier, has agreed to buy 1.4 million tonnes a year of LNG for 20 years after the start of the project, and Kansai Electric Power Co , the country's No.2 regional power utility, about 800,000 tonnes a year for 20 years, Sumitomo said in two statements.

Once approved, the U.S. project aims to start LNG shipments in the latter half of 2017, Sumitomo added.

The Cove Point project's operator, a subsidiary of Dominion Resources, intends to convert the import terminal in Maryland to an export plant that would ship up to 1 billion cubic feet of U.S. natural gas a day -- about 7.7 million tonnes of LNG a year -- to foreign markets with high demand.