Osaka Gas may buy more LNG from Russia to feed rising demand

Mon Oct 28, 2013 2:48am EDT

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By Jane Xie

SINGAPORE, Oct 28 (Reuters) - Osaka Gas Co, Japan's second-largest supplier of city gas, may step up imports of liquefied natural gas (LNG) from Russia to feed rising demand, a top company official said on Monday on the sidelines of a conference in Singapore.

Japan's requirement for the super-chilled fuel has skyrocketed after its Fukushima nuclear disaster and it now accounts for a third of global LNG cargoes, taking the bulk from Australia, Qatar and Malaysia. With demand continuing to rise and nuclear plants still down, companies are also looking at tapping new suppliers such as Mozambique and North America.

"Russia can be a very, very strong candidate" for securing more supplies, said Osaka Gas President Hiroshi Ozaki, in an interview at the Singapore International Energy Week.

Ozaki didn't give details on how much more LNG the company might buy from Russia. It imported 390,000 tonnes from Russia in the financial year that ended March 31, compared with 260,000 tonnes a year earlier. It has an annual contract, which started in 2008, to lift 200,000 tonnes from a project in Sakhalin.

In total, the company imports about 8 million metric tonnes of LNG a year. Its annual purchases are expected to reach 10 million tonnes by 2020.

Russia is Japan's No. 4 LNG supplier, behind Australia, Qatar and Malaysia. It sold 5.6 million tonnes of the fuel between January and August this year to the world's third-largest oil consumer.

MOZAMBIQUE

It may take Osaka Gas at least 10 years to realise its plans to import LNG from Mozambique, Ozaki said.

"It's a bit far-horizon business. But the potential is very huge," he said. "Mozambique is not a gas exporting country yet so they need some new infrastructure."

Osaka Gas has identified offshore Mozambique as one of several regions in which it would be interested in making an upstream investment. It is looking at cooperating with Tokyo Gas in buying LNG from one of the many projects planned from resources offshore the east African nation.

Mozambique, expected to eventually compete with Australia and Qatar as a major LNG exporter to Asia, is believed to have gas reserves of around 150 trillion cubic feet (tcf) - enough to meet Japan's demand for 35 years.

Ozaki expects U.S. shale gas exports to Asia to impact regional prices of LNG, because overall supplies will rise.

"If you have an option then it will have a very big impact on the pricing system," said Ozaki.

"Once the shale gas is introduced to the Japanese market, then the new suppliers must reflect the price of shale gas or other new competing suppliers," he said.

Osaka Gas, alongside Chubu Electric, has signed a 20-year liquefaction tolling agreement with Freeport LNG to process about 2.2 million tonnes of LNG a year each from Freeport's first unit starting from early 2018.

Freeport LNG in Freeport, Texas, received approval from the U.S. Department of Energy in May to export LNG at a rate of more than 10 million tonnes per annum from its first two trains.

(Additional reporting by James Topham in TOKYO; Writing by Manash Goswami; Editing by Tom Hogue)

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