Japanese buyers commit to Freeport LNG supply
Japanese utilities Osaka Gas and Chubu Electric Power have deepened the country's exposure to US liquefaction potential, committing to purchase LNG from the planned Freeport LNG export project in the US Gulf, the companies announced on Tuesday.
The two companies have signed fully binding liquefaction tolling agreements with Freeport LNG to lift 2.2m tonnes per annum (mtpa) each over a 20-year period from the first planned liquefaction train. The deal covers 100% of the capacity from the first train of the planned 13.2mtpa project.
"As two of the largest natural gas and electric utility service providers in Japan, having liquefaction tolling agreements with Osaka gas and Chubu Electric provides the strong end-user credit support necessary to fully finance the initial train of the liquefaction project," Freeport LNG CEO Michael Smith said in a statement.
Construction is expected to begin in the third quarter of 2013, and the first train is expected to come online near the end of 2017.
An estimate for the final investment decision or the pricing details of the tolling agreement was not immediately provided by Freeport LNG.
The company said it expects the three-train facility at Quintana Island near Freeport, Texas, will be fully subscribed by the end of 2012.
Anglo Dutch major Shell signed a heads of agreement with Freeport LNG in May to establish a framework for Shell's potential involvement in proposed liquefaction trains.
"We are encouraged by our progress to date, but of course, these are early days and our discussions on details continue," a Shell spokeswoman said.
The Freeport LNG project is pending full approval for an export license from the US Department of Energy (DOE) and from the Federal Energy Regulatory Commission (FERC) on permitting and construction.
On Tuesday, the company said Freeport LNG anticipates receiving the regulatory go-ahead by the government by mid-2013.
Formal announcements of Freeport LNG's commercial agreements come one day after Houston-based Cheniere Energy reached final investment decision (FID) on its proposed 18mtpa Sabine Pass facility, ramping up potential developments of other US LNG export projects.
Momentum for Freeport LNG initially lost traction when Australian investment bank Macquarie backed away from marketing Freeport LNG capacity earlier in 2012, ICIS understands.
Macquarie remains as a financial advisor on the project.
Over the past 12 months, Japan's utilities have found themselves increasingly squeezed, facing rising spot and long-term procurement costs, growing public opposition at passing those costs on to the end-user, and a need to step up its long-term LNG purchases to meet the post-Fukushima demand requirement.
As a result, a number of Japanese utilities have turned to potential flexibility offered by US liquefaction and the latest deals brings the total amount of LNG committed either in binding or preliminary supply deals to Japanese buyers to 15mtpa.
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