Japanese utilities look to take equity stakes in gas projects

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April 6, 2012

(Wall Street Journal; April 4) - Japanese utilities are aiming to raise their stakes in natural gas projects around the world, increasingly putting the country's natural gas buyers on the supply side. It helps the utilities to hedge the LNG they own, said Zach Allen, an analyst at energy advisory firm PanEurAsian Enterprises. "If the markets soar, as they are now soaring, they will earn some of the high cost back in the way of profits," he said.

Japan bought an average 12.6 billion cubic feet of gas per day in January and February, up 25 percent from a year earlier, according to the Finance Ministry. Japan's LNG prices, which are pegged to the cost of oil, averaged $16.38 per million Btu in the first two months of this year, up 11 percent from the average 2011 price, according to the World Bank. Direct ownership in LNG projects gives utilities greater knowledge about costs and project mechanics, helping the utilities to negotiate deals with other suppliers.

"We are aggressively moving forward in plans to expand our investments throughout the LNG value chain," said Minoru Iwashita, a spokesman for Tokyo Gas. The utility is Japan's largest gas provider, with 10.7 million customers; it plans to spend $4 billion over the next eight years to expand its overseas presence. Osaka Gas nearly tripled its 2012 budget for overseas energy development to $770 million. The company last month said it would acquire a 1.25 percent stake in Chevron's Gorgon LNG project in Australia. 

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