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Canada, Japan seek LNG fit
Gary Park For Petroleum News
Canada and Japan need each other so badly in the liquefied natural gas sector that they have started bilateral efforts to speed development of projects by ramping up Japanese investment in natural gas production and attempting to find common ground on LNG prices.
The two prime ministers — Canada’s Stephen Harper and Japan’s Shinzo Abe — agreed to an early start to talks at the level of cabinet ministers, pointing to the growing pressures on Japan to find energy sources to replace the shutdown of its nuclear industry after the Fukushima disaster in 2011.
Japan has already established a foothold in British Columbia gas fields and as a minority partner in LNG projects, with an array of companies such as Mitsubishi, Idemitsu Kosan, Japan Petroleum Exploration, Sumitomo Hitachi, Toyota and Inpex acquiring stakes, and Japanese financial institutions expected to join the list.
At his Ottawa meeting with Harper in late September, Abe praised Canada as a stable source of natural gas that could provide the commodity at competitive prices.
Japan wants diversification Susumu Fukuda, Japan’s consul general in Calgary, said that with more than 90 percent of Japans oil imported from the Middle East Canada is a “very important possibility to promote diversification” of Japan’s natural resource supplies.
He said that next to Australia, Japan prefers to do business with Canada rather than the United States, where energy exports pose greater complications.
Japan also takes an edge by preferring “more friendly” partnerships and joint ventures over China’s push for corporate control, which collides with Canada’s foreign investment barriers.
The test of the new alliance will come when they try to attach a value to LNG.
As the world’s largest LNG consumer, Japan pays the highest prices anywhere — sometimes up to US$16 per million British thermal units, while the rest of Asia is driving bargains that are tied to world oil prices.
Kyodo News, the Japanese news agency, said Abe’s government was ready to help finance pipelines and infrastructure to accelerate Canadian LNG shipments to Japan, possibly as early as late 2018.
Keisuke Tsujimoto, general manager in Canada for the Japan Oil, Gas and Metals National Corp., said the Japanese government is eager to build a relationship with the British Columbia government to achieve a memorandum of understanding for natural gas.
He said that such a deal, along with working out an acceptable LNG pricing mechanism, would encourage Japanese investment in midstream and upstream sectors.
Tsujimoto said such a deal could be finalized in December when British Columbia Premier Christy Clark visits Asia.
Tokyo Gas has suggested a more realistic price for LNG could be about US$11 per million British thermal units, based on a Henry Hub gas price of US$4 per million Btu.
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