Tokyo Gas Strategizes on Securing LNG Supply

Tokyo Gas Co.is considering buying liquefied natural gas from the Atlantic market, seeking to pay less than gas from the Asia-Pacific region.

Demand for LNG is increasing in Japan as electricity providers seek to replace offline nuclear-power capacity, but rising prices for Asia-Pacific LNG risk hurting the companies' bottom lines.

"Thanks to the shale gas revolution in North America, LNG prices in Atlantic are cheaper. We would like to get it delivered here," said Makoto Ikegami, Tokyo Gas's Accounting General Manager.

In the Asia Pacific, LNG prices under long-term contracts are linked to crude oil. Despite abundant supply of LNG for the global market, Asian buyers have paid more for gas over the past year because of climbing crude prices.

Japan's largest gas utility by sales has so far not purchased LNG from the Atlantic market, Ikegami said. It imports LNG mainly from Australia, Malaysia and Russia under long-term contracts. The company buys roughly 10 million metric tons of LNG a year.

Japan's LNG demand has risen sharply since the March 11 earthquake and tsunami, as many utilities are buying extra LNG and producing more electricity at their gas-powered plants to make up for idle nuclear-power capacity.

Government-funded Japan Oil, Gas & Metals National Corp. forecasts at least 10 million tons of additional LNG demand from Japan this year.