Japan had expected to reduce its energy imports bill by importing the US Henry Hub-based LNG but the country’s trades report, released by its ministry of finance (MOF), indicates that the US LNG is not as cheap as expected.
Japan had expected to reduce its energy imports bill by importing the US Henry Hub-based LNG as the country’s utilities and trading houses rushed to invest in the US shale gas resources and LNG export projects. But the country’s trades report, released by its ministry of finance (MOF), indicates that the US LNG is not as cheap as expected.
Angola and the US were respectively the cheapest and the most expensive LNG supplier to Japan in January, according to the MOF. The US sole LNG exporter Chenier-operated Sabine Pass plant has shipped three LNG cargoes to Japan (one to Chubu Electric, another to Tokyo Electric and third one to Kansai Electric) in January at a price of US$ 12.55/MMBTU while Angola has exported one spot LNG cargo (64,000 MT) to Japan at just US$ 6.57/MMBTU.
Four years ago, Japan eagerly asked the US to permit exports of its gas to Japan and Tokyo announced up to Y1tn ($10.9bn) in credit guarantees to fund investments by Japanese companies in the US shale gas projects.
Given the Japanese government’s support, in February 2013, Japan's Toshiba agreed to buy 2.2 MMT/Y of LNG from Freeport LNG export project in Texas under a take-or-pay tolling deal, exposing it to more than $7 billion in charges over a 20 year period ($370 MM/Y). However, the Japanese company has been unable to sell the LNG as its price is not affordable in the current market.
Toshiba's deal had seemed like a good bet at the time as Asian LNG prices surged to a record while Japan's government promoted these gas supply agreements from the US' shale gas production as a panacea for its energy problems after the 2011 Fukushima nuclear disaster, forcing it to spend huge sums on imported fuels. Now, however, the prices are two-thirds below their 2014 peak, half of what they were when Toshiba signed the deal, amid a flood of new LNG production.
Global LNG info has reckoned in its “
The US LNG Price and Beyond That
” report that LNG from the US may not be less expensive than LNG from other suppliers while some investments in North America and some long-term purchases by Asian and European players may not look viable at least in the current market situation.
Earlier, the International Energy Agency (IEA) had warned Asian LNG consumers that US LNG will be more expensive than they think as moving LNG over long distances is expensive - up to 10 times higher than moving an equivalent amount of coal or oil around the world.
Document for download:
The US LNG Price and Beyond that