TOKYO Japan Petroleum Exploration (Japex) (1662.T) is taking a 10 percent stake in an integrated shale gas development and liquefied natural gas (LNG) project being planned by Malaysia's Petronas PETR.UL in Canada's British Colombia province.
Japex said on Monday it is considering marketing its LNG offtake from the 12 million metric tons per year (mtpy) Pacific Northwest LNG project, worth 1.2 mtpy, in Japan, the world's largest importer of LNG, which has been increasingly reliant on LNG since the Fukushima disaster in 2011 knocked out much of its nuclear power capacity.
Japanese firms have been investing in shale gas projects in North America to export cheaper LNG to Asia. Asian LNG long-term prices are typically oil-linked, making them pricier than LNG from the United States, where the country's shale gas boom has helped lower natural gas prices.
Japex declined to comment on the value of the deal, which involves a 10 percent stake in a shale gas block in North Montney region, which is currently selling gas in Canada, and a stake in a liquefaction plant in Lelu Island near the Port of Prince Rupert on the country's Pacific coast.
Petronas, which would hold the remaining 90 percent of the project, is set to make a final investment decision to build the LNG plant, comprising 2 plants with capacity of 6 mtpy each, at a cost of C$9 billion-C$11 billion ($9 billion-$11 billion) at the end of 2014, with commercial launch at the end of 2018.
Petronas is expected to sign a contract with TransCanada (TRP.TO) soon so that the Canadian firm would build a 750-km (470-mile) pipeline between the shale gas block and LNG plant, Japex said.
Asked whether Japex plans to use Henry Hub gas prices in North America, Mitsuru Saito, Japex's managing director, told a media briefing it is considering using a mix of price-setting benchmarks to realize stable but less costly LNG prices, but declined to comment on a rough price target.
Asian prices of liquefied natural gas (LNG) eased to under $18 per million British thermal units, as the peak winter season draws to an end, but they are well above the U.S. gas prices of around $3.49 per mmBtu.
By 2018, Japex and Petronas aim to more than double output from the North Montney shale gas block, which contains several dozen trillion cubic feet of gas, enough to provide feedstock for the 12 mtpy LNG plant for 20 years, Saito said.
This is not the first time that Japex and Petronas are joining forces. The two are working to start production from Gharaf oilfield in Iraq by the third quarter of 2013. ($1 = 1.0280 Canadian dollars) (Reporting by Osamu Tsukimori; Writing by Risa Maeda; Editing by Shinichi Saoshiro and Muralikumar Anantharaman)