* Osaka looking for shale gas stake to support Freeport LNG
* In talks with JBIC, other banks to finance Freeport
* Eyes upstream stakes in Canada, Africa, including
By Osamu Tsukimori
TOKYO, April 15 Osaka Gas Co is looking
to buy a stake in at least one U.S. shale gas project to help
supply fuel to the Freeport LNG project in Texas, a senior
company official said on Tuesday.
Japanese gas and power utilities have been looking for ways
to cut fuel costs after their liquefied natural gas (LNG)
imports and payments rose to records last year due to the second
complete shutdown of the country's nuclear reactors since the
2011 Fukushima disaster.
One strategy has been to sign up for new LNG supplies from
the United States, which is expected to grow to be the third
largest exporter of the super-chilled gas by the end of 2020.
Osaka Gas and Chubu Electric, for instance, have
signed 20-year tolling agreements with Freeport LNG for 2.2
million tonnes of LNG a year each from the project's first
liquefaction unit. They have also invested in the plant.
"We are not considering acquiring a gas stake to cover all
volumes (for Freeport)," Motoyuki Hirabayashi, general manager
of energy development, told Reuters in an interview.
"But we have received many offers from sellers wanting us to
buy their gas stakes partly because Henry Hub prices have still
not risen sharply."
Some U.S. companies have halted development of shale gas
projects amid uncertainties over profits as benchmark Henry Hub
prices have dwindled with the U.S. shale gas boom, opting
instead to sell their stakes, Osaka Gas officials said.
Osaka Gas wants to acquire a stake in a U.S. shale gas
development by the time the Freeport project starts operations
sometime in 2017-2018, company officials said.
The officials declined to name any of the potential sellers
but said the gas stake does not have to have a direct pipeline
feed to the Freeport plant.
Having a stake in a U.S. gas field would help Osaka Gas
hedge its fuel expenses by offsetting the feedstock costs when
Henry Hub prices rise, the officials said.
Freeport last May received permission from the U.S. Energy
Department to export LNG at a rate of more than 10 million
tonnes per annum from its first two trains but has been waiting
for a final decision from the Federal Energy Regulatory
Commission, which assesses environmental impact.
Osaka Gas and Chubu Electric plan to invest about $600
million each for individual stakes of 25 percent in the
liquefaction facility. The final investment decision is expected
in the second half of 2014, and construction, which should take
about four years, should begin soon after.
Osaka Gas is looking to secure project financing for its
portion of the investment from Japan Bank for International
Cooperation (JBIC) and Japanese megabanks among others, said
Koichiro Age, senior general manager of Osaka Gas' Freeport
Project Development Unit.
Osaka Gas, Japan's second-biggest city gas supplier behind
Tokyo Gas, is also interested in procuring supplies
from Africa, including Mozambique, Age said.
"We have never been involved in projects in Canada and
Africa, and we're interested in both from the point of views of
diversifying supplies," Age said.
"But we have to see if they can finalise the projects at
attractive prices," he said.
Osaka Gas is also in talks on possible investments in gas
fields in Canada, said Hirabayashi, the general manger of energy
"During the LNG offtake negotiations, the conversations
could develop into possibly investing in an upstream stake or a
liquefaction unit," Hirabayashi said.
(Editing by Tom Hogue)