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Japanese trio join race for Canadian shale

Japan banking on BC LNG exports

CHUBU Electric Power, Tokyo Gas and Osaka Gas are each taking a 7.5% stake in a Canadian shale-gas project from fellow Japanese player Mitsubishi as they rush to make up for the loss of nuclear power in Japan’s energy mix.

The deal sees them take an interest in Cordova Gas Resources, a unit of Mitsubishi that owns 50% of the Cordova Embayment shale-gas project in northeast British Columbia.

The companies said they would receive C$1 billion ($1.04 billion) in loans from Japan Bank of International Cooperation and Bank of Tokyo-Mitsubishi UFJ to finance the acquisitions.

Nuclear fall-out

The utilities are considering importing liquefied natural gas (LNG) from North America to offset a fall in output from nuclear power plants. Japan’s natural gas demand is expected to rise following the shutdown of the Fukushima-Daiichi power plant in the northeast of the country, after March’s devastating earthquake and tsunami. Other Japanese nuclear operators have also shut in generating capacity.

Chubu Electric suspended operations at its Hamaoka nuclear plant, 200 km southwest of Tokyo, at the request on Japan’s prime minister Naoto Kan on 6 May. Kan’s request follows fears the plant may not be able to withstand a future earthquake. Analysts said Chubu could need 38% more LNG in the period to March 2012 to replace the lost nuclear output maintain electricity supply.

LNG spot prices in Asia have increased to just below $13/million British thermal units (Btu) over the past week, up from around $12/m Btu, as companies including Chubu, scramble to secure supplies.

Earlier this month, Chubu signed a 21-year LNG supply deal with BG Group. The deal included buying supplies from BG's Queensland Curtis coal-bed methane (CBM) to LNG project in Australia.

Chubu, which is the first Japanese utility company to agree to buy LNG produced from CBM, will take up to 122 cargoes (8.5 million tonnes) from 2014.

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