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Japan's Tohoku inks flexible 20-year sales deal with Engie for US LNG

Highlights

Japan's Tohoku Electric said Monday it has signed a 20-year sales and purchase agreement with France's Engie to buy 270,000 mt/year of US LNG that includes provisions giving it the flexibility to alter delivery destinations and resell volumes to third parties.

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The companies inked a sales and purchase heads of agreement in May 2014.

Under the contract signed last Friday, cargoes will be delivered on a ex-ship basis from the Cameron LNG project in the US from 2018 for 20 years. It has a Henry Hub-linked pricing basis, the Japanese utility said.

The move reflects growing demand for flexibility in term contracts from Japanese utilities that are facing increasing competition in domestic power and gas markets ahead of full deregulation.


The potential restarts of nuclear power units have also made it difficult to project future LNG demand by Japanese utilities.

Tohoku Electric consumed 4.08 million mt of LNG in the fiscal year 2014-15 (April-March), down 4.7% from the year before.

Engie holds a 16.6% stake in the Cameron LNG project, Japanese trader Mitsui Co. 16.6% and Japan LNG Investment, a joint venture between Mitsubishi Corp. and shipping company Nippon Yusen Kaisha Line, 16.6%. The remaining 50.2% is owned by Sempra Energy.

Tohoku Electric in April 2014 signed a separate heads of agreement with Diamond Gas International, a wholly-owned subsidiary of Mitsubishi Corp., to buy 300,000 mt/year of LNG from the Cameron project for 16 years from 2022.

A spokesman for Tohoku Electric said the two Japanese companies were currently in talks to hammer out the details.

--Eriko Amaha, eriko.amaha@platts.com
--Edited by Wendy Wells, wendy.wells@platts.com