Japan's Kyushu Electric to wait for US LNG policy clarity on Lake Charles

KYUDEN Holdings

20/02/2024 09:26

By Yuka Obayashi
       TOKYO, Feb 20 (Reuters) - Japan's Kyushu Electric Power
 9508.T  will wait until after the United States resumes issuing
export licences for new liquefied natural gas (LNG) projects
before deciding on whether to invest in the Lake Charles
project, an executive said.
    U.S. President Joe Biden froze approvals for LNG exports
from new projects late last month to big markets in Europe and
Asia in order to take a "hard look" at environmental and
economic impacts of the booming business.
    The United States became the largest LNG exporter last year,
and its exports are expected to double by the end of the decade.
    The Lousiana-based Lake Charles project of Energy Transfer
 ET.N  was among those affected projects. Before Biden's freeze,
Kyushu Electric had said it was considering investing in the
project, among others, to secure LNG supplies.
    Asked about whether Kyushu would hold off on the decision
until the U.S. pause is lifted, Executive Officer Takashi
Mitsuyoshi told Reuters it would likely do so.
    "We were a bit surprised by the decision," he said. "I
assume we won't be able to make a decision until then."
    Kyushu remained in talks with Energy Transfer, he added,
including on signing a long-term purchase agreement. 
    Japan is the world's second-biggest LNG importer after
China. Given the difficulty to start new LNG projects amid the
global push toward decarbonisation, Mitsuyoshi said the company
was now seeking to secure LNG supplies by buying stakes into
development projects, rather than just relying on imports
through long-term contracts.
    "While Europe and China are actively securing resources,
Japan's presence in the resource business is declining,"
Mitsuyoshi said.
    "Like global oil majors, Japanese trading companies are
gradually moving away from the resource business, and with
environmental issues making it difficult to initiate new LNG
projects, I don't think we can achieve the same level of stable
procurement as before if we solely remain in a buyer position." 
    The company is in talks with state-owned Japan Bank For
International Cooperation (JBIC) and Japan Organization for
Metals and Energy Security (JOGMEC) for financial support for
the possible U.S. deal, but no final decision on the investment
or purchase agreement has been made, Mitsuyoshi added.  
    The Lake Charles project is only one of the options for the
company to secure supplies as some of its contracts, including
Donggi-Senoro in Indonesia and Sakhalin-2 in Russia, are
expiring in 2027-2032. 
    Mitsuyoshi declined to comment on whether it plans to renew
the Sakhalin-2 contract.
    The utility has reduced its reliance on LNG, thanks to
restarts of four nuclear power reactors and the utilisation of
more renewable energy in Kyushu, Japan's southwestern main
island.
    After peaking at nearly 6 million metric tons in the
aftermath of the 2011 Fukushima nuclear disaster, Kyushu
Electric's annual LNG demand has fallen to under 2 million tons
in the fiscal year ending March.
    To better manage supply, the utility has started using two
LNG storage tanks in Indonesia and has formed a new trading unit
to quickly respond to market changes.
    "We want to grow trading flow to reinforce hedging and other
functions," Mitsuyoshi said. 

 (Reporting by Yuka Obayashi
Editing by Katya Golubkova and Miral Fahmy)
 ((Yuka.Obayashi@thomsonreuters.com; +813-4520-1265;))