Japan’s move back towards gas for electricity supply took another step yesterday as Kansai Electric Power Company (KEPCO), signed for long-term liquefied natural gas supply from Qatargas 3.
Under the terms of the agreement, Qatargas 3 will deliver 0.5 million tonnes per annum (MTA) of LNG for a period of 15 years starting from 2013.
KEPCO is the second largest electricity company in Japan, and leaned heavily of Qatar to provide gas feedstock for power generation after an earthquake in 2011 caused a nuclear accident at Japan’s Fukushima-Daiichi nuclear plant, prompting the discontinuation of nuclear power in the country.
Qatargas, the world’s largest exporter of LNG, has been tying up long-term supply deals, taking advantage of its prime position in the global market before new supplies from Australia, East Africa and potentially the USA reduce the Emirate’s relative position and pricing strength.
Qatar’s loss of a recent arbitration on long-term LNG supply contracts to Europe may also be driving the Emirate’s drive to seek the security of long-term supply arrangements elsewhere.
Edison, an Italian energy firm, won a $580 million discount on its LNG bill from RasGas after a European arbitrator ruled that the oil-linked pricing mechanism in Edison’s LNG contract should be reviewed. Edison’s supply deal obligates RasGas to provide 6.4 billion cubic metres of supply a year for 25 years.
On 11 June 2012 Qatargas 1 executed a similar long-term deal with Tokyo Electric Power Company (TEPCO).
The company has also been plugging Japanese demand at the short end, and is set to send over 20 million tonnes of LNG in the short term to help with the aftermath of the 2011 earthquake and tsunami.
Qatargas has increased its support for Japan by 11 million tonnes from the original 9 million tonnes of short-term supplies announced last autumn.
These volumes are in addition to the several new long-term LNG supply agreements reached between Qatargas and its Japanese customers over the last 12 months.
Mohammed Bin Saleh Al-Sada, Minister of Energy and Industry and Chairman of the Board of Qatargas 3, said the agreement “agreement reinforces our strong relationship with one of Qatargas’ foundation customers and demonstrates our continued commitment to supply LNG to Japan for the long-term. As the largest LNG-producing company in the world, Qatargas is committed to providing reliable energy supplies to all four corners of the world.”
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