(EnergyAsia, October 30 2014, Thursday) — Two of the world’s largest liquefied natural gas (LNG) importers in Japan said they will team up to demand better prices and terms from suppliers as the country remains far from reviving its idled nuclear power plants that used to generate 30% of its electricity.
In forming their equal joint venture to become the world’s biggest LNG buyer Tokyo Electric Power Co (Tepco) and Chubu Electric Power Co said they will also work on overseas projects, operate LNG receiving terminals, carriers and energy infrastructure, trade energy and replace Tepco’s old thermal power stations in Tokyo Bay.
Chubu and the joint venture, to be formally established by March 2015, will not be involved in issues related to Tepco’s Fukushima nuclear power plants that were seriously damaged by the earthquake-tsunami disaster of March 2011. Having shut down almost its entire nuclear power capacity since the disaster, Japan has been forced to pay high prices for its oil, gas and coal imports.
The Tepco-Chubu venture will be part of the national effort to break the high-cost formula of LNG pricing that ironically Japan helped create in the 1960s to encourage Middle Eastern and Asian countries develop their natural gas reserves. The two companies consume an annual total 40 million tons of LNG and 20 million tons of coal.
Like many Japanese companies, the power generators have suffered financially since the loss of their country’s nuclear energy source. Tepco, still struggling to plug Fukushima’s radiation leak, has to rely on substantial financial support from the government of Prime Minister Shinzo Abe to stay afloat while Nagoya-based Chubu Electric has been operating at a loss the last three years from having to pay between US$15 and $20 per million BTU for LNG imports.
The joint venture will likely focus on procuring and developing energy resources from North America and Australia while reducing dependence on Japan’s traditional suppliers from increasingly politically unstable producing countries in the Middle East and Asia.