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Tokyo Gas Adds Haynesville to Its Collection of U.S. Shale Play Interests

Major liquefied natural gas (LNG) player Tokyo Gas Co. Ltd. is taking a stake in the Haynesville Shale, a nearby natural gas supply source for U.S. Gulf Coast liquefaction and export terminals.

Subsidiary Tokyo Gas America Ltd., through an affiliate, has acquired a 30% equity interest in Castleton Resources LLC (CR), a unit of Castleton Commodities International LLC (CCI), the companies said Monday.

CR was formed to acquire and develop oil and gas assets in East Texas and Louisiana, focusing specifically on the Haynesville. CR owns and operates more than 160,000 net acres of leasehold in East Texas with access to the Cotton Valley and Haynesville Shale and has a net production of 238 MMcfe/d. CR currently operates more than 1,900 producing wells.

“The Gulf Coast area, specifically East Texas and North Louisiana, is strategically important for Tokyo Gas…” said Tokyo Gas America CEO Shunjiro Yamashita. “The CCI/Tokyo Gas partnership in Castleton Resources creates a well-capitalized vehicle for growth in the region.”

According to a Reuters report, a Tokyo Gas official said the company will not take natural gas from the Haynesville project but through its equity stake will be able to gain “a variety of insight.”

Last November, CCI announced the purchase of the Carthage upstream and midstream assets in East Texas from subsidiaries of Anadarko Petroleum Corp. for more than $1 billion. CCI subsequently combined the acquired assets with its existing East Texas upstream assets under the newly formed CR.

"Our partnership with Tokyo Gas will align CCI with one of Japan's largest LNG market participants and further solidify our company's commitment to expanding in Asia and connecting Asian and Western markets and investors," said Nicholas Haslett, CCI chief strategy officer.

The deal marks the third investment in U.S. unconventional upstream assets by Tokyo Gas and its first equity investment in a U.S. upstream company.

Last June, Tokyo Gas acquired Eagle Ford Shale assets, and about three years earlier it acquired an interest in Barnett Shale assets. Tokyo Gas Group plans to continue to expand its upstream business and build a global LNG value chain, the company said in the Haynesville deal announcement.

Last month, a Tokyo Gas affiliate acquired an interest in a natural gas-fueled power plant in Pennsylvania. The Japanese utility conglomerate also is signed up to be an offtaker of LNG from the Dominion Cove Point LNG export terminal, which is nearing completion.

Also last month, Tokyo Gas and Kyushu Electric Power Co. Inc. said they would cooperate in the area of LNG procurement and transportation in pursuit of greater flexibility and cost reduction. “We are considering the cooperation of securing LNG to ensure the stability of supply of both companies, including in an emergency,” they said.

The move is similar to one recently by Japan’s JERA Co. Inc., Korea Gas Corp. and China’s CNOOC Gas and Power Trading & Marketing Ltd., all of which signed a memorandum of understanding to “discuss opportunities for mutual collaboration in the LNG business.”

For more on the Haynesville Shale’s re-emergence, check out the NGI special report “Haynesville 2.0,” which was released last week.

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