Japan Petroleum Exploration (Japex) has agreed to take a 10% stake in the Western Canada natural gas development and production project and associated pipeline and liquefied natural gas (LNG) export projects of Progress Energy Canada Ltd.

With participation in this LNG project, Japex will be able to secure long-term natural gas imports from Canada into Japan, Japex said Monday. Japex reached a heads of agreement with Progress parent Petroliam Nasional Berhad (Petronas) for participation in the British Columbia (BC) projects.

Japex is to acquire a 10% interest in the natural gas blocks in North Montney, BC, through newly established Canadian subsidiary Japex Montney Ltd., as well as a 10% interest in Pacific Northwest LNG, which is planned to be located on Lelu Island within the District of Port Edward on land administered by the Port of Prince Rupert. Japex has committed to take 1.2 million tonnes/annum (mtpa) from the project, representing 10% of its estimated LNG production of 12 mtpa.

Petronas has been in partnership with Japex for development of the Garraf field in Iraq. Japex said it will be finalizing definitive agreements with Progress Energy Canada and its affiliates. Malaysia’s state-owned Petronas was given clearance to scoop up Progress Energy Resources for C$6 billion last year (see Daily GPI, Dec. 11, 2012).

Japex will continue working on development domestic natural gas infrastructure, including the planned Soma LNG receiving terminal and related pipeline. “Japex believes that importing natural gas as LNG from Canada, which has ample reserves, will help diversify Japan’s LNG import, contributing to improve energy supply of Japan.

According to the U.S. Energy Information Administration (EIA), Japan is the world’s largest importer of LNG. The country’s reliance on natural gas for power generation, and LNG, has increased significantly since a March 2011 earthquake and tsunami destroyed the Fukushima Daiichi nuclear power plant and placed the country’s nuclear power future in question (see Daily GPI, March 15, 2011). In 2010, Japan consumed about 3.7 Tcf of natural gas, importing over 3.4 Tcf of LNG by tanker, according to EIA.

Japan has been an importer of LNG from Alaska for decades, and it has called upon the United States to expedite the availability of U.S. gas in the form of LNG on the global market (see Daily GPI, Feb. 27).

While Japan and other Asian countries are seeking to import more LNG, they have expressed increasing dissatisfaction with the high prices they have paid for the commodity under contracts with prices linked to those for oil (see Daily GPI, Oct. 11, 2012). Last month, Tokyo Electric Power Co. (TEPCO) struck its first-ever long-term contract for LNG with prices indexed to the Henry Hub (see Daily GPI, Feb. 8).

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