Japan Enters 20-Year LNG Supply with Chevron

Japan, already without nuclear power supply, has signed a 20-year supply arrangement with U.S. oil company Chevron Corp for the latter's $29 billion Australian Wheatstone liquefied natural gas (LNG) project.

Chevron, along with partners Apache and the Kuwait Foreign Petroleum Exploration Co, will supply Japan's Tohoku Electric Power Co Inc of 900,000 metric tonnes per annum or mtpa of LNG for up to two decades.

"These agreements [with Tohoku Electric], combined with our ongoing exploration success, demonstrate that our Wheatstone and Gorgon projects in Australia are well-placed to meet the growing demand for natural gas in the Asia-Pacific region," Roy Krzywosinski, Chevron Australia managing director, said in a statement.

Japan used to rely heavily on nuclear power which provided 30 per cent of the country's energy mix prior to the March 2011 earthquake and tsunami that largely crippled the Fukushima nuclear power plant facility. All of the country's 50 nuclear power supply reactors are currently offline due to maintenance checks and the public's heavy protest to have them re-operated.

At present, Japan's power supply is being provided 40 per cent by LNG.

As of August 2013, Japan had imported a total of 11.6 million tonnes of Australian LNG, a 21 per cent up tick from a year ago.

Its supply agreement with Japan's Tohoku Electric Power Co Inc now meant Chevron has sold 85 per cent of the LNG from the Wheatstone project, expected to go online in 2016, through long-term contracts to Asian customers.

Located in northwest Australia, the Wheatstone project has an 8.9 million tonne annual capacity.

LNG is shipped in specially constructed seagoing vessels. LNG trade is completed by signing an SPA (sale and purchase agreement) between a supplier and receiving terminal, and by signing a GSA (gas sale agreement) between a receiving terminal and end-users. Most of the contracts hold the seller responsible for the transport of the gas. However, with low shipbuilding costs, a buyer may now opt to own a vessel or signs a long-term charter agreement with other independent carriers to ensure reliable and stable supply.