Tepco has agreed a supply deal with Cameron LNG to purchase liquefied natural gas (LNG) beginning in 2017 as the company looks to take advantage of falling prices following advances in technology which have allowed gas to be extracted from shale rocks.
This revolution in extracting gas from shale rocks has seen the US benchmark price fall to around $3.40 per million British thermal units, around a quarter of how much LNG is selling for in Asia.
This is all part of a plan by Tepco to cut its gas procurement costs by up to 30% through the purchase of some 2m tonnes of US liquefied natural gas a year.
With export restrictions in place, the deal is still subject to approval by US authorities in Washington, but there are expectations that these restrictions will ease over the coming years.
Export restrictions were put in place under the 1938 Natural Gas Act, which stated that exporters needed a licence issued from the Department of Energy, but it is easier to secure for those countries with a free-trade agreement with the US. Japan does not have a free-trade agreement, therefore exporting here is more difficult.
However, a recent study by the energy department found that unrestricted exports would provide a boost to the US economy and the department told the Financial Times that it planned to start looking at permit applications on a case-by-case basis “in the general order in which the department received them.”
