LNG Japan Corporation Considers Participation in Nigerian LNG Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--LNG Japan Corporation (Tokyo, Japan), a 50:50 joint venture entity between Sumitomo Corporation (TYO:8053) (Tokyo, Japan) and Sojitz Corporation (TYO:2768) (Tokyo), is considering plans to participate in the liquefied natural gas (LNG) project in Oloko, located in southwest Nigeria.

With scarce domestic energy resources, Japan is dependent on oil and gas imports in order to increase the level of energy security within the country.

LNG Japan has long been an active participant in LNG imports, having been involved in the import of the first LNG cargo from Indonesia in the late 1970s. The company is now expanding its business profile by foraying into new LNG projects and receiving terminals in the U.S. and the U.K., with a stated view to creating a connecting LNG trade model linking Asia Pacific with Europe and the U.S.

LNG is transported in specially designed tankers that need to maintain a constant low temperature to ensure that the natural gas remains in a liquefied state. At the end of 2008, there were 298 LNG tankers operating worldwide. LNG terminals receive and store the gas on arrival and process it in re-gasification plants so that it is available for use in power stations and for other domestic use. Japan is currently constructing several LNG receiving and storage terminals across the country in locations such as Sakaide, Hitachi City, Mizushima and Shimizu, with expected startup dates ranging from 2009 to 2016.

The Nigerian project, being built on the border of Ogun and Ondo, two states in the southwestern region of the country, is a joint venture undertaking between state-owned Nigeria National Petroleum Corporation (Abuja, Nigeria), Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands), Chevron Corporation (NYSE:CVX) (San Ramon, California), and BG Group plc (LSE:BG) (Reading, United Kingdom).

LNG Japan is considering participation in the $10 billion Oloko LNG project, which has a potential production capacity of 22 million tons per year, as a means of securing a constant long-term flow of LNG to Japan. Traditionally, the high freight cost involved in the transportation of LNG between Africa and Japan has been detrimental to investments in such projects, but the strategic value of a secure supply of LNG outweighs the economic cost of transport.

Japan is the world's largest consumer of LNG and already imports LNG from Nigeria, which is the fifth largest LNG exporter in the world, with export figures of around 22 million tons per year. Last year, Japan imported 69 million tons of LNG, of which imports from Nigeria accounted for 1.8 million tons. This was a substantial increase from the 657,000 tons of LNG imported from Nigeria in 2007. However, the largest source of LNG imports to Japan is Indonesia, which supplied 14.1 million tons in 2008, followed closely by Malaysia, which supplied 13.1 million tons of LNG to Japan in the same year.

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