Osaka Gas, Mitsui O.S.K. Lines Sign LNG Carrier Construction Deal, with Long-Term Transport Agreement

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Researched by Industrial Info Resources Australia (Perth, Australia)--Mitsui O.S.K. Lines (MOL) (TYO:9104) (Tokyo, Japan) and Osaka Gas International Incorporated, a subsidiary of Osaka Gas Company Limited, plan to jointly own and operate two liquefied natural gas (LNG) carriers to import new sources, beginning in 2014.

Osaka Gas Company Limited (TYO:9532) (Osaka, Japan) has completed sale and purchase agreements that amount to an annual LNG supply of 1.875 million metric tonnes from Gorgon and Papua New Guinea LNG (PNG LNG), two LNG production plants that are under construction in the Oceania region. The Japanese utility giant is also in talks with Inpex Corporation (TYO:1605) (Tokyo) to become a project participant and purchase LNG from its planned Darwin-based, Ichthys LNG production plant.

Osaka Gas has a 20-year contract to purchase 1.5 million tonnes per year of LNG from the PNG LNG project, which is scheduled to begin in 2014. The $15 billion PNG LNG project is owned by joint venture partners Esso Highlands Limited, a subsidiary of ExxonMobil Corporation (NYSE:XOM) (Irving, Texas); Oil Search Limited (Port Moresby, Papua New Guinea); Santos Limited (OTC:SSLTY) (Adelaide, Australia); Nippon Oil Corporation (TYO:5001) (Tokyo); Mineral Resources Development Company (MRDC) (Port Moresby, Papua New Guinea); and Petromin PNG Holdings Limited (Port Moresby).

Osaka Gas signed a sale and purchase agreement for 1.375 million tonnes per year of LNG from the Australian Gorgon project, of which it is also a project participant with a 1.25% share. The $43 billion Gorgon project is majority owned and fully operated by Chevron Corporation (NYSE:CVX) (San Ramon, California). Additional project participants include ExxonMobil, Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands), Osaka Gas Company Limited, Tokyo Gas Company Limited (TYO:9531) (Tokyo) and Chubu Electric Power Company (TYO:9502) (Nagoya, Japan). Osaka Gas has committed to purchasing LNG from Gorgon for a period of 25 years, starting in April 2014.

The two 288-metre-long, 138,000-ton carriers will be constructed by Mitsui Heavy Industries (TYO:8031) (MHI) (Tokyo, Japan), with the first to be ready to launch in 2014 and the second in 2015. MOL will manage and operate the vessels under a 20-year contract with Osaka Gas. The carriers will feature breakthrough technology in design, with Moss spherical tanks integrated into the ship's hull, enabling a reduction in overall weight while maintaining power. The carriers aim to be highly fuel-efficient by introducing this feature, along with a built-in steam turbine that will capture and re-use reheating steam and by fuelling the operational vessels with natural gas. The LNG carriers will each have a 75,000-ton deadweight capacity.

Japan will rely heavily on exports of LNG from the Oceania region to meet future goals of prioritizing natural gas as the nation's power source over alternatives, especially nuclear energy.

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