Purchase of Lean LNG from the U.S. Cameron Project Basic Agreement on the First Project to Secure 10 Million Lean LNG Annually

abarrelfullabarrelfull wrote on 06 Feb 2013 21:00
Tags: lng n-america sempra tepco usa

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As a result of discussing the purchase of LNG*1 from the U.S. Cameron Project with the seller, Mitsui & Co., Ltd., we have agreed on the initial terms and conditions of the transaction. We are also in the final discussion with Mitsubishi Corporation to reach a basic agreement on the purchase of lean LNG from the project. We will continue discussions with Mitsui & Co., Ltd. and Mitsubishi Corporation towards the conclusion of the final sales contract.

In accordance with the contracts, we will be purchasing an annual amount of approx. 800,000 tons and an optional amount (under discussion) of LNG starting from 2017 for the period of about 20 years. The natural gas linked price (Henry Hub linked price*2) is planned to be applied to the price index for the first time in a TEPCO long-term LNG contract.

The U.S. Cameron Project is an LNG project being planned in the State of Louisiana by Cameron LNG, a subsidiary of Sempra Energy. Mitsui & Co., Ltd. and Mitsubishi Corporation are currently in discussion with Cameron LNG regarding a tolling agreement of processing shale gas produced in the U.S. . Once the final sales contract is concluded between TEPCO, Mitsui & Co., Ltd. and Mitsubishi Corporation, it will significantly contribute to our stable procurement of LNG.

Based on the policy "Develop action plans towards the introduction of a significant amount of lean LNG, including the LNG to be exported from the U.S, which will comprise about half of the entire procurement amount (maximum of 10 million tons/year)" which is stated in the "Intensive Reform Implementation Action Plan" developed last November, we have considered multiple LNG supply sources including American LNG in order to achieve the introduction of lean LNG.

In addition to approx. 800,000 tons (annual) of lean LNG to be purchased from the Cameron Project, approx. 1.2 million tons (annual) will be committed through purchases from multiple sources, which will be a total of 2 million tons of lean LNG to be secured. We consider this as the first step towards achieving the target of 10 million lean LNG.

Upon introducing lean LNG, the operation of our receiving terminals will be reviewed and the facilities will be modified in order to achieve more flexible and stable operations of lean LNG procurement while making efforts to achieve diversification in supply sources and economical procurement.

We will continue our efforts towards stable and reasonable power supply and stable procurement of economical fuels including lean LNG.

*1 Lean LNG: LNG whose calorific value per unit volume is lower than the conventional LNG.
*2 Henry Hub price: The spot price at Henry Hub in Louisiana, U.S. (where the gas is accumulated) which is a price index of the natural gas produced in the U.S.

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