A major Japanese energy company has signed an agreement to buy liquid natural gas from Kitimat’s LNG Canada plant once the plant is completed.
Tokyo Gas president Takashi Uchida announced October 10 that the company had signed a heads of agreement with Diamond Gas International (DGI) for volume of up to 0.6 mtpa (metric tonnes per annum) over a 13-year period.
“On top of the access to abundant natural gas in Canada, the proximity of the project to Japan, which allows the shipment to take only about 10 days, promises a stable long-term supply of LNG,” said Uchida in a statement.
“By signing this agreement, Tokyo Gas is contributing to the start-up of the very first large-scale LNG production project in Canada.”
Diamond Gas is a fully owned subsidiary of one of LNG Canada’s Joint Venture Partnerships, Mitsubishi Corporation. Mitsubishi holds a 15 per cent interest in LNG Canada.
Diamond Gas is expected to offtake (see glossary below) 2.1 mtpa of LNG Canada’s projected production of 14 mtpa when the plant goes into operation, liquefying natural gas delivered by pipeline from large reserves in the northeast of B.C.
Tokyo Gas will start receiving shipments of LNG produced in Kitimat in 2026, “delivered on ex-ship (with destination flexibility).”
Diamond Gas Management Canada legal manager Ayumi Minamitake declined to share the dollar value of the contract between DGI and Tokyo Gas saying that information relates to a commercial contract.
“DGI is marketing LNG globally from a portfolio of various LNG supply sources which include LNG Canada. DGI is currently in communication with multiple potential buyers,” added Minamitake.
Tokyo Gas is Japan’s largest provider of city gas serving more than 11 million customers in Tokyo and six other Japanese cities. The company also received Japan’s very first LNG cargo.
An offtake is an agreement entered between a producer and a buyer to buy/sell a certain amount of the future production. It is generally negotiated long before the construction of a facility to guarantee a market for the facility’s future production and improve chances of getting financing for the installation concerned.
A Heads of Agreement, properly drafted, is a non-binding document which sets out the key terms of a proposed agreement between parties. It is commonly used as part of the process of negotiating commercial transactions for example, the purchase of a business.
An mtpa is a typical measurement unit in liquefied natural gas (LNG) markets for production and facility capacity.