January 29, 2019 / 5:19 PM / 3 months ago

Tokyo Gas CEO says to step up overseas LNG investment

TOKYO (Reuters) - Japanese gas distributor Tokyo Gas will target investment in overseas infrastructure projects in liquefied natural gas (LNG) and renewable energy to boost its offshore earnings, its chief executive said.

FILE PHOTO - A liquefied natural gas (LNG) tanker is tugged towards a thermal power station in Futtsu, east of Tokyo, Japan November 13, 2017. Picture taken November 13, 2017. REUTERS/Issei Kato

The country’s biggest city gas seller and major buyer of LNG plans to leverage its links with foreign partners or team up with other Japanese companies to chase deals, President & CEO Takashi Uchida said.

“We want to make an aggressive investment in Southeast Asia and North America this year to expand our LNG value chain,” Uchida told Reuters in an interview this week.

Under a three-year business plan that kicked off last April, Tokyo Gas plans to spend 260 billion yen ($2.4 billion) to boost its earnings from abroad to 20 percent of its targeted operating profit of 130 billion yen in the year to March 2021.

In the year to March 2018, earnings outside of Japan accounted for about 5.8 percent of its group operating profit of 116.3 billion yen.

“Since we have struggled to win any major overseas deals through auctions last year, we plan to seek one-on-one deals through our foreign partners or join forces with other Japanese companies,” he said.

Tokyo Gas is eyeing LNG import terminal projects in the Philippines and Vietnam.

The company also wants to proactively seek new deals in renewable energy, such as offshore wind power, Uchida said, as it aims to raise its equity interests in renewable energy to 600,000 kilowatts abroad by the mid-2020s from zero now.

SAVINGS ON LNG

In an effort to diversify procurement sources and reduce costs, Tokyo Gas last year signed non-binding contracts to buy LNG from Anadarko Petroleum’s Mozambique project, Royal Dutch Shell’s LNG Canada project and Sempra Energy’s Energia Costa Azul LNG project in Mexico.

“Given the soft LNG market, we were able to win those new deals that were more beneficial to us than the existing contracts,” Uchida said.

“We have not abandoned our goal to raise short-term and spot LNG purchases, but we can derive good terms for long-term contracts under the current market circumstances.”

Uchida said Tokyo Gas’ tie-up with Britain’s Centrica in LNG procurement from Mozambique was an example of winning more flexibility from sellers.

Japan’s Fair Trade Commission in 2017 ruled that destination restrictions that prevent the reselling of contracted LNG cargoes breach competition rules.

“Some suppliers have relaxed destination restrictions over the existing contracts,” he said.

Asked whether Tokyo Gas may scrap a new 2 gigawatt coal-fired power station project in Chiba, near Tokyo, Uchida said: “We are still assessing with Kyushu Electric Power and Idemitsu Kosan whether it is economically feasible.”

“We will make a decision by the end of March,” he said, adding that the partners may consider an LNG-fired plant if the coal-fired power plan is scrapped.

($1 = 109.1700 yen)

Reporting by Yuka Obayashi; editing by Richard Pullin

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