Mitsubishi Corporation (“MC”) today announced its participation in the Wheatstone LNG project (“the Project”), together with Nippon Yusen Kabushiki Kaisha (“NYK Line”) and The Tokyo Electric Power Company, Incorporated (“TEPCO”), which is being promoted by U.S. company Chevron Corporation and other companies in Australia.
The consortium has obtained equity interests in the Project (gas fields: 10%, LNG plant: 8%) through a newly established special-purpose company called PE Wheatstone Pty. Ltd. (“PEW”), which is headquartered in Perth, Western Australia. PEW will lift a certain volume of LNG in the Project in proportion to its equity interest. The Project has been approved by Japan Oil, Gas and Metals National Corporation (“JOGMEC”) as an eligible project for providing equity financing*
and a loan guarantee*
in order to secure stable energy resources for Japan.
The Project is led and operated by Chevron and construction work is in progress with the aim of starting LNG production from the end of 2016. The Project will produce 8.9 million tons per annum (mtpa) of LNG. TEPCO executed two Heads of Agreements with Chevron in December 2009 to acquire an equity interest in and purchase approximately 3.1 mtpa of LNG from the Project.
After the Great East Japan Earthquake in March 2011, TEPCO faced difficulties participating in the Project on its own. However, given the importance of securing stable energy resources for Japan, MC and NYK Line, which have a long-term relationship through joint ownership and operation of LNG carriers, were proposed by TEPCO to jointly participate in the Project in light of TEPCO’s financial constraints. MC decided to participate in the Project after a detailed evaluation of technologies, legal matters, finance, and economics as well as consistency with company business strategy.
MC, NYK Line and TEPCO (“the consortium”) believe that participation in the Project will contribute to the stable supply of energy to Japan. Based on this belief, the consortium has applied to JOGMEC for application of its finance support system in order to secure valuable energy resources through public-private cooperation. Following examination by JOGMEC, the Project was approved as eligible for equity financing and a loan guarantee. In addition, the consortium is now discussing the procurement of finance with private-sector banks and Japan Bank for International Cooperation (JBIC).
By participating in the Project, approximately 0.7 mtpa of LNG, PEW’s equity share of production, will be supplied to TEPCO. Including the approximate 3.1 mtpa (TEPCO secured through Sale and Purchase Agreements (“SPA”) with Chevron and others in July 2011) and another 0.4 mtpa (TEPCO secured through an SPA with Chevron today), approximately 4.2 mtpa of LNG will be supplied to TEPCO in total from the Project.
Competition is increasing globally to secure energy resources, with natural gas in growing demand as a clean energy resource. Under these circumstances, today’s participation has profound meaning as a move by Japanese energy-related companies to secure energy resources with government support.
The final investment decision on the Project was made in September 2011. The Project will be an important supply source for Japan in securing stable LNG supplies in view of the low construction and operational risk since the Project is operated by Chevron, which has extensive experience in Australia, a geopolitically advantageous country. MC, together with NYK Line and TEPCO, will leverage each company’s know-how and expertise in the LNG value chain from upstream to downstream (E&P, liquefaction, transportation and delivery) to establish a highly reliable LNG supply system in order to contribute to the stable and long-term supply of energy resources to Japan.
JOGMEC, MC, NYK Line and TEPCO will invest in Pan Pacific Energy, the parent company of PEW.
JOGMEC’s guarantee for finance to PEW will cover all finance by private-sector banks with which discussions are in progress.