TEPCO turns to Louisiana for LNG

Deal seen as a prelude to purchase of shale gas by Japan for its power plants.

Tokyo Electric Power plans to buy 400,000 tons of LNG a year for 20 years beginning in 2017 from the Cameron Parish LNG terminal in Louisiana through trading house Mitsui & Co. It expects a similar deal with Mitsubishi Corporation and other deals that could boost its imports by 1.2 million tons a year.

The benchmark price TEPCO will pay for both deals will be far lower than what Japan pays for its current gas imports.

A boom in U.S. gas production thanks to hydraulic fracturing or fracking has taken U.S. prices to 10 year lows. Reduced U.S. demand for LNG from the Middle East is freeing up more LNG for Asia, including Japan, which uses up 30% of global consumption.

Soaring imports of oil and gas helped push Japan's trade deficit in 2012 to a record US$75 billion. As the largest Japanese electricity company, TEPCO is especially keen to reduce costs for its fuel imports.