Japan’s Tokyo Electric Power Co. (TYO: 9501), also known as Tepco, hopes to purchase fuel from Mitsui & Co. (TYO: 8031) and Mitsubishi Corp.’s (TYO: 8058) Cameron project in the U.S. in order to cut down on its own energy costs.
According to Bloomberg, Tepco aims to buy 400,000 tons of LNG annually from each of the two companies for 20 years at prices linked to the U.S. Henry Hub. The purchasing will begin in 2017.
In addition, Tepco is looking for suppliers for an additional 1.2 million tons of LNG annually. The Mitsui deal is already completed, while the Mitsubishi deal is in progress.
It’s a necessary move for Tepco, which is seeing spiraling costs after Japan shuttered most of its nuclear plants following Fukushima.
This year, the company will likely see costs of up to $30 billion for keeping its gas and thermal plants operational. LNG, of course, will come at far cheaper prices, thus helping the company reduce its bill.
As Platts reports, all of this is part of Tepco’s concerted effort to import 10 million tons of LNG annually in order to reach more sustainable long-term price levels. As part of its commitment to this long-term goal, Tepco is also working to add new storage tanks to its Futtsu import terminal, and it is making adjustments so that both lean and rich LNG can be stored.
For the present fiscal year, Tepco is expected to import some 23.82 million tons, up 4.1 percent from last year’s record-setting 22.83 million tons.