Kyushu Electric Power has signed a basic agreement with Diamond Global Energy, a unit of Mitsubishi, covering the purchase of liquefied natural gas from the second phase of the LNG Canada project at Kitimat. The Canadian export venture is led by Shell. The arrangement ties the Japanese utility to a North American supply source, with the Mitsubishi unit acting as the seller.
Basic agreements in the LNG trade generally set out the commercial basis of a transaction before a definitive sale and purchase agreement is concluded, with volumes, pricing and delivery schedules typically settled at a later stage. No quantities, contract duration or start date for deliveries were disclosed. The agreement therefore represents an early stage in the commercial relationship between the two companies.
The project covered by the deal is the second phase of the Shell-led venture at Kitimat. Mitsubishi's position in the transaction, via Diamond Global Energy, places a Japanese group between the producer and the purchasing utility, a structure frequently used in LNG sales to connect export projects with buyers in consuming markets. Kyushu Electric's participation signals Japanese utility interest in the output from the project's second phase.
For Kyushu Electric, the agreement adds a Canadian supply option to its LNG procurement portfolio. For LNG Canada, attracting a Japanese utility to the second phase supports the commercial development of the project, since Japanese buyers have traditionally been among the anchors of new export capacity. Attention will now turn to whether the basic agreement is converted into a definitive sale and purchase agreement, and on what volumes and terms.
Source: LNG Prime
