Abe will ask Obama for shale exports as Japan’s gas bill soars

Japanese Prime Minister Shinzo Abe will ask U.S. President Barack Obama to allow shale gas exports as the world’s third-largest economy grapples with soaring energy costs after 2011’s nuclear disaster closed reactors.

The request will be made at a meeting tomorrow between Abe and Obama in Washington, said three Japanese officials, who declined to be identified because the information isn’t public. The bill for importing liquefied natural gas, combined with a weaker yen, prompted Japan to post a record trade deficit in January of 1.63 trillion yen ($17.4 billion), the Finance Ministry said yesterday.

The switch from nuclear to gas-fired generation after the accident at Fukushima forced Japan to increase LNG imports 11% last year. Abe wants Obama to share the benefit of surging output from shale fields, which has depressed the cost of U.S. gas to about 20% of Asian prices, by approving export terminals. Some U.S. politicians oppose shipments overseas because the lower energy costs are making manufacturers more competitive, helping to create factory jobs.

“Since Fukushima, Japan has dramatically increased its energy imports,” said Mark Lewis, a Paris-based analyst at Deutsche Bank AG. “They are desperately looking for cheaper imported sources of energy supply.”

Japan is the world’s largest importer of LNG, gas cooled to a liquid for shipment by tankers, and cargoes from North America would allow it to diversify from suppliers in Asia and the Middle East. Tokyo Electric Power Co., Japan’s largest utility, Chubu Electric Power Co. and trading company Sumitomo Corp. all have agreements to buy LNG from proposed export plants that have yet to win government approval.

Sabine Pass

The U.S. has only approved one export plant for shipments to countries without a free-trade agreement. Cheniere Energy Inc.’s plant at Sabine Pass is due to begin exports in 2015. The U.S. may ship about 50 million tons of LNG by the end of the decade, Royal Dutch Shell Plc Chief Executive Officer Peter Voser said last month. That compares with 77 million tons a year from Qatar, currently the world’s top exporter.

Japan paid an average of 67,210 yen a metric ton for LNG in December, according to data from the country’s Ministry of Finance. That’s equivalent to $15.79 per million British thermal units. U.S. gas futures traded in New York hit a 10-year low in April of less than $2 per million Btus. The gas price rose 0.2% to $3.3 per million Btus today.

Importing U.S. gas would boost Japanese utilities’ bargaining power in negotiations with suppliers who benchmark their prices against more-expensive oil, said Reiji Ogino, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. Utilities have sought government approval to raise electricity prices and pass on the burden of higher fuel bills to consumers.

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