Lake Charles LNG in talks with Japan’s Kyushu Electric over long-term supply deal

Japan’s Kyushu Electric Power Company is in talks over a potential long-term LNG contract tied to Energy Transfer’s proposed Lake Charles export project in Louisiana, according to a recent filing at the US Department of Energy.

Kyushu President and CEO Kazuhiro Ikebe disclosed the talks in a letter dated Oct. 24 to the DOE that said the Japanese utility is also considering an equity investment in the project. Ikebe said in the letter that the long-term LNG purchases and the equity investment will have the backing of Japan’s Ministry of Economy, Trade and Industry, or METI, “in the case that the LNG export to Japan is approved and Energy Transfer reaches [a] final investment decision” on Lake Charles.

The letter from the top Kyushu executive was among dozens submitted to the DOE in support of Energy Transfer’s application for a new export license for Lake Charles that had been submitted to the agency and published online as of Oct. 30. Energy Transfer submitted the application in August, after the DOE in April rejected the developer’s request for a three-year extension to bring the 16.5 million mt/year project online.

Ikebe’s letter did not discuss terms of the potential deal, including the volume of LNG being discussed. Energy Transfer, which did not respond to a request for comment Oct. 30, has in recent months touted a non-binding deal with an unnamed Japanese consortium for 1.6 million mt/year of LNG. The talks with Energy Transfer have been ongoing for “about a year,” the Kyushu executive wrote.

“In the process, we have integrated the requests from several small and medium-sized Japanese gas and electric power companies that have been forced to consider additional LNG procurement due to the increase in geopolitical risks, but are unable to procure North American LNG on their own,” Ikebe told the DOE. “We have been in vigorous discussions with ET on their behalf to secure stable LNG procurement for western Japan utilities, and as a result, we are close to reaching an agreement on specific purchase terms and conditions.”

Beyond METI’s support, Kyushu said it planned to receive financing and participation from the Japan Bank for International Cooperation, a Japanese export credit agency, and from the Japan Organization for Metals and Energy Security, a Japanese government agency.

The DOE’s denial of an extension for Lake Charles dealt a significant blow to the project, leaving in place an existing December 2025 deadline to begin LNG exports from the facility that Energy Transfer told the agency it would not be able to meet. Other potential customers of the project, including Shell, EQT and South Korea’s SK Gas, have also urged the DOE to issue the new export license.

In seeking the export license, Energy Transfer emphasized offtake agreements it has secured to support the project that include binding long-term deals covering 7.9 million mt/year and preliminary deals covering some 3.6 million mt/year, including the deal with the unnamed Japanese consortium.

Kyushu, which imports a large amount of LNG from Australia, also pointed to interest in Lake Charles volumes from other buyers in Asia.

“In addition to Japan, companies in South Korea and Thailand have shown strong interest in the project, both in terms of LNG supply and equity participation, making it an important project for energy security in the Asian region,” Ikebe said.
Source: Platts