TOKYO -- Japan's Chugoku Electric Power has signed a deal to procure liquefied natural gas from French oil major Total for 17 years starting in 2019.
The utility serving western Japan will receive 400,000 tons of LNG a year under the agreement, which will be announced soon. This marks the first LNG purchase deal between the two companies. The value has not been disclosed.
Hiroshima-based Chugoku Electric has been trying to diversify its power-source mix. With LNG prices low in tandem with cheap crude oil, the company saw an opportunity to secure a stable supply at low cost.
Carbon emissions from burning natural gas are only about half that from burning coal. With global warming in mind, Europe and the U.S. have been shifting away from coal power. The Japanese government is also encouraging natural gas use while keeping coal power as an option.
Total has been strengthening its LNG business lately, with a focus on Asia and other regions. The company expects strong demand for gas-fired power generation in Japan, where many nuclear power plants remain shut after the March 2011 earthquake. In the emerging economies of Asia, coal is still used as a main energy source. But use of gas in electricity generation is likely to increase there going forward.