TOKYO -- Japanese public and private banks plan to provide more than $10 billion in loans for liquefied natural gas projects in North America, in anticipation of imports slated to begin as early as 2017.
Three projects have received approval from the U.S. Department of Energy for exports to Japan. Mitsubishi Corp. and Mitsui & Co. have taken stakes in the Cameron project, Osaka Gas and Chubu Electric Power have invested in Freeport, and Sumitomo Corp. and Tokyo Gas have contracts with Cove Point. Imports are slated to start between 2017 and 2018.
A group of Japanese banks, including Sumitomo Mitsui Banking, Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ, put together a 16-year syndicated loan of $7.5 billion for the Cameron project, with the funds to be used for such applications as building liquefaction facilities.
The state-owned Japan Bank for International Cooperation will supply $2.5 billion, while 29 domestic and foreign private-sector banks will cover the remainder. Nippon Export and Investment Insurance will guarantee $2 billion of the private-sector portion.
A syndicated loan will be arranged for the Freeport project as early as this month. Discussions will center on a $3.7 billion loan, of which JBIC will provide $2.6 billion and the remainder will be handled by the three megabanks and other lenders. The Cove Point project may receive financing as well.
Japanese banks aim to offer lending for all aspects of the North American shale gas business, from development to transport. Some 90 ships for ferrying LNG to Japan will be ordered by 2020, costing nearly 2 trillion yen ($19.3 billion) to build. Financing by Japanese banks to maritime shipping companies for procuring LNG carriers will likely exceed 1 trillion yen.
Since Japan's nuclear reactors were taken offline after the March 2011 earthquake, more LNG has been imported for fueling fossil fuel power plants.
The country logged a record trade deficit of 7.5 trillion yen for the January-June half. Power companies need to diversify their suppliers, going beyond the Middle East, and lower procurement costs.
Once the three projects come online, Japan will be able to bring in 15 million tons of LNG a year, equivalent to about 20% of last fiscal year's import volume. LNG derived from U.S. shale gas is expected to be 20-30% cheaper than from other sources, which may help bring costs down at power companies and shrink the trade deficit.
Japanese banks are relatively sound, allowing them to offer larger loans than their European and U.S. counterparts. In the future, they plan to look for foreign borrowers without ties to Japanese companies as well.