Japanese utility giant, Tokyo Gas, has confirmed its acquisition of a 25 percent stake in Eagle Ford shale assets from a south Texas company VirTex Group. This is the second acquisition of U.S. shale assets by Tokyo Gas, following the Barnett shale gas venture in 2013, which – hurt by the falling commodity prices – forced the company to post impairment losses twice. This time round, however, the currently low energy prices mean that the Japanese utility company spent on the current acquisition about one tenth of what it did in 2013.
The project, which already is under commercial production, is expected to supply gas equivalent to 200,000 tonnes per year (tpy) of liquefied natural gas (LNG) output for 20 years, Tokyo Gas said.
The company’s senior general manager of global business department, Hisashi Nakamura, told Reuters after a briefing the firm is considering buying more U.S. stakes in the future.
“We would look for more deals if there are good ones, but only the cost-competitive projects that are profitable even at low prices would survive, so they are not found everywhere,” he said.
According to a recent report by The Wall Street Journal, Japan is the world’s largest importer of natural gas. It is no surprise then, that Tokyo Gas is not the only Japanese company looking for a bargain among American shale resources.
In August 2012, Japex had bought a 5 percent working interest in two shale oil acreages in Eagle Ford shale play. The company bought an additional 50 percent stake in 2013. Also in 2012, Marubeni Corporation entered into an agreement with Dallas-based Hunt Oil Company to acquire a 35 percent working interest in the Eagle Ford shale oil and gas acreage. Mitsui & Co. also invested in Eagle Ford during the 2011-12 period.
When it comes to Japanese companies interested in buying U.S. shale assets, this might be just the tip of the iceberg, with many companies holding back their investment in expectation of commodity prices falling even lower. With predictions that prices have formed a bottom, we soon may see more of these companies following in Tokyo Gas’ footsteps.
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