UPDATE: Exxon Mobil: PNG LNG Finalizes Sales Deal With Tepco

Exxon Mobil Corp. (XOM) said Monday the PNG LNG project in Papua New Guinea will supply 1.8 million metric tons of liquefied natural gas annually to Tokyo Electric Power Co. (9501.TO), or Tepco.

The 20-year deal with Tepco is the second binding sales agreement struck by the Exxon-led PNG LNG project, and means over half of its forecast annual output of 6.6 million tons of LNG has now been contracted to customers.

Utilities in North Asia are scrambling to finalize long-term LNG supply deals to meet their growing power needs and reduce their reliance on coal and other fuels, which are more polluting.

When burnt, natural gas emits just 35% of the carbon dioxide produced by coal and sharply lower amounts of other greenhouse gases such as sulfur dioxide, according to analysts at Credit Suisse.

On Dec. 3, Exxon said a unit of China Petroleum & Chemical Corp. (SNP), known as Sinopec, had finalized a deal to buy 2 million tons of LNG annually from PNG LNG.

Exxon and partners have yet to make a final investment decision on PNG LNG, which is expected to ship its first cargo in late 2013 or early 2014.

Oil Search Ltd. (OSH.AU), which has a 34% stake in the project, said in October that the project partners are aiming to make a final investment decision Tuesday. It's unclear whether this remains the preferred timetable.

Monday's deal between the PNG LNG project and Tepco comes on the same day as 192 member countries of the United Nations' Framework Convention on Climate Change are to open a meeting in Copenhagen to discuss a successor to the Kyoto Protocol against climate change.

It's also the second LNG supply deal clinched by Tepco in just a few days, after the Japanese utility signed a heads of agreement with Chevron Corp. (CVX) on Saturday for the delivery of 4.1 million tons of LNG from the Wheatstone project offshore Australia.

Tepco, Japan's largest power utility by capacity, imports around 20 million tons of LNG annually.

-By David Winning and Ross Kelly, Dow Jones Newswires; +61-2-82724688; david.winning@dowjones.com

Oil Search (ASX:OSH)
Historical Stock Chart
From Jun 2024 to Jul 2024