TKGSY Tokyo Gas Company Ltd (PK)

Tokyo Gas Co. (9531.TO) said Wednesday it has signed a preliminary agreement with BG Group (BG.LN) to purchase liquefied natural gas made from coal bed methane in Queensland, Australia and to buy stakes in the project.

Under the agreement, Tokyo Gas aims to buy 1.2 million metric tons a year of LNG for 20 years from 2015. It will buy a 1.25% stake in a gas block and a 2.5% stake in the no. 2 liquefaction train.

The gas will be liquefied and exported from the Gladstone facility, Tokyo Gas said. It declined to specify the investment value.

Many Japanese LNG buyers have so far been cautious about committing to CBM LNG as they will need to reconfigure their equipment to accommodate the gas or boost calorific value by adding more liquefied petroleum gas than usual.

Satoru Yasuoka, general manager of the Gas Resources Department at Tokyo Gas, said, "We have enough experience in handling lean gas, as we have bought LNG from Alaska for about 40 years."

The Alaskan LNG is almost the same as CBM LNG, composed of mostly methane, Yasuoka said.

Tokyo Gas will add 10% liquefied petroleum gas to 90% of lean LNG to boost the calorific value, he aded.

Tokyo Gas is Japan's largest gas utility by sales volume and uses more than 1 million tons of LNG a year.

-By Mari Iwata, Dow Jones Newswires; 813-6269-2798; mari.iwata@dowjones.com

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