Tokyo (Platts)--3Jul2012/410 am EDT/810 GMT

Japanese gas utilities are considering expanding their participation in upstream developments for LNG as part of efforts to lower cost of importing the product, the Japan Gas Association Chairman Mitsunori Torihara told reporters Tuesday.

Speaking at a Tokyo press conference, Torihara said that the utilities were also diversifying their sources of LNG, extending from conventional gas-based LNG to unconventional gas sources such as coalbed methane and shale-gas based LNG.

When asked whether the Japanese gas utilities had a large capacity to import shale-gas based LNG from North America, Torihara said that the utilities may work together to receive the lean-gas based LNG from North America because they would need to blend it with LPG to enrich it for city gas supply.

The government said on June 27 that Japanese companies had secured options to import up to 15 million mt/year of LNG from North America, which could start from as early as 2016, although formal contracts were yet to be finalized.

The government did not provide a breakdown of the possible 15 million mt/year LNG imports from North America, which would account for roughly 20% of the country's current import volumes.

Japan, the world's biggest importer of LNG, imported a record 78.5 million mt/year last year.

The country's LNG demand has soared since the March 2011 Fukushima nuclear disaster and Tokyo has been seeking additional supplies from major exporters such as Qatar. But Qatar has insisted on retaining oil-linked contracts for its LNG.

At the same time, Japan has also been stepping up efforts to lower the cost of LNG imports after reporting its first annual trade deficit in 31 years in 2011.

--Takeo Kumagai, takeo_kumagai@platts.com

--Edited by Haripriya Banerjee, haripriya_banerjee@platts.com

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