Japan's Toshiba Set to Buy U.S. LNG Starting in 2018

Japan's Toshiba Corp has signed a liquefied natural gas tolling agreement with the proposed Freeport LNG export plant in Texas, acting for Japanese utilities as more global companies seek to import some of America's growing fuel supplies.

Under the 20-year agreement, Toshiba will secure the right to liquefy 2.2 million tonnes of LNG each year from the Freeport plant's third production unit, known as a train, from late 2018, Freeport said in a statement.

Toshiba acts as a go-between for Japanese utilities that purchase U.S. gas and want it liquefied at Freeport's plant so it can be shipped to Japan.

Output from Freeport's first two trains, which are expected to start in early 2018 pending regulatory approvals, has already been sold to Britain's BP and Japanese utilities Osaka Gas and Chubu Electric.

Companies across the world are queueing up to import U.S. natural gas, supplies of which are at record highs thanks to horizontal drilling and hydraulic fracturing that have unlocked vast reserves of the fuel from shale rock formations, pushing U.S. prices far below global levels.

Meanwhile in Asia, LNG prices have risen since the Fukushima disaster in March 2011 closed most of Japan's large fleet of nuclear power stations and left the country scrambling for substitute fuel for power generation.

Cheap U.S. gas has attracted other Japanese companies, as well as firms in India and Europe, that have agreed to buy LNG from other proposed export plants in the United States.

So far, only three of the nearly 20 plants seeking to export LNG in the United States have approval to export to countries without a free trade agreement with the United States, and only one - Cheniere Energy's Sabine Pass in Louisiana - has a construction permit.

Freeport has full export approval from the Department of Energy but is awaiting a construction permit from the Federal Energy Regulatory Commission, which Freeport expects will be granted in the first three months of 2014.

Reporting by Edward McAllister; Editing by Bernadette Baum (C) Reuters 2013.