JERA Invests $2.5B in Texas LNG Production and Export Facility
Japan energy company JERA, which is already the world’s largest buyer of liquified natural gas, is looking toward expanding its role in the LNG through the $2.5 billion acquisition of a 25.7 percent stake in the U.S.’s Freeport LNG project, which is the second larger LNG facility in the United States. JERA, which participates in the first phase of the Texas facility, looks to secure the supply of LNG, which it expects to use for import as well as to market to other Asian importing countries.
JERA through its American operations has agreed to acquire the shares of the Freeport project owned by a U.S. investment company, Global Infrastructure Partners, which has been an investor in the Freeport facility since 2015. The import terminal, which started operations in 2008, grew as the gas industry evolved in the U.S., and in 2012 the predecessor companies to JERA joined the project as investors to develop the liquefaction facility to become an LNG exporter. The first train commenced operations in December 2019, with two additional trains added in 2020, bringing the facility to its current annual production capacity of approximately 15.45 mtpa. JERA currently purchases and transports 2.32 mtpa of LNG for use in Japan and other LNG importing countries.
In Asia, JERA reports that there is demand for both decarbonization and a stable energy supply to support economic growth. They believe that gas-fired power generation can be a flexible supplement to intermittent renewable energy, especially as Japan and other Asian countries work to reduce and eliminate the use of coal-powered facilities. JERA believes that demand for LNG as an energy source will grow rapidly while they also point to the need to secure a stable supply of competitive LNG after the shortages and price hikes experienced in the market in 2020 and early 2021.
As an investor in Freeport LNG, JERA will work to advance new LNG projects, including production capacity expansion and the development of Train 4 for the facility. Freeport has already received key regulatory agency approvals for the additional train noting that it would add more than 5 million mpta to the annual production.
JERA was attracted to the investment in Freeport in part because it views the new LNG projects as low risk as they would be an expansion for the existing operation. They noted that there are no resale or destination restrictions on LNG exported from the project, which JERA believes will make it possible to supply LNG to Japan when supply is tight and to respond flexibly to the LNG supply and demand situation in the Asian region.