(MENAFN - ProactiveInvestors - Australia) Demand for equity in Australian liquefied natural gas projects is still present with Japanese utility Tokyo Gas reportedly in talks to buy a stake of less than 10% in BG Group's Queensland Curtis LNG project.
Besides providing BG with a way to spread out the impact of a cost blowout to 20.4 billion from earlier estimates of 15 billion, the deal will also see Tokyo Gas buy 1 million tonnes of LNG per annum from the project.
BG has being searching for a partner willing to take up to 20% equity stake in the project but has struggled with finding the right partner due to global economic volatility and a weakening outlook for commodities.
The deal by Tokyo Gas, the second largest LNG importer in Japan, follows on a number of other deals by Japanese companies attempting to secure fuel supplies in the anticipation that LNG will play a bigger role in Japan's energy mix as it moves to limit or end nuclear power generation.
The Japan Gas Association had in June said that Japan would need to import 90 million tonnes of LNG per annum this fiscal year, up nearly 10% from 2011, to generate the power needed to compensate for shut nuclear reactors.
Other Asian countries are also looking to secure future LNG supplies at the right price with South Korea and India as two notable examples.
Australian LNG supplies, both existing and in development, have proven to be major draws for these buyers thanks to the high security of supply.
However, Australian LNG projects in development have struggled with costs blowouts for various reasons including high labour and raw material costs.
Woodside Petroleum (ASX: WPL) saw costs at its Pluto LNG project, which came on stream in April, increase by 26% to A14.9 billion while in June, Santos (ASX: STO) increased the cost of its Gladstone LNG project by 15% to US18.5 billion to bring forward drilling of 300 wells.
While it has not announced a cost increase yet, Chevron has admitted that labour costs for its massive Gorgon LNG project were trending higher.