Tokyo Gas Sells Australian LNG Stakes to EIG for $2.2 Billion

Japan’s largest gas utility Tokyo Gas has signed a definitive share-transfer agreement to sell its equity stakes in four integrated Australian LNG projects to a unit of US infrastructure fund EIG Global Energy Partners. The US$2.15 billion cash deal marks the first major sale of equity stakes held by a Japanese utility in LNG projects.

The deal is expected to be concluded after March 2023, subject to approvals from the Australian government and multiple conditions with each project partner. If the conditions are not met, it may prevent the sale of part or all of the projects to EIG’s unit MidOcean Energy Holdings, said Tokyo Gas.

One of the affected projects is Pluto, operated by Woodside which said it has “certain rights under existing agreements, which we will consider as part of our routine M&A screening process.”

What’s in the Deal

Tokyo Gas would be selling its equity interests in Pluto, Gorgon, Queensland Curtis LNG (QCLNG) and Ichthys, all of which are mostly contracted to Asian markets. Japanese utilities have historically held minority stakes in LNG producing projects as a way to gain information about the project operations.

The deal would exclude Tokyo Gas' 3.07% stake in Darwin LNG, which was sanctioned last year to receive backfill gas from Santos' offshore Barossa field that would allow it to operate beyond 2040.

The utility said the share transfer is aligned with the firm’s Compass Action plan for realizing the company’s management vision by 2030 and reviewing its asset portfolio in order to allocate resources to growth areas. “This transfer is based on this strategy. The transfer has no impact on LNG procurement,” it said.

Tokyo Gas has committed to invest around 2 trillion yen ($14 billion) in decarbonization and other growth areas such as methanation and hydrogen by 2030. It has pledged to be disciplined in investments and to manage its portfolio which would include selling or replacing assets with little prospect for self-sustained growth.

The sale would not affect Tokyo Gas’ existing offtake contracts with the four projects totaling 5 million tons per year — Pluto (1.5 million tons/yr), Gorgon (1.25 million tons/yr), Ichthys (1.05 million tons/yr) and QCLNG (1.2 million tons/yr).

EIG’s Asian LNG Opportunity

The deal marks another attempt by EIG in getting into the Australian LNG sector that underlines its broader LNG ambitions. Last year, it signed a deal to buy Origin Energy’s 10% stake in Australia Pacific LNG (APLNG) in Queensland, but the deal was eventually pre-empted by Origin’s partner ConocoPhillips, which purchased the additional equity in the 9 million ton/yr facility.

The deal with Tokyo Gas would give EIG's new LNG company, MidOcean, access to a diverse set of long-dated take-or-pay contracts with investment-grade counterparties and domestic gas markets. The firm said the portfolio would generate approximately 1 million tons/yr of LNG net to MidOcean, underpinned by long-life reserves and a globally competitive cost structure.

EIG’s Chairman and Chief Executive Blair Thomas said the launch of MidOcean reflects its deep belief in LNG as a critical enabler of the energy transition and the growing importance of LNG as a geopolitically strategic energy resource. “We believe this transaction provides MidOcean with a foundational portfolio of cost-advantaged integrated LNG assets in a low-risk jurisdiction, ideally positioned to supply key customers in Japan, Asia and across the globe for decades to come.”

MidOcean's newly appointed Chief Executive De la Rey Venter, who last held key LNG roles with Shell, said he sees a number of opportunities to further expand MidOcean’s position in supplying LNG markets around the world.

These comments suggest MidOcean is keen to sell Australian LNG beyond Asia, especially after acquiring a controlling stake in the 3.75 million ton/yr Quintero LNG regasification terminal in Chile.

Kpler ship-tracking data showed that Shell sent three cargoes from QCLNG in eastern Australia to the Quintero terminal in June, which takes around three weeks.

The latest deal underscores an increasing interest by infrastructure funds in acquiring midstream assets in Australia and the Middle East due to their stable and relatively high returns and LNG's role in energy transition. Earlier this year, Global Infrastructure Partners bought a 49% stake in Woodside’s planned Pluto Train 2, which is due to start up in 2026.