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Sat, May 24, 2003 - Page 12 News List

Mitsubishi plans to build California LNG terminal


Mitsubishi Corp, Japan's biggest trading company, plans to invest as much as US$400 million to build a liquefied natural gas storage terminal in Long Beach, California, to sell Asia's surplus to the US.

Mitsubishi Corp, the world's biggest trader of the fuel used by power plants and city gas companies, has taken a 40-year lease on a piece of land near Los Angeles in southern California.

It aims to invest between US$350 million and US$400 million to build the receiving terminal, the first for LNG on the US' west coast.

It would be able to take 4.536 million tonnes a year.

Mitsubishi has invested in LNG production plants across Asia -- from Sakhalin in the Russian Far East, which will start output in 2007, to Australia. Most of the new plants may be idled because slow economic growth has cut demand in Japan, which buys more than half the world's LNG output.

"We have so much upstream investment -- Brunei, Indonesia, western Australia and Sakhalin" that needs new customers, said Yusuke Uchimura, a company spokesman.

"California is seeking to diversify its energy supplies" that could help increase demand for LNG from power producers, he said.

Mitsubishi Corp shares rose as much as Japanese Yen 22, or 3.2 percent, to Japanese Yen 718 and traded at Japanese Yen 717 at 10:16am yesterday on the stock exchange in Tokyo.

The shares have dropped 0.8 percent this year, compared with a 4.6 percent decline in Japan's benchmark Nikkei-225 Stock Average.

California faces a risk of an electricity shortage by 2006 that could worsen in the following years because too few power plants are being built in the state, according to a 28-page report by the Bay Area Economic Forum.

Uncertainty in the energy industry about how California will structure its electricity markets is discouraging construction of new plants, the study said.

"The risk of a supply shortfall is real, it's not that far away, it can be dealt with," Sean Randolph, president of the Bay Area Economic Forum, said in a conference call with reporters yesterday.

Millions of Californians lost power during six days of blackouts in 2001.

State officials attributed the blackouts in part to power suppliers' unwillingness to sell to California's two largest utilities, units of PG&E Corp and Edison International.

The utilities had become insolvent buying power for more than they could charge customers.

Mitsubishi aims to begin construction within two years, and start operations in the second half of 2007, Uchimura said. The company needs approval from local regulators before starting the project.

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