TOTAL (TOT) To Supply LNG To Chugoku Electric For 17 Years

Integrated oil & gas company TOTAL S.A. (TO:TOT) announced that it has signed an agreement with Japan’s Chugoku Electric for the direct supply of liquefied natural gas (LNG) for a period of 17 years starting from 2019.

The Agreement

Per the agreement, Total will supply Chugoku Electric with up to 0.4 million tons of LNG per year sourced from its global portfolio. TOTAL has been operating in Japan for nearly the last four decades and the latest deal will further strengthen its position in the country.

Japan Post-Fukushima

After the Fukushima nuclear accident, Japan has steered clear of nuclear energy, diverting its focus to fossil fuels and alternate sources to produce electricity. The decision to shut down all nuclear power plants post Fukushima tragedy enhanced the importance of fossil fuel as an energy source in Japan.

Incidentally, Japan is the largest importer of LNG in the world. TOTAL with a presence in the entire LNG value chain is well poised to benefit from the rising demand of LNG in Japan.

TOTAL’s 3rd LNG Agreement in Asia

The agreement with Chugoku Electric of Japan is the third long-term LNG agreement signed by TOTAL in Asia this year. In February, TOTAL signed a long-term agreement with state-owned Indonesian company Pertamina to supply LNG volumes of 1 million tons per year over a period of 15 years beginning 2020.

TOTAL also entered into an agreement to supply 0.5 million tons of LNG per year to the largest Chinese natural gas distributor ENN for 10 years, starting 2018.

TOTAL’s LNG Capacity

In 2015, TOTAL’s LNG production was 10.2 million tons. Total’s objective is to double its liquefaction capacity to around 20 million tons per year and increase its LNG trading portfolio to 15 million tons per year by 2020.

The above mentioned three contracts signed by TOTAL with its Asian customers will boost its LNG trading portfolio by nearly 2 million tons per year. Without a doubt, TOTAL is on course to meet its trading objective.

The clean burning nature of natural gas and its increasing usage across the globe will drive LNG demand. We believe TOTAL with its operations spread out in more than 130 countries is one the largest integrated oil & gas companies to gain from the increasing demand for LNG.

Zacks Rank

TOTAL currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the integrated oil & gas space include BP plc (NYSE:BP) , Chevron Corp. (NYSE:CVX) and Exxon Mobil Corp. (NYSE:XOM) , all carrying a Zacks Rank #2 (Buy).

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