Sumitomo, Nissho Iwai to form LNG alliance: Report

Japanese trading houses Sumitomo Corp and Nissho Iwai Corp on Wednesday announced an alliance in the liquefied natural gas (LNG) business in a bid to tackle heightened global competition, according to Reuters.

The firms said they would set up an equally owned LNG joint venture, whose capital has not yet been decided, on October 1. "The importance of the LNG business is growing, and projects are becoming bigger in scale. It is difficult for us to undertake these by ourselves," Shiro Yasutake, president and chief executive officer of Nissho Iwai, told a news conference.

It has become harder to compete with foreign oil giants for stakes in overseas LNG projects, he said.

Nissho Iwai has stakes in LNG projects in Indonesia and Qatar, but the alliance would mark Sumitomo's first entry into the LNG business, company officials said. Nissho Iwai is the second largest LNG supplier in Japan, having a market share of about 27 per cent, second only to Mitsubishi Corp It imports LNG and sells it to Japan's power and gas utilities.

Nissho Iwai has been supplying about 15 million tons of LNG annually to power and gas utilities in Japan, the world's largest LNG importer. About 100 employees from Nissho Iwai and 10 from Sumitomo Corp will be transferred to the new venture, company officials said. Sumitomo Corp's executive vice president, Naoki Kuroda, said the new firm would be seeking stakes in overseas LNG projects.

Nissho Iwai's LNG sales for the year ended in March amounted to about 469 billion yen ($3.82 billion). Industry sources said LNG demand in Asia is set to grow because the fuel emits relatively low amounts of carbon dioxide, which is believed to contribute to global warming.(*)