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By Dinakar Sethuraman and Yuji Okada

(Updates with comment from spokesman in sixth paragraph.)

Feb. 10 (Bloomberg) — Chubu Electric Power Co., the third- largest utility in Japan, agreed to buy about 8 million metric tons of liquefied natural gas from BP Plc over 16 years.

BP Singapore Ltd. will start supplying LNG on a delivered basis to the Aichi, Japan-based company in the year ending March 2013, according to a statement on Chubu’s website. Shipments will average about 500,000 tons a year, about 4.8 percent of Chubu’s purchases last year of 10.5 million, according to data compiled by Bloomberg.

BP, a partner in LNG projects in Australia, Indonesia, Abu Dhabi and Trinidad & Tobago, has capacity of 12 million tons, the company said in a presentation on its website.

Mikio Inomata, a spokesman for Chubu, said the company traditionally buys LNG directly from project owners rather than portfolio suppliers, which pool supplies from different sites. He declined to disclose what price the company will pay in its agreement with BP.

“We believe the price is very competitive in the Japanese market,” he said. “Normally, we buy LNG from the project owners and it is very rare to buy from portfolio suppliers. We have signed only one similar deal, which was with BG Group Plc.”

Chubu agreed last year to buy as much as 122 cargoes, or 8.54 million metric tons, of LNG from BG over 21 years from April 1, 2014, Inomata said. Buying from companies insulates customers from a supplying country’s fuel export policies, he said. Indonesia Herve Leger, Japan’s fourth-biggest LNG supplier, said that it reduced exports after diverting the fuel to domestic users.

Plant Closure

Chubu plans to increase LNG purchases by 24 percent in the year ending March 2012 to 13 million tons to make up for the closure of a nuclear plant, Akio Miyazaki, a company spokesman, said in October. It shut its Hamaoka nuclear plant after the March 11 earthquake triggered the country’s worst radiation leak from Tokyo Electric Power Co.’s Fukushima Dai-Ichi reactor.

Japan, the world’s biggest buyer of LNG, paid an average of $798 a ton in 2011, 23 percent more than a year earlier, according to calculations based on data from the country’s finance ministry. That is equivalent to $15.35 per million British thermal units and about six times the price of U.S. futures at Henry Hub, according data compiled by Bloomberg.

–With assistance from Yuji Okada in Tokyo. Editors: John Chacko, Christian Schmollinger

To contact the reporter on this story: Dinakar Sethuraman in New Delhi at dinakar@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

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