Mitsubishi Heavy Industries Ltd signed a six-year deal with Royal Dutch Shell Plc to become the oil major's preferred supplier of liquefied natural gas compressors, the core component in LNG production, the Nikkei business daily said.
Shell ranks as one of the biggest producers of LNG, with plants in Australia, Malaysia and elsewhere. The supply agreement with Mitsubishi Heavy, which starts in fiscal 2011, is expected to cover Shell's new projects, including those in Australia and on Sakhalin island in Russia's Far East, the paper said.
LNG plants require multiple compressors with an order value of around 7 billion yen each on average, which works out to tens of billions of yen per plant. Mitsubishi Heavy is looking to leverage its deal with Shell to expand further into LNG equipment and take on front-runner General Electric Co , the daily reported. By some estimates, demand for LNG will nearly triple by 2035 as Asia's energy needs grow. The Fukushima Daiichi nuclear meltdown has stirred interest in natural gas as a low-carbon-dioxide-emission fuel for generating electricity, Nikkei said. Shell appears to have been impressed by Mitsubishi Heavy's ability to respond flexibly to technical requests, resulting in the deal, the business daily said. The agreement could raise Japanese industry's profile in the field of energy development, Nikkei said.