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Tokyo Gas Expands in Haynesville with $2.7B Rockcliff Purchase

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A unit of Tokyo Gas has reached a deal to buy private Rockcliff Energy II for $2.7 billion, giving the Japanese firm a larger foothold in the Haynesville.

Rockcliff, a portfolio company of Quantum Energy Partners, announced the acquisition by Tokyo Gas subsidiary TG Natural Resources on December 15. Rockcliff is one of the largest producers on the East Texas side of the Haynesville shale play, reporting 1.3 Bcf/d of gross production in 2023 from five Texas counties. The companies expected to close the deal on December 29.

East Daley Analytics covers activity of private operators like Rockcliff and TG Natural Resources in Energy Data Studio. Rockcliff in 2023 operated 4 rigs on average in the ArkLaTex Basin, according to EDA’s rig data. Williams (WMB) gathers all of Rockcliff’s production on the Trace Midstream system in East Texas. TG Natural Resources also operates 1 rig in the Haynesville.

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WMB acquired the Trace G&P system from Quantum Energy Partners for $950MM in March 2022. The Trace system saw strong growth in volumes in 2H23, up nearly 200 MMcf/d since mid-2023 (see chart). The gains have been part of a relatively stronger performance recently on the Texas side of the Haynesville play.

Additionally, Rockcliff Energy agreed to a long-term capacity commitment on Williams’ Louisiana Energy Gateway (LEG) project, a 1.8 Bcf/d greenfield pipeline expected to start service in 4Q24. LEG will deliver Haynesville gas to WMB’s Transcontinental Gas Pipe Line to serve industrial and LNG demand along the Louisiana Gulf Coast.

Tokyo Gas is a customer of Sempra Energy’s (SRE) Cameron LNG via an agreement with 11.6% project owner Mitsubishi. In 2016, Tokyo Gas agreed to purchase ~0.2 MMtpa of LNG (~30 MMcf/d) from Mitsubishi’s supply at Cameron LNG for 19 years, starting in 2020.

The Rockcliff acquisition gives Tokyo Gas a bigger upstream stake in the value chain for its imports from Cameron LNG, creating a natural portfolio hedge. When US natural gas prices increase, Tokyo Gas can offset the higher LNG costs by selling more gas at the Henry Hub or other Gulf Coast hubs.

Earlier in 2023, Tokyo Gas CEO Shinichi Sasayama told S&P the company plans to strengthen its LNG trading operations, including shipping North American LNG to Europe for locational swaps to cut freight costs. Tokyo Gas also owns and operates 10 LNG carriers.

Depending on its agreement with Mitsubishi, the Rockcliff acquisition could enable Tokyo Gas to source its own feedgas directly from the wellhead to produce LNG at the Cameron facility.

According to the latest EIA data, Japan imported the second-most LNG from the US after the Netherlands, importing ~1.1 Bcf/d of LNG in September ‘23. Japan received ~7% of total US LNG exports in 2023. – Oren Pilant Tickers: SRE, WMB.



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