Japanese Trading Companies Look Beyond Production in U.S. Shale: Focusing on Pipeline Sales and Supporting Other Companies

Sumitomo, a Japanese trading company, is looking to expand its services and related business in the U.S. shale patch, three years after exiting shale production operations. Despite selling its production assets in early 2021, including divesting its oil-producing operations in the Eagle Ford and selling its Marcellus Shale Gas development project in Pennsylvania, Sumitomo aims to play a more significant role in U.S. shale without directly returning to production.

The company plans to increase sales of pipelines used in U.S. shale fields, leveraging its strengths in related businesses. According to Sumitomo president Shingo Ueno, shale is essential for the U.S., and Sumitomo plans to capitalize on this resource by shifting its strategic focus from production to supporting other companies’ operations through pipelines and other services. This contrasts with other Japanese firms acquiring U.S. shale assets amid consolidation in the American oil and gas industry, which are focusing more on direct production operations themselves.

In another example, Tokyo Gas expanded its upstream business in the U.S., through its subsidiary TG Natural Resources LLC (TGNR). The Tokyo Gas Group’s plan through 2025 includes expanding its shale gas business in Texas and Louisiana, where it already has existing operations and partnerships with local companies like Halliburton and ExxonMobil Corporation (XOM). Recently, Mitsui & Co., another Japanese trading company, completed the acquisition of an unconventional gas asset named Tatonka in Texas from U.S.-based oil and gas companies like Pioneer Energy Partners LP (PEP) and Eni SPA (ENI). This asset provides access to the Gulf Coast industrial area, including LNG export terminals and ammonia plants that could be used for downstream processing of natural gas resources like liquefied natural gas (LNG) or ethylene oxide (EO), among others.

Overall, Japanese trading firms like Sumitomo, Tokyo Gas, and Mitsui & Co., are strategically positioning themselves to grow and capitalize on opportunities in the U.S