Plentiful supplies have depressed North American gas prices to just over $3 per million British thermal units (mmBtu), sparking interest from Asian markets, where prices for spot LNG are much higher, at around $13 per mmBtu.

At the same time Japan, the world's largest LNG importer, has been scouring the globe for supplies of the gas to fuel power stations as most of the country's nuclear plants have been closed down since the earthquake and tsunami last year caused the worst atomic catastrophe since Chernobyl in 1986.

For Tepco, the operator of the Fukushima Daiichi plant, securing cheaper fuel supplies is a crucial part of its business reform plans as it faces billions of dollars of compensation costs for the disaster. The company was nationalized earlier this year.

"We have been in negotiations with several projects," Toshiaki Koizumi, the general manager of Tokyo Electric's fuel department, said at a briefing in Tokyo.

"We want to procure LNG from the United States and Canada where prices are linked to Henry Hub. The talks have made progress, but I cannot say when they will be finalized," Koizumi said, referring to the main U.S. gas distribution centre.

Any agreement to buy U.S. shale gas will be subject to approval from Washington, which is reviewing whether to allow export licenses for some buyers of the fuel.

Tokyo has been negotiating with Washington since last year to allow more shale gas projects to export LNG to Japan, which hopes to receive LNG shipped via the Panama Canal as early as in 2015.

Chubu Electric Power Co (9502.T), Tokyo Gas (9531.T), Osaka Gas Co (9532.T) and Sumitomo Corp (8053.T) have already announced deals to buy U.S. shale gas.

Tokyo Electric is interested in taking LNG offtake but is not looking to buy a stake in upstream shale gas and liquefaction projects due to a lack of funds, Koizumi added.

Currently almost all of Japan's LNG import prices are linked to oil prices, but many Japanese firms are hoping to shift benchmark U.S. gas prices at Henry Hub, to cut down on import costs.

Japan has rapidly increased LNG purchases since Fukushima, with imports growing 17.9 percent to a record 83.2 million metric tons in the fiscal year ended March 31.

Japan hopes that if the U.S. projects receive formal U.S. government approval as early as 2015, their shipments to Japan are likely to be priced at less than $10/mmBtu.

All five major Japanese trading houses have invested in shale oil and gas projects in North America, spending a total of more than $13 billion since Sumitomo became the first firm to take part in a shale gas development in 2009.

Tokyo Electric is currently expected to buy 24.5 million to 25.0 million metric tons of LNG in the business year ending next March, and a little less than 23 million metric tons in the following business year if it is able to restart its Kashiwazaki-Kariwa nuclear plant next year, Koizumi said.

That compared with 24.1 million metric tons purchased in the business year ended in March.

(Reporting by Osamu Tsukimori; Editing by Aaron Sheldrick and Clarence Fernandez)

(osamu.tsukimori@thomsonreuters.com; 81-3-6441-1857; Reuters Messaging: osamu.tsukimori.thomsonreuters.com@reuters.net)

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