Tokyo Gas to divest U.S. shale stake, rebalancing toward midstream assets

The global energy market is awash with companies assessing their portfolios. Echoing that cautious approach is the recent news that Tokyo Gas will divest its U.S. shale stake, rebalancing its focus toward its other midstream assets. The US energy market is a volatile and unpredictable environment for companies to operate in, mostly due to the fact that the current administration in the United States is as unpredictable as a toddler on a sugar rush. Tokyo Gas has selected one of its compatriots as the buyer for its U.S. shale stake.

Tokyo Gas will sell off all of its holdings in the US shale stake as the sector faces uncertainty due to Donald Trump

Since coming into office for the second time, Donald Trump has treated the American economy with about as much care as a rollercoaster maintenance technician. The market has seen significant ups and downs in recent months. But as ever, the US economy will bounce back as the largest economy in the world.

Due to the uncertain nature of the economy, many nations have opted out of the US market, citing the volatile tariffs and increasing inflation as a major contributor to the exodus.

That exodus has reached the Japanese companies operating an interest in the US energy sector. Tokyo Gas has announced, following extensive consultation with a law firm, that it is bending the knee to activist shareholder Elliott Investment Management, which has called for the company to streamline its portfolio.

Tokyo Gas will sell all of its subsidiaries’ holdings in the Eagle Ford shale gas project in Texas. The company stated that it will sell its stake to compatriot and fellow energy company, Shizuoka Gas Co., for $130 million. Tokyo Gas, which is Japan’s largest utility, has been under Elliott’s scrutiny since last year, when the company stated it held a 5% stake in Tokyo Gas.

Elliot then proceeded to insist that Tokyo Gas sell off the stake in the Eagle Ford shale gas project, instead opting to focus on assets it acquired through the purchase of Rockcliff Energy in 2023 in East Texas and North Louisiana.

Tokyo Gas consulted with a huge law firm before opting to sell its stake in the US shale industry

The company has noted that it consulted with Akin, a leading international law firm with more than 900 lawyers across the US, Europe, Asia, and the Middle East. Akin advised the company to sell its stake in the Eagle Ford shale gas project in South Texas.

The Akin team was led by several extensively experienced lawyers who advised the company to align with Elliott Investment Management’s mandate to sell the stake in the project. While the US energy market remains unpredictable, the UAE has invested in the midstream and downstream sectors.

Akin noted that by pulling out of the sector, Tokyo Gas can instead focus on its other assets in the US energy sector. As the company is Japan’s largest gas company, its assets are spread across a wide range of projects.

The global gas sector is facing disruptions in midstream infrastructure

The sale of Tokyo Gas’s assets in the US energy sector is representative of the current state of the global gas sector. In recent years, as the international energy sector transitions towards the renewable energy sector, the conventional gas and oil sector is facing an uncertain future. Shortages in gas turbines have disrupted the schedules for global midstream infrastructure projects. The uncertain nature of the US energy market has led to an exodus of international companies, further exacerbating the problems faced by the gas sector not just in the US, but further afield as well.