Growth Strategy

Growth Strategy
This section reports the state of progress on specific points of the “Tokyo Gas Group
Challenge 2020 Vision,” announced in November 2011. For more information on the basic
ideas underlying this vision, please refer to the pamphlet entitled The Tokyo Gas Group’s
Vision for Energy and the Future ~Challenge 2020 Vision~.
http://www.tokyo-gas.co.jp/IR/english/library/pdf/vision/vision2020_01.pdf

Reducing Resource Costs and Expanding Overseas Operations–––––––––––––––––––––––––––

22––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

24––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

28

Providing Diverse Energy Solutions
Capital Expenditures Plan

18–––––––––––––

Building a Production and Supply Infrastructure to Cultivate Demand1718 Growth Strategy

Enhancing the LNG Value Chain“Challenge 2020 Vision,” the Tokyo Gas Group’s Growth Strategy
The Tokyo Gas Group is working together on initiatives to enhance
the LNG value chain and realize sustained growth.

Action Plan

Reducing Resource Costs and Expanding Overseas Operations

Accelerating Diversification of Upstream Operations to Lower Resource Procurement Costs
The “Challenge 2020 Vision” calls for Tokyo Gas to earmark 16% of

having only limited sources of procurement, has therefore been com-its capital expenditures and investments and financing, or aroundpelled to procure resources at relatively high international rates.

¥320 billion for overseas business, which includes upstream andTokyo Gas has in place long-term LNG contracts involving 11 proj-

downstream businesses, as well as service and engineering busi-

ects in six countries, providing more than 11 million tons of LNG pernesses. Our objective is to increase net income from overseas

year. We have upstream interests in some of these projects, but going

business from the current level of around 10% to approximately 25%.

forward we plan to take more aggressive upstream interests in order toAmong these investments, the vision prioritizes management strate-

lower resource costs. At the same time, we will expand and accelerate

gies for expanding overseas upstream operations.

the diversification of our procurement sources. Furthermore, to aug-

In Japan, LNG imports are generally based on 15- to 20-year long-ment our purchasing power we will procure resources jointly with otherterms contracts that use a pricing formula linking LNG to crude oil

energy companies where necessary, and we are considering active

prices. As the country relies on imports for nearly all of its energy re-participation in LNG liquefaction and other businesses.

sources, Japan’s import costs are higher than countries that have

We plan to expand our LNG shipping fleet to handle this great-natural resources of their own, such as the United States and Europe-er procurement volume. We believe that this approach will give us

an countries. LNG demand has increased since the Great East Japan

better flexibility in our procurement and help to reduce resource

Earthquake, as power companies shifted to natural gas-fired thermaltransportation costs.

power generation as an alternative to nuclear power generation. Japan,
Fuel Used throughout Japan in LNG-Fired Thermal Power Generation and LNG Import Volume
Thousands of tons
8,000

2010 monthly average: 5,830 thousand tons

2011 monthly average: 6,550 thousand tons

6,000

4,000

2,000

0

2010 monthly average: 3,470 thousand tons

Jan. 2010

Jun. 2010

Fuel used in LNG-fired thermal power generation2011 monthly average: 4,150 thousand tons

Dec. 2010

Jun. 2011

LNG import volume

Source: Compiled by Tokyo Gas from data from the Federation of Electric Power Companies Preliminary Report on Electricity Distribution and Receipt and Ministry of Finance trade statistics

Dec. 2011

Growth Strategy

Moving Steadily Ahead with New Project in Australia
In April 2012, production began on the Pluto LNG Project for an un-

LNG projects, as well as floating LNG and other projects that employ

dersea gas field off the northwest coast of Western Australia, in which

new concepts. In these efforts, we will take a prudent approach

we hold a 5% interest. Through this project, we have begun purchas-

toward balancing profitability with supply stability.

ing 1.5–1.75 million tons per year through a long-term contract. Oncethe project goes fully on stream, LNG production capacity is expected
to reach 4.3 million tons per year. Tokyo Gas also has an interest inanother project in Australia, the Gorgon LNG Project, which is underdevelopment and slated to commence production in 2014. In January
2012, we also took an interest in the Ichthys LNG Project, a gas field,
in which INPEX Corporation has become the first Japanese company
to take part as an operator.

Action 1

In addition to large-scale LNG projects such as these, Tokyo Gas
is examining the possibility of participating in small and medium-scaleFirst cargo received from the Pluto LNG Project

Action 1

Participation in the Ichthys LNG Project

Tokyo Gas has acquired a 1.575% interest in blocks WA-37-R and WA-

To smooth the launch of this project, Tokyo Gas has formed a consor-

285-P of the Ichthys LNG Project, which is under development offshore

tium with the other co-buyers on this project, which should raise Japan’sfrom Western Australia, as well as a 1.575% stake in Ichthys LNG Pty

rate of independent development of oil and natural gas and contribute toLtd., which handles liquefaction.

a stable supply of LNG.

For this project, the natural gas produced at the Ichthys gas-condensate field will be transported to a location near Darwin, in Australia’s
Northern Territories, for liquefaction and onward transport. The project is
expected to have a maximum liquefying capacity of 8.4 million tons per
year. Tokyo Gas has entered into a long-term sales and purchase contract with Ichthys LNG Pty Ltd., which is a subsidiary of INPEX Corporation, one of the project’s operators. Under this 15-year agreement, we
will purchase 1.05 million tons of LNG per year.

Overview of the Ichthys LNG ProjectGas-condensate field:
Liquefying facilities:
Liquefying capacity:
Planned commencement:
Participating interest:

Offshore of Western Australia, Block WA-37-R
Darwin, Northern Territory, Australia
8.4 million tons/year (LNG) with two 4.2 million tonliquefaction trains
October–December 2016
76% for INPEX Group companies, 24% for TOTALGroup companies (as of December 2011)

Submarine pipeline
Ichthys
Field

Ichthys gascondensate
field

Liquefaction
facilities(Darwin)
Australia

Liquefaction plant scheduled for construction in Darwin (conceptual rendering)

Promoting Upstream and Downstream Business Involving Unconventional Natural Gas in North America
As part of its efforts to diversify upstream operations, Tokyo Gas isvolved in a project aimed at acquiring LNG generated through coaltaking part in unconventional natural gas projects. In Queensland,

bed methane (CBM)*. Based on our purchase agreement for thisAustralia, we are participating in the Queensland Curtis LNG Project,

project, we expect to import 1.2 million tons per year for 20 years,

making ourselves the first Japanese energy company to become in-beginning in 2015.

* Natural gas that is absorbed in fissures on the surface of the coal bed.

19

20 Growth Strategy

Shale gas* has significantly increased the volume of recoverable

ratified free trade agreements (FTAs) (for example, the Sabine Pass

natural gas reserves. Our upstream operations in this arena include

Project). Tokyo Gas has also begun pursuing initiatives designed toparticipation in a shale gas development project in Cordova, in theimport into Japan LNG derived from U.S. natural gas.

Canadian province of British Columbia. In April 2012, we also enteredan accord to procure LNG from the Cove Point LNG Project, a natural* Shale gas is natural gas found in pockets in shale strata. Shale is a source rock composed of
hardened mud deposits.

gas liquefaction facility in the U.S. state of Maryland. Through theseprojects, we are taking part in projects on the east and west coastsof North America, which has some of the world’s largest reserves andis a global leader in drilling technologies.

Action 2

The recent expansion of drilling for shale gas in the United States
have led to easing of the supply and demand situation, and within the

U.S. Production of Natural Gas
Billions of m3 (bcm)
800
600

country the Henry Hub natural gas pricing index remains sluggish. As
a result, the gap between U.S. and international market prices has
widened. In some cases, the difference between this index and Japa-

609 bcm
511 bcm
Unconventional
natural gas

400
200

nese import prices was as much as nine times. The United States inprincipal prohibits the export of natural resources themselves, but
export is permitted on a per-project basis. In recent years, exports
have been allowed from some project to countries that have not yet

Action 20

2005
Conventional natural gas

2010
Shale gas

Tight sand gas

CBM

Source: Compiled by Tokyo Gas from data in IEA World Energy Outlook 2012

Initiatives to Pursue Unconventional Natural Gas on the East and West Coasts of North America

Tokyo Gas and Sumitomo Corporation have jointly begun negotiations

Dominion will begin construction on the LNG liquefaction plant, aimingwith Dominion Cove Point LNG, LP (hereinafter, “Dominion”), which is

to commence project operation in 2017. The company plans to procure

heading the Cove Point LNG Project, toward the procurement of LNG

natural gas for liquefaction from the Marcellus Shale Gas Development

derived from U.S. natural gas, including shale gas. The Cove Point

Project, in which Sumitomo Corporation is a participant. Assuming that

LNG Project comprises the Cove Point LNG Receiving Terminal in the

final agreement is reached and that export approval for the project is

U.S. state of Maryland, which Dominion owns and operates, and thereceived, Tokyo Gas will procure LNG derived from U.S. natural gas,company is building an LNG liquefaction plant with annual capacity ofincluding shale gas.

approximately 5 million tons of LNG, which it aims to export. Going

Tokyo Gas is taking an upstream interest in a natural gas development

forward, Dominion will apply for approval for LNG export to Japan andproject, centered on shale gas, in the Cordova Embayment in British

other countries that have not yet ratified FTAs and seek plant con-Columbia, Canada. Through this project, we aim to diversify our holdings

struction approval. Once a final investment decision has been reached,

and gain expertise in shale gas development.

Cordova Natural Gas Development Project
Exploration zone:
Reserves:
Production:

Operation structure:

Cove Point LNG Project

Cordova Embayment, British Columbia, Canada
Approximately 5–8 trillion cubic feet (approximately
100–160 million tons in LNG equivalent)Approximately 500 million cubic feet per day(approximately 3.5 million tons in LNG equivalent peryear) in 2014
Penn West Exploration serves as the operator in ajoint venture with Cordova Gas Resources

Project implementation: Dominion Cove Point LNG, LP
Location:
Maryland, United States
Liquefaction capacity: Approximately 5 million tons per year (planned)
Overview of Key Conditions of the Advance Natural Gas Liquefaction Agreement
Contracted quantity:
Approximately 2.3 million tons per year (LNG equivalent)Contract period:
20 years from the start of operations of the LNG
liquefaction plant

Marcellus Shale
CanadaCordova Embayment
United States
Cove Point LNG Terminal

Growth Strategy

Aiming to Build a Global LNG Value Chain
Tokyo Gas is working to expand its overseas gas-fired thermal power

development), we are moving ahead with participation in the LNG

generation and gas supply business. At the same time, we aim to also

and natural gas infrastructure development business centered on

create an LNG value chain overseas, combining these downstream

emerging markets.

operations with businesses in which we hold upstream interests andtransport activities.

In 1992, Tokyo Gas, the Malaysian national energy company
Petronas, and other entities joined in the establishment of Gas Malay-

We first embarked on the overseas power generation business in

sia Sdn. Bhd., the country’s first city gas provider. Over time, our2004 when we invested in the Bajio power plant (600 MW), an inde-cooperative relationship has deepened through the provision of op-

pendent power producer (IPP) in Mexico. In 2010, we joined fiveerational expertise, extending to pipeline planning and construction,

natural gas combined cycle IPP businesses (totaling 2,230 MW) in

maintenance management and the sale of city gas, and fuel conver-

the country, as well as in a pipeline business to supply natural gas tosion technologies.

these stations. Tokyo Gas also acquired a 26.66% stake in Belgium’s

Attesting to the energy services expertise that Tokyo Gas GroupT-Power N.V. (425 MW) in 2012. This was our first project in Europe

companies possess, we are conducting feasibility studies, which in-

and our third involving the overseas power generation business.

clude introduction of an electric power and heat supply system at an

The Tokyo Gas Group believes that it can leverage its strengths

urban redevelopment zone in Thailand and energy services in India.

by accelerating overseas development of energy services and engi-

In Vietnam, we have signed a memorandum of understanding withneering businesses, with natural gas at its core. In line with thePetrovietnam Gas involving the construction of an LNG value chain.

principles in the Strategies to Revitalize Japan (overseas infrastructure

Bajio (natural gas power project in Mexico)

Action 3

Action 3

Gas Malaysia Bhd. employee operating a pipeline valve

Agreement on Building an LNG Value Chain in Vietnam

Tokyo Gas has signed a memorandum of understanding with Petrovietnam Gas, Vietnam’s nationally operated energy company, to create an
LNG value chain in the country. In line with the country’s economic
growth, demand is increasing for electricity and energy to power industry. The agreement involves the consideration of plans to import LNG andconstruct an LNG receiving terminal, targeted for 2015. Highly regarded
for its technology and expertise in the design, construction, operationand maintenance of LNG facilities, wholly owned subsidiary Tokyo Gas
Engineering Co., Ltd., has received an order to provide front-end engineering and design (FEED) for the country’s first LNG receiving terminal.
Going forward, the agreement is intended to lead to the creation of suchinfrastructure as an LNG receiving terminal and a pipeline, enabling LNG
procurement, cogeneration and fuel conversion.
President Okamoto (third from left) at signing ceremony with Petrovietnam Gas

21

22 Growth Strategy
Action Plan

Building a Production and Supply Infrastructure to Cultivate Demand

Augmenting Supply Capacity in the Northern Kanto Area
The “Challenge 2020 Vision” calls for investment of approximately

for completion in fiscal 2015, linking the city of Soka in Saitama pre-¥730 billion between fiscal 2012 and fiscal 2020 in the development

fecture with Koga in Ibaraki prefecture. We are also planningof infrastructure to cultivate demand.

construction of the Koga–Moka Line. Scheduled for completion in

In the Kanto region, which extends for a 200-kilometer radiusaround Tokyo, Tokyo Gas estimates potential industrial and commer-

fiscal 2017, this line will connect the city of Koga in Ibaraki prefecturewith Moka in Tochigi prefecture.

cial demand for fuel conversion, cogeneration and power generation
at 9.0 billion m3. To cultivate this demand, we are extending our transportation pipeline network to augment our supply capabilities and tocreate pipeline loops that will boost supply stability.
March 2012 marked the completion of the Chiba–Kashima Line,a trunk pipeline having a total length of 79.3 km. Now in operation, thisline provides a structure for supplying the Kashima waterfront industrial zone.

Action 4

By linking this line with the Kashima Waterfront

Line, which was completed in May, we have also begun supplying
TEPCO’s Kashima Thermal Power Station.
Construction is moving ahead with the Saito Line, which is slated

Action 4

Operations Commence at Chiba–Kashima Line, a Trunk Pipeline

Construction on the Chiba–Kashima Line, which began in July

Kashima Waterfront Line to supply a new gas turbine generation

2006, was completed in March 2012. This high-pressure trunk

facility at TEPCO’s Kashima Thermal Power Station, which went on

pipeline extends over 79.3 km, linking the city of Chiba in Chibaline in June 2012. By July 2014, this plant will convert to highly effi-

prefecture with Kamisu in Ibaraki prefecture. In addition to supply-

cient combined cycle generation comprising three turbines. Initiallying the Kashima waterfront industrial zone in Ibaraki prefecture,planned to provide backup power for emergency situations, thewhich is one of the Kanto region’s most prominent industrial zones,

facility has been repositioned to accommodate regular power gen-the pipeline should help to cultivate new industrial demand by aug-

eration. Tokyo Gas believes that the completion of these two lines

menting a natural gas supply infrastructure that has to date been

will enable the Company to develop demand of around 300 million

insufficient. In May 2012, we also completed construction of the

m3 in fiscal 2012, eventually increasing to 2 billion m3 at maximum.
Overview of the Chiba–Kashima Line

Kashima Waterfront Line

Goten Branch Station

TEPCO Kashima
Thermal Power Station
Kashima Waterfront
Industrial Zone

Start/terminus

Goten Branch Station (Chiba, Chiba prefecture) to
Kashima Governor Station (Kamisu, Ibaraki
prefecture)

Pressure/diameter

7MPa / 600mm

Length79.3 kmConstruction start

July 2006

Construction end

March 2012

Overview of the Kashima Waterfront Line
Kashima Governor Station

Start/terminus

Towada, Kamisu, Ibaraki prefecture(Tokyo Gas Kashima Governor Station to TEPCO
Kashima Thermal Power Station)

Pressure/diameter

7MPa / 600mm

Length

4.4 kmConstruction start

August 2011

Construction end

May 2012

Chiba–Kashima LineGrowth Strategy

Hitachi Project to Significantly Augment Supply Capabilities in the Northern Kanto Area
Estimating that its gas sales volume will outstrip current supply ca-

Completion of the Ibaraki–Tochigi Line will enhance energy secu-

pacity by the late 2010s, Tokyo Gas is moving forward with the Hitachirity throughout the Kanto region and dramatically increase supply

Project. This project calls for the construction of the Hitachi LNG Ter-

capacity to northern Kanto. Through this initiative, Tokyo Gas is build-minal in the Ibaraki port Hitachi District of Ibaraki prefecture—our 4th

ing infrastructure that will enable it to support gas sales volume of 22

LNG receiving terminal, as well as for building a new high-pressurebillion m3 by fiscal 2020.

pipeline. This Ibaraki–Tochigi Line will connect the LNG receiving ter-

We are working with other energy companies on the construction

minal with the city of Moka in Tochigi prefecture. Accelerating initialof a reciprocal gas supply structure that will strengthen the natural

plans by two years, in the summer of 2012 Tokyo Gas plans to begin

gas supply network in eastern Japan by linking pipelines in the event

construction on the project, which is now scheduled to be completedof disaster. We have already formed reciprocal arrangements withand commence operations in fiscal 2015.

INPEX Corporation and Shizuoka Gas Company.

Fiscal 2020 Target

Japan Petroleum Exploration Co., Ltd. pipeline

Creation ofreciprocal gas
supply structure
for emergencies

Gunma Connecting
Trunk Line, Phase II

Hitachi–Onahama Line(provisional name)

Ibaraki–Tochigi Line

Hitachi Terminal

Koga–Moka Line
Hitachi–Kashima Line (provisional name)
Saito Line
Kashima Waterfront LineINPEX Corporation pipeline
Soka–Yashio Line

Chiba–Kashima Line
Yokohama Line, Phase II
Shin-Negishi Line
Shizuoka Gas Company pipeline

Negishi LNG Terminal

Sodegaura LNG Terminal

Ohgishima LNG Terminal

Tokyo Gas high-pressure trunk lines
Other companies’ pipelines
Tokyo Gas supply area
Tokyo Gas Group supply area
Other gas companies’ supply areas

23

24 Growth Strategy
Action Plan

Providing Diverse Energy Solutions

Promoting the Proliferation and Expansion of Dispersed Energy Systems
Tokyo Gas is working to promote dispersed energy systems that use

Furthermore, these systems have diverse applications, as they cannatural gas, as these systems help to reduce CO2 emissions, en-

be used to provide electricity and heat energy.

hance energy security in the event of disasters or power outages, andTo promote “ENE-FARM,” Tokyo Gas is endeavoring to lower

contribute to electricity peak savings. We aim to install some 300,000

their prices through mass production and faster technological inno-“ENE-FARM” residential fuel cell systems, roughly 31 times the fiscal

vation. At the same time, we are working to make the units more

2011 level, and increase our stock of commercial and industrial co-compact so they can be installed on the ve-

generation systems by approximately 2.6 times.

randas of multihome dwellings and to extend

Different from large-scale power plants, “ENE-FARM” residential

their useful life.

fuel cell systems and cogeneration generate power in demand locations, which reduces transmission losses and enables the effective
use of waste heat. Compared with conventional systems* , “ENE1

FARM” reduces primary energy requirements by 35% and cuts CO2*1 Thermal power generation +conventional city gas water
heaters*2 Thermal power generation

emissions by 48%. Compared with conventional generation systems*2, which have overall energy usage efficiencies of around 40%,
gas cogeneration systems achieve much higher levels, at 70–85%.

Cogeneration system“ENE-FARM”“ENE-FARM” (Residential) Stock Plan

Cogeneration System (Commercial, Industrial) Stock PlanThousand units

MW

400

4,000

300

300

4,000

Approximately 2.6 times
3,000

Approximately 31 times
2,000

200

Sales expected toincrease 24% year on
year, to 7,100 units.
16.7

100
0

9.6
2011

2012 (Plan)

1,530

1,680

2011

2012 (Plan)

1,000

2020 (Plan)0

FY2020 (Plan)

FY

Promoting Advanced Use of Natural Gas and Fuel Conversion
The commercial and industrial applications of natural gas are exten-

conversion from heavy fuel oil and kerosene to natural gas, and intro-

sive; it can be used for heating, heat treatment, drying, foodducing highly efficient appliances and advanced uses of natural gas

processing, and air conditioning, among other things. In the after-in cogeneration systems. As a result, wemath of the Great East Japan Earthquake, natural gas has attracted

expect gas sales volume, centering on indus-

increasing attention from the perspectives of supply stability, energy

trial use, to increase 7 billion m3 by fiscal 2020.

efficiency, CO2 reductions and operating costs. Tokyo Gas is cultivat-

Action 5

ing new demand by highlighting the benefits of combining fuelGas appliance forcommercial use

CO2 Reduction due to Fuel Conversion from Fuel Oil A to Natural Gas
Size of circle indicates amount of CO2 emitted, with a conventional burner using fuel oil A equivalent to 100

Fuel Conversion

Advanced Use

Examples of Advanced
Use Measures
Use of highly efficient burners

100

75

45 –70

Collection of waste heat
Insulation, reduction of heatloss at openings

Fuel oil A + conventional burner

Conversion to natural gas

Increased burner efficiency

Improvement of combustion
air, others

Growth Strategy

Action 5

Promoting Fuel Conversion at the Kashima Waterfront Industrial Zone

Completion of the Chiba–Kashima Line Enables Supply to Reach
Prominent Kanto Industrial Area
The Kashima Waterfront Industrial Zone, which extends over approximately 24 million m2 in the region of Ibaraki prefecture fronting
the Kashima-Nada Sea, is home to some 160 companies, making it one of the Kanto region’s most prominent industrial complexes.
In 2007, Tokyo Gas began cultivating LNG demand in the area by transporting fuel there via tank lorries. Following completion of the
Chiba–Kashima Line in March 2012, we have begun supplying the region with city gas. This new supply route opens up possibilities
for the full-fledged cultivation of new markets, such as fuel conversion to natural gas.
Here, we introduce a success story of fuel conversion by Kashima South Joint Power Corporation.

Kashima South Joint Power Corporation
Streamlined Operations Management and Cleanliness
Deciding Factors

Providing the Support that Japanese
Manufacturing Requires

Mr. Takahashi, who was involved in the fuel conversion project,offers the following comments: “At first, many aspects of the project were unclear, and it was subjected to careful internal scrutiny.
We studied the project’s impact and concerns extensively.” As ajoint independent power producer, the key decision point waswhether the project would enable the company to support thecompetitiveness of its customers by providing a stable supply ofenergy at a low cost. Streamlining operations management wasa particular focus. With the conventional power generation process using heavy fuel oil, it was necessary to carefully manage
the temperature of the fuel oil, from the time it was received to thetime it was burned in the boiler, in order to prevent coagulationand control evaporation. Large-scale equipment was also needed
to process exhaust gas following incineration. Natural gas, which
does not require such processes, offered substantial improvements in controllability and operability. The use of gas also
eliminated the need for heavy fuel tanks, heaters, gasificationequipment and flue gas processing equipment. In addition, as
natural gas is not as corrosive as heavy fuel oil, boiler repair frequency was reduced, allowing more than two years of continuous
operation. The company also forecast reduced investment in facility upgrades and maintenance costs. Another important factor
from the operational and facility management perspective wascleanliness. The company had made a thorough effort to conserve energy, improving its total thermal efficiency* from around
60% in fiscal 1990 to nearly 80% in fiscal 2010. The key to further
improvements is to substantially reduce emissions of soot, SO2,
CO2 and other substances, and lower them to near zero throughthe introduction of natural gas.
After taking these factors into consideration, the company
decided to convert to the use of natural gas as fuel.

The project to modify boilers for fuel conversion got underway in October 2010,
and in January 2012 construction commenced on Boiler No. 3. Progressing
according to schedule, construction wascompleted by March 2012, when the
Chiba–Kashima Line was completed, andthe boiler commenced operations in April
2012. Introducing the project from aworkplace perspective, Mr. Takahashi exBoiler No. 3
plains, “As we had anticipated, achievinga dramatic improvement in operability and controllability was
simple.” In September 2012, construction is scheduled to begin
on Boiler No. 2, followed by Boiler No. 1 in February 2013. By thesummer of 2013, fuel conversion is expected to be complete on all
boilers. By fiscal 2013, the company expects to reach total thermal
efficiency of 80% or higher, contributing significantly to environmental performance and energy savings.
The company’s President Kanamori explains, “Low-costenergy is essential to maintaining the competitiveness of Japanesemanufacturing. We look forward to the results of efforts by Tokyo
Gas to provide stable supplies through links with the Hitachi zone,
procure unconventional natural gas, and introduce schemes thatwill not be affected by the price of heavy fuel oil.”* Amount of heat sold/amount of heat provided by fuel(From left) Yukio Handa, Tokyo
Gas; Tadashi Maeda, Managing Director, President Tatsuro
Kanamori, Deputy General
Manager Shuji Takahashi,
Kashima South Joint Power;
Toru Ishiguro, Tokyo Gas

Kashima South Joint Power Corporation
The company, a joint independent power producer, was established in 1968 through joint investment
by seven companies on the eastern side of the Kashima industrial complex. Kashima South Joint
Power has a total capacity of 210 MW, comprising three steam turbines and two gas turbines. The
company provides 16 companies with steam, electricity and pure water. In recognition of its environmental and energy-conservation measures, in 2009 the company won an award from the Minister of
Economy, Trade and Industry for “the conservation of energy through the collection of heat from waterproduced by companies in the complex, as well as gas cogeneration.”25

26 Growth Strategy

Expanding Power Generation (Natural Gas-Fired Thermal Power Generation)
The Tokyo Gas Group currently generates electricity at four gas-fired
thermal power generation plants in Japan. These plants employ gas

Scale of the Power Generation Business(Including Other Companies’ Interests)

turbine combined cycle generation, which is highly efficient andMWoffers superior energy savings. As of March 31, 2012, we had total

6,000

3,000 MW– 5,000 MW

generating capacity of approximately 2,000 MW (of which, the Tokyo
Gas Group’s ownership share is 1,300 MW). We plan to augment

4,000

generation capacity, eventually raising this level to 3,000–5,000 MW.
Our basic policy on developing this business is to minimize risk by

1.5–2.5 times
the current level

2,000

2,000 MW

monitoring domestic trends for electricity supply and demand, as
well as electric power system reforms, keeping a careful eye to the

0

2011

2020

FY

economic viability of our operations as we strive to make effective useof our LNG procurement capacity and LNG terminals, pipelines andother equipment as one of Japan’s leading energy companies.
In April 2012, we began considering construction in Ohgishima
Power Station Unit 3.

Action 6

Action 6

Beginning to Consider Ohgishima Power Station Unit 3

The Ohgishima Power Station (Yokohama, Kanagawa prefecture) is a
cutting-edge power station. The facility employs gas turbine combined
cycle generation, which is highly energy efficient, with maximum efficien-

Floor Plan of the Ohgishima Power Station
Water intake

cy reaching 58%. Unit 1 commenced operation in March 2010, followed
1

by Unit 2 in July of the same year. Together, the units have the capacity

2

to generate 814 MW (of which, our ownership share is 610 MW). We

3

have begun considering construction of Unit 3, on which environmental
impact assessments have already been completed, believing that thisunit will make an early contribution to our ability to provide a stable andefficient supply of electricity. A construction decision is scheduled forautumn of 2012, with the aim of commencing operations in fiscal 2015.

4
5

7

6

1 Chimney stack
2 Auxiliary boiler

Unit 3

Unit 2

Unit 18

3 Waste heat collection boiler
4 Gas turbine
5 Steam turbine
6 Generator
7 Turbine building
8 Office central control room

Source: Ohgishima Power Station Environmental Evaluation Standards Digest

Expanding Energy Services throughout Japan, Centered on Natural Gas
Extending our operations outside our sales base in the Kanto region,
we provide the resources that we have procured throughout Japan.
We meet the needs of gas companies throughout Japan, supplying
them with LNG via tank lorries, large ocean-going vessels and smaller domestic ships. Anticipating an increase in long-term, stable LNG
sales volumes, in fiscal 2011 Tokyo Gas formed an accord with othergas companies seeking to secure long-term gas resources, entering
into LNG sales agreements with Hokkaido Gas Co., Ltd., and Saibu
Gas Co., Ltd.

Action 7

LNG satellite terminal

LNG tank lorries

Growth Strategy

Action 7

Encouraging Natural Gas Use throughout Japan

In August 2011, Tokyo Gas signed an LNG sales agreement with
Hokkaido Gas Co., Ltd., deepening a relationship through which

Ishikari LNG Terminal

Tokyo Gas Engineering Co., Ltd., is already cooperating on the

Hakodate Minato LNG Terminal

design and construction of the Ishikari LNG Terminal. Under thisagreement, Tokyo Gas will supply the Ishikari LNG Terminal of Hok-

Hachinohe
LNG Terminal

kaido Gas with around 300,000–400,000 tons of LNG per year
during the 11 years from fiscal 2012–2022. This is our first longterm LNG supply agreement for providing a domestic gas company

Hibiki LNG Terminal

with gas from one of our LNG projects via ocean-going tankers. We
also signed a 16-year LNG sales agreement with Saibu Gas Co.,
Ltd., in March 2012, for fiscal 2014–2029 for the supply of around
300,000 tons of LNG per year to its Hibiki LNG Terminal.

Supplying LNG via Domestic and Overseas Vessels
JX Nippon Oil & Energy
Corporation
Hokkaido Gas Co., Ltd.
Saibu Gas Co., Ltd.

Hachinohe LNG
Currently supplying
Terminal
Hakodate Minato
Currently supplying
LNG Terminal
Ishikari LNG
From 2012
Terminal
Hibiki LNG Terminal
From 2014

Looking to the Future of Energy
Tokyo Gas advocates and is making strides toward the creation of

By optimizing energy use on per-community basis, these net-

“smart energy networks.” Using optimal configurations of renewable

works can help save energy and reduce CO2 emissions. At the sameenergy, fuel cells, storage batteries and energy management sys-time, they serve as dispersed power sources that are independenttems, these networks efficiently control electricity supply and demand

from large-scale power grids, making them an effective source ofand harness the heat provided through cogeneration systems andpower in the event of disaster. We are currently moving forward with

untapped waste heat.

several projects toward verification testing and commercialization.
Action 8

Action 8

Commencing the Commercialization of Smart Energy Networks

Applying the technological expertise it has accumulated through verification testing, Tokyo Gas is working toward the commercialization of smart
energy networks. We are working with Tokyo’s Minato Ward on the construction of a smart energy network north of the east exit of Tamachi
Station. Scheduled to begin supplying energy in April 2014, the projectwill be Japan’s first in an urban redevelopment area. We are also pursu-

Smart Energy Network in Progress(North of the East Exit of Tamachi Station)
First smart energy center supply area (Conventional plan)

ICT

Future plan

Solar heat and light(combined deck
structure)

ICT
Public utilities
Mediumpressure gas

ing a project in Tokyo’s Koto Ward based on the Toyosu Green Eco Island
Concept, and have begun considering another in an area centered on

CGS

the area near the west exit of Shinjuku Station.

ICTInterface
between centers

CGS

ICT

ICT

Second smart
energy centerFirst smart
energy center

Specialhigh-voltage
electricity

ICT

ICT

Child welfare facility

Aiiku HospitalHeat used by water in underground tunnel
CGS: Cogeneration system
ICT: Information and communications technology

27

28 Growth Strategy
Capital Expenditures Plan
Capital Expenditures, Investment and Financing Plan for “Challenge 2020 Vision”
The “Challenge 2020 Vision” calls for aggressive capital expenditures,operating cash flow (consolidated net income + depreciation) to beinvestments and financing, including through external funding, toaround ¥250 billion per year, approximately ¥40 billion per year higher

achieve new growth by “enhancing the LNG value chain.” Between

than during the FY09–13 Medium-Term Plan.

fiscal 2012 and fiscal 2020, this plan calls for total capital expenditures, investments and financing of ¥2.06 trillion. As an annual

Use of Capital Expenditures, Investment and Financing

average, the vision, compared with the Group medium-term manage-

Total for fiscal 2012–2020: Approximately ¥2,060 billion

ment plan for fiscal 2009–2013 (hereinafter, “FY09–13 Medium-Term(Approx. ¥230 billion per year)

Plan”) targets an annual increase in spending of around ¥50 billion,

Infrastructure
Overseas business
Demand development
Business base
Other investments in affiliates

7%

from approximately ¥180 billion to around ¥230 billion.

13%

This proactive funding is aimed at optimizing and enhancing our

35%

infrastructure so that we can promote and expand the use of natural¥730 billion¥320 billion¥600 billion¥270 billion¥140 billion

gas. Much of this investment will go toward production and supply
29%

facilities including the Hitachi LNG Terminal. We will also augment our

16%

trunk and service lines and electric power generation to develop
demand, and continue investing aggressively in overseas business(Reference) Capital expenditures, investments and financing in the medium-term management
plan for fiscal 2009–2013: Approximately ¥180 billion per year

to procure gas resources. During the investment period, we expect

Five-Year (Fiscal 2012–2016) Capital Expenditures Plan for Tokyo Gas on a Non-Consolidated Basis
Based on the plan described above, the capital expenditures plan for

Hitachi LNG Terminal by fiscal 2015.

Tokyo Gas on a non-consolidated basis for the five years from fiscal

In supply facilities, we will invest in pipeline installations toward

2012–2016 is as follows.

the development of new demand, completing the Ibaraki–Tochigi

With regard to production facilities, we will install additional va-

Line and planning the new Koga–Moka Line. In addition, we will

porizers in our three terminals located on Tokyo Bay and complete

invest in the formation of a trunk pipeline network, including the Shin-construction of the No. 4 LNG tank in the Ohgishima LNG Terminal.

Negishi Line (Yokohama).

We will also move forward with measures to strengthen the resis-

As a result of these initiatives, we are planning capital expendi-

tance of our facilities to earthquakes and floods, and repair andtures of ¥709.5 billion over the five-year period.

upgrade aged equipment. Furthermore, we plan to complete theGas Sales Volume Plan and Facilities Development Plan
Billion m3

Saito Line
Ibaraki–Tochigi Line
Tochigi Line extension

16.5
16.0
15.5
15.0

Kashima Waterfront Line
Minamisode Line
Sowa Medium-Pressure
Line extension

14.5

Shin-Negishi Line
Yokohama TrunkLine, Phase II

13.0

Sodegaura Terminal
vaporizer expansion
2012

Hitachi LNG Terminal

14.3 billion m3

14.0
13.5

15.6 billion m3
14.9 billion m3

13.9 billion m3

16.0 billion m3

Ohgishima Terminaltank expansion
2013

2014

2015

2016

Facility Investment Plans (Non-consolidated)

Billions of yen
Fiscal
2012

Fiscal
2013

Fiscal
2014

Fiscal2015

Production facilities

28.6

27.5

33.9

Supply facilities

86.4

90.2

88.2

Business facilities

23.2

21.1

Subtotal for gas business facilities(reduction entry of land contribution for construction)

138.2
0.8
139.0

Incidental facilities
Total (reduction entry of land contribution for construction)

FY

Fiscal2016

Total for fiscal
2012–2016

22.7

7.2

120.0

85.7

78.0

428.6

33.1

44.2

36.8

158.4

138.9

155.3

152.5

122.1

706.9

0.5

0.5

0.5

0.4

2.6

139.3

155.8

153.0

122.5

709.5