Overview and Potentialof Tokyo Gas

Overview andPotential ofTokyo Gas
The Potential of Natural Gas––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Understanding Tokyo Gas through Comparison–––––––––––––––Developing Business through the LNG Value Chain––––––

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12
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and Potential
10 Overview
of Tokyo Gas

The Potential of Natural Gas
Natural gas produces energy that is much cleaner than other fossil fuels,
and thus demand is rising for this resource around the world.

Environmental Benefits of Natural Gas
Natural gas is a combustible gas mixture consisting primarily of hy-

Comparison of Emissions (Coal=100)

drocarbon methane (CH4). Like oil and coal, it is a fossil fuel. However,
it is composed of a lower percentage of carbon (C) than these substances. For this reason, it releases relatively small quantities ofcarbon dioxide (CO2) during combustion. After being processed to

Natural gas

Oil

Coal

0

70

100

40

70

100

60

80

100

SOx

the point that it can be used to generate energy through combustion,
natural gas contains almost no nitrogen (N). It is also exceptionallyeasy to control this fuel. Accordingly, nitrogen oxide (NOx) emissions

NOxduring burning are incredibly low. In addition, when liquefied, natural
gas contains almost no sulfur or other impurities, meaning that nosulfur oxide (SOx) is emitted, thus making natural gas a source ofCO2energy with an incredibly low environmental impact.

Spreading Use of Natural Gas
Demand for natural gas is rising rapidly on a global scale. This trend

Global Primary Energy Demand Estimates

can be attributed to such factors as increased affordability, a result ofMillion tons crude oil equivalent (Mtoe)

the establishment of international pipeline networks and the spread-

18,00017,142 Mtoe

ing usage of unconventional natural gases; strong demand in
emerging nations; and attention garnered through the potential for

14,867 Mtoe
12,699 Mtoe
12,000natural gas to be used as an alternative for nuclear power, which has
become more significant amidst the acceleration of a global anti-nu-

25%

22%

21%
6,000

clear movement in response to the nuclear accidents in Japan.
According to the estimates of an International Energy Agency,

0demand for natural gas, which is more environmentally sound than oiland coal and more economically feasible than renewable energies, is
expected to rise by 50% or more by 2035. Furthermore, the share ofnatural gas among primary energies is expected to rise from the cur-

2010
Coal
Biomass

Oil

2020

2035

Natural gas
Nuclear power
Other renewable energy

Hydro power

Source: “Golden Rules Case,” Golden Rules for a Golden Age of Gas,
World Energy Outlook, International Energy Agency, May 2012

rent 21%, to 25%.

Availability around the World
Currently, reserves boasting volumes of natural gas in the area of 208

Reserves Boasting Volumes of Natural Gas

trillion m3 have been confirmed. These reserves are located aroundTrillion m3

the world, and are particularly concentrated in the Middle East andEurope / Eurasia

Eurasia. While approximately half of all oil reserves are located in the
Middle East, natural gas reserves are distributed more evenly
throughout the world. In 2011, approximately 3.2 trillion m3 of natural
gas was produced. When the volume of gas contained in confirmed
reserves is divided by this figure, the result suggests that these re-North America

78.7
Asia / Pacific80.0

Middle East
Africa16.8

14.5

Central and South America
7.6

serves will be able to supply enough gas to meet demand forapproximately 63 years.

10.8

Source: BP Statistical Review of World Energy, June 2012

Overview and Potentialof Tokyo Gas

Understanding Tokyo Gas throughComparison

The Potential of Natural Gas

Developing Business through the LNG
Value Chain

Rising Volume of Reserves
When considering the volumes of reserves that are recoverable

are thought to exist, primarily concentrated along the Pacific Rim.

with current technologies, which exceeds the current volume inThis means that the combined total for the volume of conventional

confirmed reserves, it can be estimated that there exists, primarily

and unconventional gases in the reserves spread across the globe

in Russia and the Middle East, reserves boasting volumes of con-could be as much as 752 trillion m3. Looking at the current produc-

ventional natural gases in the range of 421 trillion m . Furthermore,tion volume of natural gas of 3.2 trillion m3 per year, it is entirely

reserves of unconventional natural gases have recently been being

possible that the remaining natural gas resources may be able todiscovered at a rapid pace, and volumes of roughly 331 trillion m3

sufficiently supply the world for over 200 years.

Recoverable Reserves

Reserves of Conventional and Unconventional Gases

3

OECD Europe
45 trillion m3
Eastern Europe / Eurasia
174 trillion m3
MiddleEast
137 trillion m3
Africa74 trillion m3
Conventional

Asia / Pacific
128 trillion m3

Unconventional

OECD America
122 trillion m3

CBM
47 trillion m3
10.1%

Tight sand gas
76 trillion m3
Shale gas
208 trillion m3

Latin America
71 trillion m3

Source: “Golden Rules Case,” Golden Rules for a Golden Age of Gas, World Energy Outlook,
International Energy Agency, May 2012

Conventional gases
421 trillion m3

6.3%

55.9%

27.7%

Unconventionalgases
331 trillion m3

Growing Demand in the Japanese Market
The ratio of natural gas usage among other primary energies in Japan isnotably lower than the global average of 23.7%. However, following theGreat East Japan Earthquake, which occurred on March 11, 2011, use ofDomestic and Global Primary Energy
Consumption Volumes%

natural gas for thermal power generation has been increasing in an at7.7

tempt to develop alternatives to nuclear power. Also, dispersed power

4.9

sources such as cogeneration have been reassessed to be viable sources of power. Consequently, the percent of primary energy consumption

19.9%
23.7%

1.5

JAPAN

attributable to natural gas has risen rapidly from the 17% recorded in

Natural gas

2010 to the present level of approximately 20%, and demand for thisCoalresource is expected to rise into the future.

Nuclear24.6

Petroleum

4.0
6.4
1.6

WORLD
Natural gas

30.3

Petroleum

33.1
42.2

Hydro

Coal
Nuclear
Hydro
Renewable energy

Renewable energy
Source: BP Statistical Review of World Energy, June 2012

Differing Prices between Regions
Japan suffers from a lack of gas resources. It also is without an in-Japan has increased, further widening the gap between prices international pipeline network, forcing it to rely on LNG imports

Japan and those in Europe and the United States.

utilizing tankers. Regardless of these factors, the price of LNG in
Japan was nearly the same as the price in Europe or the UnitedStates up until a few years ago. The price of LNG in Europe and theUnited States has remained at approximately the same level since

Gas Prices by Region
US$/MMBtu
18then due to such factors as the global economic recession that followed the Lehman Shock of September 2008 and the increased

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supply in the United States following the shale gas revolution. In
Japan, meanwhile, the rising price of crude oil has caused a subse-

6

quent rise in the price of LNG due to the link between the prices ofthese two resources and demand for natural gas as a replacement
for nuclear power has grown. In this manner, the price of LNG in0

2006/4
Japan (All Japan LNG)

2009/4
Europe (NBP)

Source: Compiled by Tokyo Gas from various materials

2012/4
U.S.A. (Henry Hub)11

and Potential
12 Overview
of Tokyo Gas

Understanding Tokyo Gas
through Comparison
Developing businesses from upstream activities to sales,
in areas where major potential demand is expected.

Business Structure
Activities Spanning Resource Development to Sales
Different from energy companies in Europe and the United States, thedemand assumptions, moving steadily forward in production, supply

Tokyo Gas Group conducts a chain of business operations extending

and sales efforts in an interconnected manner. Furthermore, whereas

from resource procurement and transportation to customer sales andin Europe and the United States customers are responsible for theirservice.

own safety, in Japan gas companies are accountable for all aspects of

In Japan, the Gas Utility Industry Law assigns supply districts toproviders of city gas. At the same time, the law obliges providers tosafety, all the way to customers’ gas valves. We maintain consistently
high levels of safety from supply through to sales.

supply gas safely throughout their districts. Although this arrangement

In addition to these activities, in recent years we have also begun

creates a monopoly on supplying users who consume less thanparticipating actively in resource development projects in order to pro-

100,000 m3 of gas per year (46 MJ/m3), gas rates are regulated.

cure resources more consistently and competitively. By forging

Meeting our obligation to provide a stable supply in resource-poorstronger links among our business activities, we aim to achieve aJapan requires us to conduct long-term, stable resource procurement

better overall balance in our operations, maximizing LNG’s value andbased on accurate forecasts of future demand. The situation is similar

providing natural gas in a safe and consistent manner. We also en-with regard to pipeline networks and other infrastructure, which aredeavor to provide energy solutions that meet customers’ needs,

less developed than in Europe and the United States. Tokyo Gas andincluding for electricity, heat, and renewable energy.

other major players in Japan must plan investments on the basis ofDifferences in Business Structure between the Tokyo Gas Group and European and U.S. Energy Companies

Natural gas resource
development

Business Structure of Tokyo Gas
Conducts business through an LNG
value chain spanning upstream todownstream operations

Common Business Structurein the United States
Gas industry regulation in the UnitedStates comprises two layers: federal regu-

Procurement,
transportation

Production,
power generation

lation and the regulations of individualstates. For interstate pipelines, U.S. law

Common Business Structurein Europe
As one aspect of European integration, formerly monopolistic national providers arebeing compelled to separate and privatize their operations to create consistency
across the market. Nowadays, production,

Supplytransportation, and supply are typicallyhandled by different companies. A common division is into companies that handle(1) importing and domestic production, (2)transportation and storage, and (3) distri-

Sales, services

bution and retail.

requires pipeline operations to be conducted by different companies than thosehandling procurement, supply, and sales.
Here, the gas business tends to be divided
into four types of entities: (1) producers, (2)interstate pipeline operators, (3) gas distribution companies, and (4) marketers.
* Operation of pipelines within individual states differs
by state.

Overview and Potentialof Tokyo Gas

Understanding Tokyo Gas throughComparison

The Potential of Natural Gas

Developing Business through the LNG
Value Chain

Business Area’s Potential
Developing Business in One of the World’s Largest Economic Areas
As of September 2007, Tokyo Gas had more than 10 million custom-States. Furthermore, although Japan’s total population began to de-ers, and the figure is currently around 10.85 million (as of March 31,

cline in 2010, our customer base is expected to continue increasing2012). This business base is on a par with those of leading public

at a pace of around 1% per year, owing to the ongoing influx ofservice companies in the gas business in Europe and the United

people into the Tokyo metropolitan area.
Customer Comparison among the World’s Leading
Gas Companies
Millions
20

15.88
15

11.27

10.85

8.04

10

Tokyo area

50Tokyo Gas
(Tokyo area)

GDF Suez(France and other)Gas customers

Centrica(U.K.)

Sempra(U.S.)

Electricity customers

Source: Compiled by Tokyo Gas from individual companies’ public documents(Figures for the three companies other than Tokyo Gas are as of December 31, 2011.)

Major Potential Demand Expected in the Tokyo Area
The Kanto region, which extends for a 200-kilometer radius aroundTokyo, accounts for around 40% of Japan’s GDP and is its largest

Potential for Industrial and Commercial Demand in the Kanto
Region (200-kilometer radius around Tokyo)

area of concentrated energy demand. The Chiba–Kashima Line,
which opened in March 2012, has begun supplying gas to industrial
customers in the Kashima waterfront industrial zone in Ibaraki prefecture. Going forward, we will work to meet industrial demand
concentrated in the northern Kanto region by extending necessary
pipelines and boosting gas supply capacity through the constructionof the Hitachi LNG Terminal. As a result, we expect demand to increase, centering on fuel conversion and cogeneration. We will also

200-km area

100-km area

2.0 billion m

7.0 billion m

3

3

Cogeneration system/
Power generation
0.3 billion m3

Fuel conversion
5.1 billion m3
Total

9.0 billion m3

Fuel conversion
1.7 billion m3

encourage the uptake of cogeneration—an effective means of gener-

Cogeneration system/
Power generation
1.9 billion m3

ating electricity and heat on-site—from the perspective of creating
dispersed energy systems that will help to reduce the burden on gridelectricity and contribute to peak savings.

Gas Sales Volumes of the Four Leading Companies (Consolidated)

Customers for the Four Leading Companies (Consolidated)

Million m3

Millions

18,000+3.0%

12,000

12

0

+0.5%

8

+1.8%
+0.8%

6,000

+1.1%

4

+0.7%

–0.7%
0

Tokyo Gas
Fiscal 2010

Osaka Gas

Toho Gas

Fiscal 2011

Source: Compiled by Tokyo Gas from individual companies’ public documents

Saibu Gas

Tokyo Gas
Fiscal 2010

Osaka Gas

Toho Gas

Fiscal 2011

Source: Compiled by Tokyo Gas from individual companies’ public documents±0%

Saibu Gas

13

and Potential
14 Overview
of Tokyo Gas

Developing Business throughthe LNG Value Chain
We aim to develop our business throughout the LNG value chain, maximizing value
through linked business spanning the procurement and transportation of LNG,
the production and supply of city gas, and the provision of energy solutions.

Natural Gas Resource
Development
As well as ensuring the stable procurement of gas resources, we
aim to lower procurement prices in a bid to ensure fair prices in

Procurement andTransportation

the Asian market. To achieve these goals, in addition to conventional large-scale projects we are pursuing unconventional sourcesof natural gas and actively taking various upstream interests.

We import more than 11 million tons of LNG per year, based onlong-term contracts through 11 projects in six countries, cen-

Overview of Major Overseas Upstream Operations
Project

Annual contracted
quantity
Inception of(thousands of tons)
project

1,000

DarwinPluto

2006

DurationContract type17 years(–2022)

FOB

3.07
5.0

1,500–1,750

2012

15 years

Ex-Ship,
FOB

1,100

(2014)

25 years

FOB

Gorgontered on politically stable regions.

Upstreaminterest (%)

We strive to keep transportation costs down by using ourown eight-tanker fleet efficiently to meet our own needs, aswell providing transportation for other companies.

1.0

Tokyo Gas LNG Imports by Country

1.25

Queensland
CurtisIchthysDarwin LNG Project

1,200
1,050

(2015)(2017)

20 years

Ex-Ship

15 yearsThousands of tons

(Upstream)

FY

Location

2009

2010

2011

Composition(Midstream)

Malaysia

4,274

4,479

4,479

(39.0%)

1.575

Australia

2,416

2,297

2,264

(19.7%)

Brunei

1,166

1,155

1,362

(11.9%)

Indonesia

730

843

1,011

(8.8%)

Russia

505

983

1,243

(10.8%)

Qatar

297

358

290

(2.5%)

Alaska

141

139

–

–

Other

523

440

826

(7.2%)

Total

10,052

10,692

11,476(100.0%)2.5

FOB

Queensland Curtis LNG Project
Sakhalin

Tokyo Gas Long-Term LNG Contracts
Tokyo

Qatar

BruneiMalaysia
Indonesia
IchthysPluto
New LNG project
Existing LNG project

Gorgon NWS

LNG Carrier “Energy Advance”

DarwinQueensland Curtis

Overview and Potentialof Tokyo Gas

Understanding Tokyo Gas throughComparison

The Potential of Natural Gas

Ohgishima Power Co., Ltd.
1,220 MW

Developing Business through the LNG
Value Chain

Kawasaki Natural Gas Power
Generation Co., Ltd.
420 MW x 2 stations

840 MW

Tokyo Gas Yokosuka Power
Co., Ltd.
240 MW x 1 station

240 MW

Tokyo Gas Baypower Co., Ltd.

Capacity

407 MW x 3 stations*

Generation
methodStart ofoperation

Combined cycle generation

Combined cycle generation

Combined cycle generation

Combined cycle generation

100 MW x 1 station

100 MW

Rollout of operations sincecommencement in 2010

2008

2006

2003

Tokyo Gasinterest

75%

49%

75%

100%

* Reached decision to construct third station in autumn of 2012

With three plants in the Tokyo metropolitan area, our LNG storage andProduction andproduction facilities are some of the largest in the world. We are conPower Generation tinuing to expand our production system to meet growing demand forcity gas. We also operate highly efficient power generation facilities
that employ leading-edge technology and feature reduced environmental impact. By fiscal 2020, we expect to increase our generation
capacity of the current 2,000 MW to between 3,000 MW and 5,000 MW.

Hitachi LNG Terminal(Plan)

SupplyTokyo Gas provides a stable supply of city gas via apipeline network totaling 59,575 km (consolidated),
centered on the Tokyo metropolitan area. Moving forward, we will extend our pipelines into regions ofdemand, promote earthquake preparedness measures and build supply networks that are highly
resistant to disaster.
Sodegaura LNG Terminal
Import volume FY2011 4.851 million ton/year
Storage capacity
1,610,000 kl
Vaporization capability
1,100 t/h
Sodegaura LNG Terminal
Negishi LNG Terminal

Ohgishima LNG Terminal
Ohgishima LNG Terminal
Import volume FY2011 3.326 million ton/year
Storage capacity
600,000 kl
Vaporization capability
1,115 t/hTokyo Gas high-pressure transmission pipelines
High-pressure transmission pipelines of other companies
Tokyo Gas high-pressure transmission pipelines under construction
Tokyo Gas Group supply area
Supply areas of wholesale customers

Negishi LNG Terminal
Import volume FY2011 3.299 million ton/year
Storage capacity
1,155,000 kl
Vaporization capability
560 t/h15

and Potential
16 Overview
of Tokyo Gas

Understanding Tokyo Gas throughComparison

The Potential of Natural Gas

Developing Business through the LNG
Value Chain

Major Overseas Mid-Downstream Operations (Energy and Engineering Services)

Malaysia
Gas Malaysia Bhd.
City gas supply project(Tokyo Gas interest: 14.8%)

Mexico Bajio
Natural gas power generation(Tokyo Gas interest: 49%)

Mexico MT Falcon
Natural gas power generation(Tokyo Gas interest: 30%)

Brazil Malhas Project
Natural gas pipeline project(Tokyo Gas interest: 15%)

Belgium T-Power
Natural gas power project(Tokyo Gas interest: 26.66%)

India Delhi, Mumbai
Energy services project(feasibility study underway)

VietnamCommissioned FEED project at LNG receiving terminal
ThailandEnergy services project (feasibility study underway)“ENE-FARM” residential fuel cells

Gas Sales and Service
Gas air conditioner

In the residential sector, spearheaded by Tokyo Gas LIFEVAL communitybased marketing systems we are proposing lifestyle values based on gas.
We are also working to promote “ENE-FARM” residential fuel cells and aresupplying electricity. In the commercial and industrial sectors, we introduce cogeneration and air conditioning systems and promote fuelconversion from other sources. In these ways, we help to provide energy
and contribute to reductions in CO2 emissions. In addition to selling gas
for energy, we are endeavoring to maximize added value by offering
energy services, including equipment provision and maintenance.

Solar heat collector