Review of Operations
Core Business: Gas SalesLNG Value Chainof Tokyo Gas
Bayu-Undan gas field in the Timor Sea
Gas produced at this gas field is transported to theDarwin LNG Plant, liquified, and sold. This is theCompany’s first upstream project.

Highlights of Fiscal 2009
April 2009

One year of operations at Kawasaki Natural Gas
Power GenerationKawasaki Natural Gas Power Generation, which started operations on April 1, 2008, completed its first year of operations.

September 2009
Made final investment decision for the Gorgon ProjectOctober 2009
Completed the Tokyo Gas LIFEVAL system

December 2009

Acquisition of thermal power generation
operations in Mexico
Through a holding company, Tokyo Gas and Mitsui & Co., Ltd.,
concluded a contract for the acquisition of five thermal power
generation companies and a pipeline company. The amount ofthe acquisition was US$1.2 billion (about ¥110.0 billion).

March 2010

Start of operations at Ohgishima Power Station
Ohgishima Power Co. completed the No. 1 unit at theOhgishima Power Station and began commercial operations.
Ohgishima Power’s investors include Tokyo Gas and Showa
Shell Sekiyu K.K.. The No. 2 unit also started commercial
operations in July 2010.

March 2010Signed a heads of agreement regarding participation in theQueensland Curtis LNG Project and the purchase of LNG
from the project. This is the world’s first coal bed methane(CBM) project.

24

Review of operations

Tokyo Gas is Japan’s largest city gas supplier,with 10.63 million customers. Our service area
encompasses the Tokyo metropolitan area andthe surrounding Kanto region, a market withhuge demand and high growth potential. As acity gas supplier, we do more than just deliver
gas to customers. Our operations extend fromparticipation in upstream LNG projects to thetransport of LNG by tanker, the regasificationof LNG to city gas at LNG terminals, the supplyof city gas through pipelines, and the sales ofgas appliances, as well as the implementationof safety initiatives at customer sites. Our establishment of an LNG value chain from upstream businesses to downstream businesses
makes us unique from other gas suppliers
around the world.

Natural Gas Resource Development / Procurement

Spotlight

Transportation

Production / Power Generation

LNG Procurement

City Gas Transport

Sales / Services

Implementing Initiatives to Ensure Stable Procurement
More than 95% of the city gas provided by Tokyo Gas issourced from LNG, and accordingly securing sources that

Position in the LNG value chain

can provide a stable, long-term supply of LNG is an issue ofFlexible, competitive resource procurement in linewith demand

the utmost importance for the Company. Centered on supply

Principal operating companies

sources that are geographically close to Japan and located inTokyo Gas Co., Ltd.

regions that are politically stable, Tokyo Gas has concluded

Segment

long-term LNG contracts for 10 projects in six countries andGas Sales

imports more than 10.0 million tons of LNG a year. We areTokyo Gas LNG Imports by Country of Origin

also taking steps to secure new procurement sources. In April

Thousand tons

2009, we began procurement from the Sakhalin II Project.

Years ended March 31

Moving forward, we will continue working to diversify ourCountry

2008

2009

2010

Malaysia

3,767

4,482

4,274(42.5%)

LNG procurement sources, such as commencing new pro-Australia

3,289

2,847

2,416(24.0%)

curement from the Pluto and Gorgon Projects in Australia start-Brunei

1,405

1,257

1,166(11.6%)

ing from 2011 and thereafter. In LNG procurement contracts,

Indonesia

740

742

730

(7.3%)

Russia——505(5.0%)

we are also taking steps to facilitate flexible, competitive

Qatar

715

631

297

(3.0%)

Alaska194

176

141(1.4%)

Others

763

1,027

523

(5.2%)

Total

10,874

11,162

10,052(100%)

example, we are working to accommodate changes in destinations and to increase flexibility in regard to handling volumes.

Unconventional Natural Gas Procurement

Tokyo Gas Long-Term LNG Contracts

Recently, unconventional natural gas has been drawing
considerable attention. Tokyo Gas has been working to take

Sakhalin ■advantage of unconventional natural gas through effortsTokyo■

resource procurement in line with demand fluctuations. For

geared toward expanding its options for LNG procurement,such as signing a heads of agreement for the Queensland

Qatar

Curtis LNG Project, which is highly anticipated as the world’s
first coal-bed methane (CBM) LNG project.

Brunei ■Malaysia ■■Indonesia
Pluto■
Gorgon ■ ■CBM is an unconventional natural gas like shale gas andtight sand gas. Natural gas is absorbed in the cleat of the coal■ Darwin

NWS

New LNG project

bed. In the United States, commercial production began in■Queensland Curtis

the 1980s and currently supplies about 10% of natural gas
consumption in the United States. In Australia, full-scale use

Existing LNG projectof this gas has gotten underway in recent years.

Spotlight

Upstream interests

Acquisition of Upstream Interests
In the acquisition of upstream interests, we are doing every-Position in the LNG value chain

thing possible to control the risk associated with projects.

Competitive resource procurement through the acquisition ofupstream interests

For example, we are restricting acquisitions to projects thatPrincipal operating companies

have already completed the prospecting phase and therefore

TOKYO GAS AUSTRALIA PTY LTD, Tokyo Gas Darwin LNG Pty Ltd

have a high probability of starting operations and, at theSegment

same time, are candidates for the Company’s LNG procure-

Other Businessment operations. Tokyo Gas holds about 3% of the Darwin
Project, 5% of Pluto, and 1% of Gorgon. Long-term LNG

Outline of Project Participation
Project

procurement contracts have been concluded with all ofAnnual contract­ Inception Duration
ed quantityof contract(1,000 tons)

ContracttypeProject
participation(%)

Darwin

1,000

2006

17 years(–2022)

FOB

3.07

Pluto

1,500 –1,750

2011

15 years

Ex-Ship, 5.0
FOB

Australia, an unconventional natural gas development proj-Gorgon

1,100(2014) 25 years

FOBQueensland
Curtis LNG

1,200(2015) 20 years

Ex-Ship 1.25

the LNG value chain. The Darwin Project, which is already1.0

these projects. At the same time, we have also announced
that we are moving ahead with discussions regarding theacquisition of interests in the Queensland Curtis Project inect. In these ways, we continue to aggressively strengthen(Upstream)in operation, is demonstrating steady effects on earnings,

2.5

such as through the receipt of steady dividends.

(Midstream)

TOKYO GAS ANNUAL REPORT 201025

Spotlight

Transportation

Position in the LNG value chain
Decreasing cost by increasing FOB

Principal operating company
Tokyo LNG Tanker Co., Ltd.

Segment
Other Business

LNG Vessel “Energy Confidence”

One of the Largest Fleets in Japan

Efficiently Managing Our Fleet

In May 2009, the Energy Confidence was placed into ser-

The management of our fleet is handled in cooperation

vice, bringing our fleet to a total of seven vessels. Goingwith wholly owned subsidiary Tokyo LNG Tanker Co., Ltd.

forward, we plan to introduce another vessel in 2011. AtMoreover, in order to further promote efficient utilization,eight vessels, our fleet will be one of the largest among

we have entered into basic contracts with the Petronas

domestic electric power and gas companies, and by lever-Group (Malaysia LNG, Malaysia LNG Tiga, and Asean LNG

aging this fleet we will work to increase flexibility inTrading) which is a major LNG vendor, as well as Brunei

resource procurement. Furthermore, by engaging in flex-LNG, Shell Eastern LNG, and the TEPCO Group, with theible procurement utilizing not only long-term contracts but

objective of joint use of LNG vessels.

also short-term contracts, we are planning to expand shipping operations, including the transport of LNG to thirdparties and the leasing of vessels to other companies.

Spotlight

Infrastructure Development

Ensuring both stable supply and safety

Basic Strategy
Investing in infrastructure to meet expanding demand

Principal operating company

Tokyo Gas receives about 10 million tons of LNG a year at three LNG

Tokyo Gas Co., Ltd.

terminals along the shores of Tokyo Bay. After LNG is received at theSegment

terminals, it is regasiﬁed to natural gas using vaporizers and LPG isGas Sales

added to adjust the caloric value. The city gas is delivered to custom-

Position in the LNG value chainers through a pipeline network of about 57,000 km.

Focus on Future Demand Growth—Starting Construction on the Hitachi LNG Terminal
The Company’s LNG terminals are among the largest incity gas in a 200-kilometer radius around Kanto from 2010,

the world, and we continue to invest in our facilities inand accordingly we have planned to build our fourth LNG

order to enhance our ability to respond to growth interminal, the Hitachi LNG Terminal. In consideration ofdemand for natural gas and to further stabilize supply. In

growing social need for global warming countermeasures

November 2009, we commenced construction of the No.

and of strong regional demands, we have accelerated this4 LNG storage tank at the Ohgishima LNG Terminal. Inplan and are targeting the start of operations in fiscal 2015.

addition, we are forecasting further growth in demand forTokyo Gas Sodegaura LNG Terminal26

Review of operations

Natural Gas Resource Development / Procurement

Production / Power Generation

Transportation

Pipeline Maintenance Investment andFacility Investment Plan

City Gas Transport

Sales / Services

Facility Investment Plans (non-consolidated)
Billions of yen
FY2009Result

The high-pressure trunk pipelines circling the Tokyo metropolitan area and the three LNG terminals work together

FY2010
Outlook

FY2010–2014
TotalGas Business Facilities

to support the reliable supply system of Tokyo Gas. InLNG facilities

8.7

4.7

99.4

May 2010, construction was completed on Central Line II,

Other

5.3

6.2

24.8
124.2

Production facilities

14.0

10.9

south through the loop trunk lines, and has strengthened

Trunk line investment

19.4

12.9

70.6

the trunk line network. In addition, to acquire demand in

Other

59.2

58.1

272.9
343.5

which made Central Line complete, running north tothe period after 2015 and to expand our operations, weSupply facilities

78.6

71.0

will bolster our wide-area trunk infrastructure during theBusiness facilities

18.9

24.1

122.1

period covered by the medium-term management plan.

Subtotal

111.5

106.0

589.8

0.8

0.7

3.0

112.3

106.6

592.7

Incidental facilities
Total

Major Infrastructure Formation Plan
Ibaraki-Tochigi Line
Hitachi LNG Terminal (Plan)

Saito Line

Chiba-Kashima Line
Yokohama Line II
Ohgishima LNG
Terminal

New Negishi Line

Sodegaura LNG Terminal

Negishi LNG Terminal
Tokyo Gas high-pressure transmission pipelines, etc.
High-pressure transmission pipelines of other companies
Planned pipelines
Tokyo Gas Group service area

Demand Outlook and Facility Formation Plans (non-consolidated)
Billion m3

16
15.2 bil m3
14.9 bil m3

1514.1 bil m3
13.7 bil m3

1413.2 bil m3
13

12

Chiba-Kashima Line
Chuo Trunk Line
(2nd phase)
LNG vaporizers(Negishi LNG Terminal /Hitachi Works)

LNG vaporizer(Sodegaura
LNG Terminal)

LNG vaporizer(Ohgishima LNGTerminal)

Shin Negishi Trunk LineLNG vaporizer(Negishi
LNG Terminal)

Yokohama Trunk Line
(2nd phase)
LNG vaporizer(Negishi LNG Terminal)
LNG tank(Ohgishima LNG Terminal)

11
FY2010FY2011FY2012FY2013

FY2014

TOKYO GAS ANNUAL REPORT 201027SpotlightGas Sales (Residential Sector)

Position in the LNG value chain

Gas Sales Volume

Residential 25.1 %Maintaining and expanding the number of customers
through community-based marketing

3,437 million m3

Principal operating companies
LIFEVAL companies

Segment
Gas Sales, Gas Appliance Sales, and Installation Work

Basic Strategy

been in line with our expectations. For example, LIFEVALIn the residential market, we are working to provide

has had the effect of boosting sales of environment-customers with the pleasant, comfortable lifestyles

friendly products launched in fiscal 2009, such as solarthat can be enjoyed with the use of city gas for such

power generation and “ENE-FARM.”

applications as hot water, heating, and cooking appli-

In order to compete with all-electric housing cam-ances. We are also working to offer new lifestylepaigns, which are being advanced by electric power com-value by developing products and services that meet

panies, we have been visiting customer homes anddiversifying customer needs. Furthermore, in October

explaining to them the pleasant, comfortable lifestyles

2009 we completed Tokyo Gas LIFEVAL community-that can be enjoyed with the use of gas. We are actively

based marketing systems. Leveraging theseapproaching those customers who are especially likely tosystems, we have been working to further enhanceswitch to all-electric and working to sustain andcommunications with each individual customer.

increase the demand for gas.

Building a Market for “ENE-FARM”
The “ENE-FARM” residential fuel cellthat we launched in May 2009 has
gotten off to a strong start, and wesold 1,500 units in fiscal 2009.
We are aiming to sell an additional
2,500 units in fiscal 2010, and ourplans call for an installed base of 42,000 units by the endof March 2014.
We are working on a sales initiative to have “ENEFARM” preinstalled in new residences by leveraging therelationships of trust that we have built with developers
and housing companies over many years. Sales to existing dwellings are handled primarily by Tokyo Gas LIFEVALcompanies. Additionally, in December 2009 we held theDouble Power Generation Campaign to promote the com-Construction of Community-based Marketing
Systems through Tokyo Gas LIFEVALIn order to build close ties with our customers, we com-lishment of a low-carbon society, which is an issue ofmenced the step-by-step introduction of the community-

great social concern. We have also been working tobased marketing system, Tokyo Gas LIFEVAL, in April

steadily advance the research and development of next-2008, and we completed the system in October 2009.

generation fuel cells in cooperation with fuel cell manufac-

The system currently consists of 45 companies and,turers. At the same time, we are working to reduce costs

excluding the wide-area markets, divides our service

by promoting standardized specifications and common

area in Tokyo, Kanagawa, Chiba, and Saitama prefectures

parts. Preparations for the introduction of these products

into 63 service blocks.

are underway, and we are aiming to launch them in theLIFEVAL facilitates the provision of quick, one-stop
responses to the needs of customers that come to ourattention during our various business activities, such as
maintenance and sales of gas appliances, periodic gas
facility safety checks, and meter reading. Our results have

28bination of “ENE-FARM” and solar power generation.
Through such initiatives, we are contributing to the estab-

Review of operations

first half of the 2010s.

Natural Gas Resource Development / Procurement

Spotlight

Transportation

Production / Power Generation

City Gas Transport

Sales / Services

Gas Sales (Commercial and others, industrial, and wholesale sectors)

Position in the LNG value chain

Gas Sales Volume

Proposing tailor-made solutions that match diversified
customer needs

Commercial and Others 21.5 %Principal operating companies

Industrial 39.9 %2,943 million m3

Tokyo Gas Co., Ltd., ENERGY ADVANCE Co., Ltd.

5,446 million m3SegmentWholesale 13.5 %Gas Sales, Other Business

1,841 million m3

Basic Strategy

number of issues, including countering the shift to electrici-

In the energy market, we are seeing intensifying com-ty, strengthening marketing efforts, and increasing man-petition, principally from electrical power. In this set-agement efficiency. As a result, we have establishedting, Tokyo Gas is enhancing its integrated energy
business, focusing on commercial and industrial clients, who have increasingly diverse and sophisticatedenergy needs. In accordance with those needs, wecountermeasures targeting the resolution of these issues.
* Suzuchu: A brand of commercial gas appliances that make kitchens cooland comfortable by minimizing the heat from appliances through the use ofheat insulation and a concentrated air discharge structure.
Suzuchu is a registered trademark of Osaka Gas Co., Ltd.

strive not only to supply energy from a wide range ofsources, including gas, electric power, and heat, but

Developing Our Integrated Energy Businessalso to propose tailor-made, optimal combinations ofSocial demands for global

products and services on a one-stop basis. Further-warming countermeasuresmore, in addition to engaging in wholesale operations

are increasing. In this set-

geared toward peripheral gas suppliers, we areting, we are working to pro-expanding the range of our integrated energy businessvide more customers withby aggressively working to capture demand, centerednatural gas, which is envi-

on the region extending for a 200-kilometer radiusronmentally friendly andaround Tokyo, where latent demand is expanding.

has the lowest CO2 emissions of any fossil fuel. InCombating the Shift to Electricity

addition, we are making full

For commercial customers, we are proposing high-use of the Group’s­efficiency air conditioning and water heating systems.

advanced engineering capa-

In addition, we are working together with LIFEVAL tobilities as we strive to pro-

expand sales of Suzuchu*, which reduces the heat thatvide customers withis characteristic of commercial kitchens, and we have

optimal solutions that incor-

had steady success with these initiatives.

porate renewable energies,

Tokyo Gas is working to counter the use of electric-

such as solar power, solar­powered factories by industrial customers. To that end,

heat, wind power, and bio-

we are leveraging our engineering capabilities to makemass; contribute to thesolid contributions toenvironment; and provide

the production pro-high levels of customer

cesses of customers.

satisfaction. In fiscal 2009,

At the same time,

we made progress in the

we are continuallydevelopment of an air con-providing services

ditioning/hot water systemwith reduced energy
consumption, lower
costs, and high levels

The owner of a yakitori restaurant
touches the surface of a Suzuchu
gas appliance to confirm that it has
not gotten hot.

of safety. In theseways, we are working to further differentiate our services.

Heat transfer system at theCompany’s Kumagaya Branch.
Solar heat from a solar heatcollector (front) installed on theroof of the Company’s Kumagaya
Branch is transmitted to a nearby
hotel (back) through heat transmission lines. This is the firstsystem in Japan that transmits
solar heat among private-sector
buildings with different owners.

that uses solar heating,
and we have commenced introduction and demonstration
project of these systems, both in the Company’s own facilities and in those of customers.
Furthermore, we are working in cooperation with

In wholesale operations, an important role is played byENERGY ADVANCE Co., Ltd., a wholly owned subsidiary.

the Gas Network Consortium (Gas Net 21), which is com-Together, in line with the needs and specific conditions ofposed of 41 general gas suppliers (including Tokyo Gas butcustomers, we provide customers with one-stop solutions

mainly comprising our wholesale gas customers). Throughfor facility operation and management, including other utili-Gas Net 21 activities, we have been able to discuss aty services, such as water and air, in addition to energy.

TOKYO GAS ANNUAL REPORT 201029