Growth Strategy—Enhancing the LNG Value Chain

Tokyo Gas has been accelerating efforts to enhance its LNG value chain based on
the target corporate profile for the Tokyo Gas Group clearly set out in “Challenge
2020 Vision.” This section focuses on our main achievements since announcing“Challenge 2020 Vision” in November 2011 and strategies going forward.
14

The Potential of Natural Gas

16

Understanding Tokyo Gas through Comparison

18

Procuring Resources in a Stable and Affordable Mannerand Expanding Overseas Operations

22

Building a Production and Supply Infrastructure to Cultivate Demand

25

Providing Diverse Energy Solutions

30

Capital Expenditures Plan

Tokyo Gas

Annual Report 201313

Enhancing the LNG Value Chain

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

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

Comparison of Emissions (Coal=100)

hydrocarbon methane (CH4). Like oil and coal, it is a fossil fuel.

Natural gas

Oil

Coal

SOx

0

70

100

NOx

40

70

100

CO2

60

80

100

However, it is composed of a lower percentage of carbon (C)than these substances. For this reason, it releases relatively small
quantities of carbon dioxide (CO2) during combustion. After being
processed to the point that it can be used to generate energy
through combustion, natural gas contains almost no nitrogen (N).
It is also exceptionally easy to control this fuel. Accordingly,
nitrogen oxide (NOx) emissions during burning are incredibly low.
In addition, when liquefied, natural gas contains almost no sulfur
or other impurities, meaning that no sulfur oxide (SOx) is emitted,
thus making natural gas a source of energy with an incredibly low
environmental impact.

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

Global Primary Energy Demand Estimates

trend can be attributed to such factors as increased affordability, aMillion tons crude oil equivalent (Mtoe)

result of the establishment of international pipeline networks, and

18,000the spreading usage of unconventional natural gases; strong
demand in emerging nations; and attention garnered through the

17,197 Mtoe
14,922 Mtoe

12,00012,730 Mtoe

potential for natural gas to be used as an alternative for nuclear
power, which has become more significant amidst the acceleration of a global anti-nuclear movement in response to the nuclear
accidents in Japan. According to the estimates of the International
Energy Agency (IEA), demand for natural gas, which is moreenvironmentally sound than oil and coal and more economicallyfeasible than renewable energies, is expected to rise by 50% or

21%

25%

22%

6,000

0

2010
Coal
Biomass

Oil

2020

Natural gas
Nuclear
Other renewable energy

2035
Hydro

Source: IEA, World Energy Outlook 2012, New Policies Scenarios

more by 2035. Furthermore, the share of natural gas among
primary energies is expected to rise from the current 21% to 25%.

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

year, it is entirely possible that the remaining natural gas

with current technologies, which exceeds the current volume inresources may be able to sufficiently supply the world for overproved reserves, it can be estimated that there exists, primarily in

200 years.

Russia and the Middle East, reserves boasting volumes of
conventional natural gases in the range of 421 trillion m3. Furthermore, reserves of unconventional natural gases have recently

CBM

been discovered at a rapid pace, and volumes of roughly 331

6.3% 47 trillion m3

trillion m3 are thought to exist, primarily concentrated along theTight sand gas
10.1% 76 trillion m3

Pacific Rim. This means that the combined total for the volume of
conventional and unconventional gases in the reserves spread
across the globe could be as much as 752 trillion m3. Looking at
the current production volume of natural gas of 3.2 trillion m3 per

14

Reserves of Conventional and Unconventional Gases

Tokyo Gas

Annual Report 2013

Shale gas27.7% 208 trillion m3
Unconventional gases
44.1% 331 trillion m3

Conventional gases
55.9% 421 trillion m3

Total

752
trillion m3

Recoverable Reserves
Eastern Europe / Eurasia
174 trillion m3

OECD Europe
45 trillion m3

OECD America
122 trillion m3

Middle East
137 trillion m3

Asia / Pacific
128 trillion m3

Africa74 trillion m3
Latin America
71 trillion m3

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

Growing Demand in the Japanese Market
 omestic and Global Primary Energy
DConsumption Volumes

The ratio of natural gas usage among other primary energies inJapan is notably lower than the global average of 23.9%. However,%following the Great East Japan Earthquake, which occurred on

1.7

0.9

March 11, 2011, use of natural gas for thermal power generation

3.8

has been increasing in an attempt to develop alternatives to nuclear
4.5

power. Also, dispersed power sources, such as cogeneration, have

22.0%
23.9%

6.7
1.9

26.0

been reassessed to be viable sources of power. Consequently, thepercent of primary energy consumption attributable to natural gasJapan

has risen rapidly from the 17% recorded in 2010 to the present levelWorld

24.6 29.9

Natural gas

Natural gas
Oilof approximately 22%, and demand for this resource is expected toCoalrise in the future.

Oil

33.1

Nuclear

Coal
Nuclear

45.6

Hydro

Hydro
Renewable energy

Renewable energy

Source: BP Statistical Review of World Energy, June 2013

Differing Prices between Regions
Japan suffers from a lack of gas resources. It also is without anincreased supply in the United States following the shale gasinternational pipeline network, forcing it to rely on LNG imports

revolution. In Japan, meanwhile, the rising price of crude oil has

utilizing tankers. Regardless of these factors, the price of LNG incaused a subsequent rise in the price of LNG due to the link

Japan was nearly the same as the price in Europe or the United

between the prices of these two resources and demand forStates up until a few years ago. The price of LNG in Europe andnatural gas as a replacement for nuclear power has grown. In thisthe United States has remained at approximately the same level

manner, the price of LNG in Japan has increased, further

since then due to such factors as the global economic recession

widening the gap between prices in Japan and those in Europethat followed the Lehman Shock of September 2008 and theand the United States.

Prices of Crude Oil and LNG

Gas Prices by Region

US$ / MMBtu

US$ / barrel

25

150

20

120

15

90

10

60

5

30

0

0

ʼ05/3

ʼ06/3

ʼ07/3

ʼ08/3

ʼ09/3

ʼ10/3

All Japan LNG Prices (Trade statistics) (US$ / MMBtu)
JCC Prices (Trade statistics) (US$ / barrel)
Dubai (US$ / barrel)
WTI (US$ / barrel)

ʼ11/3

ʼ12/3

ʼ13/3

US$ / MMBtu
18

12

6

0

2007/4
Japan (All Japan LNG)

2010/4
Europe (NBP)

2013/4
U.S.A. (Henry Hub)

Source: Compiled by Tokyo Gas from various materials

Source: Compiled by Tokyo Gas from various materials

Tokyo Gas

Annual Report 201315

Enhancing the LNG Value Chain

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,

providers of city gas. At the same time, the law obliges providers

the Tokyo Gas Group conducts a chain of business operations

to supply gas safely throughout their districts. Although thisextending from resource procurement and transportation toarrangement creates a monopoly on supplying users who

customer sales and service.

consume less than 100,000 m3 of gas per year (46MJ/m3),

In Japan, the Gas Business Act assigns supply districts togas rates are regulated.

Differences in Business Structure between the Tokyo Gas Group and European and U.S. Energy Companies
Natural gas resource
development

Procurement,
transportation

Production,
power generation

SupplySales, services

Business Structure of Tokyo Gas
Business is conducted through an
LNG value chain spanning upstream todownstream operations

Common Business Structurein Europe
As one aspect of European integration,
formerly monopolistic national providers
are being compelled to separate andprivatize their operations to create
consistency across the market.
Nowadays, production, transportation,and supply are typically handled bydifferent companies. A common
division is into companies that handle(1) importing and domestic production,(2) transportation and storage, and(3) distribution and retail.

Common Business Structure in
the United States
Gas industry regulation in the UnitedStates comprises two layers: federal
regulation and the regulations of individual states. For interstate pipelines,
U.S. law requires pipeline operations to
be conducted by different companies
than those handling procurement,
supply, and sales*. Here, the gas
business tends to be divided into fourtypes of entities: (1) producers,(2) interstate pipeline operators,(3) gas distribution companies,and (4) marketers.
* ‌Operation of pipelines within individual states differs
by state.

columncolumnElectric Power System Reforms and the Gas Business16

Gas businesses are subject to the same system as electricity busi-

There are presently discussions ongoing in Japan about reforms toness with rate systems for regulated areas, while gas resource costs

the electric power system in order to ensure stable supply; to limit

are decided based on the comprehensive cost principle and changes

electricity rates as much as possible; and to increase options forin resource costs under the gas rate adjustment system are reflectedcustomers and opportunities for energy companies. On April 2, 2013,

in rates. Through these systems, gas businesses enjoy healthy growth,

the Cabinet approved the “Policy on Electricity System Reform,”

while at the same time there has been an increase in gas rate trans-

which consists of measures to enhance nationwide system operation;

parency, and the results of efforts to make business more efficient

to fully liberalize the retail market and power generation; and to ensure

have become clearer. The government intends to perform a complete

the neutrality of the transmission and distribution sector throughreview of gas business systems based on the progress of electricity

legal unbundling.

power system reforms.

Tokyo Gas

Annual Report 2013

Business Area’s Potential
300km

Major Potential Demand Expected in the Tokyo Area
The Kanto region, which extends for a 200-kilometer radius‌
Gas
Sales Volumes of the Four Leading Companies(consolidated)around Tokyo, accounts for about 40% of Japan’s GDP and isJapan’s largest area of concentrated energy demand. Althoughindustrial demand is particularly concentrated in northern
Kanto, pipelines are still limited and we will extend necessary
pipelines to cultivate demand. We will also boost gas supply
capacity through the construction of the Hitachi LNG Terminal.

Million m3
18,000+1.3%

12,000– 2.0%

6,000

+0.2%
+0.4%

0

‌Energy demand concentration in the Kanto region(200-kilometer radius)Tokyo Gas
Fiscal 2011

Osaka Gas

Toho Gas

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

Hitachi LNG
Terminal

 otential for Industrial and Commercial Demand inP
the Kanto Region (200-kilometer radius around Tokyo)
100~200-km area

100-km area

2.0 billion m

7.0 billion m

3

3

Cogeneration system /Power generation
0.3 billion m3
Tokyo Gas high-pressure trunk lines(under construction)
Sodegaura
LNG Terminal
Ohgishima LNG Terminal
NegishiLNG Terminal

Saibu Gas

Fiscal 2012

Tokyo Gas high-pressure trunk lines(under consideration)
Tokyo Gas high-pressure trunk lines(medium-to-long-term concept)
Tokyo Gas pipelines (in service)

Fuel conversion
1.7 billion m3

Total

9.0

Fuel conversion
5.1 billion m3

billion m3

Cogeneration system /Power generation
1.9 billion m3

Other companies’ pipelines(in service)
Tokyo Gas supply area
Tokyo Gas Group supply area
Other gas companies’ supply areas• Factories

Developing Business in One of the World’s Largest Economic Areas
As of September 2007, Tokyo Gas had more than 10 million

Europe and the United States. Furthermore, although Japan’s

customers, and the figure is currently around 10.98 million (astotal population began to decline in 2010, our customer baseof March 31, 2013). This business base is on a par with thoseis expected to continue increasing due to the ongoing influx ofof leading public service companies in the gas business inpeople into the Tokyo metropolitan area.

‌Customers
for the Four Leading Companies(consolidated)
Millions
12‌CustomerComparison among the World’s Leading
Gas Companies
Millions

+1.1%

20

15.66

15

+0.6%

8

10.98

10
4

+1.0%

– 0.4%

8.08

5
0

0

Tokyo Gas
Fiscal 2011

Osaka Gas

Toho Gas

Fiscal 2012

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

Saibu Gas

Tokyo Gas

Centrica(Tokyo area)(U.K.)

Gas customers

Sempra(U.S.)

Electricity customers

Source: Compiled by Tokyo Gas from individual companies’ public documents(Figures for the two companies other than Tokyo Gas are as of December 31, 2012.)

Tokyo Gas

Annual Report 201317

Enhancing the LNG Value Chain

Strategy

Procuring Resources in a Stable and Affordable
Manner and Expanding Overseas Operations
Demand for liquefied natural gas (LNG) is expected to grow into the future, and
it is likely that the price of this resource in the region known as the Far East willcontinue to remain at a higher level than prices seen in the United States and

Scheduled investment inoverseas businesses underthe “Challenge 2020 Vision”

320.0

Europe. Amid these circumstances, we will work to diversify and expand our
network of suppliers along with the range of our upstream businesses so that¥

we may procure resources in a stable and affordable manner. At the same time,(16% of total investment)

billion

we are developing natural gas-fired thermal power generation ventures overseas
to construct an overseas LNG value chain.

Background for Strategies: Traditional Resource Procurement Frameworks
Traditional LNG procurement frameworks

Gas Prices by Region

generally entailed a price formula linking the

US$ / MMBtu

price of LNG to the price of crude oil and20

included conditions forbidding changing theshipment destination of procured LNG as well as

15

reselling. As such, the absence of pipelines andother infrastructure in Asia forced the region to10

accept LNG prices higher than those in the
United States and Europe, creating an “Asia5premium” on LNG. Looking ahead, natural gas
demand is growing on a global scale and it islikely that the Asia Premium will continue. In suchan environment, traditional procurement frameworks that forbid shipment destination changes

0

2006/4

2009/4

Japan (All Japan LNG)

Europe (NBP)

2013/4

U.S.A. (Henry Hub)

Source: Compiled by Tokyo Gas from various materials

and reselling lack sufficient flexibility.

ActionAccelerating Diversification in Three Areas to Reduce Resource
Procurement Costs

Under the “Challenge 2020 Vision,” ¥320.0 billion, or 16% of total

fiscal 2020. Through this investment, we aim to grow overseas

capital expenditures, investments, and financing, will be directedbusinesses to the extent that 25% of total net income is gener-

toward overseas businesses over the period from fiscal 2012 toated by these businesses. As one facet of these efforts, we will

Three Areas of Diversification for Resource Procurement
1. Resource suppliers

Present

Primarily Asia andAustralia

2. Procurement contract conditions

3. Global LNG network

Primarily crude oil linked
Mostly long term
Shipment destination restrictions

Focused on transactions between
exporting nations and Japan

Crude oil linked
Henry Hub-linked
NBP-linked
Combination of differing periods
No shipment destination restrictions

Network linking gas fields andpower plants and other users
around the world

•
•
•

•

FutureAsia, Australia, and therest of the world

•
•
•
•

18

Tokyo Gas

Annual Report 2013

diversify and expand our network of suppliers along with therange of our upstream businesses to procure resources in a morestable and affordable manner. These initiatives will be centered on
three areas of diversification.
The first area is “the diversification of resource suppliers.”
While Asia and Australia have previously been our major
suppliers, we will branch out to procure resources from a wider
range of countries around the world.
The second area is “the diversification of procurement
contract conditions.” Traditional procurement frameworks haveprimarily employed crude oil linked price formulas and forbiddenchanging shipment destinations. However, in the future, we willconclude contracts with a wider range of conditions, such as
price formulas linked to the Henry Hub index and other indexes
and freedom in changing shipment destinations. We expect thatFirst shipment received from Pluto LNG Project

this will enable us to procure resources in a more stable andaffordable manner and with increased flexibility.
The third area is “the diversification of our global LNG

in Maryland State on the east coast of the United States. Also, in
March 2013, we entered into a sale and purchase contract tonetwork.” By building upon our current contracts for trade mainly

acquire 25% working interests in the shale gas development joint

between resource exporting nations and Japan, we will develop a

venture in the Barnett basin in Texas State in the United States

global network enabling resources to be traded between regions

from Quicksilver Resources Inc. Focus 1around the world where Tokyo Gas holds gas fields, power
plants, or other such establishments.
In April 2012, the Pluto LNG Project, a project in Australia inFurther, in February 2013, an agreement was reached with
Astomos Energy Corporation entitling the Company to receive a
total amount of approximately 400,000 tons of U.S. liquefied

which the Company holds interests, commenced LNG produc-

petroleum gas (LPG) for a six-year period beginning 2013. This istion. In addition to receiving LNG from this project, Tokyo Gas

the first agreement calling for Tokyo Gas to purchase LPG withrecorded revenues from upstream equity interests through LNG

the price indexed to U.S. propane linked prices, and we believe

sales in fiscal 2012. Other LNG projects we participate in are also

this will contribute to more stable procurement and lower

progressing smoothly, and we are actively fortifying our overseas

resource procurement costs. In the future, we will introduce

business foundations.

Mozambique, which boasts some of the world’s largest gas

For example, Tokyo Gas has entered into a Heads of Agreement for Sale and Purchase with Sumitomo Corporation infields, and other African nations into the list of candidate locations
for business development as we seek out new resource supplies.

relation to LNG produced by the Cove Point LNG Project,

ActionEstablishing a Global LNG Value Chain

Tokyo Gas will expand its overseas natural gas-fired thermal

in Belgium’s T-Power NV, which was the first time for Tokyo Gas

power generation and gas supply business on a global scale toto participate in such a project in Europe. As a result, our total

secure stable revenues and further the establishment of a global

overseas generating capacity (including other companies’ inter-

LNG value chain.

ests) now amounts to 3,259 MW.

In addition, we will supply LNG procured through agreements

Tokyo Gas is also accelerating the overseas development ofwith no restrictions on shipment destinations to fill orders

its engineering and energy services businesses. Efforts in thisreceived from power plants and other users. When necessary,area include an alliance with Malaysian national energy company

alternative gas will be procured through pipelines, enabling us toPetronas and the signing of a memorandum of understanding

resell said LNG. In these ways, we will introduce a new elementwith Petrovietnam Gas, of Vietnam, involving the construction ofof flexibility into our operations.

an LNG value chain. Also, consolidated subsidiary Energy

Overseas power generation ventures that Tokyo Gas has

Advance Co., Ltd., has acquired a stake in Ecogen Brasil

participated in up until this point include the Bajio power plantSoluções Energéticas S.A., of Brazil, through a joint venture

and the MT Falcon power plant, both situated in Mexico. Adding

company with Mitsui & Co., Ltd.

to this list, in June 2012 the Company acquired a 26.66% stake

Tokyo Gas

Annual Report 201319

Enhancing the LNG Value Chain

Past Initiatives

November 2011
Overseas business
January 2012Concluded sale and purchase contract (December2011) regarding Ichthys LNG Project and approved
business participation plans

November 2011

Announced “Challenge 2020 Vision”
December 2011

Overseas business
March 2012

Overview of the Ichthys LNG Project

Signed Memorandum of Understanding withPetrovietnam Gas

Gas-condensate field:	‌Offshore of Western Australia,
Block WA-37-R
Liquefying facilities:	‌Darwin, Northern Territory, Australia

Overseas procurement

March 2012

Liquefying capacity:	‌8.4 million ton/year (LNG) with two
4.2 million ton liquefaction trains

March 2012Concluded Heads of Agreement for Sale andPurchase of LNG regarding Brunei LNG Project

Planned commencement:	‌October–December 2016
Participating interest:	‌66.07% for INPEX Group companies, 30.0% for TOTAL Group
companies, 1.575% for Tokyo
Gas and other companies(as of March 2013)

June 2012

Overseas business
June 2012

Completed acquisition of stake in Belgium natural
gas-fired thermal power plant

Submarine
pipeline

Overseas procurement

Ichthys Field

June 2012
Liquefaction
facilities(Darwin)

Ichthys gascondensate field

September 2012

Australia

Received shipment of LNG from Pluto LNG ProjectOverseas procurement
August 2012Concluded Memorandum of Agreement with
Malaysia LNG Sdn. Bhd. to renew LNG sale andpurchase contract

Overseas business
December 2012

Participated in energy services business in Brazil
December 2012
Overseas procurement
April 2013

Agreed to procure LNG from
Cove Point LNG Project in Maryland, the U.S.
Overseas procurement
February 2013

March 2013 perating Income inO
the Overseas Business

Purchased LPG with price indexed to U.S. propane
linked prices¥ billion
6.0

5.1

Overseas business

4.0

March 2013

0Participated in shale gas development joint venturein Barnett basin in Texas, the U.S.

2.4

2.0

July 2013

–1.3

–2.0

2011

20

Tokyo Gas

Annual Report 2013

2012

2013
(plan)FY

Greatly Advancing Diversification through Participation in Upstream
and Downstream Projects in North America

Focus

1

Participating in the Cove Point LNG Project and Upstream Shale Gas Development in Barnett Basin
Tokyo Gas has continued to develop the Cove Point LNG Project,in Maryland State in the United States, in cooperation with
Sumitomo Corporation (“Sumitomo”). In April 2013, the Company
concluded a Heads of Agreement for Sale and Purchase with
Sumitomo that will entitle wholly owned subsidiary TG PLUS Co.,
Ltd., to purchase 1.4 million tons of LNG per year from this project.
Through this project, we will export natural gas procured in
the U.S. market in the form of LNG. Further, this project represents a large step forward in our efforts to advance our threeareas of diversification as it involves procurement from the UnitedStates, where shale gas production is rapidly accelerating; is theCompany’s first long-term contract with prices linked to the Henry
Hub index; and the contract conditions allow for free selection of
shipment destinations*. After receiving approval from the U.S.
Department of Energy to export LNG from this project tocountries that have not entered into free-trade agreements with
the United States, the Company plans to begin importing LNG
from this project into Japan in 2017. Separately, we acquired our
first upstream interests in the United States through our participation in the shale gas development project in the Barnett basin.
U.S. company Quicksilver Resources is the operator of thisproject, which is currently producing approximately 275 million
cubic feet per day (natural gas equivalent) of shale gas and natural
gas liquids to be marketed in the United States. A stake of 25%
working interests will be acquired in this project through TG
Barnett Resources LP, a wholly owned subsidiary of Tokyo Gas
America Ltd., and it is estimated that this will entitle the Company
to receive between 350,000 tons and 500,000 tons of gas
resources a year in LNG equivalent.
* This assumes export approval is received from the U.S. Department of Energy.

Initiatives in North America
Cove Point LNG Project

Barnett Basin
Basin:

U.S. Barnett basin in Texas

Land Area:

Approx. 130,000 acres

Term:	‌Approx. 20 years from the
project start date

Proved Reserve:

1.2 Tcfe of natural gas

LNG Quantity:	‌1.4 million tons per annum
Contract Price:	‌Henry Hub index linked
formulaCurrent Net Production: 275 MMcfe per day
Participating Interest:	‌75% for Quicksilver
Resources Inc.
and 25% for TG Barnett
Resources LP

Delivery Terms: 	‌FOB

Tokyo Gas America Ltd. (Houston)‌ ‌Scheme of Cooperative Ventures with Sumitomo
Dominion Resources(Tolling operator)

U.S. Gas Market

Natural gas tolling agreement
LNG sale and purchase agreement

Pacific Summit Energy(Tolling customer)[Wholly owned subsidiary of Sumitomo]

A

Q‌Would it be best for Tokyo Gas to focus on the• ‌Heads of Agreement for Saleand Purchase of LNG

TG PLUS

Sumitomo(LNG seller)

1.4 million
tons per year

[Wholly owned
subsidiary of Tokyo Gas]

Tokyo Gas

Japanese buyers (LNG purchasing)Natural gas sale and purchase agreement

FA• ‌Natural gas
Tolling agreementQgas business? Specifically, why is the Company

Q‌As Tokyo Gas expands the scope of operations
through diversification in three areas, how will it

investing in the Barnett basin project and other

respond to risks, such as country risk, in countries

upstream businesses?

where it lacks operational knowledge?

‌Investment in upstream businesses not only enables us to securea certain level of income; it also brings other benefits. For example,
should resource procurement costs associated with the Cove
Point LNG Project increase due to a rise in the Henry Hub index,
the revenues generated by upstream interests in the Barnett basin
will also increase. In this manner, investment in upstream businesses helps stabilize the earnings of the entire Tokyo Gas Group.

A‌Diversification efforts will be conducted only after thoroughinvestigations so as to minimize our exposure to risks to thegreatest degree possible. At the same time, we feel that thedevelopment of a more diverse business portfolio will enable
us to mitigate risks through dispersion.

Tokyo Gas

Annual Report 201321

Enhancing the LNG Value Chain

Strategy

Building a Production and Supply Infrastructure
to Cultivate Demand
By bolstering our production and supply infrastructure, we will lay the

Scheduled investment ininfrastructure development underthe “Challenge 2020 Vision”

foundation for enhancing the LNG value chain by cultivating demand.

730.0

¥

billion(35% of total investment)

Background for Strategies: Growing Natural Gas Demand in the Tokyo Metropolitan Area
In response to the growing demand for natural
gas and the expansion of the area to which it issupplied, Tokyo Gas has increased its manufac-

LNG Sales Volume
Billions of m3 (bcm)“Challenge 2020 Vision”
target25.0

turing capacity by reinforcing its network of LNG
terminals and extended its transportation pipeline
network. Our policy for capital expenditures in

22.0 bcm
20.0

infrastructure development is to conduct such
expenditures after thoroughly investigating latent

15.0

demand and confirming the presence of guaranteed demand to an extent that justifies theinvestment amounts.

10.0

Natural gas has been increasingly garnering
attention in recent years because it is vastly moreenvironmentally friendly than other fossil fuels.

5.0

Another factor behind this increased attention isthe ever growing volume of recoverable reserves.

0

Following the Great East Japan Earthquake,

2005

2006

2007

2008

2009

2010

2011

2012

2013

demand for natural gas began rising rapidly in2014(plan)

2021(plan)
Years ended March 31

Japan, with demand growth particularly strong for
power generation. Tokyo Gas estimates that latent commercial and industrial demand for natural gas equating to 9.0 billion m3
exists within a 200-kilometer radius around Tokyo. The primary agent of this demand is the desire to convert to natural gas fromother fuel sources or to use this fuel source in cogeneration or other power generation systems.

ActionAccelerating the Development of Production and Supply Infrastructure

Under the “Challenge Vision 2020,” ¥730.0 billion, or 35% of total
capital expenditures, investments, and financing, will be directed
toward infrastructure development over the period from fiscal

Scheduled commencementof usageName

2012 to fiscal 2020. A particular strategic focus will be invest-

October 2013

Shin-Negishi Linements to address latent demand in the northern Kanto region by

October 2013

Yokohama Line II

February 2015

Kisarazu Rinkai Line II

October 2015

Saito Line

March 2016

Ibaraki–Tochigi Line

March 2016

Tochigi Line extension

March 2018

Koga–Moka Linebolstering supply capacity and creating pipeline loops that will
boost supply stability.
March 2012 marked the completion of the Chiba–KashimaLine. This trunk pipeline enabled us to commence supply to the
Kashima Waterfront Industrial Zone. Situated in Ibaraki Prefecture, this is one of the Kanto region industrial zones.

22

Trunk Pipeline Installation Plans

Tokyo Gas

Annual Report 2013

In addition, the Kashima Waterfront Line, which wascompleted in June 2012, has commenced supply to a new gas

Hitachi–Onahama Line(provisional name)turbine generation facility at the Kashima Thermal Power Stationof Tokyo Electric Power Company, Incorporated.
Further, July 2012 saw the start-up of construction of the

Ibaraki–Tochigi Line
Gunma Connecting
Trunk Line, Phase II

Hitachi LNG
Terminal
Koga–Moka Line
New pipeline
for Mito area

Hitachi–Kashima Line(provisional name)

Hitachi LNG Terminal in the Hitachi District of Ibaraki port, in
Ibaraki Prefecture—our 4th LNG receiving terminal. We aim tobegin operations at the Hitachi LNG Terminal in March 2016, in
conjunction with the commencement of usage of the Ibaraki–
Tochigi Line. Also, plans have been approved to accelerate the

Saito Linedevelopment of infrastructure in Ibaraki Prefecture, primarily in theareas surrounding the terminal. Focus 2

Soka–Yashio Line

Yokohama Line II

Shin–Negishi Line

Tokyo Gas high-pressure trunk lines (under construction)
Tokyo Gas high-pressure trunk lines (under consideration)

Sodegaura
LNG Terminal

Tokyo Gas high-pressure trunk lines (medium-to-long-term concept)
Tokyo Gas pipelines (in service)

Kisarazu RinkaiLine II

Negishi LNG Terminal

Ohgishima LNG Terminal‌Pipelines in which Tokyo Gas has invested
Other companies’ pipelines (in service)
Tokyo Gas supply area
Tokyo Gas Group supply area
Other gas companies’ supply areas

Focus

2

Accelerating Development of Natural Gas Infrastructure in Ibaraki

Cultivating Demand Based Outof the Hitachi LNG Terminal

Pipeline Network in Ibaraki Prefecture

Estimating that its gas sales volume will outstrip current supply
capacity by the late 2010s, Tokyo Gas is moving forward with
the Hitachi Project. The Hitachi LNG Terminal, which webegan constructing in July 2012, will play a central role inTochigi

Ibarakiadvancing this project. This terminal will be connected to the
Ibaraki–Tochigi Line that we started building on the Tochigi
Prefecture side in January 2012, and both are scheduled to

Hitachi LNG
Terminal

Koga–Moka Linebe operational during fiscal 2015.

New pipeline
for Mito Area

In the future, we will connect the Hitachi LNG Terminal to

Hitachi–Kashima
Line(provisional name)the pipelines displayed on the map to the right. We believe
this will greatly facilitate our efforts to cultivate demand in thenorthern Kanto region, centered on Ibaraki Prefecture. At thesame time, this will allow pipeline loops to be established,significantly enhancing energy security throughout theWestern Ibaraki
industrial area

Mito–Tsuchiuraindustrial area

Kashima
Waterfront
industrial
area

Kanto region.

Chiba	Natural gas infrastructure (under consideration)
	‌Tokyo Gas pipelines (under construction)
	‌Other companies’ pipelines (in service)	‌Major industrial areas in Ibaraki

Tokyo Gas

Annual Report 201323

Enhancing the LNG Value Chain

F

A

Q

Q

‌The “Challenge 2020 Vision” calls for the Tokyo Gas

AGroup to conduct aggressive investments. What is the‌Our basic approach toward investment is to make decisions

based on economic rationality, and we will only invest in

likelihood that this will result in excessive investment

projects from which we can expect appropriate returns.

in projects with insufficient profitability?

The Investment Evaluation Committee is responsible for
evaluating projects and making judgments regarding
economic rationality.

Investment Evaluation Committee
Overview

results. Prior to investment, the committee considers possible

To evaluate the economic rationality of investments, themeasures that could be implemented should the projects comeCompany has established “the Investment Evaluation

into conflict with these standards while also evaluating invest-

Committee.” This committee conducts objective, multifaceted

ment risk factors.

evaluations of estimates formulated by planning departments.
Before investment proposals are presented to the Corporate

Post-Investment Monitoring

Executive Committee for deliberation and approval, the Invest-

In addition to evaluating projects before investment, the Invest-

ment Evaluation Committee evaluates their economic rationality

ment Evaluation Committee continues to evaluate investmentsfrom a quantitative perspective. It then reports these findings toperiodically after they are concluded to ensure that they are

the Corporate Executive Committee.

properly managed. Should a project come into conflict withwithdrawal standards, the likelihood of achieving the initial
goals of the investment is reevaluated. When deemed neces-

Scope of Evaluations

The Investment Evaluation Committee evaluates investmentssary the committee will propose withdrawal to the Corporate

targeting increased profitability or business development in a

Executive Committee.

wide range of areas.
Committee Membership

The Investment Evaluation Committee is chaired by the execu-

Evaluation Methods

The conditions required to generate future cash flows aretive officer in charge of finances and its members include theevaluated, and net present value (NPV) and the internal rate ofgeneral managers of the Corporate Planning Department andreturn (IRR) are calculated based on projected cash flows. The

the Finance Department. Based on the nature of the projects

committee also formulates withdrawal standards that consider

being discussed, Tokyo Gas Group members that are knowl-

whether or not investments are producing the anticipatededgeable on the subject may be asked to participate.

Board of Directors
MonitorReport submission
ReportPresident(Corporate Executive Committee)
Settlement and monitor

Reportsubmission

Approval

Business Departments /Subsidiaries and AffiliatesQ

24‌You have mentioned plans to address industrial

Investment Evaluation Committee

Information exchangeAT‌ he gas sales volume target for fiscal 2020 of 22.0 billion m3

demand in the Tokyo metropolitan area as a means of

set out in the “Challenge 2020 Vision” was formulated in

expanding gas sales volumes. Is there no risk thatconsideration of the possibility that a decline in demand

factories move overseas and the demand will decline?

could result from the hollowing out of the industry.

Tokyo Gas

Annual Report 2013

Strategy

Providing Diverse Energy Solutions
By providing various energy solutions centered on natural gas, we aim todiversify the range of circumstances in which natural gas is used and, thereby,enhance the LNG value chain.

Scheduled investment incultivating energy demand underthe “Challenge 2020 Vision”

¥

600.0

billion(29% of total investment)

Background for Strategies: Quest for Stable Provision of Energy to the Tokyo Metropolitan Area
The supply and demand situation for electricity underwent

energy security in the event of disasters or power outages, andstructural changes following the Great East Japan Earthquake.

contribute to electricity peak savings. In addition, smart energy

As generation by nuclear power plants has declined, othernetworks are seen as a new, forward-thinking way of recycling

power sources are increasingly being used to fill the supply gap.

energy, and verification testing of these networks is progressing

In particular, natural gas-fired thermal power plants are continu-

at an accelerated pace. Diversifying the uses of natural gas andally being operated at full capacity in consideration of the fact

the sales venues the Company employs in light of thesethat they are relatively low-cost and friendly toward the environ-changes will help increase total transaction volumes of natural

ment. At the same time, dispersed energy systems are rapidly

gas over the long term and, thereby, contribute to reductions ingarnering attention. This is because such systems feature a

procurement costs. In other words, these efforts are importantvariety of benefits as they emit less CO2 than conventionalin advancing the enhancement of the LNG value chain from thelarge-scale centralized power generation facilities, enhancedownstream side.

300k

m

ActionCultivating Demand by Promoting Advanced Use of Natural Gas
and Fuel Conversion

General industry demand will play an important part in achieving

Natural gas is gaining attention for its merits in terms ofour goal of expanding gas sales volume to 22.0 billion m3 in fiscalenergy savings, CO2 reductions, and low operating costs. In light2020. Therefore, we aim to cultivate an increase in generalof this trend, Tokyo Gas is cultivating new demand by highlighting

industry demand from fiscal 2011’s 3.4 billion m to 7.0 billion m

the benefits of combining fuel conversion from heavy fuel oil andin fiscal 2020, effectively doubling this demand.

kerosene to natural gas and by introducing highly efficient appli-3

3

ances and advanced uses of natural gas in cogeneration systems.
‌Energy demand concentration in the Kanto region(200-kilometer radius)

In fiscal 2012, we successfully cultivated demand equivalent toapproximately 0.4 billion m3 in the Kashima Waterfront Industrial
Zone following the completion of the Chiba–Kashima Line. In the

North Kanto
Industrial Zone

Hitachi LNG Terminal

future, we expect to cultivate demand of as much as 2.0 billion m3
in this area.

Kashima Waterfront
Industrial Zone
Tokyo–Chiba
industrial Zone

 as Sales Volumes in the Kashima WaterfrontG
Industrial Zone
Million m3
800
600

Tokyo–Yokohama
Industrial Zone

Tokyo Gas high-pressure trunk lines(under construction)
Sodegaura
LNG Terminal

Negishi LNG Terminal

Ohgishima LNG Terminal

Tokyo Gas high-pressure trunk lines(under consideration)
Tokyo Gas high-pressure trunk lines(medium-to-long-term concept)
Tokyo Gas pipelines (in service)
Other companies’ pipelines(in service)

400
200
0

2012

2013
( plan)FY

Industrial zone

• Factories

Tokyo Gas

Annual Report 201325

Enhancing the LNG Value Chain

Focus

3

Promoting Fuel Conversion in the Kashima
Waterfront Industrial Zone

As one example of the Company’s efforts to cultivate city gas demand through fuelconversion to natural gas in the Kashima Waterfront Industrial Zone, Tokyo Gas would
like to introduce an initiative implemented by the Kashima Plant of Kao Corporation.

Kashima Plant, Kao Corporation
Conversion to Natural Gas as Part of a BusinessContinuity Plan
On June 10, 2013, the fires were lit in boiler No. 2 at Kao’s Kashima
Plant. However, this process was different to that of the past 30 years.
This time, the fuel in the boiler was natural gas. Under the watchfuleyes of representatives from the plant and Tokyo Gas, boiler No. 2
successfully completed the switch from heavy fuel oil to natural gas,as had boiler No. 1 before it.
The Kashima Plant is a critical manufacturing site in Kao’s
domestic production system forintermediate materials for household products as well as for
raw-use products. Kao has beenproactively undertaking fuelconversion ventures both in Japanand overseas and, therefore, waswell-versed in the benefits ofnatural gas. As such, the company
Boiler No. 2, which was successfully
readily began considering thelit using natural gas

Anticipated Supply of Stable and Affordable Power
Kao has accumulated a wide range of technologies related to fuelconversion, which enabled the conversion to proceed smoothly, withboiler No. 1 completing fuel-conversion construction and running on
natural gas from September 2012.
It has been 10 months since then. The managers at the Kashima
Plant feel that the greatest benefit of the switch is the improvement in
operational efficiency. Deliveries of heavy fuel oil are subject to delays,
meaning that inventories must be stringently managed. Further, the oilmust be transferred from the ship to storage tanks upon delivery, andthe temperature of these tanks must be carefully controlled to prevent
fuel from hardening. The introduction of city gas eliminates the needfor all of these processes. Moreover, when boilers operate on city gas,pressure fluctuations are minimal and nitrogen oxide (NOx) emissions
remain incredibly low. Accordingly, managing operation is infinitely
easier. Also, post-combustion flue gas processing requirements havebeen greatly reduced at the plant, and it is no longer necessary toprocess absorber after desulfurization. The plant’s management has
removed an electrostatic precipitator, which was no longer needed,
and is utilizing the site to build a cogeneration system.
Troublesome day-to day maintenance processes have also been
greatly reduced. One reason behind this is the fact that, as the plant is
no longer using C-heavy fuel oil, there is no need to clean the strainersthat would be used to remove impurities from this oil. “We used to be
wrought with anxiety because we cleaned the strainers during

Kao’s Kashima Plant

possibility of fuel conversion at the Kashima Plant from the time it was
decided that Tokyo Gas would supply natural gas to the Kashima
Waterfront Industrial Zone.
The Great East Japan Earthquake, which devastated Japan in
March 2011, was a major factor behind Kao’s decision. “It is the
Kashima Plant’s duty to supply Kao’s domestic plant with raw materials for household products,” Kashima Plant Manager Hiroshi Nagumo
exclaimed. “If operations were to be halted, it would greatly impact ourability to supply detergent and shampoo throughout Japan.”
According to Plant Manager Nagumo, a stable supply of energy is the
key to continuing operations at the Kashima Plant. For this reason, theinstability of the electricity supply and the difficulty of stably procuring
heavy fuel oil are clear reasons for concern. To address these issues,
Kao decided to introduce a cogeneration system and conduct fuelconversion at this plant. This decision was then put into effect inaccordance with Kao’s business continuity plan. “The earthquake
damaged various types of infrastructure, but gas pipes were practicallyunaffected. I was quite impressed by this fact,” stated Kiyoshi Hirano,
manager in charge of safety and the environment, reflecting on theprocess leading up to the decision.
operations, so we had to be careful to avoid extinguishing the fire. But
the new system has freed us from this pressure,” claims Takao Iwade,plant leader in charge of operations. Further, the frequency at whichpressure atomizing burners and the boiler itself must be cleaned ismuch lower. Also, as natural gas contains only minimal traces of sulfur
oxide, a major culprit in the corrosion of equipment, the natural gas
system is expected to help lengthen the lifespan of equipment. And, ofcourse, the introduction of the new system has led to a reduction of
approximately 30% in CO2 emissions in comparison to the heavy fueloil system, just as had been expected.
After the scheduled introduction of a cogeneration system at the
Kashima Plant is completed in December 2013, the plant will havefinished all steps of its fuel conversion
venture. “The Kashima Plant’s main fuelsource is now natural gas, a resource forwhich Japan is suffering due to unfavorable procurement conditions. I expect thatTokyo Gas will change this situation andsecure a stable and affordable supply ofthis resource.” This was Plant Manager(From left) Hiroyuki Sada (Tokyo
Nagumo’s last request to Tokyo Gas as itGas), Plant Leader Takao
considers such undertakings as the
Iwade (Kao), Plant Manager
procurement of unconventional natural
Hiroshi Nagumo (Kao),Manager Kiyoshi Hirano (Kao),gas and the construction of the Hitachi–
and Shinzo Ienaka (Tokyo Gas)
Kashima Line.

Kao Group
The Kao Group provides cosmetics, health drinks, detergents, and other consumer products as well as a wide range of industrial-use products to users around theworld. Acting in accordance with the Kao Environmental Statement announced in 2009, the Kao Group is developing products with low environmental impacts,
reducing CO2 emissions from production processes, and implementing energy-saving initiatives in a forward-thinking manner. Almost all of its manufacturing bases inJapan and overseas that have access to natural gas infrastructure have converted to systems utilizing this resource.

26

Tokyo Gas

Annual Report 2013

Expanding Power Generation(Natural Gas-Fired Thermal Power Generation)

ActionAs one effort to expand generation capacity, we decided on

In 2000, a revision to the Electricity Business Act of Japanderegulated sales of electricity to large-volume users. In light ofthe construction of a third unit at the Ohgishima Power Station inthis change, Tokyo Gas entered the electric power business in

October 2012. Situated in Yokohama, Kanagawa Prefecture, thisJune 2001 when it established Tokyo Gas Baypower Co., Ltd.,

cutting-edge facility employs gas turbine combined cycle genera-

within the grounds of its Sodegaura LNG Terminal. Since then,tion, which is highly energy efficient, with maximum efficiency

the Company has progressively advanced the construction ofreaching 58%. The third unit will have a generation capacity ofthermal power plants employing gas turbine combined cycle

407 MW, and the total generation capacity of the Ohgishima

generation. Today, we have a total generating capacity ofPower Station will rise to 1,221 MW once this unit is operational.
Going forward, we will continue to develop our electric power

approximately 2,000 MW (of which, the Tokyo Gas Group’s
ownership share is 1,300 MW). Under the “Challenge 2020

business in a low-risk manner by carefully monitoring trends in

Vision,” we aim to expand this capacity to between 3,000 MW

Japan’s supply and demand situation for electricity as well as

and 5,000 MW.

revisions to electricity regulations to accurately evaluate theeconomic rationality of future ventures.

Natural Gas-Fired Thermal Power Plants in the Tokyo Metropolitan Area (Fiscal year ending March 31, 2016)

840 MW

Kawasaki Natural Gas Power
Generation Co., Ltd. 
Ohgishima Power Co., Ltd. 
Tokyo Gas Baypower Co., Ltd. 
Tokyo Gas Yokosuka Power Co., Ltd. 

Combined Cycle Generation

1,221 MW
100 MW
240 MW‌Scale of the Power Generation Business(Including other companies’ interests)

Generator

Steam turbine

1.5 – 2.5 times
the current level

MW
6,000

Start-up of operationof 3rd unit of
Ohgishima Power Station

4,000

Steam Turbine Generation

Steam

2,000

2,000 MW3,000~5,000 MW

2,400 MWExhaust heat collection boiler
Gas Turbine Generation

Generator

Exhaust heat

2012

2015
(Plan)

2020(Plan)FY

Gas turbine

F

A

Q

‌Amid electricity system reforms underway atQpresent, how will Tokyo Gas develop its electric
power business?

A0and helping reduce electricity rates. In this quest, we will leverage
all of our various strengths in the electric power business. These
strengths include our LNG procurement capabilities as well as
our terminals, pipelines, and other LNG infrastructure. Another‌Reforms to electricity systems are currently in progress.

strength is our breadth of experience and expertise regarding theRegardless of how systems may change, we will remain

construction and operation of in-house generation facilities, which

committed to contributing to society and invigorating the

we have refined through our operations at Ohgishima Power Co.,

electricity market by providing a stable supply of energyLtd., and Kawasaki Natural Gas Power Generation Co., Ltd., etc.
Tokyo Gas

Annual Report 201327

Enhancing the LNG Value Chain

Supplying LNG throughout Japan

ActionNot limiting its operations to the Kanto region, Tokyo Gas

tankers. Through this venture, the Ishikari LNG Terminal will be

provides the resources that it procures throughout Japan. We

supplied with between 300,000 tons and 400,000 tons of LNG

thereby meet the needs of gas companies throughout Japan,

per year during the 11-year period beginning fiscal 2012. Further,

supplying them with LNG via tank lorries, large ocean-going

we acquired a 20% stake in Hokkaido LNG Co., Ltd., a consoli-tankers, and smaller domestic vessels. Expanding our sales

dated subsidiary of Hokkaido Gas that is the direct owner of thechannels in this manner is yet another one of our efforts to

Ishikari LNG Terminal, to deepen our relationship as we work toenhance the LNG value chain.

advance the spread of LNG. We also signed an LNG sales
agreement with Saibu Gas Co., Ltd., for the supply of about

As one facet of these efforts, we commenced supply to the
Ishikari LNG Terminal of Hokkaido Gas Co., Ltd., in October

300,000 tons of LNG per year over the 16-year period beginning2012. This project is our first endeavor to provide a domestic gas

fiscal 2014.

company with gas procured by the Company via ocean-going
Supplying LNG via Domestic and Overseas Vessels

Supplying LNG via Domestic and Overseas Vessels

JX Nippon Oil &Energy Corporation
Ishikari LNG Terminal
Hokkaido Gas Co., Ltd.

Hakodate Minato
LNG Terminal

Saibu Gas Co., Ltd.

Hachinohe LNG
Terminal

Hachinohe LNG Terminal

Currently supplying

Hakodate Minato
LNG Terminal

Currently supplying

Ishikari LNG Terminal

Currently supplying

Hibiki LNG Terminal

From 2014

Hibiki LNG Terminal

LNG Tanker“Energy Frontier”

ActionPromoting the Proliferation and Expansion of Dispersed Energy Systems

Against the backdrop of increased demand for energy security

Benefits of Cogeneration Systems

and business continuity plans, we have been promoting sales ofcommercial and industrial cogeneration systems, and our cumu-

1. Reduced Energy Usage and Costs

lative stock of these systems has risen to 1,650 MW. We plan to

As cogeneration systems make effective use of waste heat or direct this heat for
use in air conditioning or water heating equipment, they contribute to reductions
in energy costs.

raise this cumulative stock by 220 MW in fiscal 2013 and then to
4,000 MW in fiscal 2020.

2. Environmental Preservation Benefits
City gas is a clean source of energy and its systems make effective use of waste
heat, thereby helping cut CO2 emissions by approximately one-third in comparison to conventional systems.

‌Cogeneration
System (Commercial, Industrial)
Stock Plan
MW

4,000 MW4,000

3. Improved Energy Security
Cogeneration systems enable the usage of several power sources, making iteasier to secure a supply of electricity during times of disaster.

3,000
2,000

1,530 MW1,650 MW

2011

2012

1,870 MW

1,000
0

28

Tokyo Gas

Annual Report 2013

2013
(Plan)

2020(Plan)FY

Focus

Accelerating the Proliferation of New “ENE-FARM” Systems

4

Simultaneously Realizing Reduced Costs and Improved Performance
Tokyo Gas is promoting the proliferation of dispersed energy
systems for which natural gas is a core element. As part of these
efforts, we have been expanding sales of “ENE-FARM” residential
fuel cell systems, and in fiscal 2012 “ENE-FARM” sales exceeded
targets, at approximately 7,600 units. In fiscal 2013, we will

costs and the world’s highest level of total efficiency, targetinga year-on-year increase of approximately 58% in “ENE-FARM”
sales, to 12,000 units.
Our plans call for a stock of 300,000 “ENE-FARM” units to beaccumulated by fiscal 2020.

promote sales of new “ENE-FARM” systems that boast reduced“ENE-FARM” (Residential) Stock PlanThousand units
400

300

300
200
100
0

9.6

17.2

29.2

2011

2012

2013
(Plan)

2020(Plan)

FY

Promoting Smart Energy Networks

ActionTokyo Gas advocates the creation of “smart energy networks.”

projects in cooperation with the government and our business

These networks are based on a concept of combining renewable

partners to complete various verification tests for these networks

energy with cogeneration systems and controlling these in an

and realize practical use. These projects include energy usage

optimal manner through information and communications tech-related ventures, such as a network designed to optimize energy

nology (ICT). This process enables electricity and heat to besupply and demand management in the area north of the east

managed comprehensively throughout the network to reduce

exit of Tamachi Station, in Tokyo, and a network utilizing untappedenergy usage and CO2 emissions. We are advancing a number ofrenewable energy in the Toyosu wharf area, also in Tokyo.

Smart Energy Network
Apartment Buildings

Hospitals

Photovoltaic Power Generation
Fuel Cell

Photovoltaic Power Generation
Gas Cogeneration
Energy Storage System

LNG Terminal

Biomass
Generation

Waste Disposal
CenterOffice Buildings
Photovoltaic Power Generation
Gas Cogeneration
Energy Storage System

Information andCommunications
Technology

Wind Turbine Generation

Power Plant

Detached House

Commercial Facilities

Photovoltaic Power Generation
Fuel Cell

Photovoltaic Power Generation
Gas Cogeneration
Energy Storage System

Tokyo Gas

Annual Report 201329

Capital Expenditures Plan
Capital Expenditures, Investment, and Financing Plan for “Challenge 2020 Vision”
The “Challenge 2020 Vision” calls for aggressive capital expendi-

business to procure gas resources. During the investment period,tures, investments, and financing, including through external

we expect operating cash flow (consolidated net income +funding, to achieve new growth by “enhancing the LNG value

depreciation) to be around ¥250 billion per year, approximately

chain.” Between fiscal 2012 and fiscal 2020, this plan calls for¥40 billion per year higher than during the FY09–13 Medium-

total capital expenditures, investments, and financing of ¥2.06

Term Plan.

trillion. As an annual average, the vision, compared with theUse of Capital Expenditures, Investment, and Financing

Group medium-term management plan for fiscal 2009–2013

Fiscal 2012–Fiscal 2020: Approx. ¥2,060 billion(Approx. ¥230 billion per year)(hereinafter, “FY09 –13 Medium-Term Plan”) targets an annual
increase in spending of around ¥50 billion, from approximately¥180 billion to around ¥230 billion. This proactive funding isInfrastructure¥730 billion
Overseas business¥320 billion
Demand development ¥600 billion
Business base¥270 billion
Other investments
in affiliates¥140 billion

7%
13%

aimed at optimizing and enhancing our infrastructure so that we

35%

can promote and expand the use of natural gas. Much of thisinvestment will go toward production and supply facilities
including the Hitachi LNG Terminal. We will also augment our

29%

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

16%

demand, and continue investing aggressively in overseas
Gas Sales Volume Plan and Facilities Development Plan (non-consolidated)
Billion m3

Koga-Moka Line

17.0
16.5
16.0

Shin-Negishi Line
Yokohama Line II

15.5
15.0
14.5

Kisarazu Rinkai Line II

Saito Line
Ibaraki–Tochigi Line
Tochigi Line extension

15.9 billion m3
15.5 billion m3

14.6 billion m

3

14.8 billion m3

Ohgishima Terminaltank expansion

14.0
0

2013

2014

16.4 billion m3

Ohgishima Terminal
vaporization equipment
expansion
Hitachi LNG Terminal
2015

Sodegaura LNG
Terminal vaporizationequipment expansion

2016

2017

Facility Investment Plans (non-consolidated)

Billions of yen

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Total for fiscal
2013–2017

28.1

32.2

29.4

8.4

7.7

105.7

LNG-related facilities

19.6

24.3

23.2

0.1

1.2

68.3

Other

8.5

7.9

6.2

8.3

6.5

37.5

Supply facilities

95.8

97.3

99.4

79.4

76.3

448.2

Trunk lines

21.0

23.3

28.8

10.7

5.7

89.6

Other

74.8

73.9

70.6

68.7

70.6

358.7

Business facilities

22.3

34.1

40.1

51.2

40.9

188.6

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

146.2

163.6

168.8

139.0

124.9

742.6

0.8

0.6

0.6

0.6

0.6

3.1

147.0

164.2

169.4

139.6

125.5

745.7

Production facilities

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

30

FY

Tokyo Gas

Annual Report 2013