Business overview: Gas business

TOKYO GAS INTEGRATED REPORT 2020

GAS BUSINESSOutline

We have been operating the city gas business in the Greater
Tokyo Area while the applications of city gas expanded tohousehold, commercial and industrial consumption as well asuse for power generation and other purposes. We will strive
to enlarge our sales areas by promoting electricity andservices. We will redefine LNG, which is a raw material forcity gas, as a commodity and increase the flexibility and pricecompetitiveness of the procurement portfolio to expand theLNG business, including asset-backed trading.
Number of retailcustomers(active)

City gas sales volume

9.129 million 13.85 billion m
As of the endof March 2020

Segment profit

3FY2019
Equivalent to approximately 37%
of total nationwide gas sales
volume in Japan¥102.4 billion
FY2019Net sales and segment profit(¥ billion)

Net sales (LH)

2,000

Segment profit (RH)(¥ billion)

200

1,500

150

1,000

100

500

5000
2016.32017.32018.32019.32020.3

City gas sales volume and number of active retail consumers(billion m )320

Sales volume (LH)

Number of retail customers (RH)

(million)

20

City Gas and LNG sales

Japan relies heavily on LNG imports for procuring natural gas, and LNG import prices are generally determinedby a mechanism linked to crude oil prices. With the aim of achieving stable and affordable LNG procurement
under these conditions, the Tokyo Gas Group strives to achieve three types of diversification: diversification of
supply sources, contact terms and conditions, and its LNG network.
Diversification 1

Diversification 2

Diversification 3

Supply sources

Contract terms and conditions

LNG Network

In 2018, we started to procure LNG
from the US, while continuing toacquire supplies from existing sources,including Southeast Asia, Australia
and Sakhalin (Russia). In 2020, theportfolio agreement with Shell Eastern
Trading, under which multiple supply
sources supply us with LNG, came intoeffect, increasing our supply sources
to 16 projects in six countries. In thefuture, we will work to diversify ourprocurement sources, including aMozambique LNG project from which
we will jointly purchase LNG withCentrica, and the LNG Canada Projectin an effort to improve supply stability.

We will add contracts based on theU.S. natural gas prices and coalprices to conventional contracts
based on crude oil prices to diversify
price indices. In addition, we will
diversify agreements by signing
those without limits on destinations
and those with an eye towardmedium-term, short-term and spot
procurement to make our
procurement more flexible.

We will form strategic alliances withdifferent companies in Japan andabroad to construct an LNG networkthat links the Asian, North Americanand European markets to increase
the transport efficiency of LNG andto step up efforts to reduce costs
and increase flexibility inprocurement and sales agreements.

15151010

Number of LNG
procurement projects

52009

500
2016.32017.32018.32019.32020.3

Strengths Customer base of over 11 million customers and a relationship of trustwith customers through close ties with local communities
Established history of providing a safe and reliable supply of gas amongst
our customers
The Kanto region centered around Tokyo, with its high concentration ofproduction and consumption, as our primary sales area
Safety-related know-how and energy solution capabilitiesRisks Difficulties in LNG procurement due to the impact of geopolitical risks,etc., regarding imports
Potential supply issues due to damage to production and supply facilities
caused by a large-scale disasterIntensified competition driven by market deregulation; decline in demandcaused by changing lifestyle53

10projects

Past

Mainly trade between
Japan and its exportmarket countries

Network connecting
Asian, North Americanand European markets

Past

FutureFutureLinked to crude oil Diversification ofprices
price indicesLong-term contract Diversification ofperiods
contract periods
Restrictions on
Destination freeshipping destinations
clausesCompetitive
procurementof LNGTokyo Gas’ long-term contracts (as of April 2020)
2020

16

projects

Sakhalin

LNG Canada
Cove PointTokyo
Cameron

Qatar

BruneiExisting LNG Project
New LNG Project

Malaysia
Mozambique

Pluto(Sales and purchase agreement signed)

GorgonNWS

DarwinIchthys

QC

New LNG Project(Heads of agreement signed)