© 2016 The Japan Gas Association

Atsuo Kanno
General Manager,
International Relations Department
The Japan Gas Association
22 September, 2016
GASEX2016 in Beijing11© 2016 The Japan Gas Association

1. The Japanese economy and energy use
2. Current state of the city gas business in Japan
3. Full liberalization of the city gas market andderegulation of city gas business22

© 2016 The Japan Gas Association

General Information on Japan

General InformationRealon GDPJapan& GDP growth rates

Basic data

GDP growth rate (%)

Real GDP (¥ trillion)

Land area

800

8700

6377,900 sq kmPopulation

127 million

600

4Total exports¥75. 6 trillion

500

2Total imports¥78.4 trillion

4000

Trade balance−¥2.79 trillion

300-2200-4100-6

LNG imports(FY 2015)

83.6 million ton¥4.55 trillion-80'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

Sources: Ministry of Internal Affairs and Communications, Japan Statistical Yearbook; Cabinet Office, Annual Report on NationalAccounts; Ministry of Finance, Trade Statistics of Japan; IEEJ, Energy Economy Handbook33

© 2016 The Japan Gas Association

Primary Energy Supply

PrimarySupply
Primary energy
supply : Energy
518 million
KLOE[million KLOE]

Natural Gas:

130.5 million KLOE

Energy self-sufficiency:

8.5% (including nuclear)share of natural gas

Renewables
4.4% (biomass 1.8%）
3.4% Hydro
0% Nuclear
25.2% Natural gas

25.5% Coal

41.4% Petroleum

4Sources: Calculated from Agency for Natural Resources (METI), FY 2014 Energy Supply and Demand Report and Energy White Paper4

© 2016 The Japan Gas Association

Final Energy Consumption○Natural gas (mainly city gas)
FY1990FY201413.9 million KLOE
30.7 million KLOE
4%8.8%

エネルギー源別推移○Final energy consumption
FY1990FY2014349 million KLOE
349 million KLOE
[million KLOE]
450400

Others350Heat300

Coal

250
200Petroleum

150Electricity

10050

Ntural Gas01990

2005

2010

Sources: Calculated from Agency for Natural Resources (METI), FY 2014 Energy Supply and Demand Report

52014
5

© 2016 The Japan Gas Association

Strategic Energy Plan
日本のエネルギー政策の基本方針
Japan’sbasic principle for energy policy

3E＋SEnergy Security
Economic Efficiency + Safety
Environment＝○International perspective
・Low cost & stable resource procurement
・Safe utilization of nuclear power・Global warming countermeasures
・Stable energy supply system・Approach from an International
perspective
・Cooperation among all counties○Economic growth perspective
Preconditions for boosting the international
competitiveness of domestic industries andachieving further economic growth・Reform of the energy sector
・Overcome energy constraints
・Cost reductions

・Low cost & stable energy supply

Fourth Strategic Energy Plan approved by Cabinet resolution on April 11, 2014
Source: Strategic Energy Plan

66

© 2016 The Japan Gas Association

Position of Natural Gas in Strategic Energy Plan
Natural Gas
・Important energy source whose role isexpected to expand○Policy Directions
・Promote cost reduction by diversifying supply
sources & types of contracts
・Sophisticated use of natural gas by diversifying
the utilization
・Steadily drive the natural gas shift

Coal・Important base-load power supply withexcellent supply stability and economics
・Reduce environmental load
○Policy Directions
・Development and demonstration IGCC , A-USC
・Demonstration experiments underway forcommercialization of CCS by 2020 and beyond

Renewables
Nuclear・Important base-load power source
・Important diverse and promising・Reduce dependence to maximum extent domestic low carbon energy sourcespossible○Policy Directions○Policy Directions
・Restart: Sendai(Kyushu Electric), Ikata(ShikokuElectric)
・The other nuclear plants would also restart but it
will take longer time
Source: Strategic Energy Plan

・Review of feed-in tariff (FIT) program
・Promote in way that valances economic efficiency

7© 2016 The Japan Gas Association

Long-term Energy Supply-demand Outlook （1） Positioning of the long-term energy supply-demand outlook (July 16, 2015.)
The outlook sets forth the advisable shape of the future energy supply-demand structure
to be achieved by the execution of proper initiatives, upon the setting of policy objectives
regarding “3E + S” as the basic perspectives of energy policy, based on the Strategic
Energy Plan.
FY2013 (actual)

FY2030(total generated energy)
About 1,065 billion kWh

Generation loss

Power

Renewable energy
Nuclear energy
Coal
Natural gas
Oil

13%
1%
33%
37%
16%

25%

Renewable energy:
about 22 - 24%
Nuclear power:
about 20 - 22%

City gas
Coal: about 26%

Gasoline & gas oil
Kerosene

75%

Coke etc.

Natural gas:
about 27%

Conversion loss etc.

Oil: about 3%

Cogenerationsubtotal including
Ene-Farm
119 billion kWh（11.2％）
8

© 2016 The Japan Gas Association

The Japan Gas Association

２．長期エネルギー需給見通し

Long-term Energy Supply-demand Outlook（2）Perceptions of The Japan Gas Association
1. Cogeneration
 The amount of generated energy from cogeneration including Ene-Farm (119 billion kWh)indicated as a type of “utilization of diverse energy sources” for the first time.
 Cogeneration is to account for 11.2% of the total generated energy in 2030, more thandouble the current amount (51.4 billion kWh *1).
*1 Commercial and industrial use only; excluding the residential sector

2. Shift to Natural Gas
 The outlook clearly states the aim of fuel diversification in various fields, e.g., a shift tonatural gas in industrial fields etc. Together with the spread of gas cogeneration, this isanticipated to increase the amount of use of natural gas in the industrial sector by aconsiderable volume.
 Natural gas use will increase in the industrial and commercial sectors due to factors suchas the input of cogeneration. Of all fossil fuels, whose use is slated to decrease or keep
the current level overall, natural gas is only to have a trend of increase.

99© 2016 The Japan Gas Association

LNG Imports
 Japan’s LNG import occupies about 37% of LNG transactions worldwide. The volume has
increased since 2011 for power generation by thermal power instead of nuclear.
 The sources of Japan’s LNG import are diversifying. Imports from 15 countries for city gas.

LNG import volume

LNG import by gas utilities

Total imports : 89.07 million tons [FY2014]25.75 million ton(29% of all imports) [FY2014][million tons]
90[million tons]

Sharp increase due tonuclear shutdown

80

25.75

7060
50

Power Utilities

40

11.56

30
20
10

Gas Utilities

0'95'00'05'10'14
Source: JGA, Gas Business Handbook, 201510© 2016 The Japan Gas Association

１．日本の都市ガス事業の現状

Diversification of LNG suppliers and resources(Unconventional Gas)
Measures for Stable LNG Procurement

Measures
SecureforLow
Cost,gas
StableLNG Supplies
Japan’s todemand
naturalis projectedto expand. To supply gas on a stable basis in acompetitive manner, it is important to diversify procurement patterns and contracts.
Diversification of suppliers• North America, East AfricaothersDiversification of pricing• Introduce new formula of U.S.
and European pricing• Formation of a futures market
and Asia market
Diversification of resources• Development of methane
hydrate (in Japan’s EEZ)

Secure new supply
sources of supplies

LNG exports from America
・Freeport (after 2018)
Osaka Gas: 2.32 m tons/year
・Cove Point (after 2017)
Tokyo Gas: 1.4 m tons/year
・Cameron (after 2018)
Tokyo Gas: 0.52 m tons/year
Toho Gas: 0.5 m tons/year

Participate in upstream projects
and LNG import
・Indonesia: Sanga Sanga CBM
Osaka Gas
・Australia: Queensland
Tokyo Gas: 1.2 m tons/year
11

５．ＬＮＧ市場戦略© 2016 The Japan Gas Association

The Japan Gas Association「Strategy for LNG Market Development」

１．Goals of the strategy○Develop a flexible and liquid LNG market○Develop an LNG trading hub for LNG transactions, and formulating and transmitting LNG
price signals○Accelerate all efforts to establish Japan hub by the early 2020s

２．Ideal LNG Trade
Existing LNG Trade○ Long-term contracts occupies

70-80% of total LNG trade○ Limits on resale by destinationclauses○ Oil-linked price formulaIdeal LNG Trade○ Minimalize long term contracts and utilize shortterm and spot trade®Stabilizing supply and demand○ Easing or eliminating destination clauses, andutilizing resale and arbitrage trades®Reducing LNG import cost
○ Establishing a price index reflecting supply anddemand of LNG in Japan®Transparency and reasonableness of LNG price３．3 fundamental elements of the strategy○Enhancement of tradability○Creation of a proper price discovery mechanism○Open and sufficient infrastructure

Source: METI Strategy for LNG Market Development12

© 2016 The Japan Gas Association

1. The Japanese economy and energy use2. Current state of the city gas business in Japan
3. Full liberalization of the city gas market andderegulation of city gas business1313

© 2016 The Japan Gas AssociationCharacteristics of the City Gas Industry in Japan
The business of city gas utilities (general gas suppliers) has spread around cities. Their
combined supply area accounts for just under 6% of the national land.
While the power industry consists of 10 electric power utilities, the city gas industry consistsof 203 large and small utilities developing their business with close ties to the community.
Supply areas of city gas utilities

Number of residential customers (FY2015)
EnergyNumber ofcustomers

Number ofsuppliers

City Gas

29.98 M customers(number of meters)

203

LPG

About 24 million

21,052

Electric power

About 61 million

10(Reference)
Total number ofhouseholds

About 56 million

Total extended pipeline length (FY2014)
Service areas of private city gas utilities
Service areas of public city gas utilities

LNG receiving terminal and gas trunk line
In operation
Planned/under construction
Source:Gas business handbook, The Japan Gas Association

255,293km＝219,685 + 33,238 + 2,370Lowpressure(less than0.1 MPa)

MediumHighpressurepressure(1 - 0.1 MPa) (over 1 MPa)14

© 2016 The Japan Gas Association

１．日本の都市ガス事業の現状

City Gas Sales Volume and Number of Customers
 In Japan, the residential and commercial divisions accounted for the majority of city gas
sales up to around 1980. Succeeding years, however, saw a gradual increase in sales forindustrial use, which now account for 54% of the total sales volume. The number ofcustomers, too, has continued to grow at the same rate.
4040

Sales Volume:36.4 billion m³ (FY2015)
Customers：30 million (FY2015)(right axis)

35■Breakdown of City gas sales
volume by utilities (FY2015)

3530

302525Tokyo Gas
37.8%

Industrial
20201515

Commercial
101055Residential

36.4
Billion ㎥

Saibu Gas
2.3%
Toho Gas
10.5%

Osaka Gas
22.3%

00'70

'75

[billion m3]

'80

'85

'90

'95

'00

'05

'10

'15

[million]

Source：JGA “Gas business handbook”,“Result of city gas sales volume”

15

© 2016 The Japan Gas Association

１．日本の都市ガス事業の現状

Gas
Vision2030”:
Use ofofNaturalNaturalGasGas“GasVision2030”:Potential
Potentialfor
forthethe Wider
Wider Use JGA has produced a vision document for the gas industry in the year 2030, and is working
closely with the Japanese government to drive it forward.

Steps to be taken by 2030

2030

2015

【Electric power supply stability】

1. Cogeneration
5.14 GW

Expected benefit

6x30 GW

15% of annual electricity demand

2. Gas air conditioning (Electricity peak-shaving)
Approx.14 GW
equivalent

1.9x

Approx. 26 GW
equivalent

3. Share in the industrial heat demand
11.5 %

2x25.0 %【Energy reduction effects 】
Energy conservation: 8.26 million
kloe/year

4. Residential fuel cell0.15 million units 35x

5.3 million units*Including LPG fueled

5. Natural gas vehicle (NGV)
45,000 units

11x

500,000 units【CO2 reduction】
62 million tons-CO2/year

Source: Japan Gas Association, “Expand Natural Gas Use to 2030.” Revised since October 27, 2011 release16 16

© 2016 The Japan Gas Association

１．日本の都市ガス事業の現状

Smart Energy Network Centered Around Gas Cogeneration System
Diversification of transportation
fuelWider adoption of renewable
and unutilized energy
Biomass powergeneration

Wind powergeneration

Grid powernetwork
Photovoltaicsystems(heat andelectricity)
Fuel cells

Gas
cogeneration

Natural gas stations
Hydrogen stations

Fuel cellvehicles

Natural gaspipelines⇒ Development of supply
infrastructure required by “hydrogensociety” in mid to longer term

Wider adoptionof distributed
energy systems

Energy-saving/Low-carbon
energy management

Enhanced energy security

Peak load mitigation,energy conservation &carbon reduction

Gas airconditioning

Securing energy
supply to priority
facilities in case ofdisasters
17

Natural gasvehicles

Gas
cogenerationGas
cogeneration

Area-wide heatsharing via heat
supply network

17 17

© 2016 The Japan Gas Association

1. The Japanese economy and energy use
2. Current state of the city gas business in Japan
3. Full liberalization of the city gas market andderegulation of city gas business1818© 2016 The Japan Gas Association

Deregulation in the City Gas Market (retail market liberalization)
The scope of liberalization has been expanded in phases following amendment of the Gas
Business Act in FY1994.
Manufacturing

Supply (consigned transport)

LNG terminals
Regasification
plantsGas pipelines

Sales

Customers

Gas retailing
Gas retailing
Entry using the consigned
transport system

LNG terminals
Regasification
plantsGas retail market liberalization
FY1995

FY1999FY2004

FY2007

Liberalization
by annual
consumption
volume>2M
m3>1M
m3>0. 5M
m3>0.1M
m3

Liberalized
share

44％

49％

52％

62％

FY1999FY2004

FY2005FY2016>2000kW>500kW>50kW

Full liberalization

26％

40％

63％

100％

Electricity market liberalization
Liberalization bycontracted power
Liberalized share

FY2017

FY2022

FullLegal
liberalization separation(planned) (planned)
100％
FY2020LegalUnbundling(planned)19

© 2016 The Japan Gas Association

１．日本の都市ガス事業の現状

Approaches to the Total Energy Services
 The liberalization of the city gas and electric power markets now under way presents thecity gas utilities with the opportunity for evolution into total energy suppliers.
New Services

EnergyserviceExpanding gas market
Onsite use

Growth in electricity market

Power supply from
distributed energy
systems through grid
Excess power

HEMS
Fuel cells
BEMS
Life
services

Cogeneration

Power supply

ICT

Community-wide power interchange

Gas supply

Gas supply to power plants2020© 2016 The Japan Gas Association

Thank you for your attention.

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