The Japan Gas Association
1-15-12 Toranomon Minato-ku, Tokyo105-0001, JAPAN29 March 2021

Summary of Remarks by JGA Chair Michiaki Hirose

1. Regarding "Strategic policy sub-committee" of "the Advisorycommittee for natural resources and energy" on on March 24"Strategic policy sub-committee" of "the Advisory committee for naturalresources and energy" was held on March 24 to discuss new "Strategic energyplan" of the Japanese government. The Japan Gas Association also gave apresentation there titled "Efforts of the gas industry toward realization of 2050
carbon neutral -Aiming for the second innovation".

【Significance and perspective of Prime Minister Suga's declaration of "2050
Carbon Neutral"】After the declaration of Prime Minister Suga, I think that our world hasentered another phase. I think this declaration had two meanings. One is toclarify the time axis. After 30 years of "low-carbon society", we clarified the timeof the goal to realize a "decarbonized society" in 2050.

As a result, themovement of the world has been accelerated.
The other is to clarify the goal of "aiming for carbon neutrality". With carbon
neutrality, there are various options and possibilities, and the movement to work
toward them has spread throughout society.
Energy cannot be disrupted even for a moment, and what is important isthat energy should always be provided to customers at a reasonable price.

Whether or not stable supply and reasonable prices can be maintained
until 2050 will determine the success or failure of carbon neutrality.

From thecustomer's point of view, it is also extremely important to be able to "choose
energy" as well as stable supply.

In order to secure both "stable supply" and"options" in the realization of carbon neutrality, we think that an energy systemrich in multiplicity and diversity is essential.

【Efforts of the gas industry】
Based on the significance and perspective contained in this declaration,
the Japan Gas Association announced in November 2020 that we would aim for
100% or almost all carbon neutral gas by 2050.
Japan's city gas industry will celebrate the 150th anniversary in 2022.
Looking back on history, the introduction of LNG had a major impact. At thattime, LNG was not known well from technical viewpoint and the cost was very
high, but the top leaders at that time decided it as a request of the times andworked on it as a whole industry.
the situation now.

I think the situation at that time is similar toLike the phrase "learn from history and run through theages," we'd like to connect this carbon-neutral gas initiative to the second
innovation and leap following LNG. The theme is the time axis, and how toconnect the next 30 years. At the moment, it is difficult to build up things, but I
would like to think flexibly while referring to the history of LNG introduction.

Forthe time being, 2030 will be a major milestone, so what to do and how toimplement it is so important.
Next, what exactly is "carbon neutral gas"?

Fortunately, there are various

options for that, so at this point I would like to take on a wide range of challenges
without excluding all possibilities.

In addition, it is necessary to collaborate with those who work for manyother industries in order to work on it. In particular, I would like to work together
with those who work for LPG industry and Community Gas industry as the samegas energy.

On the other hand, when it comes to "connecting for the future",

energy saving and CO2 saving are also our other important issues.

Amid low-carbon society that will continue until 2050, the greatest mission is to reduce
CO2 as much as possible. We have made great efforts to realize a clean andenergy-saving society through the spread of LNG, but as a quick-acting initiative,
we will continue to further popularize high-efficiency systems such as energysaving equipment and cogeneration, and switch to natural gas. We'd like to put
more effort for that.

【Challenges of the gas industry and requests for the government】
Therearetwomainissues:"technologicaldevelopment"

and"infrastructure development". This time, it is said that technological development
and breakthrough will determine the success or failure, one of which is"Methanation". Methanation would be so challenging, including related
technologies, but I believe that's why Japan has a chance to take leadership.
In addition, since it is difficult to complete metanation in Japan alone, it isnecessary to establish an international framework with other countries in thePacific region.

Regarding infrastructure development, first of all, the idea of utilizing
existing gas pipelines is important, and then the development and expansion ofa new gas pipeline network to expand the spread of carbon-neutral gas isrequired.
Especially from the perspective of resilience, I would say it is necessary

for the public and private sectors to work together to promote the pipeline thatconnects the Sea of Japan side and the Pacific side.

Regarding thedevelopment and expansion of the pipeline network, the depreciation period is
an issue, so we requested urgent regulatory reform.
Next, regarding issues at the local level, carbon neutralization is expected
to be driven by major businesses first, but it is necessary to consider how toexpand that for rural areas.

Currently, regional revitalization is a major theme,and I think that the spread and expansion of carbon neutral gas can contributeto this, but most of the rural businesses that are responsible for this are small
and medium-sized businesses.
resource restrictions.
subsidy system.

Therefore, there are also financial and human

For this reason, we requested the establishment of aOn the other hand, from the perspective of connecting, it issaid that LNG plays a central role in a low-carbon society.
Upstream investment for stable supply of LNG, financial and politicalsupport for expanding the LNG value chain including Southeast Asia, andestablishment of an international framework and rule-making for the CO2
reduction effect of this LNG. I referred to it in the subcommittee.

【Points to keep in mind for "2050 carbon neutral"]
There are four main points to keep in mind.
(1) Energy policy is not straightforward, so warmth and suppleness, that is,
strategicity and flexibility, are important.
(2) How to align real energy and virtual finance while the role and influence offinance are increasing in recent energy policy.
(3) In the case of Japan, an international framework is required to realize
carbon neutrality, so it is necessary to be actively involved in themechanism and rules.

(4) Be cautious about carbon pricing such as carbon tax.

【Questions from the committee members (summary) and and JGA's answers】
In response to the presentation by the Japan Gas Association, thecommittee members asked four major questions and we answered as follows.
(Q1) "How do gas industry proceed with carbon neutrality initiatives based on
the time axis?"(A1)"We will pursue the two goals: "introduction of carbon neutral gas (CNG)"
and "expansion of LNG". While referring to the history of LNG introduction,
it is important to take appropriate steps in 2040 and 2030 toward therealization of carbon neutrality in 2050.

The difference from theintroduction of LNG is that gas demand was growing significantly at thattime, so the cost increase could be absorbed by volume increase, but thecurrent gas demand is a slight increase. Therefore, in order to introduce
CNG while maintaining a reasonable price, it is necessary to further spreadand expand LNG, and the balance between these two missions is the key.

(Q2) "How will gas utilities in rural areas proceed with carbon neutrality ?"(A2) From the history of LNG introduction, considering the technical issues andcosts, it is expected that the major direction will be gradually expanded frommajor operators to rural utilities.

The difference is that the introduction of LNG

was a challenge only for the gas industry, but carbon neutrality is an issue forJapan as a whole.
Therefore, if local governments that are aggressive for carbon neutrality, theutilities in such areas may be pushed back by their needs and may move inadvance.

(Q3) What support measures are needed to achieve the 2030 CO2 reduction
target?
(A3) Support for the two purposes of introducing CNG and expanding LNG isimportant.
On top of that, support will be provided by the government and local
governments, but we would like to continue to request support for theintroduction of CNG such as technological development and infrastructuredevelopment, and support for expanding LNG for customer facilities such ascogeneration.

(Q4) What does it mean that energy policy and monetary policy need to bealigned from the perspective of time axis and diversity?
(A4) The reason why carbon neutral came to this point was that financial power
was considerable, as represented by ESG investment. However, while energy
has a long time axis of 10 to 20 years, finance starts to move at once, so thesense of speed is fast. In addition, energy emphasizes diversity from theperspective of security, while finance also has a concentrated aspect. In orderto proceed with carbon neutrality, it is necessary to fill these gaps.

２．"Study Committee on the Ideal Gas Business for 2050"
In the interim report, the role of gas was organized from a wide range ofperspectives such as "decarbonization," "resilience," "as a comprehensive
energy business," and "solving regional issues."

In addition, for the promotionof methanation, the Committee proposed the establishment of a promotion
system for the public and private sectors.
in the gas industry as well.

We would like to be actively involved

３．At the end
Since I became the Chair of the Japan Gas Association in June 2018, I
have held a press conference almost every month.

I would like to express

our sincere gratitude to all the media for pushing us back and continuing.

Itwas also a great opportunity for me to study.
From the next press conference, Mr. HONJO Tekehiro, the new chair of theJapan Gas Association will take me over. I would like to ask you to keep a good
relationship with the Japan Gas Association.