About Japan LP Gas Association

Contents
1. Lowering of the mandatory stockpile
level, plus other current topics
2. LP gas industry’s initiatives in Japan
3. Challenges and efforts of the LP gas
industry over the coming years

3Chapter 1
Lowering of the mandatory stockpile
level, plus other current topics

4Building up national stockpile scheme completed
 lowering of the mandatory stockpile level for the private sector
 National stockpile target to last 50 days achieved in November 2017 (stored in fivelocations).
 After February 2018, the mandatory private sector stockpile level was lowered from50 to 40 days worth of national imports.
Total Capacity of National LP Gas
Stockpiling Base:

1,500,000 tons

Above Ground
Underground5

Japan’s LP gas stockpile framework - timelineYear

Mandatory private stockpile

1981

LP gas stockpiles made mandatory with therevised ”Oil Stockpiling Act”.

1989

Private sector stockpiles of 50-days worth
achieved in March.

National stockpile

1991

National LP gas stockpile target was developed tomitigate supply disruption risk after the Gulf War :( 1.5 million tons / worth 40 days by 1991 standards).

2005

Nanao Base, Fukushima Base and Kamisu Basecompleted.

2011

40,000 tons of propane released after the March 11
disaster (replaced by private sector stockpiles).

2013

Kurashiki Base and Namikata Base completed inMarch.

2016

Government panel proposed to lower stockpile
levels.

2017

Relevant ministry ordinance revised inDecember.

2018

Private sector stockpiles reduced to 40days worth effective from February.

National stockpile target achieved in November 2:50-days worth, or 1.4 million tons.

6LP gas import sources by country (propane and butane) US import share in Japan rose significantly in line with the US LP gas output growth.
Total

13,424

11,574

11,604

10,696

10,521(1,000 tons)
10,535 （千トン)Source: Japan LP Gas
Association7

Key LP gas exporting countries – actual and forecast volumes
 LP gas seaborn supply is expected to grow further, notably from the US.

Source: Poten & Partners

8

US shipping points
LocationStartedEnterprise

2013*

Targa

2013

Nederland

2015Free Port

2016

Marcus Hook

2016*

CapacityTotal
30 million tons

Others*At the time of initial expansions.

Ferndale(Petrogas)<Inside the Gulf of Mexico>Marcus Hook(Sunoco)

Galena Park(Targa)

Nederland(Sunoco)

Oiltanking(Enterprise)

Freeport(Philips 66)

9Efforts to diversify import sources

Marcus Hook, PA(Approx. 29 days)
Gulf States(Approx. 18 days)

Ferndale, WA(Approx. 12 days)

Houston, TX(Approx. 28days)

・Ichthys・Prelude(Approx. 8 days)

VLGC bound for Japan passing through thenew Panama Canal(June 27, 2016)10

US propane export volumes vs. inventory levels
 US domestic inventories decrease as export volumes grow in 2017.
120,000
Stock:（在庫量：百万バーレル）

Export volume:3,000（輸出量：千トン）

1,000 barrels

1,000 tons

2,800
100,000

2,600
2,400

80,0002,200
60,000

2,000
1,800

40,000

1,600
1,400

20,000

1,200
1,000

0
１月

２月

３月

在庫
2015
2015 stock

４月

５月

６月

在庫
2017
2017 stock

７月

８月

９月

輸出量
2015
2015 export

10月

11月

12月

輸出量
2017
2017 export

Source: EIA

11

Trend of Mont Belvieu price compared with crude oil (WTI) MB price went up against crude oil in 2017, followed by tight LP
gas supplies due to lower inventory levels.
($/T)

Left axis:
MB price

Right axis:
MB/WTI (%)
12

Trend of LP gas price produced in the Middle East vs. US (Japan arrival basis) Middle East price is strengthening its correlation with MB since 2014.
 Both CP and MB on the rise in 2017, together with oil prices increase.
($/T)$1,200.0$1,100.0

Middle Eastprice(CP plus spot freight)$1,000.0

Panama toll raised＋100,000 USD (VLGCround trip)$900.0$800.0$700.0$600.0Panamaexpansion$500.0$400.0$300.0

US price(MB plus spot freight and plus terminal fee)

$200.013

Trend of crude oil price (AL) and CP (propane)
($/T)
1,000
900

Arabian Light crude oil(propane calorific equivalent value)

800
700
600

Saudi Arabia CP

500
400
300
200
Jan-14Jul-14Jan-15

Jul-15(%)
140

Jan-16139.4%
Saudi Arabia CP

130

Jul-16

Jan-17

Jul-17Jan-18

Arabian Light crude oil(propane calorific equivalent)

120
110
100
90
80
70
Jan-1477.1%
Jul-14Jan-15

Jul-15Jan-16

Jul-16

Jan-17

Jul-17Jan-1814

Chapter 2
The LP gas industry’s initiatives inJapan15

Trend of LP gas demand in Japan Peaking in 1996, LP gas demand has been in decline and continued to do soin FY2016.
(Demand)20,0001,000 tons

19,703 kt

18,00014,151 kt

16,00014,00012,00010,0008,000
電力用
Electricity

6,000

化学原料用
Chemical

4,000

都市ガス用
Town gas
自動車用Vehicle

2,000

産業用
Industrial
Household
家庭業務用

0Source: JapanLP Gas Association
出典：日本ＬＰガス協会

16Demand creating initiatives of each sector (year 2030 target)

Household Commercial

Industrial

Transport

Volume of demand:

Volume of demand:

Volume of demand:

Volume of demand:

2.2 million tons

6.2 million tons

1.3 million tons

Fuel conversion

LPG vehicles

1,580,000 tons

560,000 units

5.1 million tons

GHP

High-efficiency
water heaters

Equivalent to

16 million units

1,200,000 kW

Fuel cells forhomes
1.5 million units

FRPcontainers
Expand usage

Industrial LPG furnace

Disaster responsebulk supply system

Cogeneration

LPG taxis

Equivalent to1,600,000 kW

Facilitate
installation
LPG trucks
Source: Medium to long-term outlook, second revision, Japan LP Gas Association, November 201517

Standardization of technology for producing FRP containers andacceleration of their usage
 Fiber Reinforced Plastics – FRP container advantages• Pressure resistance performance is 100% higher than iron containers, it does
not explode in fires, it is very safe.
• Half the weight of steel, highly portable (reduce freight workload).
• Colorful and aesthetic, blends well with indoor and outdoor scenes.
• Plastic does not rust, suitable for boats and use in coastal areas.
Technology standardization< 10 kg or lighter containers:
From 2016><20 kg containers:
From spring 2018>18

Promotion of installation of GHP and cogeneration systems
 Support the conversion to a diversified energy system, considering theenergy-saving measures and utilizing the experience of disasters.

Gas heat pump (GHP)□Advanced Greenhouse

Cogeneration system□Power demand peak control  CO2 emission coefficients comparison

Town gas

LNGLP gas

□Backup power for hospitals

Coal□Workable also in cold district

Crude oilIndex of emission factors per unit calorie is calculated
as crude oil being 119

Trend of automotive LP gas consumption and the number of LPG vehicles(1,000 tons)
Volume

1,626

1,594

1,570

1,486

1,409

1,370

1,295

1,231

1,177

1,110

1,054

985(Stations)
2,000(Vehicles)
350,000

1,800

1,774

1,713

LPG vehicles

1,700300,000

1,622

1,612

1,576

1,572

1,513

1,503

LPG stations
1,498

1,458

250,000

1,800

1,600

1,400

1,200

200,000

1,000
150,000

295,124

293,959

291,529

287,480

277,437

265,267800

251,076

248,733

241,886

234,236

226,450

100,000

218,218600

400
50,000200

00
FY2005

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2015FY201620

Acceleration of the spread of LPG vehicles to respond todisaster-recovery and care-giving needs

Toyota Motor

Nissan Motor

JPN-TAXI <LPG hybrid>

NV200 <LPG bi-fuel><Available since October 2017><Taxi available since July 2015><Standard passenger vehicle available since June 2017> For care-giving, ready for wheelchairs and seniors
 For diversifying fuel for official cars, introduction
to local governments
 Certified for: Eco-Car tax break (national tax) andspecial treatment of green vehicles (local tax)
LPG taxis supported disaster recovery activities in 201121

Acceleration of the spread of Bulk-Supplying Systems responding todisasters
 Promoting supplying systems responding to disasters in public-private
partnerships
Kitchen appliance

Daily use

Gas A/C

Gas water heater
Bulk supplying system

At times ofdisaster

Temporary hot bath

Soup / Rice kitchen 2018 government subsidy program

避難所Shelter

病院
Hospital

Facility

Hospital, nursing home,permanent/temporary public
shelter

BudgetJPY 600 million

Subsidy ratio

学校
SchoolTotal subsidizedsystems

1) Private facility: 66%
2) Public facility: 50%
391 units (as of January 2018)22

Improving supply-side resiliency measures

Generator car and connector
Kawasaki, Nanao, Yokkaichi, Fukushima

344Connector

Core filling stations

Aomori, Niigata, Chiba

AomoriNiigata
Nanao

Chiba
Fukushima

Kawasaki
Yokkaichi

23

Chapter 3
Challenges and efforts of the LP gas
industry over the coming years

24Japan’s energy policy from a long-term perspective(2014 published version)

Revision in line with theParis Agreement

Primary energy supply

CO2 emissions

Long Term Energy Outlook(100 million tons)(Million kiloliter )2013

Fossil fuelRenewableand Nuclear

499

43

Electricity
5.4

Transport Industrial
2.2

3.2

Heating（home/commercial)1.24 billiontons

1.3

LPG
（3%）

2030

372

117

75%

25%

3.6

2050年

1.5

3.30.90.93 billion tons(-26% against 2013)

2.0
Carbon-free innovations

Source: document from the 23rd meeting of the Natural
Resources and Fuel Committee of the Advisory Committee for
Natural Resources and Energy, METI etc.

Electricity: zero emissions
Transport/heating: convert toelectricity/hydrogen
Carbon reduction outside Japan

0.2 bil.
tons(-80% withoutreference)

25

LP Gas as potential fuel for ships

Fuel of Korean ferry
converted to LPG(GE Group)

World LPG Forum(Marrakesh, Oct 2017)

Development of LPG
vessel, VLGC(Mitsubishi)<Challenges and efforts to spread LP Gas>
Global LP gas demand outlook
Borderless collaboration between LP gas business
operators: still lacking leaders
Establish supplying framework, partnership with current
bunker operators

WLPGA report on LPG formarine engines

CO2 reduction as well as Sox control expected26

Deregulation of Japan’s domestic energy market
Current number of households

Electricity market

Town gas market

Conventional regional monopolies

FY2016FY2017
FY2020
FY2022Retail market:
completely
deregulated
Transmission anddistribution sectors
separated

Retail market:
completely
deregulated

Total numberof households

53 million
households*

Electricity only

6 million

Town gas

25 million

LP gas24 million*incl. overlaps

New players
・ICT・Automotive industry, etc.

Pipeline sector
separated＜＜＜＜ Breaking down market borders ＞＞＞＞
Competition between energy sources
accelerated by new market entries27

Price transparency and normalization of business practices
 To make LP gas more attractive to consumers and win the competition between energy
sources, business operators are required to align with government guidelines,“disclosing the standard fee menu” and the “clear indications of the fee structure onutility bills”, in an effort to enhance price transparency and normalize businesspractices.

<Government decisions>(1) <Establishment of guidelines for normalizing LP gas retail business practices>
Effective from February 22, 2017 (revised in February 2018)
In the same manner as electricity and town gas, guidelines for normalizing business practices(e.g. announcing a standard fee menu and monthly payments, explaining the reasons before
raising prices, and responding appropriately to customers’ inquiries) have been created.

(2) <Partial revision of the Ordinance for the Enforcement of theLP Gas Act>
Effective from June 1, 2017
Disclose the LP gas fee structure to consumers.

(3) <Partial changes to the operation and interpretation of theOrdinance for the Enforcement of the LP Gas Act>

Effective from June 1, 2017
Disclose the fee structure to residents in rental homes.
Clarify interpretation of the Ordinance to avoid problems when removing the existing LP
gas supply systems.

28Summary: future efforts of the LP gas industry

29