REVIEW OF OPERATIONS
CORE BUSINESS: GAS SALESLNG Value Chain of Tokyo Gas
Tokyo Gas directly serves its 10.74 million customers through its integrated “LNG value chain,” which
covers everything from gas field development and raw materials procurement to transportation via
LNG tankers, city gas production, and gas delivery via pipelines. By pursuing new levels of value foreach link in the value chain, we strive to maximize both social value and economic value.

TOKYO GAS ANNUAL REPORT 2011

Segment and LNG Value Chain

24City Gas Sales

LNG
ProcurementGas Appliances andInstallation Work

UpstreamInterests

Other Energies

Transportation

Real Estate

Infrastructure
Development

OtherGas SalesREVIEW OF OPERATIONS

Position in the LNG value chain

LNG
Procurement

Tokyo Gas Long-Term LNG Contracts

Flexible, competitive resource
procurement in line withdemand

SakhalinTokyo

Principal operating company

Tokyo Gas Co., Ltd.
Qatar

Segment

City Gas Sales
BruneiMalaysia
Indonesia

Targeting Diversified Procurement
Centered on supply sources located in regions that arepolitically stable, Tokyo Gas has concluded long-term
LNG contracts for 10 projects in six countries andimports more than 10.0 million tons of LNG a year.
Amid stiff worldwide competition for procurement,
LNG, the main resource for city gas, is subject to major
price fluctuations because it is linked to crude oil prices.
Following the Great East Japan Earthquake, moreover,
LNG-fired thermal power generation is receiving growing attention. Under these circumstances, we place top
priority on stable, long-term supply source procurement,
flexible responses to changing demand, and the ability
to procure resources at low prices.

PlutoGorgon
New LNG project

DarwinNWS

Queensland Curtis

Existing LNG project

Tokyo Gas LNG Imports by Country of Origin
Thousand tons

CountryMalaysia
Australia
BruneiIndonesia
RussiaQatar
AlaskaOthersTotalYears ended March 31

2009
4,482
2,847
1,257
742
—
631
176
1,027
11,162

2010
4,274
2,416
1,166
730
505
297
141
523
10,052

2011
4,479
2,297
1,155
843
983
358
139
440
10,692(41.9%)(21.5%)(10.8%)(7.9%)(9.2%)(3.3%)(1.3%)(4.1%)(100.0%)In addition to geographic diversification of procurement sources, we are broadening the scope of procurement options by complementing conventional
natural gas with the procurement of unconventional
forms of natural gas. In these ways, we are targeting

signed an agreement covering coal-bed methane(CBM), an unconventional form of natural gas locatedin coal seams in the Surat Basin of Queensland,

reliable, flexible responses to demand, which is
expected to grow in the future. In March 2011, weAustralia. Under the agreement, CBM will be liquefied
on Curtis Island and purchased by Tokyo Gas as LNG.

Position in the LNG value chain

Principal operating companies

TOKYO GAS AUSTRALIAPTY LTD,Tokyo Gas Darwin LNG Pty Ltd

is a high potential for going forward, to the extent that it
can limit the candidate projects for the Company’s LNG
procurement operations and otherwise minimize risk.
We have also adopted internal rate of return (IRR) as aminimum investment benchmark, and we receive divi-Segment

Other
Outline of Project Participation
Project

Annual contracted
quantity(Thousand tons)

Inception of Duration
contract

Darwin1,0002006

Pluto

2011

Gorgon1,500–
1,750
1,100(2014)

17 years FOB
3.07(–2022)15 years Ex-Ship, 5.0
FOB
25 years FOB1.0Queensland

1,200(2015)

20 years Ex-ShipCurtis LNG

Acquiring Interests over Broad Geographic Areas
With respect to upstream interests, the Company participates in projects where exploration has ended and there

Contract type Project
participation
(%)

1.25
(Upstream)

2.5(Midstream)dends from the Darwin Project.
As of March 31, 2011, Tokyo Gas held interests of1–5% in the Darwin Project, Pluto, and Gorgon in Australia,
and had concluded long-term LNG procurement contracts
with all of these projects. In unconventional LNG, in May
2011, we decided to participate in the CordovaEmbayment Project in Canada, thus complementing ourinvolvement in the Surat Basin project in Queensland,
Australia. In acquiring upstream interests, we emphasize
promising projects across broad geographic areas while
paying attention to transportation costs.

TOKYO GAS ANNUAL REPORT 2011

UpstreamInterests

Competitive resource procurement through the acquisitionof upstream interests

25

REVIEW OF OPERATIONS

Position in the LNG value chain

Decreasing costby increasing FOB
Principal operating company

Transportation

Tokyo LNG Tanker Co., Ltd.
Segment

OtherExpanding Our Business to Include Transport ofLNG to Other CompaniesThe Tokyo Gas Group operates one of the largest fleetsamong domestic electric power and gas companies. Ourown fleet now has eight LNG tankers, including one scheduled for commissioning in August 2011.

LNG Carrier with Onboard Regasification Equipment

Equity Stake in LNG Carrier with Onboard
Regasification Equipment
Consolidated subsidiary Tokyo LNG Tanker Co., Ltd. hasTokyo Gas possesses the largest-class shipping fleet inJapan. In addition to transporting LNG under long-term contracts, we will leverage this fleet to target procurement

acquired a 1.5% equity stake in a joint venture related toan LNG carrier owned by Mitsui O.S.K. Lines, Ltd. withonboard gasification equipment. Here, our aim is tobased on short- and medium-term agreements, as well asachieve further reductions in LNG import costs and flexible resource procurement. Moreover, we will seek toexpand our business to include transport of LNG to thirdbuild a flexible LNG transportation system. LNG isvaporized on board, and the natural gas is then sent via
pipeline laid on the seabed. This represents a new LNG
procurement technology that does not require conven-parties and the leasing of vessels to other companies.

tional, land-based LNG terminals.

Position in the LNG value chain

Ensuring both stable supplyand safety

Infrastructure
Development

Principal operating company

Tokyo Gas Co., Ltd.
Segment

City Gas Sales

Chuo Trunk Line Completed
In May 2010, Tokyo Gas completed the Chuo TrunkLine, which runs north-south through the center of thecircular trunk line looping the Tokyo metropolitan area.
The new line, running 32.9 kilometers from Edogawa-ku

Hitachi Project Fast-Tracked due to Growing Demandin Tokyo to Kawaguchi City in Saitama Prefecture, links
the Company’s city gas production facilities in Tokyo
Bay with customers in the northern Kanto area. We now
have 818 kilometers of high-pressure gas pipelines, cen-The Company’s LNG terminals are among the largest in
the world. We continue to invest in our facilities in orderto enhance our ability to address growth in demand fortering on the Tokyo metropolitan area. Seeking further
growth and proliferation of natural gas in the future, wewill actively expand, upgrade, and maintain our pipeline

natural gas and further stabilize supply. In fiscal 2011,
we plan to start supplying gas via a pipeline linking

network with top priority on safety.

TOKYO GAS ANNUAL REPORT 2011

Chiba and Kashima. In light of increasing demand forcity gas since 2010, meanwhile, we will fast-track theconstruction of our fourth LNG terminal, the Hitachi LNG

26Terminal, and a high-pressure gas pipeline, the IbarakiTochigi Line, linking the terminal and Moka City, Tochigi
Prefecture. Both are planned to start operation in fiscal
2015—two years ahead of schedule.

Angyo GS

Tokyo Line

Chuo Line II

Saitama Line

Soka GS

Chuo Line ITokyoKasai GS

Looped Line
No.1
NegishiLine
No.2
NegishiLine

Underwater Line

Keihin LineTokyo
Ohgishima Bay
LNG Terminal

No.2
Chiba Line
Sodegaura LNG Terminal

Negishi LNG Terminal

Kanagawa

Chiba Line

Kasai LineChiba

REVIEW OF OPERATIONS

Gas Sales Volume by Sector(Years ended March 31)

Residential
8,000
Wholesale

Residential

13.2%

23.9%

Million m3

8,000

Million m3

8,000

6,000

4,000

3,520

Commercial
and others

20.6%

8,000

Million m3

4,000

6,000

6,000

4,000

4,000

2,000

2,000

3,042

2,000

42.3%

Million m3

6,237

6,000

Gas Sales Volume

IndustrialWholesale

Industrial

Commercial andothers

2,0000009

10

11000910

111,94709

1011091011

Residential Sector

Commercial and Others, Industrial, and Wholesale Sectors

Position in the LNG value chain

Position in the LNG value chain

Maintaining and expanding the number of customers
through community-based marketing

Proposing tailor-made solutions that match diversified
customer needs

Principal operating companies

Principal operating companies

LIFEVAL companies

Tokyo Gas Co., Ltd., ENERGY ADVANCE Co., Ltd.

Segments

Segments

City Gas Sales, Gas Appliances and Installation WorkCity Gas Sales, Other Energies

In the residential sector, the average sales volume per customer has shown a continuous decline. This is due tostructural factors, such as a decreasing population, an aging
population and the low number of childbirths, as well as theIn response to the increasingly diversified and sophisticated needs of clients in the commercial and others, andindustrial sectors, Tokyo Gas is focusing on establishingan integrated energy business. Here, we coordinate aproliferation of energy-saving appliances and increases in
multiple dwelling units with exceptional air-tightness.
Spearheaded by Tokyo Gas LIFEVAL community-based
marketing systems, we are strengthening relationships
with customers by proposing lifestyle values based on gas.

comprehensive range of services covering various energy
sources, including gas, electric power, and heat. We also
propose tailor-made, optimal combinations of products
and services on a one-stop basis.
Amid growing demand for reduced electricity consump-

At the same time, we will seek to generate new demand
related to both new houses and renovations while establishing a market for our “ENE-FARM” residential fuel cells.

tion, we are accelerating the introduction of natural gas
cogeneration, a dispersed energy system that uses waste
heat, as well as cooling systems. In addition, we will con-

New “ENE-FARM” Model Unveiled
In April 2011, we introduced a new model in the “ENEFARM” series of residential fuel cells. “ENE-FARM” is afuel cell cogeneration system that generates electricity

tinue encouraging clients to switch from other fuels to natural gas, which has lower environmental impact.
Furthermore, we are aggressively working to capture
demand, including through wholesale operations targeting
peripheral gas suppliers. Here, our focus is on the region

from a chemical reaction between hydrogen, which isseparated from city gas, and atmospheric oxygen. The
waste heat from this process is used for hot water andindoor heating. Since electricity is generated in thehome, there is no transmission loss, and heat thus gen-extending for a 200-kilometer radius around Tokyo, wherelatent demand is expanding.

erated can be used without being wasted. Accordingly,
it is a very environmentally friendly system.
In addition to improvements in electricity generation effi-Cooling System, which uses heat from the sun. The system uses solar heat as the first priority, and also deploys
gas as a highly efficient backup during rainy days and otherciency, the new model features lower prices thanks to asimplified power generation system and a more compact
design of the core components. In fiscal 2011, we hope to sell

times when heat supply is inadequate. Therefore, it is environmentally friendly while offering comfort andconvenience. We will promote the system’s use in office5,000 “ENE-FARM” units (having sold 2,400 in fiscal 2010).

buildings, schools, hospitals, factories, and other facilities.

Solar Air Conditioning System Launched
The Tokyo Gas Group has commenced sales of its SolarTOKYO GAS ANNUAL REPORT 2011

Gas Sales27