LNG in JapanLNG in JapanChallenges of Tokyo Gas Challenges of Tokyo Gas
in the Current Turbulent Marketin the Current Turbulent Market
2
LNG Import around the World (2007)
South Korea(25.9)
Taiwan(8.2)
India(7.5)
U.S.A.(16.4)
Spain(18.2)
France(9.8)
Turkey(4.5)
Others (Belgium, Italy, Portugal, etc.)(10.1)
(Cedigaz)Unit: Mton
China(2.9)
Asia accounts for 64% of the total imports and Japan remains to be
the biggest importer
Asia accounts for 64% of the total imports and Japan remains to be
the biggest importer
Japan(68.3)
3
Diversification of LNG Sources In Japan
0
10
20
30
40
50
60
70
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
(Un
it:
MT
PA
)
Norway
Eq Guinea
Egypt
Nigeria
T&T
Oman
Qatar
Algeria
Australia
Malaysia
Indonesia
UAE
Brunei
US
Alaska
Brunei
Abu-Dhabi
Indonesia
Malaysia
Australia
Oman
Data Sources: Trade Statistics
Qatar
•Japan, which has been buying LNG for 39years, is an LNG buyer with credibility.
•Japan has improved its supply security through diversification of LNG sources.
•For many of such LNG sources, Japan is the foundation customer.
4
Primary Energy Consumption Comparison of the world (2007)
Source:BP Statistical Review of World Energy June 2008
The share of natural gas consumption is still smaller in comparison to other countries.
44% 46%
20%32% 28%
51%40%
32%
18%
36%
16% 14%
3%
9%7%
47%
22% 35%55% 24%
24% 25%
70%
51%56%
31% 18%16%
29%
12%14% 1% 1% 4% 1%
9%6% 6%
4% 0%6% 7% 5% 6% 6% 5% 6%
1%
1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Japan
S.Kore
a
China
Indi
a
E.Asi
a
M.E
ast
Amer
ica
Europe
Soviet
Total
HydroNuclearCoalGasOil
Former
Union
5
Unit:MTPA
based on “Natural gas market in Asia-Pacific and Atlantic 2008, IEEJ”
0
10
20
30
40
50
60
70
80
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Contract Demand (Low case) Demand (High Case)
LNG Supply-Demand Projection in Japan
38MTPA of LNG
Japan, with scarcity in natural resource, will continue to increase LNG import to meet the increase in gas demand and to renew existing contracts.
60
2
4
6
8
10
12
14
16
18
20
22
96 97 98 99 00 01 02 03 04 05 06 07 080
20
40
60
80
100
120
140
LNG(J apan)
Crude Oil(J CC)
($/mmbtu)($/bbl)
Movement in Crude Oil and LNG Prices
Asian LNG Prices have been stable in the past, but in the future … ?
•Recent rapid rise in crude oil has impacted LNG price discussion
•Recent rapid rise in crude oil has impacted LNG price discussion
Japanese Gas Company’s Current Situation
Bargaining Power of
Suppliers
Intensity of Competitive
Rivalry
Bargaining Power of
Customers
Threat to Substitute
Threat of the Entry of New Competitors
Porter’s Five Forces less LNG supplyless LNG supply
high LNG pricehigh LNG price
gas vs gas competition gas vs gas competition with electric power with electric power companycompany
deregulationderegulation
decrease in demand decrease in demand due to financial crisisdue to financial crisis
electricity electricity - less oil price sensitive - less oil price sensitive - clean brand image - clean brand image
no “easy” client anymore (less usage of no “easy” client anymore (less usage of expensive energy (ie LPG and Kerosene) expensive energy (ie LPG and Kerosene)
distant customer (investment is necessary for distant customer (investment is necessary for pipeline and main)pipeline and main)
demand from environment-friendlinessdemand from environment-friendliness
Japanese Gas Company’s Current Situation
Bargaining Power of
Suppliers
Intensity of Competitive
Rivalry
Bargaining Power of
Customers
Threat to Substitute
Threat of the Entry of new Competitors
less supplyless supply
high LNG price ~oil high LNG price ~oil parityparity
no “easy” client anymore (less usage of no “easy” client anymore (less usage of expensive energy (ie LPG and Kerosene) expensive energy (ie LPG and Kerosene)
distant customer (investment is necessary for distant customer (investment is necessary for pipeline and main)pipeline and main)
demand from environment-friendlinessdemand from environment-friendliness
electricity (less oil price electricity (less oil price sensitive)sensitive)
clean brand image for clean brand image for electricity electricity
gas vs gas gas vs gas competition with competition with electric companyelectric company
deregulationderegulation
decrease in demand decrease in demand due to financial due to financial crisiscrisis
Porter’s Five Forces
Sustainable Japanese gas market need to Sustainable Japanese gas market need to be supported by:be supported by:
1.1. LNG price that can support LNG Buyer’s LNG price that can support LNG Buyer’s long term investment and growthlong term investment and growth
2. LNG price with less sensitive to oil price 2. LNG price with less sensitive to oil price fluctuation (gentler slope)fluctuation (gentler slope)
3.3. separation of long-term and spot LNG separation of long-term and spot LNG pricingpricing
Sustainable Japanese gas market need to Sustainable Japanese gas market need to be supported by:be supported by:
1.1. LNG price that can support LNG Buyer’s LNG price that can support LNG Buyer’s long term investment and growthlong term investment and growth
2. LNG price with less sensitive to oil price 2. LNG price with less sensitive to oil price fluctuation (gentler slope)fluctuation (gentler slope)
3.3. separation of long-term and spot LNG separation of long-term and spot LNG pricingpricing
9Asia-PacificAsia-PacificEurasiaEurasiaMiddle-EastMiddle-East
AtlanticAtlanticAtlanticAtlanticExisting Flow
New Flow
Regional Aspects of Gas Prices
•Although globalization has emerged in a portion of shorter-term trades, the bulk of LNG trades remain to be regional long-term contracts.
•Downstream gas market still carry strong regional characteristics around the world.
Oil ProductsOil Products Henry HubHenry HubJCCJCC
10
LNG Market Trend in Asia
China•A large number of domestic pipe line projects exist.•The difference between domestic market prices and LNG prices cannot be covered by subsidies.
•Will end users not be able to pay high prices?•Although numerous plans exist for the LNG terminal construction, will those be realized?
•Will return to the coal-based energy policy occur?
India•With the development of domestic gas fields in Dhirubhai and Deen Dayal on the East Coast in place, is large amount of LNG is required?
Rise of LNG prices
11
Strong Points of Japan as an LNG Buyer
Japan will continue to be the Foundation Customer for New LNG Projects.
By launching new LNG projects with Japanese buyers as the Foundation Buyers, new LNG projects can further expand its business
to other new markets and new fields.
Japan will continue to be the Foundation Customer for New LNG Projects.
By launching new LNG projects with Japanese buyers as the Foundation Buyers, new LNG projects can further expand its business
to other new markets and new fields.
•39 years history Stable Buyer•Has actual market Strong demand base•Substantial facilities can absorb demand growth•Financial support for natural resources advantages in terms and conditions
•39 years history Stable Buyer•Has actual market Strong demand base•Substantial facilities can absorb demand growth•Financial support for natural resources advantages in terms and conditions
Especially natural gas demand for gas companies will dramatically increase if the LNG price satisfies conditions for sustainable growth in downstream gas market. Win/Win situation for both LNG Buyers and the Sellers.
12
Area 03-13
NORTHERN TERRITORYWESTERN
AUSTRALIA
50
KILOMETRES
A U S T R A L I A
0 100
JPDA
Area 03-12
250km
500km
Melville Is.
EAST TIMOR
DARWIN
Suai
Dili
BAYU-UNDAN
ConocoPhillips (US) 57.15% (Operator)Santos (Au) 11.39%INPEX (JPN) 11.27%Eni (Italy) 10.99%TEPCO/Tokyo GasTEPCO/Tokyo Gas 9.20% 9.20% (TE:TG= 2 : 1)(TE:TG= 2 : 1)
ResourcesNatural Gas 3.4TCF(100bcm)LPG Condensate 400mil. bbl
LPG/Condensate (FSO)
Submarine PL (500km)
Darwin LNG (1 train)Darwin LNG (1 train)
[Total Cost USD 3.5bil]
LNG Sale and Purchase (SPA)Seller: Darwin LNGBuyer:Buyer: TEPCO, Tokyo GasTEPCO, Tokyo GasVolume: 3mtpa
(TE 2mtpa, TG 1mtpa)Period: Jan. 2006~ (17years)Shipping: FOB
Topics2004: Condensate LPG2006: LNG
Upstream by Tokyo Gas
13
New Upstream ParticipationPluto and Gorgon
Project Outline
Pluto Gorgon
EquityHolder
Woodside 100%Chevron 50%Shell 25%ExxonMobil 25%
Reserve 4.5~5tcf 40tcf
Plant Capacity
4.3mtpa 15mtpa
Plant Location
Barrup LNG Park Barrow Island
Project Start 2010 -
TG Contract (LNG & Upstream)
Pluto Gorgon
<Contracted> <HOA>
Seller Woodside Chevron
ACQ 1.5~1.75mtpa 1.2mtpa
Duration 15 + 5years 25 years
TransportFOB (incl. some ExShip)
FOB
Equity 5% TBD
Gorgon LNG
14
Purpose of FOB / Owing Vessels Increase of Trading Opportunities
• for spot tradingfor spot trading• for cargo diversionfor cargo diversion
Transportation for Other Buyers• North West Shelf Expansion:North West Shelf Expansion:
transportation by Tokyo Gastransportation by Tokyo Gasfor co-Buyersfor co-Buyers
LNG Transportation by Tokyo Gas
1. 3 LNG vessels owned and 1 vessel chartered as Long Term basis 145,000 m3 Moss type
• Energy Frontier - September.2003 / Energy Advance - March. 2005• Energy Progress - November. 2006 / Energy Navigator - June. 2008
2. 2 jointly-owned LNG vessels (dedicated to Badak IV)• Service In: LNG FLORA – March. 1993/ LNG VESTA – June. 1994
3. 7th Ship (2009), 8th Ship (2011)
* Line: Malaysia-I, M-III (Short-term), North West Shelf Expansion, Darwin, Sakhalin-II, Spot, and new projects