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Tokyo Gas Group CSR Report 2016
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Social Report - Enhancement of Energy Security
Procurement of Raw Materials

With more now expected of natural gas following the 2011 Great East Japan Earthquake and full liberalization of the gas and electricity retail sectors having unleashed major changes in Japan's energy industry, Tokyo Gas Group recognizes that providing society with low-priced, stable supplies of energy stands high on the list of the public's concerns and is committed to procuring the raw materials to enable it to meet these expectations.

Securing Access to Diverse Sources of Raw Materials

We are committed to further diversifying our procurements of raw materials so as to deliver stable and affordable supplies of LNG.

Triple Diversification

1. Procurement sources

We will broaden our procurement sources from mainly Asia and Australia today to North America and other countries around the world.

2. Contract conditions

We will seek to diversify contract conditions by moving away from mainly oil-linked pricing to indexation against multiple indicators (such as the Henry Hub price) and eliminating destination clauses.

3. LNG network

We will seek to acquire gas fields, power stations, etc. on a global basis. By developing distribution channels linking Asia, North America, and Europe, we will also aim to shrink regional disparities in market prices.

Since Tokyo Gas first began procuring LNG from Alaska in 1969, our imports of LNG have risen steadily to meet growing demand. Tokyo Gas currently imports LNG under long-term contracts with 12 projects in five countries, including Russia (Sakhalin) as well as other countries in the Asia-Pacific region such as Malaysia, Australia, and Brunei.

In March 2016, we entered a new contract to procure an additional 200,000 tons per year (approximately) of LNG from the Cameron LNG project in the U.S. Combined with the approximately 520,000 tons of LNG that we had already committed to buy from the same project under a previous contract and our contract for 1.4 million tons per year from the Cove Point project, also in the U.S., we now have access to several sources of LNG at prices linked to the U.S. natural gas market (Henry Hub) price. In August 2015, we additionally signed a memorandum of understanding on strategic collaboration with Taiwanese oil and gas major CPC Corporation, under which we will discuss collaboration in areas including LNG procurements and supply sharing.

By thus diversifying our sources and contract conditions and collaborating with other buyers in Japan and overseas, we are working to secure access to stable, low-priced supplies of gas resources.

LNG Project Contract Volume (as of May 2016)
Project name Contract volume
(10,000 tons)
Start
of operation
Period
Brunei 100 1973 20 + 20 + 10 years (until 2023)
Malaysia I (Satu) 260 1983 20 + 15 years (until 2018)
Australia (Western Australia) 53 1989 20 + 8 years (until 2017)
Malaysia II (Dua) 90 1995 20 years (until 2015)
Qatar 35 1998 24 years (until 2021)
Malaysia III (Tiga) 34 2004 20 years (until 2024)
North West Shelf (NWS) Expansion 107 2004 25 years (until 2029)
Darwin (Australia) 100 2006 17 years (until 2022)
Sakhalin II 110 2009 24 years (until 2031)
Pluto (Australia) 150 2012 15 years (until 2025)
Queensland Curtis (Australia) 120 2015 20 years (until 2035)
Gorgon (Australia) 110 2016 25 years (until 2039)
Ichthys (Australia) 105 2017 (planned) 15 years
Cove Point (U.S.) 140 2017 (planned) 20 years
Cameron (U.S.) Approx. 52 2020 Approx. 20 years
Approx. 20 2020 Approx. 20 years

Flexible Procurement Terms

Energy Horizon
Energy Horizon

We aim to enter into procurement terms that allow us to quickly and flexibly obtain additional procurements in order to accommodate fluctuations in demand.

Through our wholly owned subsidiary Tokyo LNG Tanker Co., Ltd., we efficiently manage our own fleet of carriers, which transport LNG under long-term contracts from Malaysia, Australia, and Russia (Sakhalin).

Four LNG carriers are being built to a new and highly economically efficient design capable of transiting the Panama Canal. These will be used to ship LNG from Cove Point in the U.S. from 2017.

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Technically recoverable quantities of conventional and unconventional gas resources

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