““Natural Gas Trade as a Catalyst for Regional Market Integration Natural Gas Trade as a Catalyst for Regional Market Integration ””

Promoting Promoting regional regional cooperation cooperation in the Asiain the Asia--Pacific gas industry,Pacific gas industry,

for sustainable development in the regionfor sustainable development in the region

Norio IchinoNorio IchinoChairman, The Japan Gas Association Chairman, The Japan Gas Association

October 7th, 2009October 7th, 2009

ContentsContents

1.1. RegionalRegional cooperationcooperation for advanced use of for advanced use of natural gasnatural gas

2.2. RegionalRegional cooperationcooperation for ensuring supply for ensuring supply securitysecurity

3.3. Vision for the natural gas industry in the Vision for the natural gas industry in the transition to a low carbon societytransition to a low carbon society

-- The case of JapanThe case of Japan--4.4. SummarySummary

0

5

10

15

20

25

30

35

40

1980 1990 2000 2006 2015 2020 2025 2030

1. Regional cooperation for advanced use of natural gas1. Regional cooperation for advanced use of natural gas

Energy-related CO2 emissions by region

(IEA World Energy Outlook 2008)

AsiaAsia--PacificPacific

North America

Europe & Eurasia

Middle East

C. & S. America

Africa

Gigatonnes

39%

50%

19%

8.9%6.1%

8.9% 9.3% 9.6% 10.1%

0%

10%

20%

30%

40%

50%

60%

1990 2006 2015 2020 2025 2030

Natural gas share of primary energy supply by regionNatural gas share of primary energy supply by region

AsiaAsia--PacificPacific

Africa

North AmericaLatin America

Europe & Eurasia

Middle East

(IEA World Energy Outlook 2008)

Energy efficiency by regionEnergy efficiency by region

North AmericaLatin America

(IEA Key World Energy Statistics 2008)

AsiaAsia--PacificPacific Europe & Eurasia

Mtoe

Toe/2000$

Purple line : Primary energy consumption per GDPGreen column: Primary energy consumption

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0

50

100

150

200

250

300

350

400

450

0

100

200

300

400

500

600

Mongo

lia

North Kore

aNepal

Vietnam

China

Mya

nmar

IndonesiaIndia

Pakist

an

Cambodia

Thailand

Malay

sia

Brunei

Sri La

nka

Philippines

Bangla

deshKore

a

Chinese Taip

ei

Australia

Singa

poreJapan

0

500

1,000

1,500

2,000

Energy efficiency in AsiaEnergy efficiency in Asia--Pacific countriesPacific countriesMtoe Toe/2000$

(IEA Key World Energy Statistics 2008)

1,879

The possibility of regional cooperation in energy-saving technologies.i.e. Highly efficient CHP systems such as gas engine/turbine/fuel cell driven system, clean coal power generation technology, etc.)

Purple line : Primary energy consumption per GDPGreen column: Primary energy consumption

Gas cogeneration systemGas cogeneration system

Conventional power generationConventional power generation

Primary energy: 100%

Unused exhaust heat 60% Transmission loss 2%

Primary energy: 100%Electric power 25-40%Usable exhaust heat 40-50%

Unusable exhaust heat 20-30%

Efficiencyin LHV

Electric power

Thermal energyGas holder

LNG tanks

Transmission networkThermal power plants

Utilized Energy (Power & Heat): 70-80%

Utilized Energy (Power Only) : 38%

Cogeneration Cogeneration -- hhighly ighly eefficientfficient

ContentsContents

1.1. RegionalRegional cooperationcooperation for advanced use of for advanced use of natural gasnatural gas

2.2. RegionalRegional cooperationcooperation for ensuring supply for ensuring supply securitysecurity

3.3. Vision for the natural gas industry in the Vision for the natural gas industry in the transition to a low carbon societytransition to a low carbon society

-- The case of JapanThe case of Japan--4.4. SummarySummary

Continuous development of

gas resources

Promote Promote intraintra--regional regional

gas tradegas trade

Healthy development of the natural gas industry in Asia-Pacific

Increase in trade flexibility

Ensuring supply security

Competitive price

22．．RegionalRegional cooperationcooperation for ensuring supply securityfor ensuring supply security

(BP Statistical Review of World Energy June 2009)

Russia → Europe154.4 Bcm

N. Sea → Europe103.3 Bcm

N. Africa→ Europe72.0 Bcm

Canada → USA103.2 Bcm

Alaska → Japan1.0 Bcm

N. Africa → USA1.9 Bcm

Nigeria → Europe14.6 Bcm

Trinidad → USA8.8 BcmAustralia Australia →→ E. AsiaE. Asia

20.2 Bcm20.2 Bcm

In S. E. AsiaIn S. E. Asia16.8 Bcm16.8 Bcm

In S. America13.6 Bcm

S. E. Asia S. E. Asia →→ E. AsiaE. Asia65.5 Bcm65.5 Bcm

Natural gas cross-border trade (2008)

M.E. → E. Asia41.4 Bcm

M. E. → Europe8.1 Bcm

World Total Asia-Pacific

Pipeline 587.3 ( 72.2%) 16.8 ( 9.7%)

LNG 226.5 ( 27.8%) 156.0 ( 90.3%)

Total 813.8 (100.0%) 172.8 (100.0%)

Continuous development of nContinuous development of natural gas atural gas resourcesresources

Natural gas supply potential to AsiaNatural gas supply potential to Asia--PacificPacific

Gladstone

Yemen

Irkutsk

Tangguh

Natuna

Turkmenistan

Sakhalin I,

Donggi

Malaysia I, II, III

Badak

North Slope

Arun

Abu Dhabi

Kenai

Brunei

Oman, Qalhat

Greater Sunrise

Browse Basin, Ichthys

Bayu-Undan (Darwin)

NWS

GorgonPluto

Scarborough (Pilbara)

Qatar & Expansion

Papua New Guinea

Masela (Abadi)

(Nankai Trough -Methane Hydrate)Pars, NIOC (Iran)

New & Expansion ProjectsExisting LNG Projects

JapanS. Korea

China TaiwanIndia

Singapore

Indonesia

US

Existing Market

Emerging Market

Sakhalin II

0

100

200

300

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Japan Korea

Taiwan China

India Others

Total demand - High case Total demand - Low case

LNG supply and demand outlook in LNG supply and demand outlook in AsiaAsia--PacificPacific

(The Institute of Energy Economics, Japan and Tokyo Gas)

LNG

-Mt

LNG supply from existing projects

Under construction

Planned

Flexible tradeFlexible trade

Terms and conditions for natural gas trade:A need for flexibility

Terms and conditions for natural gas trade:Terms and conditions for natural gas trade:A need for flexibilityA need for flexibility

Ease restrictions on LNG cargo destinations

Expand into Upward Quantity Tolerance and Downward Quantity Tolerance

Ease restrictions on LNG cargo destinations

Expand into Upward Quantity Tolerance and Downward Quantity Tolerance

Gas exporting countries

Gas importing countries

Sustainable growth for bothSustainable growth for both

Gas exporting countries

Gas importing countries

Sustainable growth for bothSustainable growth for both

Natural gas pricing :A need for competitiveness

Natural gas pricing :Natural gas pricing :A need for competitivenessA need for competitiveness

Reasonable and acceptable price level for sustainable growth of both sellers and buyers.Less exposure to oil price fluctuations (gentler slope).Efforts by all to reduce total cost of the gas supply chain.

Reasonable and acceptable price level for sustainable growth of both sellers and buyers.Less exposure to oil price fluctuations (gentler slope).Efforts by all to reduce total cost of the gas supply chain.

Competitive priceCompetitive price

ContentsContents

1.1. RegionalRegional cooperationcooperation for advanced use of for advanced use of natural gasnatural gas

2.2. RegionalRegional cooperationcooperation for ensuring supply for ensuring supply securitysecurity

3.3. Vision for the natural gas industry in the Vision for the natural gas industry in the transition to a low carbon societytransition to a low carbon society

-- The case of JapanThe case of Japan--

4.4. SummarySummary

Target Reduction of GHG Emissions in JapanTarget Reduction of GHG Emissions in Japan

3. Vision of the gas 3. Vision of the gas industryindustry towards future towards future growthgrowth

Kyoto Protocol Target Achievement Plan (March 2008)

6% from 1990 level between 2008 and 2012

15% from the 2005 level （8% from 1990 level） by 2020

60-80% from the present level by 2050

Action plan for Achieving a low carbon society (July 2008)

Formulation of mid-term target (Speech by Prime Minister Taro Aso on 10 June 2009)

Japan’s government policy Reducing GHG emissions by

-- The case of Japan The case of Japan --

25% from the 1990 level by 2020

Formulation of mid-term target (Prime Minister Hatoyama announced at the UN climate change summit on 22 Sep 2009)

Supporting 60Supporting 60--80% reduction of CO80% reduction of CO22 emissions by expanding the emissions by expanding the advanced use of natural gas advanced use of natural gas

2010 2020 2030 2040 2050

Further efforts towarda low carbon society

Post-Kyoto PeriodThe First Commitment Period

Reductions achieved

1.1. Expanded use of natural gasExpanded use of natural gas

2.2. Advanced use of natural gas (e.g. highly efficient appliances)Advanced use of natural gas (e.g. highly efficient appliances)

3.3. Deployment of distributed energy systemsDeployment of distributed energy systems

4.4. Maximum introduction of renewablesMaximum introduction of renewables

Emission

volume

CO2 emission volume

Reducing CO2 emissions from the consumption of other types of fossil fuels such as oilReducing CO2 emissions from fossil-fired power stations, etc

5.5. Construction of local Construction of local hydrogen networkshydrogen networks

Vision of gas industry for a low carbon societyVision of gas industry for a low carbon society

Examples of advanced use of natural gas Examples of advanced use of natural gas (using natural gas with advanced energy conservation technologies)

Fuel oil +

conventional burners

1. Higher heating efficiency (burning of oxygen, etc.)

2. Higher energy efficiency (removal of nitrogen, highly efficient heat exchange, etc.)

3. CO2 sequestration and capture

Switching to natural

gas

Use of highly

efficient burners

100100 7575

Selecting optimum fuel

Selecting equipment with better performance

Technological breakthroughs for reducing CO2 emissions almost to zero

<STEP 1> <STEP 2>

4545 00

Efforts to date Future technological development

CO2 emission volume

Regenerative burner

Distributed energy systems in a low carbon societyDistributed energy systems in a low carbon society(Smart energy networks)(Smart energy networks)

Renewables

Control systems

BiogasPhotovoltaicgeneration

Wind power generation

Fuel cell

Solar thermal energy

Smart energy networks

Distributedenergysystems

CHP

Heat supply networks

Power grid networks

City gas networks

Informationnetworks

Energy expenditure

Future energy systemFuture energy system~ integration of advanced technologies ~~ integration of advanced technologies ~

Highly efficient H2 production equipment

H2

Sequestration and capture of highly concentrated CO2

City gas

VaporH2 separation type reformer

Collective housing

Hydrogen station

Hospital

Center for centralized monitoring

Public hall Hotel

Collective housing

Collective housing

Generation efficiency of 60% or higher

Sequestration and capture of highly concentrated CO2

Combination of high temperature fuel cell and gas turbine Carbon dioxide capture, transportation and storage

Underground storage

Energy infrastructure:

City gas ElectricityH2 Heat

Highly efficient CHP system

SummarySummary

Gas exporting countriesGas exporting countries Gas importing countriesGas importing countriesCreate closer relationships within the regionCreate closer relationships within the region

The medium- to long-term vision of the gas industry for growth:・ Advanced use of natural gas such as cogeneration systems・ Promotion of distributed energy system・ Harmony between renewable energy and natural gas・ Construction of local hydrogen networks, etc.

The mediumThe medium-- to longto long--term vision of the gas industry for growth:term vision of the gas industry for growth:・・ Advanced use of natural gas such as cogeneration systemsAdvanced use of natural gas such as cogeneration systems・・ Promotion of distributed energy systemPromotion of distributed energy system・・ Harmony between renewable energy and natural gasHarmony between renewable energy and natural gas・・ Construction of local hydrogen networks, etc.Construction of local hydrogen networks, etc.

Ensuring supply securityEnsuring supply security Advanced use of natural gasAdvanced use of natural gas

Thank you very much for your attention.Thank you very much for your attention.

Norio IchinoNorio IchinoChairman, The Japan Gas Association Chairman, The Japan Gas Association

October 7th, 2009October 7th, 2009