Marketing

Japanese Market

With project development costs amounting in billions of dollars, it is essential that a long-term committed purchaser is secured to make the project financially feasible. 　The key to marketing LNG to secure such purchasers is the accurate knowledge of projected demand for electric power and gas utilities, as well as industrial energy needs. 　We, LNG Japan, have been conducting marketing activities to meet market demands since the 1970's, and today, we handle approximately 25% of all LNG imported into Japan.

The common trading terms for LNG began as Destination Ex-Ship (DES) contracts, and but are now shifting to FOB contracts. Our first LNG transportation business started back in 1983. Leveraging our experience and proven results in joint-venture projects such as the medium city gas company project where smaller sized LNG tankers (in which we had an early involvement) are utilized, we are able to understand the market environment, and apply this knowledge to pursue marketing activities tailored to each customer's needs and market demands.

Asian Market

LNG trade has developed over the years in the Far East, which was primarily kicked off by the Japanese market followed by the Korean and the Taiwanese market. More recently, India and China have started importing LNG, while several other Asian countries like Thailand and Singapore are planning to import LNG in the near future. 　We, LNG Japan, are continuously focusing to establish and to develop long-term business relationships with Asian LNG buyers for future business opportunities by utilizing our LNG trading expertise in the Japanese market.

European Market

We, LNG Japan, are participating in the Canvey Project in the U.K. since 2004. 　The Project commenced with a feasibility study into the development of an LNG import and regasification facility at the existing Calor LPG terminal at Canvey Island, Essex U.K. 　The terminal began its operations in 1964 as the world’s first LNG receiving terminal by importing LNG from Algeria, but the terminal had been converted into an LPG receiving terminal in 1990.

We are promoting this Project together with Calor Gas, the owner of Canvey LPG terminal, Osaka Gas, a Japanese city gas utility, and Centrica, the largest energy supplier in the U.K. We currently anticipate that the new terminal will start operation in 2012 with annual distribution capacity of 4 million tons of LNG to the U.K. (approximately 5% of U.K.’s annual gas demand).

In the U.K., natural gas accounts for 40% of primary energy demand with gas consumption being 98 billion cubic meters (equivalent to 78 million tons of LNG) per annum. U.K. is the world’s third largest gas consumer after the U.S. and Russia. 　The U.K. became a gas exporter after discovering oil and gas fields in U.K. Continental Shelf (UKCS) in the 1980s. 　However, due to rapid declines in UKCS production in recent years, the U.K. has become a net importer of gas since 2004.

U.K.'s natural gas demand is increasing mainly from environmental reasons especially in the power generation sector. 　As a result, forecasts indicate an import dependency of 50% in 2010/11, which will increase up to 80% by 2015/16. Therefore, there is an urgent need for the U.K. government to secure natural gas into the U.K. 　Under such circumstances, LNG is expected to be the growing source of supply that enables the U.K. to diversify natural gas supply source.

North American Market

Natural gas pipeline trade is an established market in the U.S., where approximately ten times as much natural gas is consumed compared to Japan. 　However, due to recent increase in natural gas demand and decline in natural gas production in North America, LNG has attracted significant attention in the U.S. energy market and its players. 　As a result, U.S. LNG imports are expected to increase significantly in the future.

We, LNG Japan, are taking on new challenges to supply LNG to the expanding North American market and to create a consistent business model from the upstream business to the downstream business. 　This covers procurement of LNG supply source, participation in LNG receiving terminal and sales of regasified natural gas to the U.S. downstream market. We have already entered the downstream business in the U.S. market by selling pipeline natural gas to our customers through our affiliated company.