Kazumi TAKAHATA

TOKYO GAS Co., Ltd.

Paris Representative Office

2016 September

LNG Global Congress 2016

Market with Increasing Liquidity and Implications for Buyers

1

Today’s Agenda

• Supply and Demand Balance• New Developments

2

Source: IEEJ

0 

100 

200 

300 

400 

500 

600 

700 

800 計画中プロジェクト

SPA・HOA締結済プロジェクト

既存プロジェクト

高需要ケース

低需要ケース

100万トン

2010 2015 2020 2025 20300 

50 

100 

150 

200 

250 

300 

350 

400 

450 

500 計画中プロジェクト

大西洋市場からの転売可能量

SPA・HOA締結済プロジェクト

既存プロジェクト

高需要ケース

低需要ケース

100万トン

2010 2015 2020 2025 2030

Asia and Middle East Global

Projects under planningLNG from AtlanticProjects with SPA/HOAProjects in operation

‐‐‐‐‐ High demand case‐‐‐‐‐ Low demand case

‐‐‐‐‐ High demand case‐‐‐‐‐ Low demand case

Projects in operationProjects with SPA/HOAProjects under planning

Million tons Million tons

3

500

450

400

350

300

250

200

150

100

50

0 2010                  2015                   2020                  2025                   2030

800

700

600

500

400

300

200

100

02010                  2015                   2020                  2025                   2030

LNG Supply and Demand Balance

Projects No. of Trains Capacity (mmtpa) 

USA

Sabine Pass Phase 1,2Sabine Pass Train 5CameronCove PointFreeportFreeport train 3Corpus Christi

4131212

184.513.55. 39.34.69

64.2

AustraliaPreludeWheatstoneIchthys

122

3.68.98.9

21.4

Russia Yamal LNG 3 16.5

Malaysia Petronas FLNGMalaysia LNG Train 9

11

1.23.6

Indonesia Tangguh Train3 1 3.8

Cameroon GoFLNG 1 1.2

LNG Projects Under Construction or with FID

Total : 111.9mmtpa4

With LNG exports from the US:

1 Destination free is becoming common

2 Emergence of tolling scheme and service providers

3 Expanded business opportunities for traders, brokers and portfolio suppliers

4 Arbitrage and fleet optimizations through cross-regional trading

5

New Developments Caused by US Projects

• Market Changes in Japan and Asia

6

Spot and Short‐Term Volumesmillion tons

7

Source: GIIGNL LNG Industry

Increase in Liquidity of LNG Market

8

Source: WGI, Platts

Current LNG Market Price in Asia

Full liberalization(Regulated Sector‐ 50kW)Power

Gas

Legal unbundling oftransmission /  distribution sector 

Deregulation Roadmap ofPower and Gas Sector in Japan

Legal unbundling  of pipeline service sector ( 3 Majors  only)  

2016April

2017April

2020April

2022April

Full liberalization(Regulated Sector ～0.1million cm)

・Residential customers :77.3 million・Small shops and offices:7.3 million

・Residential customers :24.7 million・Small shops and offices:1.2 million

9

Among all 50 nuclear power plants:

Source: Japan Nuclear Safety  Institute

Nuclear Plants  Licensing Status(as of August 2016)

Power Generation from Renewable Energy (FIT)

Restarted 3

Approved 7

To be decommissioned 6

(TWh)

10

Nuclear Restart and Renewable Energy in Japan

Korea・Power generation policies

-Nuclear, Coal-fired

Taiwan・Nuclear policy

China・Pipeline gas from Russia・Slowdown of economic growth

(Million tons)

Source: IEEJ

India・Coal demand・Pipeline gas from Turkmenistan

Japan・Nuclear policy・Renewable Energy

Solid line: High demandDotted line: Low demand

Japan

Korea

China

India

Taiwan

11

Predicted Structural ChangesDemand Outlook in Asia

• Structural Changes and Implications for LNG Buyers

12

Predicted Structural Changes

Matters of particular importance to Japanese buyers

Secure procurement flexibility

Pursue economic rationality

1

Expansion of destination free contracts starting from US projects

Increase in market liquidity

2 Existence of large uncommitted volume

3

Buyers are increasing their percentage of spot and short-term procurement

4

Increase in the variety of new entrants, diversification of supply sources

Diversifi-cation of

price indices

and contract forms

1

Installation and normalization of contracts linked to Europe & US hub prices

2Formation of portfolios with less price volatility

3 Diversification of contract term

13

Implications for Asian Buyers

1. For buyers to effectively absorb demand fluctuations

・ Strengthen cooperative alliance among buyers

・ Optimize trading and fleets management

・ Aggregate small and medium buyers

2. To create pricing dynamics that reflect the supply-demand balance in a timely manner

・ Improve the way of term contracts’ pricing that reflect market prices in a timely manner

・ Reduce price differentials among regions through more active arbitrage trading and eliminate the Asia premium

・ Encourage the establishment of Asian hubs and Asian markets

14

Thank you for your attention

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