1

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

Promoting regional cooperation Promoting regional 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 societytransition to a low carbon societytransition to a low carbon society

-- The case of The case of JapanJapan--

4.4. SummarySummary

2

35

40

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

Energy‐related CO2 emissions by region

Gigatonnes

15

20

25

30

AsiaAsia‐‐PacificPacific

C. & S. America

Africa39%

50%

19%

0

5

10

1980 1990 2000 2006 2015 2020 2025 2030(IEA World Energy Outlook 2008)

North America

Europe & Eurasia

Middle East

50%

60%

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

Middle East

20%

30%

40%

Af i

North AmericaLatin America

Europe & Eurasia

8.9%6.1%

8.9% 9.3% 9.6% 10.1%

0%

10%

1990 2006 2015 2020 2025 2030

AsiaAsia‐‐PacificPacific

Africa

(IEA World Energy Outlook 2008)

3

Energy efficiency by regionEnergy efficiency by region

Mtoe

Toe/2000$

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

3,500

4,000

4,500

350

400

450

1,500

2,000

2,500

3,000

150

200

250

300

North AmericaLatin America

(IEA Key World Energy Statistics 2008)

AsiaAsia‐‐PacificPacific Europe & Eurasia0

500

1,000

0

50

100

500

600

1 500

2,000

Energy efficiency in AsiaEnergy efficiency in Asia‐‐Pacific countriesPacific countriesMtoe Toe/2000$1,879

The possibility of regional

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

200

300

400

500

1,000

1,500The 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.)

0

100

Mongolia

North KoreaNepal

VietnamChina

Myanmar

IndonesiaIndia

Pakistan

Cambodia

Thailand

Malaysia

Brunei

Sri Lanka

Philippines

BangladeshKorea

Chinese Taipei

Australia

SingaporeJapan

0

(IEA Key World Energy Statistics 2008)

4

Gas cogeneration systemEfficiencyin LHV

Electric power

Thermal energyGas holder

LNG tanks

Cogeneration Cogeneration ‐‐ hhighly ighly eefficientfficient

Conventional power generation

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

Unusable exhaust heat 20‐30%

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

Primary energy: 100%

Unused exhaust heat 60% Transmission loss  2%

Transmission networkThermal power plants

Utilized Energy (Power Only) : 38%

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 societytransition to a low carbon societytransition to a low carbon society

-- The case of The case of JapanJapan--

4.4. SummarySummary

5

Continuous development of gas resources

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

Promote Promote intraintra‐‐regional regional gas tradegas trade

Increase in trade flexibility

Competitive price

Healthy development of the natural gas industry in Asia‐Pacific

Ensuring supply security

N. Sea → Europe103.3 Bcm

C d → USAAlaska → Japan

Natural gas cross‐border trade (2008)

Continuous development of nContinuous development of natural gas atural gas resourcesresources

Russia → Europe154.4 Bcm

N. Africa→ Europe72.0 Bcm

Canada → USA103.2 Bcm

1.0 Bcm

N. Africa → USA1.9 Bcm

Nigeria → Europe

Trinidad → USA8.8 BcmAustralia → E. AsiaAustralia → E. Asia

20.2 Bcm20.2 Bcm

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

In S. America13 6 B

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

M.E. → E. Asia41.4 Bcm

M. E. → Europe8.1 Bcm

(BP Statistical Review of World Energy June 2009)

14.6 Bcm 13.6 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%)

6

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

North SlopeKenai

Yemen

Irkutsk

Natuna

Turkmenistan

Sakhalin I,

DonggiBadak

Arun

Abu DhabiBrunei

Oman, Qalhat

Qatar & Expansion(Nankai Trough ‐

Methane Hydrate)Pars, NIOC (Iran)

New & Expansion ProjectsExisting LNG Projects

JapanS. Korea

China TaiwanIndia

Si

US

Sakhalin II

Gladstone

TangguhMalaysia I, II, III

Greater Sunrise

Browse Basin, Ichthys

Bayu‐Undan (Darwin)

NWS

GorgonPluto

Scarborough (Pilbara)

Papua New Guinea

Masela (Abadi)

Singapore

Indonesia

Existing Market

Emerging Market

300Japan Korea

Taiwan China

India Others

LNG supply and demand outlook in AsiaLNG supply and demand outlook in Asia‐‐PacificPacificLN

G‐M

t

100

200Total demand ‐ High case Total demand ‐ Low case

Under construction

Planned

0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(The  Institute of Energy Economics, Japan and Tokyo Gas)

LNG supply from existing projects

7

Flexible tradeFlexible trade

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

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

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

Competitive priceCompetitive price

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.

Gas exporting countries

Gas importing countries

Sustainable growth for bothSustainable growth for both

8

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 societytransition to a low carbon societytransition to a low carbon society

-- The case of The case of JapanJapan--

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 6% from 1990 level between 

Japan’s government policy Reducing GHG emissions by

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

Kyoto Protocol Target Achievement Plan (March 2008) 2008 and 2012

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

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

25% from the 1990 level Formulation of mid‐term target 

60‐80% from the present level by 2050 

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

%by 2020

(Prime Minister Hatoyama announced at the UN climate change summit on 22 Sep 2009)

9

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 

Further efforts towarda low carbon society

Post‐Kyoto PeriodThe First Commitment Period

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

y

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 systems4.4. Maximum introduction of renewablesMaximum introduction of renewables

5.5. Construction of local  Construction of local  

2010 2020 2030 2040 2050

dEm

ission volum

e

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 

hydrogen networkshydrogen networks

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

Selecting  Selecting equipment with  Technological breakthroughs for d l

<STEP 1> <STEP 2>

Efforts to date Future technological development

Fuel oil +

conventional burners

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

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

Switching to natural 

gas

Use of highly efficient burners

optimum fuel better performance reducing CO2 emissions almost to zero

g , )3. CO2 sequestration and 

capture

100100 7575 4545 00

CO2 emission volume

Regenerative burner

10

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

RenewablesBiogas

Photovoltaic generation

Wind power generation

Solar thermal energy

generation

Smart energy networks

Heat supply networks

Power grid networks Information

networks

Energy expenditure

Control systems

Fuel cell

Distributedenergysystems

CHP

City gas networks

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

Highly efficient H2 production equipment

H2

City gas

VaporH2 separation type reformer

Hydrogen station 

Hospital 

Collective housing 

Sequestration and capture of highly concentrated CO2

Collective housing 

y g

Center for centralized monitoring 

Public hall  Hotel 

Generation efficiency Sequestration and capture of highly concentrated CO2

Highly efficient CHP system

Collective housing 

yof 60% or higher

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

11

SummarySummary

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

The mediumThe medium to longto long term vision of the gas industry for growth:term vision of the gas industry for growth:The mediumThe medium to longto long term vision of the gas industry for growth:term vision of the gas industry for growth:

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

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.

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.

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