LNG in Japan Challenges of Tokyo Gas in the Current Turbulent Market

LNG Import around the World (2007) South Korea (25.9) Taiwan (8.2) India (7.5) U.S.A. (16.4) Spain (18.2) France (9.8) Turkey (4.5) Others (Belgium, Italy, Portugal, etc.) (10.1) (Cedigaz) Unit: Mton China (2.9) Japan (68.3) Asia accounts for 64% of the total imports and Japan remains to be the biggest importer

Diversification of LNG Sources In Japan Japan, which has been buying LNG for 39years, is an LNG buyer with credibility. Japan has improved its supply security through diversification of LNG sources. For many of such LNG sources, Japan is the foundation customer. Alaska Brunei Abu-Dhabi Indonesia Malaysia Australia Oman Data Sources: Trade Statistics Qatar

Primary Energy Consumption Comparison of the world (2007) Former Union The share of natural gas consumption is still smaller in comparison to other countries. Source:BP Statistical Review of World Energy June 2008

LNG Supply-Demand Projection in Japan Unit: MTPA based on “Natural gas market in Asia-Pacific and Atlantic 2008, IEEJ” 38MTPA of LNG Japan, with scarcity in natural resource, will continue to increase LNG import to meet the increase in gas demand and to renew existing contracts.

Movement in Crude Oil and LNG Prices ($/mmbtu) ($/bbl) Recent rapid rise in crude oil has impacted LNG price discussion Asian LNG Prices have been stable in the past, but in the future … ?

Japanese Gas Company’s Current Situation Porter’s Five Forces Threat to Substitute less LNG supply high LNG price Bargaining Power of Suppliers electricity - less oil price sensitive - clean brand image Intensity of Competitive Rivalry deregulation decrease in demand due to financial crisis Bargaining Power of Customers Threat of the Entry of New Competitors no “easy” client anymore (less usage of expensive energy (ie LPG and Kerosene) distant customer (investment is necessary for pipeline and main) demand from environment-friendliness gas vs gas competition with electric power company

Japanese Gas Company’s Current Situation Porter’s Five Forces Threat to Substitute less supply high LNG price ~oil parity Bargaining Power of Suppliers Sustainable Japanese gas market need to be supported by: LNG price that can support LNG Buyer’s long term investment and growth 2. LNG price with less sensitive to oil price fluctuation (gentler slope) separation of long-term and spot LNG pricing electricity (less oil price sensitive) clean brand image for electricity deregulation decrease in demand due to financial crisis Intensity of Competitive Rivalry Bargaining Power of Customers Threat of the Entry of new Competitors no “easy” client anymore (less usage of expensive energy (ie LPG and Kerosene) distant customer (investment is necessary for pipeline and main) demand from environment-friendliness gas vs gas competition with electric company

Regional Aspects of Gas Prices Asia-Pacific Eurasia Middle-East Atlantic Existing Flow Oil Products JCC Henry Hub New Flow Although globalization has emerged in a portion of shorter-term trades, the bulk of LNG trades remain to be regional long-term contracts. Downstream gas market still carry strong regional characteristics around the world.

LNG Market Trend in Asia China A large number of domestic pipe line projects exist. The difference between domestic market prices and LNG prices cannot be covered by subsidies. Will end users not be able to pay high prices? Although numerous plans exist for the LNG terminal construction, will those be realized? Will return to the coal-based energy policy occur? India With the development of domestic gas fields in Dhirubhai and Deen Dayal on the East Coast in place, is large amount of LNG is required? Rise of LNG prices

Strong Points of Japan as an LNG Buyer 39 years history  Stable Buyer Has actual market  Strong demand base Substantial facilities  can absorb demand growth Financial support for natural resources  advantages in terms and conditions Japan will continue to be the Foundation Customer for New LNG Projects. By launching new LNG projects with Japanese buyers as the Foundation Buyers, new LNG projects can further expand its business to other new markets and new fields. Especially natural gas demand for gas companies will dramatically increase if the LNG price satisfies conditions for sustainable growth in downstream gas market. Win/Win situation for both LNG Buyers and the Sellers.

Upstream by Tokyo Gas LNG Sale and Purchase (SPA) Area 03-13 NORTHERN TERRITORY WESTERN AUSTRALIA 50 KILOMETRES A U S T R A L I A 100 JPDA Area 03-12 250km 500km Melville Is. EAST TIMOR DARWIN Suai Dili BAYU-UNDAN ConocoPhillips (US) 57.15% (Operator) Santos (Au) 11.39% INPEX (JPN) 11.27% Eni (Italy) 10.99% TEPCO/Tokyo Gas 9.20% (TE:TG= 2 : 1) Resources Natural Gas 3.4TCF(100bcm) LPG Condensate 400mil. bbl LPG/Condensate (FSO) Submarine PL (500km) Darwin LNG (1 train) [Total Cost USD 3.5bil] LNG Sale and Purchase (SPA) Seller: Darwin LNG Buyer: TEPCO, Tokyo Gas Volume: 3mtpa (TE 2mtpa, TG 1mtpa) Period: Jan. 2006~ (17years) Shipping: FOB Topics 2004: Condensate LPG 2006: LNG

New Upstream Participation Pluto and Gorgon Project Outline Pluto Gorgon Equity Holder Woodside 100% Chevron 50% Shell 25% ExxonMobil 25% Reserve 4.5~5tcf 40tcf Plant Capacity 4.3mtpa 15mtpa Plant Location Barrup LNG Park Barrow Island Project Start 2010 - TG Contract (LNG & Upstream) Pluto Gorgon <Contracted> <HOA> Seller Woodside Chevron ACQ 1.5~1.75mtpa 1.2mtpa Duration 15 + 5years 25 years Transport FOB (incl. some ExShip) Equity 5% TBD Gorgon LNG

LNG Transportation by Tokyo Gas Purpose of FOB / Owing Vessels Increase of Trading Opportunities for spot trading for cargo diversion Transportation for Other Buyers North West Shelf Expansion: transportation by Tokyo Gas for co-Buyers 3 LNG vessels owned and 1 vessel chartered as Long Term basis 145,000 m3 Moss type Energy Frontier - September.2003 / Energy Advance - March. 2005 Energy Progress - November. 2006 / Energy Navigator - June. 2008 2 jointly-owned LNG vessels (dedicated to Badak IV) Service In: LNG FLORA – March. 1993/ LNG VESTA – June. 1994 7th Ship (2009), 8th Ship (2011) * Line: Malaysia-I, M-III (Short-term), North West Shelf Expansion, Darwin, Sakhalin-II, Spot, and new projects

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