Safety and Security 1: Procurement Stage
- Aspects Determined as Materiality
Customer Health and Safety
Principle and Outline
In recent years, expectations and demand for natural gas have grown from the viewpoint of ensuring energy security. Osaka Gas makes efforts to ensure the stable procurement of LNG and other raw materials by further diversifying procurement sources. We also strive to procure raw materials with market competitiveness by diversifying contract price indicators. When importing LNG and other raw materials from other countries, we work to make the transportation process expeditious, safe and steady by operating LNG tankers, including those owned by us, in an efficient manner.
To ensure the stable procurement of LNG and make our natural gas business profitable, we work on participation in liquefaction projects and gas field development projects.
Believing that it is necessary to take responsible measures in cooperation with our business partners regarding the social and environmental impacts that occur in these series of value chain business processes, we have established the Daigas Group Procurement Policy and informed our business partners of it along with the Daigas Group Procurement Policy for Suppliers.
For LNG sellers with whom we have signed long-term purchase contracts for LNG, we conduct a questionnaire survey to check the status of their policies, initiatives, and information disclosure regarding items of corporate governance, human rights, labor, the environment, and consideration for local communities, referring to the European Commission's Guide for the Oil and Gas Industries concerning the Implementation of the UN Guiding Principles on Business and Human Rights, which was issued in 2013.
Ensure Stable Procurement by Diversifying Sources of LNG Imported by Osaka Gas
Natural gas resources the source of city gas and fuels for power generation are spread worldwide. Osaka Gas started importing LNG from Brunei in 1972 and has since diversified its procurement sources. In December 2019, a natural gas liquefaction project was launched in Texas, the U.S. LNG from the U.S. is procured with a new method, whereby the price is determined in connection with Henry Hub prices, the index upon which the market price for natural gas futures is based in the U.S. This procurement method has been added to Osaka Gas’s existing procurement method, whereby the price is determined by indexing to crude oil prices.
The use of more diverse price indicators will enable us to procure LNG at stable prices even if crude oil prices fluctuate. Moreover, investment in the natural gas liquefaction project will enable us to procure a kind of price-competitive LNG, whose price is closer to prime cost, among the kinds of LNG whose prices are linked to Henry Hub prices. We will continue our efforts to procure more affordable LNG in a more stable manner.
■ LNG Handled by Osaka Gas (including the amount of LNG for electricity generation and wholesale trade)
Expanding Upstream Business Including Obtaining LNG Rights
Osaka Gas is one of the first Japanese companies to work on the upstream business. In 1990, we took part in a gas field development project in Indonesia, which was later followed by gas and oil development projects in other countries.
As for our future upstream business, we will steadily implement existing projects while taking advantage of our domestic position as a gas and electricity buyer as well as an investor in development projects. In the future, we also aim to obtain concessions in new development projects, focusing on relatively less risky projects that are already in operation or being developed.
■ Upstream Businesses of the Daigas Group (As of March 31, 2022)
|Project name||Location||Project type||Concession ratio||Year of participation in the project|
|Sunrise||Australia, East Timor||LNG||10%||2000|
|East Texas Shale Gas Project (Sabine Oil & Gas Corporation)||U.S.A.||Natural gas, condensate, natural gas liquids*||100%||2018|
- * Natural gas liquids (NGLs) are liquid hydrocarbons separated and recovered from natural gas, which becomes liquid at standard temperature and pressure.
Acquires All Shares of Sabine Oil & Gas Corporation, a U.S.-based Shale Gas Development Company
On July 28, 2019 (CT), Osaka Gas Co., Ltd. and Sabine Oil & Gas Holdings*, a shale gas developer operating in Texas, the U.S., concluded an agreement for Osaka Gas’s acquisition of all issued shares of Sabine Oil & Gas Corporation (hereinafter, “Sabine”) through Osaka Gas’s U.S.-based subsidiary.
This is the first agreement by a Japanese company to acquire a U.S.-based shale gas developer. Through this agreement, we will position the shale gas development project as a third pillar of our energy business in the U.S., following the Freeport LNG project and a power generation project, to further increase profits.
Sabine owns a mining field of about 1,300 km² (about 320,000 acres) in the eastern part of Texas. In 2021, it produced gas of about 2.8 million tons when converted into LNG from about 900 wells. That is an excellent mining field with the potential for further development for the future.
In July 2018, we acquired a 35% right to a gas field in the eastern area, which is about half of the mining field owned by Sabine. The gas field has brought us a larger production amount and greater profits than we expected when joining the project. This acquisition has enabled us to own Sabine’s entire mining field, including the western area, where many wells in operation are located and producing stable profits.
In addition, since we participated in the project in 2018, cooperation with Sabine has allowed us to confirm Sabine’s great operator skills underpinned by the company’s competent management. This acquisition has enabled us to acquire operatorship that helps us take the initiative in promoting the project in the upstream energy business in the U.S. and consequently to conduct businesses more strategically. In the future, we aim to develop the business efficiently and sustainably with Sabine as a promotor of our upstream energy business in the U.S. by merging the shale gas development division of our U.S.-based subsidiary with Sabine.
- * Sabine Oil & Gas Holdings owns all shares of Sabine Oil & Gas Corporation.
Expanding Fleet of LNG Tankers
Osaka Gas has been striving to secure its LNG transportation capacity using a fleet of eight LNG tankers. Demand for LNG transportation is expected to grow following the scheduled starts of new projects such as the Freeport project in the United States.
Under these circumstances, we will effectively utilize our existing fleet and expand it if necessary to ensure stable and economical source gas procurement and to diffuse the use of natural gas.
■ Fleet of Osaka Gas LNG Tankers (As of March 31, 2022)
|Tanker||Loading capacity (m³)||Tank type||Tanker management company||Shipyard||Year the service started|
|1||LNG JAMAL||135,000||5 Moss||NYK Line||Mitsubishi Heavy Industries, Ltd.||2000|
|2||LNG DREAM||145,000||4 Moss||NYK Line||Kawasaki Heavy Industries, Ltd.||2006|
|3||LNG BARKA||153,000||4 Moss||NYK Line||Kawasaki Heavy Industries, Ltd.||2008|
|4||LNG JUPITER||153,000||4 Moss||NYK Line||Kawasaki Heavy Industries, Ltd.||2009|
|5||LNG VENUS||153,000||4 Moss||Mitsui O.S.K. Lines, Ltd.||Mitsubishi Heavy Industries, Ltd.||2014|
|6||LNG MARS||153,000||4 Moss||Mitsui O.S.K. Lines, Ltd.||Mitsubishi Heavy Industries, Ltd.||2016|
|7||LNG JUNO||180,000||4 Moss||Mitsui O.S.K. Lines, Ltd.||Mitsubishi Shipbuilding Co., Ltd.||2018|
|8||LNG SATURN||153,000||4 Moss||Mitsui O.S.K. Lines, Ltd.||Mitsubishi Heavy Industries, Ltd.||2020
(launched in 2016)
Freeport LNG Project Put into Commercial Operation
Freeport LNG plant
Photo: Courtesy of Freeport LNG Development, L.P.
In December 2019, the Freeport LNG project in Texas, the U.S., in which Osaka Gas and JERA Co., Inc. have participated through FLNG Liquefaction LLC (hereinafter “the first-train liquefaction company”), was put into commercial operation on the first train of the LNG production equipment.
This project is an LNG project promoted by Freeport LNG as an operator. It liquefies natural gas procured from the U.S. gas market to export the resulting LNG. Osaka Gas and JERA annually receive about 2.32 million tons of LNG each based on the liquefaction and processing agreement with the first-train liquefaction company.
In addition, through LNG procurement from this project, we will secure LNG with no destination restrictions and diversify supply sources and price indicators to ensure stable and flexible LNG procurement.
■ Overview of the Freeport LNG project
|Location||Freeport, Texas, U.S.A.|
|Capacity of liquefaction equipment||Approximately 5 million tons / year x 3 trains|
Osaka Gas: Approximately 2.32 million tons/year (20-year liquefaction processing agreement)
JERA: Approximately 2.32 million tons/year (20-year liquefaction processing agreement)
- Sustainability of
the Daigas Group
- Values and Sustainability Promotion of the Daigas Group
- Daigas Group's Values Daigas Group Charter of Business Conduct and Management Policy Daigas Group Code of Business Conduct Sustainability Promotion System and Management Stakeholder Engagement Initiatives the Daigas Group Participates In Commendation from the Outside
- Sustainability Management and Value Creation Process
- Value Creation Process of the Daigas Group Long-Term Management Vision 2030 Medium-Term Management Plan 2023 Daigas Group Carbon Neutral Vision
- Actions on Materiality
Materiality of the Daigas Group
Materiality Review Cycle
Creating Value for Customers
(Charter I) Contributing to the Sustainability of the Environment and Society
(Charter Ⅱ) Engaging with and Contributing to Society (Charter Ⅲ) Respecting Human Rights
(Charter IV) Complying with Laws and Regulations (Charter V) Providing Work Environment That Supports Employees’ Personal Growth (Charter VI)
- Corporate Governance
- Corporate Governance Risk Management Compliance Messages from Outside Directors
- Value Chain and Sustainability
- Consideration for the Value Chain and Stakeholders Social Impact of Business Activities in Our Energy Value Chain and Our Efforts toward Sustainability
- FY2022 Activities Report
- Creating Value for Customers (Charter I)
Charter I Index
Management for Creating Value for Customers
Safety and Security 1:
Procurement Stage Safety and Security 2:
Processing Stage Safety and Security 3:
Distribution Stage Safety and Security 4:
Consumption Stage Incorporating Customer Opinions Proposing New Value
- Contributing to the Sustainability of the Environment and Society (Charter Ⅱ)
- Charter Ⅱ Index Management toward Contributing to the Sustainability of the Environment and Society Environmental Management Environmental Management: Indicators, Targets and Results Actions for Climate Change: Recognition of and Action on Risks and Opportunities Actions for Climate Change: Method to Evaluate Effects of CO2 Emissions Reduction Actions for Climate Change: Working to Reduce CO2 Emissions in Business Activities Actions for Climate Change: Working to Reduce CO2 Emissions at Customer Sites Efforts in Resource Recycling Conserving Biodiversity Developing Environmental Technologies Addressing Environmental Risk Promotion of Green Purchasing Environmental Communication
- Engaging with and Contributing to Society (Charter Ⅲ)
- Charter Ⅲ Index Management of Engagement with and Contribution to Society Activities for Promoting Communication with Society Corporate Volunteering Activities under the Small Light Campaign Social Contribution Activities Activities at Osaka Gas' Foundations
- Respecting Human Rights (Charter IV)
- Charter IV Index Status of Management regarding Respect for Human Rights Human Rights Due Diligence Action on Human Rights
- Complying with Laws and Regulations (Charter V)
- Charter V Index Management for Complying with Laws and Regulations Compliance Promotion Efforts Efforts for Protection of Personal Information Information Security Consultations and Reports from Partner Companies
- Providing Work Environment That Supports Employees’ Personal Growth (Charter VI)
- Charter VI Index Status of Management to Support Employees' Personal Growth Employment Acceptance of Diversity Balancing Work and Family Human Resource Development and Rewards Communication Between Employees and Company Improving Occupational Health and Safety
- Reporting Guidance and Guidelines and ESG Data
- Reporting Guidelines