Stakeholder dialogue 1
At the end of March 2006, Tokyo Electric Power Company (TEPCO), Mitsubishi Corporation, and NYK joined
forces again to launch a second liquefied natural gas (LNG) carrier. Masaru Negishi, general manager of the
Fuel Business Group in the TEPCO Fuel Department, and Hitoshi Nagasawa, general manager of the LNG
Group at NYK, discussed the present situation and future prospects for LNG carriers.
New directions for the LNG project
Nagasawa Thank you for taking time from your busy
schedule to visit us. TEPCO and NYK first joined forces
in September 2003 as owners of Pacific Notus and recently teamed up again to launch Pacific Eurus on March 31,
2006. Can you explain TEPCO’s interest in owning LNG
vessels and transporting LNG?
Negishi Historically, LNG sellers relied on shipping
firms to transport LNG. When we began operating the
world’s first LNG thermal power plant in 1970, we were
dependent on the LNG seller and shipping firm to deliver
the LNG to us. After Japan liberalized its electric power
Stakeholder dialogue 1
Providing a steady supply of energy
Tokyo Electric Power Company
industry in 2000, we reexamined our cost structure and
found that the transport costs formed a much larger percentage of the LNG procurement costs compared to oil or
coal. It was at that point that we started considering owning our own vessels. We also wanted to participate in the
LNG supply chain from the gas field all the way to the
consumer. The outcome was the establishment in 2000 of
a ship-owning company in partnership with the Mitsubishi Corporation and NYK. Mitsubishi Heavy Industries
built the LNG vessels, and NYK oversees crew employment and ship maintenance.
Nagasawa How much LNG does TEPCO expect to
transport using the jointly owned vessels?
Negishi We do not plan to switch all our LNG procurement to jointly owned vessels. TEPCO currently consumes about 16 million tons of LNG annually, of which
10 NYK Group CSR Report 2006
LNG vessels: LNG vessels are specialized
carriers of liquefied natural gas (LNG). Natural gas is chilled to minus 162˚C then compressed to a liquid state at 1/600 its original
density. Liquefied natural gas is transported
from Southeast Asia, Australia, and other regions to Japan for use as a fuel in thermal
power plants and municipal gas utilities. LNG
is drawing increasing attention as a clean energy resource for producing fewer harmful
emissions compared to other fossil fuels.
* FOB contract: A free-on-board (FOB) contract is a terms of trade agreement. Under
this agreement, all LNG ownership rights
and risk transfer from the local seller to the
buyer when the seller loads the LNG onto
the vessel. The buyer then bears full responsibility for marine insurance and ocean
transport arrangements, including ocean
freight rates.
Masaru Negishi
General Manager
Fuel Business Group
Fuel Department
Tokyo Electric Power Company
Stakeholder dialogue 1
about 20% is handled on an FOB contract* basis. As the
LNG buyer, we are in charge of transport arrangements
for the LNG. Our purchasing contracts with the Darwin
LNG Project in Australia, from which we commenced
purchases in March this year, and the Sakhalin LNG Project are also fixed as FOB for procurement and transport.
Nagasawa The TEPCO and NYK jointly owned vessels
will be in service for both projects.
Negishi By enhancing risk management and reducing
costs, we would like to increase our options for LNG procurement.
Preserving lifelines through safe vessel
operation
Nagasawa Three companies joined together to establish
a vessel operation company. Why did TEPCO select NYK
to participate?
Negishi NYK is fully versed in the operation and management of LNG carriers.
Nagasawa Was the fact that we have not had any accidents in over 20 years of LNG transportation a factor in
the decision?
Negishi Certainly. It is very important that we continue
to deliver a steady, uninterrupted flow of electric power to
our customers. For households across Japan, electricity is
a virtual lifeline. For commercial clients, even a momentary outage could have an enormous impact on the economy. A secure inflow of LNG, oil, and coal from overseas
is crucial, and therefore a reliable marine transport of
these energy resources is essential.
Nagasawa What does TEPCO expect of NYK in its
role as the ship management company of the LNG vessels?
Negishi We have completely entrusted NYK with the safe operation of the LNG carriers. The special characteristics of LNG make it
particularly difficult to handle, and
our chief concern is the safe transport.
Nagasawa Fortunately, there
have been no major environmental
accidents involving LNG carriers.
As you pointed out, LNG requires
special conditions while in transit.
Hitoshi Nagasawa
Ships must be equipped with both
General Manager
LNG Group
a refrigeration system and heat-insulation construction to maintain a
constant temperature of about minus 160˚C. Safe vessel
operation requires highly specialized ship management.
Negishi As the leading LNG-carrier company, we hope
you will continue to set a superlative example.
Nagasawa Currently, most of our officers are Japanese,
while the majority of the crew is from other countries. We
plan to cooperate with several universities around the
world to provide training and other activities to help support and improve skill levels of crew members. We also
aim to improve the safety of the ships themselves. LNG
vessels generally have an operating lifespan of about 40
years, and we conduct daily vessel maintenance procedures to ensure the ships continue operating in top form
throughout their usage.
Working together for a steady supply
Negishi Before we began the LNG transportation project in 2000 with the jointly owned vessels, we paid little
attention to how the LNG was transported. We were not
very familiar with vessel conditions, and I am sure we
made many difficult demands. Now that we own vessels
ourselves, we are more sensitive to safety issues. The relationship between TEPCO and NYK has evolved from a
mere contractual relation to a partnership in which we
continue to deepen our mutual trust.
Nagasawa NYK has taken on the responsibility of contributing an important link in the LNG supply chain to
provide energy to all of Japan. As a partner, we are responsible for delivering a safe and steady flow of LNG to
TEPCO.
Negishi About 40% of our entire electric power output
comes from our LNG thermal power plants.
Nagasawa The transport of LNG plays an important
role in energy production. How does TEPCO incorporate
CSR into its operations?
Negishi TEPCO’s ultimate mission and its social responsibility are to provide a steady supply of affordable
and quality electricity. One important element of this
quality is environmental protection. I believe LNG will
become an increasingly significant energy source because
it has no sulfur oxide emissions and lower carbon dioxide
and nitrogen oxide emissions than any other fossil fuel.
Nagasawa I look forward to maintaining our close
partnership to provide safe vessel operations and a stable
flow of energy for many years to come.
March 17, 2006
NYK Headquarters
NYK Group CSR Report 2006
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