Osamu Masuda, President, Astomos Energy
The Great East Japan Earthquake has brought sweeping social and economic change in Japan and given rise to a number of issues. In particular, the resulting nuclear accident and power supply shortages have once again called into question the nature of Japan’s energy supply, and discussion of energy that returns to basics. From your perspective which is the aftermath and effects of the Fukushima incident and how did this change the Japanese energy scenario?
Japan can’t escape from natural disasters but we did not expect that such kind of natural action will impact on a nuclear facility. We had the confidence that nuclear power is very safe. Nobody could predict such a devastating result.
But after that, some utilities like electricity and city gas were also damaged because of the effects of the earthquake on pipelines or electric lines. Because of the Fukushima calamity, the government suddenly realised that LPG (Liquefied Petroleum Gas) would be good for Japan. It is very efficient in case of a disaster.
At that time Atosmos Energy was part of a rescue team in Fukushima and we supplied equipment and helped re-building the energy supply. Everyone who could was helping there and so did we.
LPG has emerged as one of the principal fuel sources in residential & commercial sectors for cooking and heating applications replacing the conventional coal and wood fuels. The market value of this product is expected to reach 147$bn by 2024. What is your vision of the LPG market in the upcoming years?
I see it growing, especially considering that historically the main suppliers were Middle Eastern countries accounting for 90% of our supply, nevertheless, now the Japanese import volume ratio has changed and roughly 30% is coming from the US.
This boost in the LPG imports from the US is because of the revolution in the Shell gas. In fact such a kind of expansion comes sustained by new technology or supply sources. Right now we are considering some options as partners since, with the recent opening of the Panama channels our supply from the US has new options.
We have been able to diversify our sources and we are seeking new alternatives in Australia and Africa to reduce the geopolitical risk, count with an alternative supply and increase our bargaining power.
To reflate Japan and reform it, Shinzo Abe, prime minister since December 2012, proposed the three “arrows” of what has become known as Abenomics: monetary stimulus, fiscal “flexibility” and structural reform. The prevailing view is that there have been too few structural reforms, however, in the energy sector, we have seen a very ambitious policy that has liberalised the power industry and will deregulate the gas one this April allowing for a greater competition and decreased prices. As a company that started to operate within the power generation sector in 2015, what is the future that you see as a result of the electricity deregulation of the country and how are you planning to expand your operations in the sector?
Last April we had the liberalisation of electricity sector and this coming April 2017 we will see the city gas liberalised as well. So far, the liquidity ratio of end users is around 3% of the total consumption which is very small. The government expected around 10% but it seems a bit early for that. In the case of city gas, it is a bit more difficult compared to electricity because of safety in transport and handling. Despite that, there are from 10 to 12 companies interested in entering the market.
In the case of LP gas, we are seeing that it is clean and diversified, and we are seeing the progress of the storage batteries as well. Hence, all these factors will give LP gas a competitive edge.
We are facing a very heavy ageing problem so people are going to the rural areas where is very difficult for city gas companies to build pipelines. Hence, we want to fetch that market by improving our distribution in some areas.
Since its establishment in 2006, Astomos Energy has played a key role in the energy sector both domestically and internationally, by contributing towards enhancing peoples’ quality of life through the supply of clean and innovative energy solutions. Could you please walk us through Astomos Energy’s history and its major milestones?
Yes, we were established in 2006. At that time most of the LP gas companies had serious financial problems, hence the LPG divisions of Idemitsu Kosan and Mitsubishi Corporation merged to create Astomos Energy. The first objective from 2007 to 2010 was to make it a profitable business and succeed in the market. Also, with the merge, we needed to implement an optimal management so we implemented internal controls, compliance and other policies to set a basis on how we want to work.
In terms of growth, we talked about the ageing population problem so we realized that we cannot expect to rely only on Japanese households, we have to go overseas and focus on other markets such as China and South East Asia.
Astomos counts with one of the biggest fleet of ships worldwide. More specifically it handles 23 ships out of the 45 that are owned all over Japan, making it 46% out of the total. How are you planning to further expand your operations?
We expect to expand because the world portable volume is increasing, especially in the US. Because of that, we have a plan for a further expansion, however, it depends on China’s demand. If China can keep up with the demand we will expand our network. Our internal market is 3 million per year and the overall around 10 million, so we work in the expansion of our business but also in optimising processes to increase our benefit.
Furthermore I would like to highlight that Astomos is planning to create new LPG demand in the shipping bunker sector. We think LPG has incredible potential as shipping fuels because it will reduce sulphur emissions by 90% compared with heavy oil, and it requires less investments in creating tanks, barges and terminals. Certainly LPG is a niche market, nevertheless we believe that the later has a huge potential to become a major energy source.
Astomos Energy has continuously supplied a stable amount of LPG and energy solutions to customers, earning therefore their trust. Which would you say that are your competitive advantages compared to other global players?
As an LPG company we are the biggest player in the world, I would say the strongest. Our parent companies have the other energy sources like refinery or LNG so the coordination and communication with them are what we could say, our competitive advantage.
LPG and renewables are called to be the new trend worldwide. In this context, what is your strategy in order to position Astomos Energy as a reference company in the sector?
I see the LP gas industry as quite a niche market whose presence is not as strong as it should be, however, its awareness is constantly rising.
Industrial use of LPG is very small in comparison to other alternatives. Power generation using LP gas can gain market share in specific areas, for example in islands, where they can’t build tanks or have room for the disposal of other alternatives, especially environmentally wise. In that sense LPG is a very practical solution. For instance, in a country like Indonesia, it would work very well.
What has been your biggest achievement at Astomos Energy so far?
The thing that makes me more proud is the team and the people that work with us, because we have managed to build a trustworthy business model. Our company is a public utility company, hence our contribution to our country is also something which I am very proud of. My duty here is to create an environment in which people feel as if they were at home.
We can see in your answers that Astomos is a company that knows how to solve a crisis, as per your help in the Fukushima disaster and its capability of turning a struggle into profit. Furthermore, Japan is certainly going through a transition with the Abenomics towards a brighter future. What would you highlight about your country that defines what the US should expect when doing business with Japanese companies?
Companies such as Exxon Mobil, Shell or Petrobras have retreated from the Japanese market since our energy demand has been decreasing because of Japan’s ageing population. Hence it might be a tough market for foreign investments. However, we believe elders can produce huge demand in the country as well, for instance, demand for food manufacturing for the elder supply is increasing,
Also, because LPG is characterized as a diversified source of energy, there are still many opportunities for foreign investors to look for.