Energy Division-I Strategies and Initiatives
Industry Environment and Fiscal 2010 Results
Profit Generation Centered on LNG Business Spurred by Recovering Energy Demand
Energy demand rose in step with the global economic recovery in fiscal 2010. The result was relatively robust growth in the price of oil and other energy resources, which generated profits for the division, most notably in the LNG business.
The price of crude oil held firmly at around US$70 to US$90 a barrel from the start of fiscal 2010 until the calendar year-end, mainly reflecting increased oil demand and production adjustments by OPEC (Organization of the Petroleum Exporting Countries) nations. From January 2011, however, price levels climbed to over US$110 a barrel, as unrest in the Middle East disrupted crude oil supplies from Egypt, Libya, and other oil-producing countries. In contrast, natural gas prices remained at around US$3 to US$5 per mmbtu, due to increased non-conventional gas production and high stockpile levels. In Japan’s oil market, unseasonably hot weather and other specific factors led to year-on-year growth in sales volume for gasoline and other fuel oil for the first time in five years.
Under these circumstances, the continuation of steady progress in the LNG sector on operations at projects in Qatar and Equatorial Guinea contributed to division earnings. Meanwhile, full production was reached at the Peru LNG Project, where stable operations continue since the start of initial shipments in June 2010. Marubeni has been participating in this project since 2007. In energy trading, while prices were strong atop increased demand for crude oil and petroleum products from China, India, and other emerging economies, low overall price volatility resulted in few earnings opportunities. In the marketing field, the division secured a certain level of earnings on increased demand for gasoline and other fuel oil due to an unseasonably hot summer and a recovery in margins. In the LPG business, the division completed a merger with another company in an effort to enhance its competitiveness.
As a result, total segment net income in fiscal 2010 for Energy Division-I and Energy Division-II amounted to ¥28.2 billion.
Initiatives in Fiscal 2011
Maintain Stable Operations in the LNG Business and Aim for Entrenchment in Energy Trading
In the LNG sector, beyond pursuing opportunities to take part in new projects, we will focus on maintaining operational stability at existing projects in Qatar, Equatorial Guinea, and Peru. In LNG trading, our plan is to move forward with building a value chain by securing transport vessels, terminals, and other assets, in a drive to enhance the division’s earnings base.
In petroleum trading, in response to extreme volatility in crude oil and petroleum products prices, and an increasingly complex oil market, we intend to expand business scope and strengthen alliances among division bases worldwide, and push ahead with developing operations overseas. In energy marketing, we look to offer distinctive, high-value-added services with the goal of emerging as a dominant market competitor.
Regarding the situation surrounding energy in fiscal 2011, the IEA (International Energy Agency) and other entities are predicting a tight supply-demand picture in the oil market, mainly due to increased oil demand worldwide and long-term unrest in oil-producing nations in the Middle East and North Africa. In light of these circumstances, we will strive to boost profitability by seeking to expand trade in the LNG sector, developing global trade further in the energy trading sector, and enhancing value-added services in energy marketing.
