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News Release

Establishment of Biogas Net Japan

January 15, 2008

Kanematsu Corporation
Orient Geo Services Co., Ltd.
Ichikawa Kankyo Engineering Co., Ltd.
Idemitsu Kosan Co., Ltd.
Adsorption Technology Industries Ltd.
Dai-Dan Co., Ltd.
Tokyo Gas Engineering Co., Ltd.
Tesco Inc.
Nippon Gas Co., Ltd.
The First Energy Service Company, Limited
The Japan Research Institute, Limited

Kanematsu Corporation, Orient Geo Services Co., Ltd., Ichikawa Kankyo Engineering Co., Ltd., Idemitsu Kosan Co., Ltd., Adsorption Technology Industries Ltd., Dai-Dan Co., Ltd., Tokyo Gas Engineering Co., Ltd., Tesco Inc., Nippon Gas Co., Ltd., The First Energy Service Company, Limited, and The Japan Research Institute, Limited are to establish a joint venture whose business will relate to biomass energy.
The new company will pursue the establishment of biogas recovery, refining, transportation and supply systems.

1. Outline Background to the Establishment of Biogas Net Japan

— Objective: to create Japan's first biogas supply network —

Biogas Net Japan (Headquarters: Minato-ku, Tokyo; Capital: ¥1.1 million; Representative partner: Kanematsu Corporation), funded jointly by 11 leading companies with advanced technologies relating to the supply of reusable energy, will pursue the commercial recovery, refining and distribution of biogas and will be established on January 16, 2008.

The establishment of Biogas Net Japan follows a series of trials carried out by the Biogas Network Consortium (established in 2005 under the aegis of The Japan Research Institute by some 30 energy related companies and plant & equipment makers with a view to making efficient use of the biogas produced by organic waste matter). These trials have reached the stage at which biogas supply can be developed as a commercial business. The Biogas Network Consortium has conducted extensive research into business models for biogas distribution that make use of sewage sludge, food waste, industrial waste, and livestock waste. It has succeeded in developing a) technologies that allow biogas to be refined to the point where it becomes equivalent in quality to town gas or natural gas and can be used in ordinary gas equipment, and b) technologies that allow the refined biogas to be put into pressurized containers and transported so that it can be used by consumers in urban areas, far from the place where it is produced.

Biogas Net Japan's main objective will be the construction of Japan's first nationwide biogas network. This network will distribute biogas which has been recovered and refined, using compact, high-performance gas refining equipment installed at sewage treatment plants, food product factories, industrial waste treatment enterprises, livestock farms, for use as gas by businesses and households or as fuel for automobiles.

2. What is Biogas?

A biomass fuel that does not compete with food crops

Biogas is a biomass fuel (a fuel derived from biomass) that provides a carbon-neutral alternative to fossil fuels. Unlike other bio-fuels such as bio-ethanol, derived from sugar beet or maize, biogas can be produced from "venous" waste such as food waste and sewage sludge and therefore does not compete with food crops. Moreover, the methane fermentation technology by which biogas is generated is well-established and keeps costs to around 1/4 of those required to produce a quantity of ethanol that would give the same calorific value.

Thanks to these characteristics, biogas is more widely used than bio-ethanol as a substitute for fossil fuels in Germany, Sweden and other world leaders in the use of biomass. However, the low energy density of biogas, which is 40% carbon dioxide, makes it difficult to achieve profitability and in Japan, until now, biogas has, in almost all cases, been burned off.

Taking advantage of the recently validated refining technology that allows biogas to be further refined so as to create "refined biogas" with a methane content of over 95%, Biogas Net Japan will promote the use of biogas as a truly all-round alternative fuel.

3. Basic Concept and Pillars of Business

Transforming industrial waste treatment facilities, sewage treatment plants, food product factories and livestock farms into gas supply bases

The basic concept of Biogas Japan Net's business is to build a network of industrial waste treatment facilities, sewage treatment plants, food product factories, livestock farms and other sources of biogas with a view to securing a stable gas supply base and to create systems for returning refined biogas to the local community as an alternative to fossil fuel energy.

Biogas Net Japan's business will be built around the following three pillars:

  1. Advanced in-house utilization
    The proposal of solutions that will allow sources of biogas such as food product factories to make in-house use of refined biogas produced from the organic waste they generate
  2. Fuel for transportation
    The supply of refined biogas from industrial waste treatment facilities and other sources to transportation companies and other enterprises using natural gas-powered vehicles
  3. Sale to outside users
    The supply of refined biogas from livestock farms and other sources to food product factories and other external users

4. Content of Business Activities

With a view to the growth and development of the above businesses, Biogas Net Japan will pursue the following activities:

  1. Marketing to producers of raw biogas (sewage treatment plants, livestock farms, industrial waste treatment facilities, food product factories, etc.)
  2. Marketing to users of refined biogas (factories, transportation companies, etc.)
  3. Development and proposal of business models and systems relating to the supply of refined biogas
  4. Provision of technical support in the construction of systems for the supply of refined biogas
  5. Development of efficient transportation methods with a view to enhancing business efficiency, etc.

5. Objectives

1.Development of core technology: gas refining equipment

The use of technology to which Adsorption Technology Industries Ltd. (Registered offices: Nagasaki Prefecture) holds the intellectual property rights allows Biogas Net Japan to raise the quality of biogas to a level equivalent to that of town gas or natural gas, increasing its methane content to over 95%. Extended validation trials in the Tarumizu area, in Kagoshima Prefecture, and the Eniwa area, in Hokkaido, conducted with sponsorship from the New Energy and Industrial Technology Development Organization (NEDO) and the Ministry of the Environment have confirmed the feasibility of transporting the gas in pressurized containers. Biogas Net Japan will support Adsorption Technology Industries in the development of new containers and the improvement of refining equipment with a view to improving the profitability of the biogas supply business.

2.Reduction of the greenhouse effect through the recovery of methane gas

The methane gas found in biogas produced by organic waste has a greenhouse effect 21 times stronger than that of carbon dioxide. Biogas Net Japan's business model, which uses this methane gas as fuel instead of releasing it into the atmosphere, helps to reduce the greenhouse effect in two ways, both by cutting methane gas emissions and by reducing the consumption of fossil fuels, and contributes to the creation of a sustainable global environment.

3.Expansion of biogas distribution network

Biogas Net Japan will shortly begin supplying biogas for use as automobile fuel in the Tokyo area. The distribution network for refined biogas will gradually be extended to the Hokkaido, Kanto and Kyushu areas, where feasibility studies are currently in progress.

4.Development of a market worth approximately ¥200 billion

Many local authorities have considerable hopes for the growth and development of refined biogas as a local production/local consumption-type energy business, and Biogas Net Japan will aim to take advantage of the partnerships between its investors and local authorities to expand its business nationwide. The projected value of the market for biogas is in excess of ¥200 billion (Japan Research Institute estimates) and Biogas Net Japan will pursue tie-ups with energy- and transportation-related companies with a view to promoting the use of refined biogas nationwide as an environmental protection measure and as renewable energy.

For more information on the content of this report, please contact Kazuyuki Akaishi, the Japan Research Institute, Limited.

Tel: 03-3288-4985

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