Annual Report

2010

Photo:
Rig in the WA-344-P,
offshore Western Australia

Financial
Highlights
page

01

INPEX
OutlineINPEXOperation

Financial
SectionBusiness
Location

Financial Section

page

Our Vision

page

Business Activities

02

Our Business

page

03

Our Performance

page

04

INPEX
Direction

page

22

INPEX
Sustainability
Corporate Social
Responsibility
page

40

Board ofDirectors

President’s Letter

06

49

page

Additional
Information
Business Risks

82

page

page

page

20

92

Subsidiaries
and Affiliates

43

Corporate
Governancepage

Oil and Gas
Reserves andProduction
Volume
page

97

page

Stock Data

44

page

99

Mid-to-Long-Term
Strategy & Our
Strengths

Corporate Data

page

page

10

100

Two Major Projects

page

16

FORWARD-LOOKING STATEMENTS
This annual report includes forward-looking information that reflects the Company’s plans and expectations. Such forward-looking information is based on
the current assumptions and beliefs of the Company in light of the information currently available to it, and involves known and unknown risks, uncertainties, and other factors. Such risks, uncertainties and other factors may cause the Company’s actual results, performance, achievements or financial position
to be materially different from any future results, performance, achievements or financial position expressed or implied by such forward-looking information.
Such risks and uncertainties include, without limitations, fluctuations in the following:• the price of and demand for crude oil and natural gas;
• exchange rates; and• the costs associated with exploration, development, production and other related expenses.
The Company undertakes no obligation to publicly update or revise any information in this annual report (including forward-looking information).

NOTES REGARDING FIGURES
Financial figures in this annual report have been rounded to the nearest unit (millions, billions, etc.) for purposes of convenience.
The “Business Activities” section (from p. 22 onward) describes the operating situation as of August 31, 2010.

INPEX CORPORATION

1

Financial Highlights
INPEX CORPORATION and Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars*7

Millions of yen

Millions of yen

2009

2010

2010

¥1,076,165

840,427$9,032,964

Operating income

663,267

461,668

4,962,038

Net income

145,063

107,210

1,152,300

Cash flows from operating activities

230,352

241,3732,594,293

ROE*1 (%)

11.9

8.1

8.1

Net ROACE*2 (%)

14.6

10.5

10.5

Payout ratio (%)

13.0

12.1

12.1

Total assets

1,768,045

2,013,778

21,644,218

Net debt (at period end)*3, 6(324,109)(349,211)(3,753,343)

Equity ratio*4 (%)

71.9

68.9

68.9

Net debt/Total capital employed*5, 6 (%)(31.2)(30.6)(30.6)Net sales

Yen

Yen

U.S. dollars*7

Net income

61,601.60

45,553.56

489.61

Cash dividends

8,000.00

5,500.00

59.11

Per share data:

Yen

Share price

683,000

Billions of yen

Market capitalization

1,610.8

Yen

686,000

Billions of yen

1,617.9—
Millions of
U.S. dollars*7

17,389Notes:*1 ROE = Net income / Average of net assets excluding minority interests at the beginning and end of the fiscal year
*2 Net ROACE = (Net income + Minority interests + (Interest expense – Interest income) × (1 – Tax rate)) / (Average of sum of net assets and net
debt at the beginning and end of the fiscal year)*3 Net debt = Interest-bearing debt – Cash and cash equivalents – Time deposits – Public bonds and corporate bonds and other debt securities
with determinable value*4 Equity ratio = (Net assets – Minority interests) / Total assets*5 Net debt / Total capital employed = Net debt / (Net assets + Net debt)*6 Figures in parentheses denote negative amounts.
*7 The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at¥93.04 = US$1.00, the approximate rate of exchange in effect on March 31, 2010.

2 INPEX CORPORATIONINPEX Outline

Our Vision• We aim to raise the level of daily production
to between 800,000 and one million barrels(crude oil equivalent) by 2020, and as amember of a leading independent group,
establish a robust position as an upstream, or
semi-major company..

20• Abadi project (production start in 2016)16• Ichthys project (production start in 2016)16• Kashagan oil field (production start in 2012)

12

Business Environment• As a major source of energy, oil and natural gas account for around 60% of Japan’s primarydemand. Of this total, almost all is brought in from overseas.
• Operating conditions in the oil and natural gas business are projected to remain harsh. In addition
to the instability that continues to characterize oil prices as well as foreign currency exchange
markets, both economic and financial conditions particularly in leading industrialized countries
are becoming increasingly uncertain. This difﬁcult climate is exacerbated by the growing nationalistic attitude toward resources adopted by oil producing countries and intense competition with
developing countries.
• Exacerbating this extremely harsh environment, economic issues increasingly pose challenges to
exploration and production (E&P) projects. At the same time, environmental conservation concerns
are placing increased burdens on development work schedules and costs.

Social Function• Against the backdrop of an adverse operating climate, the INPEX Group (hereinafter “INPEX”) actively engages in oil and natural gas exploration, development and production. As Japan’s largest
oil and natural gas E&P company operating in both the domestic and overseas markets, we aspire
to be in an equal position among the world’s leading oil and gas companies, boasting international competitive advantage in the E&P ﬁeld.
• INPEX is committed to fulﬁlling its social function and mission of providing a stable and efﬁcient
supply of energy. At the same time, we are dedicated to realizing sustained growth in our corporate value by maintaining and expanding our reserves and production volumes over the medium
to long terms.

INPEX CORPORATION

3INPEX Outline

Our Business
Step1

Acquisition● Advance surveys of target areas● Bidding/Contract negotiations for participating interests● Acquisition of exploration/development licenses, etc.

Step2

Exploration● Geological/geophysical surveys(subsurface/seismic/subsea)● Drilling of exploratory wells*1● Production tests; discovery of oil and gas

Step3

Evaluation● Drilling of appraisal wells*2● Estimation of reserve volumes● Feasibility study/making a development plan

Step4

Development● Drilling of production wells*3● Construction of production/logistics infrastructure(pipelines)● Production start-up

Step5

Production/sales● Production and operation management● Marketing and sales(crude oil/condensate/LPG/natural gas/LNG, etc.)

Investment in Further Exploration
and Asset Acquisition(to expand reserve and production volumes)

Notes:
1. Wells drilled to test for the presence of oil/gas
2. Wells drilled to investigate the extent of oil/gas
3. Wells drilled to produce crude oil and natural gas

4 INPEX CORPORATIONINPEX Outline

Our Performance
Net proved reserves*1

Proved reserves in comparison with competitor companies*2(by product)

Natural gas(MM BOE*17)(MM BOE)

Oil

2,000 1,770
1,500(Oil•Natural gas)630

23,0001,645 1,598
558

550

12,000

1,475

9,000

495

6,000

1,000
500
0

1,139

3,000
1,087

1,048

980

07 08 09 10

Net production volumes*3(by product)

Natural gas(Thousand BOE/
day)

400
300

418

423

175

181

405 405

0

187

243

242

223

218

07 08 09 10

Net probable reserves
Net proved reserves
4,774
4,404
4,366

(MM BOE)

5,000

1,959

2,721

3,176

2,929

5000

2,500

1,000
405

0

）
）
）
）
）
）
）
）
）
） ）
）
）
） X
）
UK US NL （US （US （FR NO I（IT （US UK （US （US INPE CA AU AUl（ l（ K･（ EN talsn（ de（ tos（
G（ rko cheaBP obi l（U vron illip ota toil
B
i
n
s
a
m
a
T ta
e
lis od SanS
ad Ap
nM Shel Che oPh
cid
Ta Wo
c
xo
An
Oc
Ex RD
no
Co

Reserve to production ratio*6(Years)1,770

Proved + probable reserves
Net proved reserves

50
24.5

28.2

32.3

Reserve replacement ratio(3-year average)*7
(%)

400

29.8

300

293

30
200
20

2,000

0

(Thousand BOE/day)

40

4,000 3,728

1,000(Oil•Natural gas)

500

Net proved reserves, Net probablereserves*5

3,000

Production volumes in comparison with competitor companies*4

1,500
182

200
100

nM

xo

Ex

） K） L） S） S） R） IT） O） S） K） S） S） EX U） A） U）
F
U
U
N
U
US
U
U
P
（ P（U UK･ n（ s（ al（ NI（ il（N al（ G（U e（ o（ IN e（A n（C s（AE to nt
B l（ vro illip ot
B ach ark
sid isma anto
T
e
a
l
e
d
d
h
p
t
e Ch oPS
S ccidA na
oo Tal
Sh
c
A
W
O
no
RD
Co

il
ob

4,500

Oil

500

1,475

0

1,645

1,598

1,475

07 08 09 10

10011.6 10.7 10.8
10.0

122

100

61
35

07 08 09 10

0

07 08 09 10

INPEX CORPORATION

based on guideline established by SPE and WPC (1997 SPE/WPC). Proved reserves arecalculated in accordance with SEC rules. Proved and probable reserves are based on
the reserves report by DeGolyer and MacNaughton. Reserve volumes of Joslyn oil sandproject (mining) as of March 31, 2008 are based on the evaluation by RYDER SCOTT.
*6 Reserves to production ratio (Years) = Reserves as of the end of the fiscal year /Production in the fiscal year
*7 R eserve replacement ratio = Proved reserves increase including acquisition /production*8 Net margin = Net income / Net sales*9 Net assets excluding Minority interests = Net assets – Minority interests*10 Equity ratio = (Net assets – Minority interests) / Total assets*11 Net debt = Interest-bearing debt – Cash and cash equivalents – Time deposits –Public bonds and corporate bonds and other debt securities with determinable value*12 Net debt / Total capital employed = Net debt / (Net assets + Net debt)*13 Payout Ratio = Annual Dividends per Share / EPS*14 EPS = Net Income/Average number of shares issued during the year
*15 PER = Stock price (end of fiscal year) / EPS*16 ROE = Net income / Average of net assets excluding Minority interests at the
beginning and end of the fiscal year
*17 BOE = Barrels of Oil Equivalent*1 Proved reserves are calculated in accordance with U.S. Security Exchange Commission(SEC) rules. Proved reserve volumes are based on the reserves report by DeGolyer and
MacNaughton.
*2 Reserves Data as of December 31, 2009, except for INPEX (as of March 31, 2010) in
accordance with SEC regulations. Assets DeGolyer and MacNaughton did not evaluate
are not included. Proved reserve volumes are based on the reserves report by DeGolyer
and MacNaughton applying SEC regulations and amounts attributable to the equity
method affiliates are included. Government — owned companies are not included. Oilreserves include bitumen and synthetic oil.
*3 Production volumes are calculated in accordance with SEC. The production volumeof crude oil and natural gas under the production sharing contracts entered into by
INPEX corresponds to the net economic take of our group.
*4 Production data for the year ended December 31, 2009, except for INPEX (for the year
ended March 31, 2010). Production figures are in accordance with SEC rules. Amounts
attributable to the equity method are included. Government – owned companies are
not included. Oil production include bitumen and synthetic oil.
*5 Probable reserves as of March 31, 2008, 2009 and 2010 are calculated in accordancewith SPE/WPC/AAPG/SPEE guideline (SPE – PRMS) approved in March 2007. The
volumes are sum of proved reserves and probable reserves by SPE – PRMS after
deduction of proved reserves by SEC rules. Probable reserves as of March 31, 2007 are

Net sales (by product)

Net Income, Net margin*8(Billions of yen)(Billions of yen)

1,500

200

1,200
900
600
300
0

1,203.0
28.4 1,076.2
969.7
27.5
840.4
29.4 391.1
398.3 27.1
332.9
326.4
607.4

783.5

650.4

486.9

07 08 09 10

Net assets excluding minority
interests*9, Equity ratio*10(Billionsof yen)Net assets excluding (%)
minority interests
Equity ratio 1,387.5 120

1,500
1,200

1,271.1
1,157.4
1,028.9

900

64.0

64.0

5

71.9

165.1

100
Other sales
Natural gas sales(Including LPG)
Crude oil sales

600

0

30
107.2

17.0

14.4

13.5

20

12.8

10

Net debt
Net debt/Total capital
employed (Net)(Billionsof yen)100–169.7 –328.3 –324.1 –349.2

(Yen)

10

10,000

0
–10

60

−200

–20

–18.6

−400

–36.1

–31.2

Annual cash dividends per share,
Payout ratio*13

(%)

−100

8,000

Annual cash dividends (%)
per share
Payout ratio
1500000
25
7,000

7,500

6,000
4,000

–30
–30.6

Net Income
Net margin

0

07 08 09 10

Net debt*11, Net debt/
Total capital employed (Net)*12

90

30

145.1

50

−300

300

40

173.2

150

0
68.9

(%)

8,000

15000020120000090

13.0 5,500
9.9200000
120

10.2

12.1

15

10000090000060

10600000

5

–40

2,000

300000

–50

0

0 0

50000
30
0

0

07 08 09 10

0

Earnings per share (EPS)*14−500(Times)100,000

30

60,00070,423 73,510

14.5

45,55440,000

10

15.1

15.1

100000

25

80000

20

60000

15

40000

10

0

17.7

20

15.8

20
15

11.9
8.1

07 08 09 10

10
10

20000

07 08 09 10

25
30

11.1

20,000
0

2

(%)

20

61,60207 08 09 10

2007 年

20072008
年 2008
年 2002007 年
年 2009年

Return on equity (ROE)*16

Price earnings ratio (PER)*15(Yen)

80,00007 08 09 10

0

0

5
0

5

2007 年 2008 年 2009 年 2010 年

07 08 09 10

00

2007
年 年2008200720

6 INPEX CORPORATIONINPEX Direction

President’s Letter

At a meeting of the Company’s Board of Directors following the Ordinary
General Meeting of Shareholders held on June 23, 2010, I was appointed
President and Representative Director of INPEX CORPORATION.
In delivering an overview of business conditions and INPEX’s
performance in ﬁscal 2009, the ﬁscal year ended March 31, 2010, I would
like to take this opportunity to outline the Company’s policy initiatives forthe future and my views toward management going forward.

INPEX CORPORATION

7

Reflecting on the two years since business integration
It is now almost two years since we completed our business integration in October 2008. Looking at theCompany, I have a real sense that we are witnessing the very best in synergy benefits and continue to mature
into a leading Japanese oil and natural gas E&P company. Through business integration, we have also experienced
marked improvements in our upstream business presence, financial strength and technical capabilities. The
positive effects are particularly evident in the progress of individual projects. Discussions with government
officials of oil-producing nations as well as major international oil companies are cause of additional comfort
and confidence. We are being increasingly recognized for our vast potential, and on the back of wide-ranging
as well as high acclaim, are attracting attention as a project partner of preferred choice and a company distinguished by our development capabilities and reliability.
Under these circumstances, and following closely on the heels of the majors, we aim to transform ourselves
into a global independent upstream, or semi-major company and to expand production volume at our oil andnatural gas projects to 800,000 to 1 million barrels (crude oil equivalent) by 2020. From head office corporate
departments to domestic and overseas development and production sites, these goals are commonly shared byeach and every INPEX employee. As individual employees go about their assigned duties and tasks, I can truly
sense the energy, enthusiasm and dedication to achieving established goals.

My roleI recognize that my task, as President, is to overview business management as a whole and step-by-step,
project-by-project to resolutely lead the Company forward in efforts to realize its objectives.
Currently, we are pushing ahead with several important developments including the Ichthys project inAustralia, the Abadi project in Indonesia and the Kashagan project located in the north of the Caspian Sea,
Kazakhstan. The role of top management in each of these mainstay endeavors is to ensure the effective andefficient allocation of resources. In this regard, I am cognizant that one of the key tasks in my first year as
President is to assign the right people in the right jobs while securing a robust financial base.
Amid a business environment in which competition is becoming increasingly intense, it is imperative that
we remain acutely attuned to market conditions and that we swiftly grasp every possible opportunity to acquire
quality interests and development rights. Furthermore, in engaging in business activities of a long-term nature,
I acknowledge the importance of face-to-face communication with stakeholders. In my role as President, I am
therefore fully aware of my responsibilities toward promoting deeper ties with all interested parties and tofoster relationships based on mutual trust.

Fiscal 2009 results and a report on the statusof key projects
The Company’s performance in the fiscal year ended March 31, 2010 was again substantially affected by market
conditions. Compared with the previous fiscal year, the average price of crude oil declined 18% while the valueof the yen appreciated 10%. Against this backdrop, INPEX recorded net sales of ¥840.4 billion and net incomeof ¥107.2 billion. This effectively represented a significant 20 to 30% year-on-year drop in revenues and earnings.
Turning to the Company’s oil and gas reserve volumes, the source of its overall value and worth, INPEX
experienced only nominal growth on the back of new oil and gas field development, while buffeted by adecrease in production during the fiscal year under review. Thus, the total of proved and probable reserves

8 INPEX CORPORATION

contracted approximately 8% compared with the previous fiscal year of 4.4 billion barrels oil equivalent (BOE).
From a net production volume perspective, identified by the Company as a long-term growth target, there
were some production start-ups at new oil and gas fields including Frade, Van Gogh and Tangguh, but mainly
due to the impact of the OPEC production cut in ADMA, the net production equivalent stood at 405,000 BOE
per day, essentially the same level as the previous fiscal year.
Reflecting on the Company’s performance in upstream businesses, and in taking into account the severe
impacts of market and foreign currency exchange rate fluctuation, I am again convinced of the critical need toramp up both net production and reserve volumes.
On an individual project basis, INPEX embarked on heavy oil development in Venezuela and deep water
exploration in Brazil during the fiscal year. At the same time, the Company continued to make positive strides
in preliminary work associated with both the Ichthys and Abadi LNG projects. On the domestic front, and as apart of our second of three core strategies for growth to establish a gas supply chain, we continued to witness
steady progress in the construction of the Naoetsu LNG receiving terminal. In the field of new energy
development, INPEX decided to make an equity investment in ELIIY Power Co., Ltd., a company engaged in themass production of high-capacity lithium-ion batteries, and also in the DB Masdar Clean Tech Fund, L.P., a Fund
primarily focused on private equity investment in clean and renewable energy companies.

Looking ahead
Building on the momentum provided by economic growth in developing countries such as China and India, I
expect global energy demand to expand over the medium to long term. All is not, however, smooth sailing. I
anticipate that our operating environment will remain harsh moving forward. This is largely attributable to theinstability of crude oil prices and foreign currency exchange rates, growing uncertainty surrounding the futureof economic and financial conditions mainly in developed countries, the upswing in resource nationalism exhibited by oil-producing nations and increasingly intense competition with newly developing countries withrespect to the acquisition of resources. In addition, the incidence of new deep water and polar region exploration and development projects are increasing significantly lifting the bar in terms of funding and technologicalrequirements. At the same time, accidents such as the oil spill Gulf of Mexico in illustrate the growing needfor improved safety, health and environmental measures.
While the attributes required in a business environment of this type are wide-ranging and diverse, I am
convinced that the confidence and reliability generated by financial strength and technical capabilities are exceedingly important. From an oil-producing country perspective, the focus is naturally on identifying the mostcapable development company. Other upstream companies, on the other hand, place the most emphasis on
locating best-fit development partners. It is therefore imperative that we take into close consideration theseperspectives and strive to meet the strict criteria put forward.
With approximately 60% of its employees boasting an impressive technical background, INPEX offers
world-class technological capabilities. The Company also maintains a wealth of onsite facilities situated invarious locations including Japan, Indonesia, Australia and the UAE that consistently boost technical prowess.
Harnessing this competitive advantage, INPEX will work resolutely to accumulate a robust track record, enhance its international standing and presence and expand the scope and scale of business opportunities.
In specific terms, the Company has earmarked approximately ¥4 trillion in development investment overthe next seven years focusing largely on the Ichthys LNG project. In this manner, every effort will be madeto realize our mid- to long-term growth scenario. Following a public offering as well as a third-party allotment, INPEX newly issued approximately 1.3 million shares, raising approximately ¥520 billion in August 2010.
While the Company has significantly enhanced the soundness and flexibility of its financial position throughthis increase in capital, plans are also in place to build on this improved platform to procure additional funds
through debt finance. In crystallizing these endeavors, we will secure the necessary ¥4 trillion in investment
to ensure the commercial viability of such mainstay developments as the Ichthys LNG project. This will help
secure sustainable growth in both the Company’s corporate and shareholder value. With a strong resolve, I

INPEX CORPORATION

9am committed to fulfilling my responsibilities as President of INPEX and to addressing the expectations of all
stakeholders, including new shareholders.
Having successfully completed our business integration, we look to the many challenges that lie ahead
as we strive to take the next significant leap forward. Working in unison, each and every employee will utilize
every ounce of their energy and expertise to achieve a set of commonly shared goals. As President, I too will
exert every effort to leading the Company to more robust and sound heights.

Toshiaki Kitamura
President and Representative Director
August 2010

Details regarding the increase in capital through a public offering:
Overview of the issue of new shares between July and August 2010 as a part of the increase in capital through a public
offering
Offer price

Per share¥417,100

Issue price

Per share

Increase in the number of shares by way of an offering of new shares

Common share

1,297,400 shares

Total number of issued shares after the offering of new shares

Common share

3,655,809 shares

Special class share
Total
Total issue price¥402,050

1 shares
3,655,810 shares¥521,619,670,000

10 INPEX CORPORATIONINPEX Direction

Mid-to-Long-Term
Strategy & Our Strengths
We are following a mid-to-long-term business strategy to realize our visionof fulfilling a social mission and increasing corporate value sustainably. The
critical business resources that underpin this strategy are a unique set ofstrengths of INPEX, such as abundant reserves.
By enhancing unique strengths through the business integration,*1 we willraise our market competitiveness based on global scale and strengthen ourbusiness base further.
*1 In October 2008, having completed a 30-month integration process that started in 2006, INPEX Holdings Inc. absorbed the former INPEX CORPORATION
and Teikoku Oil Co., Ltd. and made a fresh start as the new INPEX CORPORATION. Having consolidated head office functions and fully integrated bothorganizations, INPEX has secured a more efficient and flexible management structure.

Strong reserve base*2（Million boe*4）

Reserve Life*3(RP Ratio)

5,000

4,404

4,000
3,000

2,929
29.8 years

2,000

1,475

1,000
0

10.0 years

ProvedReserves

Probable
Reserves

Proved+Probable Reserves*2 Proved reserve volumes are based on the reserves report by DeGolyer and MacNaughton applying SEC regulations. Probable and possible reserve
volumes are based on the reserves report by DeGolyer and MacNaughton applying SPE/WPC/AAPG/SPEE guideline (SPE‐PRMS) approved in March 2007.
Contingent resources, which are expected in addition to our proved, probable and possible reserves, are evaluated by INPEX. Volumes attributable to theequity method affiliates are included.
*3 Reserve Life = Proved (+Probable) Reserves as of March 31, 2010 / Production for the year ended March 31, 2010 (RP Ratio: Reserve Production Ratio)*4 Barrels of Oil Equivalent

INPEX CORPORATION

11

Our Strengths
1. Strong reserve/resource base*1
Reserves and resources, which are the source of corporate value, are the critical factor in oil and natural gas upstream
business. With a total of 77 E&P projects in 27 countries (as of August 30, 2010) around the world, INPEX has the largest
proved reserves among any Japanese companies in the sector. Our net proved and probable reserves total 4,404 million
boe*2. Our reserves-to-production ratio is 10.0 years for proved reserves, 29.8 years if net probable reserves are added.
Beyond our probable reserves, we also have an abundance of possible reserves and contingent resources. We expect tocontinue increasing proved and probable reserves over the mid–to-long-term.

2. A large-scale LNG project operator
INPEX is in the process of developing two of the world’s largest LNG projects at Ichthys in Australia and Abadi inIndonesia. We are the first Japanese company to develop such large LNG projects as an operator. The projected scale of
the LNG produced by both projects is vast, being equivalent to around 20% of Japan’s current LNG annual import volume.

3. Gas supply chain
INPEX owns a domestic natural gas pipeline network stretching approximately 1,400 km that connects local and overseas
gas assets to the Japanese gas market. Going forward, we plan to enhance the added value by establishing gas supply
chain through linkage between this network and our major overseas LNG projects. Specifically, in July 2009, we started
the construction of a new LNG receiving terminal at Naoetsu that is scheduled to enter operation in 2014.

4. Strong financial position
Strong, healthy balance sheet and plentiful cash reserves are essential for oil and gas E&P companies. This reflects boththe high degree of risk associated with these activities and the need to have sufficient funds at hand to take advantage ofmajor investment opportunities quickly as they arise. As of the end of March 2010, INPEX had an equity ratio of 68.9%.
Compared with the majors and other international peers, this represents a high level of financial strength. In addition, ourcash, bank deposits, government bonds and other highly liquid instruments exceeded the liabilities. The ratio of net debt
to total capital employed*3, which is an indicator of financial soundness, was –30.6% at that date. This ratio also shows
our strong financial position.

*1 Please see *2 of Page 10*2 Please see *4 of Page 10*3 Net debt/total capital employed = Net debt / (Net assets + Net Debt)

12 INPEX CORPORATIONINPEX Direction

Mid-to-Long-Term
Strategy & Our Strengths
Harnessing its wealth of inherent strengths including a well-balanced asset
portfolio attributable to business integration, INPEX continues to pursue
three fundamental strategies in its efforts to achieve established growthgoals.

Objectives for Corporate GrowthLong-term projections of net production(Thousand boe/d)Long-term
production outlook
Kashagan oil field

800 〜 1,000(production start in 2012)

Ichthys project(production start in 2016)

Abadi project(production start in 2016)

405

398

2010

2011

(actual)

434

430

2012

2013

435

439

2014

2015

New
projects

Existing
projects

2020• We aim to raise the daily production level up to 800,000 to 1 million barrels (crude oil equivalent) by
2020, and establish a ﬁrm position as a global independent upstream company.*1• During the period from April 1, 2010 to March 31, 2017, we currently expect aggregate expenditureand investments for new and existing projects of approximately ¥4 trillion, the majority of which will
be used for the three major projects.
• We aim to maintain RRR*2 over 100% over the mid-to-long-term.
• While the upstream business is our core business, we will establish a gas supply chain, and will evolve
into a company that supplies diversiﬁed energies.
• We will maintain ﬁnancial health, empower corporate vitality, and enhance corporate value.
*1 Independents are oil and gas E&P companies with smaller operation scales, following the Majors.
*2 The reserve replacement ratio (RRR) is an indicator measuring growth in reserves. It is calculated by dividing the increase in proved reserves by total
production for that accounting period (expressed as a percentage).

INPEX CORPORATION

Three Fundamental Strategies

13

1 Sustainable Expansion of Our Upstream
Business• INPEX will continue to pursue the ongoing maintenance and enlargement of its production andreserve volumes in an effort to ensure the stable supply of energy.
• We will enhance the overall capabilities necessary for conducting an upstream business including
intelligence, financial strength, technical prowess and the ability to access new opportunities bycarrying out existing exploration, development and production projects.
First and foremost, we will launch the large-scale Ichthys
LNG and Abadi LNG operator projects. To this end, we will
enhance the engineering capabilities critical to the successof both operator projects including such core technologies
employed for offshore development as subsea completion.
Recognizing the need to procure substantial funds for theongoing development of each project, we will also pay
close attention to ensuring financial health while considering an optimal financing strategy.
Second, we will seek out and acquire new opportunities as part of efforts to secure certain reserve volumes
and earnings in the post Ichthys and Abadi period. On
the understanding that management resources for theforeseeable future will be channeled toward existing largescale projects, we will adopt an approach toward theimplementation of action plans focusing on projects inregions with high levels of potential. With respect to theacquisition of interests, we will endeavor to upgrade andexpand assets over the mid-to-long-term. To this end wewill engage actively in the direct acquisition of rights, casta keen eye over international as well as domestic M&A
and assess such purchase methods as the exchange ofshares while taking into consideration efforts to secure an
optimal balance between exploration projects. In addition,with an eye to the development of unconventionalhydrocarbon resources such as oil sand, we will develop
comprehensively advanced technologies encompassing
cutting-edge oil recovery techniques for existing oil andgas fields and the technology to produce heavy oil in orderto obtain promising interests.
In parallel with efforts to acquire new interests, we will
move flexibly to improve our asset portfolio quality andbalance by selling off existing projects where profitability
is expected to decline due largely to the expected growing
cost for abandonment in the late production phase.

Sustainable expansion of our
upstream business14 INPEX CORPORATION

Three Fundamental Strategies

2 Establishment of a Gas Supply Chain andProactive Expansion of the Gas BusinessIn pursuit of the diversification and expansion of our gas business, we will establish a
gas supply chain by organically connecting domestic and overseas gas sources with ourmother market in Japan. This will entail the construction of an LNG receiving terminal andextension of existing pipeline networks.

Commensurating with the expansion in our domestic gas
business, we started the supply of regasified LNG from
Shizuoka Gas Co., Ltd. from January 2010. We are now
supplying both domestic and imported LNG into ourpipeline network in an effort to further fortify its stablesupply structure. We have also introduced a new gas
pricing formula in agreement with customers and relevant
authorities.
With the projected start up in 2014 of the Naoetsu
LNG receiving terminal, we aim to establish a gas supply
chain that connects overseas LNG projects with thedomestic gas market by bringing LNG produced in the
Ichthys and Abadi fields to Naoetsu. Buoyed by ample
supply capacity of regasified overseas LNG at the Naoetsu
LNG receiving terminal after 2014, we will promote gas

sales in such new locations as the Hokuriku region as wellas surrounding areas along our existing pipeline network.
In complementing each of the aforementioned
initiatives, we will pursue appropriate strategic cooperation with domestic energy companies with the aim ofgenerating mutual benefits with respect to gas supply
infrastructure and gas trading.
Positioning the domestic gas supply chain as a
stepping-stone, we will endeavor to further expand ourgas business on a global basis by participating in activities
with LNG receiving terminals overseas and LNG shipping
operations essential to the gas trading business both inJapan and internationally. In undertaking these activities,
we will pay close attention to the balance between
economic gain and future potential.

Establishment of a gas supply chain
and proactive expansion of the gas
business

INPEX CORPORATION

Three Fundamental Strategies

15

3 Evolution into a Company that Offers
Diversified Forms of Energy

We will evolve into a company that offers diversified forms of energy by expanding themeans and methods of energy supply. In this context of ensuring the development andsupply of diversified forms of energy, we will at the same time promote harmonious
coexistence with local and global communities while contributing to the sustainable
development of society.
I N PE X will concentrate on enhancing the energy
efficiency of upstream projects and undertake to reducecarbon dioxide emissions by employing CCS (Carbon
Dioxide Capture and Storage).
In addition, we will seek over the mid-to-long-term
to uncover opportunities for business participation inwide ranging business fields. These include new energies
that employ for ward-looking technologies in suchareas as gas-to-liquids (GTLs) and dimethyl ether (DME)and renewable energy sources including solar light,
solar power generation, wind and geothermal power,
storage batteries, hydrogen and biomass fuels. To thisend, we will utilize networking activities, alliances andbusiness partnerships with various national oil companies(NOCs) from oil and gas producing countries as well asinternational oil companies (IOCs) all of whom are aiming
to become comprehensive energy suppliers.

Evolution into a company that offers
diversiﬁed forms of energy

16 INPEX CORPORATIONINPEX Direction
Two Major Projects

Major Driving ForceIchthys Project

INPEX CORPORATION

17

Ichthys Project

Project History
INPEX participated in an open bid conducted by the Australian federal government
in March 1998 for the WA-285-P block, which is located off the coast of Western
Australia about 200km from the Kimberley region. In August 1998, we acquired the
exploration permit for this block. In the first drilling campaign, which took about
one year from March 2000, three exploratory wells all confirmed the presence ofgas and condensate. Thereafter, from May 2001, INPEX gathered, processed andinterpreted 3D seismic data. A second drilling campaign began in June 2003 andthree exploratory wells were drilled. Through these endeavors, we discovered theIchthys gas-condensate field. The name“ Ichthys,” which means“ fish” in ancient
Greek, is derived from the many fossilized fish that had been discovered in onshore
areas in close proximity to the block.
A further two wells were drilled from April 2007 to confirm the extent of gascondensate reserves. Drawing on an in-depth evaluation of the cumulative data andresults from INPEX’s eight wells, recoverable reserves are currently estimated at 12.8
trillion cubic feet (Tcf) of gas and 527 million barrels of condensate.
In August 2006, INPEX was granted Major Project Facilitation status for the
Ichthys field by the Federal Minister for Industry, Tourism and Resources. This
status recognized the fact that the development of this gas-condensate field would
contribute to the long-term economic development of Australia.

An Outline of the Project
Development Concept
Production volume (projected):
LNG — approximately 8.4 million tons per year;
Condensate — approximately 100,000 barrels
per day (peak rate); LPG — approximately 1.6
million tons per year

Offshore production facilities:

The Status of Development Progress
In proceeding with front-end engineering and design (FEED) for the Ichthys project,care and consideration with respect to the adequacy of technology and costs iscurrently being undertaken as a part of the development process. At the same time,
INPEX submitted a Preliminary Field Development Plan (PFDP) to the Australian federal government and the government of Western Australia in March 2010 to secure
the necessary Production Licenses. Furthermore, an Environmental Impact Statement(EIS) was lodged with the Australian federal government and the government of theNorthern Territory to obtain environmental approval for the project in April 2010.
Most recently in July 2010, public review of the aforementioned EIS began. As a partof its LNG marketing activities, INPEX is currently in discussion with potential buyers
in order to secure purchasing commitments. In this regard, plans are in place to makethe FID in 2011 with its project partner Total of France. The post-FID phase will begin
with detailed design work on both the onshore and offshore facilities, followed byequipment procurement and the construction of the LNG plant and other facilities.
The target date for production start-up is 2016.

Due to the large scale of projected gas andcondensate production, the central processing
facility (CPF) employed to process the gas andcondensate is one of the largest of its kind in
the world. In addition, the Floating Production,
Storage and Offloading (FPSO) facility to handle
storage and shipment of condensate is also of
significant scale with an oil storage capacity of
up to 1.2 million barrels.

Gas export pipeline:
The gas will be pumped to an onshore LNG
plant in Darwin via a pipeline that will be one of
the longest such pipelines in the world. In addition to confirming such aspects as the troublefree transportation of gas, ample verification
has been obtained with respect to the viabilityof pipeline laying and construction.

Onshore production facilities:
The onshore production facility at Darwin will
first extract condensate and LPG from thenatural gas pumped via the pipeline. Using
two trains, the liquefaction plant will then cool
the gas to -162°C to form LNG. Plans call forstoring the LNG, LPG and condensate at theonshore facility prior to shipment. The planned
construction site is considered an ideal location.
It is situated away from Darwin’s city center,
separated by the bay and boasts relatively easy
access to the city’s airport.
First LNG

FID

Government Approval

Application ofEnvironmental Approval Submission of Supplemental Information
To obtain Environment Approval
Public Comments
Application of Production Licence

Onshore & Offshore
Facilities

FEED and Other Work

To obtain Production Licence

EPC Decision

2011

EPC: Engineering, Procurement & Construction2016

18 INPEX CORPORATIONINPEX Direction
Two Major Projects

Major Driving Force
Abadi Project

INPEX CORPORATION

19

Abadi Project

Project History
In October 1997, INPEX submitted a bid for the Masela block at a public tenderconducted by the Indonesian government. A production sharing contract (PSC) forthe block was concluded in November 1998.
A series of 2D seismic survey was conducted in the block from February to March
1999. The Abadi-1 exploration well was drilled from October to December 2000, andconfirmed the presence of gas and condensate.
Following the success of the first exploration well, a new series of 3D seismic
survey was conducted to cover the discovered structure of Abadi from July to
September 2001. The Abadi-2 and Abadi-3 wells were drilled in 2002 to appraise
the extent of the gas-condensate reservoir discovered in Abadi-1. The drilling results
indicated that the overall size of the structure was larger than initially projected.
Reserves evaluation and concept selection studies of development options werecarried out from 2003 to 2007. From May 2007 to June 2008, the second appraisal
drilling campaign was carried out to narrow the range of reserves estimates. Allof the 4 wells confirmed the gas column enabling INPEX to substantially upgrade
estimates of the field’s reserves.
From September 2007 to November 2008, Pre-FEED work was conducted inconnection with a Floating LNG (a floating offshore facility where natural gas isprocessed, liquefied and stored for offloading) and subsea facilities.
INPEX received approval in principle from the Indonesian government to its planof development (POD) submitted in September 2008. A third-party evaluation on the
POD is currently being conducted by the Indonesian government. Upon the outcomeof this evaluation as well as our updating works, FEED and its related preparatory
development works will commence shortly.

An Outline of the Project
Development Concept
Geography:
The Abadi field is situated in the Indonesian
territory of the Arafura Sea, approximately
2,600km east of Jakarta. The field is classified
as a giant gas-condensate field with more than
1,000 sq-km in its areal extent. Its reservoir
is sandstone of Plover Formation of which
depth ranges from 3,700m to 3,900m subsea.
Tanimbar Islands are located 150km to thenortheast of the block as the nearest land area.
Timor Trough straddles between the field andthe islands, where water depth varies from1,500m to 2,300m.

Overview of the Plan of Development (POD)The Status of Development Progress
For initial development of the Abadi field, INPEX plans to conduct FEED works on
the FLNG and subsea production facilities and LNG marketing activities for FID (Final
Investment Decision) in due course.
An environmental and social impact assessment including AMDAL have commenced. More recently in November 2009, INPEX signed an agreement with PT EMP
Energi Indonesia to transfer a 10% participating interest in the project.

The POD approved in principle by theIndonesian government, involves the“ Floating
LNG (FLNG)” concept, which has yet to berealized anywhere in the world, in combination
with subsea production facilities. This initialdevelopment is planned for the northern partof the field where most of the reserves areconcentrated and the water depth ranges
500m to 800m. Under the POD, it is expected
to produce 4.5 million tons per annum of LNG
and 13 thousand barrels per day of condensate.

FID

Government ApprovalFirst LNG

Public Announcement/Public Consultations
Environmental Permit
Environmental & Social Impact Assessment

Floating LNG Subsea
Production System

FEED

EPC: Engineering, Procurement & Construction
EPC Agreement Execution

20 INPEX CORPORATIONINPEX Operation

Business LocationPage

28 Eurasia(Europe & NIS)

55
56
57
58
59

56

Sakhalin Project (Russia)
P799 (U.K.)
Offshore North Caspian Sea Block (Kashagan Oil Field and Others) (Kazakhstan)ACG Oil Fields (Azerbaijan)
BTC Pipeline Project (Azerbaijan•Georgia•Turkey)

Page

57

38 Japan

58
59
41
40

42 43
45

44
47
46

39
38

2

31 Middle East & Africa
51
53 50
52

36 Azadegan Oil Field (Iran)
37 Soroosh & Nowrooz Fields (Iran)
38 ADMA Block (UAE)39 Abu Al Bukhoosh Block (UAE)40 Ohanet Block (Algeria)
41 El Ouar I and II Blocks (Algeria)★42 Block 81-2 (Libya)★43 Block 82-3 (Libya)
44 Block 42-2&4 (Libya)★45 Block 113-3&4 (Libya)★46 West Bakr Area (Egypt)
47 South October Area (Egypt)
48 Offshore D.R. Congo Block (Congo)
49 Nganzi Block (Congo)
50 3/05 Block (Angola)
51 3/85 Block (Angola)
52 3/91 Block (Angola)
53 3/05A Block (Angola)
54 Onshore Cabinda North Block (Angola)★INPEX operated projects

1★1 Minami-Nagaoka Gas Field andDomestic Natural Gas Pipeline
Network Business (Japan)

36
37

Page

54
48
49

55

3
8 4 5

11

9

7
14
6
15 10
18
32 31 34 33 17
29
30
35
28

27 26 24
25
21
22 23

12
16
13
17

19
20

INPEX CORPORATION

21

77 projects encompassing 27 countries
Page

22 Asia & Oceania
2 Offshore Martaban (Myanmar)
3 Blocks 05-1b and 05-1c (Vietnam)
60
4 Block SK-8 (Malaysia)
61
5 Block SK-10 (Malaysia)
6 Offshore Mahakam Block (Indonesia)
7 Attaka Unit (Indonesia)
8 South Natuna Sea Block B (Indonesia)
9 Offshore Northwest Java Block (Indonesia)
10 Tengah Block (Indonesia)
11 Offshore Southeast Sumatra Block (Indonesia)
12 Berau Block, Tangguh LNG Project (Indonesia)★13 Masela Block (Abadi) (Indonesia)
14 East Kalimantan Block (Indonesia)
15 South East Mahakam Block (Indonesia)
66
16 Semai II Block (Indonesia)
67
17 Bayu-Undan Project (JPDA)
18 JPDA06-105 (JPDA)
19 PDL3 & PDL4 Unitization (Papua New Guinea)
20 PPL190 (Papua New Guinea)
21 WA-35-L (Van Gogh Oil Field) (Australia)
22 WA-35-L (Australia)
23 WA-155-P (Part I) / WA-43-L (Australia)
24 WA-155-P (Part II) (Australia)
25 WA-255-P Block 1081 (Australia)
26 WA-12-L (Australia)
27 WA-357-P (Australia)★28 WA-285-P / WA-37-R (Ichthys) (Australia)
29 WA-274-P (Australia)
30 WA-281-P (Australia)
31 WA-410-P (Australia)
32 WA-411-P (Australia)★33 WA-341-P (Australia)★34 WA-343-P (Australia)★35 WA-344-P (Australia)

65
63
64 62

70
69

Page

73

68

71

72

35 Americas
74

60 Joslyn Oil Sands Project (Canada) 77
61 Athabasca Block (Canada)
75 76
62 Ship Shoal Block 72 (U.S.A.)
63 Main Pass Blocks 118 (U.S.A.)
64 West Cameron Blocks 401 and 402 (U.S.A.)
65 Louisiana Block SL19372 (U.S.A.)
66 Block Cuervito (Mexico)
67 Block Fronterizo (Mexico)
68 Guarico Oriental Block (Venezuela)★69 Copa Macoya Block (Venezuela)★70 Moruy Block (Venezuela)
71 Carabobo Block, Project 3 (Venezuela)★72 Block 31 (Surinam)
73 Block 18 (Ecuador)
74 Block 117 (Peru)
75 Frade Project (Brazil)
76 BM-C-31 (Brazil)
77 BM-ES-23 (Brazil)

22 INPEX CORPORATIONINPEX Operation
Business Activities

Asia & Oceania
Results for the fiscal year ended March 31, 2010 in Asia and Oceania were mixed. In the fiscal year, sales volumes ofcrude oil and natural gas increased. Net sales in this region decreased 19.1% compared with the previous fiscal yearto ¥352.3 billion owing to the drop in crude oil and gas prices as well as the effects of appreciation in the value ofthe yen. From a profit perspective, operating income fell 33.1% year on year to ¥191.0 billion.
Net sales by region¥352.3billion

Net reserves by region

Net production
by region

42%

195thousand boe/d*1(proved)

48

32

%

%
*1 Thousands ofbarrels of oil
equivalent per day

INPEX is currently involved in a total of 34 projects across seven countries in the Asia and Oceania region.
Principal
projects include the Offshore Net
Mahakamand Abadi Project inIndonesia and the Ichthys project in Australia.
Net sales by region
production
Net reserves by region
by region¥73.6billion
9%
Main Projects
Contract Area

1
2
3

*1

7

Offshore Mahakam

INPEX CORPORATIONINPEX CORPORATION 50% TOTAL* 50%

Attaka Unit

(Est. February 21, 1966)

INPEX CORPORATION 50% Chevron* 50%

South Natuna Sea Block B

INPEX Natuna, Ltd.

INPEX Natuna 35% ConocoPhillips* 40% Chevron 25%

Net sales by region(Est. September 1, 1978)
Net production
INPEX Masela,Ltd.
by region(Est. December 2, 1998)

Masela36%

132

thousand boe/dMI Berau
B.V.

*1

Net reserves by region
INPEX Masela* 90% ※ In November 2009, INPEX signed an agreement(proved)with PT EMP Energi Indonesia to transfer a 10% participating interest.
The transaction is subject to certain conditions precedent.

33%(Est. August 14, 2001)

Tangguh Unit

WA-37-R, WA-285-P

INPEX Browse, Ltd.

INPEX Browse* 76% TOTAL 24%

WA-274-P(Est. September 1, 1998)

INPEX Browse 20% Chevron 50% Santos* 30%
INPEX Browse 20.0000% Santos* 47.8306% Chevron 24.8300%
Beach 7.3394%

WA-344-P¥16.6
billionWA-410-P

INPEX
Browse*60% TOTAL 40%
Net
reserves
by region

Net production
by region

WA-343-P

2%

21thousand boe/d*1(proved)INPEX Browse* 60% TOTAL 40%
INPEX Browse* 60% TOTAL 40%

5%WA-411-P

3

INPEX Browse 20% Santos* 30%% Chevron 50%
INPEX Browse 26.6064% Santos* 63.6299% Beach 9.7637%

WA-12-L (Deep)

INPEX Alpha, Ltd.

WA-155-P (PartⅠ)(Est. February 17, 1989)

INPEX Alpha 18.67% ExxonMobil* 81.33%
INPEX Alpha 28.5% BHPBP* 39.999% Apache 31.501%

WA-43-L

INPEX Alpha 28.5% BHPBP* 39.999% Apache 31.501%

Van Gogh Defined Area

INPEX Alpha 47.499% Apache* 52.501%

WA-155-P (PartⅡ)

INPEX Alpha 18.67% Apache* 81.33%

WA-357-PNet
sales by region
WA-35-L(Excluding Van Gogh Defined Area)

WA-255-P
Block 1081
¥93.9
billion11%
JPDA06-105

INPEX Alpha 35% Apache* 65%
Net reserves by region(proved)INPEX Alpha 47.499% Apache* 52.501%

Net production
by region

30thousand boe/d*1

INPEX Timor Sea, Ltd.

7

%

9

INPEX Alpha 23.7495% Apache* 26.2505% Woodside 50.0000%% Talisman 25%
INPEX Timor Sea 35% Eni* 40%(Est. November 25, 1991)

JPDA03-12

INPEX Sahul, Ltd.
(Est. March 30, 1993)

843

Ml Berau 22.856% BP* 48.0% Nippon Oil Exploration (Berau)%
17.144% KG Breau 12.0%
MI Berau 16.3% BP* 37.16% CNOOC 13.9% Nippon Oil Exploration(Berau) 12.23% KG Berau, KG Wiriagar 10.0% LNG Japan 7.35%
Talisman 3.06%

sales by region
WA-341-P
5 Net

7

%

Interest Owned

WA-281-P

6

14%

Venture Company¥303.8Berau billion
427thousand boe/d(proved)Bayu-Undan Unit

INPEX Sahul 19.0712244% ConocoPhillips* 61.6624238% Santos
19.2663518%
INPEX Sahul 11.274908% ConocoPhillips* 57.150852% Eni
10.985973% Santos 11.390267% Tokyo Timor Sea Resources (Tokyo
Electric/Tokyo Gas) 9.198000%*Operator

2

23

INPEX CORPORATION

1

4
7
5

6

Bontang LNG Plants

38

1. Offshore Mahakam Block and Attaka Unit
INPEX entered into a production sharing contract (PSC) with
the Indonesian government in October 1966, at that timeacquiring a 100% working interest in the Offshore Mahakamblock. The Attaka Unit was established in April 1970 throughunitization of part of adjacent blocks owned by INPEX andUnocal (now Chevron), with each company taking a 50%
interest. The Attaka field was subsequently discovered, andproduction of crude oil and natural gas began in 1972. INPEX
farmed out a 50% working interest in the Offshore Mahakamblock to CFP (now TOTAL) in July 1970. This venture
subsequently made a series of discoveries in the Bekapai (oil),
Handil (oil), Tambora (oil and gas), Tunu (gas), Peciko (gas),
Sisi and Nubi (gas) fields, all of which have continued to
produce crude oil and natural gas.

WA-37-R Block(Ichthys)

The crude oil and condensate produced from these fields
are shipped mainly to oil refineries and power companies inJapan by tanker from the Santan and Senipah terminals. Mostof the natural gas is supplied to Bontang, one of the largest
liquefaction plants in the world before being shipped as LNG
to Japan, etc.
A 20-year extension through to the end of 2017 for eachof these two blocks underpins the overall Mahakam block’s
role as a key profit center for INPEX. In addition, negotiations
are underway with the Indonesian authorities to secure afurther contract extension beyond 2018 with respect to the
Offshore Mahakam Block.

Bontang LNG Plants

Attaka Unit

Santan Terminal

Attaka Field

Badak Field
Tunu Field

Nilam Field
Tambora Field

Sisi Field

Handil Field

Nubi Field

Senipah Terminal

Bekapai Field

Balikpapan

Peciko Field

Offshore
Mahakam BlockSouth Mahakam Fields

Masela Block(Abadi)Gas field

Oil field

Oil and gas field

アジア･オセア

2

24 INPEX CORPORATION

14
7

2. South Natuna Sea Block B

6

In July 1977, INPEX acquired a 17.5% working interest in

5

3

8

the South Natuna Sea block B, which includes the Udang
oil field. Later, in January 1994, INPEX increased its total
working interest in the block to 35% with the purchase of anadditional 17.5% interest.
The following fields were subsequently discovered within
the block: Belanak (oil and gas), Hiu (gas), North Belut (gas),
Belida (oil), Sembilang (oil), and Kerisi (oil and gas).
Crude oil production has continued since 1979. A sales
agreement to deliver natural gas to Singapore via Indonesia’s

3. Masela Block (Abadi)

first international pipeline was concluded in January 1999.

INPEX acquired a 100% working interest in the Masela block

The pipeline started supplying gas from the block as well as

in November 1998 through a public tender process.

the two adjacent blocks of Natuna Sea block A and Kakap

The Abadi-1 exploration well was drilled from Octoberblock in 2001. Additional deliveries of natural gas from thisto December 2000, and confirmed the presence of gas andpipeline to Malaysia started in 2002. These supply milestones

condensate. This marked the first discovery of crude oil andhave contributed to the extension of the PSC covering thenatural gas in the Indonesian Arafura Sea.

block until 2028.

The Abadi-2 and Abadi-3 wells were drilled in 2002 to

Production operations in the Belanak field utilize a world-

appraise the extent of the gas-condensate reservoir discoveredclass Floating Production, Storage and Offloading (FPSO)

in Abadi-1. The drilling results indicated that the overall size ofsystem. Production of crude oil and condensate began in

the structure was larger than initially projected.

December 2004 and of LPG in April 2007. The Hiu and Kerisi

From May 2007 to June 2008, the second appraisal drillingfields came on-stream in 2006 and 2007, respectively. Gas

campaign was carried out to narrow the range of reserves

production commenced at the North Belut field in November

estimates. All of the 4 wells confirmed the gas column

2009.

enabling INPEX to substantially upgrade estimates of the field’sreserves.
From September 2007 to November 2008, Pre-FEED work

Natuna Sea

was conducted in connection with a Floating LNG (a floating

North Belut

Belidaoffshore facility where natural gas is processed, liquefied andSouth Natuna Sea
Block B

Kerisistored for offloading) and subsea facilities.

Tanimbar Island

INPEX received approval in principle from the IndonesianMasela Block

Arafu

INDON

government to its plan of development (POD) submitted
in September 2008. A third-party evaluation on the POD is
Natuna Island
Hiu

AUSTRA

Timor
currently being conducted by the Indonesian government.
AtSea
Timor Sea Joint

the same time, a variety of preparatoryPetroleum
steps including FEEDDevelopment Area
work as well as environmental and social
impact assessment

Sembilang

are underway in the lead-up to development of the Abadi

BelanakDarwinfield.
Natuna Sea

Gas field

North Belut

BelidaOil field

Oil and gas field
Tanimbar Island

South Natuna Sea
Block B

Kerisi

Masela Block

ニア 1

アジア･オセアニア 2
Natuna Island

AUSTRALIA
Timor Sea

Timor Sea Joint
Petroleum
Development Area

Hiu

mbilang

WEST TIMOR

BelanakDarwinOil field

Oil and gas field

Abadi Gas-Condensate Field

East Timor

Timor Sea

Gas field

Arafura Sea
INDONESIA

DarwinTimor Sea Joint
Petroleum Development Area

Darwin Gas Pipeline

INDOINPEX CORPORATION

25

5. WA-37-R (Ichthys) and its Surrounding
BlocksINPEX acquired a working interest in WA-285-P offshore
Western Australia after winning an open bid in August

Bontang LNG Plants

4. Berau Block, Tangguh LNG Project

1998. In 2000, after pursuing exploration activities as an

MI Berau B.V., a joint venture established by INPEX (44%)

condensate field.

operator, INPEX discovered the high-potential Ichthys gas andand Mitsubishi Corporation (56%), acquired in October

Eight exploratory wells drilled by INPEX confirmed the2001 an interest of around 22.9% in the Berau block, a hub

presence of sufficient reserves for a large-scale gas andwithin the Tangguh LNG Project. MI Berau owns a 16.3%

condensate project. Later in September 2008, a site in Darwin

working interest (including an actual interest held by INPEX

was selected for construction of an LNG plant. FEED work onof about 7.17%) in the Tangguh Unit, which is a unitized

this plant then began in January 2009. In April of the same

area spanning the Berau block and the adjoining Wiriagar

year, an office was established in Darwin. FEED work also

and Muturi blocks. MI Berau Japan Ltd., a second jointcommenced on offshore production facilities at that time. A

venture between INPEX (44%) and Mitsubishi Corporation

retention lease (WA-37-R) was granted for the block covering(56%), also acquired approximately 16.5% of the issued andthe Ichthys gas and condensate field in September 2009.

outstanding shares of KG Berau Petroleum Ltd. in October

Sea
Thereafter, a PreliminaryNatuna
Field Development
Plan (PFDP) was

2007,
bringing
AttakaUnit INPEX’s total interest in the project up to

submitted to authorities
in March 2010 and procedural steps
North Belutapproximately
Attaka 7.79%.
Field

Santan Terminal

initiated to acquire a production license. Most recently in July
South Natuna Sea

Badak Field

In March 2005, the Indonesian government approved

2010, public
review of
the Company’s
Block B Environmental Impact
BelidaKerisiNilam Fielda development plan for the Tangguh LNG Project and an

Statement (EIS) began. Through these and other measures,

extension Sisi
of Fieldthe PSC until 2035. Subsequently, development

INPEX is actively driving the project forward. Commercial

Tunu Field

Tambora Field
Handil Field

Field drilling of production wells and construction
work suchNubi
as theah Terminal

Bekapai
Field was conducted over a period of four years.
of an LNG
plant

apan

Field
The fi rst Peciko
cargo
of LNG was shipped in July 2009. LNG of 7.6

milliontons per annum has been supplied to buyers in China,
Offshore
MahakamBlockNorth America with whom long-term sales
South
Korea andproduction of LNG, condensate and LPG is scheduled to
Natuna Island are for annual
commence in 2016. Current projections
Hiu

output of roughly 8.4 million tons of LNG and 1.6 million
tons of LPG. INPEX plans to consider expanding LNG and LPG
Sembilang

Belanakproduction further depending on reserve capacity and market
conditions. Peak production is estimated at 100,000 bpd forSouth Mahakam
Fields have been concluded.
agreements

condensate.
Gas field

Oil and gas field

Oil field

Gas field
Oil inandsevengas fieldblocks
Oil field
INPEX hasalso acquired
interests

surrounding WA-285-P (namely WA-274-P, WA-281-P, WA-

Papua Province (INDONESIA)

341-P, WA-343-P, WA-344-P, WA-410-P and WA-411-P).
Exploration activities are ongoing: any discoveries of major oil

アジア･オセアニア 1

or gas reserves in these blocks could considerably augment

the potential of the Ichthys field benefitting from synergy アジア･オ
effects.

WEST TIMOR

Kaimana

Ocean

WA-255-P (1081)
Barrow Island

Van Gogh Field

Timor Sea

Berau Block
WA-10-L

WA-357-P

Darwin

Griffin Fields

WA-155-P (Part II)

WA-37-R, WA-285-P and others

Gas field

WA-12-L
WA-155-P (Part I)
Ravensworth Field

WA-35-L

Onslow

Exmouth

WA-43-L
セアニア
3

Broomeアジア･オセアニア
4

AUSTRALIA

Oil field
Abadi Gas-Condensate Field

East Timor

JPDA06-105
Timor Sea Joint
Petroleum Development Area

INDONESIA

AUSTRALIA

26 INPEX CORPORATION

6. WA-35-L (Van Gogh Oil Field), WA-43-1(Ravensworth Oil Field) and Others
INPEX acquired a 20% working interest in the WA-210-P
offshore Western Australia in February 1989. Subsequent
exploration activities resulted in the discovery of the Griffin
oil fields. The Australian government granted a production

Natuna Sea

license (WA-10-L)
forPlants
the contract area covering four blocks
Bontang LNG
Attaka Unit

North Belutthat include the fi elds. Commercial crude oil and natural gas
Santan Terminal

Attaka Field

production from the fields commenced in January 1994, but
Badak Field

Field
ceased in October
2009 due to naturalTunu
depletion.
Nilam Field

Papua Province (INDONESIA)
BelidaSouth Natuna Sea
Block B

Kerisi7. JPDA06-105 (Kitan Oil Field)

Tanimbar Island

TamboraField
INPEX acquired
working
ArafuraSea interests in WA-155-P (Part II)
Sisi Field

INDONESIA
Field offshore Western Australia in July 1994,
andWA-12-L(Deep)
MaselaBlockHandil
Nubi Field

WA-155-P(Part I) in July 1999, WA-357-P in July 2006 andSenipah Terminal
Bekapai Field

in a blockof WA-255-P
Balikpapan
AUSTRALIA in March 2009. The Van Gogh and
Peciko Field

a contract area located within the Timor Sea Joint Petroleum
Kuda Tasi structure was discovered in 1996 and 2001 throughIt was agreed among the partnersOffshore
to develop the Van Gogh
Mahakam Block

exploration works.

Sembilang

Kaimana

Belanakfield in April 2007. The Australian government granted

Oil was found in March 2008 by the Kitan-1 explorationa production license (WA-35-L) for the two blocks which

well and the presence of a commercial oil accumulation was

includesDarwin
thein the WA-35-L
contractarea
GasVanfieldGogh field
Oil and gas
field
Oil field

Berau
Blockappraisal well drilled subsequently.
confirmed by the
Kitan-2South Mahakam Fields

Natuna Island

Development Area (JPDA). Oil in the Jahal structure andHiu
theRavensworth oil fields were discovered in WA-155-P (Part I).

Timor Sear Sea Joint
oleum
lopment Area

INPEX acquired an interest in JPDA06-105 in January 1992,

Gas field

Oil and gas f

Oil field

in October 2008. Oil production commenced in February

In line with the provisions of the PSC, INPEX made a2010. A final investment decision was taken to develop thedeclaration in April 2008 to the Timor Sea DesignatedRavensworth field in November 2007, and a production

Gas field
Authority (TSDA), currently Autoridade
Nacional do Petróleo

license (WA-43-L) acquired in November 2009. Development(ANP) for the JPDA that an oil field of commercial scale had

been found at Kitan. Thereafter, INPEX acquired approval tois currently proceeding toward a scheduled production startアジア･オセアニア
1
the Final Development Plan from the relevant authority in
up in the second half of 2010.

アジア･オセアニア 3

April 2010. Currently, development work is underway at the
Kitan oil field with a target production start-up in the second
half of 2011.

Indian Ocean

アジア･オセWEST TIMOR

WA-255-P (1081)
Barrow Island

Van Gogh Field

WA-357-P

WA-10-L

INDONESIA

Abadi Gas-Condensate Field

Timor Sea

Timor

Griffin Fields

Abadi Gas-Condensate Field

JPDA06-105

WA-155-P (Part II)

Timor Sea Joint
Petroleum Development Area

WA-12-L
WA-155-P (Part I)

Darwin Gas Pipeline

an Gas-Condensate Field

AUSTRALIA

Gas field

WA-37-R, WA-285-P and others

Undersea gas pipeline

Onslow

Kitan Oil Field
Bayu-Undan Gas-Condensate Field

ExmouthDarwinWA-43-L

DarwinTimor Sea Joint
Petroleum Development Area

Ravensworth Field

WA-35-L

INDONESIA

East Timor

BroomeDarwinAUSTRALIA

Oil field

AUSTRALIA

Gas field

Oil field

AUSTRALIAINPEX CORPORATION

27

2
1

8. JPDA03-12, Bayu-Undan Project

4
7

In April 1993, INPEX acquired a working interest in

3

JPDA03-12, a contract area located in the Timor Sea JPDA.
Exploration within this contract area resulted in the discovery
TanimbarIsland North andof oil and gas in the Elang, Kakatua,
Kakatua

Undan structures.

Arafura Sea

INDONESIA

Masela Block

Oil production in the Elang, Kakatua and Kakatua North

6

5

Papua Province (INDONESIA)

8

oil fields began in 1998, but ceased in 2007 due to natural
AUSTRALIA

depletion.

Timor Sea

GeologicalstudiesTimor
Sea Jointrevealed that the Undan structure

Kaimana

Petroleumand the Bayu
structureArea
in the adjacent JPDA03-13 contract
Development

area were a single body. Final agreement on unitization wasreached in 1999 between interest holdersof both contract
DarwinBerau Blockareas, allowing joint development of the Bayu-Undan gas andcondensate field to proceed. The commercial production of
Gas field

condensate and LPG from the project commenced in 2004.
An LNG sales agreement was concluded with Tokyo ElectricPower Co., Inc. and Tokyo Gas Co., Ltd. in August 2005
stipulating a total annual supply of 3 million tons. The gas
is transported through a 500-km subsea pipeline to an LNG

オセアニア 2 plant built in Darwin in Australia’s Northern Territory. LNG アジア･オセアニア 3

Mahakam Block

shipments from the plant commenced in February 2006.

INDONESIA

Abadi Gas-Condensate Field

East Timor

Abadi Gas-Condensate Fie

East Timor

JPDA06-105
Timor Sea Joint
Petroleum Development Area

Timor Sea Joint
Petroleum Development Area

Darwin Gas Pipeline

Undersea gas
Kitan Oil Field

Bayu-Undan Gas-Condensate Field

Bayu-Undan Gas-Condensate Field
DarwinAUSTRALIA

Gas field

AUSTRA

Gas field

JPDA03-12 BlockOil field

28 INPEX CORPORATIONINPEX Operation
Business Activities

Eurasia
Net sales by region

Net reserves by region

Net production
by region

42(proved)195
thousandboe/d volumes of crude oil from the ACG oil field were up. Buffeted by thebillionIn¥352.3
the fiscal
year ended %March 31,
2010,
sales
%
%
drop in oil prices and an increasingly strong yen, net sales edged down 0.2% compared with the previous fiscal yearto ¥73.5 billion in the Eurasia region. Operating income, on the other hand, climbed 15.4% year on year to ¥39.7
billion due largely to reductions in the cost recovery portions at the ACG oil fields.
*1

Net sales by region¥73.6billion

48

32

Net production
by region

9%

27thousand boe/d*1

Net reserves by region(proved)

7

14

%

%
*1 Thousands ofbarrels of oil
equivalent per day

Together with the Offshore North
Caspian Sea block in Kazakhstan
and the ACG block in Azerbaijan,
Net production
Net reserves by region(proved)by region
INPEX currently operates five projects in four countries in the Eurasia region which includes Europe and the New
Independent
132thousand boe/d¥303.8billionStates.
Net sales by region

36

*1

%

33

43

%

%

Main Projects
Contract Area

1
2

3

Venture Company

Interest Owned

Offshore North Caspian Sea

INPEX North Caspian Sea, Ltd.

Net sales by region(Est. August
1998)
Net6,production
by region

INPEX North Caspian Sea 7.56% Eni 16.81% ExxonMobil 16.81%
KMG
16.81%
16.81% TOTAL 16.81% ConocoPhillips 8.40%
Netreserves
byShellregionACG (Azeri, Chirag, Gunashli)¥16.6billion
BTC Pipeline

INPEX Southwest Caspian Sea, Ltd.
(Est. January 29, 1999)

2%

21thousand boe/d

*1

5

%

INPEX BTC Pipeline, Ltd.

(proved)INPEX Southwest Caspian Sea 10.96% BP* 37.43% Chevron 11.27%
SOCAR 10.00% Statoil 8.56% ExxonMobil 8.00% TPAO 6.75% Itochu
4.30% Hess 2.72%%

3

INPEX BTC Pipeline 2.5% BP* 30.1% SOCAR 25% Chevron 8.9%
Statoil 8.71% TPAO 6.53% Eni 5% TOTAL 5% Itochu 3.4%
ConocoPhillips 2.5% Hess 2.36%(Est. October 16, 2002)*Operator

Net sales by region¥93.9billion

Net production
by region

11%

30thousand boe/d*1

Net reserves by region(proved)

7

9

%

%

1
3

2

INPEX CORPORATION

29

Offshore North
Caspian Sea Block(Kashagan Oil Field)

1. Offshore North Caspian Sea Block (including Kashagan Oil Field)
In September 1998, INPEX acquired a working interest in
the Offshore North Caspian Sea block inside Kazakhstan’s
territorial waters. Today INPEX holds an approximately 7.56%
interest.
The Kashagan oil field was discovered during the first
exploratory drillings in the block in September 1999. The first
discovery in the
20Kazakhstan-controlled part of the CaspianSea, the Kashagan field is among the largest finds in thehistory of oil exploration. A phased development of thissuper-giant field is planned, with the Phase 1 experimental
program now underway. Target peak production for the fully
developed field is 1.5 million bpd.
Besides the Kashagan field, hydrocarbon reserves havealso been confirmed in the four other structures of Kalamkas,

ACG Oil Fields

Kashagan Southwest, Aktote and Kairan. Appraisal of thesestructures is continuing in parallel with development of themain Kashagan field with a view to expanding the total
production of the block.

KAZAKHSTAN

20
Kashagan

KairanCaspian Sea

Kashagan Southwest

Offshore North
Caspian Sea Block

ガス田
油田
油ガス田

BTC Pipeline

100

Kalamkas

Aktote30 INPEX CORPORATION

3. BTC Pipeline
INPEX acquired a 2.5% interest in the BTC pipeline project in
October 2002.

2. ACG Oil Fields

The 1,770-kilometer BTC pipeline stretches from the Azeri
capital of Baku to Ceyhan on Turkey’s Mediterranean coast

INPEX acquired a 10% working interest in the Azeri-Chirag-through Tbilisi, Georgia. The original transport capacity of the

Gunashli (ACG) oil fields in April 2003. The fields are locatedroute is 1.0 million bpd. Commencing full-scale operation inin a region of the South Caspian Sea controlled by theJune 2006, the pipeline was originally built to transport crude

Republic of Azerbaijan.

oil produced in the AGC oil fields in Azerbaijan. The pipeline’s

Oil production started in the Chirag field and has since

capacity is planned to expand up to 1.2 million bpd so that it

expanded to include the Central Azeri field (February 2005),

can also accommodate future oil output from the Kashagan

the West Azeri field (December 2005) and the East Azeri

oil field in Kazakhstan.

field (October 2006). The Deep Water Gunashli field came

The Ceyhan marine terminal has seven crude oil storage

on-stream in April 2008. New Chirag Oil Project (COP)

tanks with capacity of 1 million barrels and a jetty with 2,000

wassanctioned in March 2010. The COP is the additional
120

meters long where two 300,000-ton tankers can dock at the

portion of the Gunashili fields. Operations continues to

INPEX has been participating in the development of

increase oil output from the ACG fields to the 1.0 million bpd

the ACG fields in Azerbaijan and the Kashagan field inmark.

Kazakhstan, both of which rank among the world’s limited

investment for the development of Chirag and deepwater

120

same time.

220

220

In August 2010, INPEX purchased an additional

number of super-giant oil fields. Completion of the BTC

interest (0.9644%) which increased its working interest to

pipeline has enabled direct shipment of oil from these fields

10.9644%.

by supertanker from a Mediterranean port without passing

Most of the crude oil produced by the ACG fields isthrough the congested shipping lanes of Turkey’s Bosporus

being transported from Azerbaijan to Turkey via Georgia

straits. The BTC pipeline is expected to play a major rolefor shipment from the Mediterranean coast using the Baku-

in transporting the crude oil produced in the ACG and

Tbilisi-Ceyhan (BTC) pipeline, a major oil transportation

Kashagan fields as their output grows.

system that began full-scale operations in June 2006.

RUSSIA
Tbilisi RUSSIAAZERBAIJANACG Fields
Baku
AZERBAIJAN
Sangachal

Black Sea

ACG Fields
Baku

Black Sea

Sangachal

Tbilisi

Caspian Sea

AZERBAIJANGEORGIAAZERBAIJAN

ARMENIA

Oil Pipeline

Baku
ARMENIA

TURKEY

Deep
Oil Water
Pipeline
Gunashli Field

BTC Pipeline

Chirag Field

Deep Water
Gunashli Field

Azeri Field

Chirag Field

BTC Pipeline

CeyhanMediterranean
Sea
CYPRUS

Caspian Sea

Baku

TURKEY

Azeri Field

Caspian Sea

Caspian Sea

GEORGIACYPRUSIRAN

CeyhanIRAN

SYRIA
Mediterranean
IRAQ
Sea
SYRIA
IRAQ

Oil field
Oil field

132Net sales by region¥352.3
INPEX
Operation42%
Business Activities
billion195thousand boe/d*1

INPEX CORPORATIONNet reserves by region

Net production
by region

31(proved)

48

32

%

%

Middle East & Africa
Net sales by region

Net production
by region

Net reserves by region(proved)27thousandbillionNet¥73.6
sales inthe Middle%East and Africa
forboe/d
the fiscal year
under review totaled ¥303.8 billion,a decrease of 34.4%%%
compared with the previous fiscal year. This was primarily attributable to lower oil prices, a drop in crude oil sales
volumes at the ADMA block and the impact of appreciation in the value of the yen. On a year-on-year basis,
operating income declined 35.5% to ¥205.5 billion.

9*1

Net sales by region¥303.8billion

714

Net production
by region

36%

132thousand boe/d*1

Net reserves by region(proved)

33

43

%

%

主なプロジェクト

*1 Thousands ofbarrels of oil
equivalent per day

INPEX is engaged in 19 projects Net
in production
seven countries throughoutNetthe
Middle East and Africa including the ADMA
reserves by region(proved)by region
block in the United Arab Emirates.
Net sales by region¥16.6billion

2%

Main Projects
Contract Area

Umm Shaif Field/Lower
Zakum Field
Upper Zakum Field

3

5

3

%

%

Venture Company

Interest Owned

Japan Oil Development Co., Ltd. (JODCO)JODCO 12% ADNOC 60% BP 14.67%
TOTAL 13.33%
JODCO 12% ADNOC 60% ExxonMobil 28%
Net reserves by region(proved)JODCO 12% ADNOC 88%

Net production
by region

Umm Al-Dalkh Field

2*1(Est. February 22, 1973)

1 Net sales by region
Satah Field¥93.9
billion

21thousand boe/d

11%

30thousand boe/d*1

7

JODCO 40% ADNOC 60%%

9%Teikoku Oil (D.R. Congo) 32.28% Perenco* 50% Chevron 17.72%

Offshore Democratic Republicof the Congo

Teikoku Oil (D.R. Congo) Co., Ltd.

West Bakr

The Egyptian Petroleum Development
Co., Ltd. (EPEDECO)(Est. August 1, 1970)
EPEDECO* 100%

(Est. July 17, 1970)

4

El Ouar I/II

Teikoku Oil Algeria Co., Ltd.

Teikoku Oil Algeria 10.29% Sonatrach 67.33% Eni* 22.38%(Est. December 21, 2001)*Operator

4

3

2

1

32 INPEX CORPORATION

1. ADMA Block
ADMA Block

In May 2004, INPEX made Japan Oil Development Co.,
Ltd. (JODCO) a wholly owned subsidiary by acquiring all of
the JODCO shares held by Japan National Oil Corporation
through a share exchange. Established in 1973, JODCO owns
an interest in the ADMA block located offshore Abu Dhabi in
the United Arab Emirates. Oil production currently spans five
fields in the block. Production started from the Upper Zakum(UZ) oil field (the largest in the block) in 1982, followed by
the Umm Al-Dalkh (UA) oil field in 1985 and the Satah (ST) oil
field in 1987. JODCO has been involved in the developmentof these fields. The Umm Shaif (US) and the Lower Zakum(LZ) oil fields have also been producing crude oil steadily since
1962 and 1967, respectively. The oil produced from thesefields is transported by subsea pipelines to the islands of Das(from US & LZ) and Zirku (from UZ, UA & ST) for shipment
onward.
A number of development projects are currently underway
to maintain and expand oil output from the ADMA block,including plans to develop promising untapped structures

Offshore
Democratic Republicof the Congoin the block;
20 construction of new gas injection facilities for

the Umm Shaif field; installation of additional gas treatment
facilities for the Lower Zakum field; and redevelopment plans
for the Upper Zakum field that involves the use of artificial
islands.
Operation and development of these fields is undertaken
by ADMA-OPCO and ZADCO, the two local operatingcompanies whose shares are owned by JODCO, Abu Dhabi
National Oil Company (ADNOC) and other participating oil
companies. Through JODCO, INPEX continues to dispatch
engineers and other personnel to both of these operatingcompanies.

ADMA Block20
Satah Field
Das Island

Umm Shaif Field

Upper Zakum/
Lower Zakum Field

Zirku Island
Umm Al-Dalkh Field

Abu Dhabi
ガス田
油田

UNITED ARAB EMIRATES

油ガス田

West Bakr BlockOil fieldOフリカ 1INPEX CORPORATION

33

3. West Bakr Block
The Egyptian Petroleum Development Co., Ltd. (EPEDECO), a
joint venture established by a consortium including INPEX and
Mitsui & Co., acquired a 100% working interest in the West

120

Bakr blockin June 1975. EPEDECO as operator conducted
220
exploration activities within the block, which is located ina desert region in Egypt on the west bank of the Gulf of

2. Offshore Democratic Republic of theCongo

Suez. Three oil fields were discovered and oil productioncommenced in 1980.
Furthermore, new oil fields were successfully discovered

INPEX acquired
120 a 17.03% working interest in July 1970 in

220
following addition
exploration activities in 1989 with

an offshore area in the country now known as Democratic

production commencing from 1990.

Republic of the Congo (DRC) and has been participating in

The contract covering the West Bakr block was extended

oil exploration and development in this region. An additional

until 2020 in July 2005. Production levels from the existing

interest was acquired in July 1972, increasing its participating

fields remain stable. EPEDECO is looking to increaseinterest to the current share of 32.28%.

production through further exploration activities.

Oil production commenced in 1975 from the GCO oil
field, which was discovered in 1971. Including GCO, a totalof 11 oil fields have been discovered in the Offshore DRC

Mediterranean Sea

block. The contract covering this block was extended until
Mwambe2023 in May 1995, and production levels from existing fields
Miasatoremain stable.

Libwa

MibaleCairo

MotobaLukami

Gulf of Suez
Mediterranean Sea

MuandaMoko

BananaTshialaMwambeEGYPTWest Bakr

Miasato

GCO
Mibale

Libwa

Soyo

Cairo

MotobaLukami

TshialaOil field

Gulf of Suez

MuandaMoko

BananaOil field

EGYPT

GCO

West Bakr

Soyo

中東・アフリカ 3

Oil field
Oil field

中東・アフリカ 2

4

3

中東・アフリカ 2

2

中東・アフリカ1

34 INPEX CORPORATIONEl Ouar I/II Blocks

320

420

4. El Ouar I/II Blocks
In November 2001, INPEX acquired a 10.29% working
interest in the El Ouar I and II onshore blocks locatedin eastern Algeria. Exploratory drilling in 1997 and thesubsequent drilling of appraisal wells confirmed the presenceof natural gas, condensate and crude oil in the El Ouar
I block. Natural gas and condensate were also found in
the El Ouar II block in exploratory drilling in 2001. Joint
development studies of these blocks and surrounding fields
are currently ongoing.

ALGERIALIBYAEl Ouar Block

リカ 3

4

3

2

1

Net sales by region

Net production
by region¥73.6billion

9
INPEX Operation%

27thousand boe/d

Net reserves by region

7

*1

35

INPEX CORPORATION(proved)

14%%

Business Activities

Americas
Net sales by region¥303.8billion

Net production
by region

36%

132thousand boe/d*1

Net reserves by region(proved)

33

43

%

%

In the Americas, INPEX experienced a surge in sales volumes of crude oil during the fiscal year ended March 31,
2010. As a result, net sales jumped 65.6% compared with the previous fiscal year to ¥16.6 billion. Operating income
totaled ¥1.0 billion compared with the operating loss of ¥1.3 billion incurred in the previous fiscal year.

Net sales by region

Net production
by region¥16.6billion

2%

21thousand boe/d*1

Net reserves by region(proved)

5

3

%

%
*1 Thousands ofbarrels of oil
equivalent per day

Operations in the Americas encompass 18 projects in eight countries. Major projects include the Joslyn Oil Sands
Net production
Net reserves by region(proved)by region
project in Canada and the Frade oil fielddevelopment project in Brazil.
Net sales by region¥93.9billion

11%

30thousand boe/d

*1

7

9

%

%

Main Projects
Contract Area
OSL 7280060T24

1

OSL 7405070799

Venture Company

Interest Owned

INPEX Canada, Ltd.

INPEX Canada 10% TOTAL* 75% Occidental 15%(Est. November 28, 2006)

OSL 7404110452

2

3

Copa Macoya
Guarico Oriental
Frade Block

Main Pass 118

5

Teikoku Oil and Gas Venezuela 70% PDVSA 30%(Est. June 7, 2006)

Teikoku Oil and Gas Venezuela 30% PDVSA 70%

Frade Japão Petróleo Limitada (FJPL)

FJPL 18.2609% Chevron* 51.7391% Petrobras 30%(Est. July 5, 1999)

Ship Shoal 72

4

Teikoku Oil and Gas Venezuela, C.A.

Teikoku Oil (North America) Co., Ltd.
(Est. May 30, 2003)

1

Teikoku Oil (North America) 25% PetroQuest* 50.5% Other 24.5%
Teikoku Oil (North America) 10% XTO* 50% Other 40%

West Cameron 401

Teikoku Oil (North America) 25% PetroQuest* 38% Other 37%

West Cameron 402

Teikoku Oil (North America) 25% PetroQuest* 25% Other 50%

Louisiana SL19372

Teikoku Oil (North America) 18.75% PetroQuest* 41.25% Other 40%

Block Cuervito

Teikoku Oil de Burgos, S.A.de C.V.
(Est. September 9, 2003)

Teikoku Oil de Burgos 40% *Petrobras 45% Diavaz 15%

Block Fronterizo

54*Operator

2

3

36 INPEX CORPORATION

1. Joslyn Oil Sands Project
In November 2007, INPEX acquired a 10% interest in the
Joslyn Oil Sands Upstream Project in Alberta, Canada.
The Joslyn project plans to conduct a multi-phase minedevelopment which is expected to produce 100,000 barrelsof bitumen per day as Phase-1 development in Joslyn North
Mine. The development framework is under investigation andthe project start-up is expected to be in the next decade.
Along with acquiring an interest in the Oil Sands
Upstream Project, INPEX acquired the right to participate
in the Upgrader project planned by TOTAL in Edmonton,
Alberta. This project plans to construct a new upgrader that
anticipates a capacity of 130,000 barrels of synthetic crude
oil as Phase-1 development.

2. Copa Macoya and Guarico Oriental Blocks
INPEX was awarded a 100% working interest in a central
onshore area, the East Guarico block, Venezuela in July 1992.
INPEX participated in oil and natural gas field rehabilitation,
exploration and development activities as an operator under
the operating service agreement (OSA) terms.
The existing OSAs were changed to joint ventureagreements in 2006 after a change of policy by the
Venezuelan government. Based on the new policy, INPEX

Copa Macoya Block/Guarico Oriental Blockestablished gas and crude oil venture companies jointlywith Petroleos de Venezuela, S.A. (PDVSA), the Venezuelan
national petroleum company, and from April 2006 continued
Caracasthe gas business in the Copa Macoya blockandGeorgetown
the crude oil

business in the Guarico Oriental block (which replaced the

Athabasca River

VENEZUELA

Joslyn Oilsand Lease

features contractBogota
extensions until 2026 for each of the two

Alberta

blocks.

COLOMBIA
BRAZIL

Fort McMurray

Copa Macoya Block/Guarico Oriental Block

CaracasAthabasca River

Georgetown

VENEZUELA

Joslyn Oilsand Lease
Bogota1

Alberta

COLOMBIA
BRAZIL
Fort McMurray

5

GUYANA

East Guarico block). The new joint venture agreement also

4
2

3

GUYANAINPEX CORPORATION

37

4. U.S. Gulf of Mexico Projects
INPEX has participated in oil and gas development projects
in the shallow waters of the U.S. Gulf of Mexico since April
2006. Following production startup from Ship Shoal 72 inJuly 2006, Main Pass 118 started production in April 2007,

3. Frade Blockand West Cameron 401/402 and Louisiana SL19372 started
production in 2008.

Frade Japão Petróleo Limitada (FJPL), a joint venture
established by INPEX and Sojitz Corporation, acquired
a 12.75% working interest in the Frade block in Brazil’s
offshore Northern Campos basin in July 1999. FJPL increased

5. Cuervito and Fronterizo Blocks

its working interest to 15% in July 2001. As a result of

INPEX’s affiliate, Teikoku Oil de Burgos S.A. de C.V. has

the change in interest ownership due to arrangements

participated in gas development and production operations

determined under contract, FJPL’s working interest amounted

in the Cuervito and Fronterizo Blocks located in the Burgos

to approximately 18.3% in June 2006.

basin, Mexico since 2004. This project has been conducted

After its initial discovery in 1986, the reserves of the Fradeoil fi eld were first estimated in 2001 with the drilling of two

under the Multiple Service Contract with PEMEX and INPEX’s
affiliate holds a 40% working share of this project.

appraisal wells after FJPL acquired a participating interest
アメリカ合衆国

in the block. A final investment decision to develop FradeLouisiana SL19372

was made in June 2006 after subsequent feasibility studies.
Commercial production started in June 2009, marking theCamposfirst crude oil to be produced in Brazil by an enterprise with a

Cuervito Block/
Fronterizo Block

BRAZILsignificant Japanese equity interest.

Ship Shoalアメリカ合衆国
72

Macae

Frade BlockLouisiana SL19372
MEXICO

Atlantic Ocean

Campos

Cuervito Block/
Fronterizo Block

Main Pass 118

West Cameron 401/402

BRAZIL

Ship Shoal 72

Macae

Frade Block
MEXICO
Atlantic Ocean

中東・アフリカ 3

中東・アフリカ 3

West Cameron 401/402

Main Pass 118

38 INPEX CORPORATIONNet sales by region

Net production
by region¥303.8INPEX
Operation36%
Business Activities
billion132thousand boe/dJapan
Net sales by region*1

Net reserves by region(proved)

33

43

%

Net production
by region%

Net reserves by region(proved)thousandnet
boe/dsales in Japan edged up 0.6% compared with the previous fiscal year
billionIn ¥16.6
the fiscal
year ended%March 31,21
2010,
%
%
to ¥93.9 billion. While sales of crude oil and petroleum products declined, this was offset by an increase in natural
gas sales. Operating income contracted 3.9% year on year to ¥32.5 billion. This largely reflected an increase in thebalance of products purchased.

2*1

Net sales by region¥93.9billion

53

Net production
by region

11%

30thousand boe/d*1

Net reserves by region(proved)

7

%

9

%
*1 Thousands ofbarrels of oil
equivalent per day

In its domestic operations, INPEX places considerable weight on exploration, development and production
activities in Niigata Prefecture. In the fiscal year under review, the Company undertook the drilling of additional
production wells aimed at boosting production capacity at the Minami-Nagaoka gas field, the largest gas field inJapan.
In addition, the Company has commenced introduction of imported LNG. We are now supplying both domestic
and imported LNG into our pipeline network in an effort to further fortify its stable supply structure. At the sametime, INPEX is promoting the construction of its own LNG receiving terminal with the aim of building a gas supply
chain.

INPEX CORPORATION

39

Minami-Nagaoka Gas Field and the Domestic
Natural Gas Business
Discovered in 1979 and in production since 1984, Minami-

Echigo Line

Nagaoka is the largest gas field in Japan and accounts
for approximately 40% of the Japan’s total natural gas
production. After being processed, the natural gas istransported through a 1,400-km trunk pipeline network
stretching across the Kanto and Koshinetsu regions thatsurround the greater Tokyo metropolitan area, and delivered

Mitsuke City

Sekihara Gas Field

Sea of Japan(Underground Storage)

Higashi-Kashiwazaki
Gas Field

NagaokaCity
JoetsuShinkansenLine

to city gas companies and industrial customers along thisnetwork.
In the context of its natural gas domestic pipeline,

Shinetsu
honsenMinami-Nagaoka
Gas Field

Kashiwazaki CityINPEX has experienced substantial sales growth over recent

Ojiya City

years. This is against the backdrop of the sharp upswing

Joetsu Linein competing fuel prices as well as the high eco-friendly
attributes inherent in natural gas compared with other fossil

Gas field

fuel energy sources. The medium- to long-term projection isfor further growth in annual demand to the 2.5 to 3.0 billion

日本 1

m3 range, reflecting further active expansion of the supply
Naoetsu LNG Receiving Terminal

Echigo Line
network into new regions.

(under construction)

Supply capacity and reliability hasMitsuke
beenCity
dramatically
Sekihara Gas Field

Sea of Japanenhancedthrough
dynamic
reinforcement of production(Underground
Storage)
Shinetsu

honsenand the introduction
facilities, pipeline network expansion

Higashi-Kashiwazaki
of LNG from Shizuoka Gas Co.,Nagaoka
Ltd. from 2010. To boost
Gas FieldCity

the overall scale of this business, INPEX has decided to build

Minami-Nagaoka
Gas Field

Shin Oumi Line

Shin Tokyo Line
Tokyo Linean LNG receiving terminal at Naoetsu,
Joetsu Joetsu City in Niigata
Shinkansen

Prefecture on the Japan Sea coast.
The target operationalLinestart-up dateMinami-Nagaoka
is 2014. In constructing the Naoetsu LNG

Kashiwazaki City

Gas Field
receiving terminal,
INPEX plans to build a gas supply chain
Ojiya City

that in the future will link the Group’s overseas projects to the
Joetsu Linedomestic gas market. This in turn is expected to help securecontinuous growth in the domestic natural gas business.
Gas field

INPEX also produces natural gas dissolved in water.

Ryomo Line

Iruma Line

Matsumoto Line
Kofu Line

Shizuoka Line
Sodeshi LNG Terminal[Shizuoka Gas]

Minamifuji Line
[INPEX/Shizuoka Gas/Tokyo Gas]

Second Suruga Trunk Line
[Shizuoka Gas]

Domestic pipeline network

Natural gas dissolved in water is contained in underground“brine water.” We pump up the brine water, extract natural

日本 1

gas and supply the gas to surrounding areas. The brine water
also contains high levels of iodine. We refine and export all
the iodine.

日本 2

40 INPEX CORPORATIONINPEX Sustainability

Corporate Social Responsibility
INPEX carries out E&P business around the world with commitment to the protection and preservation of environment and to
the safety and well-being of our employees. To turn this commitment into action, we have implemented our own HSE (Health,
Safety and Environment) Management System as a guiding framework for undertaking a series of initiatives.
In order to develop energy resources efficiently in different parts of the world, we must have a dialogue with those who livein the regions in which we operate, and solicit their understanding and support. We make a positive contribution to theircommunity, such as promoting mutual understanding through intercultural exchange, multifaceted support for social andeconomic development, community-oriented corporate citizenship activities, and transmission of information to promote
understanding of business activities.

Overview of HSE Management System
A stable supply of energy can be disrupted for any number ofreasons. Of most concern to us is the risk of incidents that not
only could interrupt the energy supply, but also could cause
environmental pollution, jeopardizing our business continuity.
Given the inseparable relationship between environmental
protection and disaster prevention, INPEX constantly engages in
the improvement and enhancement of its health and safety
programs as well as environmental protection activities under its“HSE Management System,” which enables us to continuously

enhance our HSE performance.
This system is comprised of document structure, as specified
in documents that include the Health, Safety and Environment
Policy, the HSE Management System Manual and otherprocedures and guidelines for HSE, the HSE Committee
structure established at both the Head Office and businessoffice levels, and objectives regarding HSE and action plansrenewed every fiscal year.

Implementation Framework for the Group’s HSE Management System
The implementation framework for INPEX’s HSE Management
System is comprised of a Head Office HSE Unit supported byoperational organizations responsible for operator projects thatare established as required. At the same time, and with the aimof promoting HSE activities on a systematic Group-wide basis,
we established the Corporate HSE Committee, which is tasked
to formulate the HSE Management System. Manual, procedures
and objective for the INPEX Group. During fiscal 2009, 10
Corporate HSE Committee meetings were held. In addition to
discussing and approving HSE-related procedures, theCommittee took steps to consider HSE activity plans, securing
management methods as well as implementation plans for andthe results of HSE awareness surveys. Each Operational
Organization charged with the responsibility of implementing
HSE activities at the frontline also establishes its own HSE
committee to discuss and approve HSE documentation, consider
HSE activity plans and pursue initiatives aimed at raising HSEawareness.
Furthermore, it is stipulated that an HSE Meeting attended

by Head Office management as well as the top executive fromeach Operational Organization or an HSE Managers Meeting
attended by managers of each Operational Organization is held
once a year. The third HSE Meeting was held in February 2010.
Participating responsible personnel from each domestic andoverseas Operational Organization undertook to report on thestatus of HSE management systems and issues arising from its
implementation. Taking into consideration the details of eachreport and with the opportunity to exchange opinions withmanagement, participants were left with a renewed sense of
the difficulties involved in promoting HSE. This third meeting
confirmed the critical need to implement specific measures on apriority basis aimed at for example securing qualified andcapable human resources.
Operator: a company that takes primary responsibility for the
management of exploration, development and production workin a block.

HSE management system implementation framework
Corporate

Corporate HSE Committee
Toshiaki Kitamura(President)

Masatoshi Sugioka (Vice Chairman)[In charge of HSE] (Director for HSE)

Operational Organization

Operational Organization

Operational Organization

Operational Organization

Operational Organization
Representative

Operational Organization
Representative

Operational Organization
Representative

Operational Organization
Representative

HSE Committee

HSE Committee

HSE Committee

HSE Committee

INPEX CORPORATION

41

Management Structure of the Group’s HSE Management System
The ideals and principles of INPEX’s Mission and Corporate
Social Responsibility Policy cover a variety of aspects. In relation
to environmental protection and safety, INPEX formulated its
Health, Safety and Environment Policy. Furthermore, steps weretaken to establish document architecture for the Group’s HSE
Management System to serve as a foundation for systematicand steady implementation. Under the guidance of thisarchitecture, we established a corporate-level HSE Management
System Manual, procedures and plans. From fiscal 2009, INPEX
has initiated a system under which it continuously formulates
procedures and guidelines to complement the aforementioned
HSE Management System Manual, procedures and plans. In
addition, each Operational Organization prepares such related
documents as procedures and plans in accordance with thecorporate-level HSE Management System Manual andassociated documentation. Through these means every effort isbeing made to establish and strengthen the HSE Management
System for each project.
In fiscal 2009, procedures that had remained at the planningstage were completed in full. Currently, INPEX is working tocompile the HSE guidelines that support these procedures.

Structure of the HSEMS documents
MissionCorporate Social Responsibility Policy
Structure of
the HSEMS
documents

Health, Safety and Environmental Policy

Corporate HSE Management System
ManualCorporete
HSE Procedures

Corporate
HSEMS documents

Corporete HSE
Guidelines
HSE Plan(s)Related documents such as
Procedures, Work Instructions, etc.

Operational
Organization
HSEMS documents

Bridging documents with Contractors HSEMS documents
Contractors HSEMS documents

Contributing to Local Communities
INPEX continues to implement a large number of projects that contribute to
the sustainable development.

Education-Related Support in the UAE
At the request of Crown Prince Mohammed bin Zayed al-Nahayan of Abu
Dhabi, the capital of the United Arab Emirates (UAE), and with the support of
the government of Japan, the Japanese school in Abu Dhabi, which includes akindergarten, has accepted two young UAE children each year since the endof 2004. As of May 2010, there are nine UAE children attending the school.
INPEX employees are involved locally in the school’s management as membersof the board. In collaboration with other companies in Japan, INPEX also
provides support through the dispatch of Japanese teachers, who help to
educate these UAE children in the Japanese language and mathematics as
they progress from kindergarten to elementary school. Our hope is that these
pupils will in the future serve as a bridge that links the UAE with Japan.

The Japanese school
in Abu Dhabi

Supporting the Indigenous People of Australia
Through INPEX Browse, Ltd., the Group is providing support to the Djarindjin
Aboriginal Corporation, which owns and operates the Djarindjin-Lombadina
Airport, 185 kilometers north of Broome in the Kimberley reigion, Western
Australia. To date, INPEX has contributed to the major upgrade of the airport,
including resealing the airstrip, expanding fuel facilities with the addition of
three fuel tanks and installing two shelter facilities as well as an automatedweather station. These efforts have served to generate and expand local
employment providing considerable support to the local community. In
addition, the automated weather station transmits data to the Australian
Meteorological Office at regular intervals of 30 minutes. This is of substantial
assistance in ensuring air safety across the skies of the Kimberley region.

Signing ceremony for the business support agreement

Environment-Related Support in Venezuela
INPEX is planning to conduct a large-scale dredging operation of theZazarida Harbor located near the Moruy II block in Venezuela through PT
Moruy II, its partially owned company. As a part of this endeavor, weundertook a cleanup of the Chuadi creek, which borders the harbor between
November 2009 and January 2010. In addition to employing more than 50
residents from the local community, we undertook a host of initiatives
including the collection of refuse from the creek, the distribution of rubbish
bins and the installation of rubbish disposal warning notices. At the sametime, we held seminars on the handling and disposal of waste. The coredredging work, which began in May 2010 is scheduled to end in December
2010 and involves the construction of a canal and dikes.

A waste disposal seminar

42 INPEX CORPORATION

Activities Aimed at Promoting Safety
Both at the Head Office and Operational Organization levels,
the INPEX Group is committed to ensuring complete safety in its
operations. To this end, we implement a wide range ofinitiatives.
In the context of safety management, implementation
procedure documentation based on HSE procedures as well asprocedures relating to such key issues as the soundness offacilities, risk assessment, security and health management isprepared in line with the actual condition and situation of each
operational organization. Running in concert with existing
safety activities, each individual operational organization
pursues activities in tune with these new procedures.

Measures against Environmental Incidents
Continuing on from fiscal 2008, the incidence of small-scale
crude oil leakages was high throughout fiscal 2009. This was
mainly attributable to the corrosion of pipelines servicing theWest Bakr Oil Field in Egypt. This incidence was particularly
prevalent in November with leakage coming to 22 barrels.
In addition to implementing onsite emergency measures as
specified under the HSE Management System, we took steps toprogressively replace corroded pipelines. All of the leaked oil
was recovered and converted to asphalt, and is currently being
applied in trials for reuse as pavements. Furthermore, we took
steps to strengthen the areas around each pipeline, toinvestigate the causes of corrosion and to modify the materials
used in the manufacture of pipelines. Complementing theseand other initiatives, we introduced the use of corrosion
inhibitors, and continue to give careful thought to preventive
measures including the removal from pipelines of such solidmaterials as sludge.

conduct benchmarking with other participating companies.
Furthermore, we are currently considering the numerical targets
to be established from fiscal 2010. In the event of an incident,
INPEX is committed to reporting in full the details and cause
following appropriate investigation. Consideration anddisclosure will also naturally be given to preventive measures.

Activities Aimed at Preventing Incidents due to
Human Error: Near-miss Prevention Activities
Operational Organizations in Japan have commenced near-missactivities which involve strict adherence to the prediction of
hazards and risks as well as “pointing and naming” and “callingout” activities. In this context, we have put together aproprietary “near-miss map,” which illustrates at a glance therisk factors associated with operations. Every effort is made toshare in the recognition of safety risks during meetings held
prior to the commencement of operations as well as to harness
risk prediction activities.
Fiscal 2009 was a period during which incidents and nearmisses due to human error were particularly pronounced. INPEX
is taking steps to launch new initiatives aimed at preventing
unsafe situations and conditions and by association incidents
across its entire organization. Providing further insights, we areinviting external experts to lecture on such topics as humanfactor engineering.
Near-miss activities: Employees are encouraged to record small
incidents that do not involve human and material damage, butscare or startle them at project sites to share their experienceswith fellow workers so as to prevent a small incident frombecoming a serious one.

Upgrading Contractors’ HSE Management
At the INPEX Group, we require all our contractors to have a fullunderstanding of our HSE Policy as they go about their assigned
duties; working in unison with contractors, we strive to prevent
work-related incidents and reduce environmental loads. Each
Operational Organization, whether in Japan or overseas, istranslating the Corporate HSE Procedure for Contractors’ HSE
Management into its own Contractors’ HSE Management
Manual that meets regional requirements and specific needs ofindividual projects. In addition, in the case of a contractor
competitive bid, we evaluate not only each contractor’s
engineering expertise and cost estimate, but also its HSE
competence to select a contractor that excels in this area.
Furthermore, we monitor and evaluate each contractor’s HSE
performance against agreed-upon criteria during the course ofcontract work, and ask them to improve performance asnecessary. In fiscal 2009, we commenced steps to prepare the
Guidelines for HSE Requirements for Contractors—a set of
more practical guidelines that are derived from the Corporate
HSE Procedure for Contractors’ HSE Management.

A safety consultative meeting in connection with construction work for the
Naoetsu LNG receiving terminal

Activities Aimed at Raising HSE AwarenessIn an effort to raise HSE awareness, management calls on
domestic operating sites and conducts HSE briefing meetings.
Working to assess the level HSE awareness within the Group’s
overall corporate culture, steps are taken to implement andassess the results of HSE awareness surveys. With the aim of
improving the Group’s performance in the areas of health andsafety, INPEX also collects and evaluates work safety
performance data. At the same time, and as a member of theInternational Association of Oil and Gas Producers (OGP), we

Treating an oil leak in Egypt

INPEX CORPORATIONINPEX Sustainability

Board of Directors(Back row)⑭⑫⑩⑨⑪⑬⑮(Center row)⑦⑤④⑥⑧
(Front row)②①③

1

Representative Director, Chairman

13 Statutory Auditor

Shigeru Hayashi

2

Representative Director, Vice Chairman Masatoshi Sugioka

14 Statutory Auditor

Haruhito Totsune

3

Representative Director, President

Toshiaki Kitamura

15 Statutory Auditor

Koji Sumiya

4

Director, Executive Vice President

Katsujiro Kida

Director (Adjunct)

Kazuo Wakasugi

5

Director

Seiji Yui

Director (Adjunct)Yoshiyuki Kagawa

6

Director

Masaharu Sano

Director (Adjunct)

Seiji Kato

7

Director

Noboru Tezuka

Director (Adjunct)

Shigeo Hirai

8

Director

Shunichiro Sugaya

Statutory Auditor (Adjunct)

Hiroshi Sato9

Director

Masahiro Murayama

Statutory Auditor (Adjunct)

Masaru Funai

10

Director

Seiya Ito11

Director

Wataru Tanaka

12

Director

Takahiko Ikeda

Naoki Kuroda

4344 INPEX CORPORATIONINPEX Sustainability

Corporate Governance
INPEX recognizes the importance of improving the efficiency and soundness of its management while
enforcing compliance in order to continue to increase corporate value and maintain the trust of its
stakeholders including shareholders and society at large. In this context, INPEX will continue to reinforce its
corporate governance.
The following contents are based on conditions as of June 30, 2010, unless otherwise stated.
Shareholders’ Meeting
Appoint/dismiss

Appoint/dismiss
Coordinate

Board of Statutory Auditors

Independent Auditors

5 Statutory Auditors
Including 4 Outside
Statutory Auditors

Accounting audit

Appoint/dismiss
Audit

Board of Directors
16 Directors Including
4 Outside Directors

Coordinate
Accounting audit

Audit

Coordinate

Appoint/supervise/dismiss

Appoint

Executive Committee

President
ReportAudit Unit

Internal audit

Corporate Officers

10 Concurrent Directors and Corporate Officers
24 Corporate Officers Total 34

Divisions and Subsidiaries

Shareholders’ Meeting
The Company’s Ordinary General Meeting of Shareholders isheld in June each year. This meeting is well attended and INPEX
obtains the wide-ranging opinions of shareholders. In order toenhance the convenience of foreign shareholders, convocation
and resolution notices in English are posted on the Company’s
website. In addition, INPEX introduced an electronic platform forthe exercise of voting rights for Company’s fourth Ordinary General Meeting of Shareholders held on June 23, 2010. Shareholders are also able to exercise their voting rights via the Internet.

Directors, Board of Directors’ Meeting and Outside
Directors
The Board of Directors of INPEX meet once a month and whennecessary to discuss and make decisions regarding importantmatters and oversee the execution of directors’ operations.
When deliberating on and determining important matters relating to the oil and natural gas E&P, the expertise and experienceof directors, who have for the most part spent their entire
careers with the Company, as well as directors appointed fromoutside the Company with significant knowledge and insight are
taken fully into consideration. In this manner, steps are taken to
ensure a reasonable and efficient decision-making process whileat the same time securing objectivity and balance.
The appointment of outside directors reflects the Company’s
recognition considering the commitment to independence, as
efforts to enhance the validity of business decisions and tosecure efficacy, professionalism and objectivity in the oversightfunction. The Board of Directors is therefore comprised of 12

Compliance
Committee

internal appointees with a comprehensive understanding of thebusiness of the Company and four outside appointees. The
appointment of outside directors is ratified at relevant shareholders meetings based on the perceived level of contribution to
the Company’s business development. Each of the four outside
directors is well versed in matters relating to the energy industry
as well as extensive and wide-ranging management experienceand insight.
At the same time, the four outside directors concurrently
serve as directors of or advisors to several of the Company’s
shareholder corporations which are involved in businesses thatoverlap with those of the Company. Accordingly, INPEX recognizes that it must pay particular attention to corporate governance to avoid conflicts of interest in connection with competition and other matters. To this end, all Company directors,
including the outside directors, are required to sign a written
undertaking to carry out their duties as directors of the Company appropriately and with the highest regard for the importance of such matters as their obligations in connection with
non-competitive practices under the Japanese Companies Act,the proper manner for dealing with conflicts of interest, andconfidentiality. As a result, INPEX is confident that decisions are
made by the Board of Directors in a reasonable, effective, objective and appropriate manner.

Executive Committee and Executive Officer System
The Executive Committee has been established to speed up
decision-making and resolve matters that do not require a decision by the Board of Directors, and to conduct discussions thatfacilitate the Board’s decisions by conducting meetings. The

INPEX CORPORATION

Executive Committee meets once a week and when necessary.
In addition, with the aim of responding more appropriately andrapidly to the fast-changing business environment and expanding businesses, the Executive Officer System has been introduced
since October 1, 2008 to clarify the executive function and to
implement an increasingly flexible and efficient management
system.

Statutory Auditors, Board of Statutory Auditors andOutside Auditors
The Company employs a statutory auditor system. The Board ofAuditors is composed of five members, including four from outside the Company. Three of the four outside auditors concurrently serve as officers of the Ministry of Finance, a financial
institution and the finance department of a company that is
involved in businesses that overlap with those of the INPEXGroup. Accordingly, each has extensive knowledge and experience in the Company’s business as well as such fields as financeand accounting. This knowledge and experience is being effectively applied in the audit of the Company’s business.
The statutory auditors attend meetings of the Board of
Directors and the Executive Committee, conduct interviews withdivisions and units as necessary read reports from relevant divisions and units and other information in order to audit the business execution of directors with regard to overall operations andindividual projects. The statutory auditors also receive reports
related to regular and special audits from the independent auditors and regular reports from the Internal Audit Unit on the status of internal audits.
In addition to objectivity and independence, the Company
recognizes the importance of such factors as efficacy and professionalism in the auditing function. In this regard, the appointment of outside auditors is undertaken based on comprehensive
considerations. In this context, INPEX is confident that its outside
auditors are more than capable of fulfilling their anticipatedroles.
In addition to augmenting ancillary staff, INPEX promotes
regular meetings between auditors and the Internal Audit Unit
as well as independent auditors in efforts to strengthen thefunctions of auditors and to secure the efficacy of corporate
governance. Complementing these initiatives aimed at bolsteringcollaboration, auditors hold periodic meetings with representative directors and directors to reinforce for monitoring function.

Accounting Audit and Auditor Compensation
The Company receives accounting audits from Ernst & Young
ShinNihon LLC in accordance with the Companies Act and the
Financial Instruments and Exchange Act. Certified Public
Accountants (CPAs) and assistants for audits during the fiscal
year under review are described as follows.
• Names of CPAs:
Kenji Endo, Yusuke Kosugi, Takeshi Nakano, Satoshi Takahashi• Accounting audit members:
12 CPAs, 10 assistant CPAs and 16 others
Details of compensation paid to CPAs and related parties arepresented as follows.
【 Fiscal year ended March 31, 2010 】• Compensation for auditing services
The Company: ¥141 million; Consolidated subsidiaries: ¥57
million• Compensation for non-auditing services
The Company: ¥4 million; Consolidated subsidiaries: ¥4
million
The amount of compensation paid to the CPAs is determined
in total based on the audit plan and the number of auditing
dates, after obtaining approval from the Board of Auditors.

45

Internal Audit
The Internal Audit Unit has been established as an internal audit
department independent from business divisions and units anddirectly responsible to the president, to ensure the appropriateness and efficiency of business activities. The Internal Audit Unit
(with 12 full-time members as of March 31, 2010) examines andevaluates the status of management bodies, the efficiency ofbusiness operations and other matters, pinpointing problem
areas, making necessary reports and conducting follow-up
audits to confirm the status of improvements. The Internal Audit
Unit also contributes to proper operational management by
exchanging opinions with independent and statutory auditors asnecessary.

The Status of Coordination between Statutory Auditors and Independent Auditors
Statutory auditors meet with independent auditors six times eachyear and on additional occasions as needed. Independent auditors provide statutory auditors with reports related to regular andspecial audits, the results of quarterly financial settlement andthe status of interim internal control audits. At the same time,
opportunities are provided for a full exchange of audit-related
views and opinions. Through these means, INPEX makes every
effort to ensure the collection and collation of wide-ranging
information for the statutory auditors with respect to the Company’s status and standing.

The Status of Coordination between Statutory Auditors and the Internal Audit Unit
Statutory auditors receive regular reports from the Internal Audit
Unit on the status of internal audits. Contact is effectively maintained with the Internal Audit Unit on a daily basis. In an effort
to formalize the process and procedures for reporting details ofinternal audits conducted by the Internal Audit Unit as well as
the status of internal control, fixed and regular meetings areheld between statutory auditors and the Internal Audit Unit
three to four times each year.

Compliance Committee
Chaired by the representative director as the officer responsible
for compliance, INPEX established the Compliance Committee,
which is tasked with reviewing the Group’s basic policy andissues concerning compliance, as well as monitoring and managing the implementation of compliance practices, so as to ensure
consistency in compliance throughout the Group. The CommitCompliance System
Board of Directors
Compliance Committee

Appoint

ReportDirector in Charge of Compliance(Committee Chairperson): Masatoshi Sugioka
Compliance Committee Members (Head of Business Divisions)
ReportAnonymize
External Consultation(Lawyer)
ReportGeneral Administration Unit
In-house
Consultation

Department in Chargeof Compliance

ReportOfficers and Employees

46 INPEX CORPORATIONINPEX Sustainability

tee works with statutory auditors, the Board of Statutory Auditors, independent auditors and the Internal Audit Unit to: (1)develop and implement compliance programs; (2) monitor theirimplementation; (3) raise employees’ awareness of compliancepolicy and procedures; (4) receive reports on and investigate
cases of noncompliance; (5) issue warnings and take measures to
end any noncompliant conduct; and (6) establish measures toprevent recurrence of noncompliant conduct.
In addition, steps have been taken to compile compliancemanuals on important matters that need to be addressed, suchas the handling of company information and assets, fair tradepractices as well as safe and secure workplace environments.
These manuals are distributed to all directors and employees.
Ever y ef for t is made to ensure complete and thoroughawareness.

Compliance manuals

Compliance Q&A

In December 2009, a compliance awareness survey was conducted covering all of the Group’s directors and employees
including temporary and part-time staff. Taking the results ofthis survey into consideration, INPEX began implementing aseries of compliance training seminars and programs from March2010 with the aim of further enhancing compliance awarenessand understanding.

■ Basic Stance toward Internal Control Systemsa) System to Ensure that Directors and Employees Conduct Business inCompliance with Laws and Regulations as well as the Company’s
Articles of Incorporation
In order to ensure that directors and employees conduct businessin compliance with laws and regulations as well as the Company’s
Articles of Incorporation, INPEX has formulated a corporate social
responsibility policy and is building a structure to make sure that
all concerned thoroughly abide by its contents.
To this end, the Company has appointed a representative
director with compliance responsibilities. Simultaneously, INPEX
established a Compliance Committee chaired by the officer
responsible to ensure that directors and employees remain incompliance with laws and regulations as well as the Company’s
Articles of Incorporation in the execution of their businessduties. Furthermore, the Company set up an internal notification
system with the responsible in-house department and an outside
specialist (lawyer) as points of contact.
In order to maintain an effective compliance system andrelated in-house rules, the Company also makes timely improvements by implementing inspections and evaluations of these systems through audits carried out by the Internal Audit Unit, which
reports directly to the president.
Furthermore, we established the necessary system that is
capable of securing the accuracy and reliability of financial
reports. This system is appropriately managed with steps taken
to consistently evaluate its effectiveness.
b) System for the Administration and Storage of Information Regarding
the Execution of Directors’ Business Duties
In accordance with laws and regulations, the Company’s Articles
of Incorporation and in-house rules, directors administer andstore documents as well as information regarding the executionof their business duties.
c) Management System for Losses and Other Risks
To deal with all risks relating to the Group’s business activities,
the Company has designated a division to support risk management conducted by directors and formulated a basic risk management policy. In concert with these initiatives, the Company
has established a Group-wide risk management system, which ishandled in liaison with other Group companies based on theGroup Management Regulations.
With regard to the management of risks relating to daily
business operations, the Company makes timely improvements
by implementing inspections and evaluations of these systems
through audits carried out by the Internal Audit Unit.
d) System to Ensure the Efficient Execution of Directors’ Business Duties
To ensure efficient business execution, directors engage in business operations with particular attention to the following:i. Holding of meetings of the Executive Committee, composed offulltime directors, on a weekly and an as-needed basis in atimely manner, to ensure that duties are performed promptly
and appropriately.
ii. For daily business duties, responsibility is delegated in accordance with rules governing job demarcation and administrative
authority, those responsible at each level performing their duties
in a prompt manner.
e) System to Ensure Appropriate Business Conduct in a Business Group
Composed of the Company and Its Subsidiaries
In accordance with the Group Management Regulations, theCompany entered into a Group Management Contract with its
subsidiaries. Under this contract, the Company requires thateach subsidiar y’s impor tant matters be repor ted to andapproved by the Company.
For risk management, compliance management and internal
auditing, the Company also pursues closer collaboration withsubsidiaries based on the Group Management Contract.

Compliance training

INPEX CORPORATIONf) Matters Concerning Auditor-approved Employees Appointed to Assist
Auditors’ Duties
Two designated Company employees one of which is in the
manegerial position concurrently serve as auditors’ assistants.
The assistants concerned are engaged in business in accordancewith auditors’ instructions.
g) Matters Concerning the Impartiality of Employees Mentioned in thePreceding Clause
Any changes in personnel involving auditors’ assistants are discussed with auditors.

47

through IR activities directed at shareholders and investors, theshareholders’ meeting, Website, public relations activities and inother ways, and will constantly strive to enhance these efforts.
In terms of its internal system, the Company reinforces theinformation disclosure system by establishing rules for corporate
information disclosure that systematically outline a timely disclosure process, while setting up a manual for the information
management, transmission and disclosure processes for theentire Group.

h) System for Directors and Employees to Report to Auditors, Other
Systems for Reporting to Auditors
Directors and employees report and provide information to auditors for matters stipulated in law, matters that may cause significant impact on the Company and its Group companies, andother matters that are judged as necessary to be reported inrelation to the execution of auditors’ business duties.
Auditors shall always obtain information on business execution by attending the Board of Directors’ meetings and otherimportant in-house meetings as well as receiving in-houseapproval documents.
i) System to Ensure Efficient Audit Implementation
Upon the implementation of audits, the Company ensures close
coordination with outside specialists including lawyers, CPAs
and certified tax accountants.
In addition, the Company is in close liaison with the Internal
Audit Unit to enhance audit efficiency by receiving reports on aregular basis.
INPEX established the Internal Control Promotion Committee
and continues to work diligently toward the establishment anddevelopment of an appropriate internal control structure andsystem in accordance with the internal control reporting systemmandated under the Financial Instruments and Exchange Act. As
the product of a merger between companies, INPEX has since
October 2008 worked diligently to develop entity-wide, processlevel and IT internal controls and to determine the scope andprocesses subject to internal control assessment. As we uncoverthrough assessment deficiencies in our internal control structureand systems, we will take immediate steps to improve and rectify. As a result, management had assessed that the Company’s
internal controls over its financial reporting functioned effectively as of March 31, 2010. These assessment were compiled in
an internal control report and submitted to the Kanto Finance
Bureau a branch office of the local Ministry of Finance. In addition, the Company has received an unqualified clean opinion
with respect to the aforementioned internal control report fromits independent auditors. Looking ahead, INPEX will continue todevelop and evaluate the operations and management of its
internal control structure and systems as a part of efforts toensure the reliability of its financial reporting.
Furthermore, the INPEX Group takes a firm stance to ensurethat there is no connection whatsoever with antisocial forcesthat threaten the order and safety of civil society. At the sametime, the Company endeavors to collect and collate informationfrom relevant government agencies, industry associations andlocal companies, coordinate closely with the relevant law
enforcement authorities as well as legal specialists and adopt a
resolute attitude toward any unreasonable demands made byantisocial forces.
This stance is clearly stipulated in the Group’s complianceand related manuals together with details of specific response
measures. Complementing these manuals, INPEX also has inplace relevant education and training programs.

■ Information Disclosure
The Company seeks to improve management transparency andaccountability by disclosing information in a timely manner

Results briefing for analysis

IR exhibition■ Measures for Ensuring Information Security
INPEX has formulated the Basic Policy on Information Security asa binding framework for ensuring consistent information security
practices throughout the organization. Under this basic policy,
we have established an information security management system and implemented a range of security measures.
When, in October 2008, a set of procedures for information
security was put in place, the Information Security Committee
became operational. The committee is responsible for defining
information security standards, including Standards for Managing Company Information, Standards for Using Internal Information Systems and Standards for Responding to Information Security Breaches, and for developing and implementing information
security measures. It also ensures that our employees have agreater awareness of information security in an effort to foster a
corporate culture that embraces the concept of protecting the
integrity of our information assets.

■ The Rationale for Adopting the Structure andSystem as It Currently Stands
INPEX is a company that engages in the development of oil andnatural gas on the world stage. In this context, the Company isafforded numerous opportunities to pursue important negotiations with oil-producing countries, national petroleum companies
and major international oil companies. Accordingly, INPEX recognizes the need for directors with a long-standing career within
the Company well-versed in the industry’s business and its operations. In addition, INPEX is fully aware of the need not only for48 INPEX CORPORATIONINPEX Sustainability

knowledgeable directors of long-standing, but also directors withthe relevant expertise and experience appointed from outside theCompany. With this balance, INPEX is better positioned to deliberate on and make decisions about important business operations relating to the development of oil and natural gas. The
appointment of outside directors also enhances the legitimacy,
efficiency and objectivity of the decision-making process.
The appointment of outside directors reflects the Company’s
recognition of and commitment to independence as well as
efforts to enhance the validity of business decisions and to secure
efficacy, professionalism and objectivity in the oversight function.
The Board of Directors is therefore comprised of 12 internal
appointees with a comprehensive understanding of the businessof the Company and four outside appointees. The appointmentof outside directors is ratified at relevant shareholders meetings
based on the perceived level of contribution to the Company’sbusiness development. Each of the four outside directors is wellversed in matters relating to the energy industry as well as extensive and wide-ranging management experience and insight. On
this basis, the Company’s directors are expected to more thansufficiently fulfill their appointed roles.
INPEX maintains a Board of Statutory Auditors comprised offive members, the majority of whom are appointed from outside
the Company. Every effort is made to ensure the independence
and efficacy of statutory auditors. INPEX strives diligently tostrengthen the audit function, augment the number and qualityof ancillary staff and to increase collaboration between the
Board of Statutory Auditors and the Internal Audit Unit as wellas independent auditors.
From a compliance perspective, INPEX has appointed a representative director with compliance responsibilities. Simultaneously, the Company established a Compliance Committee chairedby the director responsible. Furthermore, INPEX set up an internal
notification system with the responsible in-house divisions andunits and an outside specialist (lawyer) as points of contact.
Moreover, Corporate Health, Safety and Environment (HSE)meetings provide the forum to upgrade and expand dialogue
between labor and management.
Through all of aforementioned multifaceted initiatives,
INPEX strives to ensure that its corporate governance structureand systems function appropriately. At the same time, we recognize there remains ample room for further improvement.

■ Director Compensation
In the fiscal year ended March 31, 2010, the Company’s compensation to directors and statutory auditors was as follows:a) The Amount of Compensation Paid by Director Classification; theAmount of Compensation Paid by Type of Compensation; the Number
of Directors Eligible for Compensation
Total Amount ofCompensation Paid by
Type of Compensation(Millions of Yen)
Basic
Bonus
Compensation

The Number
of Directors
Eligible forCompensation

Director
Classification

Total Amount ofCompensation
Paid(Millions of Yen)

Directors (excluding
outside directors)

565

467

98

14

54

50

4

2

47

40

7

6

Statutory Auditors(excluding outside
auditors)
Outside Directors

Notes:
1. The Company does not maintain a stock option plan.
2. The Company does not maintain an accrued retirement benefits plan.
3. The total amount of compensation paid includes a provision to accrued bonuses to
officers for the fiscal year ended March 31, 2010.
4. The number of directors eligible for compensation includes two directors who retired
from the Company effective June 25, 2009.
5. Compensation was not paid to one of the 16 directors as of March 31, 2010.

b) The Total Amount of Consolidated Compensation Paid to each
Individual Director
As there are no directors for whom the total amount of consolidated

compensation exceeds ¥100 million, this information is not provided.
c) Important Items Included in Ordinary Employee Bonuses of Directors
who Concurrently Serve as Ordinary Employees
The Company does not pay ordinary employee bonuses to directors who concurrently serve as ordinary employees.
d) Policy Concerning the Determination of the Amount of Compensation
Paid to Directors
Compensation paid to directors is determined by the Board of
Directors. Compensation paid to directors is comprised of a basemonthly compensation amount and a bonus. The base monthly
compensation amount is based on the status of each individual
director as well as the nature and details of duties. The bonus
components is based on the Company’s business results, performance and related factors. Compensation paid to statutory auditors is comprised of a base monthly compensation amount and abonus, which are determined through deliberations among statutory auditors.

■ Special-Class Share
The Company’s Articles of Incorporation stipulate that certain
major corporate decisions require a resolution by the holder of a
special-class share in addition to the approval of shareholders’meetings or the Board of Directors. The special-class share isissued to the Minister of Economy, Trade and Industry. The special-class share does not have voting rights at shareholders’ meetings of the Company unless otherwise stipulated by law.
The major corporate decisions include the appointment or
removal of directors, disposal of the entire or part of important
assets, amendments to the Articles of Incorporation, mergers, shareexchanges or share transfers, capital reductions and dissolutions.
Director appointments or removals, mergers, share exchanges orshare transfers require a resolution by the holder of the special-classshare, provided a 20 percent or more of the voting rights attached
to shares of common stock is held by a single non-public entity or asingle non-public entity and its joint shareholders.
The Minister of Economy, Trade and Industry announced theestablishment of guidelines for the exercise of the special-classshareholder’s veto rights (with respect to decisions not approvedby a resolution of the special-class shareholder) in a Notice (No.
74, April 3, 2006). The Minister of Economy, Trade and Industry
may veto any one of the aforementioned major corporate decisions only to the extent that it determines a proposed action ortransaction (1) will likely result in the Company being managed ina manner inconsistent with its goal of securing a stable supply ofenergy to Japan as a flagship company; (2) will likely adversely
affect the goal of efficiently securing a stable supply of energy toJapan as a flagship company; or (3) may affect the exercise of voting rights of the special-class shareholder. These guidelines wereonce again announced in a Ministry of Economy, Trade and Industry Notice (No. 220, October 9, 2008) due to a partial revision of
the Company’s Article of Incorporation on October 1, 2008,
which involved the name change of the Company.
The Company believes that the ownership of the special-classshare by the Minister of Economy, Trade and Industry would be
effective as a countermeasure to prevent control over the businessof the Company or against hostile takeovers for speculation purposes. In addition, the Company, as a national flagship company,
expects that the ownership of the special-class share of the Ministerof Economy, Trade and Industry will play a key role in efficiently
realizing a stable supply of energy to Japan, while bringing theCompany positive results in terms of international negotiations andcredits. These were the major purposes of the Company’s issuanceof the special-class share. Moreover, because the scope of the special-class shareholder’s veto rights is limited and the guidelines havebeen set for the exercise of veto rights, the special-class share is anabsolute minimum necessary measure that is highly transparent anddoes not unjustly impinge on the Company’s ability to operate withflexibility and efficiency.

INPEX CORPORATION

Financial Section
Background Information
Oil and Gas Accounting Policies and Treatment

50

Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

53

Consolidated Balance Sheets

60

Consolidated Statements of Income

62

Consolidated Statements of Changes in Net Assets

63

Consolidated Statements of Cash Flows

64

Notes to Consolidated Financial Statements

65

Report of Independent Auditors

8049

50 INPEX CORPORATION

Background Information

Oil and Gas Accounting Policies and Treatment
Accounting Methods for Types of Agreements
The crude oil and natural gas business generates theoil and gas operations. These are production sharing

bulk of consolidated net sales revenues for INPEX

contracts (PSCs) and concession agreements. The latter

CORPORATION and consolidated subsidiaries (“thecategory also includes domestic mining rights as wellGroup”). Two types of agreement govern the Group’s

as overseas permits, licenses and lease agreements.

— Production sharing contracts
Cost recovery and production sharing
PSCs determine the allocation of crude oil and natural gas
production among the host country’s government (orrelated entity) and the contractors such as the Group. The
allocation formula generally differs according to the termsof the individual PSC. The overview below is specific to
one type of PSC typical of many oil and gas projects inIndonesia, a country with which the Group has concluded
numerous PSCs.
Under this type of arrangement, the total production in
any given year or other accounting period is allocated at
the end of the period between three portions:(1) “First tranche petroleum”
		This is a prescribed portion of total production allocatedbetween the host country’s government and the contractors in line with agreed percentages.
(2) “Cost recovery portion”		This is the oil and gas equivalent of (a) non-capital production-related expenditures incurred in that period,
plus (b) the scheduled depreciation expenses in that
period for capital expenditures, as calculated under the
PSC. The equivalents are determined based upon thecurrent unit prices of crude oil and natural gas, and allocated between the contractors alone. The quantity of oil
and gas in the “cost recovery portion” decreases as unit
prices increase, while that of the “equity portion”(explained below) rises. If the actual production for theperiod is insufficient to cover the quantity of oil and gas
equivalent calculated for the cost recovery portion, thelatter is capped at actual production and any surplus
amount is carried forward to the following period, as
stipulated in the PSC.
(3) “Equity portion”
		This is any residual production that is left after the firsttwo portions have been allocated. It is allocatedbetween the host country’s government and the contractors based on agreed percentages.
		Calculation of items in the income statement based on
the above PSC-related considerations is as follows:— T he Group records as net sales its share of total sales
relating to the oil and gas production that is allocatedto contractors under PSCs.
— T he Group books as cost of sales the portion of “Recoverable accounts under production sharing” that isrecovered through the allocation of its share of the“cost recovery portion.”
Recoverable costs under PSCs
Exploration costs
The share of recoverable exploration costs incurred by theGroup under the terms of the relevant PSC is capitalized
within “Recoverable accounts under production sharing.”
Development costs
The share of all development costs incurred by the Group
that is recoverable under the terms of the relevant PSC isrecorded within “Recoverable accounts under production
sharing.”
Production costs
Any operating costs incurred during the production phasethat are recoverable under the relevant PSC are initially
recorded within “Recoverable accounts under production
sharing.”
Administrative expenses
Any administrative expenses that are recoverable under
the relevant PSC are recorded within “Recoverable
accounts under production sharing.”
Interest expense
Any interest expense that is recoverable under the relevant
PSC is recorded within “Recoverable accounts under production sharing.”
As discussed above “Cost recovery and production sharing, “these costs are recovered either as capital or noncapital expenditures.

INPEX CORPORATION

Non-recoverable costs under PSCs
Acquisition costs
Costs relating to the acquisition of rights (recorded as
intangible assets under “Exploration and development
rights”) for any projects governed by PSCs that are entirelyin the exploration phase are expensed as incurred andamortized. Expenditures or costs relating to the acquisitionof rights to projects already in the development or produc-— Concession agreements
Acquisition costs
Costs relating to the acquisition of rights (recorded as
intangible assets under “Mining rights”) for projects governed by concession agreements are treated in the same
way as projects governed by PSCs, as described above.
Exploration costs
The Group’s share of exploration costs is expensed as
incurred.
Development costs
The Group’s share of any development costs related tomining facilities is capitalized within tangible fixed assets.
Depreciation of tangible fixed assets that are governed by51

tion phase are capitalized within “Exploration and development rights” and amortized based on the units-of-production method. These amortization costs are recorded
within “Depreciation and amortization.” Cost recovery
provisions in PSCs do not generally cover these­expenditures.

concession agreements is computed primarily using theunits-of-production method for mining assets located outside Japan and the straight-line method for domestic facilities. These depreciation expenses are recorded within thecost of sales.
Production costs
The Group’s share of operating costs that are incurred during the production phase is recorded within the cost of
sales.
Administrative expenses
The Group’s share of administrative expenses is expensed
as incurred.

Critical Accounting Policies and Estimates
The Group’s consolidated financial statements are prepared in conformity with Japanese GAAP. The preparationof these financial statements requires the application of
estimates, judgments and assumptions that affect thereported values of assets and liabilities at the date of thefinancial statements as well as the reported amounts ofrevenues and expenses for the reporting period. Actual
results may differ from the previously estimated or assumed
values.
Accounting estimates pursuant to the preparation of theconsolidated financial statements are deemed critical if thedegree of uncertainty associated with such estimates ishigh, or if rational changes to such estimates could exert amaterial impact on financial condition or operating results.
Critical accounting policies and estimates relating to financial presentation are outlined below.

— Allowance for recoverable accounts under production sharing
Any expenditure made during the exploration, development and production phases of projects governed by PSCs
are capitalized within “Recoverable accounts under production sharing” if they are recoverable under the relevant
PSC. A reserve equal to exploration costs is recorded within“Allowance for recoverable accounts under production
sharing” to provide for potential losses from unsuccessful
exploration. This reserve typically remains unchanged on
the balance sheet until it exceeds the residual balance of
exploration costs that had previously been capitalized
within “Recoverable accounts under production sharing”
during the exploration phase. Reflecting the uncertainty
associated with oil and gas projects, a reserve is recorded
within “Allowance for recoverable accounts under production sharing” to provide for probable losses on development activities, as individually estimated for each project.
Although assessments and accounting estimates are madeon a reasonable basis, actual operating results can change
depending on project status.

52 INPEX CORPORATION— Units-of-production method
Overseas mining facilities, mining rights and exploration,and development rights that are acquired during the production phase are mainly depreciated or amortized basedon the units-of-production method. This approach requires
the estimation of reserves. While the Group believes thatthe assessment of reserves is done in an appropriate manner, any changes in these estimates could significantly
affect future operating results.
— Liabilities for site restoration and decommissioning costs
Liabilities for future expected decommissioning costs arerecognized based on decommissioning plans. While theGroup believes that assessments of such costs produce
reasonable estimates, any changes to decommissioning
plans could significantly affect future operating results.
— Liabilities for losses on development activities
Liabilities relating to probable losses on oil and gas development activities that are caused by delays or other factors
are recognized and estimated on an individual projectbasis. While the Group believes that assessments of suchliabilities produce reasonable estimates, any changes in thestatus of projects could significantly affect future operating results.
— Allowance for investments in exploration­companies
A reserve is recorded to provide for probable losses oninvestments made by the Group in other companies
engaged in oil and gas activities, as estimated based on
the net assets of such companies. While the Group believes
that the assessments and estimates relating to such investments are reasonable, changes in actual production volumes, prices or foreign exchange rates could significantly
affect future operating results.
— Provision for exploration projects
A provision for exploration projects is provided for future
expenditures of consolidated subsidiaries at the ­exploration
stage based on a schedule of investments in exploration.

— Deferred tax assets
Deferred tax assets reflect temporary differences (including
net operating loss carry-forwards) arising mainly from thewrite-down of investments in related parties or foreigntaxes payable. Valuation allowances are provided once it isjudged that the non-realization of deferred tax assets has
become the more probable outcome. The effect of foreign
tax credits is taken into account in the calculation of suchvaluation allowances. Realization of deferred tax assets isprincipally dependent on the generation of sufficient taxable income, based on the available evidence. Adjustments
to deferred tax assets could be required if future taxable
income were lower than expected due to market conditions, foreign exchange rate fluctuations or poor operating
performance.
— Retirement benefits to employees
Accrued retirement benefits to employees are recognizedat the net present value of future obligations as of the endof the accounting period, taking into account any periodic
benefit costs that have arisen during the period. The determination of retirement benefits and periodic benefit costs
is based on various actuarial assumptions, including thediscount rate, employee turnover and retirement rates,
remuneration growth rates, and the expected return on
pension plan assets. Future operating results could be significantly affected if any deviation between the baseassumptions and actual results or revision of such assumptions were to generate actuarial gains or losses. Actuarial
gains and losses are charged or credited to income as
incurred.
—G oodwill
The excess of cost over underlying net assets excluding
minority interests at fair value as of the dates of investment in subsidiary companies and equity-method affiliates
is accounted for as goodwill and amortized over 20 years
on a straight-line method.

INPEX CORPORATION

53

Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
Business Environment
Following a prolonged slump due to the U.S. financial crisis
in 2008, which triggered a recession of global proportions,and difficult operating conditions owing to such factors asappreciation in the value of the yen, the Japanese economy
showed concrete signs of a turnaround in the second halfof the year ended March 31, 2010 on the back of an
upswing in export activity, reflecting increased demand particularly in Asia, and initiatives implemented by various governments to stimulate the economy. Despite favorable conditions, however, economic conditions in Japan are yet toexperience a full-fledged self-sustaining recovery. Employment markets continue to confront serious conditions andearnings in the corporate sector remain weak.
International crude oil prices as measured by the closing
spot market price of West Texas Intermediate (WTI) exert asignificant influence on the operating results of the Group.
Against the backdrop of the aforementioned business environment, the WTI benchmark stood at US$48.39 per bbl at
the beginning of the period, climbing steadily to the US$70
per bbl range by the end of June. This was attributable to avariety of factors including prospects of an early recovery in
the global economy, which triggered upward adjustmentsin oil demand forecasts, and political disquiet surrounding
certain oil producing countries in Africa. Thereafter, oilprices continued to hover around the high US$70 per bbl
range with a brief period during which the WTI benchmark
rose above US$80 per bbl. This largely reflected the steadyrecovery in the US economy after late July and an escalation in international tensions with respect to nuclear issues
through to the end of December. Following the turn of theyear, oil prices remained entrenched in the US$80 per bbl
range. With cold weather conditions throughout Europe
and America, firm stock prices in the U.S. and a progressive
decline in the value of the dollar, oil prices closed at
US$83.76 as of the fiscal year-end. Turning to the domestic
market, the prices of crude oil and petroleum products inJapan generally followed international benchmark fluctuations. As a result, the Group’s average sales price for crude
oil for the year ended March 31, 2010 was US$68.40 per
bbl, US$14.30 per bbl lower compared with the previous
year.

Movements in foreign currency exchange markets also
have a significant influence on the Group’s performance. At
the start of the fiscal year under review, the value of theyen to the US dollar hovered around the ¥98 level. Whilethe yen’s value then depreciated to the ¥101 range in early
April, it again strengthened amid upswings in the values ofcurrencies that offered relatively high interest rates. This
was attributable to a build up in market risks reflecting thefiling for Chapter 11 bankruptcy by a major US automobile
manufacturer and the safe completion of stress tests by US
financial institutions supervised by the Federal Reserve
Board. Following the statement in September by a government official of Japan’s newly inaugurated administrationsuggesting support for the yen’s appreciation, values
climbed to over ¥90 against the US dollar. This trend wasboosted by concerns surrounding the ability of a real estatecompany in the Middle East to meet its debts, which refueled the aversion toward risk assets. As a result, the yen
climbed to ¥84.82 to the US dollar in November, a levelthat had not been recorded since 1995. Toward the end of
the year and into the fourth quarter, the yen’s appreciation
steadily eased. This was largely the work of additional credit
relaxation initiatives implemented by the Bank of Japan andthe effects of a statement by a Japanese government official pledging to temper further appreciation. As a result,the value of the yen weakened. The closing USD-JPY rate at
the end of the fiscal year on a Telegraphic Transfer Middle(TTM) rate basis was ¥93.04 to the US dollar, representing a
net increase of ¥5.22 compared with the previous year. The
average yen exchange rate for the Group’s sales during the
fiscal year ended March 31, 2010 was ¥92.64 to the US
dollar. This equated to an appreciation in the yen’s value
against the US dollar of ¥10.31, or 10.0%, year on year.

54 INPEX CORPORATION

Operating Results(Millions of yen, except percentages)

Years ended March 31,
Net sales:
Crude oil
Natural gas
Other
Cost of sales
Gross profit
Exploration expenses
Selling, general and administrative expenses
Depreciation and amortization
Operating income
Other income:Interest income
Dividend income
Equity in earnings of affiliates
Other
Other expenses:
Interest expense
Equity in losses of affiliates
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Provision for investments in exploration
Loss on valuation of investment securities
Foreign exchange loss
Other
Income before income taxes and minority interests
Income taxes
Minority interests
Net income
Net sales
Consolidated net sales for the year ended March 31, 2010
decreased by ¥235.8 billion, or 21.9%, from ¥1,076.2 billion in the year ended March 31, 2009 to ¥840.4 billion.
Although an increase in sales volumes inflated revenues,
this decrease was mainly attributable to the drop in crude
oil and overseas gas sales prices as well as appreciation in
the average yen exchange rate against the US dollar for theperiod under review. On a year-on-year basis, net sales ofcrude oil declined by ¥163.5 billion, or 25.1%, from ¥650.4
billion to ¥486.9 billion; net sales of natural gas contractedby ¥71.9 billion, or 18.0%, from ¥398.3 billion to ¥326.4
billion; and sales revenue from other sources edged downby ¥0.4 billion, or 1.6%, from ¥27.5 billion to ¥27.1­billion.
On a year-on-year basis, sales of crude oil in volume
terms were slightly higher, edging up by 668 thousand bbl,
or 0.9%, to 76,095 thousand bbl. Despite a downturn in

2009

2010

ChangePercentage change¥1,076,165
650,352
398,267
27,546
319,038
757,127
25,98250,683
17,195663,267
32,0359,536
12,338946
9,215
79,135
3,934—
16,643
3,387—
31,79914,571
8,801
616,167
470,378726¥ 145,063¥840,427
486,921326,41227,094
298,168
542,259
15,711
44,86920,011
461,668
21,473
4,354
9,476
—
7,643
41,114
1,275
1,920
6,028
8,595
5,408
—
13,2644,624
442,027
325,126
9,691¥107,210¥(235,738)(163,431)(71,855)(452)(20,870)(214,868)(10,271)(5,814)2,816(201,599)(10,562)(5,182)(2,862)(946)(1,572)(38,021)(2,659)1,920(10,615)
5,208
5,408
(31,799)(1,307)(4,177)(174,140)(145,252)
8,965¥(37,853)(21.9)%(25.1)(18.0)(1.6)(6.5)(28.4)(39.5)(11.5)
16.4(30.4)(33.0)(54.3)(23.2)(100.0)(17.1)(48.0)(67.6)—(63.8)
153.8—(100.0)(9.0)(47.5)(28.3)(30.9)—(26.1)%

sales volumes at the ADMA block, this was principally due
to increased sales volumes from the ACG oil fields and Offshore Mahakam block. Sales volumes of natural gas wereup by 16 billion cubic feet (Bcf), or 3.9%, to 417 Bcf. At
355 Bcf, sales of natural gas produced overseas were 15
Bcf, or 4.3%, higher than in the previous year. Sales ofdomestically produced natural gas also rose by 22 million
m3, or 1.4%, to 1,647 million m3 (equivalent to 61 Bcf).
The average sales price of crude oil produced overseas was
US$68.40 per bbl, a decrease of US$14.30 per bbl, or
17.3%, compared with the previous year. The average sales
price of natural gas produced overseas was US$7.43 perthousand cubic feet (Mcf), which represented a year-onyear decline of US$1.79 per Mcf, or 19.4%. On the domestic front, the average sales price of natural gas produced inJapan was ¥38.41 per m3, up by ¥1.02 per m3, or 2.7%,
compared with the year ended March 31, 2009.

INPEX CORPORATION

Analyzing the factors contributing to the year-on-year fallof ¥235.8 billion in net sales, higher sales volumes contributed to an increase in sales of ¥29.8 billion, while the dropin average unit prices, the yen’s stronger average exchange
rate and other factors pushed down sales by ¥182.1 billion,¥83.1 billion and ¥0.4 billion, respectively, compared withthe previous year.
Cost of sales
For the fiscal year under review, the cost of sales declinedby ¥20.8 billion, or 6.5%, from ¥319.0 billion in the year
ended March 31, 2009 to ¥298.2 billion. This largely
reflected the decrease in royalties from the ADMA blockowing to the drop in sales.
Exploration expenses
From ¥26.0 billion in the previous year, exploration expenses
fell by ¥10.3 billion, or 39.5%, year on year to ¥15.7 billion. This was mainly attributable to the drop in expenses
for the Ichthys and surrounding blocks.
Selling, general and administrative expenses
Selling, general and administrative (SG&A) expenses were
11.5% lower compared with the previous year, decreasingby ¥5.8 billion from ¥50.7 billion to ¥44.9 billion. During
the fiscal year under review, the increase in transport costs
for crude oil from the ACG fields due to higher sales volumes was more than offset by the drop in crude oil prices
reflecting lower taxes levied by east Timor associated with
the Bayu-Undan project.
Depreciation and amortization
Depreciation and amortization expense increased by ¥2.8
billion, or 16.4%, from ¥17.2 billion in the year ended
March 31, 2009 to ¥20.0 billion in the fiscal year underreview. This largely reflected amortization applicable toexploration and development rights held by INPEX Southwest Caspian Sea Ltd. on the back of increased sales volumes and higher depreciation costs for domestic gas pipelines for sale. The Group records depreciation costs for
production facilities that are covered by concession agreements within the cost of sales. In addition, under its
accounting treatment of PSCs, the Group records capital
expenditures within “Recoverable accounts under production sharing” instead of capitalizing these costs within tangible fixed assets and depreciating them. Costs that arerecovered in any given year based on the terms of PSCs areincluded in the cost of sales.

55

Operating income
Taking into account all of the aforementioned factors, operating income for the year ended March 31, 2010 declinedby ¥201.6 billion, from ¥663.3 billion to ¥461.7 billion. Thisequated to a fall of 30.4% in year-on-year terms.
Other income
Other income dropped by ¥10.5 billion, or 33.0%, from
¥32.0 billion to ¥21.5 billion. This was mainly attributable
to the decrease in interest and dividend income received.
Other expenses
Other expenses fell from ¥79.1 billion in the year ended
March 31, 2009 to ¥41.1 billion in the fiscal year underreview. This represented a year-on-year decrease of ¥38.0
billion, or 48.0%. The principal reason for this decline was
the significant drop in loss on valuation of investment securities.
Income taxes
Income taxes contracted by ¥145.3 billion, or 30.9%, from
¥470.4 billion to ¥325.1 billion. This largely reflected thedecline in overseas income taxes paid due to the drop in
net sales. The Group pays the majority of its taxes outside
Japan. In addition to the high corporate tax rates imposedin a number of regions, the Group is generally unable todeduct expenses incurred in Japan for such taxes. Despite
the positive effects attributable to application of the foreign
tax credit system, this has resulted in a high effective income
tax rate of 73.6% in the fiscal year under review.
Minority interests
Minority interests increased by ¥9.0 billion from ¥0.7 billion
in the previous year to ¥9.7 billion in the year ended March
31, 2010. This largely was the result of the decline in exploration investment in the Masela block and the increase in
net income of INPEX Southwest Caspian Sea Ltd.
Net income
Based on the aforementioned, net income for the fiscal
year under review amounted to ¥107.2 billion. On a yearon-year basis, net income therefore declined ¥37.9 billion,
or 26.1%, from ¥145.1 billion recorded in the previousyear.

56 INPEX CORPORATION

Investments and Funding— Investments in upstream oil and gas projects
Continuous exploration for new reserves of crude oil andnatural gas is an essential part of maintaining and growing
the Group’s earnings.
The information in this section on upstream oil and gas
investments is based on the data reported by project operators relating to exploration expenditures, development
expenditures and operating expenses. Categories of expenditure are defined as follows:• Exploration expenditures include the costs of exploratory
drilling and any geological or geophysical studies. The
costs of local personnel and office operations and related
administrative expenses are also included in this category
if a project (or contract area) is entirely in the exploration
phase.
• Development expenditures include the costs of development drilling and any production facilities.
• Operating expenses include the costs of well operations,maintenance and the supervision of production activities.
This category also includes the administrative expenses
for the project (or contract area) if it contains a field in
active production and/or development.

• These definitions of exploration and development expenditures and the basis of preparation for the following
tables differ from the stipulations of the Statement of
Financial Accounting Standard Codification Topic 932,
“Extractive Industries — Oil and Gas.” (Topic 932). The
following is a list of discrepancies between the accounting policies adopted by the Group and Topic 932. This list
is not exhaustive.
• Group expenditures relating to PSC-governed joint ventures where the Group is not the operator are disclosed
on a cash basis, rather than an accruals basis as requiredby Topic 932.
• The tables below have been prepared based on the costdefinitions used by operators in their reporting, which
may not be consistent with Topic 932.
• Project-related administrative costs are not necessarily
excluded from these expenditures, whereas Topic 932
requires that administrative costs not directly related to
exploration and development activities be excluded from
exploration and development expenditures.
Expenditures (excluding amounts equivalent to interest) for
the years ended March 31, 2009 and 2010 are shown in
the following table:

For the year ended March 31, 2009

(Millions of yen)Eurasia (Europe
Asia & Oceania& NIS)

Japan

Consolidated subsidiaries
Exploration
Development
Subtotal * **Other expenditures
Total
Equity-method affiliate exploration anddevelopment expenditures

Middle East &AfricaAmericasTotal¥ 3,408
4,731
8,139
23,88632,025¥ 33,207
137,662
170,869—
170,869¥ 1,90958,28060,189—60,189¥ 4,340
28,53332,873
5
32,878¥ 5,789
6,100
11,889—11,889¥ 48,653
235,306
283,959
23,891
307,850¥¥¥¥ 1,193¥ 7,619¥ 16,334

Americas

Total

—

7,522

—

* Figures include equity-method affiliates of Japan Oil Development Co., Ltd. (JODCO).
**Figures included an amount equivalent to interest of ¥1,647 million.

For the year ended March 31, 2010

(Millions of yen)
Asia & Oceania

Eurasia (Europe& NIS)¥ 2,997
4,572
7,569
46,67854,247¥ 19,386
108,276
127,66218
127,680¥ 2,032
66,042
68,074—68,074¥ 6,379
18,56324,942
1
24,943¥2,201
4,582
6,783
—
6,783

¥ 32,995
202,035
235,030
46,697281,727

—
—
—

—
1,219
1,219

—
—
—

481
1,422
¥ 1,903—
4,350¥4,350

481
6,991
7,472

Japan

Consolidated subsidiaries
Exploration
Development
Subtotal *Other expenditures
Total
Equity-method affiliates
Exploration
Development
Total

¥

¥

* Figures include equity-method affiliates of Japan Oil Development Co., Ltd. (JODCO).

¥

Middle East &Africa¥INPEX CORPORATION57

The aggregate total of expenditures for the year ended March 31, 2010 amounted to ¥281.7 billion. This represented a yearon-year decrease of ¥26.2 billion, or 8.5%, compared with the ¥307.9 billion recorded in the previous year. This is mainly
attributable to the decline in development expenditures relating to the Van Gogh oil field and Offshore Mahakam block primarily in the Asia and Oceania region.
Operating expenses by geographical region for the years ended March 31, 2009 and 2010 are shown in the following
table:(Millions of yen, except percentages)

Years ended March 31,
Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Total

2010

2009
¥ 9,659
47,2097,799
25,903
3,263
93,833— Upstream oil and gas project acquisitions
Consolidated expenditures on acquisitions of upstream oil
and gas projects by geographical region for the years ended
March 31, 2009 and 2010 are shown in the table below.
Expenditures in this category include the costs of acquiring

10.3%
50.3
8.3
27.6
3.5
100.0

¥ 9,324
48,888
7,099
21,192
5,189
91,692

10.2%
53.3
7.7
23.1
5.7
100.0

mining rights, exploration and development rights, signingbonuses, as well as any related tangible fixed assets or recoverable accounts under production sharing that are alsoacquired in the process.

(Millions of yen, except percentages)

Years ended March 31,
Consolidated subsidiaries
Asia & Oceania
Middle East & Africa
Americas
Total
Equity-method affiliates
Asia & Oceania
Middle East & Africa
Americas
Total
Total expenditures on acquisitions of upstream oil and gas
projects in the year ended March 2010 amounted to ¥0.7
billion, declined by ¥9.7 billion from the previous year’s figure of ¥10.4 billion. This mainly reflected a lower figure foracquisitions in the Americas.

2010

2009
441
43
9,921
10,405

4.2%
0.4
95.4
100.0

¥292
384
15
691

42.2%
55.6
2.2
100.0

—
—
—
¥—

—
—
—
—%

—
—
—
¥—

—
—
—
—%

¥

—A
 nalysis of recoverable accounts under production sharing
For upstream projects governed by PSCs, the Group’s shareof costs arising during the exploration, development andproduction phases is capitalized within “Recoverable
accounts under production sharing.” The following tableshows the changes in the balance of “Recoverable accounts
under production sharing” during the years ended March
31, 2009 and 2010:(Millions of yen)

Years ended March 31,
Balance at beginning of period
Add: Exploration costs
		 Development costs
		 Operating expenses
		 OtherLess: Cost recovery—capital expenditures
		 Cost recovery—non-capital expenditures
		 Other
Balance at end of period
Allowance for recoverable accounts under production sharing at end of period

2009

2010

¥383,163
23,643
160,589
55,930—45,725
104,848
18,830453,922¥ (87,829)¥453,922
10,085
146,02854,9382,671
45,653
107,075270
514,646¥ (94,892)

58 INPEX CORPORATIONTaking into consideration their recoverability in the fiscal
year in which they are incurred, a portion of explorationand development costs are included in the “cost recovery –noncapital expenditures” recoverable amount in addition
to operating expenses.
Exploration costs for the year ended March 31, 2010
declined compared with the year ended March 31, 2009.
This was due mainly to the year-on-year decrease in exploration expenditures relating to the Masela block.
Development costs contracted on a year-on-year basis forthe fiscal year under review. Although development expenditures for the Kashagan oil field increased, this contraction
in development costs primarily reflects the year-on-year
drop in development expenditures applicable to the Offshore Mahakam block and ACG oil fields.
Taking into consideration the South Natuna Sea Block B
and other factors, operating expenses for the year ended
March 31, 2010 declined on a year-on-year basis.
Cost recovery in the fiscal year under review increased
compared with the previous year. This was mainly attributable to the upswing in cost recovery applicable to the SouthNatuna Sea Block B.
In addition, other deductions to recoverable accounts
under production sharing were due to the elimination ofrelated recoverable accounts on block withdrawal.
The allowance for recoverable accounts under production sharing as of the end of the fiscal year under review
was higher than the allowance as of March 31, 2009. Thislargely reflected additional allowance provisions in connection with the increase in recoverable accounts under production sharing with respect to exploration expenditures in
Libya.

— Funding sources and liquidity
Oil and natural gas exploration and development projects
as well as the construction and expansion of domestic LNG
receiving terminal, pipelines and other supply infrastructure
require substantial amounts of funds. In the procurementof funds, the Group generally relies on cash flow together
with external sources. Basically, exploration projects aremainly funded using cash flow and external equity financing while development projects and the construction ofpipelines and LNG receiving terminal are primarily fundedfrom cash flow and loans. In specific terms, the Group currently receives joint-financing from the Japan Bank forInternational Cooperation and Japanese commercial banks.
The Japan Oil, Gas and Metals National Corporation (JOGMEC) has provided guarantees for the principal on certain
outstanding amounts of this joint-financing. In addition,
the Development Bank of Japan and various Japanese commercial banks provide loans for the construction and expansion of domestic pipelines and LNG receiving terminal.
Going forward, the Group is looking to optimize its funding
capabilities and methods. In order to diversify the funding
required for its projects, the Group will take into consideration such sources as non-recourse financing, loan arrangements and equity financing.
The Group’s financing policy is to maintain sufficient cashon hand at all times to fund expenditures for existing andnew crude oil and natural gas projects in a timely manner,
while also keeping a cushion of liquidity to provide for steep
falls in oil and gas prices. In line with this policy, excess cash
reserves are invested in low-risk, highly liquid financial
instruments. The Group’s strategy is to improve capital efficiency over the long term through business expansion while
continuing to maintain a sound financial position with sufficient liquidity.

— Maturities of long-term debt
The composition of the Group’s long-term debt by maturity as of March 31 2010 is summarized in the following table:(U.S. dollars and Millions of yen)
Long-term debt denominated inYears ending March 31,

U.S. dollars

2011
2012
2013
2014
2015
2016 and thereafter
Total

$

—
—
—
—
—
1,785.5$1,785.5

Yen¥ 4,712
4,279
4,258
3,753
3,604
53,490¥74,096— Cash flows
Cash flows for the years ended March 31, 2009 and 2010 are summarized in the following table:

Total yen equivalent

¥

4,712
4,279
4,258
3,753
3,604
219,617¥240,223

INPEX CORPORATION

59(Millions of yen)

Years ended March 31,
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Cash and cash equivalents at end of the period
Net cash provided by operating activities
Net cash provided by operating activities in the year ended
March 31, 2010 totaled ¥241.4 billion. This was ¥11.0 billion more than the ¥230.4 billion of positive cash flow generated in the previous year. While income before income
taxes and minority interests declined due mainly to thedecrease in the unit sales prices of crude oil and overseas
natural gas as well as appreciation of the average value ofthe yen against the US dollar for the period, this was largely
attributable to the drop in income taxes paid.
Net cash used in investing activities
Net cash used in investing activities in the fiscal year underreview amounted to ¥251.8 billion. This represented a

2009

2010

¥ 230,352(240,168)(46,090)¥ 162,845¥ 241,373(251,812)
68,937¥ 216,395¥11.6 billion increase in cash outflow compared with thenegative cash flow figure of ¥240.2 billion for the previous
year. During the year ended March 31, 2010, despite adecrease in investment in recoverable accounts under production sharing (capital expenditures), this was more thanoffset by the decrease in proceeds from sales of marketablesecurities and investment securities.
Net cash provided by (used in) financing activities
Net cash provided by financing activities in the year ended
March 31, 2010 was ¥68.9 billion. This was a ¥115.0 billion turnaround from the ¥46.1 billion net cash used infinancing activities in the previous year. This primarilyreflects the cash inflow of proceeds from long-term debt.

Adoption of new accounting standard
On March 31, 2008, the ASBJ published a new accounting
standard for asset retirement obligations, “AccountingStandard for Asset Retirement Obligations” (ASBJ Statement No. 18) and “Guidance on Accounting Standard for
Asset Retirement Obligations” (ASBJ Statement No. 21).
This standard is effective for fiscal years beginning on orafter April 1, 2010.
Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by
law or contract that results from the acquisition, construction, development and the normal operation of a tangible
fixed asset and is associated with the retirement of suchtangible fixed asset. It is recognized as the sum of the discounted cash flows required for the future asset retirement
and is recorded in the period in which the obligation isincurred if a reasonable estimate can be made. If a reason-

able estimate of the asset retirement obligation cannot bemade in the period the asset retirement obligation isincurred, the liability should be recognized when a reasonable estimate of asset retirement obligation becomes available.
Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized byincreasing the carrying amount of the related fixed asset by
the amount of the liability, and is subsequently allocated to
expense through depreciation over the remaining useful lifeof the asset. Over time, the liability is accreted to its present
value each period. Any subsequent revisions to the timingor the amount of the original estimate of undiscounted
cash flows are reflected as an increase or a decrease in the
carrying amount of the liability and the capitalized amountof the related asset retirement cost.

Consolidated Financial Forecasts for Year Ending March 2011
Consolidated net sales are forecasted to increase ¥22.6 billion, or 2.7%, year on year to ¥863.0 billion in the year
ending March 31, 2011. Operating income, ordinary
income and net income are expected to fall ¥10.6 billion,
or 2.3%, ¥9.0 billion, or 2.0% and ¥5.2 billion, or 4.9%,
respectively, on a year-on-year basis, to ¥451.0 billion,¥433.0 billion and ¥102.0 billion, respectively.
The year increase in net sales for the year ending March

31, 2011 assumes a higher year-on-year average oil price.
From a profit perspective, net income is projected to fall
due mainly to the forecast increase in cost of sales andexploration expenses as well as other factors.
The aforementioned forecasts are based on an averageoil price of US$77.5 per bbl for the Brent crude benchmark
and an average value for the yen of ¥90 against the US dollar for the year ending March 31, 2011.

60 INPEX CORPORATION

Consolidated Balance Sheets
INPEX Corporation and Consolidated Subsidiaries
As of March 31, 2009 and 2010

Thousands of
U.S. dollars(Note 3)

Millions of yen

ASSETS

2009

2010

2010

¥ 162,845
73,540101,544
18,205
6,145
37,871
10,988(28)
411,110¥ 216,395
88,364112,669
12,322
5,356
43,161
14,611(23)
492,855$ 2,325,828
949,742
1,210,974
132,438
57,567
463,897
157,039(247)
5,297,238

196,639
194,623
249,292
20,752
76,81935,511
773,636(476,000)
297,636

231,681203,056
255,846
20,79091,44760,774
863,594(505,500)
358,0942,490,123
2,182,459
2,749,850
223,452
982,878
653,2039,281,965(5,433,147)
3,848,818

114,884
115,566
18,593
4,638
253,681108,123
107,857
18,155
5,070
239,205

1,162,113
1,159,254
195,13154,4932,570,991

453,922514,646

5,531,449(87,829)
366,093344,699
14,195
26,141
65,926(529)(10,907)805,618¥1,768,045(94,892)
419,754403,978
18,641
24,56372,577(641)(15,248)
923,624¥2,013,778(1,019,905)
4,511,544
4,341,982
200,355
264,005
780,062(6,890)(163,887)
9,927,171$21,644,218

Current assets:
Cash and cash equivalents
Accounts receivable—tradeMarketable securities (Note 5)Inventories
Deferred tax assets (Note 7)
Accounts receivable— other
Other
Less allowance for doubtful accounts

Tangible fixed assets:
Buildings and structures (Note 6)
Wells (Note 6)
Machinery, equipment and vehicles (Note 6)
Land (Note 6)
Construction in progress
Other
Less accumulated depreciation and amortization

Intangible assets:
Goodwill (Note 14)
Exploration and development rights
Mining rights
Other

Investments and other assets:
Recoverable accounts under
production sharing
Less allowance for recoverable
accounts under production sharing
Investment securities (Notes 5 and 6)
Long-term loans receivable
Deferred tax assets (Note 7)
Other investments (Note 6)
Less allowance for doubtful accounts
Less allowance for investments in exploration
Total assets
Refer to accompanying notes to consolidated financial statements.

INPEX CORPORATION

Thousands of
U.S. dollars(Note 3)

Millions of yen

LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable—trade
Short-term borrowings and current portion of long-term
debt (Notes 6 and 11)
Income taxes payable (Note 7)
Accounts payable—other (Note 6)
Provision for exploration projects
Accrued bonuses to officers
Other

Long-term liabilities:
Long-term debt (Notes 6 and 11)
Deferred tax liabilities (Note 7)
Accrued retirement benefits to employees (Note 13)
Liabilities for site restoration and decommissioning costs
Liabilities for losses on development activities
Accrued special repair and maintenance
Other (Note 6)
Total liabilities

2009

2010

¥

¥

11,87361

16,602

2010$

178,439

27,81670,41965,441
7,948
135
22,427206,059

4,872
86,535
81,211
15,324132
23,229227,905

52,365930,084
872,861
164,703
1,419
249,6672,449,538

136,430
28,171
8,546
14,192
1,965
404
10,217
199,925
405,984

235,511
27,1397,586
14,258
1,965
442
8,369
295,270
523,175

2,531,288
291,692
81,535
153,246
21,1204,751
89,9503,173,582
5,623,120

30,00030,000322,442

Net assets (Note 8):
Common stock:
Authorized: 2009—9,000,001.00 shares
2010—9,000,001.00 shares
Issued:2009—2,358,410.00 shares
2010—2,358,410.00 shares
Capital surplus
Retained earnings
Less: Treasury stock: 2009—4,916.00 shares
2010—4,916.00 shares
Total shareholders’ equity

418,478
844,833(5,248)418,478
936,745(5,248)4,497,829
10,068,196(56,406)

1,288,063

1,379,975

14,832,061

Unrealized holding gain (loss) on securities
Unrealized loss from hedging instruments
Translation adjustments
Total valuation, translation adjustments and others
Minority interests
Total net assets(6,818)(1)(10,121)(16,940)
90,9381,362,061

12,351—(4,826)
7,525
103,1031,490,603

132,749—(51,870)
80,8791,108,158
16,021,098¥1,768,045¥2,013,778$21,644,218

Contingent liabilities (Note 16)
Total liabilities and net assets

62 INPEX CORPORATION

Consolidated Statements of Income
INPEX Corporation and Consolidated Subsidiaries
For the years ended March 31, 2008, 2009 and 2010

Thousands of
U.S. dollars(Note 3)

Millions of yen

2010

2010

2008

2009

¥1,202,965¥1,076,165¥840,427$9,032,964

390,554

319,038

298,168

3,204,729

812,411757,127542,259

5,828,235

Exploration expenses

34,45825,982

15,711

168,863

Exploration subsidies

(363)

—

—

—

Selling, general and administrative expenses(Notes 12, 13 and 14)

48,346

50,68344,869482,255

Depreciation and amortization

15,75917,19520,011215,079

Operating income

714,211663,267

461,668

4,962,038

Interest income

10,984

9,536

4,354

46,797

Dividend income

5,440

12,3389,476

101,849

Equity in earnings of affiliates

1,765

946

—

—

Net gain on re-determination of unitized field

4,005

—

—

—

Net gain on taking effect of exploration andproduction agreement

3,482

—

—

—

Foreign exchange gain

2,747

—

—

—

Other

4,667

9,215

7,643

82,14733,09032,035

21,473

230,793

10,888

3,934

1,275

13,704

—

—

1,920

20,636

Provision for allowance for recoverable
accounts under production sharing

20,587

16,643

6,028

64,789Provision for exploration projects

3,104

3,387

8,595

92,380

—

—

5,408

58,126

21,35031,799———14,571

13,264

142,562

5,572

8,801

4,624

49,69961,501

79,135

41,114

441,896

685,800

616,167

442,027

4,750,935

Current

496,852

488,262

322,9933,471,550

Deferred(5,503)(17,884)

2,133

22,925491,349

470,378

325,126

3,494,475

Net sales
Cost of sales
Gross profit

Other income:

Other expenses:
Interest expense
Equity in losses of affiliates

Provision for investments in exploration
Loss on valuation of investment securities
Foreign exchange loss
Other
Income before income taxes and minority
interests
Income taxes (Note 7):

Minority interests
Net income (Note 9)
Refer to accompanying notes to consolidated financial statements.

21,205726

9,691

104,160¥ 173,246¥ 145,063¥ 107,210$ 1,152,300

INPEX CORPORATION

63

Consolidated Statements of Changes in Net Assets
INPEX Corporation and Consolidated Subsidiaries

For the year ended March 31, 2008

Millions of yen
Balance
as of MarchCash
31, 2007 dividends paid

Common stock¥ 30,000
Capital surplus
418,491
Retained earnings
570,120
Treasury stock(1,108)
Total shareholders' equity
1,017,503
Unrealized holding gain (loss) on securities
9,349
Unrealized gain (loss) from hedging instruments
18
Translation adjustments
2,025
Total valuation, translation adjustments and others
11,392
Minority interests
51,121
Total net assets¥1,080,016¥——(24,750)—(24,750)—————¥(24,750)

Purchaseoftreasurystock

Disposaltreasury
stock

—
—
—
(1,160)(1,160)—————¥(1,160)

¥—
3
—
53
56
—
—
—
—
—
¥56

Net
income¥——173,246—
173,246—————¥173,246¥

Net changes in
items otherthan those in
Total
Balanceshareholders' changes during
as ofequitythe period March 31, 2008

¥

—
—
—
—
—
(16,817)(14)(2,085)(18,916)
30,321¥11,405¥—3
148,496(1,107)
147,392(16,817)(14)(2,085)(18,916)
30,321¥158,797

For the year ended March 31, 2009¥

30,000418,494
718,616(2,215)
1,164,895(7,468)4(60)(7,524)81,442¥1,238,813
Millions of yen

Balance
as of MarchCash
31, 2008 dividends paid

Common stock¥ 30,000
Capital surplus
418,494
Retained earnings
718,616
Treasury stock(2,215)
Total shareholders' equity
1,164,895
Unrealized holding gain (loss) on securities(7,468)
Unrealized gain (loss) from hedging instruments
4Translation adjustments(60)
Total valuation, translation adjustments and others(7,524)
Minority interests
81,442
Total net assets¥1,238,813¥——(18,846)—(18,846)—————¥(18,846)

Purchaseoftreasurystock

Disposaltreasury
stock

—
—
—
(3,563)(3,563)—————¥(3,563)

¥ —
(16)
—
530
514
—
—
—
—
—
¥514

Net
incomeNet changes in
items otherthan those inshareholders'equityNet
income¥——145,063—
145,063—————¥145,063

Net changes in
items otherthan those in
Total
Balanceshareholders' changes during
as ofequitythe period March 31, 2009

¥

¥

—
—
—
—
—
650
(5)
(10,061)(9,416)
9,496
¥
80

¥

—
(16)
126,217(3,033)
123,168650(5)(10,061)(9,416)
9,496¥123,248

For the year ended March 31, 2010¥

30,000418,478
844,833(5,248)1,288,063(6,818)(1)(10,121)(16,940)
90,938¥1,362,061
Millions of yen

Balance
as of March
31, 2009¥

30,000418,478
844,833(5,248)1,288,063(6,818)(1)(10,121)(16,940)
90,938¥1,362,061

Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders' equity
Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Total valuation, translation adjustments and others
Minority interests
Total net assets

Cashdividends paid¥——
(15,298)—(15,298)—————¥(15,298)¥——
107,210—
107,210—————¥107,210

¥

¥

Total
changes during
the period

—
—
—
—
—
19,1691
5,295
24,465
12,16536,630¥——91,912—
91,912
19,1691
5,295
24,465
12,165¥128,542

Balance
as ofMarch 31, 2010¥

30,000418,478
936,745(5,248)1,379,975
12,351—(4,826)
7,525
103,103¥1,490,603

Thousands of U.S. dollars (Note 3)
Balance
as of March
31, 2009

Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders' equity
Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Total valuation, translation adjustments and others
Minority interests
Total net assets$

322,442
4,497,829
9,080,320(56,406)
13,844,185(73,280)(11)(108,781)(182,072)
977,408$14,639,521

Refer to accompanying notes to consolidated financial statements.

Cashdividends paid$——
(164,424)—(164,424)—————$(164,424)

Net
income$——1,152,300—
1,152,300—————$1,152,300

Net changes in
items otherthan those inshareholders'equity

$

—
—
—
—
—
206,02911
56,911
262,951
130,750$393,701

Total
changes during
the period

Balance
as ofMarch 31, 2010

$

$

—
—
987,876—
987,876
206,02911
56,911
262,951
130,750$1,381,577

322,442
4,497,829
10,068,196(56,406)
14,832,061
132,749—(51,870)
80,8791,108,158$16,021,098

64 INPEX CORPORATION

Consolidated Statements of Cash Flows
INPEX Corporation and Consolidated Subsidiaries
For the years ended March 31, 2008, 2009 and 2010

Thousands of
U.S. dollars(Note 3)

Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Amortization of goodwill
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Provision for accrued retirement benefits to employees
Provision for site restoration and decommissioning costs
Other provisions
Interest and dividend income
Interest expense
Foreign exchange loss
Equity in (earnings) losses of affiliates
Loss (gain) on the sales of investment securities
Loss on the valuation of investment securities
Accounts receivable—trade
Recovery of recoverable accounts under production sharing (capital expenditures)
Recoverable accounts under production sharing (operating expenditures)
Inventories
Accounts payable—trade
Accounts receivable—otherAccounts payable—other
Advances received
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Increase in time deposits
Decrease in time deposits
Payments for purchases of marketable securities
Proceeds from sales of marketable securities
Payments for purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for purchases of intangible assets
Payments for purchases of investment securities
Proceeds from sales of investment securities
Investment in recoverable accounts under production sharing (capital expenditures)
Decrease in short-term loans receivable
Long-term loans madeCollection of long-term loans receivable
Payments for purchase of mining rights
Proceeds from transfer of mining rights
Other
Net cash used in investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from minority interests for additional shares
Purchases of treasury stock
Cash dividends paid
Dividends paid to minority shareholders
Stock transfer payment
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Refer to accompanying notes to consolidated financial statements.

2008

2009

2010

2010

¥ 685,800
36,181
6,617
21,207
3,937
276
815
(2,377)(16,424)
10,8881,036(1,765)15
21,350(39,393)
92,147(26,052)(2,275)481(16,986)
21,80910,352
7,156
814,795
17,515(11,508)(456,807)
363,995¥ 616,167
42,967
6,760
20,310(2,320)
(97)
1,598
3,468
(21,874)
3,934
10,087(947)(81)
31,79944,20045,725(27,020)
2,348(9,825)27,558(47,813)
4,229(6,489)744,684
21,258(4,801)(530,789)
230,352¥ 442,027
40,354
6,759
7,431
7,361
(902)
60
4,484
(13,830)
1,275
2,380
1,920
—
—
(14,639)
45,653(14,996)
5,844
4,719
(9,671)
13,670(1,120)3,357
532,136
16,170(1,734)(305,199)
241,373$ 4,750,935
433,727
72,646
79,86979,117(9,695)645
48,194(148,646)
13,70425,58020,636——(157,341)
490,682(161,178)
62,81250,720(103,944)
146,926(12,038)
36,082
5,719,433
173,796(18,637)(3,280,299)
2,594,293(2,765)18,997(39,949)
51,495(59,465)183(2,012)(112,378)
105(131,060)
10,534(7,453)527(15,887)
27,891(530)(261,767)(6,464)
4,498(19,082)
111,451(88,611)
246(2,865)(137,447)
16,531(108,294)
71(5,896)762——(5,068)(240,168)(9,925)8,430—
101,321(87,549)86(991)(156,264)—(91,650)
77(7,521)
34——(7,860)(251,812)(106,675)
90,606—
1,089,005(940,982)
924(10,651)(1,679,536)—(985,060)
828(80,836)
365——(84,480)(2,706,492)(50)
40,785(67,745)8,344(1,105)(24,719)
(737)
(1)
—
(45,228)(24,147)
32,853
189,417¥ 222,270

20,934
12,041(66,365)
9,370(3,049)(18,833)
(82)
—
(106)
(46,090)(3,519)(59,425)
222,270¥ 162,845(20,121)
108,063(5,284)
4,704—(15,306)(2,973)—(146)
68,937(4,948)53,550162,845¥ 216,395(216,262)
1,161,468(56,793)
50,559—(164,510)(31,954)—(1,569)740,939(53,181)575,559
1,750,269$ 2,325,828

INPEX CORPORATION

65

Notes to Consolidated Financial Statements
INPEX Corporation and Consolidated Subsidiaries

1. BASIS OF PRESENTATIONINPEX CORPORATION (the “Company”) is primarily

No. 18, issued on May 17, 2006). In accordance with PITF

engaged in the research, exploration, development andNo. 18, the accompanying consolidated financial state-production of natural gas and crude oil.

ments for the year ended March 31, 2009 have been pre-The Company and its domestic subsidiaries maintainpared by using the accounts of foreign consolidated sub-their accounting records and prepare their financial state-sidiaries prepared in accordance with International Financial

ments in accordance with accounting principles generally

Reporting Standards, or IFRS or the accounting principles

accepted in Japan.

generally accepted in the United States, or U.S. GAAP as

Until the year ended March 31, 2008, the accompany-

adjusted for certain items.

ing consolidated financial statements had been prepared

The accompanying consolidated financial statements

by using the accounts of foreign consolidated subsidiaries

have been prepared in accordance with accounting princi-

prepared in accordance with accounting principles gener-

ples generally accepted in Japan, which may differ in cer-ally accepted in their countries of domicile.

tain material respects from IFRS or U.S. GAAP, and are

Effective the year ended March 31, 2009, as describedcompiled from the consolidated financial statements pre-in Note 2. (u), the Company applies “Practical Solution onpared by the Company as required by the Financial Instru-

Unification of Accounting Policies Applied to Foreign Sub-ments and Exchange Act of Japan.

sidiaries for Consolidated Financial Statements” (ASBJ PITF

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of consolidation and accounting forinvestments in affiliates

year ended on the consolidated closing date were used,even though their closing date is December 31.

The accompanying consolidated financial statements

Until the year ended March 31, 2007, INPEX Browse,

include the accounts of the Company and companies con-Ltd. had been consolidated on the basis of fiscal periods

trolled directly or indirectly by the Company. Companies

ended December 31, which differs from that of the Com-over which the Company exercises significant influence inpany. Effective the year ended March 31, 2008, its finan-

terms of their operating and financial policies are included

cial statements prepared for consolidation purposes as ofin the consolidated financial statements on an equity basis.

the consolidation closing date have been used due to

All significant intercompany balances and transactions are

increase in its materiality. Accordingly, the consolidated

eliminated in consolidation. Further, because certain com-

operating results for the year ended March 31, 2008

panies do not have a significant impact on the consoli-

included operating results for 15 months from January 1,

dated financial statements, these are not consolidated or2007 to March 31, 2008. The effect of this change does

accounted for by the equity method.

not have a significant impact on the consolidated financial

For the 35 companies for which the closing date differedstatements.

from the consolidated closing date, including but not lim-

Teiseki Real Estate Co., Ltd. has changed the closing

ited to, INPEX Sahul, Ltd. and INPEX Masela, Ltd., thedate from December 31 to March 31, since the year ended

financial statements for the year ended December 31 were

March 31, 2010. Accordingly, the consolidated operatingused. However, the necessary adjustments have been

results for the year ended March 31, 2010 included oper-

made to the financial statements of those companies toating results for 15 months from January 1, 2009 to Marchreflect any significant transactions made between the31, 2010. The effect of this change does not have a sig-

Company’s closing date and those of the consolidated

nificant impact on the consolidated financial statements.

subsidiaries.

The excess of cost over underlying net assets excluding

For the 10 companies, including but not limited to,minority interests at fair value as of their dates of acquisi-

Japan Oil Development, Co., Ltd., Teikoku Oil D.R. Congo,

tion is accounted for as goodwill and amortized over 20

Co., Ltd., INPEX Southwest Caspian Sea, Ltd., and INPEX

years on a straight-line method.

North Caspian Sea, Ltd., the financial statements for the66 INPEX CORPORATION(b) Cash equivalents

mate of uncollectible amounts determined by reference to

All highly liquid investments with a maturity of three

specific doubtful receivables from customers experiencing

months or less when purchased are considered cash

financial difficulties.

­equivalents.
(g) R ecoverable accounts under production sharing(c) Foreign currency translation

and related allowance

Monetary assets and liabilities denominated in foreign cur-

Cash investments made by the Company during an explo-

rencies are translated into yen at the exchange rates pre-ration, development and production project under a pro-vailing at the balance sheet date. All revenues and expenses

duction sharing contract and a service contract (buyback

associated with foreign currencies are translated at thearrangement) are recorded as “Recoverable accounts

rates of exchange prevailing when such transactions were

under production sharing” so long as they are recoverable

made. The resulting exchange gain or loss is credited orunder the terms of the relevant contract. When the Com-charged to income.

pany receives natural gas and crude oil in accordance with

The assets and liability accounts of overseas subsidiaries

the relevant contract, an amount corresponding to theare translated into yen at the exchange rates prevailing atpurchase costs of the products (i.e., a cost recovery portion

the balance sheet date. The revenue and expense accountsof the investments) is released from this account.

of the overseas subsidiaries are translated into yen at the

Because these investments are recoverable only where

average rates of exchange during the period. The compo-

commercial oil or gas is discovered, an allowance for recov-

nents of net assets excluding minority interests are trans-

erable accounts under production sharing is provided for

lated at their historical exchange rates. The differences

probable losses on investments made during the explora-arising from the translation are presented as translation

tion stage under production sharing contracts arising fromadjustments and minority interests in the accompanying

the failure to discover commercial oil and gas. In light ofconsolidated financial statements.

this uncertainty, an allowance for recoverable accounts
under production sharing is provided for probable losses(d) Securities

on development investment individually estimated for each

In general, securities are classified into three categories:

project.

trading, held-to-maturity or other securities. Securities heldby the Company and its subsidiaries are all classified as(h) Allowance for investments in exploration

other securities. Other securities with a determinable mar-

The allowance for investments in exploration is provided

ket value are mainly stated at fair value with any changes infor future potential losses on investments in exploration

unrealized holding gain or loss, net of the applicable

companies at an estimated amount based on the net

income taxes, included directly in net assets. Other securi-

assets of the investees.

ties without a determinable market value are stated at cost.
Cost of securities sold is determined by the moving average(i) Provision for exploration projects

method.

Provision for exploration projects is provided for future
expenditures of consolidated subsidiaries at the ­exploration(e) Inventories

stage based on a schedule of investments in exploration.

Overseas inventories are carried mainly at cost, determinedby the average cost method (balance sheet value is carried(j) Accrued bonuses to officers

at the lower of cost or market). Domestic inventories are

Accrued bonuses to officers are provided at the expected

carried mainly at cost, determined by the moving-average

payment amount for the fiscal year.

method (balance sheet value is carried at the lower of costor market).

(k) Tangible fixed assets (except leased assets)
Depreciation of overseas mining facilities is mainly com-(f) Allowance for doubtful accounts

puted by the unit-of-production method.

The allowance for doubtful accounts is provided at an

For other tangible fixed assets, the straight-line method

amount determined based on the historical experience ofof depreciation is applied. The useful lives of fixed assets

bad debt with respect to ordinary receivables, plus an esti-

are based on the estimated useful lives of the respective
assets.

INPEX CORPORATION

67(l) Intangible assets (except leased assets)(r) Hedge accounting

Exploration and development rights at the exploration

The simplified accounting method is applied to interest

stage are fully amortized in the year such rights arerate swaps. In addition, the nominal amount of the deriva-

acquired, and those at the production stage are amortizedtive transaction is limited to the scope of actual demand,by the unit-of-production method.

and the Company does not engage in speculative deriva-

Mining rights are amortized mainly by the unit-of-pro-tive transactions.

duction method.
Capitalized computer software costs are amortized overa period of five years.
Other intangible assets are amortized by the straight-line(s) Research and development expenses
Research and development expenses are charged toincome as incurred.

method.
(t) Income taxes(m) Leased assets

Deferred tax assets and liabilities are determined based on

Leased assets are amortized by the straight-line method

the differences between financial reporting and the tax

over the lease period assuming no residual value.

bases of the assets and liabilities and are measured using
the enacted tax rates and laws which will be in effect when(n) Accrued retirement benefits to employees

the differences are expected to reverse.

Accrued retirement benefits to employees are provided at
the amount calculated based on the expected retirement(u) Adoption of new accounting standard

benefit obligation and the fair value of pension plan assets

Effective the fiscal year ended March 31, 2009, the Com-at the end of this period. Because certain subsidiaries arepany applies “Practical Solution on Unification of Account-classified as small enterprises, we employ a simplified

ing Policies Applied to Foreign Subsidiaries for Consoli-

method (at the amount which would be required to bedated Financial Statements” (ASBJ Practical Issues Task

paid if all active employees voluntarily terminated theirForce No.18, issued on May 17, 2006). This does not have

employment as of the balance sheet date) for thea significant impact on the consolidated financial­calculation of the retirement benefit obligation of the sub-­statements.

sidiaries.
Actuarial gains and losses are charged or credited toincome as incurred.

Effective the fiscal year ended March 31, 2009, theCompany applies “Accounting Standard for Lease Transactions” (ASBJ Statement No.13, revised on March 30, 2007)
and “Guidance on Accounting Standard for Lease(o) Liabilities for site restoration and decommissioning costs

Transactions”(ASBJ Guidance No.16, revised on March 30,2007) for lease transactions entered into a contract on andLiabilities for site restoration and decommissioning costs

after April 1, 2008, other than lease transactions which

are provided for expected future costs for site restoration

are deemed to transfer ownership of the leased assets toand decommissioning.

the lessee. This does not have a significant impact on the
consolidated financial statements.

(p) Liabilities for losses on development activities

Effective the fiscal year ended March 31, 2009, theLiabilities for losses on development activities are provided

Company applies “Accounting Standard for Measurement

for probable losses on oil and natural gas developmentof Inventories” (ASBJ Statement No.9, issued on July 5,

activities individually estimated for each project.

2006). This does not have a significant impact on the consolidated financial statements.

(q) Accrued special repair and maintenance

Effective the fiscal year ended March 31, 2009, theAccrued special repair and maintenance are provided for

Company applies “Accounting Standard for Related Party

planned major repair and maintenance activities on tanks

Disclosures” (ASBJ Statement No.11, issued on Octoberin certain subsidiaries at amounts accumulated through17, 2006) and “Guidance on Accounting Standard forthe next activity.

Related Party Disclosures” (ASBJ Guidance No. 13, issued
on October 17, 2006).

68 INPEX CORPORATION

Effective the fiscal year ended March 31, 2010, the2008) and “Guidance on Disclosures about Fair Value ofCompany applies “Accounting Standard for Financial

Financial Instruments” (ASBJ Guidance No.19 issued on

Instruments” (ASBJ Statement No.10 issued on March 10,

March 10, 2008).

3. U.S. DOLLAR AMOUNTS
The translation of yen amounts into U.S. dollar amounts istion should not be construed as a representation that yen

included solely for convenience, as a matter of arithmetic

have been, could have been, or could in the future be,computation only, at ¥93.04=US$1.00, the approximate

converted into U.S. dollars at the above or any other rate.

rate of exchange in effect on March 31, 2010. This transla-

4. Status of Financial Instruments(a) Policy regarding financial instruments(Market price fluctuation risk related to securities)

The Company raises funds for oil and gas exploration,

For marketable securities and investment securities exposeddevelopment and production, construction or expansion

to market price fluctuation risk, analysis of market values isof domestic pipelines and LNG receiving terminal primarily

regularly reported to the Management Committee. For

from cash flow on hand and from bank loans. Oil and gas

shares of stock, the Company holds shares of trading part-development projects are primarily funded from long-term

ners and others to establish close and smooth relationships

loans that the Company has secured from the Japan Bankfor the purposes of maintainting a medium- to long-termof International Cooperation and Japanese commercial

stable business. Of these shares, the Company holds a partbanks. Japan Oil, Gas and Metals National Corporation hasof these shares for the purpose of investment. As forprovided guarantees for the principal on certain outstand-bonds, the Company mainly holds government bonds withing amounts of the Company’s long-term loans. The Devel-

short-term maturities to reduce market price fluctuation

opment Bank of Japan and Japanese commercial banksrisk.

have provided long-term loans for the construction or
expansion of domestic pipelines and LNG receiving termi-(Interest rate fluctuation risk related to short-term

nal. The Company generally borrows with variable interest

loans and long-term debt)

rates, while some loans are with a fixed interest rate

Loans are mainly used to fund oil and natural gas explora-depending on the nature of each project.

tion projects and the construction or expansion of domes-

Regarding financing policy, the Company manages

tic pipelines and LNG receiving terminal and others. The

funds mainly from cash on hand and government bonds,

borrowing period is determined considering the financial

which are considered to be of low-risk and high-liquidity.

prospects of the project and useful lives of the facilities.

The Company does not engage in speculative derivative

Loans with variable interest rates are exposed to interest

transactions. However, the Company uses derivative trans-

rate fluctuation risk. However, the Company leverages inactions to prevent risks hereinafter described below.

line with the above policy. Loans with fixed interest rates
include fixed interest expenses under special treatment of(b) Details of financial instruments, associated riskinterest rate swaps.

and risk management(Credit risks related to trade receivables)(Exchange rates fluctuation risk related to assets andTrade receivables—accounts receivable-trade and accounts

liabilities in foreign currencies)

receivable-other—are comprised mainly from sales of oil

As most of the Company’s business consists of its overseas

and natural gas. Main trading partners are national oil

business, the Company is exposed to exchange fluctuationcompanies, major oil companies and others. In line withrisk due to a large portion of monetary assets and liabilities

the criteria for trading and credit exposure management,

held in foreign currencies such as cash and deposits,

the Company properly analyzes the status of trading part-

accounts receivables and loans required in overseas proj-

ners for early detection and reduction of default risks.

ects. As a result of fiscal year-end conversion, yen appreci-

INPEX CORPORATION

69

ation causes a foreign exchange loss on assets and a for-

(Management of derivative transactions)eign exchange gain on liabilities while yen depreciation

For the above derivative transactions such as interest ratecauses a foreign exchange gain on assets and a foreignswap transactions and forward exchange contracts, theexchange loss on liabilities. For this reason, foreign

Company follows its derivative transactions management

exchange gains and losses are largely offset and the posi-

outline. Further, the Company only transacts with financial

tion between assets and liabilities in foreign currencies isinstitutions with high credit ratings to reduce credit risks

maintained. At present, the Company is in the position of

for the use of derivatives.

incurring foreign exchange losses when the foreignexchange rate results in yen appreciation. The Company(Management of the liquidity risk related totimely converts to yen to avoid excess holding of foreign­financing)currency deposits on hand and engages in hedging trans-

The finance unit controls cash management based on aactions, based on the Company policy, partly using foreign

monthly financing plan prepared by each project division

currency forward exchange contracts as necessary forand secures sufficient liquidity on hand to be prepared for

expected foreign currency trading.

liquidity risks.

5. SECURITIESa) Information regarding other securities with determinable market value as of March 31, 2009 is as follows:
Millions of yen
March 31, 2009

Securities with fair values exceeding their acquisition cost:
Stock
Bonds:
Public bonds
OthersSubtotal
Securities with acquisition costs exceeding their fair value:
Stock
Bonds:
Public bonds
Other debt securities
OthersSubtotal
Total						

Acquisition cost¥

431

Carrying value¥

507

Unrealized gain (loss)¥

76

279,599
68
280,098

281,76075
282,342

2,161
7
2,244

55,29849,466(5,832)

43,723417
5,857
105,295¥385,393

40,883355
5,857
96,561¥378,903(2,840)(62)—(8,734)¥ (6,490)

70 INPEX CORPORATION

Information regarding other securities as of March 31, 2010 is as follows:
Millions of yen
March 31, 2010

Thousands of U.S. dollars

Acquisition cost

Carrying value

Unrealized gain
(loss)

Acquisition cost

Carrying value

Unrealized gain
(loss)¥ 28,825¥ 43,779¥14,954$309,813$470,540$160,727

Securities with fair values
exceeding their acquisition cost:
Stock
Bonds:
266,324

267,953

1,629

2,862,468

2,879,976

17,508Others

6,733

8,722

1,989

72,366

93,744

21,378Subtotal

301,882

320,454

18,572

3,244,647

3,444,260

199,61326,87322,396(4,477)

288,833

240,714(48,119)

103,007

101,423(1,584)

1,107,126

1,090,101(17,025)

40

37

(3)

430

398

(32)

Public bonds

Securities with acquisition costs
exceeding their fair value:
Stock
Bonds:
Public bonds
Other debt securities
Subtotal

129,920

123,856(6,064)

1,396,389

1,331,213(65,176)

Total¥431,802¥444,310¥12,508$4,641,036$4,775,473$134,437b) Information regarding sales of securities classified as other securities for the years ended March 31, 2008,2009 and 2010 is as follows:
Millions of yen
Years ended March 31,

2008

2009

Proceeds from sales¥51,580¥127,974—

107

Gain on sales
Loss on sales¥
Millions of yen

Year ended March 31, 2010

16

¥

—

Thousands of U.S. dollars

Proceeds from sales

Gain onsales

Loss onsales

Proceeds from sales

Gain onsales

Loss onsales¥101,000¥—¥—$1,085,555$—$—

Bonds:
Public bonds
Other debt securities
Total

321

—

—

3,450

—

—

¥101,321¥—¥—$1,089,005$—$—c) Components of other securities without a determinable market value as of March 31, 2009 are summarized
as follows:
Millions of yen
March 31,2009

Other securities:
Unlisted securities*
Total¥28,176¥28,176*An allowance is provided for investments in exploration companies at an estimated amount based on the financial position of the­investees.

INPEX CORPORATION

71

Components of securities for which it is extremely difficult to determine market value as of March 31, 2010 are
summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2010

2010

¥30,623$329,138

March 31,

Other securities:
Unlisted securities

5,000

53,740Stocks of subsidiaries and affiliates

36,714

394,605

Total¥72,337$777,483

Preferred securities

These securities are assumed to have no market value and require excessive costs to estimate future cash flows. Accordingly, these financial instruments are not included in a) as they are financial instruments for which it is extremely difficult todetermine fair value. For shares of exploration companies among unlisted securities and stocks of subsidiaries and affiliates, an allowance is provided for investments in exploration at an estimated amount based on the financial position of theinvestees.
d) Redemption schedule for securities with maturity dates classified as other securities as of March 31, 2010 is
as follows:
Millions of yen

March 31, 2010

Thousands of U.S. dollars

1 year or lessMore than 1
year but lessthan 5 years

More than 5
years but lessthan 10 years¥112,000¥210,500¥37,000

More than 1
year but lessthan 5 years

More than 5
years but lessthan 10 years

More than 10
years¥6,500 $1,203,783 $2,262,468$397,678$69,862

More than 10years

1 year or lessDebt securities:
Public bonds

—

45

—

¥112,000¥210,545¥37,000

Other debt securities
Total

483

—

—

¥6,500 $1,203,783 $2,262,951——$397,678$69,862

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings as of March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen
March 31,

2010

2009

2010

Short-term borrowings from banks and others(Interest rates ranging from 1.325% to 2.150% and from
1.215% to 1.325% at March 31, 2009 and 2010)
Total¥22,782¥160$1,720¥22,782¥160$1,720Long-term debt as of March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen
March 31,

2009

2010

¥141,464¥240,223

2010

Loans from banks and others, due through 2024
(Interest rates ranging from 1.100% to 3.240% and from
0.473% to 2,700% at March 31, 2009 and 2010)
Less: Current portion$2,581,933

5,034

4,712

50,645¥136,430¥235,511$2,531,288

72 INPEX CORPORATION

Assets pledged as of March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen

March 31,

2009

2010

2010

¥ 2,615¥ 2,240$ 24,076

Wells

6,919

3,445

37,027

Machinery, equipments and vehicles

9,391

9,512

102,236

Land

1,826

660

7,094

Investment securities

Buildings and structures

7,861

9,385

100,870

Other

—

246

2,644

Total

¥28,612¥25,488$273,947

The above assets were pledged against the following liabilities:
Thousands of
U.S. dollars

Millions of yen

2010

2010

145

¥ 2,130$ 22,893

Accounts payable—other

5,264

5,497

59,082Long-term debt

11,5006,153

66,133

March 31,

Short-term loans

2009
¥

Other

17

17

183

Total

¥16,926¥13,797$148,291

In addition, investment securities of ¥5,508 million as of March 31, 2009 and ¥5,572 million ($59,888 thousand) as ofMarch 31, 2010 are pledged as collateral for the BTC Pipeline Project Finance.
The aggregate annual maturities of long-term debt subsequent to March 31, 2010 are summarized as follows:
Years ending March 31,

Millions of yen

2011

¥

4,712

Thousands of U.S. dollars$

50,645

2012

4,279

45,991

2013

4,258

45,765

2014

3,753

40,338

2015

3,604

38,7362016 and thereafter

219,6172,360,458

Total¥240,223$2,581,933

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to a number of taxes based on income which, in theaggregate, resulted in a statutory tax rate of approximately 40.7%, 36.2% and 36.2% for the fiscal years ended March 31,
2008, 2009 and 2010, respectively.
The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2008, 2009
and 2010 differ from the statutory tax rate for the following reasons:

INPEX CORPORATION

Years ended March 31,

2008

2009

2010

Statutory tax rate
Effect of:Permanently non-taxable income such as dividends income
Valuation allowance
Foreign taxes
Foreign tax credits
Adjustment of deducted amounts of foreign taxes
Net operating losses utilized
Equity in (earnings) losses of affiliates
Amortization of goodwill
Differences of effective tax rates applied to income of foreign subsidiaries
Differences of effective tax rates applied to tax effect accounting
Other
Effective tax rate

40.7%

36.2%

36.2%

(0.7)
0.2
70.5
(19.1)(11.3)
(0.9)
(0.1)
0.4
(4.7)
(4.2)
0.8
71.6%

(1.4)
2.6
75.6
(18.4)(18.1)
—
(0.1)
0.4
—
—
(0.5)
76.3%

(1.5)
0.7
69.9
(20.1)(14.2)
(1.8)
0.2
0.6
—
2.8
0.8
73.6%

73

The significant components of deferred tax assets and liabilities as of March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen

March 31,

Deferred tax assets:
Investments in related parties
Loss on revaluation of land
Loss on valuation of investment securities
Recoverable accounts under production sharing (foreign taxes)
Allowance for investments in exploration
Foreign taxes payable
Net operating loss
Accumulated depreciation
Accrued retirement benefits
Translation differences of assets and liabilities denominated inforeign currencies
Liabilities for site restoration and decommissioning costs
Exploration expenses
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Foreign taxes
Reserve for overseas investment loss
Translation differences due to an application of purchaseaccounting method
Reserve for exploration
Unrealized holding gain on securities
Translation differences of assets and liabilities denominated inforeign currencies
Other
Total deferred tax liabilities
Net deferred tax assets

2009

2010

2010

¥ 57,315
4,839
11,726
6,379
5,236
19,063
19,112
22,9503,092¥ 62,493
4,854
11,348
4,389
6,721
21,846
12,96424,787
2,773

$

597
2,937
—
8,200
161,446(128,233)
33,213

111
3,912
5,781
10,438172,417(138,382)
34,035

1,193
42,047
62,135
112,188
1,853,149(1,487,339)
365,810

9,853
6,950

7,558
7,098

81,23476,290

3,884
757
66

2,894
4,499
390

31,10548,355
4,192

7,540
2,339
31,389¥ 1,824

8,801
2,788
34,028¥
7

94,59429,965
365,735$
75

671,679
52,171
121,969
47,173
72,238234,802139,338
266,41229,804

74 INPEX CORPORATION

8. NET ASSETS
As of March 31, 2010, the total number of the Company’s• Mergers, share exchanges or share transfers

shares issued consisted of 2,358,409 shares of common• Capital reduction

stock and 1 special class share. The special class share has• Dissolution

no voting rights at the common shareholders’ meeting,

The special class shareholder may request the Company

but the ownership of the special class share gives its holder

to acquire the special class share. In addition, the Com-a right of veto over certain important matters by imposing

pany may also acquire the special class share by a resolu-

the requirement to obtain a class vote. However, require-tion of a meeting of the Board of Directors in case of thatments stipulated in the Articles of Incorporation need to

special class share is transferred to a non-public subject.

be met in cases involving the appointment or removal of

Under the Companies Act of Japan, 10% of the amountdirectors, the disposition of important assets or the exer-

to be distributed as dividends from capital surplus (othercise of the veto over;than capital reserve) and retained earnings (other than

• Appointment and removal of directors

legal reserve) should be transferred to capital reserve and• Disposition of all or part of Company’s the material

legal reserve, respectively, up to the point where the total

assetsamount of capital reserve and legal reserve equals 25% of• Amendments to the Article of Incorporation with respect

the common stock account.

to the purpose of the Company’s business and the grant-

Such distribution can be made at any time by a resolu-

ing of voting rights to the Company’s shares other thantion of the shareholders, or by the Board of Directors if

common stock

certain conditions are met, but neither capital reserve nor
legal reserve is available for distributions.

9. AMOUNTS PER SHARE
Yen

Years ended March 31,

Net income
Cash dividends
Net assets

U.S. dollars

2008

2009

2010

2010

¥ 73,510.14¥ 61,601.60¥ 45,553.56$ 489.61

7,500.00

8,000.00

5,500.00

59.11¥491,168.09¥540,100.10¥589,548.88$6,336.51

Net income per share is computed based on the net income available for distribution to shareholders of common stock andthe average number of shares of common stock outstanding during the year.
Cash dividends per share represent the cash dividends proposed by the Board of Directors together with the interim cash
dividends paid.
Net assets per share are computed based on the net assets excluding minority interests and the number of common
stock outstanding at the year end.

10. DERIVATIVES
Fair value of derivatives

The special treatment of interest rate swaps and hedge

No derivatives as of March 31, 2009 are disclosed because

accounting is applied to all derivative transactions as ofhedge accounting is applied for all derivatives.

March 31, 2010. Fair values of derivatives are included in
the estimated fair value of the long-term debt, as disclosed
in Note 11 a), since they are accounted for as a part oflong-term debt.

INPEX CORPORATION

75

11. OTHER FINANCIAL INSTRUMENTSa) The carrying values and estimated fair values of financial instruments excluding securities and investment securities
which are disclosed in Note 5.a) and derivatives which are disclosed in Note 10 as of March 31, 2010 are as shown below.
The following summary also excludes cash and cash equivalents and accounts receivable-trade for which fair values approximate their carrying amounts.
Millions of yen
March 31, 2010

Carrying value

Thousands of U.S. dollars

Estimated fair value

Carrying value

Estimated fair value

Short-term borrowings andcurrent portion of long-term debt
Long-term debt

¥

4,872

¥235,511

¥

4,935

$

¥237,024

52,365$$2,531,288

53,042$2,547,550b) For other financial instruments, computation methods of estimated fair value are as shown below.
Short-term borrowings and current portion of long-term debt
The fair value of current portion of long-term debt is calculated by the same method as long-term debt. For short-termborrowings, the relevant carrying value is used since these items are settled in a short periods of time and its market value
is almost the same as the carrying value.
Long-term debt
The fair value of long-term debt is calculated by applying a discount rate to the total of principal and interest. The discountrate is based on the assumed interest rate if a similar new loan is entered into.

12. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in selling, general and administrative expenses amounted to ¥2,229 million,¥643 million and ¥470 million ($5,052 thousand) for the years ended March 31, 2008, 2009 and 2010, respectively.

13. RETIREMENT BENEFITS
1. Retirement benefit obligations as of March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen
March 31,

2009

2010

2010

Retirement benefit obligations¥(15,231)¥(15,379)$(165,295)

Plan assets at fair value

6,685

7,793

83,760Unfunded retirement benefit obligation(8,546)(7,586)(81,535)———¥ (8,546)¥ (7,586)$ (81,535)

Unrecognized actuarial gain or loss
Accrued retirement benefits to employees

76 INPEX CORPORATION

2. Retirement benefit expenses for the years ended March 31, 2008, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen

2010

2010

Years ended March 31,

2008

2009

Service cost

¥ 846

¥1,001¥ 803$ 8,631

Interest cost

274

282

284

3,053

Expected return on plan assets

(108)

(86)

(33)

(355)

Amortization of actuarial gain or loss

153

462

(310)

(3,332)¥1,165¥1,659¥ 744$ 7,997Retirement benefit expenses

Except for the above retirement benefits expenses, in accordance with the change of retirement benefit plan resulting fromthe merger of the Company with non - surviving companies, past service gain amounting to ¥644 million was credited toother income (other) during the year ended March 31, 2009.
3. The assumptions used in accounting for the above plans are as follows:
Years ended March 31,

2008

2009

2010

Discount rate

2.0%

2.0%

2.0%

Expected return on plan assets
Period for amortization of actuarial gain or loss
Period for amortization of past service cost

1.5%

0.5%

0.5%

Amortized as
incurred

Amortized as
incurred

Amortized as
incurred—

Amortized as
incurred—

14. GOODWILL
The changes in the carrying amount of goodwill for the years ended March 31, 2008, 2009 and 2010 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

Balance at beginning of year

2008

2009

2010

2010

¥132,106¥121,644¥114,884$1,234,781

Goodwill acquired during the year

(3,845)

—

(2)

(22)

Amortization of goodwill(6,617)(6,760)(6,759)(72,646)¥121,644¥114,884¥108,123$1,162,113

Balance at end of year

Negative goodwill acquired during the year ended March 31, 2008 consisted of negative goodwill related to the taking
effect of an exploration and production agreement in Venezuela.

15. LEASES
Future minimum lease payments subsequent to March 31, 2010 for operating lease transactions are summarized as­follows:
		Years ending March 31,

20112012 and thereafter
Total

Millions of yen

Thousands of U.S. dollars¥ 2,077$ 22,324

8,012

86,113¥10,089$108,437

INPEX CORPORATION

77

16. CONTINGENT LIABILITIESAs of March 31, 2010, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of affiliates in the aggregate amount of ¥31,502 million ($338,586 thousand).

17. SEGMENT INFORMATIONBusiness segment information
As net sales, operating income and total assets of the oil and natural gas business constituted more than 90% of the consolidated totals for the years ended March 31, 2008, 2009 and 2010, the disclosure of business segment information has
been omitted.
Geographical segment information
The geographical segment information for the Company and its subsidiaries for the years ended March 31, 2008, 2009
and 2010 is summarized as follows:
Millions of yen
Year ended March 31, 2008

Sales to third parties
Total sales

Japan

Asia &
Oceania (a)¥ 93,882 ¥452,542
93,882452,542

Eurasia(Europe & NIS)(b)

Middle East
& Africa (c)Americas
(d)

Total

Eliminations

Consolidated¥183,879 ¥464,523 ¥ 8,139 ¥1,202,965 ¥—¥1,202,965

183,879—

1,202,965

464,5238,139

1,202,965

Operating expenses

61,950165,837

97,843

140,492

16,101

482,223

6,531

488,754

Operating income (loss)

31,932286,705

86,036

324,031(7,962)

720,742(6,531)

714,211¥363,184 ¥299,563 ¥60,656 ¥1,296,007 ¥511,894¥1,807,901

Total assets¥212,306 ¥360,298(a) Asia & Oceania: Indonesia, Australia, East Timor, Vietnam(b) Eurasia (Europe & NIS): Azerbaijan, Kazakhstan, UK(c) Middle East & Africa: UAE, D.R.Congo, Iran, Libya, Egypt, Algeria, Angola(d) Americas: Venezuela, Ecuador, USA, Canada, Surinam
Millions of yen
Year ended March 31, 2009

Japan

Asia &
Oceania (a)Eurasia(Europe & NIS)(b)

Sales to third parties¥93,423¥435,824¥73,688¥463,151¥10,079 ¥1,076,165

Total sales

93,423435,824

73,688463,151

10,079Operating expenses

59,540150,416

39,223

144,460

11,419(1,340)671,107(7,840)663,267¥85,169 ¥1,258,237¥509,808¥1,768,045

Operating income (loss)
Total assets

Middle East
& Africa (c)Americas(d)33,883

285,408

34,465

318,691¥208,326¥409,558¥365,914¥189,270(a) Asia & Oceania: Indonesia, Australia, East Timor, Vietnam(b) Eurasia (Europe & NIS): Azerbaijan, Kazakhstan, UK(c) Middle East & Africa: UAE, D.R.Congo, Iran, Libya, Egypt, Algeria, Angola(d) Americas: Venezuela, Ecuador, USA, Canada, Surinam, Brazil

Total

Eliminations

Consolidated¥—¥1,076,165

1,076,165—

1,076,165

405,058

7,840

412,898

78 INPEX CORPORATION

Millions of yen
Year ended March 31, 2010

Japan

Asia &
Oceania (a)Eurasia(Europe & NIS)(b)

Middle East
& Africa (c)Americas
(d)

Total

Sales to third parties¥ 93,959¥352,383¥ 73,574¥303,819¥16,692¥ 840,427

Total sales

93,959352,383

73,574

303,819

16,692

Operating expenses

61,404

161,31333,80598,247

15,664

Operating income
Total assets

Eliminations

Consolidated¥—¥ 840,427

840,427—

840,427

370,433

8,326

378,759

32,555

191,070

39,769205,572

1,028

469,994(8,326)461,668¥240,879¥451,167¥446,849¥229,843¥85,242¥1,453,980¥559,798¥2,013,778

Asia &
Oceania (a)Eurasia(Europe & NIS)
(b)

Total

Eliminations

Consolidated$—$ 9,032,964—

9,032,964

Thousands of U.S. dollars
Year ended March 31, 2010

Japan

Middle East
& Africa (c)Americas(d)Sales to third parties$1,009,877 $3,787,436 $ 790,778 $3,265,466 $179,407 $ 9,032,964

Total sales

1,009,877

3,787,436

790,778

3,265,466

179,407

9,032,964

Operating expenses

659,974

1,733,803

363,338

1,055,965

168,358

3,981,438

89,4884,070,926

Operating income

349,903

2,053,633

427,440

2,209,501

11,0495,051,526(89,488)4,962,038$2,588,983 $4,849,172 $4,802,762 $2,470,368 $916,187 $15,627,472 $6,016,746$21,644,218

Total assets(a) Asia & Oceania: Indonesia, Australia, East Timor, Vietnam(b) Eurasia (Europe & NIS): Azerbaijan, Kazakhstan, UK(c) Middle East & Africa: UAE, D.R.Congo, Iran, Libya, Egypt, Algeria, Angola(d) Americas: Venezuela, Ecuador, USA, Canada, Surinam, Brazil
The geographical segment information for the Company and its subsidiaries has been reflected in the regions based on thelocation of operations.
Overseas sales
Overseas sales, which include sales (other than exports to Japan) of its overseas subsidiaries, for the years ended March 31,
2008, 2009 and 2010 are summarized as follows:
Millions of yen
Year ended March 31, 2008

Overseas sales

Asia & Oceania (a)Other (b)Total¥381,147¥84,470¥ 465,617

Consolidated net sales
Overseas sales as a percentage ofconsolidated net sales

1,202,965
31.7%

7.0%

38.7%

(a) Asia & Oceania: South Korea, Taiwan, Indonesia, Singapore, Thailand, China, Philippines, Australia(b) Other: USA, Italy

Millions of yen
Year ended March 31, 2009

Overseas sales

Asia & Oceania (a)¥371,102

Other (b)¥46,281

Consolidated net sales
Overseas sales as a percentage ofconsolidated net sales

Total¥ 417,383
1,076,165

34.5%

4.3%

38.8%

INPEX CORPORATION

79(a) Asia & Oceania: South Korea, Taiwan, Indonesia, Singapore, Thailand, China, Philippines, Australia(b) Other: USA
Millions of yen
Year ended March 31, 2010

Asia & Oceania (a)¥271,231

Overseas sales

Other (b)¥53,425

Thousands of U.S. dollars
Total

Asia & Oceania (a)Other (b)Total¥324,656$2,915,209$574,215$3,489,424

840,427

Consolidated net sales
Overseas sales as a percentage
of consolidated net sales

32.3%

6.3%

38.6%

9,032,964
32.3%

6.3%

38.6%

Transaction
detailAmounts(a) Asia & Oceania: South Korea, Taiwan, Indonesia, Singapore, Thailand, Philippines, Australia(b) Other: USA, Italy

18. RELATED PARTY TRANSACTIONSThere were no related party transactions for the year ended March 31, 2008.
There was the following related-party transaction for the year ended March 31, 2009:
Affiliated Company
Name ofrelated party

Location

MI Berau Amsterdam,
B.V.
Netherlands

Capial investment

Nature of operations

Voting interest

e656,279
thousand

Exploration and development of natural gas
in Berau Block conducted in West Papua
province, Indonesia andTangguh LNG Project

Directly
44.00%

Description of thebusiness relationship

Serve the officer Guarantee ¥20,380
millionfor debt inconcurrently,
U.S. dollars*
capitalsubscription* The Company guarantees financial institution loans to finance developments of the LNG projects. The guaranteedamounts above is as of March 31, 2009.
There was the following related-party transaction for the year ended March 31, 2010:
Affiliated Company
Name ofrelated party

Location

MI Berau Amsterdam,
B.V.
Netherlands

Capial investment

Nature of operations

Voting interest

e656,279
thousand

Exploration, development, production andsales of natural gas inBerau Block conductedin West Papua province,
Indonesia and Tangguh
LNG Project

Directly
44.00%

Description of thebusiness relationshipTransaction
detailAmounts

Serve the officer Guarantee ¥22,459
millionfor debt inconcurrently,
U.S. dollars* $241,397
capitalthousandsubscription* The Company guarantees financial institution loans to finance developments of the LNG projects. The guaranteedamounts above is as of March 31, 2010.

80 INPEX CORPORATION

Report of Independent Auditors

Report of Independent Auditors
The Board of Directors
INPEX CORPORATION
We have audited the accompanying consolidated balance sheets of INPEX CORPORATION
and consolidated subsidiaries as of March 31, 2010 and 2009, and the related consolidated
statements of income, changes in net assets, and cash flows for each of the three years in
the period ended March 31, 2010, all expressed in yen. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of INPEX CORPORATION and consolidated
subsidiaries at March 31, 2010 and 2009, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended March 31, 2010 inconformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements withrespect to the year ended March 31, 2010 are presented solely for convenience. Our audit
also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 3.

June 23, 2010

INPEX CORPORATION 81

Additional Information
Business Risks

82

Oil and Gas Reserves and Production Volume

92

Subsidiaries and Affiliates

97

Stock Data

99

Corporate Data100

82 INPEX CORPORATIONBusiness Risks
The following is a discussion on key items that can be considered potential risk factors relating to
the business of INPEX CORPORATION and its consolidated subsidiaries (“the Group”). From thestandpoint of information disclosure to investors and shareholders, we proactively disclose mattersthat are not necessarily the business risks but that can be considered to have important effects on
the investment decisions of investors. The following discussion does not completely cover all
business risks relating to the Group’s business.
Unless stated otherwise, forward-looking statements in the discussion are the judgment of theGroup as of August 11, 2010 and are subject to change after such date due to various factors,
including changes in social and economic circumstances.

1. Characteristics of and Risks Associated with the Oil and Gas Development
Business(1) Risk of Failure in Exploration, Development, orProduction
Payment of compensation is ordinarily necessary toacquire blocks and acreages. Also, surveying and exploratory drilling expenses (exploration expenses) become necessary at the time of exploration activities for the purposeof discovering resources. When resources are discovered,
it is necessary to further invest in substantial development
expenses according to various conditions, including thesize of the recoverable reserves, development costs anddetails of agreements with oil-producing countries (including gas-producing countries; hereinafter the same shallapply).
There is, however, no guarantee of discoveringresources on a scale that makes development and production feasible. The probability of such discoveries is considerably low despite various technological advances inrecent years, and even when resources are discovered thescale of the reserves does not necessarily make commercial production feasible. For this reason, the Group conservatively recognizes expenses related to exploration
investment, maintaining financial soundness by booking
100% as expenses in consolidated financial statements inthe case of concession agreements (including mining
rights awarded in Japan as well as permits, licenses andleases awarded overseas) and by booking 100% of exploration project investment as allowances in the case of production sharing agreements. In addition, if there areimpossibilities of recovery of development investment in a
project, we also book the corresponding amount of development expenses as allowances in accordance with thecircumstances of each project.
To increase recoverable reserve and production volumes,
the Group always takes interest in promising properties
and plans to continue exploration investment. At thesame time, we invest in development projects, including
the acquisition of interests in discovered undeveloped
fields and producing fields, so as to maintain an overallbalance between assets at the exploration, development,
and production stages.
Although exploration and development (including theacquisition of interests) are necessary to secure thereserves essential to the Group’s future sustainable business development, each type of investment involves technological and economic risks, and failed exploration ordevelopment investment could have an adverse affect on
the results of the Group’s operations.
(2) Oil, Condensate, LPG and Natural Gas Reserves① Proved Reserves
INPEX CORPORATION (“the Company”) commissioned
DeGolyer and MacNaughton, an independent petroleum
engineering consultant in the United States, to assess
proved reserves of the Group. The definition of proved
reserves evaluated by DeGolyer and MacNaughton isbased on the U.S. Securities and Exchange Commission’s
Regulation S-X, Rule 4-10(a), which is widely known
among U.S. investors. Notwithstanding the use in evaluation of either the deterministic or probabilistic approaches,
proved oil and gas reserves are estimated quantities thatgeological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs
under existing economic and operating conditions, fromthe date of evaluation through to the expiration date of
the agreement granting operating rights (or in the eventof evidence with a reasonable certainty of agreement
extension through to the expiration of the projected
extension period). For definition as “proved reserves,”
operators must have a reasonable degree of certainty thatthe recovery of hydrocarbons has commenced or that the
project will commence within an acceptable period oftime. This definition is widely regarded as being conservative. Nevertheless, the strictness of the definition does not
imply any guarantee of the production of total reserves
during a future production period.
For further details on proved reserves of crude oil, con-

INPEX CORPORATION

densate, LPG and natural gas held by the Group, including
affiliates accounted for under the equity method, please
see the section “Crude Oil and Natural Gas Reserves” on
P92.
② Probable Reserves and Possible Reserves
In addition to the assessment of proved reserves based on
the SEC standards, the Company commissioned DeGolyer
and MacNaughton to assess its probable reserves andpossible reserves based on the Petroleum Resources Management System 2007 (PRMS) published by four organizations: the Society of Petroleum Engineers (SPE), the WorldPetroleum Congress (WPC), the American Association ofPetroleum Geologists (AAPG), and the Society of Petroleum Evaluation Engineers (SPEE). Probable reserves, as
defined by the four organizations, are reserves outside
proved reserves that are less likely to be recovered thanproved reserves but more certain to be recovered thanpossible reserves based on analyses of geological andengineering data. In this context, when probabilistic
methods are employed, there should be at least a 50%
probability that the quantities actually recovered will equalor exceed the sum of estimated proved and probablereserves. In addition, possible reserves are also defined inaccordance with PRMS guidelines. In specific terms, possible reserves are a part of those reserves not categorized asproved reserves or probable reserves. Possible reservesrefer to oil and gas volumes that are less likely to be
recovered than probable reserves based on analyses ofgeological and engineering data. In this case, it is unlikelythat the actual quantity of oil and gas recovered will
exceed the sum of proved reserves, probable reserves andpossible reserves. Possible reserves accordingly accommodate scenarios where estimates are high. Furthermore,when probabilistic methods are employed to calculatepossible reserves, there should be at least a 10% probability that the quantities recovered will equal or exceed thesum of proved reserves, probable reserves and possible
reserves. Probable reserves can be upgraded to proved
reserves after the addition of new technical data, under
different economic conditions, and with advances in operational conditions. Nevertheless, probable reserves do notoffer a guarantee of the production of total reserves during a future production period with the same certainty as
proved reserves.
For further details on probable reserves of crude oil,condensate, LPG and natural gas held by the Group,
including affiliates accounted for under the equity
method, please see the section “Crude Oil and Natural
Gas Reserves” on P92.
③ Possibility of Changes in Reserves
A reserve evaluation depends on the available geologicaland engineering data from oil and gas reservoirs, the83

maturity of development plans and a considerable numberof assumptions, factors and variables including economic
conditions as of the date such an estimate is made.
Reserves may be revised in the future on the basis of geological and engineering data as well as development plans
and information relating to changes in economic andother conditions made newly available through progressin production and operations. As a result, there is a possibility that reserves will be restated upwards or downwards. As to the reserves under a PSC, not only production, but also oil and gas prices, investments and cost
recoveries as well as remuneration fees may affect theeconomic entitlement. This may cause reserves to increaseor decrease. In this way, reserves could fluctuate becauseof various data, assumptions and changes of definition.
(3) In the Oil and Natural Gas Development Businessthe Period from Exploration to Sales is Highly
Capital Intensive and Funds Cannot be Recovered
for a Long Time
Considerable time and expense is required for exploration
activities. Even when promising resources are discovered
through exploration, substantial expenses including production facility construction costs, and an extended periodof time, are necessary at the development stage leading
up to production. For this reason, a long period of 10
years or more is required from the time of exploration anddevelopment investment until the recovery of funds
through production and sales. In particular, the development of the Ichthys and the Abadi, large-scale LNG
projects, being pursued by the Company requires a verylarge amount of investment, and the financing of theseprojects could be impacted by changes in the economic
and financial environment. Following the discovery of
resources, in the development process leading up to production and the commencement of sales, the occurrenceof events such as a delay in the acquisition of government
approvals or a delay in the development schedule or theloss of the economic viability of the properties due to factors such as unanticipated problems related to geologicalconditions or fluctuations in the price of oil or gas, fluctuations in foreign exchange rates, or other changes in thebusiness environment, including escalating prices ofequipment and materials, or in the case of LNG projects,
an inability to complete such procedural requirements as
FID owing to the lack of any long-term contractual agreement with prospective purchases with respect to production, could have an adverse affect on the Group’s operational results.
(4) Operatorship
In the oil and gas development business, companies frequently form business partnerships for the purpose of thedispersion of risk and financial burden. In such partner-

84 INPEX CORPORATION

ships, one of the companies becomes the operator, which
performs the actual work and bears the responsibility for
operations on behalf of the partners. The companies
other than the operator, as non-operators, participate in
the business by providing a predetermined amount offunds and either carefully examining the exploration anddevelopment plan devised and implemented by the operator, or participating in some operations.
The Company was a holding company jointly established by INPEX CORPORATION and Teikoku Oil Co., Ltd
on April 3, 2006 through a transfer of stocks. The twocompanies were fully absorbed by and integrated into theholding company on October 1, 2008. The resultant company possesses abundant operational capabilities thanks
to the amalgamation of the former two companies’
extensive experience and knowhow in exploration, development and production both within Japan and overseas
as well as their high-level proprietary technologies.
The Group intends to actively pursue operator projects
focusing on the two large-scale LNG Ichthys and Abadi
projects taking into consideration the effective applicationof business resources as well as the balance between
operator and non-operator projects, based on the Group’s
technical capability, which has been considerablyenhanced by the above-stated business integration. While
the Company lacks operator experience in LNG development projects, it has significant expertise as an operator in
the development and production of crude oil and natural
gas both in Japan and overseas as well as a wealth ofknow-how and knowledge accumulated over many years
as a participant in LNG and other projects in such countries as Indonesia and Australia. In addition, we believethat by utilizing the services of specialized subcontractors
and highly experienced external consultants, a practicesimilar to foreign oil companies including the majors, itwill be possible to execute business appropriately as an
operator.
Engaging in project coordination as an operator willcontribute to the expansion of opportunities of block andacreage acquisition through enhancement of technological capabilities and greater presence in oil-producing
countries and the industry. At the same time, there exist
risks such as constraints on the recruitment of personnel
who have specialized operational skills and an increase infinancial burden. Inability to adequately cope with suchrisks could have an adverse affect on the Group’s resultsof operations.
(5) Project Partners
In the oil and gas development business, as previously
mentioned, several companies often engage in joint business for the purpose of dispersion of risk and financial
burden. In such cases, the partners generally enter into a
joint operating agreement among themselves to decideon the decision-making procedure for execution of thejoint business, or to decide on an operator that conducts
business on their behalf. A company that is a partner in
one property in which the Group is engaged in joint business may become a competitor in the acquisition of otherblocks and acreages, even though the relationship withthe partner may be good.
In undertaking the joint business, participants in principle bear a financial burden in proportion to their interest
share. Any inability by a joint business partner to fulfill thisfinancial burden may adversely affect the project.
(6) Disaster and Accident Risks
Oil and gas development entails the risk that operational
accidents and disasters may occur in the process of exploration, development, production and transportation.
Should such an accident, disaster or other such incident
occur, there is the risk that costs will be incurred, excluding compensation covered by insurance, due to facility
damage, as well as the risk of a major accident involving
loss of life. In addition, a cost burden for recovery or
opportunity loss from the interruption of operations could
occur. For the domestic natural gas business, the Company has continued to procure natural gas regasified fromimported LNG since January 2010 to supplement its traditional supplies of natural gas produced in Japan. An inability to procure natural gas regasified from imported LNG
due to an accident, disaster or incident at city gas companies that supply the source of purchases may interferewith the Company’s ability to supply to its customers. This
could in turn have an adverse affect on the Company’s
domestic natural gas business.
With regard to environmental problems, there is a possibility of soil contamination, air pollution, and freshwaterand seawater pollution. The Group has established a“Health, Safety and Environment Policy,” and as a matterof course abides by the environmental laws, regulations,and standards of the countries in which we operate andgive due consideration to the environment in the conductof business, based on our independent guidelines. Nevertheless, in the event of an operating accident or disasterthat for some reason exerts an impact on the environment, a response or necessary cost burden for recovery or
loss from the interruption of operations could occur. Furthermore, in the event of changes to or the strengtheningof the environmental laws, regulations, and standards(including support measures for the promotion of new,alternative and other energies) of the countries in which
we operate, it may be necessary for the Group to devise
additional measures, and an associated cost burden could
occur.
Although the Group maintains accident insurance in thenatural conduct of its operations, should such an accident
or disaster be attributable to willful misconduct or negli-

INPEX CORPORATION

gence on the part of the Group, the occurrence of a costburden could have an adverse affect on financial results.
Also, such accident or trouble would result in receiving
administrative punishment or result in damage to the85Group’s credibility and reputation as an oil and gas development company, and could therefore have an adverse
affect on future business activities.

2. Effects of Fluctuations in Crude Oil Prices, Natural Gas Prices, Foreign
Exchange and Interest Rates on Financial Results(1) Effects of Fluctuations in Crude Oil Prices andNatural Gas Prices on Financial Results
Crude oil prices and a large percentage of natural gas
prices in overseas businesses are determined by international market conditions. In addition, those prices fluctuate significantly in response to the influence of a variety offactors including global or local supply and demand as
well as trends and conditions in the global economy andfinancial markets. The vast majority of these factors arebeyond the control of the Company. In this regard, INPEX
is not in a position to accurately predict movements infuture crude oil and natural gas prices. The Group’s sales
and profits are subject to the effects of such price fluctuations. Such effects are highly complex and are caused by
the following factors.
① Although a majority of natural gas selling prices inoverseas businesses are linked to crude oil prices, they
are not in direct proportion to crude oil prices.
② Because sales and profits are determined on the basisof crude oil prices and natural gas prices at the timesales are booked, actual crude oil transaction prices
and the average oil price during the accounting period
do not necessarily correspond.
For the domestic natural gas businesses, the Company
has continued to purchase natural gas regasified fromimported LNG as a raw material in addition to natural gas
produced in Japan since January 2010. The price of theCompany’s natural gas sold in Japan is comprised of a
fixed price portion as well as a portion that reflects fluctuations in the price of imported LNG. In addition to thedirect impact of trends in the market prices of LNG andcompeting energy sources on that portion that reflects
fluctuations in the price of imported LNG, contract negotiations held each fiscal year with end purchasers could
have an indirect affect on the fixed price portion.

(2) The Effect of Fluctuations in Exchange Rates on
Financial Results
As most of the Group’s business consists of E&P conducted overseas, associated revenues (sales) and expenditures (costs) are denominated in foreign currencies (primarily in U.S. dollars), and profit and loss is subject to theeffects of the foreign exchange market. In the event ofappreciation in the value of the yen, yen-denominatedsales and profits decrease. Conversely, in the event ofdepreciation in the value of the yen, yen-denominatedsales and profits increase.
On the other hand, when borrowing necessary funds,
the Company borrows in foreign currencies. In the eventof appreciation in the value of the yen, a foreignexchange gain on foreign-currency denominated borrowings is recorded as a result of fiscal year-end conversion; inthe event of depreciation in the value of the yen, a foreignexchange loss is incurred. For this reason, the exchange
risk associated with the above business is diminished andthe impact of fluctuations in exchange rates on profit andloss tends to be mitigated. Moreover, while the Company
is taking measures to reduce a portion of the risks associated with movements in foreign currency exchange rates
these measures by no means cover all possible risks. As aresult, the impact of fluctuations in foreign currency
exchange rates cannot be completely eliminated.
(3) The Effect of Fluctuations in Interest Rates on
Financial Results
The Group raises some of the funds necessary for exploration and development operations through borrowing.
Much of these borrowings are with variable-rates, longterm borrowings based on the U.S. dollar six months
LIBOR rate. Accordingly, the Company’s profits are subject
to the influence of fluctuations in U.S. dollar interest rates.

3. Overseas Business Activities and Country Risk
The Group engages in a large number of oil and gas
development projects overseas. Because the Group’s business activities, including the acquisition of blocks andacreages, are conducted on the basis of contracts with thegovernments of oil-producing countries and other entities,
steps taken by oil-producing countries to further tighten

controls applicable to home country natural resources,changes in the political, economic, and social circumstances in such oil-producing countries or neighboring
countries (including government involvement, stage of
economic development, economic growth rate, capital
reinvestment, resource allocation, government control of

86 INPEX CORPORATION

foreign exchange or foreign remittances, and the balanceof international payments), the application of OPEC production ceilings in OPEC member countries and changes
in the legal system of those countries (including the establishment or abolition of laws or regulations and changes
in their interpretation or enforcement) could have a significant impact on the Group’s business or results unless theimpact is compensated by insurance.
Additionally, against the background of rising develop-

ment costs and other changes in the business environment, the progress of oil and gas projects, and the needto address environmental issues, the governments of oilproducing countries may seek to renegotiate the fiscal
conditions including conditions of existing oil contracts
related to blocks and acreages. In the event that the fiscal
conditions of contracts were to be renegotiated, this
could have an adverse effect on the Group’s businessperformance.

4. Dependence on Specific Geographical Areas or Properties(1) Production Volume
The Group engages in stable production of crude oil andnatural gas in the Offshore Mahakam Block (Indonesia),
the ADMA Block (United Arab Emirates), the Minami
Nagaoka Gas Field (Japan) and so on. Through a processof business integration, the Group had established a wideranging, diversified yet balanced portfolio that encompassed the Asia-Oceania regions (particularly Japan, Indonesia, and Australia), the Middle East, the Caspian Sea
area, Central and South America and Africa. As of fiscal
2009, however, the Asia and Oceania regions including
Japan, the Group’s core geographical business area,
accounted for about 55% of the Group’s production volume, and the Middle East accounted for about 30% making up the vast majority of the Group’s operations. Looking ahead, the Group will endeavor to further enhance
the balanced of its asset portfolio on a geographic andregional basis.
However, the Group relies heavily on specific geographical areas and properties for its production volume, andthe occurrence in these properties of an operational problem or difficulty could have an adverse affect on theGroup’s operational results.
(2) Principal Business Areas and Contract Expiration
Dates
Expiration dates are customarily stipulated in the agreements related to blocks and acreages, which are prerequisites for the Group’s overseas business activities. Although
March 30, 1997 was the initial contract expiration date in
the production sharing agreement for the Offshore
Mahakam Block of Indonesia, the Group’s principal geographical business area, an extension was approved in
1991, and the current expiration date is December 31,
2017. On the basis of the concession agreement for the
ADMA Block, the concession expiration date is March 8,
2018. (However, the expiration date for the Upper Zakum
Oil Field has been extended to March 8, 2026.) Although
the Group plans to make efforts together with partners tofurther extend these agreements, inability to re-extend theagreements or unfavorable contract terms and conditions

at the time of re-extension could have an adverse effecton the Group’s results. Even should the agreements be reextended, we anticipate that remaining recoverable
reserves may decrease at the time of re-extension.
Although the Group is striving to acquire interests thatcan substitute these properties, failure to acquire properties to fully substitute for these properties could have an
adverse affect on the Group’s results.
In addition, in the event that the period for explorationin oil and gas fields currently under exploration is fixed bycontracts, and in the case of fields where oil and/or gas
reserves are found that are deemed to be commercialized,
and the Company is unable to decide on the transition to
the development stage by the expiration of the current
contract, efforts will be made through negotiations withthe government of the oil- or gas-producing country inquestion to have the periods extended. However, there
remains the possibility that such negotiations may not be
successfully concluded, in which event the Company
would be forced to withdraw from operations in the oil orgas field concerned. Also, as a rule, when there has beena major breach of contract on the part of one party, it iscustomary for the other party to have the right to cancel
the agreement before the expiration date. The agreements for properties in these principal geographical business areas contain similar provisions. The Group has neverexperienced early cancellation of an agreement due tobreach of contract, and we do not anticipate such an
occurrence in the future. Nevertheless, a major breach ofcontract on the part of a party to an agreement could
result in cancellation of an agreement before the expiration date. And in the overseas gas development and production activities, in many cases we are selling and supplying gas based on long-term sales and supply contracts inwhich expiration dates are stipulated. We plan to makeefforts with partners to extend or re-extend the expiration
date. Nevertheless, inability to extend the contracts, or theoccurrence of cases in which extension is made but sales
and supply volumes are reduced, could have an adverse
effect on the Group’s business or results.

INPEX CORPORATION87

5. Production Sharing Agreements(1) Details of Production Sharing Agreements
The Group has entered into production sharing agreements with countries including Indonesia and Caspian Sea
area. In the case of Indonesia, where the Group has, inmany cases, entered into production sharing agreementswith Pertamina, a company that holds mining rights, theGroup has acquired rights to explore and develop oil andgas in those properties. Owing to the enactment of a newlaw that went into effect on November 23, 2001, Pertamina’s exclusive ownership of blocks was rescinded, andit was decided that agreements would be concluded withBPMIGAS, which is an enforcement body that supervises
and regulates oil and gas upstream operations and is agovernment organization directly under the control of thepresident of Indonesia. We are engaged in procedures toconvert existing agreements so as to make BPMIGAS the
Indonesian party to the agreements.
Production sharing agreements are agreements bywhich one or several oil and gas development companies
serve as contractors that undertake at their own expense
exploration and development work on behalf of the governments of oil-producing countries or national oil companies and receive production from the projects as cost
recovery and compensation. That is to say, when exploration and development work results in the production of
oil or gas, the contractors recover the exploration anddevelopment costs they incurred by means of a share in
the production. The remaining production (crude oil andgas) is shared among the oil-producing country or
national oil company and the contractors according to
fixed allocation ratios. (The contactors’ share of production after cost recovery is called “profit oil and gas.” In
the case of gas in Indonesia, as sales are conducted byIndonesia, the contractors receive cost recovery and profit

gas in the form of cash.) On the other hand, in cases
when exploration fails and expected production is notrealized, the contractors are not to recover their invested
funds.
(2) Accounting Treatment of Production Sharing
Agreements
When a company in the Group owns participating interests under production sharing agreements, as mentioned
above, in the role of contractor it invests technology andfunds in the exploration and development of the property,
recovers the invested costs from the production produced,
and receives a share of the remaining production after
recovery of invested costs as compensation.
Costs invested on the basis of production sharing
agreements are recorded on the balance sheet as assets
for which future recovery is anticipated under the balance
sheet item “Recoverable accounts under production sharing.” After the start of production, recovered costs on thebasis of those agreements are deducted from this balance
sheet item.
As production received under production sharing agreements is divided into the cost recovery portion and thecompensation portion, the method of calculating cost of
sales is also distinctive. That is to say, the full amount of
production received is temporarily charged to cost of sales
as the cost of received production, and subsequently theamount of the compensation portion is calculated andthis amount is booked as an adjustment item to cost of
sales (“Free of charge production allocated”). Consequently, only the cost recovery portion of production after
deduction of the compensation portion is booked as costof sales.

6. Azadegan Oil Field Development Project(1) Overview of the Azadegan Oil Field Development
Project
On February 18, 2004, the Company signed a service contract with the National Iranian Oil Company and its subsidiary Naftiran Intertrade Co. Ltd. (NICO) for the appraisaland development operations of the Azadegan Oil Field in
Iran. The contract went into effect on March 14, 2004.
The Azadegan Oil Field, located about 80 kilometers
south of Ahvaz, the capital of Khuzestan Province in Iran,was discovered in 1999.
The Company’s current participating interest in the
project is 10%. At this time, we are holding talks with thegovernment of Iran regarding the future development of
this project. In the event that the two sides fail to reachan agreement on the development, thereby raising thepossibility of a basic change in the way project development is conducted, potential exists for the project not toproceed as planned and for difficulties to arise withrespect to the recovery of investment.
(2) Influence of UN Security Council Resolutions withregard to sanctions against Iran
The United Nations Security Council in December 2006
passed a resolution imposing sanctions against Iran,
including actions to personnel, funds, or materiels to Iranmainly related to its nuclear weapon development program. In March 2007 and again in March 2008 the Council passed resolutions expanding the scope of these sanc-88 INPEX CORPORATION

tions, and in September 2008 the Council once again
passed a resolution seeking observation of the previous
resolutions by the United Nations Security Council andresponse to requests issued by the Board of Directors of
the International Atomic Energy Agency (IAEA). Furthermore, a resolution was passed imposing new sanctions inJune 2010.
(3) Influence of Moves to strengthen sanctions
against Iran originating in the U.S. Iran Sanctions
Act of 1996
The Iran Sanctions Act 1996 (formerly The Iran and Libya
Sanctions Act 1996) is a law of the United States enacted
for the purpose of deterring the acquisition of weapons ofmass destruction and support for international terrorismon the part of Iran. The law stipulates that three or moreof the nine sanctions below be applied to any person,
without distinction between U.S. and non-U.S. entities,
who has made an investment of U.S.$20 million or morein any twelve-month period and who the president of theUnited States determines has directly and significantly
contributed to the development of oil resources in Iran.
(Sanctions six to eight were added following the signing
into law on July 1, 2010 of certain revisions to the Act.
Prior to these revisions the law stipulated that two or
more of the six sanctions, sanction one to five and nine,
below be applied.)①The prohibition of export assistance to any sanctioned
person from the Export-Import Bank of the UnitedStates②The prohibition of the issuance of export licenses to any
sanctioned person by the U.S. government③The prohibition of loans of U.S.$10 million or more in
any twelve month period to any sanctioned person by
U.S. financial institutions④If a sanctioned person is a financial institution, the prohibition of designation as a primary dealer of U.S. government bonds⑤The prohibition of procurement of goods or services
from any sanctioned person on the part of the U.S.
government⑥Prohibitions in transactions in foreign exchange by theentity⑦P rohibition on any credit or payments between theentity and any U.S. financial institution⑧Prohibition of the sanctioned entity from acquiring,holding, or trading any U.S.-based property⑨The restrictions of import from any sanctioned personon the basis of the International Emergency Economic
Powers Act of the United States
Sanctions under this law have never been applied to
any non-U.S. oil company that has investments in oil
resource development projects in Iran. Also, althoughextraterritorial applications of the laws of one country onother countries are not internationally recognized, it is notpossible at this time to predict whether in the future theU.S. government will apply the act to the business activities of the Azadegan Oil Field Development Project. In theevent that the U.S. government decides to apply sanctions
with respect to the project’s business activities under theAct, this could have an indirect adverse impact on the
Company’s involvement in the Azadegan Oil Field Development Project or other projects.
Additionally, sanctions to the aforementioned imposedat the federal level have been enacted by the state legislatures in the U.S. The legislatures of some states, such as
Florida and Louisiana, have established state laws to promote or mandate curbs on possession and divestment of
the shares of companies doing business in Iran by stateowned public pension funds and similar entities.

7. Relationship with the Japanese Government(1) The Company’s Relationship with the Japanese
Government
Although the government of Japan (the Minister of Economy, Trade and Industry) holds 19.37% of the Company’scommon shares issued and a special-class share as ofAugust 11, 2010, the Company autonomously exercises
business judgment as a private corporation. There is no
relationship of control, such as through the dispatch of
officers or other means between the Company and theJapanese government. Moreover, we believe that no such
relationship will develop in the future. Furthermore, there
is no concurrent posting or secondment to the Company
of officers or employees from the Japanese government.
(2) Ownership and Sale of the Company’s Shares by
the Japanese Government (the Minister of Economy, Trade and Industry)

The Japanese government (the Minister of Economy, Tradeand Industry) holds 19.37% of the shares of the common
stock issued by the Company. For this reason, it is possiblethat in the future the Minister of Economy, Trade andIndustry, in accordance with the purport of the after-mentioned Report, may sell off the Company’s shares in Japanor overseas. This could have an impact on the market
price of the Company’s shares.
The Minister of Economy, Trade and Industry holds one
share of the Company’s special-class share. The Ministerof Economy, Trade and Industry, as the holder of the special-class share, has veto rights over certain resolutions of
the Company’s general shareholders’ meetings and meetings of the Board of Directors. For details on the specialclass share, please refer to section 9 “Special-Class Share”
below.

INPEX CORPORATION89

8. Treatment of shares of the Group’ project company owned by Japanese
government and JOGMEC(1) Treatment of shares of the Group’ project company owned by Japan National Oil Corporation(JNOC)
With regard to the liquidation and disposition of the oiland gas upstream assets owned by JNOC, which was dissolved on April 1, 2005, the Policies Regarding the Disposal of Oil and Gas Development- Related Assets Held byJapan National Oil Corporation (hereinafter the “Report”)
was announced on March 18, 2003 by the Japan National
Oil Corporation Asset Evaluation and Liquidation Deliberation Subcommittee of the Advisory Committee on Energy
and Natural Resources, an advisory body of the Ministry of
Economy, Trade and Industry.
In the Report, INPEX CORPORATION (prior to the integration with Teikoku Oil; reorganized on October 1, 2008)
was identified as a company that should comprise part ofa core company, and is expected to play a role in efficient
realization of a stable supply of energy for Japan throughthe involvement by a national flagship company. In
response to the Report, the Company has sought to promote efficient realization of a stable supply of energy forJapan while taking advantage of synergy with the effortsof active resource diplomacy on the part of the Japanese
government, and has aimed to maximize shareholder
value by engaging in highly transparent and efficient business operations.
As a result, with regard to the integration by means oftransfer of shares held by JNOC proposed in the Report,
INPEX CORPORATION and JNOC concluded the Basic
Agreement Concerning the Integration of Assets Held by
JNOC into INPEX CORPORATION of February 5, 2004
(hereinafter the “Basic Agreement”) and a memorandumof understanding related to Basic Agreement (hereinafter“MOU”). On March 29, 2004, INPEX CORPORATION and
JNOC entered into related contracts including the BasicContract Concerning the Integration of Assets Held by
JNOC into INPEX CORPORATION (hereinafter the “BasicContract”), achieving the agreement on the details including the treatment of the project companies subject to theintegration and shareholding ratios.
In 2004 INPEX CORPORATION accomplished the integration of Japan Oil Development Co., Ltd. (JODCO),INPEX Java Ltd. and INPEX ABK, Ltd. which are three offour companies covered by the Basic Agreement.
Although INPEX Southwest Caspian Sea Ltd. (hereinafter“INPEX Southwest Caspian”) would become a whollyowned subsidiary of INPEX CORPORATION by means of ashare exchange and the procedures were undertaken, theshare exchange contract was invalidated owing to failure
to accomplish the terms and conditions of the shareexchange contract and the planned share exchange wascancelled. Following the dissolution of JNOC on April 1,

2005, the Minister of Economy, Trade and Industry succeeded to the INPEX Southwest Caspian shares held by
JNOC. The Company continues to study the possibility toacquire the shares. However, the future treatment ofthese shares is undecided and acquisition of INPEX Southwest Caspian shares could be unavailable.
The treatment of Sakhalin Oil and Gas Development
Co., Ltd. (hereinafter “SODECO”), INPEX Offshore North
Campos, Ltd., INPEX North Makassar, Ltd. (liquidation
proceedings completed on December 19, 2009), INPEX
Masela, Ltd., and INPEX North Caspian Sea, Ltd. wasagreed between INPEX CORPORATION and JNOC in the
MOU of February 5, 2004. Regarding the treatment ofshares of SODECO, refer to the section “(2) Treatment ofshares of Sakhalin Oil and Gas Development owned by
the Japanese government” below. With regard to thetransfer to INPEX CORPORATION of the shares in theabove project companies other than SODECO, it was
decided that the shares are to be transferred for cash
compensation as soon as prerequisites such as the consent
of the oil-producing country and joint venture partners
and the possibility of appropriate asset evaluations are inplace. However, the transfer of shares held by JNOC in theabove companies has not been decided and the shares in
the above project companies were succeeded to by theJapan Oil Gas and Metals National Corporation (hereinafter “JOGMEC”) on the dissolution of JNOC on April 1,
2005, except shares related to INPEX North Makassar,
Ltd., to which the Minister of Economy, Trade and Industry
succeeded. JOGMEC states in its “medium-term objective” and “medium-term plan” that the shares succeeded
to from JNOC will be disposed of in an appropriate manner, but the timing and manners of the disposal have notbeen decided, and it is possible that the Company will be
unable to acquire the shares.
(2) T reatment of the shares of Sakhalin Oil and Gas
Development owned by the Japanese­government
The Japanese government (the Minister of Economy, Tradeand Industry) owns 50% shares of SODECO. SODECO
was established in 1995 to engage in an oil and gas
exploration and development project located on thenortheast continental shelf off Sakhalin Island. SODECO
owns a 30.0% interest in the Sakhalin-1 Project, of which
ExxonMobil of the Unites States is the operator. This
project started production in October 2005. Furthermore,
there is a plan for additional development operations(Phase 2) for the purpose of the full-scale production ofnatural gas. The Company holds a 5.74% of SODECO
shares issued and outstanding.

90 INPEX CORPORATIONIn the previously mentioned Report, SODECO, alongwith INPEX CORPORATION and JODCO, has been identified as a company that should comprise part of a corecompany in Japan’s oil and gas upstream industry in the
future.
In accordance with the Report, it is assumed that private-sector shareholders, including INPEX CORPORATION,
will acquire shares of SODECO issued and outstanding towhich the Minister of Economy, Trade and Industry succeeded and that were previously held by JNOC (50.0%).
The Company plans to hold a maximum of 33% of the
SODECO shares to become its largest shareholder. In theevent that the consent of SODECO’s joint-venture partners, the relevant Russian government entity, or other parties is necessary for the acquisition of the shares, obtaining the consent is a prerequisite for acquisition. In
addition, it will be necessary to reach agreement on theshareholder composition for SODECO, the share transfer
price, and other matters.
In the event that the additional acquisition of the
SODECO shares is realized, the Group will hold a substantial ownership interest in oil and gas assets in Russia, as
well as in Asia and Oceania, the Middle East, Caspian Sea
area, and other regions, and we expect the acquisition tocontribute to the achievement of a more balanced overseas asset portfolio for the Group.
However, at this time it is undecided whether agreement concerning acquisition of the shares with the Minister of Economy, Trade and Industry will be reached as
anticipated and will be realized. Also, even in the eventthat the acquisition is realized, the conditions and time ofacquisition are undecided and the acquisition by the Company could be unavailable.

9. Special-Class Share(1) Overview of the Special-Class Share① Reason for the Introduction
The Company was established as the holding company
through a stock transfer between INPEX CORPORATION
and Teikoku Oil Co., Ltd. on April 3, 2006. Along with
this, a classified share originally issued by INPEX CORPORATION (prior to the merger) was transferred and at thesame time the Company issued a classified share with thesame effect (hereinafter the “special-class share”) to the
Minister of Economy, Trade and Industry. The classified
share originally issued by INPEX CORPORATION was theminimally required and a highly transparent measure toeliminate the possibility of management control by foreign
capital while not unreasonably impeding the efficiency
and flexibility of management based on the concept in
the Report discussed in the above section 8. INPEX CORPORATION is identified as a company that should comprisepart of a core company for Japan’s oil and gas upstream
industry and is expected to play a role in efficient realization of a stable supply of energy for Japan as a nationalflagship company. On the basis of the concept of theReport, the Company issued the special-class sharebecause it can be considered an effective means of preventing risks such as a speculative hostile takeover.
② Shareholders’ Meeting Resolutions, Dividends, Distribution of Residual Assets, and Redemption
Unless otherwise provided by laws or ordinances, the special-class share does not have any voting rights at theCompany’s general shareholders’ meetings. The holder ofthe special-class share will receive the same amount ofdividends, interim dividends, and distributions of residual
assets as a holder of common stock. The special-classshare will be redeemed by resolution of the Board of
Directors of the Company if the holder of the special-classshare requests redemption or if the special-class share istransferred to a party other than the government of Japanor an independent administrative body that is fully fundedby the government of Japan.
③ Veto Rights in the Articles of Incorporation
The Articles of Incorporation of the Company provide thatan approval resolution of the meeting of the holder of thespecial-class share is necessary in addition to resolutionsof the Company’s general shareholders’ meetings and resolutions of meetings of the Board of Directors for thedecision on certain important matters such as theappointment or removal of Directors, disposition of material assets, changes to the Articles of Incorporation, capital
reduction or company dissolution in connection with thebusiness of the Company. Accordingly, the Minister of
Economy, Trade and Industry, as the holder of the specialclass share, has veto rights over these important matters.
④ Criteria for the Exercise of Veto Rights Provided in
the Guidelines
Guidelines concerning the exercise of the veto rights havebeen established in a Ministry of Economy, Trade andIndustry Notice (No. 220, 2008) (hereinafter the “Notice”).
The guidelines stipulate the exercise of veto rights only inthe following specific cases.
･When resolutions pertaining to appointment or removalof Directors and Integration are not voted down and it isjudged that the probability is high that the Company will
engage in management inconsistent with the role that acore company should perform for efficient realization ofa stable supply of energy to Japan.
･When resolutions pertaining to disposition of material
assets are not voted down and the objects of disposition
are oil and gas exploration or production rights or rights
similar thereto or shares or ownership interest in the
Company’ subsidiary whose principal assets are said
rights and it is judged that the probability is high that theINPEX CORPORATION

Company will engage in management inconsistent withthe role that a core company should perform for efficient
realization of a stable supply of energy to Japan.
･W hen resolutions pertaining to amendments to theCompany’s Articles of Incorporation relating to changes
in the Company’s business objectives, capital reduction,or dissolution are not voted down and it is judged thatthe probability is high that the Company will engage inmanagement inconsistent with the role that a core company should perform for efficient realization of a stablesupply of energy to Japan.
･When resolutions pertaining to amendments to the Articles of Incorporation granting voting rights to any shares
other than the common shares of the Company are notvoted down and could have an effect on the exercise of
the voting rights of the special-class share.
It is provided that the above guidelines shall not be limitedin the event that the Notice is changed in the light ofenergy policy.
(2) Risk in Connection with the Special-Class Share
Although the special-class share was issued as a minimallyrequired measure to eliminate the possibility of management controlled by foreign capital while not unreasonably
impeding the efficiency and flexibility of management,
anticipated risks in connection with the special-class shareinclude the following.
① Possibility of Conflict of Interest between National
Policy and the Company and Its Common Shareholders
It is conceivable that the Minister of Economy, Trade and91

Industry could exercise the veto rights in accordance withthe above guidelines provided in the Notice. As the guidelines have been provided from the standpoint of efficient
realization of a stable supply of energy to Japan, it is possible that the exercise of the veto rights by the Minister of
Economy, Trade and Industry could conflict with the interest of other shareholders who hold the Company’s common shares. Also, it is possible that the above guidelines
could be changed in the light of energy policy.
② Impact of the Exercise of Veto Rights on the Priceof Shares of Common Stock
As mentioned above, as the holder of the special-classshare has the veto rights over certain important matters inconnection with the business of the Company, the actual
exercise of the veto rights over a certain matter could
have an impact on the price of the Company’s shares ofcommon stock.
③ Impact on the Company’s Degree of Freedom in
Business and Business Judgment
As the Minister of Economy, Trade and Industry holds the
special-class share with the previously mentioned vetorights, the Company needs a resolution of the meeting of
the older of the special-class share concerning the above
matters. For this reason, the Company’s degree of freedom in management in those matters could be restrictedby the judgment of the Minister of Economy, Trade andIndustry. Also, attendant on the need for a resolution of
the meeting of the holder of the special-class share concerning the above matters, a certain period of time isrequired for procedures such as the convening and holding of meetings and resolutions and for the processing offormal objections, if necessary.

10. Concurrently Serving Outside Directors
As of June 30, 2010, the Board of Directors of the Company is composed of 16 members, four of whom are outside directors.
The four outside directors have many years of management experience in the Company’s business and are able
to offer objective, professional advice regarding operations. For this reason, they were asked to join the Board of
Directors to contribute to the development of the Company’s business. The four outside directors concurrently serve
as directors or advisors of Japan Petroleum Exploration
Co., Ltd., Mitsubishi Corporation, Mitsui Oil Exploration
Co., Ltd. and JX Holdings, Inc. (“shareholder corporations”), respectively.
At the same time, however, the shareholder corpora-tions are involved in businesses that overlap with those of
the Company or its holding company. The Company
therefore recognizes that it must pay particular attention
to corporate governance to avoid conflicts of interest inconnection with competition and other matters.
To this end, all Company directors, including the outside
directors, are required to sign a written undertaking tocarry out their duties as officers of the Company appropriately and with the highest regard for the importance ofsuch matters as their obligations in connection with noncompetitive practices under the Japanese Companies Act,the proper manner for dealing with conflict of interest,and confidentiality.

92 INPEX CORPORATIONOil and Gas Reserves and Production Volume
1. Oil and Gas Reserves
Proved Reserves
The following tables list the proved reserves of crude oil,proved reserves between March 31, 2009 and March 31,

condensate, LPG and natural gas of our major subsidiaries

2010 are reported in accordance with the Accounting

and equity method affiliates. Disclosure details applicableStandard Codification Topic 932 “Extractive activities —to proved reserves are presented in accordance with the

Oil and Gas.”

rules and regulations stipulated by the U.S. Financial

Our proved reserves as of March 31, 2010 were 980.0

Accounting Standards Board. Movements in proved

million barrels for crude oil, condensate and LPG, 2,970.1

reserves between March 31, 2008 and March 31, 2009

billion cubic feet for natural gas and 1,475.0 million boe

are reported in accordance with the U.S. Statement of(Barrels of Oil Equivalent) in total.

Financial Accounting Standards No. 69. Movements in
Asia &
OceaniaJapan

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

20

786

—

—

0

—

—

(0)

(14)

Eurasia(Europe & NIS)

Gas
(Bcf)

Middle East &AfricaAmericas

Crude oil Gas Crude oil Gas Crude oil(MMbbls) (Bcf) (MMbbls) (Bcf) (MMbbls)

Interest in
Reserves Held by
Equity-Method
Affiliates

Subtotal

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

259

Gas
(Bcf)

Total

Crude oil(MMbbls)

Gas
(Bcf)

Proved developed
and undeveloped
reserves
As of March 31, 2008
Extensions anddiscoveries
Acquisitions andsales
Revisions ofprevious estimatesInterim production

112 2,014

207

—

489

—

1

106

829 2,905

440 1,088 3,346

—

—

—

—

—

—

—

—

—

(2)

—

(1)

—

—

—

(12)

—

—

—

6

5

(6)

5

—

—

(6)

5

28

217

25

—

(3)

—

(1)

78

49

281

(1)

65

48

346

(81) (397)

(1)

(60)

(16) (307)

(9)

—

(30)

—

(1)

(30)

(57) (397)

(23)

—

18

713

124 1,923

211

—

457

—

5

159

815 2,795

233

505 1,048 3,300

As of March 31, 2009
Extensions anddiscoveries
Acquisitions andsales
Revisions ofprevious estimatesInterim production

18

713

124 1,923

211

—

457

—

5

159

—

—

5

—

—

—

—

—

—

—

5

—

—

—

—

—

—

—

—

—

—

—

—

—

0

0

(1)

45

6

—

3

—

1

62

9

107

(1)

(57)

(17) (319)

(10)

—

(27)

—

(2)

(32)

(57) (408)

As of March 31, 2010

16

656

111 1,649

207

—

433

—

4

190

771 2,495

—

—

2

505

—

—

226

—

6

1

233

505

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(0)

(30)

—

—

(2)

—

(1)

(0)

(2)

(30)

—

—

(0)

—

—

—

(21)

—

(1)

(0)

(22)

(0)

—

—

1

475

—

—

203

—

4

0

209

475

16

656

112 2,124

207

—

636

—

8

190

As of March 31, 2009
Consolidated
subsidiaries

815 2,795

Equity method
affiliates
As of March 31, 2009
Extensions anddiscoveries
Acquisitions andsales
Revisions ofprevious estimatesInterim production
As of March 31, 2010
Proved developed
and undeveloped
reserves
As of March 31, 2010

980 2,970

INPEX CORPORATION

Proved developed
reserves
Consolidated
subsidiaries
As of March 31, 2010

93

16

656

79 1,212

36

—

433

—

4

190

568 2,058

As of March 31, 2010

—

—

1

314

—

—

203

—

3

0

207

314

Proved undeveloped
reserves
Consolidated
subsidiaries
As of March 31, 2010

—

—

31

437

172

—

—

—

0

—

203

437

—

—

0

161

—

—

—

—

1

0

2

161

Equity method
affiliates

Equity method
affiliates
As of March 31, 2010

Note 1.	As of March 31, 2010, INPEX held proved reserves in Indonesia of approximately 75.0 million barrels for crude oil andaround 1,973.0 billion cubic feet for natural gas for a total of about 404.0 million boe (Barrels of Oil Equivalent).
2.	Reserves of the following blocks and fields include minority interests.
		 Asia & Oceania: Offshore Northwest Java (16.5%), Offshore Southeast Sumatra (16.5%)
		 Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)
		 Middle East & Africa: Abu Al Bukhoosh (5%), West Bakr (47.3%)
		 Americas: Copa Macoya (30%)
3.	MMbbls: Millions of barrels
4.	Bcf: Billions of cubic feet
5.	Crude oil includes condensate and LPG

Standardized Measure of Discounted Future Net Cash Flows and Changes Relating to Proved Oil and
Gas Reserves
Disclosure details for the standardized measure ofproved reserves to determine future cash inflows. Future

discounted future net cash flows relating to proved

development costs are estimated based upon constantreserves and movements during the fiscal year underprice assumptions and assume the continuation of existing

review are presented in accordance with the rules andeconomic, operating, and regulatory conditions. Future

regulations stipulated by the U.S. Financial Accounting

income taxes are calculated by applying the period-end

Standards Board. Movements between March 31, 2008

statutory rate to estimated future pretax cash flows afterand March 31, 2009 are reported in accordance with theprovision for taxes on the cost of oil and natural gas

U.S. Statement of Financial Accounting Standards No. 69.

properties based upon existing laws and regulations. The

Movements between March 31, 2009 and March 31,

discount is computed by applying a 10% discount factor

2010 are reported in accordance with the Accounting

to the estimated future net cash flows.

Standard Codification Topic 932 “Extractive activities —Oil and Gas.”

We believe that this information does not represent thefair market value of the oil and natural gas reserves or the

In calculating the standardized measure of discounted

present value of estimated cash flows since no economic

future net cash flows, period-end oil and gas prices andvalue is attributed to potential reserves, the use of a 10%

costs are applied as of March 31, 2009, and the period

discount rate is arbitrary, and prices change constantly.

average of oil and gas prices at the first day of each

We use the exchange rates of ¥98.26 and ¥93.04 tomonth as well as period-end costs are applied as of March

US$1.00 as of March 31, 2009 and 2010, respectively.

31, 2010, to the estimated annual future production from

94 INPEX CORPORATION

Millions of yen

As of March 31, 2009

Total

Asia &
OceaniaJapan

Eurasia(Europe & NIS)

Middle East &AfricaAmericas

Consolidated subsidiaries
Future cash inflows

5,089,166

666,124

1,547,449

788,338

2,034,401

52,854

Future production and development costs(2,179,952)(141,203)(706,891)(425,575)(876,844)(29,439)

Future income tax expenses(1,704,618)(169,144)(341,036)(89,052)(1,098,893)(6,493)Future net cash flows

1,204,596

355,777

499,522273,71158,664

16,922

10% annual discount for estimated timing of
cash flows(617,598)(178,323)(172,777)(214,198)(48,704)(3,596)586,998

177,454

326,745

59,513

9,960

13,32626,275—

12,888—13,476(89)

Standardized measure of discounted future net
cash flows
Share of equity method investees’ standardized
measure of discounted future net cash flows

Notes: 1. Reserves of the following blocks and fields include minority interests.
Asia & Oceania: Offshore Northwest Java (16.5%), Offshore Southeast Sumatra (16.5%)
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)
Middle East & Africa: Abu Al Bukhoosh (5%), West Bakr (47.3%)
Americas: Copa Macoya (30%)
Millions of yen

As of March 31, 2010

Total

Asia &
OceaniaJapan

Eurasia(Europe & NIS)

Middle East &AfricaAmericas

Consolidated subsidiaries
Future cash inflows

6,194,451

495,648

1,707,919

1,150,581

2,781,641

58,663Future production and development costs(2,159,840)(128,497)(648,877)(485,115)(870,046)(27,306)

Future income tax expenses(2,548,220)(117,201)(449,341)(149,413) (1,820,429)(11,837)

Future net cash flows

1,486,391

249,950

609,701

516,053

91,166

19,52010% annual discount for estimated timing of
cash flows(709,314)(121,312)(189,090)(337,759)(56,669)(4,483)777,077

128,638

420,611

178,294

34,497

15,037

1,439,084—

83,504—

1,329,955

25,625

Standardized measure of discounted future net
cash flows
Eequity method affiliates
Future cash inflows
Future production and development costs(509,279)—(29,380)—(464,240)(15,659)

Future income tax expenses(856,117)—(19,192)—(835,636)(1,289)Future net cash flows

73,688—34,932—30,0798,677

10% annual discount for estimated timing of
cash flows(37,025)—(18,384)—(16,900)(1,740)Share of equity method investees’ standardized
measure of discounted future net cash flows

36,663—

16,548—13,1796,937

Total consolidated and equity-method affiliates
in standardized measure of discounted future
net cash flows

813,740

128,638

437,159

178,294

47,676

21,974

Notes: 1. Reserves of the following blocks and fields include minority interests.
Asia & Oceania: Offshore Northwest Java (16.5%), Offshore Southeast Sumatra (16.5%)
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)
Middle East & Africa: Abu Al Bukhoosh (5%), West Bakr (47.3%)
Americas: Copa Macoya (30%)

INPEX CORPORATION

95

Millions of yen
Total

Japan

Asia &
Oceania

613,273

177,454(477,438)

Share of equity
method investees’
standardized measure

Eurasia(Europe & NIS)

Middle East &Africa326,745

59,513

9,960(37,617) (201,573)(27,132)(98,361)(6,986) (105,769)

Americas

Consolidated subsidiaries
Standardized measure, beginning of
period As of April 1, 2009

13,32626,275

Changes resulting from:
Sales and transfers of oil and produced,
net of production costs

Net change in prices, and production costs 1,257,233(70,134)

331,816

185,126

460,172

8,309

341,944

Development cost incurred

127,4213,114

86,032

13,56813,132465

11,109Changes in estimated development costs(61,607)(3,552)(11,651)(47,379)

1,322

(537)

189

Revisions of previous quantity estimates

71,242(1,055)36,272

18,02826,364

3,395(11,761)

Accretion of discount187,995

24,93852,928

10,17756,6801,506

41,765

Net change in income taxes(753,861)

20,376(95,799)(27,639) (431,991)

465

—

465

—

—

—

—

(150,983)

15,114(104,624)(5,968)(2,781)(128)(52,595)

813,740

128,638

420,611

178,294

34,497

15,03736,663Extentions, discoveries and improved
recoveries
OtherStandardized measure, end of period
As of March 31, 2010

(4,313) (214,494)

Notes: 1. Reserves of the following blocks and fields include minority interests.
Asia & Oceania: Offshore Northwest Java (16.5%), Offshore Southeast Sumatra (16.5%)
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)
Middle East & Africa: Abu Al Bukhoosh (5%), West Bakr (47.3%)
Americas: Copa Macoya (30%)

Probable Reserves and Possible Reserves
The following tables list the probable and possible reserves

lion boe (Barrels of Oil Equivalent) in total. In addition, theof crude oil, condensate, LPG and natural gas of our majorGroup’s possible reserves as of March 31, 2010 were 313.8

subsidiaries and equity method affiliates.

million barrels for crude oil, condensate and LPG, 2,316.2

Our probable reserves as of March 31, 2010 were1,475.9 million barrels for crude oil, condensate and LPG,

billion cubic feet for natural gas and 699.8 million boe(Barrels of Oil Equivalent) in total.

8,716.3 billion cubic feet for natural gas and 2,928.7 milAs of March 31, 2010

Japan

Asia &
Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericas

SubtotalInterest in Reserves Heldby Equity-Method
Affiliates

Total

Probable reserves
Crude oil, condensate and
LPG (MMbbls)
Natural gas (Bcf)

3

645

598

121

68

1,434

42

1,476

133

8,377

—

—

104

8,614

102

8,716

Note 1: Bitumen reserve volumes are included in the net probable reserves of crude oil, condensate and LPG for the Americas.

As of March 31, 2010

Japan

Asia &
Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericas

SubtotalInterest in Reserves Heldby Equity-Method
Affiliates

Total

Possible reserves
Crude oil, condensate and
LPG (MMbbls)
Natural gas (Bcf)
Notes: 1. MMbbls: Millions of barrels
2. Bcf: Billions of cubic feet

4

183

110

10

0

308

6

314

169

2,126

—

—

18

2,314

2

2,316

96 INPEX CORPORATION

2. Oil and Gas Production
The following tables list average daily productions for

Our productions for the year ended March 31, 2010

crude oil, natural gas, and the total of crude oil and natu-

were 218 thousand barrels per day for crude oil, conden-

ral gas by region. The proportional interests in productionsate and LPG, 1,123 million cubic feet per day for natural

by our equity-method affiliates are not broken down by

gas and 405 thousand boe (Barrels of Oil Equivalent) per

geographical regions.

day in total.

For the years ended March 31

2007

2008

2009

2010

3.9

4.9

4.9

4.5

Crude oil, condensate and LPG (Thousands of barrels per day):Japan
Asia & Oceania

40.4

36.5

44.7

47.7

Eurasia (Europe & NIS)

47.9

54.5

24.8

26.9

Middle East & Africa

82.3

80.7

81.0

73.3

Americas

0.1

0.4

2.7

5.5

   Subtotal

174.7

177.0

158.1

158.0

67.8

64.6

65.1

60.4

   Total

242.5

241.5

223.2

218.3

Annual production (Millions of barrels)

88.5

88.4

81.5

79.7

Proportional interest in production by equitymethod affiliates

Natural gas (Millions of cubic feet per day):
Japan

127.8

161.5

164.9

155.1

Asia & Oceania

865.8

845.7

842.8

880.5

Eurasia (Europe & NIS)

—

—

—

—

Middle East & Africa

—

—

—

—

Americas

57.5

81.6

82.3

86.9

   Subtotal

1,051.1

1,088.8

1,090.0

1,122.6

—

—

—

—

1,051.1

1,088.8

1,090.0

1,122.6

383.6

398.5

397.8

409.7

Proportional interest in production by equitymethod affiliates   Total
Annual production (Billions of cubic feet)
Crude oil and natural gas (Thousands of barrels of oil equivalent per day):
Japan

25.2

31.9

32.4

30.4

Asia & Oceania

184.7

177.4

185.1

194.5

Eurasia (Europe & NIS)

47.9

54.5

24.8

26.9

Middle East & Africa

82.3

80.7

81.0

73.3

Americas

9.7

14.0

16.4

20.0

   Subtotal

349.8

358.4

339.7

345.1

67.8

64.6

65.1

60.4

   Total

417.7

423.0

404.9

405.4

Annual production (Millions of barrels of oil equivalent)

152.5

154.8

147.8

148.0

Proportional interest in production by equitymethod affiliates

INPEX CORPORATION

97

Subsidiaries and Affiliates
As of March 31, 2010

Consolidated Subsidiaries
Issued Capital*(Millions of yen)

Voting Rights
Held by Us (%)

INPEX Natuna, Ltd.

5,000

100.00%Exploration, development, production and sales of oil and natural gas inSouth Natuna Sea Block B, Indonesia

INPEX Sahul, Ltd.

4,600

100.00%Exploration, development, production and sales of oil and natural gas in
JPDA03-12 Block and Bayu-Undan gas-condensate field in the timor Sea
JPDA

INPEX Alpha, Ltd.

8,014

100.00%Exploration, development, production and sales of oil and natural gas in
WA-35-L Block and others, Australia

INPEX Jawa, Ltd.

4,804

83.50%

Exploration, development, production and sales of oil and natural gas inOff-shore Northwest Java Block, Indonesia

INPEX Sumatra, Ltd.

400

100.00%Exploration, development, production and sales of oil and natural gas inOff-shore Southeast Sumatra Block, Indonesia

INPEX Tengah, Ltd.

1,020

100.00%Exploration, development, production and sales of oil and natural gas intengah Block in Offshore East Kalimantan, Indonesia

INPEX Browse, Ltd.

53,690100.00%Exploration and development of oil and natural gas in WA-37-R Block andothers, Australia

INPEX Masela, Ltd.

33,34851.93%

Exploration and development of oil and natural gas in Masela Block in the
Arafura Sea, Indonesia

INPEX Offshore Northeast Mahakam,
Ltd.

3,875

100.00%Exploration of oil and natural gas in East Kalimantan Block in Offshore East
Kalimantan, Indonesia

INPEX Timor Sea, Ltd.

5,597

100.00%Exploration and development of oil and natural gas in JPDA06-105 Block inthe timor Sea JPDA

INPEX Southwest Caspian Sea, Ltd.

53,59451.00%

Exploration, development, production and sales of oil in ACG Oil Fields,
Azerbaijan

INPEX North Caspian Sea, Ltd.

50,58045.00%

Exploration and development of oil in Offshore North Caspian Sea Block,Kazakhstan

Japan Oil Development Co., Ltd.

18,800100.00%Exploration, development, production and sales of oil in ADMA Block, United
Arab Emirates

INPEX ABK, Ltd.

2,500

95.00%

Exploration, development, production and sales of oil in Abu Al Bukhoosh
Block, United Arab Emirates

10100.00%Exploration, development, production and sales of oil in Offshore D. R.
Congo Block

10,72252.70%

Exploration, development, production and sales of oil in the West Bakr
Block, Egypt

10,075100.00%Appraisal and development of Azadegan Oil Field, IranCompany Name

Teikoku Oil (D.R. Congo) Co., Ltd.
The Egyptian Petroleum
Development Co., Ltd.
Azadegan Petroleum Development,
Ltd.
Teikoku Oil Algeria Co., Ltd.

Main Business

708

100.00%Exploration and development of oil in the eastern onshore, Algeria

4,680

100.00%Exploration of oil and natural gas in the 42-2&4 and 113-3&4 Blocks, Libya

63,855(Thousands of
U.S. dollars)

100.00%Exploration of oil in the 81-2 and 82-3 Blocks, Libya

100

100.00%

Reactivation of oil and gas fields, exploration, development, production
and sales of oil in the Guarico Oriental area, Venezuela

Teikoku Oil Ecuador

35(Thousands of
U.S. dollars)

100.00%Exploration, development, production and sales of oil in the Block 18,
EcuadorTeikoku Oil (North America) Co., Ltd.

16,593(Thousands of
U.S. dollars)

100.00%Exploration, development, production and sales of oil in the United Statesof America

INPEX Canada, Ltd.

16,660100.00%Exploration and development of oil and natural gas including oil sands in
CanadaTEIKOKU OIL (SURINAME) CO., LTD.

1,357

54.79%

Exploration of oil in the Northern offshore, Suriname

INPEX Libya, Ltd.
Teikoku Oil Libya UK LTD

Teikoku Oil (Venezuela) Co., Ltd.

98 INPEX CORPORATION

Issued Capital*(Millions of yen)

Voting Rights
Held by Us (%)

100

100.00%Natural gas transportation, pipeline operation, maintenance andmanagement

INPEX DLNGPL Pty Ltd

86,135(Thousands of
AUS dollars)

100.00%Investment in Darwin LNG Pty Ltd., that constructs and operates the undersea pipeline and LNG plant connecting Bayu Undan Gas/Condensate Field
and Darwin (Australia)

INPEX BTC Pipeline, Ltd.

63,800(Thousands of
U.S. dollars)

100.00%Investment in pipeline construction and management business whichconnects Baku (Azerbaijan), tbilisi (Georgia) and Ceyhan (turkey)

Teiseki Topping Plant Co., Ltd.

70

100.00%Refining domestic crude oil, storage and shipment of petroleum products

INPEX Trading, Ltd.

50

100.00%

Sales, agency, and brokerage of crude oil and market research and sales
plan-ning in connection with oil and natural gas sales

Teiseki Propane Co., Ltd.

80

100.00%

Sales of LPG and petroleum products

Saitama Gas Co., Ltd.

60

62.50%

City gas sales

Teiseki Transport System Co., Ltd.

10100.00%Transport by motor trucks and sales of petrochemical products

Issued Capital*(Millions of yen)

Voting Rights
Held by Us (%)

Company Name

Teiseki Pipeline Co., Ltd.

Main Business

Other 21 subsidiaries

Equity Method Affiliates
Company Name

Main Business

MI Berau B.V.

656,279(Thousands ofeuros)

44.00%

Exploration, development, production and sales of natural gas in Berau
Block and tanggu LNG Project, Indonesia

JJI S&N B.V.

36,883(Thousands ofeuros)

25.00%Development and production of oil in Soroosh and Nowrooz Fields, Iran

Angola Japan Oil Co., Ltd.

8,000

19.60%Development and production of oil in Offshore 3/05 Block, Angola

Japan Ohanet Oil & Gas Co., Ltd.

6,400

15.00%Development and production of natural gas in the southeastern onshore,
Algeria

INPEX Offshore North Campos, Ltd.

6,852

37.50%

Financing for oil and natural gas exploration and development projects in
Frade Block in Offshore North Campos, Brazil

Other 7 equity method affiliates

Subsidiaries of Equity Method Affiliates
Company Name

Issued Capital*(Millions of yen)

Frade Japão Petróleo Limitada

103,051(Thousands ofreis)

Other one subsidiary of equity method affiliates* Rounding off fractions less than the unit.

Voting Rights
Held by Us (%)

0.00%

Main Business

Exploration, development, production and sales of oil and natural gas in
Frade Block in Offshore North Campos, Brazil

INPEX CORPORATION

99

Stock Data
(As of March 31, 2010)

Share Data
Authorized Shares
9,000,000 common shares
1 special class share
Total Number of Shareholders and Issued Shares
Common shares:...... 26,330 shareholders............................................ 2,358,409 shares (As of August 31, 2010: 3,655,809 shares)
Special class share*:.1 shareholder (Minister of Economy, Trade and Industry)......1 share* The Company’s Articles of Incorporation stipulate that certain major corporate decisions require a resolution by the holder of the special class share in
addition to the approval of the shareholders’ meetings or Board of Directors.

Shareholding by Shareholder Type*1
Treasury Stock: 0.2%

Financial Institutions (Including Trust Accounts): 12.6%

Shareholders: 1

Shareholders: 119

Shares: 4,916

Shares: 298,645

Individuals and Other: 2.8%

Securities Companies: 0.7%

Shareholders: 25,271

Shareholders: 72

Shares: 65,843

Shares: 16,678

Foreign Corporations and Other: 17.9%

Other Domestic Corporations: 36.4%

Shareholders: 570
Shares: 421,436

Shareholders: 296
Shares: 858,584

Minister of Economy, Trade and Industry*2: 29.4%
Shareholders: 1
Shares: 692,307*1 Shareholding ratios are for all issued and outstanding shares*2 Excludes one special class share

Major Shareholders (Common Shares)
Name

Number of Shares

Holding (%)*

Minister of Economy, Trade and Industry

692,307

29.4

Japan Petroleum Exploration Co., Ltd.

267,233

11.3

Mitsui Oil Exploration Co., Ltd.

176,760

7.5

Mitsubishi Corporation

170,110

7.2

Nippon Oil Corporation

111,920

4.7

The Master Trust Bank of Japan, Ltd. (Trust Account)

61,947

2.6

Japan Trustee Services Bank, Ltd. (Trust Account)

57,851

2.5

Marubeni Corporation

46,4462.0

State Street Bank and Trust Company 505223

26,894

1.1

Sumitomo Mitsui Banking Corporation

23,1291.0* Shareholding ratios are for all issued and outstanding shares

100 INPEX CORPORATION

Corporate Data
(As of March 31, 2010)

Company Name

Company Headquarters

INPEX CORPORATION

Akasaka Biz Tower 5-3-1 Akasaka, Minato-ku,
Tokyo 107-6332, Japan

Established

Number of Employees (Consolidated)

April 3, 2006

1,870

CapitalMain Business¥30 billion(As of September 30, 2010: ¥290,809,835,000)

Research, exploration, development, production and sales ofoil, natural gas and other mineral resources, other related
businesses and investment and lending to companies
engaged in these activities.

Organization Chart
Shareholders’ Meeting

Audit Unit
HSE Unit

Board of Directors

General Administration Division

Board of Auditors

Corporate Strategy & Planning Division
Compliance Committee

Management Committee

Finance & Accounting Division
Logistics & IT System Division

President

Technical Division
Oil & Gas Business Division 1
Oil & Gas Business Division 2
Asia, Oceania & Offshore Japan Project Division
America & Africa Project Division
Eurasia & Middle East Project Division
Abu Dhabi Project Division
Masela Project Division
Ichthys Project Division
Domestic Project Division
Pipeline Construction Division
LNG Receiving Terminal Construction Division

HomepageInquiries

The Company’s Web site provides investors with the most upto-date IR information, including financial statements.

Please contact us at:
INPEX CORPORATION
Corporate Strategy & Planning DivisionCorporate Communications Unit
Investor Relations Group
Phone: +81-3-5572-0234
Facsimile: +81-3-5572-0235

http://www.inpex.co.jp/

Akasaka Biz Tower 5-3-1 Akasaka,
Minato-ku, Tokyo 107-6332, Japan
Phone: +81-3-5572-0200
http://www.inpex.co.jp/

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