1Message
from the President

Toshiaki Kitamura
President & CEO

Looking Back at the Past YearFor the ﬁscal
scal year ended March 31, 2017, net
sales decreased 13.4% year on year to ¥874.4billion, while net income attributable to owners of parent showed a signiﬁcantsigni
increase of
175.2% to ¥46.2 billion. Looking at trends inoil prices, although the price fell under to theUS$42 level a barrel in August 2016, the December 2016 Declaration of Cooperation accord
between OPEC and non-OPEC oil-producing
countries triggered a price rise and ended theﬁscal year at around the US$50 a barrel level.
Despite the decrease in net sales, brought
about by falls in crude oil and natural gas prices
as well as by a decline in revenues due to theyen’s appreciation in comparison with the previous ﬁscal year, operating income increased due
to a variety of factors, such as a decrease in theamount of temporary loss recorded.
Net production volume (the total of crude
oil and natural gas, crude oil conversion),
which is a key pillar supporting the Company’s earnings, increased by 70,000 barrels
a day compared with the previous ﬁscal year

to 521 thousand barrels of oil equivalent per
day (BOED), and we are continuing to maintain a level of more than 500 thousand BOED.
Proved reserves (the total of crude oil andnatural gas, crude oil conversion), which represent a source of future earnings, also roseslightly compared with the previous ﬁscal yearend to about 3.3 billion barrels of oil equivalent (BOE). Summarizing the progress of themajor projects now under way, we are continuing to make progress with the development
work on offshore and onshore facilities on theIchthys LNG Project, and the project will, during the current ﬁscal year (ending March 31,2018), begin production of condensate, liqueﬁed natural gas (LNG) and liqueﬁed petroleumgas (LPG) in sequence and then ship theseproducts. In the Abadi LNG Project in Indonesia, we began preparatory work related to thestart of the conceptual design (pre-front-endengineering and design [pre-FEED]) for theoptimum development of the Abadi gas ﬁeld
centered on an onshore LNG plant.

INPEX CORPORATION Annual Report 201701

C o s t R e d u c t io n In it ia t iv e s
As an oil and natural gas development company, we are responsible for fulﬁlling our social
mission through our business activities, regardless of current supply and demand uctuations. Crude oil prices, which had remained atmore than US$100 per barrel until the middleof 2014, dropped to under US$30 per barrel atthe beginning of 2016, a mere year and a halflater. In response to this change in the price for
crude oil, the Company is continuing to handle
the issue with a sense of urgency and, keeping
in mind the possibility that crude oil prices willremain at a low level for some time to come,has drawn up countermeasures and is advanc-ing a number of initiatives to continue making
investments for future growth and maintainstable dividends.
Whereas operating cash ows for theperiod under review showed a substantial
increase of more than ¥270.0 billion comparedwith the previous ﬁscal year, total investment
decreased by just under 40% year on year. Production costs per barrel (crude oil equivalent)
were further reduced from US$7.80 in the previous ﬁscal year to US$6.10. We believe thatthese efforts to reduce costs played a supporting role leading to recovery and the postingof a net proﬁt for the ﬁscal year under review.

Shifts in Investment-Reduction Measures

Production Cost per BOE***

Development*

Exploration

Other capital expenditures**(US$/BOE)(¥ billion)

971.2

7.8
6.1
615.0

605.2

880.0

39.3
51.8
2016/3 (Actual)

578.5

606.0

16.1
10.5

8.0
1.0

2017/3 (Actual)

2016/3 (Actual)

2018/3 (Forecast)*Includes investments in Ichthys downstream business**Mainly investments in Naoetsu LNG Terminal and domestic pipeline network***Excluding royalties

Net Proved Reserves andReserve Replacement Ratio (3-year average)

Net Production

Proved reserves (Billion BOE)
Reserve Replacement Ratio (3-year average) (%)

2.53
370%

2.43

3.26

2017/3 (Actual)(Thousand BOED)

514

521

Americas 4%

5%

Middle East/
Africa 48%

52%

3.30

321%
246%

Eurasia 6%

02

2015/3

INPEX CORPORATION Annual Report 201731%

Asia/Oceania 36%

100%

2014/36%

2016/32017/3

Japan 5%5%
2016/32017/3

1Message
from the President

A im in g t o A c h ie v e O u r G r o w t h T a r g e t s
We have set three growth targets for sustainable growth. With regard to our growth target’s ﬁrst pillar of Continuous Enhancementof Exploration & Production (E&P) Activities, if we report on progress from the standpoint of the indicators for that progress, ourreserves (the total of crude oil and natural gas)
as of March 31, 2017, were net proved reservesof about 3.3 billion BOE and net probablereserves of about 1.39 billion BOE. The total ofproved and probable reserves was roughly atthe 4.69 billion BOE level. At 246%, we continued to maintain the reserve replacement ratio(RRR) (proved reserve increase during year
divided by production volume during year,three-year average) at a good level. Although
there was a natural decline in production
volume in the Asia/Oceania segment, net
production volume for the ﬁscal year underreview increased by 70,000 barrels per day to521,000 barrels per day due to the contribution throughout the year from the Abu Dhabi
onshore ADCO Block acquired in the Middle
East/Africa segment and the restart of production at the Kashagan Project in the Eurasia
segment.
Looking at the progress of Continuous
Enhancement of E&P Activities by individual
project, in the case of the offshore facilities atthe Australian Ichthys LNG Project, the construction work for each of the Central Processing Facility (CPF) and the Floating Production
Storage and Of oading (FPSO) facility has now
been completed.
Having started the drilling of the produc-tion wells in February 2015, work is continuingsmoothly. At the Darwin onshore LNG plant,
we ﬁnished bringing all the modules thatwere manufactured overseas to the plant sitein September 2016 and are carrying out commissioning operations. At the gas export pipeline (GEP), the installation and pressure tests
on the land section are completed, and we areready to accept gas, including the seabed partthat has already been laid and pressure tested.
Looking ahead at the production schedule,
installation and commissioning work will be
undertaken and production from the wellhead
will commence. Thereafter, the Ichthys LNG
Project will, during the current ﬁscal year (ending March 31, 2018), begin production of condensate, liqueﬁed natural gas (LNG) and liqueﬁed petroleum gas (LPG) in sequence andthen ship these products.
At the Abadi LNG Project in Indonesia, wereceived a notiﬁcation instructing to re-propose a plan of development based on onshore
LNG from the Indonesian government authorities in April 2016. As a company, we will maintain our policy of aiming for early start-up of
development and implementing the projecting the most economically and technicallyrational way, and will proceed with the project.
In line with this basic policy, we started thepreparatory work relating to the start of theconceptual design (Pre-FEED) on the basis ofthe results of constructive consultations withthe Indonesian government up until then withregard to the optimum development of theAbadi Gas Field.

Courtesy Capt. Serge Prakhov

CPF (Ichthys Explorer) undergoing mooring operations

Aerial view of the Ichthys LNG Project’s
new operations complex at Bladin Point, Darwin, Australia

INPEX CORPORATION Annual Report 201703

04With regard to the Abu Dhabi offshore
Satah oil Field and Umm Al-Dalkh oil Field in
Abu Dhabi in the United Arab Emirates, weagreed in principle with Abu Dhabi NationalOil Company (ADNOC) concerning the extension of the duration of the joint development
in January 2017. On the basis of this agreement in principle, we will aim to conclude aformal agreement by consulting with ADNOC
on detailed terms, such as extending the joint
development for about 25 years. In exploration
projects, we succeeded in discovering deposits of quality oil as a result of an exploration
well drilled at the onshore Exploration Block
10 in Iraq and conﬁrmed a production volume
capacity of more than 8,000 barrels per day
in crude oil production tests that were subsequently conducted.
Going forward, we will analyze the dataobtained from the crude oil production tests,
undertake further exploration activities and,dependent upon the evaluation results, expect
there to be a high probability of the ﬁnd
becoming a large-scale oil ﬁeld. In December
2016, we acquired a joint license for Exploration Block 3 in the Mexican sector of thenorthern Gulf of Mexico. I hope that such an
exploration project will contribute to our Continuous Enhancement of E&P Activities.
With regard to our second pillar of ourgrowth targets, “Strengthening the Gas SupplyChain,” the construction work on the Toyama
Line, which began in April 2012 and extends
around 100 km, was completed in June 2016,
and the total extent of the Company’s domestic pipeline network stretches over approximately 1,500 km. The natural gas sales volume
for the ﬁscal year ending March 31, 2018, isforecast to be 2.12 billion cubic meters and,due to the full-year contribution of the Toyama

Line and an increase in the fuel supply volume
for gas-ﬁred power plants, the Company’s ﬁrst
annual sales volume is expected to exceed 2billion cubic meters. Responding exibly andaccurately to changes in the business environment triggered by the liberalization of the gas
retail market in April 2017, we conducted areshuf e of the organizations involved in thedomestic gas business with the aim of further
strengthening the domestic gas business.
In the years to come, under the new organizational structure, we will continue to focus
on continuing to strengthen the gas supply
chain that will organically link the natural gas
sources developed by overseas projects, suchas Ichthys, and the natural gas business inJapan.
Finally, I will explain about our growth target’s third pillar, “Reinforcement of Renewable Energy Initiatives”. The ﬁrst unit started
commercial operations in the geothermal
power generation project in the Sarulla Block,located on the island of Sumatra, Indonesia, inMarch 2017. The Sarulla Geothermal Independent Power Producer (IPP) Project is the world’s
largest single-contract geothermal power project, and we plan to sell all the generated power
to Indonesia’s government-owned electricity
company over a period of 30 years. We areproceeding with construction and other workon the plant’s second and third units with theaim of commencing commercial operations
in sequence, starting with the second unit in2017 and the third unit in 2018, and expect
the amount of power generated to ultimately
be increased to 330 MW. As a comprehensive
energy company that contributes to society,we will continue to actively engage in the Reinforcement of Renewable Energy Initiatives.

Naoetsu LNG Terminal

Commercial operations commenced at the ﬁrst unit of the Sarulla
Geothermal Independent Power Producer (IPP) Project

INPEX CORPORATION Annual Report 2017

1In order to contribute to the creation of aprosperous society through the realization ofthe stable and efﬁcient supply of energy, weare working on the development and supplyof energy all over the world. In May 2012, weformulated the INPEX Medium- to Long-Term
Vision and, as focused initiatives up to production startup at Ichthys, are advancing the three
abovementioned growth target pillars: Continuous Enhancement of E&P Activities, Strengthening the Gas Supply Chain and Reinforcement of Renewable Energy Initiatives. Crude
oil prices remain in a state where we cannot be
optimistic about the future, but the decline ininvestment in E&P projects, particularly among
the oil majors, is showing signs of bottoming due to a recovery in the balance between
supply and demand and other factors. Under
such circumstances, we are currently considering our post-Ichthys startup growth strategies
and making earnest progress in examining thelevel of investment for future growth and thestrengthening of shareholder returns, including an increase in dividends.
While building trust-based relationships
with stakeholders, including local communities,
as a company that develops business globally,
we are steadily fulﬁlling our social responsibility throughout the value chain and focusing
our efforts on contributing to the creation of asustainable society, for example, by ensuringsafety in our business activities, environmental
protection, creating employment, respecting
human rights as well as cultures and customs,
and contributing to local communities. With aparticular focus on ensuring respect for humanrights, and as a part of efforts to address theUK Modern Slavery Act of 2015, the Company and the Company Group disclosed its
Modern Slavery Act Statement FY2015 (UKModern Slavery Act Statement) in September
2016. This disclosure was designed to clarify
initiatives aimed at preventing any violation ofhuman rights including slave labor and human
trafﬁcking from a supply chain management
perspective. In addition, to comprehensively
specify our stance toward respect for humanrights, we formulated the INPEX Humana L o n g - T e rm

Messagefrom the President

T o w a r d Im p r o v e d C o r p o r a t e V a lu e f r o m

P e r s p e c t iv e

Rights Policy in May 2017. Formulated on thebasis of the UN’s Guiding Principles on Business and Human Rights, the policy is applicable to all ofﬁcers and employees of the Group.
We will continue to adhere strictly to a policy ofhuman rights management in the years ahead.
The total dividend for the year underreview was ¥18.0 per share, the interim andyear-end dividend having each been ¥9.0.
The initial dividend forecast for the year ending March 31, 2018, is that we will pay interim
and year-end dividends of the same ¥9.0 pershare, for a full-year dividend of again ¥18.0per share. However, on the basis of the progress made with the Ichthys LNG Project going
forward and the earnings outlook for the current ﬁscal year as well as other factors, the yearend dividend may be reviewed again toward
the end of the year.
Energy resources are essential to theeconomy and society, and the importanceof their long-term, stable development andefﬁcient use will remain unchanged. Japan’s
energy self-sufﬁciency rate (2016) is only about
6%, the second from the bottom among OECDmember countries. Under such circumstances,I believe that our mission is to improve our corporate value through the stable and efﬁcient
supply of energy. In the years to come, wewill facilitate the stable and efﬁcient supply ofenergy and, as an international oil and natural
gas development company, will enhance ourcompetitiveness so that these efforts lead tosustainable improvement in both shareholder
and corporate value. We will be doing ourutmost in these efforts, so I would like to takethis opportunity to thank you in anticipation ofyour unwavering support.

June 2017
President & CEO
Toshiaki Kitamura

INPEX CORPORATION Annual Report 201705