Message
from theMessage
Looking Back at the Past YearFor the ﬁscal year ended March 31, 2015, netsales and net income decreased 12.2% and57.6% year on year to ¥1,171.2 billion and ¥77.8
billion, respectively. Given the harsh market
environment exacerbated by factors such as thedrop in crude oil prices averaging approximately
20% in the ﬁscal year, impairment losses wereincurred on certain projects and INPEX reported
a downturn in revenue and earnings. Judging by
the trends in oil prices, the Company recognizes
that the future remains uncertain. INPEX is therefore currently adopting measures designed tominimize the impact to our earnings to the extent
possible.
In the ﬁscal year ended March 2015, net
production volume, which is a key pillar supporting the Company’s earnings, was essentiallyunchanged year on year at 408 thousand BOED.
Proved reserves, which represent a source offuture earnings, stood at approximately 2.43 billion BOE at the end of March 2015.
Turning brieﬂy to the status of the Company’s
major projects, development work at the Ichthys
LNG Project in Australia is now at its peak, andthe project has surpassed the 70% progress rate.
Preparations for development work to expand
the scale of production have commenced at theAbadi LNG Project in Indonesia following theconﬁrmation of a greater volume of natural gas
reserves. In April 2015, INPEX announced that it
acquired a 5% participating interest in the ADCO
Onshore Concession in Abu Dhabi, U.A.E. This
concession makes up one of the world’s largest
deposits of oil and currently produces approximately 1.6 million bbl/d. As a result, we anticipate
this project will contribute signiﬁcantly to maintaining and expanding the Company’s proved
reserves and net production volume.

Toshiaki Kitamura
President & CEO002

INPEX CORPORATION Annual Report 2015

1Message
from the President

President
Update on the Ichthys LNG Project
The Ichthys LNG Project in Australia, which is theﬁrst large-scale LNG project to be operated bya Japanese company, is paramount to the Company’s future growth. Following the ﬁnal investment decision (FID) made in January 2012, development work has proceeded and the project
reached its halfway mark in mid-2014. Currently,
the progress rate is more than 70% and is steadily
taking shape toward ﬁrst production. In terms of
the status of offshore facilities, construction of thecentral processing facility (CPF) and the ﬂoatingproduction storage and ofﬂoading (FPSO) facility
has progressed. As for onshore facilities, the ﬁrst ofover 200 prefabricated modules (large-scale components that make up facilities) currently underconstruction at yards in China, the Philippines andThailand was delivered last year, and steady progress is being made with respect to transportation,delivery and installation work. Concrete steps arealso being taken at the onshore LNG plant to construct storage tanks for LNG, LPG and condensate,
as well as power generation and module ofﬂoad-

Steady progress in construction of the onshore LNG plant

INPEX CORPORATION Annual Report 2015003

ing facilities. As for the 889-km pipeline that willlink the Ichthys gas-condensate ﬁeld locatedoffshore Western Australia to the onshore LNG
plant in Darwin, Northern Territory, the shallow
water pipelay in Darwin Harbour was completed
in November 2014 and the deepwater pipelay
has been ongoing since February 2015. Development well drilling work also began in February
2015 for the eventual recovery of products fromthe gas-condensate ﬁeld. Having personally conducted site inspections on several occasions in
the past year and witnessing the progress on theconstruction of the offshore facilities, pipelineand onshore LNG plant, I was ﬁlled with great
excitement and anticipation. I will collaborate
with all involved parties to ensure further progress on development work in the year ending
March 31, 2016, putting safety as our ﬁrst andforemost priority.
In tandem with development work on theIchthys LNG Project, INPEX is conducting exploration work in a bid to locate and secure new gas

reserves across several exploration blocks in thearea surrounding the Ichthys gas-condensate
ﬁeld. During the ﬁscal year ended March 2015,
the Company acquired two additional exploration blocks (WA-513-P and WA-514-P) bringing
the total number of owned exploration blocks inthe surrounding area to 13. We intend to further
strengthen our initiatives in these exploration
blocks with the expectation of tapping the synergies created with the Ichthys LNG Project.

Conceptual image of the completed onshore LNG plant

Advancing Preparation Work forthe Development at the Abadi LNG Project
The Abadi LNG Project is another large-scale
LNG project in which INPEX as Operator isundertaking preparation work for the development of a giant gas ﬁeld offshore Indonesia.
The company aiming to deploy a ﬂoating LNG(FLNG) facility that processes, liqueﬁes, storesand ofﬂoads natural gas with an annual LNG processing capacity of 2.5 million tons as the ﬁrst
stage of development, based on a plan of development for the Abadi Gas Field approved by theGovernment of Indonesia, as a result of evaluations of three appraisal wells drilled between
2013 and 2014, a substantially greater volumeof natural gas reserves was conﬁrmed. Taking
this ﬁnding into consideration, INPEX is studying
ways to optimize development plans centeredon a large-scale FLNG, and is currently in discussions with the Indonesian government alongside
partner Shell.

004

INPEX CORPORATION Annual Report 2015

Drillship deployed in the Abadi LNG Project1
Messagefrom the President

Acquisition ofOnshore Concession in Abu Dhabi
In 2014, we announced the extension of the concession agreement for the Upper Zakum OilField offshore Abu Dhabi in the U.A.E. In 2015,
INPEX has again been successful in achieving
notable results in the region, with the acquisitionof a participating interest in the ADCO Onshore
Concession. The ADCO Onshore Concession is
one of the world’s largest oil ﬁelds and is madeup of 11 ﬁelds currently in production and fourthat remain undeveloped. The Company has
acquired a 5% participating interest based on a40-year agreement effective January 2015. While
production currently stands at 1.6 million BOD,INPEX plans to proceed with development work
aimed at increasing oil production to 1.8 million
BOD by 2017.
The company’s acquisition of a participatinginterest in one of the world’s largest oil ﬁelds islikely the result of the value placed by local government authorities and stakeholders on INPEX’s
track record in oil development and production
operations as well as technological contributionsin Abu Dhabi that span over 40 years. In addition
to its oil development business, INPEX is also
involved in social contribution activities in Abu
Dhabi in areas such as human resources development.
It is most rewarding to witness how thesesteadfast initiatives have driven the growth of theCompany, signiﬁcantly contributing to the longterm, stable supply of energy to Japan.

Oil terminalStrengthening
the Natural Gas Business in JapanThe Naoetsu LNG Terminal completed in Niigata
Prefecture in December 2013 had received atotal of six LNG vessels as of July 2015 and isoperating smoothly. In 2014, INPEX also began
upgrading facilities at its Koshijihara Plant also inNiigata Prefecture. The Koshijihara Plant reﬁnesand processes natural gas produced from theMinami-Nagaoka Gas Field, which the Company is developing as Operator. The upgrades
are expected to enhance the rate of natural gas
and condensate recovery at the ﬁeld, increase
the volume of recoverable reserves by approximately 20% and extend the production life spanof the Minami-Nagaoka Gas Field by nearly 20
years beyond current estimates. This initiative at
one of Japan’s largest natural gas ﬁelds will help
promote the efﬁcient and effective use of Japan’s
energy resources, and allow the Company todeliver a stable supply of energy while securing asteady source of earnings.

Drilling work at the Minami-Nagaoka Gas Field(Nagaoka City, Niigata Prefecture)

INPEX CORPORATION Annual Report 2015005

Addressing the Fall in Crude Oil Prices
Crude oil prices, which hovered above theUS$100 per barrel mark in mid-2014, plunged
dramatically toward the beginning of the new year
falling temporarily below US$50. Oil prices are
expected to converge to a new equilibrium point
over the medium to long term, INPEX recognizes
the critical need to factor in a prolonged periodof low oil prices when implementing countermeasures to manage risk. In response to the drop inoil prices, the Company is evaluating the importance level of individual projects while adopting
a comprehensive approach toward determining
investment priorities. Speciﬁcally, we will resolve
to proceed with investments and projects thathave been identiﬁed as essential in accordancewith original plans. For all other projects, we will
make every effort to reduce investments and curtail costs to minimize the impact of oil prices on
our performance. To elaborate, INPEX pursues
the following three policy measures.
We will continue to push forward with theIchthys LNG Project and other importantdevelopment projects that serve as key
growth drivers.
During the year ended March 31, 2015, we
took steps to curtail development and exploration costs considering the drop of oil price.
In particular, regarding exploration projects,
we conducted investment reduction byreviewing the schedules and cost structures.
3 We will continue to focus on enhancing theoperational efﬁciency of projects throughout the year ending March 31, 2016, while
cutting back on related expenditures.
As part of our efforts to curtail the costs identiﬁed in the second policy measure above, we
reduced our initial development investment planby about 15% from approximately US$9.9 billion
to around US$8.5 billion. In terms of exploration
investment plans, INPEX adjusted drilling schedules taking into account the upswing in drilling
costs associated with the rise in crude oil prices,while postponing operations at certain exploration wells and other initiatives including thetransfer of certain participating interests. Throughthese initiatives, we streamlined our initial investment plan from about US$1.1 billion to around
US$0.7 billion in the year ended March 31, 2015,006

INPEX CORPORATION Annual Report 2015

a reduction of approximately 37%. In the year
ending March 31, 2016, INPEX will continue its
cost cutting initiatives. Plans are in place to reduce
the total amount of investment by approximately
US$0.4 billion compared with the ﬁscal year
ended March 2015, from around US$9.4 billion toroughly US$9.0 billion.
In assessing the outlook for oil prices over themedium to long term, it is imperative that we shift
away from the US$100 per barrel mind-set thatpersisted over the past several years. From theperspective of the Company’s business development activities, it is equally important that we put
in place a robust ﬁnancial scheme capable of carrying out the necessary business activities evenin an environment of persistently low oil prices.
It goes without saying that energy is an essential resource for both the economy and society
at large irrespective of short-term ﬂuctuations indemand. At the same time, there is no denying
the importance of the long-term and stable development of energy and its efﬁcient consumption
not only to Japan but also to the rest of the world.
I am therefore convinced more than ever that themission of the Company is to actively pursue thedevelopment of energy to fulﬁll its responsibility to society while securing sustainable growth.
Despite a persistently difﬁcult operating environment, INPEX is uniﬁed in its commitment toundertake whatever measures are necessary to
carry out its mission and tasks.
Shifts in investment-reduction measures
Development expenditures
Other capital expenditures*Exploration expenditures* Mainly investment in the Naoetsu LNG Terminal andthe domestic pipeline network, etc.

(US$ million)

11,250
9,381

9,030

9,900
8,464

1,050

300

2015/3（Announced onMay 2014)

662
2015/3(Actual)

8,240

255

470
2016/3（Forecast)320

1Message
from the President

OutlookFinancial forecasts for the year ending March
31, 2016 announced in August 2015 are basedon the assumption that crude oil prices (full yearaverage) will fall more than US$20 compared tothe ﬁscal year ended March 2015. Taking thisand other assumptions into account, net income
attributable to INPEX is projected to decrease by
10% year-on-year, to ¥70.0 billion. Consolidated
net sales, on the other hand, are expected toslightly increase year-on-year, to ¥1,181.0 billion
spurred by revenue generated from the ADCO
Concession and other factors.
Net production volume in the current period
is forecast to rise around 25% compared withthe ﬁscal year ended March 2015 to 512 thousand BOED, due mainly to the addition of production from the ADCO Concession. This willbe the ﬁrst time for the Company to exceed 500
thousand BOED since its public listing. While
the startup of the Ichthys LNG Project and otherfactors are expected to lift the net production
volume of existing projects to around the 700thousand BOED level, this forecast increase toover 500 thousand BOED prior to the startupof the Ichthys LNG Project is highly signiﬁcant.
Moreover, the volume of proved reserves andthe reserve replacement ratio (RRR), which is theamount of proved reserves added to a company’s reserve base during a given period relative
to the amount of oil and gas produced, are projected to increase substantially as of the end ofMarch 2016 owing mainly to production from theADCO Concession.
In terms of the Company’s shareholder
return policy, INPEX is implementing a balancedapproach between investments and the paymentof dividends. In the lead-up to production at theIchthys LNG Project, cash ﬂows derived from producing projects are being channeled into reinvestments. In this context, the focus of our activities is directed toward investment. As a result, weplan to pay an annual dividend of ¥18.0 per sharefor the year ending March 31, 2016, unchanged
from the ﬁscal year ended March 2015. However,after production begins at the Ichthys LNG Project,
we would like to provide returns to shareholders
considering the levels of top-class international
oil and gas E&P companies.
Looking back once again on the year ended
March 31, 2015, I personally visited the sites ofa number of projects with a view to promoting
each project while exchanging opinions withthe government authorities of each country andproject partners. At the same time, I placed considerable emphasis on building and maintaining
strong ties of mutual trust with all stakeholders
including institutional investors through directcommunication. As was earlier stated, crude oil
prices plummeted dramatically from the second
half of the ﬁscal year ended March 2015, and as aresult, we took steps to reduce costs. In the ﬁscal
year ending March 31, 2016, the INPEX Groupwill continue to work in unison to push forward
its various business activities and make every
effort to address and overcome a harsh operating environment while clearly deﬁning criticalinvestments and projects the Group needs topursue, as well as investment and cost-reduction
priorities.
In addition to securing the stable and efﬁcient supply of energy on an ongoing basis, theCompany will work diligently to enhance its competitiveness as an international oil and gas E&P
company and ensure sustainable growth in bothshareholder and corporate value. As we work toachieve these goals, we would greatly appreciate your continued understanding and support.
August 2015
President & CEO
Toshiaki Kitamura

INPEX CORPORATION Annual Report 2015

007