INPEX CORPORATION

Annual Report 2017

Year ended March 31, 2017

About INPEX

INPEX is the largest oil andgas E&P company in Japan.
The Company currently is
engaged in approximately
70 projects spread acrossmore than 20 countries
worldwide.

As a company that is engaged in oil and natural gas exploration, development and production activities worldwide,
INPEX boasts the highest reserve and production volumes
among companies in Japan. The Company is positioned
as a mid-tier E&P player just behind the world’s oil majors.
The Ichthys LNG Project in Australia being one of its key
initiatives, INPEX is actively engaged in oil and natural gas
projects in Japan and overseas. In addition to securing
a stable and efﬁcient supply of energy, the Company isworking diligently to ensure sustainable growth in its corporate value.

Annual Report 2017 Contents
1 Message from the President .................. 01
2 Financial & Operating Highlights ......... 06
3 Market Trend & Management Policy
Business Model and Strengths

08

The Structure and Mechanism of
Oil and Natural Gas Exploration
and Development .............................. 10
The Medium- to Long-Term Vision of
INPEX and Investment Plans ........... 12
4 Project Overview

Segment Overview................................... 14
Project Overview by Region
Asia & Oceania .................................. 16
Eurasia ................................................. 22
Middle East & Africa.......................... 24
Americas ............................................. 26
Japan ........................................ ........... 28

5 Sustainability & Governance

Sustainability ............................................. 30
Corporate Governance ........................... 34

6 Financial & Corporate Information

11-Year Financial Information ................. 42

Our Mission

The mission of the INPEX Group is toprovide a stable and efﬁcient supplyof energy to customers by exploringand developing oil and natural gas
resources both domestically andthroughout the world. Through ourbusiness, we aim to become an
integrated energy company, which
contributes to our community andmakes it more livable and prosperous.

Background Information:
Oil and Gas Accounting
Policies and Treatment...................... 44
Management’s Discussion andAnalysis of Financial Condition
and Results of Operations ............... 46
Consolidated Financial Statements/
Notes to Consolidated
Financial Statements ......................... 52
Independent Auditor’s Report ............... 71
Subsidiaries and Afﬁliates ....................... 72
Business Risks............................................ 74
Oil and Gas Reserves
and Production Volume ................... 82
Corporate Information ............................. 85

DISCLAIMER

Information contained in this Annual Report is not an offer or a solicitation of an offer to buy or sell securities. You are requested to make investment decisions using your own judgment. Although the Company has made sufﬁcient effort to ensure the accuracy of information provided herein, the Company assumes no responsibility for any damages or liabilities
including, but not limited to, those due to incorrect information or any other reason.

FORWARD-LOOKING STATEMENTS

This Annual Report includes forward-looking information that re ects 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 otherfactors 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, uctuations in the following:
the price of and demand for crude oil and natural gas;exchange rates; andthe 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 basically rounded to the nearest unit (e.g., millions, billions) for convenience. The “ Project Overview by Region” section (starting on p. 16)
basically describes the operating situation as of June 30, 2017. Figures in parentheses denote negative amounts. Natural gas production volume for projects in production is not the volume at wellheads, but corresponds to sales to buyers.
INPEX CORPORATION is listed on the First Section of the Tokyo Stock Exchange under the securities code 1605. The Company is also included in the Nikkei Stock Average (Nikkei
225) and the JPX-Nikkei Index 400 (JPX400).

1
Messagefrom 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 ¥874.4
billion, 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 the
US$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 the
yen’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 the
major projects now under way, we are continuing to make progress with the development
work on offshore and onshore facilities on the
Ichthys 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-end
engineering and design [pre-FEED]) for the
optimum development of the Abadi gas ﬁeld
centered on an onshore LNG plant.

INPEX CORPORATION Annual Report 201701

Cost Reduction Initiatives
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%

6%

31%

Asia/Oceania 36%

100%

Japan 5%
2014/302

2015/3

INPEX CORPORATION Annual Report 20172016/32017/3

5%
2016/32017/3

1
Messagefrom the President

Aiming to Achieve Our Growth Targets
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 of
proved and probable reserves was roughly at
the 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 to
521,000 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 at
the 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, we
received 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 the
preparatory work relating to the start of theconceptual design (Pre-FEED) on the basis of
the results of constructive consultations with
the Indonesian government up until then withregard to the optimum development of the
Abadi 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 2017

03

04

With regard to the Abu Dhabi offshore
Satah oil Field and Umm Al-Dalkh oil Field in
Abu Dhabi in the United Arab Emirates, we
agreed in principle with Abu Dhabi National
Oil 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 our
growth targets, “Strengthening the Gas Supply
Chain,” 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, is
forecast 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 2
billion 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

1
Messagefrom the President

Toward Improved Corporate Value from a Long-Term Perspective
In order to contribute to the creation of aprosperous society through the realization of
the stable and efﬁcient supply of energy, we
are 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 the
UK 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 Human

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 per
share, for a full-year dividend of again ¥18.0
per 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

Financial and Operating Highlights (Five-Year Comparative Graphs)
As of or years ended March 31. Please refer to p. 43 for notes of major indices.

Profitability Indices
Net Income Attributable to Owners of Parent, EBIDAXNet Sales (by product)
Crude oil

Natural gas

1,186.7

1,216.5

31.4
429.1

30.6
397.8

726.2

2012

Other

1,334.6
20.4
455.4

858.8

788.1

2013

(Earnings before interest, depreciation and amortization, and exploration)(¥ billion)

2014

1,171.2

Net income attributable to owners of parent

1,009.6

18.9
421.9

13.6
316.8

730.4

2015

679.2

2016

874.4

EBIDAX (¥ billion)

194.0
362.6

183.0
350.9

183.7
402.2

77.8
303.1

16.8
217.9

46.2
229.3

2012

2013

2014

2015

2016

2017

14.6
242.6
617.2

2017

Efficiency IndicesStability Indices

Return on Equity (ROE)

Net Assets Excluding Non-Controlling Interests, Equity Ratio,
Net Debt, Net Debt/Net Total Capital Employed

ROE （%）Net assets excluding non-controlling interests
Net debt (¥ billion)
Equity ratio
Net debt/Net total capital employed (%)

2,179.3
71.1

9.3

2,481.3

2,791.1

3,066.7

2,932.9

2,943.2

68.6

69.1

68.2

67.1

68.3

7.9
7.0
-874.1
2.7

1.6

0.6
2012

2013

2014

2015

2016

2017

-60.7

2012

-815.3-43.9
2013-725.3-31.9
2014-472.2-239.3
-8.1
-16.8

2015

2016

29.6

0.9

2017

Performance Indices
Price Earnings Ratio (PER), Price Book-Value Ratio (PBR)

Cash Dividend per Share, Payout Ratio
Cash dividend per share

Cash dividend per share(2nd quarter end)

(Fiscal year-end)

Payout ratio (%)

17.50
10.00

17.50

18.00

18.00

8.75

9.00

9.00

PER

(Yen)

18.00
9.00
156.7

PBR (Times)

74.3

18.00

34.6

9.00
24.9

7.50
13.2
2012

8.75

9.00

9.00

9.00

9.00
56.9

14.0
2013

14.3
2014

33.8
2015

2016

2017

Note: Cash dividend per share is retroactively adjusted for a stock split at a ratio of 1:400 ofcommon stock on October 1, 2013. Cash dividend per share data for each ﬁscal year is after
retroactively adjusting to account for the impact of the stock split.

06

INPEX CORPORATION Annual Report 2017

10.5

10.0

0.9

0.7

0.7

0.6

0.4

0.5

2012

2013

2014

2015

2016

2017

10.6

Reserve/Production Indices
Net Proved and Probable Reserves, Reserves-to-Production Ratio

Net Proved Reserves (by product),
Reserve Replacement Ratio (3-year average)

Proved reserves
Probable reserves (Million BOE)
Reserves (proved + probable) -toProved reserves-to-production ratio (Years)
production ratio

Crude oil
Natural gas (Million BOE)
Reserve replacement ratio (3-year average) (%)

2,432

2,188

255
1,259

1,451

2014

3,304

1,094

1,121
321

246
2,210

2,143

2015

4,256

1,907

27.4

27.5

15.6

2016

2017

Average Expenses per BOE Produced,
Exploration and Development Cost per BOE (3-year average)
Average production cost per BOE produced (excluding royalty)
Exploration and development cost per BOE (3-year average) (US$/BOE)

2012

Crude oil

175

7.9
6.3

2012

11.2

11.7

9.0

9.8

2013

2014

11.2

2015

251

16.9

14.7

2013

4,044

1,705

1,945
30.2

1,610
27.2

2,532

2,434

17.1

16.4

2014

4,970

2015

4,693

2

1,389

26.4
3,264
17.4

2016

3,304
24.7
17.4

2017

Natural gas (Thousand BOED)

408

162

246

409

408

164

245

514

521

175

173

339

348

165

243

15.7

7.8
2016

2,188

4,477

Net Production (by product, barrels of oil equivalent)

426

58.2

4,095

1,823

2,432

1,213
100

929

2013

3,264

1,221

1,278

981

2012

1,254

2,434

Financial andOperating Highlights

282

2,532
370

6.1
2017

2012

2013

2014

2015

2016

2017

The Environment
Exploration and Appraisal Success Ratio (3-year average),
Number of Exploratory and Appraisal Wells
Exploration success ratio (3-year average) （％）
Number of exploratory and appraisal wells （Number）

7

2

15

59.5

15

13

Volume of Water Sources Used, Total GHG Emissions
Volume of water sources used (Thousand m3)
Total GHG emissions (Thousand t-CO2)

791

7
1,749
513
381

1,994

605

1,436

52.9

50.6

2,006

650

644
1,822

1,373

45.3
43.8

45.0
2012

2013

2014

2015

2016

2017

2012

2013

2014

2015

2016

2017

INPEX CORPORATION Annual Report 201707

Business Model and Strengths
In its oil and gas development business, INPEX employs a business model that
focuses on stable production and supply, as well as the reinvestment of cash ows
obtained from production activities toward the acquisition of new reserves and thediscovery and development of oil and gas that contribute to further production revenues. This cycle is the source of sustainable growth as a company.

INPEX’s Strength 1

Dynamic Growth Scenario

Ichthys LNG Project

INPEX is the ﬁrst Japanese company to develop a global
large-scale LNG project such as Ichthys in Australia as
an operator. Steps are also being taken to quickly bringto fruition the Abadi LNG Project in Indonesia, another
undertaking after the Ichthys project in which INPEX willserve as the operator. The Company’s net production
volume is currently at a level of around more than 500
thousand BOED, and there are prospects of an increase
to 600-700 thousand BOED following the start of production at Ichthys and other projects. We are focusing
on Ichthys development work, which will increase thecorporate value of our company.

INPEX’s Strength 2

A Balanced Portfolio andStrong Reserve Volume/
Resources

4.69 billion BOE(Proved and probable reserves)

INPEX has secured a balanced portfolio while establishing appropriate risk management by combining different projects to ensure an optimal balance across such
key parameters as the oil and natural gas ratio, regional
distribution, and exploration, development and production activities. Turning to the Company's reserve volume,the source of its corporate value, INPEX holds a proved
and probable reserve volume of 4.69 billion BOE, as wellas an abundance of possible reserves and contingent
resources that are not included in probable reserves.
Looking ahead, we expect to expand proved and probable reserves over the medium to long term.

08

INPEX CORPORATION Annual Report 2017

Growth of
Production
VolumeIncreasing
Reserves

INPEX’s Strength 3

Natural Gas Supply Chain
Domestic natural gas pipeline network

1,500 km

Proactive
Exploration andDevelopment
Investment

3
Market Trend &Management Policy

Accountingof Revenue
Attributable
to SalesINPEX owns a natural gas pipeline network in Japanof around 1,500 km. The Naoetsu LNG Terminal commenced operations in December 2013, bringing one
step closer the realization of a natural gas supply chainthat links natural gas assets in Japan and overseas andthe domestic market. Looking ahead, the Company will
endeavor to further strengthen its gas supply chain byorganically combining its efforts to develop natural gas
sources overseas including the Ichthys LNG Project with
the infrastructure of its Natural Gas Business in Japan.

INPEX’s Strength 4Strong Financial Base
Equity ratio:

68.3%

Net debt/Net total
capital employed:

0.9%

A healthy balance sheet and cash reserves are essential
for oil and gas E&P companies. This re ects both thehigh degree of risk associated with E&P activities andthe need to have sufﬁcient funds on hand to take advantage of major investment opportunities. As of March 31,
2017, the Company had an equity ratio of 68.3% and aratio of net debt to net total capital employed of 0.9%.
(Cash and deposits were roughly the same as interest-bearing debt.)

INPEX CORPORATION Annual Report 201709

The Structure and Mechanism of
Oil and Natural Gas Exploration and Development
The business activities of the oil and gas industry can be envisioned as the ow of ariver. The upstream consists of development and production of oil and natural gas.
The midstream is where products are transported. The downstream refers to reﬁning
and sales. Our mainstay business is to handle operations in the upstream including the
exploration, production, and sales of crude oil and natural gas. As shown in the business ow below, upstream business activities can be further classiﬁed into the acquisition of blocks, exploration, appraisal, development, production and sales.

Acquisition of Blocks
We collect extensive informationon legal system and country risks
related to areas in which oil andnatural gas are expected to exist.
We then apply and bid for mining rights and/or exploration anddevelopment rights and enter
into a contract for explorationand development.

Signing ceremony
ony of a contract

Sales

There are many methods for selling crude oil linked to spot
prices (market prices established one time per transaction),
the spot prices themselves being mainly decided based on
crude oil, which has become the transaction benchmark.
Representative crude oil spot prices are those quoted for
Middle East Dubai crude, North Sea Brent crude and West
Texas Intermediate (WTI) from the United States, to namebut a few.
In contrast, because projects characteristically requirelarge-scale investment, in many cases sales of liqueﬁed natural gas (LNG) result from long-term sale and purchase contracts concluded from both producers and buyers.

Major oil and natural gas
producing regions (image)

Production
The extracted oil and natural
gas are refined and processed.
After separating oil and removing impurities (e.g., carbon gas,hydrogen), we ship natural gasthat can be used as a product.
LNG tanker

10

INPEX CORPORATION Annual Report 2017

Where do crude oil and natural gas come from?

Crude oil and natural gas are thought to originate from organic matter,such as the remains of once-living organisms that accumulated at thebottom of seas and lakes, that was then subjected to extreme heat andpressure underground. Crude oil and natural gas that have formed deep
underground are lighter than the water in the earth, allowing them togradually rise to the surface over a long period of time. If the crude oil andnatural gas encounter highly dense geological formations on the way tothe surface, however, deposits form that become oil and gas ﬁelds.

Exploration
In addition to geological surveys, we utilize geophysical surveys
conducted through satellite images and seismic waves to assess
the potential subsurface accumulations of oil and natural gas.
Furthermore, we drill exploratory
wells to conﬁrm the presence ofoil and gas. The bit, a special drill
attached to the tip of the pipe,
drills through hard rock while digging into the ground.

3
Market Trend &Management Policy

Geophysical surveys

AppraisalOnce the presence of oil
and natural gas has been
conﬁrmed, we drill appraisal
wells to assess the extent
of the oil and gas ﬁelds andto evaluate the amount ofreserves. In addition, we
make comprehensive judgments regarding the commercial viability of the ﬁelds.

Drilling of appraisal wells

Development
After a ﬁnal investment decision (FID) has been made, steps aretaken to construct the necessary facilities to engage in crude oiland natural gas production andshipment. This includes facilities that separate resources into
their liquid and gaseous states toremove impurities and pipelines tofacilitate transportation. In addition,
the drilling of production wells isundertaken to extract crude oil andDrilling of production wells
natural gas.

INPEX CORPORATION Annual Report 201711

The Medium- to Long-Term Vision of
INPEX and Investment Plans
In May 2012, the Company formulated the INPEX Medium- to Long-Term Vision that clariﬁed
key initiatives up to the Ichthys start-up as well as medium- to long-term growth targets and theachievement of those targets. The Medium- to Long-Term Vision deﬁnes three growth targets
and three management policies and clearly speciﬁes our key initiatives.

Three
Growth Targets

1

We have set three growth targets
necessary for sustainable growth
and will conduct key initiatives toachieve them.

Continuous Enhancement of E&P Activities
Achieve net production volume of

1 million BOED by the early 2020s

2

Strengthening Gas Supply Chain
Achieve domestic gas supply volume of

2.5 billion m3/yearby the early 2020s (3.0 billion m³/year in the long term)

3 Promote efforts to commercialize

Reinforcement of Renewable Energy Initiatives

renewable energies and reinforce
R&D activities for the next generation
Three Management Policies
We are positioning ourselves to become a top-classinternational oil and gas E&P company and are improving and building our management base to evolve into
an integrated energy company.

2

Investment for Growth andReturn for Shareholders

Investment

1

Securing/Developing
Human Resources andBuilding an Efﬁcient
Organizational Structure
Recruit and utilize personnel in and outsideof Japan to develop global professionals.
Establish an efﬁcient business execution
system to facilitate decision making.

12

INPEX CORPORATION Annual Report 2017Over
ﬁve years

Payout Ratio
（%）
200

¥3.5
trillion

150

Including
exploration
expendituresof around

50¥300
billionFrom the year ended
March 31, 2013, to
March 31, 2017156.7%

100

14.0% 14.3%
02013/3

2014/333.8%
2015/3

2016/356.9%
2017/3

From the period in which Ichthys starts production,
we will be aware of our position as a top-classinternational oil and gas E&P company and will plan
appropriate returns for our shareholders.

1,000521 thousand BOED

Proved reserves and production volume indicated in this chart are from documents disclosed by the major E&P companies in ﬁscal
2016. The size of the circle shows the market
value of each company as of March 31, 2017.
Currently, INPEX is positioned as a mid-tier
E&P player. As our operations expand throughnew milestones including the start of production at the Ichthys LNG Project in Australia, wewill endeavor to secure a foothold among theworld’s oil majors by the early 2020s.

Net production volume (Thousand BOED)

Proved Reserves,
Net Production Volume
and the Market Value ofthe Major International Oil
and Gas E&P Players

Anadarko (US)To achieve
1 MMBOED ofnet
production
800
by the early2020s through
600 medium- tolong-term
investment

400

Occidental (US)

any
n
mp
tio
osi &P coprmsEa ﬁ d ganish
abl l oil a
t
s
INPEX
na
oe
g t atio s
kin ern 020
See n int rly 2
Probable reserves toaaas the e
upgrade to provedbythrough the shift ofdevelopment

Apache (US)Santos (AU)
200
0

0.5

1.0

Woodside (AU)
1.5

2.0

Proved reserves: 3.30 billion BOE

2.5

3.0

3.5

Proved and probable reserves (Billion BOE)

4.0

4.5

5.0

Probable reserves: 1.39 billion BOE

5.5

Becomea Top-ClassInternational Oil and Gas
E&P Company

3Market Trend &Management Policy

Become an Integrated
Energy Company
with natural gas as the core

MEDIUM- TO LONG-TERM VISION OF INPEX:X:
Ichthys and Our Growth Beyond
For details, please refer to the booklet entitledd“MEDIUM- TO LONG-TERM VISION OF INPEX::
Ichthys and Our Growth Beyond,” or refer toothe following Web site:
4www.inpex.co.jp/en/vision

Maintain Financial Strength

Funding Source
Own funds

50

Target: 50% or higher
Equity ratio

68.3%(As of March 31, 2017)20
0Target: 20% or less
Net debt/Net total
capital employed

0.9%(As of March 31, 2017)¥663.0 billionof cash available on hand
(As of March 31, 2017)

Cash flows
Future operating cash ows
obtained each year

Bank loans
Lending from JBIC
Guarantee from JOGMEC
Project ﬁnance3

Responsible
Management as a
Global Company
Promote continuous improvements
in corporate compliance and HSE
initiatives.
Build trust-based working relationships with stakeholders throughinteractive communications.

INPEX CORPORATION Annual Report 201713

Segment Overview

Asia &
Oceania

Eurasiau p. 22

u p. 16

37

Under development
Preparation for development

1,218

1,296

In production

1,245

Number of projects

Under exploration

4

12

1

6

1
2
1

4

1,117

22

1,145

5
1,551

Number of countries

14

INPEX CORPORATA ION Annual Report 2017
AT

33
60,192
12,113188
32
66,852
13,832

197
27
94,05032,228

191

190

2017

2012

2013

2014

2015

218,099

26

2017

2014

96,34142,601

2016

25

188

162

2016

2017

2013

85,541
41,752

2015

2016

25
2014

2015

2012

84,32547,0762013

2017

51,566

2012

178,225

Operating income (¥ million)

185

485,069

Net sales (¥ million)

2016

302,871166
2015

97,204167
2014409,776179
2013

264,849

Net sales/Operating income

299,599

483,187

2012

485,275

Net production (thousand BOED)

281,623

Proved reserves (million BOE)

201

Reserves/Production

242

Other

Middle East
& Africa

AmericasJapanu p. 26

u p. 28

9

6

5

7

1

15

1

Minami-Nagaoka
Gas Field
Naoetsu LNG
Terminal

Natural gas
pipeline network(Approx. 1,500 km)
etc.

9

783

857

2

1,778

6

1,742

u p. 24

140

2016

2017

2012

2013

2014

2015

2017

12,096
2016

102,660
18,034

28

153

2015

109,601

26

163

2014

16,693

25

174

130
2013

129,522

11,290（9,361）

2016

27

13,727（14,002）

2015

2012

120,268
22,771

13,351（15,303）

2014

29

2013

2017

118,937
28,568

2012

28

23
36
2016

113,662
24,607

21
2015

28
27

20
2014

11,435（7,646）

74

17
2013

5,945
（6,089）

65

18
36
2017

2012

5,525
（5,518）

2016

68

138

270
482,182
276,8702015

290,866

2014

2017

333,213357,3432013

421,184

354,1362012

2016

516,513169
2015

524,5282014

621,513

168

248

505
158
2013

520,835155
2012

500,033

Project Overview

518

4

2017

INPEX CORPORATA ION Annual Report 2017
AT

15

Project Overview by Region

Asia & Oceania

In the Asia and Oceania region, INPEX holds participating interests in the Offf shore Mahakam
ff
Block in Indonesia, which is contributing signiﬁcantly to earnings, and the large-scale Ichthys
and Abadi LNG projects, where development and preparatory development activities areunder way as the operator. The Company is also actively advancing more than 20 exploration
projects with growth potential across the region.

16

INPEX CORPORATA ION Annual Report 2017AT

1 Offshore Mahakam Block and Attaka Unit
INPEX entered into a production sharing contract (PSC) with the Indonesian
Government in October 1966, at thattime acquiring a 100% interest in the
Offshore Mahakam Block. The Attaka
Unit was established in April 1970
through the unitization of part of theadjacent blocks owned by INPEX andUnocal (now Chevron), with each company taking a 50% interest. Production of crude oil and natural gas has
continued since 1972. INPEX farmedout 50% of its interest in the Offshore
Mahakam Block to CFP (now TOTAL) in
July 1970. This venture subsequently
made a series of discoveries in theContract area
(block)Offshore Mahakam
Attaka Unit

Bekapai (oil), Handil (oil), Tambora (oiland gas), Tunu (gas), Peciko (gas), Sisi
and Nubi (gas) ﬁelds, as well as theSouth Mahakam Gas Fields (gas), eachof which has continued to produce
crude oil and natural gas. The crude
oil and condensate produced fromthese ﬁelds are shipped mainly to oil
reﬁneries and power companies inJapan by tanker from the Santan andSenipah terminals. Most of the natural
gas is supplied to the Bontang LNG
Plant, and then shipped as LNG to customers in Japan and elsewhere.
The Offshore Mahakam Block has
begun to see output decline after more

Project status(production on the basis of all fields and average rate of FY2016)
In production

Crude oil: 68 Mbbld
Natural gas: 1,362 MMcf/d
LPG: 7 Mbbld

than 40 years of production. In 2012,
impediments at production wells led
to a large drop in output, in addition tonatural attrition. Thereafter, successful
steps were taken to control the decline
in production by advancing efforts tocounter sand problems and accelerate the pace at which the Company
undertakes development well drilling.
Despite these endeavors, production
is still expected to decrease graduallyin the future. INPEX has been in discussions with Pertamina and TOTAL
concerning Participation in the block
after 2018.

Venture company(established)

Interest owned(*Operator)

INPEX CORPORATIONINPEX 50% TOTAL* 50%(February 21, 1966)

Bontang LNG Plant

INPEX 50% Chevron* 50%

Attaka Unit

Santan Terminal

Attaka Field

Badak Field
Nilam Field

4

Tunu Field

Project Overview

Tambora Field
Sisi Field

Handil Field

Nubi Field

Senipah Terminal

Bekapai Field

Balikpapan

Peciko Field

Offshore
MahakamBlock

INDONESIASouth Mahakam Fields
Gas field

Oil field

Oil and gas field

1

2

1: Booster station 2: Offshore platform during well drilling work

INPEX CORPORATION Annual Report 201717

2 Sebuku Block Ruby Gas Field

Offshore production facility in the Ruby Gas Field

In September 2010, INPEX obtained
a 15% interest in the Sebuku Block off
the shore of South Makassar, Indonesia. Thereafter, work began to develop
the Ruby Gas Field in the block, andproduction of natural gas followed in
October 2013. The natural gas produced here is transported from offshore production facilities via undersea
pipeline to onshore storage facilities
that receive products from the Offshore
Mahakam Block. The natural gas is thenmainly sent via inland pipeline to a fertilizer plant in East Kalimantan.

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2016)

SebukuIn production (Natural gas: 77 MMcf/d)

Bontang LNG Plant
Santan Terminal

Fertilizer plant
Attaka Field
Tunu Field

Senipah Terminal
Balikpapan

Peciko Field

Kalimantan

South Mahakam Field
Makassar Strait

INDONESIA

Sebuku BlockGas field
Oil field

Sulaewesi

Ruby Gas Field

Venture company(established)

Interest owned(*Operator)

INPEX South Makassar, Ltd.

INPEX South Makassar 15％
PEARL OIL (Sebuku) Ltd.* 70% TOTAL 15%(May 17, 2010)

3 Abadi LNG Project
INPEX acquired a 100% interest in
the Masela Block in November 1998
through an open bid conducted by theIndonesian government and subsequently went about exploratory activities as the operator, discovering theAbadi Gas Field through the ﬁrst exploratory well drilled in 2000. The Company
subsequently drilled two appraisal
wells in 2002 and four in 2007–2008, allof which conﬁrmed the presence of gas
and condensate reservoirs.
In December 2010, Indonesianauthorities approved the initial planof development (POD-1) deploying
a floating LNG (FLNG) plant with anannual processing capacity of 2.5
million tons, and from November 2012
to November 2014, INPEX undertook
SURF (subsea, umbilical, riser andflowline) and FLNG FEED work.
INPEX drilled three more appraisal
wells in 2013 and 2014 with theaim of expanding the volume ofrecoverable reserves, confirming agreater volume of natural gas reserves
that were certified by the Indonesianauthorities. Having revised its concept

selection studies to factor in thisincreased volume of reserves, INPEX
decided it would be optimal to center
development on a large-scale FLNG.
The Company submitted a revisedplan for the development based on
an FLNG plant with an annual LNG
processing capacity of 7.5 million
tons to the Indonesian authorities
in September 2015. In April 2016,
however, the Company received
a notification from the Indonesianauthorities instructing it to re-proposea plan of development based on
onshore LNG. The Company‘s policyof aiming for the early start-up of
development and implementing the
project in the most economically andtechnically rational way in alignment
with the policies of the Indonesian
government remains unchanged. In
accordance with this policy, based on
the constructive discussions with theIndonesian government regarding thedevelopment of the project based on
an onshore LNG development scheme,
INPEX has begun preparations for thecommencement of Pre-FEED work.

Contract area (block)

Project status

Venture company (established) Interest owned (*Operator)

MaselaPreparation fordevelopment

INPEX Masela, Ltd.
(December 2, 1998)

Abadi Gas Field

INDONESIA
Arafura Sea

AUSTRALIA

Timor Sea

DarwinGas field

INPEX Masela* 65%
Shell 35％
Drillship for the Abadi LNG Project

18

INPEX CORPORATION Annual Report 2017

4 The Ichthys LNG Project and Surrounding Blocks
Status of Development WorkRegarding the status of offshore facilities, construction work has ﬁnished
on a oating central processing facility(CPF) and a oating production, storage and of oading (FPSO) facility. A
naming ceremony for the facilities washeld in the South Korean shipyards in
February 2017, naming the CPF “Ichthys Explorer” and the FPSO “Ichthys
Venturer.” At the end of April 2017, the
CPF sailed away from the South Korean
shipyard following the completion ofcommissioning and preparation work,
arrived at the Ichthys gas-condensate
ﬁeld at the end of May, and mooring
was completed in late June. Plans callfor the FPSO to set sail for the projectsite soon. In other offshore-related
work, installation work was ﬁnishedin January 2017 on almost all of thesubsea infrastructure and equipment
needed to produce natural gas andcondensate. The drilling of production
wells is ongoing. With regard to theonshore LNG plant, INPEX has basically ﬁnished construction work on themain facilities and is currently carryingout connection work for the delivered
and installed modules, as well as ismaking steady progress with commissioning. 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
Interest owned(*Operator)

Contract area Project status(block)Venture company(established)

WA-50-L
WA-51-L

INPEX Ichthys Pty. Ltd. INPEX Ichthys Pty* 62.245%
TOTAL 30.000% CPC 2.625%(April 5, 2011)
Tokyo Gas 1.575% Osaka Gas 1.200%
Kansai Electric Power 1.200%
JERA 0.735%
Toho Gas 0.420%
INPEX Browse E&P Pty* 60% TOTAL 40%

WA-285-P
WA-343-P

AC/P36
WA-494-P
WA-274-P
WA-58-R
WA-74-R

WA-281-P

Under exploration
Under exploration(Oil/gas reservoirs conﬁrmed)

Under exploration

Under exploration(Oil/gas reservoirs conﬁrmed)

WA-57-R
WA-502-P
WA-504-P
WA-513-P
WA-514-P

Under exploration
Under exploration(Oil/gas reservoirs conﬁrmed)

INPEX Browse
E&P Pty. Ltd.
(October 21, 2013)

Surrounding Exploration Blocks
INPEX holds 14 exploration blocks inthe vicinity of the Ichthys gas-condensate ﬁeld and is currently engaging
in exploration activities. Of this total,
exploration work has led to the discovery of gas at eight blocks (WA-56-R,
WA-57-R, WA-58-R, WA-74-R, WA-281-P,
WA-274-P, WA-513-P, and WA-514-P).
Evaluation work is now being performed on these discoveries. In theevent that substantial amounts of crude
oil and natural gas are conﬁrmed as aresult of this exploration and evaluation
activity, synergies and other effects with
the Ichthys LNG Project are expected tofurther expand business.

Timor Sea

WA-513-P
WA-504-P

WA-274-P

WA-502-P

INPEX Browse E&P Pty* 50% Murphy 50%
INPEX Browse E&P Pty* 100%

WA-514-P

INPEX Browse E&P Pty 20.0000%
Santos* 47.8306% Chevron 24.8300%
Beach 7.3394%
INPEX Browse E&P Pty 20%
Santos* 30% Chevron 50%
INPEX Browse E&P Pty 40% Santos* 60%
INPEX Browse E&P Pty 40% Santos* 60%
INPEX Browse E&P Pty 40% Santos* 60%
INPEX Browse E&P Pty 40% Santos* 60%

Naming ceremony of FPSO Ichthys Venturer

WA-343-P

WA-57-R

INPEX Browse E&P Pty* 60% TOTAL 40%

INPEX Browse E&P Pty 20%
Santos* 30%
Chevron 50%

AC/P36

WA-58-R

WA-281-P

4

WA-74-R
WA-56-R

Project Overview

WA-56-R

Under development

petroleum gas (LPG) in sequence andthen ship these products.

WA-285-P
WA-494-P
IchthysWA-50-L
WA-51-L

Ichthys gas-condensate field

AUSTRALIACPF Ichthys Explorer after arriving at Ichthys gas-condensate ﬁeld

INPEX CORPORATION Annual Report 201719

5 Prelude FLNG Project (WA-44-L)
In June 2012, we acquired from Shella 17.5% interest in the Prelude FLNG
Project, which is located in WA-44-L,
approximately 475 km north-northeastof Broome, off the coast of Western
Australia. A production, liquefaction
and shipment project using FLNG, thePrelude FLNG Project consists of thePrelude and Concerto gas ﬁelds andwill approximately produce 3.6 million tons per year of LNG, 400 thousand tons per year of LPG at peak andapproximately 36 thousand barrels
per day of condensate at peak.

Shell (the operator) made the FID
on the Prelude FLNG Project in May
2011. Development of the Prelude
FLNG Project is currently under way. The
Project is expected to begin contributing to the campany’s ﬁnancial performance, including its cash ow, in 2018.

Timor Sea

Concerto Gas Field

WA-44-L

Prelude Gas Field

Ichthys
Gas-Condensate Field

AUSTRALIA

Gas field

The Prelude FLNG sail away

Contract area (block) Project status
WA-44-L

Under development

Venture company (established)

Interest owned (*Operator)

INPEX Oil & Gas Australia Pty. Ltd. (February 28, 2012)

INPEX Oil & Gas Australia 17.5%
Shell* 67.5% KOGAS 10.0% OPIC 5.0%

6 Tangguh LNG Project (Berau Block)
MI Berau B.V., jointly established by
INPEX and Mitsubishi Corporation,acquired an interest in the Berau Blockin October 2001. In October 2007, MI
Berau Japan Ltd., a joint venture with
Mitsubishi Corporation, acquired astake in KG Berau Petroleum Ltd., effectively increasing the Company’s interest to around 7.79% in the Tangguh

LNG Project.
In March 2005, the Indonesian
Government approved an extensionof the production sharing contract(PSC) and project development plans
for the Tangguh LNG Project through2035. Development work commenced
thereafter, and the first shipments of
LNG began in July 2009.

The FID for expanding the Tangguh
LNG Project was announced in July
2016. The Tangguh Expansion Projectwill add a third LNG process train with
3.8 million tons per annum (mtpa) ofproduction capacity to the existing
two trains with 7.6 mtpa of production
capacity. Plans call for production tocommence in 2020.
Papua Province (Indonesia)

Berau BlockGas field
Shipping facility

Venture company Interest owned
Contract area Project status(block)(production on the basis of all fields and average rate of FY2016) (established)(*Operator)
Berau
TangguhUnit

20

In production

Crude oil: 6 Mbbld
Natural gas: 1,023 MMcf/d

INPEX CORPORATION Annual Report 2017

Ml Berau 22.856% BP* 48.000％
Nippon Oil Exploration (Berau) 17.144% KG Berau 12.000%
MI Berau B.V.
MI Berau 16.30％ *BP 40.22% CNOOC 13.90％(August 14, 2001)
Nippon Oil Exploration (Berau) 12.23% KG Berau 8.56%
LNG Japan 7.35% KG Wiriagar 1.44%

7 Van Gogh Oil Field, Ravensworth Oil Field and Others
INPEX acquired interests in offshore
Western Australia WA-155-P (PartI) in July 1999, after which the Van
Gogh and Ravensworth oil fields werediscovered. The Australian Government
granted production licenses for theabove oil fields as the WA-35-L andWA-43-L blocks, at which oil productioncommenced in February and August of
2010, respectively. The development of
the Coniston Oil Field, which saddles
WA-35-L and WA-55-L, was started
in December 2011, and crude oil
production commenced in May 2015.
Van Gogh FPSO vessel

Project status
Venture(production on the basis of allcompany
fields and average rate of FY2016) (established)

Contract area (block)WA-35-L(Van Gogh Oil Field)

WA-43-L(Ravensworth Oil Field)

WA-155-P (PartⅡ)

INPEX Alpha 47.499%
Quadrant* 52.501%

In production (Crude oil: 10 Mbbld)

WA-35-L & WA-55-L
Unitization area

In production (Crude oil: 6 Mbbld)

Interest owned(*Operator)

INPEX
Alpha, Ltd.
(February17, 1989)

Under exploration

Indian Ocean

WA-35-L & WA-55-L
Unitization
Van Gogh Oil Field

INPEX Alpha 47.499%
Quadrant* 52.501%
INPEX Alpha 28.500%
BHPBP* 39.999%
Quadrant 31.501%
INPEX Alpha 18.670%
Quadrant* 40.665%
OMV 27.110% JX 7.000%
Tap 6.555%

Barrow Island

WA-155-P（Part II）
Ravensworth Oil Field

WA-43-L
Exmouth

Onslow

AUSTRALIA

Oil ﬁeld

4
Project Overview

8 Bayu-Undan Project (JPDA03-12)
In April 1993, INPEX acquired aninterest in JPDA03-12, a contract area
located in the Timor Sea JPDA, which
is jointly managed by Australia andEast Timor. Exploration within thiscontract area resulted in the discovery

EAST TIMOR

of oil and gas ﬁelds. Of these, studies revealed that the Undan structure
and the Bayu structure in the adjacent
JPDA03-13 contract area were a single
structure. The interest holders unitizedboth contract areas in 1999, allowing

joint development of the Bayu-Undan
Gas-Condensate Field to proceed.
The commercial production and shipment of condensate and LPG started
in 2004 and LNG in February 2006.

INDONESIA
Abadi Gas Field
Timor Sea
Joint Petroleum Development Area

Darwin Gas Pipeline
Bayu-Undan
Gas-Condensate Field
Gas field

DarwinAUSTRALIA

Oil field
Bayu-Undan offshore facility

Project status
Contract area
(production on the basis of all(block)fields and average rate of FY2016)
JPDA03-12
Bayu-Undan
Unit

In production

Crude oil: 20 Mbbld
Natural gas: 561 MMcf/d
LPG: 13 Mbbld

Venture company Interest owned(established)(*Operator)
INPEX Sahul, Ltd.
(March 30, 1993)

INPEX Sahul 19.2458049% ConocoPhillips* 61.3114766% Santos 19.4427185%
INPEX Sahul 11.378120% ConocoPhillips* 56.943372% Eni 10.985973%
Santos 11.494535% Tokyo Timor Sea Resources (JERA / Tokyo Gas) 9.198000%

INPEX CORPORATION Annual Report 201721

Eurasia
In the Eurasia region, INPEX has large-scale crude oil projects in Azerbaijan (ACG) andKazakhstan (Kashagan). Having acquired exploration projects in the Far East region of Russia,
the Company has partially transitioned to the development and production stages.

1 Offshore North Caspian Sea Contract Area (Kashagan Oil Field and Others)
In September 1998, INPEX acquired aninterest in the Offshore North Caspian
Sea Contract Area in Kazakhstan’s territorial waters. The Offshore North Caspian Sea Contract Area consists of two
blocks: the East Block is about 4,300 km2
and the West Block is about 1,275 km2
in area (for a total of about 5,575 km2).
The Kashagan Oil Field, which is in the
East Block, is located in the Caspian Sea
at depths of 3–5 m and is approximately
75 km southeast of Atyrau, Kazakhstan.
Since the ﬁrst exploratory well
was drilled in September 1999, theKashagan Oil Field was conﬁrmed in2000 and commercial discoveries wereannounced in 2002. After development
work, the Kashagan Oil Field began

22

producing crude oil in September 2013.
Production was temporarily halted due
to a pipeline gas leak, but production
resumed shortly thereafter. Shipmentsof crude oil commenced in October
2016. Besides the Kashagan ﬁeld, thepresence of hydrocarbon reserves

was also conﬁrmed in the surrounding
Kalamkas, Aktote and Kairan structures.
Appraisal of these three structures is
continuing in parallel with the development of the main Kashagan ﬁeld with aview to expanding the total productionof the contract area.

Offshore facility

Contract area (block)

Project status (production on the basis of
Venture company (established) Interest owned
all fields and average rate of FY2016)

Offshore
North Caspian Sea

In production

Crude oil: 55 Mbbld
Natural gas: 96 MMcf/d

INPEX CORPORATION Annual Report 2017

INPEX North Caspian Sea, Ltd.
(August 6, 1998)

INPEX North Caspian Sea 7.56% Eni 16.81% ExxonMobil 16.81%
KMG 16.87% Shell 16.81% TOTAL 16.81% CNPC 8.33%

2 ACG Oil Fields
INPEX acquired an interest in the
Azeri-Chirag-Gunashli (ACG) Oil Fields
in a region of the south Caspian Sea in
Azerbaijan in April 2003. At the ACG

Oil Fields, oil is being produced at
the Chirag, the Central Azeri, the West
Azeri, the East Azeri, the Deepwater
Gunashli and the West Chirag.

Contract
area(block)Project status(production on
Venture company(established)
the basis of all fields
and average rate of FY2016)

ACG

In production(Crude oil: 609 Mbbld)

Offshore production facilities

KAZAKHSTANInterest owned(*Operator)

INPEX Southwest Caspian Sea 10.96%
INPEX Southwest
BP* 35.78% Chevron 11.27% SOCAR 11.65%
Caspian Sea, Ltd.
Statoil 8.56% ExxonMobil 8.00% TPAO 6.75%(January 29, 1999)
Itochu 4.30% ONGC 2.72%

AtyrauRUSSIA

Offshore
North Caspian Sea
Contract Area

GEORGIA

Project Overview

Black Sea

4

Caspian Sea

Tbilisi

Baku

ARMENIA
TURKEYAZERBAIJANBTC Pipeline

ACG Oil Fields

CeyhanMediterranean
Sea

SYRIA

IRAN

IRAQ

Oil ﬁeld

3 BTC Pipeline Project
The 1,770-km BTC pipeline stretchesfrom Baku in Azerbaijan on the coastof the Caspian Sea to Ceyhan in Turkey.
Full-scale operation commenced inJune 2006. Total transportation capacity
stands at 1.2 million barrels per day,mainly for crude oil produced in the
ACG Oil Fields in Azerbaijan.

Contract area
(block)Venture company(established)

Interest owned(*Operator)

BTC Pipeline

INPEX BTC Pipeline, Ltd.
(October 16, 2002)

INPEX BTC Pipeline 2.50% BP* 30.10%
Azerbaijan (BTC) Limited 25.00% Chevron 8.90%
Statoil 8.71% TPAO 6.53% Eni 5.00% TOTAL 5.00%
Itochu 3.40% CIECO 2.50% ONGC 2.36%

Shipping terminal

INPEX CORPORATION Annual Report 201723

Middle East & Africa

In the Middle East, the ADMA Block offshore Abu Dhabi in the United Arab Emirates and theonshore ADCO Block, in which INPEX acquired a participating interest from April 2015, arecontributing substantially to the Company’s oil production capacity. In Africa, oil production
is ongoing at various locations including the Offshore Angola Block 14.

1 ADMA Block

Zirku Island

Contract area (block)

In May 2004, INPEX made Japan Oil
Development Co., Ltd. (JODCO), a
wholly owned subsidiary by acquiring all of the JODCO shares held byJapan National Oil Corporation (atthat time) through a share exchange.
JODCO owns an interest in the ADMA
Block located offshore Abu Dhabi in the
United Arab Emirates. Oil production
currently spans seven ﬁelds in the block.
In addition, a number ofdevelopment projects are under way
to maintain and expand oil output,
such as redevelopment of the Upper
Zakum Oil Field involving the use of

Project status

Venture company (established)

In production

Japan Oil Development Co., Ltd.
(JODCO)(February 22, 1973)

Umm Shaif Field, Lower Zakum Field,
Umm Lulu Field, Nasr Field
Upper Zakum Field
Umm Al-Dalkh Field
Satah Field

24

INPEX CORPORATION Annual Report 2017

artificial islands, as well as Phase 2
development and other work, with theaim of engaging in overall production
at the Umm Lulu and Nasr oil fields.

Satah Field
Das
IslandNasr Field
Umm Shaif Field

Zirku Island

Upper Zakum/
Lower Zakum
Field

Umm Al-Dalkh Field
Umm Lulu Field
Abu Dhabi

U.A.E.

Oil field

Subsea pipeline

Interest owned
JODCO 12.00% ADNOC 60.00% BP 14.67% TOTAL 13.33%
JODCO 12.00% ADNOC 60.00% ExxonMobil 28.00%
JODCO 12.00% ADNOC 88.00%
JODCO 40.00% ADNOC 60.00%

2 ADCO Onshore Concession
Through its wholly owned subsidiary,
Japan Oil Development Co., Ltd.
(JODCO), INPEX acquired a 5% interestin the ADCO Onshore Concession in
Abu Dhabi in April 2015 following its
participation bid. The Company also
concluded a 40-year agreement with
the Supreme Petroleum Council of
the Emirate of Abu Dhabi and Abu
Dhabi National Oil Company (ADNOC)

Abu Dhabi

United Arab Emirates

Crude oil pipelines
Oil fields in production

Undeveloped oil fields

that came into effect on January 1,
2015. The concession is one of theworld’s largest deposits of oil and ismade up of 15 principal onshore oilfields in Abu Dhabi of which 11 arecurrently in production and four remain
undeveloped. Steps are being taken to
pursue development work with the aimof increasing oil production capacity to
1.8 million barrels per day.

Contract area (block)

Project status

Venture company (established) Interest owned

ADCO

In production

JODCO Onshore Limited(April 15, 2015)

JODCO 5% ADNOC 60%
TOTAL 10% BP 10% CNPC 8%
CEFC 4 % GS 3%

4
Onshore pipeline

Project Overview

Concession agreement signing ceremony held in April 2015

3 Angola Block 14
Participating through a joint venturecompany with TOTAL S.A., INPEX
acquired a 9.99% indirect interest in
the oil-producing Angola Block 14 in
February 2013. Located approximately
100 km offshore from Cabinda,
Angola, Block 14 includes discovered
and undeveloped fields. Crude oil iscurrently being produced from fourdevelopment areas, and steps arebeing taken to pursue exploration
potential within the block.
CONGO

AngolaBlock 14

Production facility

Contract area
(block)Project status
Venture company(production on the basis of all fields and average rate of FY2016) (established)

Offshore
In production (Crude oil: 104 Mbbld)
Angola Block 14

Atlantic
Ocean

The State ofCabinda

Democratic
Republic of
Congo

ANGOLA

Interest owned(*Operator)

Angola Block 14 B.V. Angola Block 14 B.V. 20.00% (including 9.99% of INPEX’s interest)(April 19, 2012)
Chevron* 31.00% Sonangol 20.00% Eni 20.00% Galp 9.00%

INPEX CORPORATION Annual Report 201725

Americas
In Canada, INPEX participates in shale gas projects and others. The Company is also engaged
in projects including a major deepwater exploration project in the U.S. Gulf of Mexico (Lucius)and off
f shore oil projects in Brazil.
ff

26

INPEX CORPORATA ION Annual Report 2017AT

1 Shale Gas Project in Canada
In August 2012, INPEX acquired a 40%
interest in the shale gas projects in theHorn River, Cordova and Liard basinsin British Columbia, Canada, from
Nexen Inc.
Some production is under way,and INPEX is examining whether toperform more development work andimplement studies to consider commercialization to export shale gas as
LNG from the Canadian west coast.

Shale Gas Project
British Columbia
CANADA

Prince Rupert

Edmonton

Calgary

VancouverInterest owned (*Operator)

Contract area (block)

Project status

VentureV nture company (estaVeestablished)

Horn River,r Cordova and Liard areasr,

In production (partpartlyr ly)rt

INPEX Gas British Colum
Columbia Ltd. (November 28,
2011)
Victoria

Oil field
INPEX Gas British Columbia 40% Nexen*
60%

2 Gulf of Mexico Projects and Others

アメリカ合衆国

Energía de Mexico, S de R.L. de C.V.

In August 2012, INPEX joined the
deepwater Lucius Oil Field in the Gulf
of Mexico and acquired a 7.2% interest
from U.S.-based Anadarko Petroleum
Corporation. Oil and gas production
at the Lucius Oil Field has proceeded
steadily since its commencement inJanuary 2015.
In December 2016, INPEX, Chevron(Chevron) and Pemex Exploración yProducción (Pemex) made a successful

joint bid for the first round of deepwater
exploration of Block 3 located in the
Perdido Fold Belt in the Mexican sectorof the northern Gulf of Mexico. INPEX
holds a 33.3333% participating interest,and is conducting exploration activities.

Project status(production on the basis of all fields andaverage rate of FY2016)

Blocks 874/875/918/919(Lucius Oil Field)

In production

Mexican sector of the northern
Gulf of Mexico Block 3

Under exploration

Crude oil: 73 Mbbld
Natural gas: 75 MMcf/d

Ship Shoal
Block 72
Walker Ridge 95

MEXICO

Block 3Blocks 874/875/918/919(Lucius Oil Field)

VentureVVe
ntu company(esta
established)

Interest owned(*Operator)TTe
iko Oil (North America)
TeikokuCo., L
Ltd. (May 30, 2003)

Teikoku Oil (North America) 7.8％
Anadarko* 23.8％ Other 68.4％

INPEX
INPE E&P Mexico S.A. de C.V.

INPEX E&P Mexico 33.3333% Chevron* 33.3334%
Pemex 33.3333%(Janu
January 25, 2017)

4
Project Overview

Contract area
(block)UNITED STATES

Cuervito/
Fronterizo
Blocks3 Brazil (Frade Project and Others)
A joint venture established by INPEXand Sojitz Corporation, Frade Japão
Petróleo Limitada (FJPL) acquired aninterest in the Frade Project in Brazil’s
offshore Northern Campos basin in July
1999. Commercial production started
in June 2009. Crude oil production
was temporarily suspended in March2012 due to the presence of a small oil
sheen but safely resumed at the endof April 2013.
Having also acquired a 15% inter-

est in the BM-ES-23 concession in the
Espírito Santo Basin off the southeast
coast of Brazil in February 2010, theCompany is advancing exploration
activities together with other companies, including the operator, Petrobras.
The presence of quality oil and gas
deposits has been conﬁrmed at thesame concession as a result of exploratory and appraisal well drilling. Evaluation work continues.

Contract
area (block)

Project status
Venture company(production on the basis of all fields and average rate of FY2016) (established)

Frade
Project

In production

BM-ES-23

Under exploration (Oil/gas reservoirs conﬁrmed)

Crude oil: 22 Mbbld
Natural gas: 2 MMcf/d

Vitoria

BM-ES-23

BRAZIL
Atlantic Ocean

CamposFrade Project

Macae

Oil field

Interest owned(*Operator)

Frade Japão Petróleo Limitada(FJPL) (July 5, 1999)

Frade Japão Petróleo 18.2609%
Chevron* 51.7391% Petrobras 30.0000%

INPEX Petróleo Santos Ltda.
(January 19, 2007)

INPEX Petróleo Santos 15%
Petrobras* 65% PTTEP 20%

INPEX CORPORATION Annual Report 201727

JapanYabase Oil Field

INPEX is active in the Minami-Nagaoka Gas Field in Niigata Prefecture, one of thelargest of its kind in Japan, and participates in other oil and natural gas projects.
In addition, the Company operates a domestic trunk pipeline network. INPEX
also commenced operation the Naoetsu LNG Terminal in December 2013.

Sekihara Gas Field(underground storage)

Naoetsu LNG Terminal

ToyamaToyama Line

ToyamaCity

Minami-Nagaoka Gas Field
Fiel

Shin Oumi Line

Domestic
Natural Gas
Ga

Tomi BS*

Matsumoto City

Chino City
Chin

NaganoPrefecture
Kofu Line[Shizuoka Gas]

Shizuoka Shizuoka City
Prefecture
Minamifuji Line

Gunma Prefecture
Prefectur

Karuizizawa
Town

Matsumoto Line

Kofu City

Honjo City

Sano City
Konosuno Cityy

Iruma LineOme City

Oil and gas fields

SaitamaPrefecture
Prefectur

Adachi-ku, Tokyo

Metropolitan
Tokyo

Gotemba
Got
mb
City

Regasified
LNG(INPEX, Shizuoka Gas, Tokyo Gas)

Tochigi
Prefecture

Ryomo Line

Shizuoka Line

Fuji Ci
Ci y
Cit

Fujioka BS*

Shin Tokyo Line

Tomiokam oka
CityYamanashi
Prefecture

S
Town

Niigata
Prefecture

Domestic Natural Gas /Regasified LNG
LN

Tokyo Line
T

Second Suruga Trunk Line

Minami-Kuwayama Oil Field
Nagaokaoka City

Nagano City

Sodeshi LNG Terminal

Minami-Aga Oil Field

Joetsu Cityy

ToyamaPrefecture

East Japan Station

Niigata Ci
City
Cit
y

Kashiwazaki
aki
ki
Cit
City

Itoigawa
City
City
Cit

Akita Prefecture
Prefectur

Chiba City

Technical Research Center

Other project
Natural gas
pipeline network

Head Office(Akasaka, Minato-ku)* BS・・・Booster station

Narita Line

(Kitakarasuyama, Setagaya-ku)
Setagaya-ku
Sam
S
Sammu
Samm
Sa
a
City

Major office
officNaruto Gas Field

Chiba
Prefecture0

100 kmNatural Gas Business in Japan
In the natural gas business in Japan, thenatural gas produced from the Company-held Minami-Nagaoka Gas Field(Niigata Prefecture), as well as the LNG
and other products received at the
Naoetsu LNG Terminal (Niigata Prefecture), which commenced operations in
December 2013, is transported througha trunk pipeline network of approximately 1,500 km stretching across the
Kanto, Koshinetsu and Hokuriku regions,

28

INPEX CORPORATION Annual Report 2017

and sold to customers including city gas
companies and large-scale plants along
the aforementioned network.
INPEX has experienced steady
growth in sales of natural gas volume
due to efforts to expand its supply
infrastructure, as well as the highly
environmentally friendly attributes ofnatural gas. Natural gas is expected to be
used for a wide variety of applications,
not only as a fuel for thermal energy

but also as a fuel for onsite power
generation and co-generation, as well
as a fuel for natural gas electric power
plants and a raw material for chemical
products. INPEX is targeting annual
sales of 2.5 billion m3 by the early 2020s
and as much as 3.0 billion m3 overthe long term. In October 2016, theCompany marked the full-scale openingof the Toyama Line, a natural gas trunk
pipeline stretching from Itoigawa City,

Niigata Prefecture, to Toyama City,
Toyama Prefecture, that had been underconstruction since 2012.
Alongside the full deregulation of
the electric power market since April
2016, INPEX has responded to growing
demand from gas-fired electric power
plants and is engaged in the electric
power wholesale business with partner
Chubu Electric Power Co., Inc., for the
supply of electric power to city gas

Natural Gas Sales Volume in Japan(100 million Nm3/year) Note: 41.86MJ per 1m3

17.2

17.6

17.5

18.0 17.9

17.5

19.1

2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3

companies. Moreover, in light of the fullderegulation of the gas retail market
from April 2017, INPEX undertook areorganization of relevant areas withthe objective of enhancing marketing
capabilities and advancing businessstrategies suited for the entire domesticgas business, in order to precisely
address changes in the businessenvironment, including changes in thecompetitive landscape in the domesticgas market, as well as the creation andstrengthening of demand as companies
shift to natural gas in the Company’s gas
wholesale service areas.
At the Naruto Gas Field in Chiba
Prefecture, natural gas is being
produced from water-soluble gas
fields. In addition, after extracting thenatural gas from underground water(brine water), the brine water is used
to produce iodine, which is exported
to Europe, the United States andelsewhere.

Sea ofJapan

Echigo Line

Sekihara Gas Field(underground storage)

MitsukeCity

Shinetsu
HonsenNagaokaCity

JoetsuShinkansen
Line

Kashiwazaki City

Minami-Nagaoka
Gas Field
Gas ﬁeld

Ojiya City
Joetsu Line

Natural gas pipeline crossing a river(Shibumi River, Niigata Prefecture)

Renewable Energy and Other Initiatives
In March 2013, the Company began
generating electricity at INPEX Mega
Solar Joetsu, a solar power plantwith a maximum output of 2 MW,
located on the former site of an oil
refinery that it shut down in Joetsu
City, Niigata Prefecture. In 2014,
through cooperation between Group
companies, a new 2MW solar power
plant was built next to the original site.
Power generation began in July 2015. Itis estimated that these two solar power
plants will generate around 5,330,000
kWh annually, enough electricity topower 1,600 homes.
In addition, INPEX constructed ahigh-efﬁciency gas turbine combined
cycle thermal power plant with an
output of about 55,000 kW next to its
Koshijihara plant in Niigata Prefectureand has been supplying electricity on
a wholesale basis to power producers
and suppliers (now retail electricity providers) since May 2007.

Geothermal Development

Geothermal power is the generationof electricity with turbines poweredby steam produced from the thermalenergy of magma underground.
With a view toward geothermal
power generation, INPEX and Idemitsu
Kosan Co., Ltd., have jointly conducted
geothermal surveys in the Amemasudake region of Hokkaido Prefecture
and the Oyasu region of Akita Prefecture since 2011. Joined by Mitsui Oil
Exploration Co., Ltd., in 2012, the companies undertook geothermal resource
surveys by drilling a total of ﬁve survey
wells in the Amemasudake region andsix more survey wells in the Oyasu
region from 2013 to 2016.
In ﬁscal 2017, we plan to continue
conducting geothermal resource surveys by drilling at one of the Amemasudake survey wells and at one of the
Oyasu wells.
Also a member of the geothermal
resource survey group in Fukushima
Prefecture, INPEX has been conducting land surveys in areas surrounding
Mt. Bandaisan since September 2013.
Having conducted geophysical surveys from 2014 to 2015, two survey
wells were drilled in the Bandai regionin 2016. We plan to continue evaluation work based on the results of thedrillings.

4

Moreover, INPEX took steps to participate in the Sarulla Geothermal Independent Power Producer (IPP) Project inIndonesia from June 2015. The project
involves constructing a world-class geothermal power plant in the Sarulla Geothermal Field located in the island province of North Sumatra, and plans callfor providing generated power to Indonesia’s government-owned electricity
company over a period of 30 years.
Construction of the power generation
plant began in 2014. In March 2017,
commercial operations were launchedwith 110 MW of electricity being generated by the ﬁrst unit. We are proceeding with construction and other workon the plant’s second and third units
with the aim of commencing commercial operations in sequence, and expect
the amount of power generated to be
increased to 330 MW in stages.

Project Overview

Power Generation Business in Japan

Sarulla Geothermal IPP Project

INPEX CORPORATION Annual Report 201729

Sustainability

Sustainability

INPEX aims to further enhance its reputation as a company essential to society bycontributing to economic growth and social development through its business
operations. Fulﬁlling our corporate social responsibility (CSR) is a vital plank in
the platform that supports our existence and business. Each year, we take steps
to evaluate the progress of our CSR activities and to push forward all appropriate
measures from a medium- to long-term perspective.
1 CSR Promotion System

2 Relationships with Major Stakeholders

INPEX has clearly expressed the CSR stance of executive
management and established the CSR Committee, chairedby the President & CEO, to promote company-wide and systematic CSR activities. The CSR Committee members include
the Representative Director & Chairman, the head of theGeneral Administration Division and the head of the Corporate Strategy & Planning Division (vice chair). The chairs of
the Compliance Committee and the Corporate HSE Committee attend CSR Committee meetings to facilitate collaboration with their respective committees.

The INPEX Group seeks to maintain continuous dialogue
with a wide range of stakeholders in the Group’s businesses
to achieve sustained growth and enhancement of corporate
value while fulﬁlling its social responsibility of providing astable and efﬁcient supply of energy.
1
2

8

CSR Promotion System
73

General Meeting of Shareholders

Nomination andCompensation
Advisory Committee
Advisory Committee
Compliance
Committee

Board ofDirectors

Audit &
Supervisory Board

5

Executive
Committee

1 Project Partners

5 Local Communities

2 Contractors

6 NGOs

We aim to build a sustainable society
together with project partners throughfair and impartial project operation with afocus on compliance.

CSR Committee
Corporate HSE
Committee
Information Security
Committee
INPEX Value Assurance
System Committee

CSR Promotion
Council

INPEX CORPORATION Annual Report 2017

We seek to coexist with local communities as a good corporate citizen throughrespectful dialogues.

We engage in day-to-day regular communication with contractors to carry out
construction and operation with maximum consideration for safety and theenvironment.

We strive to build a network of NGOs inwide-ranging ﬁelds including environment, human rights, and social contribution and seek to create partnerships tosolve environmental and social problems.

3 Customers

7 Employees

We contribute to the growth and development of our customers by providing a stable and efﬁcient energy supply and delivering safety, peace of mind and efﬁciency.

We provide opportunities for employees
to grow into professionals who can thrivein an international business environment
through wide-ranging work experienceand interaction with people from diverse
backgrounds in a global corporation.

4 Shareholders and Investors

8 Oil- and Gas-Producing Countries

We strive for highly transparent information disclosure and aim to increase corporate value by meeting the expectations ofshareholders and investors.

30

4

6

We develop long-term relationships
based on mutual trust with oil- andgas-producing countries and contributeto mutual development by serving as abridge between the producing countries
and other countries, including Japan.

3 Material CSR Issues Addressed by the Company
As a global energy company that aims to constantly expand its upstream operations, in April
2012 the Company identiﬁed the Material CSR
Issues that it would tackle as important issues on apriority basis in a bid to gain the trust of all stakeholders. In May 2015, we reviewed the overall
initiatives conducted over the three-year period
for each of the ﬁve Material CSR Issues identiﬁed
three years earlier. At the same time, we reexamined the Material CSR Issues in light of suchfactors as events that affect our business activities accompanying progress in our main projects
and changes in the concerns of shareholders.
We then reidentiﬁed our Material CSR Issues andadded “Governance” as a sixth area of concern.
In addition, actions that we should prioritize
for each theme are deﬁned as “important issues”
and are incorporated into our PDCA cycle so that
improvements are made on an ongoing basis.
Incorporating the perspectives from the Sustainable Development Goals (SDGs)* into the existing issues, in ﬁscal 2017 we implemented the four
steps on the right and conducted a review of theimportant issues.

Process for Setting Out Important Issues
Referring to our own policies, GRI standards, theSDGs, SRI/research organization evaluation items,
etc., we extracted social issues to consider. In
extracting the issues, we gave consideration to theboundaries and the content of the dialogue withstakeholders.

STEP

1

STEP

2

STEP

3

Based on the results of the stakeholder questionnaire survey, we evaluated social issues along twoaxes, the degree of their importance to stakeholders and to the Company’s management.

STEP

4

Advisory Committee member Ms. Kaori Kuroda
conducted reviews of the qualitative information on
the importance to stakeholders and to the Company’s management as well as of the matrix.

Ascertaining Current
Situation/Gap Analysis

Stakeholder Dialogue

Prioritizing of Issues

Management Review

We conducted a questionnaire survey in February
2017 to conﬁrm stakeholders’ expectations/concerns with regard to the issues that we should be
addressing.

*The 17 goals set as action plans for people, the Earth and prosperity at theUnited Nations Sustainable Development Summit in September 2015.

Level of importance to stakeholders

High-priority areas

Development and production of oil/natural gas
Building of governance framework
Building of risk management system
Respect for human rights
Observance of laws and regulations
as well as compliance with
anti-bribery/corruption (ABC)
measures
Implementation of social/environmental impact assessments
in procurement
Prevention of major disasters
Ensuring occupational healthand safety

Conservation of biodiversity andefﬁcient use of water resources
Impact assessments on local
communities/indigenous people,
implementation of measures tomitigate any impact
Contribution to local economy
Promotion of renewable energy
business
Promotion of environment-friendly
natural gas development
Response to climate change issues
Human resource development andfair appraisals
Promotion of diversity

5
Sustainability & Governance

Level of importance to Company management(Necessity/degree of urgency to strengthen organization)

INPEX Important Issues

In this section of Annual Report 2017, we outline the progress made in the ﬁscal year ended March 2017
and the plans for the ﬁscal year ending March 2018 for each of the important issues in the Material CSR
Issues. For more speciﬁc efforts of each theme, please see Sustainability Report 2017.
Sustainability Reportr 2017rt
INPEX publishes its Sustainability Report annually to keep its stakeholders informed of its CSR
initiatives and activities. To
T help our stakeholders efﬁciently
efﬁ
f ciently and effectivelyfﬁ
eff
f ectively understand the value
ffthat our Company creates, we have strategically compartmentalized the reporting media andprepared the Sustainability Report 2017 in printed booklet, PDF and online formats on the basisof the Material CSR Issues.
Readers can access and order each of these reports via the Company’s CSR Web site.
} www.inpex.co.jp/english/csr/

INPEX CORPORATION Annual Report 201731

Sustainability

Material CSR Issue Results and Goals
Material CSR Issue

Related Sustainability Development Goals (SDGs)

GovernanceImportant Issues
Build up a governanceframework
Build up a risk management
systemManagement Advisory Committee

Compliance

Respect human rights

Observe laws and regulations
as well as comply with anti-bribery/corruption (ABC) measures
General view of training session

HSE

Implement social/environmental
impact assessments in procurement

Prevent major disasters

2016 HSE CEO Forum attendees

Ensure occupational healthand safety
Conserve biodiversity andefﬁciently use water resources

Local
Communities

Conduct impact assessments
on local communities/indigenous
people, implement measures
to mitigate any impact
Contribute to local economy

Students selected as scholarshipstudents under the Larrakia
scholarship system by the
Ichthys LNG project

Addressing
ClimateChangePromote renewable energy
businesses

First unit of the Sarrula
Geothermal IPP Project

Promote environmentfriendly natural gas development
Respond to climate change
issuesEmployees

Develop human resourcesand ensure fair appraisals
Promote diversity

Recruitment/training team
*1 Business Continuity Plan : For important business not to be brought to a halt even in the event of a disaster, a plan to select business tasks to be continued andpreparations for a system to enable business continuity.
*2 Business Continuity Management : Management activities from normal times to implement education/training and conduct ongoing improvements to decide, maintain/update BCP and ingrain initiatives

32

INPEX CORPORATION Annual Report 2017

Fiscal 2016 Results

Fiscal 2017 Goals

Evaluated effectiveness of Board meetings as a whole and disclosed summary ofevaluation results, clariﬁcation of items to be improved on a priority basis andresponses to them
Established the Nomination/Remuneration Advisory Committee

Continue to evaluate and improve eff
f ectiveness of Board meetings as a wholeff(establishment of a PDCA cycle)
Promote smooth operation of the Nomination/Remuneration Advisory Committ
t ee
tt

Reviewed HQ BCP*1 for earthquakes and provided relevant education and training

Promote, educate and train HQ BCM*2 for earthquakes

Strengthened efforts toward more advanced human rights management, including UK
Modern Slavery Act 2015 statement disclosure

Strengthen eff
f orts toward more advanced human rights management including
ff
putting in place a human rights policy
Implement human rights training (target participation rate: 90%)

Implemented ABC-related risk assessment at two overseas ofﬁces
Revised ABC Guidelines, created and commenced operation of their procedures
Promoted global compliance activities through collaboration with Jakarta ofﬁce anddepartment in charge of compliance at Perth ofﬁce

Continue to implement ABC-related risk assessments at overseas ofﬁ
f ces
fﬁ
Vigorously promote awareness toward and an understanding of ABC regulations andstrengthen operation (implement training and other measures)
Upgrade and expand global compliance systems

Participated in the United Nations Global Compact network of Japan’s Supply Chain
Working Group, contributed to creation of cross-industry supplier self-evaluationquestionnaire
Implemented risk assessments covering major service/construction contractor
candidates in Japan (eight ABC-related risk reviews; 30 HSE evaluations)
Implemented risk assessments covering major service construction contractor
candidates in Australia and Indonesia (ABC-related risk assessments, HSE evaluations)Continue to participate in the United Nations Global Compact network of Japan’s Supply
Chain Working Group
Implement cross-industry supplier self-evaluation questionnaires to domestic major
suppliers/ contractors
Continue risk assessments covering major suppliers/contractors

Revised environmental safety policy and HSE management system regulations
As planned, conducted corporate HSE audits and reviews and undertook management
HSE site visits
Reported HSE risk management information to management meetings, continued tocreate safety cases
Performed Level 3 emergency response training exercises as planned a total of four times

Improve HSE management systems
Implement education and training for all employees
Improve HSE assurance/governance levels
Strengthen HSE risk management processes
Implement more practical levels of emergency response training

Implemented HSE technical support in Japan and overseas and shared HSE lessons
learned from construction work in various places at HSE forums
Maintained a lost-time injury frequency (LTIF)*3 of 0.11, and a total recordable injury rate
(TRIR)*4 of 0.97

Promote HSE technical support and strengthen onsite HSE management capabilities
Maintain incident reduction targets: LT
L IF 0.12; TRIR 0.81 or lessEstablished the Environmental Management Working Group

Collect environmental risk information
Strengthen environmental management

Japan

Provided information on the operational status and safety initiatives at
Naoetsu LNG Base through local brieﬁngs and newsletters

Maintain good dialogue through ongoing interaction with stakeholders, including
brieﬁngs for local communities and publishing of newsletters

Australia

Engaged in dialogue with more than 230 stakeholders
Held meetings on six occasions with the INPEX Larrakia Advisory Committee

Reduce the impact on the local community in the transition from the construction of theIchthys LNG Project to the operations phase, maintain good relations with stakeholders

GlobalINPEX Group social investment planned expenditures: ¥1.34 billion

INPEX Group social investment planned expenditures: ¥1.64 billion

Australia

Implemented 39 regional support programs

Maintain the number of indigenous employees at 1% of directly hired employees

Ichthys
LNG
Project*5

More than 8,700 Northern Territory local residents engaged in construction work
Placed contract orders with more than 1,100 Northern Territory-based local companies
Contributed more than A$1.7 billion to the Australian domestic economy
Engaged more than 1,200 indigenous people in construction work
Placed contract orders worth more than A$1.5 billion with 61 indigenous companies

Decide on/execute long-term local contribution strategy for operations phase of project
Set targets for direct hiring of indigenous people in operations phase of project
Set targets for subcontractor’s direct hiring of indigenous people in operations phase of
project
Execute and review strategies relating to procurement from indigenous companies(to end of 2018)
Ensure stable operation of solar power plant
Start commercial operations of second and third units at Sarulla geothermal power
generation project, Indonesia
Promote Geothermal Power Generation Business in Japan
Promote all types of R&D for new energy/renewable energy

Expanded pipeline network to total length of approximately 1,500 km by starting serviceof Toyama LineStarted supply of natural gas along Toyama Line (Nihonkaigas Co., Ltd., Nissan Chemical
Industries, Ltd.’s Toyama Plant, and Asahi Soft Drinks Co., Ltd.’s Hokuriku Plant)

While expanding volume, continue supplies of natural gas through safe operation ofdomestic gas ﬁelds, Naoetsu LNG terminal, approximately 1,500 km pipeline network,
expansion of supply volume
Promote natural gas use proposal activities

Revised position paper regarding climate change issues
Held GHG management workshop

Introduce, administration and management of internal carbon prices
Examine scenarios toward low-carbon society
Hold workshops to promote climate change countermeasures

Continued measures to instill INPEX Values (conducted internal questionnaire survey
regarding INPEX Values, in-house sharing of practical cases of value: Case study
collection/Intranet release of handbook)Continue holding global HR meetings
Continue measures to instill INPEX Values (publish additional practical INPEX Values
case studies)

Carried feature articles on the advancement of women in internal newsletters
Actively employed females, foreign nationals, and persons with disabilities
Installed barrier-free consultation points of contact

Promote general employer action plan based on Act of Promotion of Women’sParticipation and Advancement in the Workplace
Continue to promote diversity (promote hiring of females, foreign nationals, and persons
with disabilities)

Sustainability & Governance

Maintained stable operation of solar power plant
Started commercial operations of ﬁrst unit at Sarulla geothermal power generation
project, Indonesia
Conducted drilling surveys at Amemasudake area of Hokkaido Prefecture and Oyasu in
Akita Prefecture as well as in the area around Mt. Bandaisan in Fukushima Prefecture;
performed fumarolic testing at two wells in Amemasudake area
Promoted R&D of artiﬁcial photosynthetic process, etc.

5

*3 LTIF : Frequency of fatal accidents and lost-time injuries per million working hours*4 TRIR : Frequency of fatal accidents, lost-time injuries, lost work days, occupational accidents requiring medical procedures per million working hours*5 Both cumulative totals from the start of the Ichthys LNG Project development in 2012 to the end of 2016

INPEX CORPORATION Annual Report 201733

GovernanceCorporate Governance(As of June 28, 2017)

To achieve sustainable growth and increase corporate value over the medium tolong term, the Company fulﬁlls its social responsibilities in cooperation with its shareholders and other stakeholders and works to enhance its corporate governance forthe purpose of conducting transparent, fair, timely and decisive decision-making.

Overview of the Corporate Governance Structure
INPEX has adopted an Audit & Supervisory Board Member organizational structure,under which Audit & Supervisory Board members audit the execution of operations,which are in turn carried out by directors well versed in their ﬁeld. In addition, theCompany has introduced an Executive Ofﬁcer System to pursue the managementwith agility and efﬁciency. INPEX frequently engages in negotiations with the governments of oil-producing countries and overseas oil companies. This necessarily
requires internal directors and executive ofﬁcers who have knowledge, expertiseand international experience relating to the Company’s business and both a soundknowledge of the Company and their particular ﬁeld of expertise. Internal directors
in principle hold the concurrent position of executive ofﬁcers. By adopting this concurrent organizational structure, the Company’s Board of Directors is better placed
to execute operations in an efﬁcient manner. At the same time, this structure helps toensure effective operating oversight.
In addition to enhancing the transparency of management and bolstering
the ability of the Board of Directors to carry out its supervisory function, INPEX has
appointed six of its 15-member Board of Directors from outside the Company.
Through this initiative, steps have been taken to ensure that management issues are
considered and deliberated with a greater degree of objectivity from an independent
standpoint. Moreover, four of the Company’s ﬁve Audit & Supervisory Board members
are also appointed from external sources. In addition to putting in place an Audit &Supervisory Board, INPEX has set up the Audit & Supervisory Board Members’ Ofﬁceand deployed dedicated staff and is reinforcing collaboration between Audit & Supervisory Board members and the Audit Unit, as well as independent auditors.

Overview of the Corporate
Governance Structure
Organizational structure ....................................................
Company with Audit & Supervisory Board Members
Directors
Number of directors as stipulated by
the Articles of Incorporation ............................ up to 16
Number of directors(number of outside directors) ................................ 15 (6)Term of ofﬁce .............................................................. 1 year
Audit & Supervisory Board members
Number of Audit & Supervisory Board members
as stipulated by the Articles ofIncorporation ...................................................up to 5
Number of Audit & Supervisory Board members(number of outside Audit & Supervisory
Board members) ................................................ 5 (4)Term of ofﬁce.................................................. 4 years
Number of independent directors and auditors.. 10(6 outside directors,
4 outside Audit & Supervisory Board members)
Rights plan and other measures to protect
against a takeover ............................................ None
Other ........................ Issuance of a Class A Stock to
the Minister of Economy, Trade and Industry

Corporate Governance Framework (Diagram)

General Meeting of Shareholders
Appoint/Dismiss Compensation
limit setup
Audit

ReportNomination andCompensation
Advisory Committee

Proposal/
Advice/Report

Coordinate

Board of Directors
6 Outside Directors

Coordinate

Advisory Committee
ReportBusiness Operation
SystemReportCorporate HSE
Committee
Information Security
Committee
INPEX Value Assurance
System Committee

Appoint/
Dismiss/
Supervise

Appoint/
Dismiss/
Supervise

President & CEO

INPEX CORPORATION Annual Report 2017

Accounting
audit

Independent
Auditors
ReportCoordinate

Audit Unit

ﬁ
Divisions and Subsidiaries

34

Coordinate

Audit & Supervisory
Board MembersʼﬁCoordinate

Executive
Committee
CSR Committee

Audit & Supervisory
Board (Member)

Appoint/
Dismiss

Accounting audit

ReportCompliance Committee

Appoint/Dismiss Compensation
limit setup

Internal audit

1 Directors and the Board of Directors
The responsibilities of the Board of Directors shall be to fully
exercise its supervisory function, secure fairness and transparency in management, and ensure sustainable growthand increase corporate value over the medium to long term
through implementation of effective corporate governance,with recognition of its ﬁduciary responsibility to shareholders.
The Company’s Board of Directors comprises 15 members, six of whom are outside directors. In addition to a monthly
meeting, the Board of Directors meets as necessary in order
to discuss and determine matters concerning management
strategy, important business execution, and also supervises theexecution of duties by directors. In addition, the term of ofﬁce
for directors was set at one year from June 2012. This initiative
helps to enhance the ability of directors to respond to changes
in the Company’s operating environment in a timely mannerand to further clarify management responsibilities.

2 Executive Committee andExecutive Officer System
From the perspective of increasing the speed of decision making related to the execution of business, we have establishedan Executive Committee. The meetings are held weekly and asnecessary. At the Executive Committee, exible decision making is conducted for resolutions not afﬁliated with the Boardof Directors, and deliberation is held to contribute to decision
making by the Board of Directors.
We implemented an Executive Ofﬁcer System in order to
respond accurately and quickly to a rapidly changing management environment and the expansion of our business activities.
The term of ofﬁce for executive ofﬁcers is set to one year, thesame as for directors.

3 Formulation of Corporate

Governance Guidelines

4 Class A Stock
According to the stipulations of the Articles of Incorporation,
INPEX issues a Class A Stock to the Minister of Economy, Tradeand Industry. The Class A Stock does not possess voting rights
at shareholders’ meetings. However, it is possible for the holderof the Class A Stock to exercise veto rights for certain major
corporate decisions. We think the holding of Class A Stock by} See pp. 82­83 for Business Risks (8. Class A Stock)

5 Director Compensation
In the business of developing oil and natural gas, a considerable amount of time is required between the launch of abusiness venture and any investment recovery. Accordingly,
INPEX does not consider it appropriate to re ect short-term
performance in directors’ compensation. Compensation for
directors consists of monthly compensation (basic compensation), which is paid based on the duties of each director, and abonus based on the Company’s performance. Compensation
is determined by the Board of Directors. Compensation paid to
Audit & Supervisory Board members consists solely of a ﬁxed
monthly compensation, which is determined through consultation between the Audit & Supervisory Board members.
The table below shows the amount of compensation
paid to directors and Audit & Supervisory Board members forthe year ended March 31, 2017. From the year ended March
31, 2014, the bonus component paid to outside directors andAudit & Supervisory Board members has been abolished.
Outside directors and Audit & Supervisory Board members
are now paid a consolidated ﬁxed compensation amountonly. This takes into account efforts to further bolster corporate governance.
Compensation Paid to Directors andAudit & Supervisory Board Members (Year ended March 31, 2017)
Director classification

Directors (excluding outside directors)

Audit & Supervisory Board members(excluding outside Audit & Supervisory Board members)
Outside Directors and Outside
Audit & Supervisory Board members

Total amount of
Number ofcompensation paid bydirectors
Total
type of compensation
and Audit &amount of(¥ million)
Supervisorycompensation
Board members
paideligible for basic
Basic(¥ million)
Bonuscompensationcompensation(persons)

354

298

55

12

27

27

-

1

96

96

-

11

Notes: 1. The Company does not adopt a stock option plan. 2. The Company does not maintainan accrued retirement beneﬁts plan. 3. The bonus amount is the amount resolved at theOrdinary General Meeting of Shareholders held on June 27, 2017.

5
Sustainability & Governance

The mission of the Company is to provide a stable and efﬁcient supply of energy to our customers by exploring anddeveloping oil and natural gas resources throughout theworld. Through its business, we aim to become an integrated
energy company, that contributes to the community andmakes it more livable and prosperous. Based on this mission,in order to achieve sustainable growth and increase corporate value over the medium to long term, the Company fulﬁlls
its social responsibilities in cooperation with its shareholders
and other stakeholders, and works to enhance its corporate
governance for the purpose of conducting transparent, fair,timely and decisive decision-making.
In November 2015, the INPEX Group made clear its basic
views and policies on corporate governance and, with the aimof ensuring transparency and fairness in the Company’s decision-making as well as realizing effective corporate governance by carrying out the proactive dissemination of information, formulated its Corporate Governance Guidelines. Pleaserefer to our Web site for details.
} www.inpex.co.jp/english/company/governance.html

the Minister of Economy, Trade and Industry will help prevent
any incidence of unusual management, allow INPEX to stably
supply energy as a core company for Japan’s oil & gas E&P, andensure that the Company does not incur any negative impact
from a speculative acquisition or an attempt at management
control through foreign capital. On this basis, INPEX’s role isassured. Furthermore, we expect positive results in terms ofexternal negotiation and credits as a national agship company
efﬁciently contributing to the stable supply of energy in Japan.

6 Accounting Audit andAuditor Compensation
In accordance with the Companies Act and the Financial Instruments and Exchange Act, we accept accounting audits from
Ernst & Young ShinNihon LLC. The amount of auditor compensation is determined in total based on the audit plan and thenumber of auditing dates, after obtaining approval from the
Audit & Supervisory Board.
Compensation Paid to the CPAs and Related Parties(Year ended March 31, 2017)

Name of the CPA ﬁrm
Names of the CPAs
Accounting audit members
Compensation for auditing services

Ernst & Young ShinNihon LLC
Kazuhiko Umemura, Toru Kimura,Takeshi Yoshida
23 CPAs and 34 others¥257 million ( INPEX: ¥165 million;
Consolidated subsidiaries: ¥92 million)

million ( INPEX: ¥4 million;
Compensation for non-auditing services ¥15
Consolidated subsidiaries: ¥11 million)

INPEX CORPORATION Annual Report 201735

GovernanceMonitoring of Management by Outside Directors
and Audit & Supervisory Board Members
3 Independence of Outside Directors and

1 Outside Directors
Regarding the appointment of outside directors, we believethat it is important to comprehensively consider a variety offactors. These factors include the validity of business decisions and consideration of their efﬁcacy, professionalism
and objectiveness in the oversight function in addition to theperspective of independence.
As corporate managers, academics or other specialists,
our Company’s six outside directors possess broad knowledge and many years of experience as managers in suchﬁelds as the resource/energy industry, ﬁnance and legal matters. Also, three of the outside directors are shareholders of
the Company and serve as advisors of companies that conduct business in the same ﬁeld. Therefore, we recognize theimportance of paying special attention to the possibility ofcompetition and other con icts of interest. In response, wecollect written pledges from outside directors in order toensure conformance with the Companies Act when taking aproper response toward noncompetition, the prevention of
information leakage and the implementation of appropriate
measures toward transactions with a con ict of interest. These
written pledges are the same as those submitted by internal
appointees.

2 Outside Audit &Supervisory Board Members

When appointing outside Audit & Supervisory Board members, we believe that it is important to comprehensively consider factors such as independence, efﬁcacy in the oversightfunction and professionalism.
Four of the ﬁve Audit & Supervisory Board members areoutside Audit & Supervisory Board members who possess richknowledge and experience in our Company’s business, as wellas in ﬁelds such as ﬁnance and accounting, and utilize thesequalities when performing auditing activities for our Company.
One of the outside Audit & Supervisory Board members also
holds the position of executive ofﬁcer at Japan Petroleum
Exploration Co., Ltd. (JAPEX), a company that engages in thesame type of business as the Company.

Outside Audit & Supervisory Board Members

The Company has reported all outside directors and outside
Audit & Supervisory Board members as independent directors as deﬁned by Tokyo Stock Exchange, Inc.
As a part of efforts to comply with the Corporate Governance Code, INPEX has formulated independence standards foroutside directors and outside Audit & Supervisory Board members taking into consideration the independence standards
and qualiﬁcation for independent directors issued by the Tokyo
Stock Exchange. The Company determines the independenceof outside directors, including major shareholders and business
partners that do not fall within the scope of these standards.

4 Audit & Supervisory Board andAudit & Supervisory Board Members

INPEX has adopted an Audit & Supervisory Board Members
system. The Audit & Supervisory Board is composed of ﬁve
Audit & Supervisory Board members, four of which come fromoutside.
In addition to attending meetings of the Board of Directors
and the Executive Committee, the Audit & Supervisory Board
members review the execution of business duties by directors
and executive ofﬁcers through reports given by and hearings
for related departments. Furthermore, the Audit & Supervisory
Board members meet on regular and as needed bases with
the Independent Auditors, and receive reports from the Independent Auditors regarding audits. They also conduct regularmeetings with the internal audit department (Audit Unit) toreceive reports regarding internal audits and the evaluation ofinternal controls.
To strengthen the auditing function and ensure viablecorporate governance, steps have been taken to set up the
Audit & Supervisory Board Members’ Ofﬁce and to deploy
dedicated staff. In this manner, efforts are being made to promote collaboration along the aforementioned terms between
Audit & Supervisory Board members, the Audit Unit and Independent Auditors. Moreover, we have constructed a system tostrengthen the monitoring function through periodic meetings
with representative directors and directors.

Outside Directors/Outside Audit & Supervisory Board Members: Concurrently Held Positions and Reason for Appointment
Name

Outside directors

Yasuhiko
Okada

Hiroshi
Sato
Isao
Matsushita
Jun
Yanai
Norinao
Iio

Outside Audit &Supervisory Board members

AtsukoNishimura

36

Hideyuki
ToyamaKoji
SumiyaIndependent
director/auditors

Significant concurrently held positions

Reason for appointment

Senior Partner of Kitahama Partners(Tokyo Ofﬁce)

Possesses extensive experience and knowledge in finance, as well as
professional knowledge and experience as an attorney, in addition to
management experience in financial institutions

Advisor of Japan Petroleum Exploration
Co., Ltd. (JAPEX)

Attendance at board meetings for the year
ended March 31, 2017
Board of Directors meetings 17/17

To utilize in our company’s management his rich experience andbroad knowledge in the oil and gas development industry

Board of Directors meetings 17/17

Senior Executive Advisor of
JXTG Holdings, Inc.

To utilize in our company’s management his rich experience andbroad knowledge as a business executive

Board of Directors meetings 11/12

Advisor of Mitsubishi Corporation

To utilize in our company’s management his rich experience andbroad knowledge in the resources/energy industry

Board of Directors meetings 12/12―

To utilize in our company’s management his rich experience andbroad knowledge in the resources/energy industry――

To utilize in our company’s management her extensive knowledge ofinternational affairs created through her abundant experience as a
diplomat as well as her insight into the resources and energy business――

Possesses extensive experience and knowledge in finance, as well as
professional knowledge and experience as an attorney

Board of Directors meetings 17/17
Audit & Supervisory Board meetings 17/17―

Possesses extensive experience and knowledge in financial matters

Board of Directors meetings 17/17
Audit & Supervisory Board meetings 17/17

MasaruFunai―

To utilize in our company’s auditing procedures his rich experiencein the energy industry, as well as his knowledge in financial andaccounting matters, in addition to accounting experience

MichiroYamashita

Managing Executive Ofﬁcer in charge ofTo utilize in our company’s auditing procedures his rich experience in the
Finance & Accounting Department of Japan oil and gas development industry, as well as his knowledge in financial
Petroleum Exploration Co., Ltd. (JAPEX)
and accounting matters, in addition to accounting experience

INPEX CORPORATION Annual Report 2017

Board of Directors meetings 17/17
Audit & Supervisory Board meetings 17/17
Board of Directors meetings 16/17
Audit & Supervisory Board meetings 15/17

Internal Committees
To further enhance the efﬁcacy ofthe corporate governance function,
INPEX has set up 1 the Nomination
and Compensation Advisory Committee, 2 the Advisory Committee,
3 the Compliance Committee and 4
the CSR Committee. In addition, theCompany maintains 5 the Corporate
HSE Committee, 6 the Information
Security Committee and 7 the INPEX
Value Assurance System Committee toappropriately manage risks associatedwith business operations.

4 CSR Committee

In April 2012, INPEX Group established
the CSR Committee with the aims of better fulﬁlling its corporate social responsibility and promoting activities that contribute to the sustainable development ofsociety. The committee puts in place fundamental policies and formulates important measures designed to promote CSR.

5 Corporate HSE

Committee

In accordance with the HSE Management
System, the Corporate HSE Committee was established in October 2007 topromote health, safety and environment
initiatives. In addition to formulating corporate HSE policies and priority targets
for each period, the committee advances
HSE activities across the organization.

1 Nomination and
Board of Directors

Executive Committee

Compensation Advisory
Committee

The Nomination and Compensation
Advisory Committee was established in
January 2017 with the aim of strengthening the functional independence andobjectivity as well as accountability of theBoard of Directors in connection with thenomination of and compensation paid to
directors.

2 Advisory Committee
6 Information Security

Committee

The Information Security Committee wasestablished in November 2007 to consider and determine all appropriate measures necessary to maintain, manage andstrengthen information security. The committee also takes steps to address any
incident relating to information security
and to put in place preventive measures.

7 INPEX Value Assurance

System Committee

The INPEX Value Assurance System Committee was established in May 2014 to contribute to the Company’s decision-making
process with respect to conﬁrmation of thestatus of preparations in connection with
important milestones of those oil and natural gas upstream business projects in which
INPEX participates, and the improvement
and promotion of project value.

The Advisory Committee was establishedin October 2012 with the aim of enhancing corporate value and the corporate
governance function. Comprising external experts in a broad spectrum of ﬁelds,
the committee provides the Board of
Directors with multifaceted and objective
advice and recommendations across awide range of areas. Areas of discussion
and advice include international politicaland economic conditions, an outlook ofenergy conditions and ways in which tobolster corporate governance.

3 Compliance Committee

The Compliance Committee was established in April 2006 with the aim of promoting compliance initiatives across theentire Group. The committee formulates
fundamental compliance policies applicable to the Group, deliberates on important matters and manages the manner inwhich compliance is practiced.

Information Disclosure and Activities for
the Benefit of Shareholders and Investors
5

tutional investors. Video archives of these ﬁnancial results presentations are provided on the Company’s IR Web site together
with a simultaneous interpretation in English. In general, INPEX
undertakes overseas IR road shows covering such regions as
Europe, North America and Asia. Furthermore, INPEX strives toparticipate in conferences attended by domestic and overseas
investors while engaging in one-on-one meetings.
The Company’s Web site (IR section: www.inpex.co.jp/
english/ir/) features a host of IR tools including ﬁnancial reports,ﬁnancial results presentations and annual reports. Together withrecent news releases,
every effort is made todisclose pertinent information on the Company ’s performance andﬁnancial position, as wellas trends in crude oil
prices, foreign currency
exchange rates, theCompany’s share priceIR fair in February 2017
and stock information.

INPEX CORPORATION Annual Report 2017

Sustainability & Governance

INPEX undertakes the early delivery of convocation notices for
its general meeting of shareholders to ensure that shareholders
have sufﬁcient time to consider agenda items at each Ordinary
General Meeting of Shareholders. The Convocation Notice for
INPEX ’s 11th Ordinary General Meeting of Shareholders held in
June 2017 was posted on the Company’s Web site more than
three weeks prior to the meeting on May 29, 2017. The Convocation Notice itself was dispatched on June 5, 2017. To facilitate
the exercise of voting rights, INPEX implemented the exercise
of voting rights via the Internet. The Company also adopted aplatform for the electronic use of voting rights while posting
copies of the convocation notice and other related documents,
both in Japanese and English, on its Web site and TDnet (Timely
Disclosure network).
Turning to the Company’s IR activities, INPEX participates in
events such as IR fairs for individual investors and meetings in avariety of venues including the branch ofﬁces of securities ﬁrms.
More than 10 information meetings for individual investors are
generally held each year. Video archives of certain meetings arealso made available on the Company’s Web site. INPEX holds
biannual meetings on its ﬁnancial results for analysts and insti-

37

Directors, Audit Supervisory Board Members andExecutive Officers(As of June 28, 20177)

Toshiaki Kitamura
President & CEO

Years of service as Director: 7 years, Number of shares owned: 31,700 shares

Masaharu Sano

Masahiro Murayama

Seiya Ito

Years of service as Director: 11 years, Number of shares owned: 26,900 shares

Years of service as Director: 8 years, Number of shares owned: 23,200 shares

Years of service as Director: 11 years, Number of shares owned: 20,100 shares

Shunichiro Sugaya

Takahiko Ikeda

Yoshikazu Kurasawa

Years of service as Director: 8 years, Number of shares owned: 20,700 shares

Years of service as Director: 8 years, Number of shares owned: 27,000 shares

Years of service as Director: 5 years, Number of shares owned: 17,400 shares

Director, Senior Executive Vice President

Director, Managing Executive Ofﬁcer

Director, Senior Managing Executive Ofﬁcer

Director, Managing Executive Ofﬁcer

Kimihisa Kittaka

Director, Managing Executive Ofﬁcer

Years of service as Director: 1 year, Number of shares owned: 6,300 shares

38

INPEX CORPORATION Annual Report 2017

Director, Senior Managing Executive Ofﬁcer

Director, Managing Executive Ofﬁcer

Nobuharu Sase

Director, Managing Executive Ofﬁcer

Years of service as Director: 1 year, Number of shares owned: 23,800 shares

Yasuhiko Okada

Hiroshi Sato

Isao Matsushita

Jun Yanai

Norinao Iio

Atsuko Nishimura

Years of service as Director: 5 years,
Number of shares owned: - share

Years of service as Director: 2 years,
Number of shares owned: - share

Years of service as Director: 1 year,
Number of shares owned: - share

Years of service as Director: 1 year,
Number of shares owned: - share

Years of service as Director: - year,
Number of shares owned: - share

Years of service as Director: - year,
Number of shares owned: - share

Kazuo Yamamoto

Hideyuki Toyama

Koji SumiyaYears of service as Audit & Supervisory
Board Member: 2 years,
Number of shares owned: 9,000 shares

Years of service as Audit & Supervisory Board
Member: 2 years,
Number of shares owned: - share

Years of service as Audit & Supervisory Board
Member: 7 years,
Number of shares owned: 7,600 shares

Director (Outside)

Director (Outside)

Audit & Supervisory
Board Member

Director (Outside)

Audit & Supervisory
Board Member (Outside)

Director (Outside)

Audit & Supervisory
Board Member (Outside)

Director (Outside)*

Director (Outside)*

Masaru Funai

Michiro Yamashita

Years of service as Audit & Supervisory
Board Member: 7 years,
Number of shares owned: - share

Years of service as Audit & Supervisory
Board Member: 2 years,
Number of shares owned: - share

Audit & Supervisory
Board Member(Outside)

Audit & Supervisory
Board Member(Outside)

Directors and Audit & Supervisory Board Members
President & CEO
Director
Director
Director
Director
Director
Director
Director
Director

Toshiaki Kitamura（1）

Masaharu Sano

（1）

Masahiro Murayama（1）

Seiya Ito

（1）

Shunichiro Sugaya（1）Takahiko Ikeda（1）

Yoshikazu Kurasawa（1）

Kimihisa Kittaka（1）

Nobuharu Sase（1）

Director (Outside)

Isao Matsushita

Hiroshi Sato

Director (Outside)

Jun Yanai

Director (Outside)

Norinao Iio*

Director (Outside)

Toshiaki Kitamura
Masaharu Sano

Senior Vice President, Chief Technical Executive,
In charge of HSE and Compliance of the Company

Senior Managing Executive Ofﬁcer Masahiro Murayama Senior Vice President, Finance & Accounting

Hideyuki Toyama

（3）
（4）

Audit & Supervisory Board Member (Outside)

Masaru Funai

Koji Sumiya

Michiro Yamashita

Executive Ofﬁcer

Noboru Himata

Vice President, Finance & Accounting
General Manager, Finance Unit

Executive Ofﬁcer

Hajime Kawai

Vice President, Masela Project

Executive Ofﬁcer

Arihiro Kezuka

Vice President, Ichthys ProjectVice President, Corporate Strategy & Planning
General Manager, New Business Planning UnitManaging Executive Ofﬁcer

Senior Vice President, Masela Project

Executive Ofﬁcer

Toshiya Oshita

Vice President, Technical Headquarters

Executive Ofﬁcer

Hideki Iwashita

Vice President, Ichthys Project
Director, Commercial Coordination, Perth Ofﬁce

Executive Ofﬁcer

Tetsuo Yonezawa

General Manager, HSE Unit

Executive Ofﬁcer

Hiroshi Nakamura

Vice President, General Administration
General Manager, Human Resources Unit

Executive Ofﬁcer

Tsuyoshi Watanabe

Vice President, General Administration
General Manager, General Administration Unit

Senior Vice President, Asia & Australasia

Executive Ofﬁcer

Nobusuke Shimada

Vice President, Asia & Australasia
General Manager, Exploration & Production Unit

Senior Vice President, Eurasia & the Middle East

Executive Ofﬁcer

Kazuyoshi Miura

Vice President, Domestic Energy Supply & Marketing
General Manager, Gas Marketing UnitManaging Executive Ofﬁcer

Yoshikazu Kurasawa

Senior Vice President, New Ventures

Managing Executive Ofﬁcer

Kimihisa Kittaka

Senior Vice President,
Corporate Strategy & PlanningManaging Executive Ofﬁcer

Nobuharu Sase

Senior Vice President, General Administration

Managing Executive Ofﬁcer
Managing Executive Ofﬁcer
Managing Executive Ofﬁcer
Managing Executive Ofﬁcer

Shuhei Miyamoto
Kenji Kawano

Yasuhisa Kanehara
Hiroshi Fujii

Senior Vice President, the Americas & Africa

（2）
（4）

Audit & Supervisory Board Member (Outside)

Audit & Supervisory Board Member (Outside)

Yoshiro Ishii

Senior Vice President, Technical Headquarters

（2）
（4）

Kazuo Yamamoto

Executive Ofﬁcer

Takahiko Ikeda

（2）
（4）

（2）
（4）

Audit & Supervisory Board Member

Senior Vice President, Ichthys ProjectManaging Executive Ofﬁcer

（2）
（4）

Atsuko Nishimura*

Senior Managing Executive Ofﬁcer Seiya Ito

Shunichiro Sugaya

（2）
（4）

（3）
（4）
（3）
（4）

5

（3）
（4）

Sustainability & Governance

Senior Executive Vice President

Yasuhiko Okada

Director (Outside)

Audit & Supervisory Board Member (Outside)

Executive Officers
President & CEO

Director (Outside)

Vice President, Eurasia & the Middle EastManaging Executive Ofﬁcer

Shigeharu Yajima

Managing Executive Ofﬁcer

Vice President, Domestic Energy Supply
Yoshinori Yamamoto &SeniorMarketingManaging Executive Ofﬁcer

Kimiya Hirayama

Senior Vice President, Domestic Exploration &Production

Managing Executive Ofﬁcer

Takashi Kubo

Senior Vice President, Logistics & IMTManaging Executive Ofﬁcer

Atsushi Sakamoto

Vice President, Ichthys Project
Director, Onshore Project, Perth Ofﬁce

Senior Vice President, Global Energy Marketing* Newly appointed Directors(1) Concurrently hold the position of executive ofﬁcer(2) Outside directors as deﬁned in Article 2, Item 15, of the Companies Act(3) Outside Audit & Supervisory Board members as deﬁned in Article 2, Item 16, of the Companies Act(4) Independent directors/auditors as deﬁned in Article 436, Item 2, Sub-Item 1, of the Securities

Listings Regulations for the Tokyo Stock Exchange

INPEX CORPORATION Annual Report 201739

Toshiaki Kitamura
April 1972
July 2002
July 2003
June 2004
July 2006
November 2007
August 2009
June 2010

Joined Ministry of International Trade and Industry (currently
Ministry of Economy, Trade and Industry)
Director-General for Trade and Economic Cooperation Bureau,
Ministry of Economy, Trade and Industry
Director-General for Manufacturing Industries Bureau, Ministry of
Economy, Trade and Industry
Director-General for Trade Policy Bureau, Ministry of Economy,
Trade and Industry
Vice-Minister for International Affairs, Ministry of Economy, Tradeand Industry
Advisor to Tokio Marine & Nichido Fire Insurance Co., Ltd.
Senior Executive Vice President of the Company
Representative Director, President & CEO of the Company(incumbent)

Masaharu Sano
April 1974
April 2000
March 2001
March 2002
March 2005
April 2006
October 2008
June 2012
June 2015
June 2016
April 2017

Joined Teikoku Oil Co., Ltd.
General Manager of Technical Planning Department of Teikoku
Oil Co., Ltd.
Senior General Manager, General Manager of New Ventures
Department, International Projects Division of Teikoku Oil Co.,Ltd.
Director, General Manager of New Ventures Department,International Projects Division of Teikoku Oil Co., Ltd.
Managing Director, President of International Projects Division /Domestic Offshore Division of Teikoku Oil Co., Ltd.
Director, Deputy Senior General Manager of Corporate Strategy& Planning Division / Technology Division of INPEX Holdings Inc.
(currently the Company)
Director, Senior Managing Executive Ofﬁcer, Senior Vice
President of Americas & Africa Project Division of the Company
Director, Senior Vice President of Technical Headquarters of theCompany
Director, Senior Executive Vice President, Senior Vice President ofTechnical Headquarters, in charge of HSE of the Company
Director, Senior Executive Vice President, Senior Vice President ofTechnical Headquarters, in charge of HSE & Compliance of theCompany
Director, Senior Executive Vice President, Chief TechnicalExecutive, in charge of HSE and Compliance of the Company(incumbent)

Masahiro Murayama
April 1976
June 1999
June 2001
April 2002
December 2002
October 2003
April 2004
October 2004
April 2005
April 2008
May 2009
June 2009
June 2016

Joined The Industrial Bank of Japan, Ltd.
(currently Mizuho Bank, Ltd., etc.)
General Manager of Financial Institutions Banking
Division No. 2 of The Industrial Bank of Japan, Ltd.
General Manager of Corporate Banking Department No. 2 of The
Industrial Bank of Japan, Ltd.
General Manager of Corporate Banking Division No. 9 of Head
Ofﬁce of Mizuho Corporate Bank, Ltd. (currently Mizuho Bank,
Ltd.)
General Manager of Syndicated Finance Structuring Division No.
1 of Mizuho Corporate Bank, Ltd.
General Manager of Syndicated Finance Distribution Division No.
1 of Mizuho Corporate Bank, Ltd.
Executive Ofﬁcer, General Manager of Syndicated FinanceDistribution Division No. 1 of Mizuho Corporate Bank, Ltd.
Executive Ofﬁcer, General Manager of Loan Trading Division ofMizuho Corporate Bank, Ltd.
Managing Executive Ofﬁcer, in charge of corporate banking ofMizuho Corporate Bank, Ltd.
Director, Deputy President of Mizuho Securities Co., Ltd.
Advisor to the Company
Director, Managing Executive Ofﬁcer, Senior Vice President of
Finance & Accounting of the Company
Director, Senior Managing Executive Ofﬁcer, Senior Vice
President of Finance & Accounting of the Company (incumbent)

Seiya Ito
April 1977
April 2002
June 2003
November 2004
September 2005
April 2006

July 2006
October 2008
June 2016

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
General Manager of Corporate Planning &Management Department of INPEX Corporation
Director, General Manager of Corporate Planning &Management Department of INPEX Corporation
Director, General Manager of Corporate Planning &Management Department and Public Affairs
Department of INPEX Corporation
Director, Assistant Senior General Manager of Corporate Strategy& Administration Division, General Manager of Corporate Strategy & Planning Unit and Public Affairs Unit of INPEX Corporation
Director, Assistant Senior General Manager of Corporate Strategy& Planning Division, General Manager of Corporate Strategy &Planning Unit and Senior Fellow of Public Affairs Unit of INPEX
Holdings Inc. (currently the Company)
Director, Deputy Senior General Manager of Oceania & America
Project Division of INPEX Corporation
Director, Managing Executive Ofﬁcer, Senior Vice
President of Ichthys Project of the Company
Director, Senior Managing Executive Ofﬁcer, Senior Vice
President of Ichthys Project of the Company (incumbent)

Shunichiro Sugaya
April 1976
April 1997
June 2001
June 2002
September 2005
June 2007
October 2008

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
General Manager of Development Department ofIndonesia Petroleum, Ltd.
Director, General Manager of Development
Department of INPEX Corporation
Director, Coordinator in charge of Development Department of
INPEX Corporation
Director, Senior General Manager of Asia Project
Division, Assistant Senior General Manager ofTechnology and HSE Division of INPEX Corporation
Managing Director, Senior General Manager of Asia Project
Division of INPEX Corporation
Director, Managing Executive Ofﬁcer, Senior Vice
President of Masela Project of the Company (incumbent)

Takahiko Ikeda
April 1978
March 2002
March 2004
March 2005
April 2006

June 2007
October 2008
June 2014
April 2017

October 2008
June 2011
June 2012

Kimihisa Kittaka
April 1981

October 2007
July 2008
November 2010
June 2011
June 2012

June 2016

April 1981
September 2005
April 2006
October 2008
June 2010
June 2016

April 1966
July 1994
May 1995
July 1999
June 2003
January 2012
June 2012

April 1970
June 2002
June 2005
April 2006
June 2006
June 2007
June 2010
June 2014
June 2015

INPEX CORPORATION Annual Report 2017

Joined Japan Petroleum Exploration Co., Ltd. (JAPEX)
Director, General Manager of Finance and Accounting
Department of JAPEXManaging Executive Ofﬁcer of JAPEX
Audit & Supervisory Board Member (part-time) of
INPEX Holdings Inc. (currently the Company)
Managing Director & Executive Ofﬁcer of JAPEX
Senior Managing Director & Executive Ofﬁcer of JAPEX
Executive Vice President & Executive Ofﬁcer of JAPEX
Advisor of JAPEX (incumbent)
Director (Outside) of the Company (incumbent)

Atsuko Nishimura

April 1979
June 1995

August 1999
June 2001
September 2004
June 2008
April 2012
April 2014
July 2016
June 2017

April 1978
March 2002
August 2003
March 2004
March 2005
April 2006
October 2008
November 2010
June 2011
June 2015

April 1975
July 2001
July 2003
July 2005
October 2006
November 2012
January 2013
April 2013
June 2015

April 1976
April 2001
April 2002

October 2005
October 2007
October 2008
May 2010

April 1972
April 1998

June 2003
April 2004
June 2004
April 2005
June 2006
April 2010
July 2010
June 2012
June 2015
June 2016
April 2017

Jun Yanai

April 1973
May 2001
April 2004
April 2005
April 2008
April 2011
April 2013

June 2013
April 2014
June 2016
June 2016

Norinao Iio

June 1973
April 2001
April 2005
April 2008

August 2009
April 2010
April 2011
June 2011
June 2017

Joined Mitsubishi Corporation
Senior Assistant to Group CEO of Energy Business Group of
Mitsubishi Corporation
Senior Vice President, Senior Assistant to Group CEO of Energy
Business Group of Mitsubishi Corporation
Senior Vice President, Division COO, of Petroleum
Business Division of Mitsubishi Corporation
Executive Vice President, Group COO of Energy Business Groupof Mitsubishi Corporation
Executive Vice President, Group CEO of Energy Business Groupof Mitsubishi Corporation
Member of the Board, Executive Vice President, Group CEO of
Energy Business Group of Mitsubishi Corporation
Member of the Board, Senior Executive Vice President, GroupCEO of Energy Business Group of Mitsubishi Corporation
Member of the Board, Senior Executive Vice President, GroupCEO of Energy Business Group, Chief Compliance Ofﬁcer of
Mitsubishi Corporation
Advisor of Mitsubishi Corporation (incumbent)
Director (Outside) of the Company (incumbent)

Joined Mitsui & Co., Ltd.
General manager, Natural gas Second Division Tokyo Head
Ofﬁce, Mitsui & Co., Ltd.
Managing Ofﬁcer, Chief Operating Ofﬁcer, Energy Business Unit,
Mitsui & Co., Ltd.
Executive Managing Ofﬁcer, Chief Operating Ofﬁcer, Europe
Middle East and Africa Unit, Mitsui & Co., Ltd.
Senior Executive Managing Ofﬁcer, Chief Operating Ofﬁcer,
Europe Middle East and Africa Unit, Mitsui & Co., Ltd.
Representative Director, Senior Executive Managing Ofﬁcer,
Mitsui & Co., Ltd.
Representative Director, Senior Executive Managing Ofﬁcer,
Mitsui & Co., Ltd.
Representative Director, Senior Executive Managing Ofﬁcer,
Mitsui & Co., Ltd.
Director, Mitsui & Co., Ltd.
Counselor, Mitsui & Co., Ltd.
Director (Outside) of the Company (incumbent)

Joined Ministry of FinanceDirector-General of Sapporo Regional Taxation Bureau, National
Tax Agency (NTA)
Executive Secretary of the Administration Ofﬁce of the
Director-General, Cabinet Legislation Bureau (CLB)
Director-General of the Fourth Department, CLB
Director-General of the Third Department, CLB
Advisor, Aioi Nissay Dowa Insurance Co., Ltd.
Registered as attorney-at-law (incumbent)
Visiting Professor, Graduate School of Public Policy, University ofTokyo (incumbent)
Audit & Supervisory Board Member (full-time) of the Company(incumbent)

Koji Sumiya

September 2002

Joined Nihon Kogyo Co., Ltd.
Executive Ofﬁcer, Assistant to General Manager of Corporate
Planning Department and Principal of Corporate Planning
Department (in charge of Finance) of Japan Energy Corporation
Member of the Board of Nippon Mining Holdings, Inc.,in charge of Finance Group
Executive Board Member of Nippon Mining Holdings, Inc.
Executive Vice President, in charge of Supply and Demand
Department, Logistics Department and Crude Material
Department of Japan Energy Corporation
Member of the Board, Executive Vice President of Japan Energy
Corporation
Member of the Board, Senior Executive Vice President of Japan
Energy Corporation
President and Representative Director of Japan Energy
Corporation
Member of the Board of JX Holdings, Inc. (part-time)
Executive Vice President, Assistant to President of JX Nippon Oil& Energy Corporation
Representative Director and President, President and Chief
Executive Ofﬁcer of JX Holdings, Inc.
Senior Executive Advisor of JX Holdings, Inc.
Director (outside) of the Company (incumbent)
Senior Executive Advisor of JXTG Holdings, Inc. (incumbent)

Joined Teikoku Oil Co., Ltd.
General Manager of Petroleum Products Marketing Department,
Marketing Division of Teikoku Oil Co., Ltd.
General Manager of Petroleum Products Marketing Department
and Power Business Department, Marketing Division of Teikoku
Oil Co., Ltd.
Senior General Manager, General Manager of Petroleum
Products Marketing Department and Power Business
Department, Marketing Division of Teikoku Oil Co., Ltd.
Director, General Manager of Technical Planning Department
and Deputy General Manager of LNG Planning Ofﬁce of Teikoku
Oil Co., Ltd.
General Manager of Technology Planning Unit, Technology
Division of INPEX Holdings Inc. (currently the Company)
Executive Ofﬁcer, Assistant to General Manager of Technical
Division, General Manager of Technical Planning Unit of theCompany
Executive Ofﬁcer, Assistant to General Manager of Technical
Division, General Manager of Technical Infrastructure Unit of theCompany
Managing Executive Ofﬁcer, General Manager of Logistics & IMTDivision of the Company
Audit & Supervisory Board Member (full-time) of the Company(incumbent)

Hideyuki Toyama

June 2010

April 1970
April 2001

Joined Ministry of Foreign Affairs
Director, First Africa Division, Middle Eastern and African Affairs
BureauCounselor/Minister, Permanent Mission of Japan to the United
Nations
Minister, Embassy of Japan in Belgium
Professor, School of Law, Tohoku University
Administrative Vice President, Japan Foundation
Senior Councilor, Japan Oil, Gas and Metals National
Corporation
Ambassador Extraordinary and Plenipotentiary to the Grand
Duchy of Luxembourg
Ambassador Extraordinary and Plenipotentiary in charge of
Women, Human Rights and Humanitarian Affairs
Director (Outside) of the Company (incumbent)

Kazuo Yamamoto

Isao Matsushita

October 2008

April 2006

Joined Ministry of FinanceDirector-General for the Tokyo Regional Taxation Bureau
Secretary-General of Executive Bureau, Securities and Exchange
Surveillance Commission
Administrative Vice-Minister of Environment Agency (currently
Ministry of the Environment)
President of National Association of Labour Banks; President of
The Rokinren Bank
Attorney at Law admitted to practice in Japan; Partner ofKitahama Partners (Tokyo Ofﬁce) (incumbent)
Director of the Company (incumbent)

Hiroshi Sato

June 2009

September 2005

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
General Manager of Secretary Unit, Corporate Strategy &Administration Division of INPEX Corporation
General Manager of Secretary Unit, General
Administration Division of INPEX Holdings Inc.
(currently the Company)
Assistant Senior General Manager of General Administration
Division, General Manager of Secretary Unit of the Company
Executive Ofﬁcer, Vice President of Oil & Gas Business Division
No.1, General Manager of Oil Marketing Unit of the Company
Director, Managing Executive Ofﬁcer, Senior Vice President ofGeneral Administration Division of the Company (incumbent)

Yasuhiko Okada

April 1982
February 2004

Joined Japan National Oil Corporation
Deputy General Manager of Planning & New Ventures
Department of INPEX Corporation
General Manager of Planning & New Ventures
Department of INPEX Corporation
General Manager of Business Development and Legal Unit,
General Administration & Corporate
Planning Division of INPEX Corporation
General Manager of Overseas Project Planning andJoined Ministry of International Trade and Industry (currently
Ministry of Economy, Trade and Industry)
Director-General for Consumer Policy, Ministry of
Economy, Trade and Industry
Director-General for Kyushu Bureau of Ministry of
Economy, Trade and Industry
Joined the Company and assumed the post of Senior
Coordinator of Business Development & Legal Unit, Corporate
Strategy & Planning Division
General Manager of Corporate Strategy & Planning Unit, and of
Corporate Communications Unit, Corporate Strategy & Planning
Division of the Company
Executive Ofﬁcer, Vice President of Corporate Strategy &Planning Division, General Manager of Corporate Strategy& Planning Unit, and Corporate Communication Unit of theCompany
Director, Managing Executive Ofﬁcer, Senior Vice Presidentof Corporate Strategy & Planning Division of the Company(incumbent)

Nobuharu Sase

Yoshikazu Kurasawa
April 2005

40

Joined Teikoku Oil Co., Ltd.
General Manager of Production Department,
Domestic Operating Division of Teikoku Oil Co., Ltd.
Senior General Manager of Production Department, Teikoku OilCo., Ltd.
Director, Domestic Operating Division of Teikoku Oil Co., Ltd.
General Manager of Domestic Project Planning and
Administration Unit, Corporate Strategy &Administration Division of INPEX Holdings Inc.
(currently the Company)
Managing Director, President of Domestic Operation
Division and General Manager of Niigata District
Department of Teikoku Oil Co., Ltd.
Director, Managing Executive Ofﬁcer, Senior Vice President ofDomestic Projects of the Company
Director, Managing Executive Ofﬁcer, Senior Vice President of
Gas Supply & Infrastructure of the Company
Director, Managing Executive Ofﬁcer, Senior Vice President ofTechnical Headquarters of the Company (incumbent)

June 2007

Administration Unit, Corporate Strategy &Administration Division of INPEX Holdings Inc.
(currently the Company)
Executive Ofﬁcer, General Manager of Business
Development and Legal Unit, General Administration &Corporate Planning Division of INPEX Corporation
Executive Ofﬁcer, Assistant Senior General Manager of Corporate
Strategy & Planning, General Manager of Business Development
and Legal Unit of the Company
Managing Executive Ofﬁcer, Vice President ofCorporate Strategy & Planning of the Company
Director, Managing Executive Ofﬁcer, Senior Vice President of
New Ventures of the Company (incumbent)

Joined The Export-Import Bank of Japan (currently Japan Bankfor International Cooperation)
Director General, International Finance Department I of Japan
Bank for International Cooperation (Currently Japan Bank forInternational Cooperation)
Director General, Policy Planning and Coordination Department
of Japan Bank for International Cooperation
Resident Executive Director, Osaka Branch of Japan Bank forInternational Cooperation
Senior Executive Director of Japan Bank for International
Cooperation
Managing Executive Ofﬁcer of Japan Bank for International
Cooperation, Japan Finance Corporation (Currently Japan Bankfor International Cooperation)
Retired from Japan Bank for International Cooperation, Japan
Finance Corporation
Audit & Supervisory Board Member (full-time) of the Company(incumbent)

Masaru Funai

April 2000
April 2001
April 2002
April 2003
April 2005

June 2005

April 2007

April 2009

April 2010
June 2010
April 2011

Joined Marubeni Corporation
General Manager, Corporate Planning & Coordination
Department of Marubeni Corporation
Executive Vice President and CFO of Marubeni America
Corporation
Executive Vice President, CFO and CAO of Marubeni America
Corporation
General Manager, Risk Management Department of Marubeni
Corporation
Corporate Vice President, General Manager, Corporate
Planning & Coordination Department of Marubeni Corporation
Corporate Senior Vice President, CIO, Executive
Corporate Ofﬁcer, Human Resources Department, Information
Strategy Department and Risk Management Department ofMarubeni Corporation
Corporate Senior Vice President, Member of the Board, CIO,
Executive Corporate Ofﬁcer, Human Resources Department,
Information Strategy Department and Risk Management
Department of Marubeni Corporation
Corporate Executive Vice President, Member of the Board,
Executive Corporate Ofﬁcer, General Affairs Department, Human
Resources Department, Risk Management
Department and Legal Department of Marubeni Corporation
Senior Executive Vice President, Member of the Board, CIO, Chief
Operating Ofﬁcer, Information Strategy
Department, Corporate Accounting Department,
Business Accounting Department-I, Business Accounting
Department-II, Business Accounting Department-III and Finance
Department, Senior Operating Ofﬁcer, Audit Department, Chief
Operating Ofﬁcer, Investor Relations of Marubeni Corporation
Senior Executive Vice President, Member of the Board, Senior
Operating Ofﬁcer, Audit Department of Marubeni Corporation
Audit & Supervisory Board Member of the Company (incumbent)
Senior Consultant of Marubeni Corporation

Michiro Yamashita
April 1982
June 2005
April 2010
June 2011
July 2012
June 2013
June 2014
June 2015
June 2016
June 2017

Joined Japan Petroleum Exploration Co., Ltd. (JAPEX)
General Manager of Corporate Strategy Department of JAPEX
Vice President of Environment and Innovative Technology
Projects Division of JAPEX
Vice President of Environment and Innovative Technology
Projects Division of JAPEX
Senior Advisor, Assistant to Executive Ofﬁcer in charge of Finance& Accounting Department of JAPEX
Executive Ofﬁcer in charge of Finance & Accounting Departmentof JAPEX
Executive Ofﬁcer in charge of Finance & Accounting Department,
Vice President of Asia & Oceania Division of JAPEX
Audit & Supervisory Board Member of the Company (incumbent)
Managing Executive Ofﬁcer in charge of Financing & Accounting
Department, Vice President of Asia & Oceania Division of JAPEXManaging Executive Ofﬁcer in charge of Finance & Accounting
Department of JAPEX（incumbent)Financial &Corporate Information
11-Year Financial Information

42

Background Information: Oil and Gas
Accounting Policies and Treatment

44

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

46

Consolidated Financial Statements/
Notes to Consolidated Financial Statements

52

Independent Auditor’s Report

71

Subsidiaries and Afﬁliates

72

Business Risks

74

Oil and Gas Reserves and Production Volume

82

Corporate Information

85

11-Year Financial Information
INPEX CORPORATION and Consolidated Subsidiaries
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a mat ter ofarithmetic computation only, at ¥112.20=US$1.00, the approximate exchange rate in effect as of March 31, 2017.
Millions of yen(Results ofoperations)

2007/3

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

Net sales¥ 969,713¥1,202,965¥1,076,165¥ 840,427¥ 943,080¥1,186,732¥1,216,533¥1,334,626

Cost of sales

343,795

390,554

319,038

298,168

334,833

395,443426,326

490,417Gross profit

625,918

812,411757,127542,259

608,247

791,289

790,207844,209

Operating income

559,077

714,211663,267

461,668

529,743

709,358

693,448

733,610685,800

616,167

442,027

508,587

767,039

718,146

750,078¥ 173,246¥ 145,063¥ 107,210¥ 128,699¥ 194,001¥ 182,962¥ 183,691¥ 474,124¥ 565,111¥ 411,110¥ 492,855¥ 492,932¥ 908,702¥1,106,504¥1,140,204

Tangible fixed assets

219,227

254,481

297,636

358,094

379,862

383,698584,541

951,779

Intangible assets

265,822265,481

253,681239,205

249,111233,318

380,156

439,179

Investments andother assets

648,934

722,828805,618

923,624

1,558,475

1,540,680

1,544,958

1,506,977

1,608,107

1,807,901

1,768,045

2,013,778

2,680,380

3,066,398

3,616,159

4,038,139

Current liabilities

266,248

325,286

206,059

227,905

254,729

367,844414,977375,670

Long-term liabilities

261,843

243,802

199,925

295,270

328,268

384,361

530,198

666,432¥1,080,016¥1,238,813¥1,362,061¥1,490,603¥2,097,383¥2,314,193¥2,670,984¥2,996,037

Income before income
586,263
taxes
Net income attributable¥ 165,092
to owners of parent(Financial position)
Current assets

Total assets

Net assets(Cash flows)
Cash flows from¥ 231,982 ¥ 363,995 ¥ 230,352 ¥ 241,373 ¥ 274,094 ¥ 320,692 ¥ 252,347 ¥ 213,514
operating activities
Cash flows from
(209,243)(261,767)(240,168)(251,812)(844,511)(280,864)(489,870)(395,555)
investing activities
Cash flows from13,794(45,228)(46,090)
68,937548,057
29,294137,069
48,961
financing activities
Cash and cash equivalents¥ 189,417 ¥ 222,270 ¥ 162,845 ¥ 216,395 ¥ 182,025 ¥ 249,233 ¥ 199,859 ¥ 117,531
at end of the period(Per share data)
Net assets per share(Yen)
Cash dividends per
share (Yen)
Earnings per share(EPS) (Yen)¥1,091.17*¥1,227.92*¥1,350.25*¥1,473.87*¥1,367.40*¥1,492.27*¥1,699.10*¥1,911.25*

17.50*

18.75*

20.00*

13.75*

15.00*

17.50*

17.50*

18.00*¥ 176.06*¥ 183.78*¥ 154.00*¥ 113.88*¥ 102.08*¥ 132.84*¥ 125.29*¥ 125.78** Retroactively adjusted for a stock split at a ratio of 1:400 of common stock on October 1, 2013.

(Financial indicators)

42

Net debt / Net total
capital employed (%)(18.6)%(36.1)%(31.2)%(30.6)%(48.9)%(60.7)%(43.9)%(31.9)%

Equity ratio (%)

64.0

64.0

71.9

68.9

74.5

71.1

68.6

69.1

D/E ratio (%)

24.2%

16.8%

12.9%

17.3%

13.7%

14.6%

19.2%

20.9%

INPEX CORPORATION Annual Report 2017

Thousands of
U.S. dollars

Millions of yen

2017/32017/3

2015/3

2016/3¥1,171,227¥1,009,564

525,444526,758

453,847

4,044,982

645,783

482,806

420,576

3,748,449

534,886

390,139

336,453

2,998,690

540,023

328,887

327,525

2,919,118¥

77,820¥16,777¥ 874,423 $ 7,793,431¥

46,168 $411,480¥1,342,410¥ 984,345¥ 942,960 $ 8,404,278

1,497,622

1,752,615

1,928,598

17,188,930

458,770

541,471521,253

4,645,749

1,200,352

1,091,411

919,363

8,193,966

4,499,154

4,369,842

4,312,174

38,432,923

365,212319,128

297,465

2,651,203

845,238

871,911807,166

7,193,993¥3,288,704¥3,178,803¥3,207,543 $28,587,727¥ 216,749¥ 183,708¥ 275,810 $ 2,458,200(81,087)(543,534)

53,484

476,684(4,178)

156,726(65,428)(583,137)¥ 260,978¥¥ 2,099.95¥ 2,008.34

18.00

18.00

¥

53.29

¥

53,813

11.49

Notes
* EBIDAX = Net income (including non-controlling interests) +Deferred tax + (1 – Tax rate) × (Interest expense – Interest income) +Foreign exchange gain and loss + Depreciation and amortization +Amortization of goodwill + Recovery of recoverable accounts under
production sharing (capital expenditures) + Exploration expenses +Provision for exploration projects + Provision for allowance forrecoverable accounts under production sharing + Impairment loss
* Net assets excluding non-controlling interests = Net assets – Noncontrolling interests* Equity ratio = Net assets excluding non-controlling interests / Total
assets* Net debt = Interest-bearing debt – Cash and cash equivalents– Time deposits – Certificate of deposits – Public bonds and corporate bonds and other debt securities with determinable value– Long-term time deposits* Net debt / Net total capital employed = Net debt / (Net assets +Net debt)* D/E ratio = Interest-bearing debt / (Net assets – Non-controllinginterests)* ROE = Net income attributable to owners of parent / Average of net
assets excluding non-controlling interests at the beginning andend of the year
* The reserves cover most of INPEX group projects including theequity-method affiliates. The reserves from March 31, 2007 to
March 31 2010 were evaluated by DeGolyer & MacNaughton, andfrom March 31, 2011, the reserves of projects which are expected
to be invested a large amount and affect the Group’s future resultmaterially are evaluated by DeGolyer & MacNaughton, and theothers are done internally.
The proved reserves are evaluated in accordance with SEC
regulations.
The probable reserves are sum of proved reserves and probablereserves evaluated in accordance with SPE/WPC/AAPG/SPEE
guideline Petroleum Resources Management System 2007(PRMS)
approved in March 2007 after deduction of proved reserves evaluated in accordance with SEC regulations. Probable reserves as ofMarch 31, 2007 are evaluated in accordance with the guideline
established by SPE and WPC (1997 SPE/WPC).
Possible reserves are evaluated in accordance with PRMS.
* Production volumes are calculated in accordance with SEC regulations and include the equity-method affiliates. The production
volume of crude oil and natural gas under the production sharing
contracts entered into by the Group corresponds to the net economic take of the Group.
Calculation of the conversion factor from gas to oil equivalent wasaltered from the year ended March 31, 2012.

¥ 316,791 $ 2,823,449¥ 2,015.38 $

17.96

18.00

0.16

31.61 $

0.28¥

(8.1)%

0.9%

0.9%

68.2

67.1

68.3

68.3

22.1%

25.3%

23.4%

23.4%

Financial/
Corporate Information(16.8)%

6

Notes: In consolidated financial statements, amounts are basicallyrounded to the nearest million.

INPEX CORPORATION Annual Report 201743

Background Information
Oil and Gas Accounting Policies and Treatment
ACCOUNTING METHODS FOR TYPES OF AGREEMENTS
The oil and gas business generates the bulk of consolidated net sales
revenues for INPEX CORPOR ATION and its consolidated subsidiaries(the “Group”). Two types of agreements govern the Group’s oil and gas
operations. One is production sharing contracts (the “PSCs”) and the otheris concession agreements. The latter category also includes domestic mining
rights, as well as overseas permits, licenses and lease agreements.

1. Production sharing contracts
Production sharing contract is an agreement by which one or several oil andgas development companies serve as contractors that undertake at their own
expense exploration and development work on behalf of the governmentsof oil-producing countries or national oil companies and receive production
from the projects as cost recovery and compensation.

As discussed above, in “Cost recovery and production sharing,” thesecosts are recovered either as capital or operating expenditures.

Cost recovery and production sharing
The PSCs determine the allocation of oil and gas production among thehost country’s government (or related entity) and the contractors such as theGroup. The allocation formula generally differs according to the terms of theindividual PSC. The overview below is specific to one type of PSC typical ofmany oil and gas projects in Indonesia, a country with which the Group has
concluded numerous PSCs.
Under this type of arrangement, the total production in any given year orother accounting period is allocated at the end of the period between three
portions.
(1) “First tranche petroleum”: This is a prescribed por tion of total
production allocated between the host country’s government and thecontractors in line with agreed percentages.
(2) “Cost recovery portion”: This is the oil and gas equivalent of a) noncapital production-related expenditures incurred in that period, plusb) the scheduled depreciation expenses in that period for capitalex penditures, as c alculated under the PSC. The equivalent s are
determined based on the current 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, whereasthat of the “equity portion” (explained below) rises.
If the actual production for the period is insufficient to cover thequantity of oil and gas equivalent calculated for the cost recover yportion, the latter is capped at actual production and any surplus amountis carried forward to the following period, as stipulated in the PSC.
(3) “Equity portion”: This is any residual production after the first two
portions have been allocated. It is allocated between the host country’s
government and the contractors based on agreed percentages.
The calculation of items in the income statement based on the above
PSC-related considerations is as follows:• The Group records as net sales its share of total sales relating to the oiland gas production that is allocated to contractors under the PSCs.
• The Group books as cost of sales the portion of “Recoverable accounts
under production sharing” that is recovered through the allocation ofits share of the “cost recovery portion.”

Recoverable costs under the PSCs
Exploration costs
The share of recoverable exploration costs incurred by the Group under the

Production sharing contracts
Costs
Exploration
costs
Development
costs
Production costs(Operating costs)
Acquisition
costs

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 is recorded within “Recoverable accounts
under production sharing.”
Production costs
A ny oper ating cos t s incur red during the produc tion phase that arerecoverable 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 arerecorded within “Recoverable accounts under production sharing.”

Non-recoverable costs under the PSCs

Acquisition costs

Costs relating to the acquisition of rights (recorded as intangible assets
under “Exploration and development rights”) for any projects governed by
the PSCs that are entirely in the exploration phase are expensed as incurredand amortized. Expenditures or costs relating to the acquisition of rights
to projects already in the development or production phase are capitalized
within “Exploration and development rights” and amortized based on theunit-of-production method. These amortization costs are recorded within“Depreciation and amortization.” Cost recovery provisions in the PSCs do not
generally cover these expenditures.

2. Concession agreements
Concession agreement is an agreement or authorization (including mining
rights awarded in Japan, as well as overseas permits, licenses and leaseagreements) by which a government entity or a national oil company of thecountry directly awards mining rights to an oil company. The oil company
makes its own investment in exploration and development and has the rightof disposition of the oil and gas it extracts. Revenues are returned to the hostcountry in the form of royalties, taxes, etc., on sales.

Acquisition costs

Costs relating to the acquisition of rights (recorded as intangible assets under“Mining rights”) for projects governed by concession agreements are treatedin the same way as projects governed by the 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 to mining facilities iscapitalized within tangible fixed assets. The depreciation of tangible fixed
assets that are governed by concession agreements is computed primarily
using the unit-of-production method for mining assets located outside Japanand the straight-line method for domestic facilities. These depreciation
expenses are recorded within the cost 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.

Concession agreements

Assets on
Balance Sheet

Statement of
IncomeCosts

Assets on
Balance Sheet

Statement of
IncomeProject under
exploration phase

Provision for allowance
for recoverable
accounts under
production sharing

Explorationcosts

All exploration costs
are expensed
as incurred

Exploration
expenses

Development
costs

Tangible fixed
assetsCost of sales(Depreciation andamortization)

Production costs(Operating costs)

All production costs
are expensed
as incurred

Cost of sales(Operating expenses)

Acquisition
costs

Mining rights

Cost of sales(Depreciation andamortization)

Recoverable
accounts under
production sharing
Project underdevelopment andproduction phase
Recoverable
accounts under
production sharing
Project underdevelopment andproduction phase
Exploration anddevelopment
rightsCost of sales(Recovery of recoverable
accounts under
production sharing(capital expenditures))

Cost of sales(Recovery of recoverable
accounts under
production sharing(operating expenditures))

Selling, general andadministrative expenses(Depreciation andamortization)

CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe Group’s consolidated financial statements are prepared in conformity
with Japanese GAAP. The preparation of these financial statements requires
the application of estimates, judgments and assumptions that affect thereported values of assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses for the reporting
period. Actual results may differ from the previously estimated or assumed
values.
Accounting estimates pursuant to the preparation of the consolidated
financial statements are deemed critical if the degree of uncer taint y
associated with such estimates is high, or if rational changes to such estimates
could exer t a material impac t on the financial condition or operating
results. Critical accounting policies and estimates relating to the financial
presentation are outlined below.

— Allowance for recoverable accounts under production sharing
Any expenditures made during the exploration, development and production
phases of projects governed by the PSCs are capitalized within “Recoverable
accounts under production sharing” if they are recoverable under the
relevant PSC. A reser ve equal to exploration costs is recorded within“Allowance for recoverable accounts under production sharing” to provide
for potential losses from unsuccessful exploration. This reserve typicallyremains unchanged on the balance sheet until it exceeds the residual balanceof exploration costs that previously had 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 individuallyestimated for each project. Although assessments and accounting estimates
are made on a reasonable basis, ac tual operating results can change
depending on the project status.

— Unit-of-production method
Overseas mining facilities, mining rights and exploration and development
rights that are acquired during the development and production phase aremainly depreciated or amortized based on the unit-of-production method.
This approach requires the estimation of reserves. Although the Group
believes that the assessment of reserves is done in an appropriate manner,
any changes in these estimates could significantly affect future operating
results.

— Asset retirement obligations
Asset retirement obligations are recorded by a reasonable estimate of thepresent value of retirement costs incurred upon termination of the operationand production with respect to oil and gas production facilities, based on
the oil and gas contracts or laws and regulations within the countries in which
the Group operates or has working interests. Although the Group believes
that such estimates of the present value of retirement costs are reasonable,changes to estimates of the present value of retirement costs which causedby the factors such as changes to retirement plans, escalating prices ofdrilling equipment and materials and others could significantly affect future
operating results.

— Allowance for investments in exploration companies
A reserve is recorded to provide for probable losses on investments madeby the Group in entities engaged in oil and gas activities, as estimatedbased on the net assets of such entities. Although the Group believes thatthe 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 ofinvestments in exploration. Although the Group believes that assessments
relating to the schedule of investments are reasonable, changes to theschedule could significantly affect future operating results.

— Provision for loss on businessA provision for loss on business is provided for future potential loss on crude
oil and natural gas development, production and sales business individuallyestimated for each project. Although assessments and accounting estimates
are made on a reasonable basis, ac tual operating results can change
depending on the business status.

— Deferred tax assets
Deferred tax assets reflect temporary differences (including net operating
loss carr y-for wards) arising mainly from the write-down of exploration
expenditures, foreign taxes payable and excess of tax allowable depreciation.
Valuation allowances are provided once it is judged that the non-realizationof deferred tax assets has become the more probable outcome. The effectof foreign tax credits is taken into account in the calculation of such valuation
allowances. The realization of deferred tax assets is principally dependent
on the generation of sufficient taxable income, based on the available
information. Adjustments to deferred tax assets could be required if futuretaxable income was lower than expected due to market conditions, foreignexchange rate fluctuations or poor operating performance.

— Retirement benefits to employees
Retirement benefit obligation to employees are recognized at the net present
value of future obligations as of the end of the accounting period, taking into
account any periodic benefit costs that have arisen during the period. The
calculation of retirement benefit obligations and retirement benefit expenses
is based on various actuarial assumptions, including the discount rate,
employee turnover and retirement rates, remuneration growth rates, and thelong-term expected return on plan assets. Future operating results could besignificantly affected by deviation between the base assumptions and actual
results or the revision of such assumptions which were to generate actuarial
gains or losses.

— Goodwill
The excess cost over underlying net assets excluding non-controllinginterests as fair value as of their dates of acquisition is accounted for as
goodwill and amortized over 20 years on a straight-line method.

6

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
BUSINESS ENVIRONMENT
During the year ended March 31, 2017, the Japanese economy
continued on a path of gradual recover y overall driven by
improvements in employment and income levels, although
improvement in certain segments of the economy was delayed.
O f t h e i n te r n a t i o n a l c r u d e o il p r i c e i n d i c e s, w hi c hsignificantly influence the financial performance of the INPEXGroup, Brent crude, commonly considered a benchmark index,
started at US$38.67 per barrel on April 1, 2016 and increased to
US$52.51 per barrel in early June due to concerns over crude oil
supply shortages caused by large-scale wildfires in Canada andpolitical instability in Libya and Nigeria.
Thereafter, the index dropped to US$41.80 per barrel inearly August due to increased oil production from major OPEC
countries.
The index then bounced back following the agreementin principle to reduce oil production at the OPEC Meeting inlate September contrary to market expectations, and rose to
US$53.14 in mid-October. While the index then dropped again
to US$44.43 in mid-November due to high levels of output in
Russia, Saudi Arabia and other countries as well as skepticism
over OPEC’s plans to cut back on production, the agreement to
reduce production at the OPEC Meeting in late November wasa turning point that saw the index rise again and reach a high of
US$57.10 in early January.
Brent then hovered at around US$55 per barrel for sometime, after which it dropped in early March following revelations
that the U.S. crude oil inventory had risen to unprecedented
levels, ultimately closing at US$52.83 per barrel on March 31,
2017.
Meanwhile, in Japan too, the prices of crude oil andpetroleum products shifted in correlation with international oil

prices. The Group’s average crude oil sales price for the year
ended March 31, 2017 reflected this shift and fell to US$46.41 per
barrel, down US$1.54 from the year ended March 31, 2016.
The foreign exchange market, another important factor that
affects the business of the Group, began to trade at ¥112 level
against the U.S. dollar. In late-April, the Bank of Japan passedon the additional monetary easing and United States included
Japan in the “Monitoring List”. Therefore, the Yen appreciated to¥105 level.
Thereafter the suggestion by Chairman of Federal Reserve
Board Yellen, which showed a possibility to rise Federal Funds
rate within a few months, brought the dollar buying to ¥111 level.
However, “Current Employment Statistics (CES)” in early-June
was much lower than the market forecast, which brought the Yen
buying. In addition, Brexit was passed on in late-June, which
accelerated the Yen buying to under ¥100 level for the first timein two and a half years. From July onward, the Yen has remainedin steadiness roughly ¥100 to ¥105 level to the U.S. dollar.
In November, Donald Trump won United States Presidential
election against the market forecast, which raise the expectationfor easing the restrictions and changing the trade policy andfinance policy. In addition, after FOMC appreciated the interestrate in December, the Yen depreciated to ¥118 level.
In March, FOMC appreciated the interest-rate again. The
Yen has remained in steadiness in the anticipation of the interestrate appreciation. TTM closed at ¥112.20 to the U.S. dollar which
turned out to be ¥0.49 higher than that on March 31, 2016.
Reflecting these situations, the average sales exchange rate
for the Group for the year ended March 31, 2017, was ¥108.60
to the U.S. dollar, which is ¥11.95 higher than that for the year
ended March 31, 2016.

PERFORMANCE OVERVIEW
Net sales
Consolidated net sales for the year ended March 31, 2017,
decreased by ¥135.1 billion, or 13.4%, to ¥874.4 billion from
¥1,009.6 billion for the year ended March 31, 2016, due to adecrease in unit sales price and the appreciation of the Japanese
yen against the U.S. dollar.
Compared with the year ended March 31, 2016, net sales ofcrude oil decreased by ¥62.0 billion, or 9.1%, to ¥617.2 billion from¥679.2 billion, and net sales of natural gas decreased by ¥74.2
billion, or 23.4%, to ¥242.6 billion from ¥316.8 billion.
The sales volume of crude oil increased by 4,980 thousandbarrels, or 4.2%, to 122,207 thousand barrels compared withthe year ended March 31, 2016. The sales volume of natural
gas increased by 6 billion cubic feet (Bcf), or 1.7%, to 343 Bcf
compared with the year ended March 31, 2016. Of this, the sales
volume of overseas natural gas decreased by 0 Bcf, or 0.1%, to272 Bcf compared with the year ended March 31, 2016. The sales

volume of domestic natural gas increased by 161 million m3, or
9.2%, to 1,910 million m3 (equivalent to 71 Bcf) compared with theyear ended March 31, 2016. The average sales price of overseas
crude oil was US$46.41 per barrel, a decrease of US$1.54, or 3.2%,
compared with the year ended March 31, 2016. The average sales
price of overseas natural gas was US$5.19 per thousand cubic feet(Mcf), a decrease of US$1.39, or 21.1%, compared with the year
ended March 31, 2016. The average sales price of domestic natural
gas was ¥43.36 per m3, a decrease of ¥8.93 per m3, or 17.1%,
compared with the year ended March 31, 2016.
The decrease of ¥135.1 billion in net sales was mainly derived
from the following factors: regarding net sales of crude oil andnatural gas, an increase in sales volume contributing ¥34.9 billion
to the increase, a decrease in unit sales price pushing sales downof ¥85.9 billion, the appreciation of the Japanese yen against the
U.S. dollar pushing sales down of ¥85.2 billion, and an increase in
net sales excluding crude oil and natural gas of ¥1.1 billion.

(Millions of yen, %)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
Gain on sales of marketable securities
Gain on sales of investment securities
Equity in earnings of affiliates
Foreign exchange gain
Other
Other expenses
Interest expense
Equity in losses of affiliates
Provision of allowance for doubtful accounts
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Loss on disposal of fixed assets
Impairment loss
Other
Income before income taxes
Income taxes
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income attributable to owners of parent

Cost of sales

Cost of sales for the year ended March 31, 2017, decreasedby ¥72.9 billion, or 13.8%, to ¥453.8 billion from ¥526.8 billion
for the year ended March 31, 2016. This was mainly due to theappreciation of the Japanese yen against the U.S. dollar.

Exploration expenses

Exploration expenses for the year ended March 31, 2017,
increased by ¥0.6 billion, or 9.2%, to ¥6.7 billion from ¥6.2 billion
for the year ended March 31, 2016. This was mainly due to anincrease in exploration activities in the Japan and Asia & Oceania
region.

Selling, general and administrative expenses

Selling, general and administrative expenses for the year ended
March 31, 2017, decreased by ¥4.1 billion, or 6.7%, to ¥57.3 billion
from ¥61.4 billion for the year ended March 31, 2016. This was
mainly due to decreases in freight expenses, taxes and personnel
expenses.

Depreciation and amortization

Depreciation and amortization for the year ended March 31,
2017, decreased by ¥5.0 billion, or 19.9%, to ¥20.1 billion from¥25.1 billion for the year ended March 31, 2016. This was mainly
due to change in useful lives of structures (pipelines). The Group
records depreciation costs for production facilities that arecovered by concession agreements as cost of sales. In addition,
under its accounting treatment of the PSCs, the Group records
capital expenditures as “Recoverable accounts under production
sharing” instead of capitalizing these costs within tangible fixed
assets and depreciating them. Costs that are recovered in any
given year based on the terms of the PSCs are included in thecost of sales.

Operating income

As a result of the above, operating income for the year ended
March 31, 2017, decreased by ¥53.7 billion, or 13.8%, to ¥336.5

2016

2017

ChangeRatio¥1,009,564
679,241
316,761
13,562526,758
482,806
6,166
61,387
25,114
390,139
69,934
10,751
10,82625,987
5,669
—
2,964
13,737
131,186
4,199
20,696
122
25,026335—
13,28845,885
21,635
328,887354,393(25,506)(42,283)¥ 16,777¥874,423
617,194242,576
14,653453,847
420,576
6,734
57,265
20,124
336,453
39,09010,460
2,803
—
5,000
2,175
—
18,65248,018
5,229
—
8,309
14,375
—
3,759
4,786
6,366
5,194
327,525
271,393
56,1329,964¥ 46,168¥(135,141)(62,047)(74,185)
1,091(72,911)(62,230)
568(4,122)(4,990)(53,686)(30,844)(291)(8,023)(25,987)
(669)
2,175
(2,964)
4,915(83,168)
1,030(20,696)
8,187(10,651)
(335)
3,759
(8,502)(39,519)(16,441)(1,362)(83,000)
81,63852,247¥ 29,391(13.4)%(9.1)(23.4)
8.1(13.8)(12.9)
9.2(6.7)(19.9)(13.8)(44.1)(2.7)(74.1)(100.0)(11.8)—(100.0)35.8(63.4)
24.5(100.0)—(42.6)(100.0)—(64.0)(86.1)(76.0)(0.4)(23.4)——
175.2%

billion from ¥390.1 billion for the year ended March 31, 2016.

Other income

Other income for the year ended March 31, 2017, decreased by¥30.8 billion, or 44.1%, to ¥39.1 billion from ¥69.9 billion for theyear ended March 31, 2016. This was mainly due to decreases ingain on sales of marketable securities and dividend income.

Other expenses

Other expenses for the year ended March 31, 2017, decreasedby ¥83.2 billion, or 63.4%, to ¥48.0 billion from ¥131.2 billion forthe year ended March 31, 2016. This was mainly due to decreases
in impairment loss, equity in losses of affiliates and provision forallowance for recoverable accounts under production sharing.

Income taxes

Total current income taxes and deferred income taxes for theyear ended March 31, 2017, decreased by ¥83.0 billion, or 23.4%,
to ¥271.4 billion from ¥354.4 billion for the year ended March 31,
2016. The Group pays the majority of its taxes outside Japan. In
addition to the high corporate tax rates imposed in a numberof regions, the Group is generally unable to deduct expenses
incurred in Japan for such taxes. Despite the positive effects
attributable to the application of the foreign tax credit system,
this situation resulted in a high effective income tax rate.

Net income (loss) attributable to non-controlling interests

Net income attributable to non-controlling interests for theyear ended March 31, 2017, was ¥10.0 billion. Meanwhile, net
loss attributable to non-controlling interests for the year ended
March 31, 2016, was ¥42.3 billion.

Net income attributable to owners of parent

As a result of the above, net income attributable to owners ofparent for the year ended March 31, 2017, increased by ¥29.4
billion, or 175.2%, to ¥46.2 billion from ¥16.8 billion for the year
ended March 31, 2016.

6

FINANCIAL POSITION
Total assets as of March 31, 2017, decreased by ¥57.7 billion,
or 1.3%, to ¥4,312.2 billion from ¥4,369.8 billion as of March
31, 2016. Current assets decreased by ¥41.4 billion, or 4.2%,
to ¥943.0 billion from ¥984.3 billion due to a decrease in time
deposits and others. Fixed assets decreased by ¥16.3 billion,
or 0.5%, to ¥3,369.2 billion from ¥3,385.5 billion as of March 31,
2016, due to a decrease in investments and other assets andothers.
Meanwhile, total liabilities decreased by ¥86.4 billion, or
7.3%, to ¥1,104.6 billion from ¥1,191.0 billion as of March 31,
2016. Current liabilities decreased by ¥21.7 billion, or 6.8%, to¥297.5 billion from ¥319.1 billion as of March 31, 2016. Long-term
liabilities decreased by ¥64.7 billion, or 7.4%, to ¥807.2 billion
from ¥871.9 billion as of March 31, 2016.
Net assets increased by ¥28.7 billion, or 0.9%, to ¥3,207.5
billion f rom ¥3,178.8 billion as of Marc h 31, 2016. Tot alshareholders’ equity increased by ¥19.9 billion, or 0.8%, to¥2,556.9 billion from ¥2,537.0 billion as of March 31, 2016. Total
accumulated other comprehensive income decreased by ¥9.6
billion, or 2.4%, to ¥386.3 billion from ¥395.9 billion as of March
31, 2016, and non-controlling interests increased by ¥18.5 billion,
or 7.5%, to ¥264.4 billion from ¥245.9 billion as of March 31, 2016.

INVESTMENT AND FUNDING— Investments in upstream oil and gas projects
Continuous exploration for new reserves of crude oil and natural
gas is essential for stable earnings of the Group. The informationin this section on upstream oil and gas investments is based on
the data reported by project operators relating to exploration
ex penditures, development ex penditures and oper ating
expenses. The Group’s expenditure categories are defined asfollows:• 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 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 forthe project (or contract area) if it contains a field in active
production.
• Discrepancies exist between the standards stipulated in

U.S. FASB Accounting Standards Codification Topic 932,
“Extractive Industries—Oil and Gas (Topic 932),” and boththe Group’s definitions of exploration and development
expenditures and the standards used in preparing thefollowing tables. The following is a par tial list of thediscrepancies between the Group’s accounting policies andTopic 932.
- Group expenditures relating to the PSC-governed joint
ventures where the Group is not the operator are disclosed
on a cash basis rather than an accrual basis as required by
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.
- Topic 932 requires that administrative costs not directly
related to exploration and development ac tivities be
excluded from exploration and development expenditures,
whereas such administrative costs are not necessarily
excluded from those expenditures under the Group’s
accounting policies.

The table below shows the Group’s exploration and development costs and other expenditures (excluding capitalized interest costs
and asset retirement costs corresponding to asset retirement obligations capitalized under fixed assets) by segment for the years
ended March 31, 2016 and 2017.
(Millions of yen)

Year ended March 31, 2016

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥ 2,492
Development
6,352
Subtotal* 1
8,844
Equity-method Affiliates
Exploration—
Development—
Subtotal—
Other capital expenditures* 2
51,142¥59,986
Total* 3

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 23,981
418,496
442,477¥—
58,89058,890¥ 1,372
113,849
115,221¥11,495
1,807
13,302¥ 39,340
599,394
638,734—
155
155
281,399¥724,031

343
—
343
—
¥59,233

4
14,695
14,699—¥129,920

0
849
849
—
¥14,151347
15,69916,046
332,541¥987,321*1 Figures include an equity-method affiliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic gas infrastructure, the Group's share of investment in the Ichthys downstream entity(Ichthys LNG Pty Ltd, an equity-method affiliate) and others.
*3 The amount capitalized for the asset retirement costs (including change in estimates) corresponding to asset retirement obligations for the year ended March
31, 2016 was ¥6,882 million.

(Millions of yen)

Year ended March 31, 2017

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥ 3,322Development
4,352
Subtotal* 1
7,674
Equity-method Affiliates
Exploration—
Development—
Subtotal—
Other capital expenditures* 2
10,334¥18,008
Total* 3

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericas¥ 10,035
214,650
224,685¥ 195
46,02946,224¥ 1,693
76,71978,412

¥ 917
3,174
4,091

¥ 16,162
344,924
361,086—475
475
233,837¥458,997

148
833
981
—
¥47,205

7
5,191
5,198
—
¥83,610

—
447
447
—
¥4,538

155
6,946
7,101
244,171¥612,358

Total*1 Figures include an equity-method affiliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic gas infrastructure, the Group's share of investment in the Ichthys downstream entity(Ichthys LNG Pty Ltd, an equity-method affiliate) and others.
*3 The amount capitalized for the asset retirement costs (including change in estimates) corresponding to asset retirement obligations for the year ended March
31, 2017 was ¥5,966 million.

Total investments for the year ended March 31, 2017, decreased by ¥375.0 billion, or 38.0%, to ¥612.4 billion (including ¥7.1 billion for
exploration and development by equity-method affiliates) from ¥987.3 billion for the year ended March 31, 2016. This was mainly due to adecrease in expenditures in the Asia & Oceania region.
The table below shows the Group’s operating expenses by segment for the years ended March 31, 2016 and 2017.
(Millions of yen, %)INPEX CORPORATION and Consolidated Subsidiaries
Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Equity-method Affiliates
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Total

2017

2016

Years ended March 31,¥ 12,380
75,25910,761
56,178
1,938
156,516

7.9%
48.1
6.9
35.9
1.2
100.0

¥ 11,501
55,084
7,809
40,338
1,867
116,599

9.9%
47.2
6.7
34.6
1.6
100.0

1,390
—
7,676
9,762
18,828¥175,344

7.4
—
40.8
51.8
100.0
—%

513
85
5,312
3,925
9,835
¥126,434

5.2
0.9
54.0
39.9
100.0
—%

— Expenditures for acquisitions of upstream oil and gas projects

The table below shows the Group’s expenditures for acquisitions of upstream oil and gas projects by segment for the years ended
March 31, 2016 and 2017. Expenditures in this category include the costs of acquiring mining rights, exploration and development
rights, signing bonuses and any tangible fixed assets or recoverable accounts under production sharing gained through the acquisitionof interest in upstream oil and gas projects.
(Millions of yen, %)INPEX CORPORATION and Consolidated Subsidiaries
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Equity-method Affiliates
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Total

2017

2016

Years ended March 31,——
134,516—
134,516

—%
—
100.0
—
100.0

¥—
—
—
—
—

—%
—
—
—
—

—
—
—
—
—
¥134,516

—
—
—
—
—
—%

—
—
—
—
—
¥—

—
—
—
—
—
—%

¥

6

— Analysis of recoverable accounts under production sharing
For upstream projects governed by the PSCs, the Group’s share of costs arising during the exploration, development and production
phases is capitalized under “Recoverable accounts under production sharing.” The following table shows the changes in the balance of“Recoverable accounts under production sharing” during the years ended March 31, 2016 and 2017.
(Millions of yen)

Years ended March 31,

Balance at beginning of the year
Add: Exploration costs
Development costs
Operating expenses
Other
Less: Cost recovery—capital expenditures
Cost recovery—operating expenditures
Other
Balance at end of the year
Allowance for recoverable accounts under production sharing at end of the year2016
¥ 703,291
30,970104,519
70,365
9,745(64,200)(107,133)(19,785)
727,772¥(131,766)

2017¥ 727,772
9,461
39,92955,514
6,970(79,874)(73,414)(27,156)
659,202¥(120,544)

The amount posted as “Cost recovery—operating expenditures”

Cost recovery for the year ended March 31, 2017, decreased

in recoverable accounts under production sharing is greatercompared with the year ended March 31, 2016. This was mainly

than that posted as operating expenses. Along with operating

due to a decrease in cost recovery in the Asia & Oceania region.

expenses, this is because a por tion of the exploration and

In addition, other deduction was mainly due to the decreasedevelopment cos t s, which are incur red and recover able

in recoverable accounts under production sharing related to thewithin the year, is included in the “Cost recovery—operating

business withdrawal from certain exploration blocks.

expenditures” account.

The allowance for recoverable accounts under production

Cos t s for the year ended March 31, 2017, decreased

sharing as of March 31, 2017, decreased compared with March

compared with the year ended March 31, 2016. This was mainly

31, 2016. This was mainly due to the business withdrawal fromdue to a decrease in expenditures in the Asia & Oceania region.

certain exploration blocks.

— Funding sources and liquidity
Oil and gas exploration and development projects, as well as the

The Ichthys downstream entity (Ichthys LNG Pty Ltd, anconstruction of gas infrastructure, require significant funding.

equity-method affiliate), as the borrower, has utilized external

The Group relies on cash flow derived from internal reserves,loans from export credit agencies and commercial banks for

together with external sources, to procure funds. The Group’s

project financing and others throughout the year ended Marchbasic policy is to utilize internal cash flow and external equity

31, 2017.

financing to fund exploration projects and to utilize internal cash

The Group’s basic liquidity policy is to maintain sufficient

flow and external loans to fund development projects and the

cash on hand at all times to fund expenditures for existing andconstruction of gas infrastructure. The Group currently receives

new oil and gas projects in a timely manner, while also keeping aloans from the Japan Bank for International Cooperation,

cushion of liquidity to provide for steep falls in oil and gas prices.

Japanese commercial banks and others. The Japan Oil, Gas

In line with this policy, excess cash reserves are invested in low-and Metals National Corporation (JOGMEC) guarantee systemrisk, highly liquid financial instruments. The Group’s strategy is tocovers these loans. In addition, the Development Bank of Japan

improve capital efficiency over the long term through businessand various Japanese commercial banks provide loans for the

expansion while continuing to maintain a sound financial position

construction of domestic gas infrastructure.

with sufficient liquidity.

— Maturities of long-term debt
The aggregate annual maturities of long-term debt subsequent to March 31, 2017, are summarized as follows:(Millions of U.S. dollars and Millions of yen)
Long-term debt denominated inYears ending March 31,

U.S. dollars

Yen

Total yen equivalent

2018
2019
2020
2021
2022
2023 and thereafter
Total$ 258.6
458.6
658.6
704.0
339.0
1,897.5$4,316.3¥ 10,288
17,381
43,33026,197
24,23877,009¥198,443¥ 39,305
68,838117,226
105,186
62,274289,908¥682,737— Cash flows
Cash flows for the years ended March 31, 2016 and 2017, are summarized as follows:(Millions of yen)

Years ended March 31,

Net cash provided by (used in) operating activities
Net cash provided by (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 (used in) operating activities
Net cash provided by operating activities for the year ended
March 31, 2017, was ¥275.8 billion, an increase of ¥92.1 billion
from ¥183.7 billion for the year ended March 31, 2016. This was
mainly due to decreases in income taxes paid and recoverable
accounts under production sharing (operating expenditures),despite a decrease in income before income taxes.

Net cash provided by (used in) investing activities
Net cash provided by investing activities for the year ended
March 31, 2017, was ¥53.5 billion. This was mainly due to anincrease in proceeds from time deposits, the lack of payments

2016¥ 183,708(543,534)
156,726¥ 53,813

2017¥275,810
53,484(65,428)¥316,791

for purchases of mining rights, and a decrease in payments forpurchases of tangible fixed assets. Meanwhile, net cash used
in investment activities for the year ended March 31, 2016, was¥543.5 billion.

Net cash provided by (used in) financing activities
Net cash used in financing activities for the year ended March
31, 2017, was ¥65.4 billion. This was mainly due to an increase in
repayments of long-term debt and decreases in proceeds fromlong-term debt and proceeds from non-controlling interests for
additional shares. Meanwhile, net cash provided by financing
activities for the year ended March 31, 2016, was ¥156.7 billion.

6

Consolidated Balance Sheet
INPEX CORPORATION and Consolidated Subsidiaries
March 31, 2017

Thousands of
U.S. dollars(Note 3)

Millions of yen

ASSETS
Current assets
Cash and cash equivalents (Note 6)
Time deposits (Note 12)
Accounts receivable—trade (Note 4)
Marketable securities (Notes 4 and 5)
Inventories (Note 6)
Deferred tax assets (Note 7)
Accounts receivable—other (Note 4)
Recoverable accounts under production sharing
Other (Note 6)
Less allowance for doubtful accounts
Less allowance for recoverable accounts under production sharing
Total current assets
Tangible fixed assets
Buildings and structures
Wells
Machinery, equipment and vehicles
Land (Note 6)
Construction in progress (Note 6)
OtherLess accumulated depreciation and amortization
Total tangible fixed assets
Intangible assets
Goodwill (Note 17)
Exploration and development rights
Mining rights
Other
Total intangible assets
Investments and other assets
Recoverable accounts under production sharing
Less allowance for recoverable accounts
under production sharing
Investment securities (Notes 4, 5 and 6)
Long-term loans receivable (Note 6)Long-term time deposits
Deferred tax assets (Note 7)
Other (Note 6)
Less allowance for doubtful accounts
Less allowance for investments in exploration
Total investments and other assets
Total fixed assets
Total assets
See accompanying notes to consolidated financial statements.

2016

2017

¥

2017

53,813¥ 316,791$ 2,823,449

718,715

335,824

2,993,084

56,46272,364644,955—

5,503

49,04635,91630,721

273,806

2,852

7,265

64,75084,65083,291

742,344421,248—

47,26445,013

68,403609,653(13,076)(20,764)(185,062)—(3,702)(32,995)

984,345942,960

8,404,278

298,714399,647

3,561,916

298,855

320,3112,854,822

399,665410,072

3,654,831

19,67419,190171,034

1,407,490

1,511,660

13,472,905

29,00030,039267,727

2,453,398

2,690,919

23,983,235(700,783)(762,321)(6,794,305)

1,752,615

1,928,598

17,188,930

67,55860,797

541,863

146,262

154,557

1,377,514

318,438

298,3712,659,278

9,213

7,528

67,094541,471521,253

4,645,749

727,772

611,938

5,453,993(131,766)(116,842)(1,041,373)

596,006

495,096

4,412,620

213,731

246,085

2,193,271

4,231

134,235

1,196,391

202,842——

13,10525,750229,501

71,35829,249260,686(7,815)(8,283)(73,824)(2,047)(2,769)(24,679)

1,091,411

919,363

8,193,966

3,385,497

3,369,214

30,028,645¥4,369,842¥4,312,174$38,432,923

Thousands of
U.S. dollars(Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2016

2017

¥

¥

2017

Current liabilities
Accounts payable—trade
Short-term borrowings and current portion of
long-term debt (Notes 4, 6 and 12)
Income taxes payable (Note 7)
Accounts payable—other (Note 6)
Provision for loss on business
Provision for exploration projects
Accrued bonuses to officers

47,351

51,105$455,481

68,46944,253

394,41242,84545,219403,02179,62173,721

657,050—

2,920

26,025

4,782

4,479

39,920

56

63

562

Asset retirement obligations (Note 16)

2,234

4,301

38,333

Other (Note 7)

73,77071,404

636,399

319,128

297,465

2,651,203

Long-term debt (Notes 4, 6, 11 and 12)673,099

643,432

5,734,688

Deferred tax liabilities (Note 7)

56,04545,615406,551

Provision for loss on business

4,737

—

—

293

331

2,950

Total current liabilities

Long-term liabilities

Accrued special repair and maintenance
Liability for retirement benefits (Note 15)

7,462

5,953

53,057

Asset retirement obligations (Note 16)

100,829

104,845934,448

Other

29,446

6,990

62,299871,911807,166

7,193,993

1,191,039

1,104,631

9,845,196

Common stock
Authorized: 2016 — 3,600,000,001 shares2017 — 3,600,000,001 shares
Issued:2016 — 1,462,323,601 shares2017 — 1,462,323,601 shares
Capital surplus

290,810

290,810

2,591,889

676,273

676,273

6,027,389

Retained earnings
Less: Treasury stock 2016 — 1,966,400 shares2017 — 1,966,500 shares
Total shareholders’ equity

1,575,136

1,595,018

14,215,847(5,248)(5,248)(46,774)

2,536,971

2,556,853

22,788,351

Unrealized holding gain on securities

4,959

6,480

57,754

Unrealized gain (loss) from hedging instruments(6,660)

717

6,390

Translation adjustments

397,622

379,120

3,378,966

Total accumulated other comprehensive income

395,921386,317

3,443,110

Non-controlling interests

245,911

264,373

2,356,266

3,178,803

3,207,543

28,587,727¥4,369,842¥4,312,174$38,432,923

Total long-term liabilities
Total liabilities

Net assets (Note 9)

Total net assets
Contingent liabilities (Note 19)
Total liabilities and net assets

6

Consolidated Statement of Income andConsolidated Statement of Comprehensive Income
Consolidated Statement of Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2017

Thousands of
U.S. dollars(Note 3)

Millions of yen

2017

2017

¥1,009,564
526,758
482,806
6,166
61,387
25,114
390,139¥874,423
453,847
420,576
6,734
57,265
20,124
336,453$7,793,431
4,044,982
3,748,449
60,018510,383
179,358
2,998,690

10,751
10,82625,987
5,669
—
2,964
13,737
69,934

10,460
2,803
—
5,000
2,175
—
18,65239,09093,22724,982—
44,563
19,385—
166,239
348,396

4,199
20,696
122

5,229
—
8,309

46,604—74,05525,026

14,375

128,120335—
13,28845,885
21,635
131,186
328,887

—
3,759
4,786
6,366
5,194
48,018327,525—
33,50342,65656,73846,292427,968
2,919,118

356,585(2,192)354,393(25,506)(42,283)¥ 16,777

304,620(33,227)
271,393
56,1329,964¥ 46,168

2,714,973(296,140)
2,418,833
500,285
88,805$ 411,480

2016
Net sales
Cost of sales
Gross profit
Exploration expenses
Selling, general and administrative expenses (Notes 13, 15 and 17)
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Gain on sales of marketable securities
Gain on sales of investment securities
Equity in earnings of affiliates
Foreign exchange gain
Other
Total other income
Other expenses
Interest expense
Equity in losses of affiliates
Provision of allowance for doubtful accounts
Provision for allowance for recoverable
accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Loss on disposal of fixed assets
Impairment loss (Note 14)
Other
Total other expenses
Income before income taxes
Income taxes (Note 7)
Current
Deferred
Total income taxes
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income attributable to owners of parent

Consolidated Statement of Comprehensive Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2017
Thousands of
U.S. dollars(Note 3)

Millions of yen

Net income (loss)
Other comprehensive income
Unrealized holding gain (loss) on securities
Translation adjustments
Share of other comprehensive income of affiliates accounted for by
the equity-method
Total other comprehensive income (Note 8)
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See accompanying notes to consolidated financial statements.

2016

2017

2017

¥ (25,506)¥ 56,132$ 500,285(41,094)(129,079)

1,522(19,868)

13,565(177,077)

29,3106,120

54,546(140,863)(166,369)(12,226)
43,906(108,966)
391,319(104,488)¥ (61,881)

36,564¥ 7,342

325,882$ 65,437

Consolidated Statement of Changes in Net Assets
INPEX CORPORATION and Consolidated Subsidiaries

For the year ended March 31, 2016
Balance as of April 1, 2015
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those inshareholders' equity
Total changes during the period
Balance as of March 31, 2016

For the year ended March 31, 2016
Balance as of April 1, 2015
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those inshareholders' equity
Total changes during the period
Balance as of March 31, 2016

For the year ended March 31, 2017
Balance as of April 1, 2016
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those inshareholders' equity
Total changes during the period
Balance as of March 31, 2017

For the year ended March 31, 2017
Balance as of April 1, 2016
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those inshareholders' equity
Total changes during the period
Balance as of March 31, 2017

For the year ended March 31, 2017
Balance as of April 1, 2016
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those inshareholders' equity
Total changes during the period
Balance as of March 31, 2017

For the year ended March 31, 2017
Balance as of April 1, 2016
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those inshareholders' equity
Total changes during the period
Balance as of March 31, 2017

Common stock¥290,810

Capital surplus¥679,288

Millions of yen
Shareholders’ equity
Retained earnings¥1,584,645

Treasury stock¥(5,248)(3,015)(3,015)(26,286)
16,777—¥290,810

Unrealized holding
gain on securities¥46,049

Total shareholders’ equity¥2,549,495(3,015)¥676,273(26,286)
16,777—(9,509)¥1,575,136—¥(5,248)

Millions of yen
Accumulated other comprehensive income
Unrealized gain (loss) fromTranslation
Total accumulated otherhedging instruments
adjustments
comprehensive income¥(36,423)¥507,560¥517,186

Non-controllinginterests¥222,023(12,524)¥2,536,971

Total net assets¥3,288,704(3,015)(26,286)
16,777—(41,090)

29,763(109,938)(121,265)

23,888(97,377)(41,090)¥ 4,959

29,763¥ (6,660)(109,938)¥397,622(121,265)¥395,921

23,888¥245,911(109,901)¥3,178,803

Common stock¥290,810

Capital surplus¥676,273

Millions of yen
Shareholders’ equity
Retained earnings¥1,575,136

Treasury stock¥(5,248)

Total shareholders’ equity¥2,536,971—(26,286)
46,168—¥290,810

Unrealized holding
gain on securities¥4,959—¥676,273

19,882¥1,595,018

Millions of yen
Accumulated other comprehensive income
Unrealized gain (loss) fromTranslation
Total accumulated otherhedging instruments
adjustments
comprehensive income¥(6,660)¥397,622¥395,921(0)(26,286)
46,168(0)(0)¥(5,248)

19,882¥2,556,853

Non-controllinginterests¥245,911

Total net assets¥3,178,803—(26,286)
46,168
(0)

1,521

7,377

(18,502)(9,604)

18,462

8,858

1,521
¥6,480

7,377
¥ 717

(18,502)¥379,120(9,604)¥386,317

18,462¥264,373

28,740¥3,207,543

Thousands of U.S. dollars (Note 3)
Shareholders’ equity
Capital surplus
Retained earnings$6,027,389$14,038,646

Common stock$2,591,889

Treasury stock$(46,774)

Total shareholders’ equity$22,611,150—(234,279)
411,480—$2,591,889

Unrealized holding
gain on securities$44,198—$6,027,389

177,201$14,215,847

Thousands of U.S. dollars (Note 3)
Accumulated other comprehensive income
Unrealized gain (loss) fromTranslation
Total accumulated otherhedging instruments
adjustments
comprehensive income$(59,359)$3,543,868$3,528,707(0)(234,279)
411,480(0)(0)$(46,774)

177,201$22,788,351

Non-controllinginterests$2,191,720

Total net assets$28,331,577—(234,279)
411,480(0)13,55665,749(164,902)(85,597)

164,546

78,94913,556$57,754

65,749$ 6,390(164,902)$3,378,966(85,597)$3,443,110

164,546$2,356,266

256,150$28,587,727

See accompanying notes to consolidated financial statements.

6

Consolidated Statement of Cash Flows
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2017

Millions of yen

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Provision for allowance for recoverable accounts under
production sharing
Provision for exploration projects
Other provisions
Liability for retirement benefits
Interest and dividend income
Interest expense
Foreign exchange loss (gain)
Equity in losses (earnings) of affiliates
Loss (gain) on sales of marketable securities
Loss (gain) on sales of investment securities
Recovery of recoverable accounts under production sharing(capital expenditures)
Recoverable accounts under production sharing(operating expenditures)
Accounts receivable—trade
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 (used in) operating activities
Cash flows from investing activities
Payments for time deposits
Proceeds from time deposits
Payments for long-term time deposits
Payments for purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for purchases of intangible assets
Proceeds from sales and redemptions of marketable securities
Payments for purchases of investment securities
Proceeds from sales and redemptions of investment securities
Investment in recoverable accounts under production sharing(capital expenditures)
Decrease (increase) in short-term loans receivable
Long-term loans madeCollection of long-term loans receivable
Payments for purchases of mining rights
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from non-controlling interests for additional shares
Cash dividends paid
Cash dividends paid to non-controlling interests
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
See accompanying notes to consolidated financial statements.

Thousands of
U.S. dollars(Note 3)

2016

2017

2017

¥ 328,887
86,79145,8856,761¥ 327,525
91,1596,366
6,761$ 2,919,118
812,469
56,73860,25829,844

15,934142,014(4,399)(4,353)
945(21,580)
3,465
15,085
20,696(25,987)(5,669)

(240)
7,145
(1,483)(13,263)
5,229
4,896
(2,175)—(5,000)(2,139)63,681(13,217)(118,209)
46,604
43,636(19,385)—(44,563)

64,20079,874

711,889(45,833)(2,823)(25,160)

15,193(2,551)(4,389)41,632(13,746)
2,882
15,294
549,053
31,447(3,206)(393,586)
183,708(16,351)
5,593
4,300
11,5694,182
280
23,312552,790
18,773(2,912)(292,841)
275,810(145,731)
49,84838,324
103,11137,273
2,496
207,772
4,926,827
167,317(25,954)(2,609,990)
2,458,200(544,331)
790,267(439,989)(476,789)
1,132(26,898)
175,585(6,877)
27,701(355,238)
921,781—(278,360)
4,611(21,954)—(80,225)
10,601(3,166,114)
8,215,517—(2,480,927)
41,096(195,668)—(715,018)
94,483(60,442)(37,326)(332,674)(4,120)(215,710)
384,759(134,516)(13,306)(543,534)(1,322)(133,478)
275—
24,11953,484(11,783)(1,189,643)
2,451—
214,964
476,68492
127,120(26,869)
87,279(26,298)(4,524)(74)
156,726(4,065)(207,165)
260,978¥ 53,813(96)
11,760(62,904)
16,110(26,287)(3,939)(72)(65,428)(888)
262,978
53,813¥ 316,791(856)
104,813(560,642)
143,583(234,287)(35,107)(641)(583,137)(7,915)2,343,832
479,617$ 2,823,449

Notes to Consolidated Financial Statements
INPEX CORPORATION and Consolidated Subsidiaries

1. BASIS OF PRESENTATIONINPEX CORPORATION (the "Company") is primarily engaged in the
research, exploration, development and production of crude oil andnatural gas.
The Company and its domestic subsidiaries maintain theiraccounting records and prepare their financial statements inaccordance with accounting principles generally accepted in Japan.
The accompanying consolidated financial statements have been
prepared by using the accounts of foreign consolidated subsidiaries
prepared in accordance with International Financial ReportingStandards, or IFRS or the accounting principles generally accepted in

the United States, or U.S. GAAP as adjusted for certain items.
The accompanying consolidated financial statements havebeen prepared in accordance with accounting principles generally
accepted in Japan, which may differ in certain material respects fromIFRS or U.S. GAAP, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
The Company has made certain reclassifications of the previous
years' consolidated financial statements to conform to thepresentation used for the year ended March 31, 2017.

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

The accompanying consolidated financial statements include theaccounts of the Company and companies controlled directly or
indirectly by the Company. Companies over which the Company
exercises significant influence in terms of their operating and financial
policies are included in the consolidated financial statements on an
equity basis. All significant intercompany balances and transactions
are eliminated in consolidation. Further, certain companies that do
not have significant impact on the consolidated financial statements,
are not consolidated or accounted for by the equity-method.
For the 48 companies for which the closing date differed from theconsolidated closing date, including but not limited to, INPEX Sahul,Ltd. and INPEX Masela, Ltd., the financial statements for the year
ended December 31 were used. However, the necessary adjustments
have been made to the financial statements of those companies toreflect any significant transactions made between the Company's
closing date and that of the consolidated subsidiaries. For the 10companies, including but not limited to, Japan Oil Development,
Co., Ltd., INPEX Southwest Caspian Sea, Ltd., INPEX North CaspianSea, Ltd., INPEX Holdings Australia Pty Ltd, and INPEX Ichthys Pty
Ltd, the financial statements for the year ended on the consolidated
closing date were used, even though their closing date is December
31.
The excess of cost over underlying net assets excluding noncontrolling interests at fair value as of the date of acquisition is
accounted for as goodwill and amortized over 20 years on a straightline method.

(b) Cash equivalents

All highly liquid investments with a maturity of three months or lesswhen purchased are considered cash equivalents, including shortterm time deposits with original maturities of three months or less.

(c) Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the exchange rates prevailing at the balance
sheet date. All revenues and expenses associated with foreign
currencies are translated at the rates of exchange prevailing whensuch transactions were made. The resulting exchange gain or loss iscredited or charged to income.
The assets and liability accounts of overseas subsidiaries aretranslated into yen at the exchange rates prevailing at the balance
sheet date. The revenue and expense accounts of the overseas
subsidiaries are translated into yen at the average rates of exchange
during the period. The components of net assets excluding noncontrolling interests are translated at their historical exchange
rates. The differences arising from the translation are presented
as translation adjustments and non-controlling interests in theaccompanying consolidated financial statements.

(d) Securities

In general, securities are classified into three categories: trading,held-to-maturity or other securities. Securities held by the Company
and its subsidiaries are all classified as other securities. Other

securities with a determinable market value are mainly stated at fairvalue with any changes in unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. Other
securities without a determinable market value are stated at cost.
Cost of securities sold is determined by the moving average method.

(e) Derivatives

Derivatives are stated at fair value.

(f) Inventories

Overseas inventories are carried mainly at cost, determined by theaverage cost method (balance sheet value is carried at the lowerof cost or market). Domestic inventories are carried mainly at cost,
determined by the moving-average method (balance sheet value iscarried at the lower of cost or market).

(g) Allowance for doubtful accounts

The allowance for doubtful accounts is provided at an amountdetermined based on the historical experience of bad debt withrespect to ordinary receivables, plus an estimate of uncollectible
amounts determined by reference to specific doubtful receivablesfrom customers experiencing financial difficulties.

(h) Recoverable accounts under production
sharing and related allowance

Cash investments made by the Company during an exploration,
development and production project under a production sharing
contract are recorded as "Recoverable accounts under production
sharing" so long as they are recoverable under the terms of therelevant contract. When the Company receives crude oil andnatural gas in accordance with the relevant contract, an amountcorresponding to the purchase costs of the products (i.e., a cost
recovery portion of the investments) is released from this account.
Because these investments are recoverable only where commercial
oil or gas is discovered, an allowance for recoverable accounts
under production sharing is provided for probable losses oninvestments made during the exploration stage under production
sharing contracts arising from the failure to discover commercial oil
and gas. In light of this uncertainty, an allowance for recoverable
accounts under production sharing is provided for probable losses ondevelopment investment individually estimated for each project.

(i) Allowance for investments in exploration

The allowance for investments in exploration is provided for future
potential losses on investments in exploration companies at an
estimated amount based on the net assets of the investees.

(j) Tangible fixed assets (except leased assets)

Depreciation of overseas mining facilities is mainly computed by theunit-of-production method.
For other tangible fixed assets, the straight-line method ofdepreciation is applied. The useful lives of fixed assets are based on
the estimated useful lives of the respective assets.

6

(k) Intangible assets (except leased assets)

Exploration and development rights at the exploration stage are
fully amortized in the year such rights are acquired, and those at the
production stage are amortized by the unit-of-production method.
Mining rights are amortized mainly by the unit-of-production
method.
Other intangible assets are amortized mainly by the straight-line
method.
Capitalized computer software costs are amortized by the straightline method over a period of 5 years.

(l) Leased assets

Leased assets are amortized by the straight-line method over thelease period assuming no residual value.

(Method of recognizing for actuarial differences)
Actuarial gains and losses are charged or credited to income as
incurred.

(r) Asset retirement obligations

Asset retirement obligations are recorded by a reasonable estimateof the present value of retirement costs incurred upon termination of
the operation and production with respect to oil and gas production
facilities, based on the oil and gas contracts or laws and regulations
within the countries in which the Group operates or has working
interests.

(s) Hedge accounting

Provision for exploration projects is provided for future expendituresof consolidated subsidiaries at the exploration stage based on aschedule of investments in exploration.

The special treatment is applied to the interest rate swaps that meetcertain criteria. For certain equity-method affiliates, the deferredhedge accounting method is adopted.
In addition, derivative transactions are limited to the scope of
actual demand, and the Company does not engage in speculative
derivative transactions.

(n) Accrued bonuses to officers(t) Research and development expenses(o) Provision for loss on business(u) Income taxes(m) Provision for exploration projects

Accrued bonuses to officers are provided at the expected payment
amount for the fiscal year.
Provision for loss on business is provided for future potential losses
on crude oil and natural gas development, production and sales
business individually estimated for each project.

(p) Accrued special repair and maintenanceAccrued special repair and maintenance are provided for planned
major repair and maintenance activities on tanks in certain
subsidiaries at amounts accumulated through the next activity.

(q) Accounting for retirement benefits(Method of attributing expected retirement benefits to proper
periods)
When calculating retirement benefit obligations, the benefit formula
method is used for attributing expected retirement benefits toperiods through March 31, 2017. Because certain subsidiaries areclassified as small enterprises, a simplified method (the amountwhich would be required to be paid if all active employees voluntarily
terminated their employment as of the balance sheet date) is applied
for the calculation of the retirement benefit obligation for thosesubsidiaries.

Research and development expenses are charged to income as
incurred.
Deferred tax assets and liabilities are determined based on the
differences between financial reporting and the tax bases of theassets and liabilities and are measured using the enacted tax rates
and laws which will be in effect when the differences are expected toreverse.

(v) Changes in accounting estimates(Change in useful life)
The Company reviewed the estimated period of economic useof structures (pipelines) considering the progress of initiatives on
strengthening our gas supply chain defined in the "Medium- to
Long-Term Vision", actual use records and others since the Toyama
Line commenced operation in the year ended March 31, 2017. It was
confirmed that they could be used longer than their conventional
useful lives, which had been based on the method prescribed in the
Corporation Tax Act, and the Company has changed their useful lives
from the year ended March 31, 2017.
As a result, compared with the conventional method, operating
income and income before income taxes for the year ended March
31, 2017 increased by ¥7,171 million ($63,913 thousand), respectively.

3. U.S. DOLLAR AMOUNTS
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at¥112.20=US$1.00, the approximate exchange rate in effect as of March 31, 2017. This translation should not be construed as a representationthat yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

4. STATUS OF FINANCIAL INSTRUMENTS(a) Policy regarding financial instruments

The Company raises funds for oil and gas development andproduction, construction or expansion of gas infrastructure
primarily from cash flow on hand and from bank loans. Oil and gas
development projects are primarily funded from long-term loansthat the Company has secured from the Japan Bank for International
Cooperation, Japanese commercial banks and others. Japan Oil, Gas
and Metals National Corporation has provided guarantees for the
principal on certain outstanding amounts of the Company's long-termloans. The Development Bank of Japan and Japanese commercial
banks and others have provided long-term loans for the construction
or expansion of domestic gas infrastructure. The Company generally
borrows loans with variable interest rates, while some loans are with afixed interest rate depending on the nature of each project.
Regarding the financing policy, the Company manages funds
mainly from deposits and government bonds, which are considered
to be of low-risk and high-liquidity. The Company limits the use ofderivative transactions for managing risks of forecasted transactions
and portfolio assets, and does not engage in speculative derivativetransactions.

(b) Details of financial instruments,
associated risks and risk management(Credit risk related to trade receivables)

Trade receivables such as accounts receivable-trade and accounts
receivable-other are comprised mainly from sales of crude oil andnatural gas. Main trading partners are national oil companies, major
oil companies and others. In line with the criteria for trading andcredit exposure management, the Company properly analyzes thestatus of trading partners for early detection and reduction of default
risks.

(Market price fluctuation risk related to securities)

For marketable securities and investment securities exposed tomarket price fluctuation risk, analysis of market values is regularly
reported to the Executive Committee. For shares of stock, theCompany mainly holds shares of trading partners and others
to establish close and smooth relationships for the purpose ofmaintaining a medium- to long-term stable business. A part ofthese shares are held for the purpose of investment. As for bonds,
the Company mainly holds bonds with short-term maturities byconsidering medium- to long-term cash outflow forecast and market
price fluctuation risk.

(Interest rate fluctuation risk related to short-term loans andlong-term debt)

Loans are mainly used to fund oil and natural gas development
projects and construction or expansion of domestic gas infrastructure
and others. The borrowing period is determined considering thefinancial prospects of the project and useful lives of the facilities.
Loans with variable interest rates are exposed to interest rate
fluctuation risk, however, the Company analyzes the impact of interest
rate fluctuation at the time of borrowing and on an annual basis, andleverages fixed-rate-loans or interest rate swaps as necessary.

(Exchange rates fluctuation risk related to assets and liabilities
in foreign currencies)

As most of the Company’s business is conducted overseas, theCompany is exposed to exchange rate fluctuation risk due to a large
portion of monetary assets and liabilities held in foreign currencies
such as cash and deposits, accounts receivables and loans requiredin overseas projects. As a result of fiscal year-end conversion,
yen appreciation causes a foreign exchange loss on assets and aforeign exchange gain on liabilities while yen depreciation causes
a foreign exchange gain on assets and a foreign exchange loss
on liabilities. For this reason, the Company endeavors to reduce
exchange rate fluctuation risk by maintaining the position between
assets and liabilities in foreign currencies. In addition to planned
expenditures in foreign currencies on the Ichthys Project and others,
the Company manages exchange rate fluctuation risk throughderivative transactions such as foreign exchange forwards and others
as necessary.

(Management of derivative transactions)

For the above derivative transactions, the Company follows its
internal rules. For derivative transactions exposed to market pricefluctuation, market values of these derivatives are regularly reported
to the Executive Committee, and the Company only transacts withfinancial institutions with high credit ratings to reduce counterparty
risks for the use of derivatives.

(Management of liquidity risk related to financing)

The finance and accounting division controls cash management
based on a monthly financing plan prepared by each project divisionand secures sufficient liquidity on hand to prepare for liquidity risk.

5. SECURITIES(a) Information regarding other securities as of March 31, 2016 and 2017 is as follows:
Millions of yen
March 31, 2016

Acquisition cost

Carrying value

Securities with carrying values exceeding their acquisition costs¥14,582¥22,889
Stock
Bonds:
5,500
5,509
Corporate bonds
2,462
4,971
Other
22,54433,369Subtotal
Securities with acquisition costs exceeding their carrying values
33,67628,054
Stock
33,67628,054
Subtotal¥56,220¥61,423
Total

Unrealized gain
(loss)¥ 8,307
9
2,509
10,825(5,622)(5,622)¥ 5,2036

Millions of yen
March 31, 2017

Acquisition cost

Carrying value

Thousands of U.S. dollars
Unrealized gain
Carrying value(loss)

Unrealized gain
(loss)

Acquisition cost

¥6,464$302,184$359,795$57,611

3
2,785
9,252

49,01919,412
370,615

49,04644,234453,075

27
24,822
82,460(752)(752)¥8,50077,70177,701$448,316

70,99870,998$524,073(6,703)(6,703)$75,757

Securities with carrying values exceeding their acquisition costs¥33,905¥40,369
Stock
Bonds:
5,500
5,503
Corporate bonds
2,178
4,963
Other
41,58350,835
Subtotal
Securities with acquisition costs exceeding their carrying values
8,718
7,966
Stock
8,718
7,966
Subtotal¥50,301¥58,801
Total(b) Information regarding sales of securities classified as other securities for the years ended March 31, 2016 and 2017 is as follows:
Millions of yen
Gain onsales

Year ended March 31, 2016

Proceeds
from sales

Bonds
Public bonds
Corporate bonds
Other
Total

¥ 31,205
30,906102,667¥164,77859
931,633¥31,701

Year ended March 31, 2017

Proceeds
from sales

Millions of yen
Gain on
sales

Stock

¥10,600¥5,000Loss on
sales

¥

¥—
3
—
¥ 3

Loss onsales¥—

Proceeds
from sales

Thousands of U.S. dollars
Gain onsales$94,474$44,563

Loss onsales$—(c) Components of securities for which it is extremely difficult to determine fair value as of March 31, 2016 and 2017 are summarized as follows:
Millions of yen
March 31,

Other securities
Unlisted securities
Stocks of subsidiaries and affiliates
Total

Thousands of U.S. dollars

2016

2017

2017

¥ 32,239
120,069¥152,308¥ 29,260
163,527¥192,787$ 260,784
1,457,460$1,718,244

These securities are not included in (a) as they have no quoted market prices and it is extremely difficult to determine their fair value. For sharesof exploration companies, an allowance for investments in exploration is provided 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, 2017 is as follows:
Millions of yen
March 31, 2017

Bonds
Corporate bonds

1 year or lessMore than 1
year but lessthan 5 years¥5,500¥—Thousands of U.S. dollars

More than 5More than 10
years but lessyears
than 10 years¥—¥—

1 year or lessMore than 1
year but lessthan 5 years$49,020$—

More than 5More than 10
years but lessyears
than 10 years$—$—

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT,ASSETS PLEDGED(a) Short-term borrowings as of March 31, 2016 and 2017 are as follows:
Millions of yen
March 31,

Short-term borrowings from banks and others(Interest rates ranging from 0.784% to 19.000% and from0.635% to 3.700% at March 31, 2016 and 2017)

Thousands of U.S. dollars

2016

2017

2017

¥5,182¥4,948$44,100(b) Long-term debt as of March 31, 2016 and 2017 are as follows:
Millions of yen
March 31,

Loans from banks and others, due through 2028
(Interest rates ranging from 0.360% to 2.012% and from
0.094% to 2.560% at March 31, 2016 and 2017)
Less: Current portion

Thousands of U.S. dollars

2016

2017

2017

¥736,386¥682,737$6,085,000

63,287¥673,099

39,305¥643,432

350,312$5,734,688(c) Assets pledged as of March 31, 2016 and 2017 are as follows:
Millions of yen
March 31,

Cash and cash equivalents
Inventories
Land
Construction in progress
Investment securities
Long-term loans receivable
Other
Total

¥

2016

1,507
8,862
150
945,518
15,039—15,113¥986,189¥

Thousands of U.S. dollars

2017

222
8,533
150
1,119,050
62,492
131,261
10,147¥1,331,855

$

2017

1,979
76,052
1,337
9,973,707
556,970
1,169,884
90,436$11,870,365

The above is mainly related to the Ichthys LNG Project Finance, and include others that are pledged as collateral for liabilities of affiliates.
(d) Collateral-backed debt as of March 31, 2016 and 2017 are as follows:
Millions of yen
March 31,

Accounts payable—otherThousands of U.S. dollars

2017

2016

¥532

¥—

2017

$—

(e) The aggregate annual maturities of long-term debt subsequent to March 31, 2017 are summarized as follws:
Years ending March 31,

Millions of yen

Thousands of U.S. dollars

2018
2019
2020
2021
2022
2023 and thereafter
Total¥ 39,305
68,838117,226
105,186
62,274289,908¥682,737$ 350,312
613,529
1,044,795
937,487
555,027
2,583,850$6,085,000

67. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to income taxes which, in the aggregate, resulted in a statutory tax rate of
approximately 28.8% and 28.2% for the years ended March 31, 2016 and 2017, respectively.
(a) The effective tax rates reflected in the consolidated statement of income for the years ended March 31, 2016 and 2017 differ from thestatutory tax rate for the following reasons:Years ended March 31,

Statutory tax rate
Effect of:Permanently non-taxable expenses such as entertainment expenses
Permanently non-taxable income such as dividends income
Valuation allowance
Foreign taxes
Foreign tax credits
Adjustment of deducted amounts of foreign taxes
Amortization of goodwill
Differences of effective tax rates applied to tax effect accounting
Other
Effective tax rates

2016

2017

28.8%

28.2%

0.8
(0.7)
8.8
95.3
(15.4)(13.3)
0.6
1.1
1.8
107.8%

0.3
(2.1)
6.3
76.3
(12.6)(15.6)
0.6
1.8
(0.3)
82.9%

(b) The significant components of deferred tax assets and liabilities as of March 31, 2016 and 2017 are as follows:
Thousands of U.S.
dollars

Millions of yen
March 31,

Deferred tax assets
Exploration expenditures
Loss on valuation of investment securities
Recoverable accounts under production sharing (foreign taxes)
Allowance for investments in exploration
Foreign taxes payable
Net operating loss carry forward
Accumulated depreciation
Liability for retirement benefits
Provision for loss on businessTranslation differences of assets and liabilities denominated in foreign
currencies
Asset retirement obligations
Allowance for doubtful accounts
Impairment loss
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Foreign taxes
Translation differences of assets and liabilities denominated in foreign
currencies
Reserve for overseas investment loss
Translation differences due to an application of purchase accounting
methodReserve for exploration
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

2016

2017

2017

¥ 77,785
2,583
8,524
573
32,102
119,972
12,316
2,070
1,338¥ 58,237
2,413
7,096
776
18,727
184,483
37,575
1,960
825

15,802

15,090134,492

11,8303,958
14,60523,597
327,055(276,292)
50,76314,142
6,189
15,41837,145400,076(315,192)
84,884

126,043
55,160137,415331,061
3,565,740(2,809,198)
756,542(83,019)(83,042)(740,125)$

519,047
21,506
63,244
6,916
166,907
1,644,234
334,893
17,469
7,353

(234)

(102)

(909)

(2,840)——(1,732)(7,052)(62,852)(5,026)(248)(6,331)(99,430)¥ (48,667)(5,509)(2,023)(3,993)(101,721)¥ (16,837)(49,100)(18,030)(35,588)(906,604)$ (150,062)

8. COMPREHENSIVE INCOME
Amount of reclassification adjustments and income tax effects allocated to each component of other comprehensive income for the years ended
March 31, 2016 and 2017 are as follows:

2016

Years ended March 31,

Unrealized holding gain (loss) on securities
Amount recognized during the period
Amount of reclassification adjustments
Before income tax effectAmount of income tax effectTranslation adjustments
Amount recognized during the period
Amount of reclassification adjustment
Share of other comprehensive income of affiliates accounted for by the equity-method
Amount recognized during the period
Amount of reclassification adjustments
Adjustment for acquisition cost of assets
Total other comprehensive income

Millions of yen

2017

Thousands of
U.S. dollars

2017¥ (15,819)(27,568)(43,387)
2,293(41,094)¥ 8,327(5,030)3,297(1,775)
1,522$ 74,216(44,831)
29,385(15,820)
13,565(128,941)(138)(129,079)(19,878)
10(19,868)(177,166)
89(177,077)

8,668
(154)
20,79629,310¥(140,863)(2,838)
(553)
9,511
6,120
¥(12,226)(25,294)(4,929)84,76954,546$(108,966)

9. NET ASSETS
The total number of the Company's shares issued consisted of
1,462,323,600 shares of common stock and 1 Class A stock as ofMarch 31, 2017.
Class A stock has no voting rights at the common shareholders'meeting, but the ownership of Class A stock gives its holder a rightof veto over certain important matters described below. However,requirements stipulated in the Articles of Incorporation need to be
met in cases involving the exercise of the veto over the appointment
or removal of directors, the disposition of all or a portion of material
assets, and business integration;• Appointment or removal of Directors• Disposition of all or a portion of material assets• Amendments to the Articles of Incorporation relating to theCompany's business objectives and granting voting rights to any
shares other than the common shares of the Company• Business integration• Capital reduction• Company dissolution
Class A stock shareholder may request the Company to acquireClass A stock. Besides, the Company may also acquire Class A stockby a resolution of the meeting of the Board of Directors in case where
Class A stock is transferred to a non-public entity.
The Company conducted a stock split at a ratio of 1:400 ofcommon stock with October 1, 2013 as the effective date, but
for Class A stock, no stock split was conducted. The Articles ofIncorporation specifies that dividends of Class A stock are equivalent
to dividends of a common stock prior to the stock split. The cash
dividends of Class A stock for the year ended March 31, 2017
amounted to ¥7,200.
Under the Companies Act of Japan, 10% of the amount to be
distributed as dividends from capital surplus (other than capitalreserve) and retained earnings (other than legal reserve) should betransferred to capital reserve and legal reserve, respectively, up to
the point where total amount of capital reserve and legal reserve
equals 25% of the common stock account.
Distributions can be made at any time by a resolution of themeeting of shareholders, or the Board of Directors if certain
conditions are met, but neither capital reserve nor legal reserve isavailable for distributions.

10. AMOUNTS PER SHARE
Amounts per share as of March 31, 2016 and 2017 are as follows:
Years ended March 31,

Net assets excluding non-controlling interests per share
Cash dividends per share
Net income per share2016¥2,008.34
18.00¥ 11.49

Yen

2017¥2,015.38
18.00¥ 31.61

U.S. dollars

2017$17.960.16$ 0.28

Diluted net income per share is not presented because there are no dilutive potential of shares of common stock.
Net assets excluding non-controlling interests per share are computed based on the net assets excluding non-controlling interests and thenumber of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by the Board of Directors together with the interim cash dividends paid.
Net income per share is computed based on the net income available for distribution to shareholders of common stock and the average
number of shares of common stock outstanding during the year.

611. DERIVATIVE TRANSACTIONS(a) Derivatives not subject to hedge accounting
Contract amounts, fair value and valuation gain (loss) regarding derivatives not subject to hedge accounting as of March 31, 2016 and 2017 are
as follows:
Millions of yen
March 31, 2016

Foreign exchange forwards*
Sell (CAD)
Buy (USD)

Contract amounts

Due after one year

¥37,451

Fair value¥—

Valuation gain (loss)¥(270)¥(270)

Millions of yen
March 31, 2017

Foreign exchange forwards*
Sell (CAD)
Buy (USD)

Contract amounts

Due after one year

¥39,981

Fair value¥—

Valuation gain (loss)

¥43

¥43

Thousands of U.S. dollars
March 31, 2017

Foreign exchange forwards*
Sell (CAD)
Buy (USD)

Contract amounts

Due after one year

$356,337

Fair value$—

Valuation gain (loss)

$383

$383

* Fair value is the price obtained from the counterpar ty financial institutions.

(b) Derivatives subject to hedge accounting

Contract amounts, fair value and valuation gain (loss) regarding derivatives subject to hedge accounting as of March 31, 2016 and 2017 are as
follows:
Millions of yen
March 31, 2016

Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

Principal items hedged

Contract amounts

Long-term debt

Due after one year

¥4,760Fair value¥4,760*Millions of yen
March 31, 2017

Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

Principal items hedged

Contract amounts

Due after one year

¥4,760Long-term debt

Fair value¥4,760*Thousands of U.S. dollars
March 31, 2017

Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

Principal items hedged

Contract amounts

Due after one year

Long-term debt

$42,424$42,424

Fair value** Fair value of derivatives for which special treatment of interest rate swaps is applied is included in the estimated fair value of the longterm debt as disclosed in Note 12. (a) since the interest rate swap is treated together with long-term debt subject to hedging.

12. OTHER FINANCIAL INSTRUMENTS(a) The carrying value and estimated fair value of financial instruments excluding marketable securities and investment securities which aredisclosed in Note 5.(a) and derivatives which are disclosed in Note 11 as of March 31, 2016 and 2017 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, 2016

Carrying value

Estimated fair value

Time deposits¥718,715¥723,322

Short-term borrowings and current portion of long-term debt
Long-term debt

68,46968,361¥673,099¥663,985

Millions of yen

Thousands of U.S. dollars

March 31, 2017

Carrying value

Estimated fair value

Carrying value

Estimated fair value

Time deposits¥335,824¥335,906$2,993,084$2,993,815

44,25343,967394,412391,863¥643,432¥635,083$5,734,688$5,660,276

Short-term borrowings andcurrent portion of long-term debt
Long-term debt(b) For other financial instruments, computation methods of estimated fair value are as shown below.

(Time deposits)

The fair value of current portion of long-term time deposits included in time deposits, is calculated by applying a discount rate to the totalof principal and interest. The discount rate is based on the assumed interest rate if a similar new deposit is entered into. For the other time

deposits, the relevant carrying value is used since the item is settled in a short period of time and its market value is almost the same as the
carrying value.

(Short-term borrowings and current portion of long-term debt)

The estimated 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 fair value is almost the same as
the carrying value.

(Long-term debt)

The estimated fair value of long-term debt is calculated by applying a discount rate to the total of principal and interest. The discount rate isbased on the assumed interest rate if a similar new loan is entered into.

13. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in general and administrative expenses and cost of sales amounted to ¥755 million and ¥1,984
million ($17,683 thousand) for the years ended March 31, 2016 and 2017, respectively.

14. IMPAIRMENT LOSSThe Company groups mining area and other assets as a basic unit that generates cash inflows independently of other groups of assets.
Due to impact from deteriorating business environments based on such factors as the drop in oil prices, the Company reduced the respective
carrying amounts of the assets listed below to recoverable amounts, posting the reductions as impairment loss.
For the year ended March 31, 2016
Use

Location

Classification

Wells

Assets related to
Keathley Canyon Blocks
874/875/918/919(Lucius Oil Field)

U.S. Gulf of Mexico

Assets related to
JPDA06-105 Block(Kitan Oil Field)

Timor Sea Joint Petroleum
Development Area (JPDA),
the Commonwealth ofAustralia / the Democratic
Republic of Timor-Leste

Assets related to
Copa Macoya Block

Bolivarian Republic ofVenezuela

4,379
19,736

Subtotal

26,450

Wells

2,702

Machinery, equipment and vehicles

2,517

Construction in progress

2,185

Subtotal

7,404

745

Mining rights

471

Other

104

Subtotal

4,570

Buildings and structures

73

Wells

945

Machinery, equipment and vehicles
Construction in progress
Subtotal
Buildings and structures

UAE

392
2,858

Machinery, equipment and vehicles

Other

Assets related to
Abu Al Bukhoosh Block¥ 2,335

Mining rights

Wells
British Columbia, Canada

Millions of yen

Machinery, equipment and vehicles

Buildings and structures
Assets related tothe shale gas project inthe Horn River area

Impairment loss

77
2,587
3
3,685
76

Wells

1,202

Machinery, equipment and vehicles

1,294

Construction in progress

577

Other

43

Subtotal

3,192

Other

584

Total

¥45,885

The recoverable amount of the assets related to Keathley Canyon Blocks 874/875/918/919 (Lucius Oil Field), the shale gas project in the Horn
River area and Abu Al Bukhoosh Block is reasonably estimated by discounting the future cash flows at a rate of 6.5%. The recoverable amountof the assets related to JPDA06-105 Block (Kitan Oil Field) and Copa Macoya Block is estimated at zero.

6

For the year ended March 31, 2017
Use

Assets related tothe shale gas projectin the Horn River area

Assets related to
Yabase Oil Field

Location

British Columbia, Canada

Akita City, Akita, etc.

Assets related to
Republic of Indonesia
South Natuna Sea Block B
Other

Impairment loss

Classification

Millions of yen

Thousands of U.S. dollars

Buildings and structures¥ 225$ 2,005

Wells

1,689

15,053

Machinery, equipment and vehicles

421

3,752

Mining rights

268

2,389

Other

27

241

Subtotal

2,630

23,440

Buildings and structures

650

5,793

Wells

11

98

Machinery, equipment and vehicles

906

8,075

Land

443

3,948

Other

17

152

Subtotal

2,027

18,066

Exploration and development rights

1,703

15,178

Total

6

54

¥6,366$56,738

The recoverable amount of the assets related to the shale gas project in the Horn River area is reasonably estimated by discounting the future
cash flows at a rate of 8.3%. The recoverable amount of the assets related to South Natuna Sea Block B is estimated at zero. The recoverable
assets of the land related to Yabase Oil Field is estimated by the net realizable value of the assets (reasonably adjusted amount based on thevaluation for real estate tax purposes), and the others are estimated at zero.

15. RETIREMENT BENEFITS
Retirement benefits for the years ended March 31, 2016 and 2017 are as follows:(a) Defined benefit plans(1) Reconciliation of beginning and ending balances of the retirement benefit obligations (excluding plans included in (3))
Millions of yen

Balance at beginning of the period
Service cost
Interest cost
Actuarial loss (gain)
Retirement benefits paid
Balance at end of the period

Thousands of U.S. dollars

2016

2017

2017

¥19,979
1,047
204
(187)
(543)
¥20,500¥20,500
1,046
209
(9)
(679)
¥21,067$182,709
9,323
1,863
(80)
(6,052)$187,763(2) Reconciliation of beginning and ending balances of plan assets at fair value (excluding plans included in (3))
Millions of yen

Balance at beginning of the period
Expected return on plan assets
Actuarial gain (loss)
Contributions to the plans
Retirement benefits paid
Contributions to retirement benefit trust
Balance at end of the period

Thousands of U.S. dollars

2016

2017

2017

¥13,940
348
(916)
567
(387)
—
¥13,552¥13,552
339
356
592
(378)
1,135
¥15,596$120,784
3,022
3,173
5,276
(3,369)
10,116$139,002(3) Reconciliation of beginning and ending balances of liability for retirement benefits applying simplified methods
Millions of yen

2016
Balance at beginning of the period
Retirement benefit expenses
Retirement benefits paid
Contributions to the plans
Other
Balance at end of the period

¥ 661
86
(32)
(13)
(188)
¥ 514

Thousands of U.S. dollars

2017
¥514
62
(90)
(13)
9
¥482

2017
$4,581
553
(802)
(116)
80
$4,296

(4) Reconciliation between retirement benefit obligations and plan assets at fair value and liability for retirement benefits and asset for retirement
benefits on the consolidated balance sheet
Millions of yen

Thousands of U.S. dollars

2016

2017

2017

Retirement benefit obligations (unfunded plans)
Net liability (asset) on consolidated balance sheet¥ 20,780(13,778)
7,002
460
7,462

¥ 21,334(15,810)
5,524
429
5,953

$ 190,143(140,909)
49,234
3,823
53,057

Liability for retirement benefits
Net liability (asset) on consolidated balance sheet

7,462¥ 7,462

5,953¥ 5,953

53,057$ 53,057

Retirement benefit obligations (funded plans)
Plan assets at fair value* Including plans applying simplified methods.

(5) Details of retirement benefit expenses
Millions of yen

2016
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss (gain)
Retirement benefit expenses under simplified methods
Retirement benefit expenses for defined benefit plans¥1,047
204
(348)
729
85
¥1,717

Thousands of U.S. dollars

2017¥1,046
209
(339)
(365)
63
¥ 614

2017
$ 9,323
1,863(3,022)(3,253)561$ 5,472(6) Plan assets (excluding plans applying simplified methods)
Components of plan assets

2016

2017

Stock
General accounts
Bonds
Other
Total

39%
43%
18%
0%
100%

44%
39%
17%
0%
100%

(7) Basis of measurement for long-term expected return rate on plan assets
The expected long-term return rate on plan assets is determined based on the current and expected future distribution of plan assets and thecurrent and expected future long-term return rate on various assets of which plan assets are composed.
(8) Basis of the actuarial assumptions

Discount rateLong-term expected return rate on plan assets

2016

2017

1.0%
2.5%

1.0%
2.5%

(b) Defined contribution plans

The Group's contributions for defined contribution plans amounted to ¥1,913 million and ¥2,302 million ($20,517 thousand) for the years ended
March 31, 2016 and 2017, respectively.

616. ASSET RETIREMENT OBLIGATIONS(a) Asset retirement obligations recognized in the consolidated balance sheet
The changes in asset retirement obligations for the years ended March 31, 2016 and 2017 are as follows:

Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2016

2017

2017

Balance at beginning of the period¥106,328¥103,063$918,565

New obligations

10,103

15,611

139,135

Accretion expenses

1,793

2,592

23,102

Obligations settled(503)(1,504)(13,405)

Change in estimates *1(7,166)(9,336)(83,208)

Other *2

(7,492)(1,280)(11,408)¥103,063¥109,146$972,781

Balance at end of the period*1 “Change in estimates“ for the year ended March 31, 2016 mainly reflects the change in the estimated period of use of certain subsidiaries.
“Change in estimates“ for the year ended March 31, 2017 mainly reflects the revised discount rate of certain subsidiaries.
*2 “Other“ mainly includes the change due to foreign exchange rates fluctuation.

(b) Asset retirement obligations other than those recognized in the consolidated balance sheet

Regarding domestic oil and gas production facilities and gas supply and marketing facilities, the Group has obligations to prevent mine
pollution at abandoned well sites after the completion of the production under Mine Safety Act and restore sites to their original condition at
the time of business termination in accordance with lease contracts.
Among these facilities, certain domestic oil and gas production facilities are operated complementarily and holistically in connection with the
LNG terminal and it is impossible to determine the timing of decommission since it is difficult to formulate reasonable long-term production
plan considering the balance between the production and the inflow of LNG at this time. The Group plans to operate domestic gas supply andmarketing facilities permanently as highly public infrastructures for energy supply.
The Group also has obligations to decommission mines with respect to certain overseas oil production facilities. However, it is difficult toestimate retirement costs since the information about decommissioning work including the assets subject to the work based on the approval by
the government of oil-producing country has not been specified yet.
Therefore, it is impossible to estimate the relevant asset retirement obligations reasonably and the Group does not recognize them in the
consolidated balance sheet.

17. GOODWILL

The changes in the carrying amount of goodwill for the years ended March 31, 2016 and 2017 are as follows:

Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2016

2017

2017

Balance at beginning of the period
Goodwill acquired during the period
Amortization of goodwill
Balance at end of the period¥74,319—(6,761)¥67,558¥67,558—(6,761)¥60,797$602,121—(60,258)$541,863

18. LEASES

Future minimum lease payments subsequent to March 31, 2017 for operating lease transactions are summarized as follows:(a) As lessee

Millions of yen

Thousands of U.S. dollars¥ 4,594
11,285¥15,879$ 40,945
100,579$141,524

Millions of yen

Thousands of U.S. dollars

20182019 and thereafter
Total(b) As lessor
20182019 and thereafter
Total

¥49
—
¥49

$437
—
$437

19. CONTINGENT LIABILITIESAs of March 31, 2017, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of affiliates in theaggregate amount of ¥585,233 million ($5,215,980 thousand).
In addition, the Company guarantees for derivative transactions utilized to hedge exchange rate fluctuation risk regarding payments ofdevelopment costs for the Ichthys LNG Project. The relevant loss on valuation as of March 31, 2017 was ¥212 million ($1,889 thousand).
In connection with the Ichthys LNG Project Finance, the Company and other project participants provide lenders with a guarantee of liabilities
during the construction phase based on each participating interest. The portion guaranteed by the Company as of March 31, 2017, was¥903,862 million ($8,055,811 thousand).

20. SEGMENT INFORMATION

Segment information for the years ended March 31, 2016 and 2017(a) Overview of reportable segments
The reportable segments for the Group's oil and natural gas development activities are composed of individual mining area and others forwhich separate financial information is available in order for the Board of Directors to make Group management decisions. Since the Group
operates oil and natural gas businesses globally, the Group's reportable segments are the mining areas and others by geographical region,
categorized in “Japan“, “Asia & Oceania“ (mainly Indonesia, Australia and East Timor), “Eurasia (Europe & NIS)“ (mainly Azerbaijan), “Middle
East & Africa“ (mainly UAE) and “Americas.“
The Company produces oil and natural gas in each segment. In addition, the Company conducts marketing activities for petroleum products
and others in “Japan“ segment.

(b) Basis of measurement for sales, income (loss), assets and other items by reportable segment

Accounting policies for the reportable segments are substantially the same as those described in “Note 2. SUMMARY OF SIGNIFICANTACCOUNTING POLICIES“.
As described in Note 2. (v) Changes in accounting estimates, the Company reviewed the period of economic estimated use of structures(pipelines) considering the progress of initiatives on strengthening our gas supply chain defined in the “Medium- to Long-Term Vision“, actual
use records and others since the Toyama Line commenced operation in the year ended March 31, 2017. It was confirmed that they could be
used longer than their conventional useful lives, which had been based on the method prescribed in the Corporation Tax Act, and the Company
has changed their useful lives from the year ended March 31, 2017. As a result, compared with the conventional method, “Japan“ segment
income for the year ended march 31, 2017 increased by ¥7,171 million ($63,913 thousand).

(c) Information on sales, income (loss), assets and other items by reportable segment
Millions of yen
Year ended March 31, 2016
Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assetsEurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas¥109,601
109,601
12,096
338,026¥ 302,871
302,871
97,204
1,729,119¥ 66,852
66,852
13,832576,843¥516,513
516,513290,866
412,577¥ 13,727 ¥1,009,564
13,727
1,009,564(14,002)399,996
165,634
3,222,199

20,642

23,171

10,143

14,756

16,44085,152

1,639

86,791

—

—

—

—

(192)

(192)

6,953

6,761

1,684

73,328—35,535—110,547—

110,547¥ 59,369¥ 308,434¥ 24,156¥210,659

4,798¥ 607,416

1,652¥ 609,068

Japan

¥

Total

Adjustments *1 Consolidated *2¥— ¥1,009,564—
1,009,564(9,857)
390,139
1,147,643
4,369,842¥

Millions of yen
Year ended March 31, 2017
Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assetsEurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas¥102,660
102,660
18,034
320,853¥ 218,099
218,099
51,566
1,997,494¥ 60,192
60,192
12,113600,854¥482,182
482,182
276,870446,792¥ 11,290 ¥ 874,423
11,290874,423(9,361)
349,222
137,119
3,503,112

16,992

21,623

10,32829,298

11,40589,646

1,513

91,159

—

—

—

—

(192)

(192)

6,953

6,761

1,966

116,619

253

34,773—

153,611281

153,892¥ 15,082¥ 197,958¥ 19,871¥ 42,967

3,329¥ 279,207

574¥ 279,781

Japan

¥

Total

Adjustments *1 Consolidated *2¥— ¥ 874,423—
874,423(12,769)
336,453809,062
4,312,174¥

Thousands of U.S. dollars
Year ended March 31, 2017
Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assetsEurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas$ 914,973
914,973
160,7312,859,652$ 1,943,841
1,943,841
459,590
17,802,977$ 536,471
536,471
107,959
5,355,205$4,297,522
4,297,522
2,467,647
3,982,104$ 100,624 $ 7,793,431
100,624
7,793,431(83,431)
3,112,496
1,222,094
31,222,032

151,444

192,718

92,050261,123

101,649

798,984

13,485

812,469

—

—

—

—

(1,711)(1,711)

61,96960,25817,522

1,039,385

2,255

309,920—

1,369,082

2,504

1,371,586$ 134,421$ 1,764,332$ 177,103$ 382,950

29,670$ 2,488,476

5,116$ 2,493,592

Japan

$

Total

Adjustments *1 Consolidated *2$— $ 7,793,431—
7,793,431(113,806)
2,998,690
7,210,891
38,432,923$*1 Adjustments include elimination of inter-segment transactions and corporate incomes, expenses and assets that are not allocated to areportable segment.
*2 Segment income is reconciled with operating income on the consolidated statement of income.

(d) Products and service information(Sales to third parties)
Years ended March 31,

Crude oil
Natural gas (excluding LPG)
LPG
Other
Total

Millions of yen

2016¥ 679,241
306,206
10,555
13,562¥1,009,564

Thousands of U.S. dollars

2017¥617,194235,794
6,782
14,653¥874,423

2017$5,500,837
2,101,551
60,446
130,597$7,793,431

6

(e) Geographical information(Sales)Millions of yen

Thousands of U.S. dollars

2017

2016

Years ended March 31,

Japan
Asia & Oceania (excluding Singapore)
Singapore
Other
Total
(Tangible fixed assets)

2017¥409,945
296,733
91,22676,519¥874,423¥ 491,204
279,532
98,862
139,966¥1,009,564$3,653,699
2,644,679
813,066
681,987$7,793,431

Millions of yen

Thousands of U.S. dollars

March 31,

2016

2017

2017

Japan
Australia
Other
Total

¥ 291,248
1,209,075
252,292¥1,752,615¥ 282,442
1,390,187
255,969¥1,928,598$ 2,517,308
12,390,258
2,281,364$17,188,930(f) Information on impairment loss from fixed assets

Millions of yen

Years ended March 31,

2016

Japan
Asia & Oceania
Middle East & Africa
Americas¥

Thousands of U.S. dollars

2017

Total

2017

¥2,033
1,703
—
2,630
¥6,366

—
7,404
3,192
35,289¥45,885$18,120
15,178—23,440$56,738

21. RELATED PARTY TRANSACTIONSThere are the following related party transactions for the years ended March 31, 2016 and 2017.

(a) Affiliated company
Year ended March 31, 2016

Descriptionof thebusinessrelationship

Name ofrelatedparty

CapitalLocation
investment

Ichthys
LNG Pty
Ltd

Transportation,
Serve theliquefaction andofficersales of oil andWestern$482,700
Indirectly
concurrently,
natural gas throughAustralia,
62.25%
thousandcapitalpipeline in WA-50-L
Australia
subscription
block in offshore
Western Australia

Nature ofoperations

Votinginterest

Amounts
Transaction
detailMillions of yen

Amounts
Title of accountMillions of yen

Loans offunds*1¥ 215,138—¥—

Guarantee of
liabilities*2¥1,388,370—¥—

Year ended March 31, 2017
Name ofrelatedparty

Ichthys
LNG PtyLtd

CapitalLocation
investment

Nature ofoperations

Votinginterest

Descriptionof thebusinessrelationshipAmounts

Transaction
detailAmounts
Title of
Millions of Thousands of account Millions of Thousands ofyen
U.S. dollars
yen
U.S. dollars

Loans ofTransportation,¥ 133,107
1
liquefaction andServe the funds*
sales of oil andofficer
Western$1,617,600
Indirectly
natural gas throughconcurrently, Subscription
Australia,
62.25%
thousand¥76,562
pipeline in WA-50-L
capital for new shares
Australia
block in offshore
subscription
Western Australia
Guarantee of¥1,466,099
liabilities*2

Long-term$ 1,186,337

loans¥131,261$1,169,884——

receivable$682,371—$13,066,836

—

¥

—

$

—

*1 The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.
*2 Guarantee of liabilities are for securing loans from financial institutions and for providing lender with a guarantee of liabilities during the construction
phase based on each participating interest. In addition, "Amounts" are guaranteed balance by the Company.

(b) Note related to the parent company or significant affiliated companies
The significant affiliated company for the years ended March 31, 2016 and 2017 is Ichthys LNG Pty Ltd. The summary of its financial information
is as follows:
Millions of yen

Years ended March 31,

Total current assets
Total fixed assets
Total current liabilities
Total long-term liabilities
Total net assets
Net sales
Net income (loss) before income taxes
Net income (loss)

¥

2016

46,8262,604,208
75,472
2,537,755
37,807¥—(3,901)(572)

Thousands of U.S. dollars

¥

2017

20,516
3,094,713
61,4112,882,514
171,304¥—(1,882)(1,634)$2017

182,852
27,582,112
547,335
25,690,856
1,526,773$—(16,774)(14,563)

Independent Auditor’s Report

Ernst & Young ShinNihon LLC
Hibiya Kokusai Bldg.
2-2-3 Uchisaiwai-cho, Chiyoda-ku
Tokyo 100-0011, Japan

Tel: +81 3 3503 1100
Fax: +81 3 3503 1197
www.shinnihon.or.jp

Independent Auditor’s Report
The Board of Directors
INPEX CORPORATION
We have audited the accompanying consolidated financial statements of INPEX CORPORATION and its
consolidated subsidiaries, which comprise the consolidated balance sheet as at March 31, 2017, and theconsolidated statements of income, comprehensive income, changes in net assets, and cash flows for theyear then ended and a summary of significant accounting policies and other explanatory information, allexpressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for designing andoperating such internal control as management determines is necessary to enable the preparation and fairpresentation of the consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error. The purpose of an audit of the consolidated financial statements is not to express an
opinion on the effectiveness of the entity’s internal control, but in making these risk assessments the auditor
considers internal controls relevant to the entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances. An
audit also includes evaluating the appropriateness of accounting policies used and the reasonablenessof accounting estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of INPEX CORPORATION and its consolidated subsidiaries
as at March 31, 2017, and their consolidated financial performance and cash flows for the year then ended
in conformity with accounting principles generally accepted in Japan.
Convenience Translation
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented forthe convenience of readers, and, in our opinion, the accompanying consolidated financial statements havebeen properly translated on the basis described in Note 3.

6
June 27, 2017
Tokyo, Japan

Subsidiaries and Affiliates
As of March 31, 2017

Consolidated Subsidiaries
Company name

Issued capital*(Millions of yen)

Voting rights
held by us (%)

INPEX Sahul, Ltd.

4,600

100.00%INPEX Alpha, Ltd.

8,014

100.00%INPEX Tengah, Ltd.

1,020

100.00%INPEX Browse, Ltd.

423,190

100.00%INPEX Ichthys Pty Ltd(Thousands of
U.S. dollars)

INPEX Browse E&P Pty Ltd(Thousands of
U.S. dollars)

100.00%INPEX Masela, Ltd.

58,51851.93%INPEX South Makassar, Ltd.

1,097

100.00%INPEX Oil & Gas Australia Pty Ltd

804,456
358,650

746,000

100.00%(Thousands of
U.S. dollars)

100.00%INPEX Babar Selaru, Ltd.

1,426

51.01%INPEX Southwest Caspian Sea, Ltd.

53,59451.00%INPEX North Caspian Sea, Ltd.

50,68045.00%

Japan Oil Development Co., Ltd.

18,800100.00%INPEX ABK, Ltd.

2,500

100.00%JODCO Onshore Limited
Teikoku Oil (D.R. Congo) Co., Ltd.

111

(Thousands of
U.S. dollars)

10475,600

INPEX Angola Block 14 Ltd.

(Thousands of
U.S. dollars)

Teikoku Oil & Gas Venezuela, C.A.

(Thousands ofbolivars)

Teikoku Oil (North America) Co., Ltd.

(Thousands of
U.S. dollars)

INPEX Canada, Ltd.
INPEX Gas British Columbia Ltd.
Teiseki Pipeline Co., Ltd.

1,620

19,79310
1,043,488(Thousands ofCanadian dollars)

100

65.76%
100.00%100.00%100.00%100.00%100.00%45.09%
100.00%Main business

Exploration, development, production and sales ofoil and natural gas in the JPDA03-12 Block and BayuUndan Gas-Condensate Field in the Timor Sea JPDA,
Australia and East Timor
Exploration, development, production and sales ofoil and natural gas in the WA-35-L Block and others,
Australia
Exploration, development, production and sales of oil
and natural gas in the Tengah Block in Offshore East
Kalimantan, Indonesia
Financing for oil and natur al gas explor ation anddevelopment in the WA-285-P Block and others, Australia
Exploration and development of oil and natural gas in
the Ichthys Gas-Condensate Field (WA-50-L/WA-51-L),
Australia
Exploration of oil and natural gas in the WA-494-P
Block and others, Australia
Exploration and development of oil and natural gas in
the Masela Block in the Arafura Sea, Indonesia
Exploration, development, production and sales of oil
and natural gas in the Sebuku Block in the Makassar
Strait, Indonesia
Exploration and development of oil and natural gas in
the Prelude Gas Field (WA-44-L) and others, Australia
Exploration of oil and natural gas in the Babar Selaru
Block in the eastern sea area, Indonesia
Exploration, development, production and sales of oilin the ACG Oil Fields, Azerbaijan
Exploration, development, production and sales of oilin the Offshore North Caspian Sea Block, Kazakhstan
Exploration, development, production and sales ofoil in the ADMA Block in Offshore Abu Dhabi, United
Arab Emirates
Exploration, development, production and sales of oilin the Abu Al Bukhoosh Block in Offshore Abu Dhabi,
United Arab Emirates
Exploration, development, production and sales of oilin the ADCO Block in onshore Abu Dhabi, United ArabEmirates
Exploration, development, production and sales of oilin the Offshore D.R. Congo Block
Inves t ment in oil ex plor ation, develop ment,
production and sales in Block 14, Offshore Angola
Investment in exploration, development, production
and sale of natural gas in the Copa Macoya Block andexploration, development, production and sale of oil in the
Guarico Oriental Block, Bolivarian Republic of Venezuela
Exploration, development, production and sales of oil
and natural gas in the Lucius Oil Field and others, inthe U.S. Gulf of Mexico
Exploration and development of oil including oil sandsin the Joslyn project, Canada
Exploration, development, production and sales ofnatural gas in the shale gas blocks of the Horn River,
Cordova and Liard basins in British Columbia, Canada
Natural gas transportation, pipeline operation,
maintenance and management

Company name

Issued capital*(Millions of yen)

86,135INPEX DLNGPL Pty Ltd(Thousands of
AUS dollars)

INPEX BTC Pipeline, Ltd.

(Thousands of
U.S. dollars)

63,800

Voting rights
held by us (%)

100.00%100.00%INPEX Trading, Ltd.

50

100.00%Saitama Gas Co., Ltd.

60

62.67%INPEX Geothermal Sarulla, Ltd.

10100.00%Main business

Investment in Darwin LNG Pty Ltd, which constructs
and operates the undersea pipeline and LNG plantconnecting the Bayu Undan Gas-Condensate Field
and Darwin (Australia)
Investment in the pipeline construction andmanagement business that connects Baku (Azerbaijan),
Tbilisi (Georgia) and Ceyhan (Turkey)
Sales, agency and brokerage of crude oil and market
research and sales planning in connection with oil andnatural gas sales
City gas sales
Supply of business capital, etc. to geothermal power
project in Sarulla Geothermal Field, Indonesia

37 other subsidiaries

Equity-Method Affiliates
Company name

Issued capital*(Millions of yen)

588,601

Voting rights
held by us (%)

Main business44.00%

Exploration, development, production and sales ofnatural gas in the Berau Block and the Tangguh LNG
Project, West Papua province, Indonesia

49.00%

Supply of business capital, etc. to geothermal power
project in Sarulla Geothermal Field, Indonesia

MI Berau B.V.

(Thousands of
U.S. dollars)

PT Medco Geopower Sarulla(Thousands of
U.S. dollars)

Ichthys LNG Pty Ltd(Thousands of
U.S. dollars)

62.25%

Japan South Sakha Oil Co., Ltd.

1,563

25.16%

Angola Japan Oil Co., Ltd.

8,000

19.60%

Angola Block 14 B.V.
INPEX Offshore North Campos, Ltd.

52,776

1,617,600

18

Engaged in laying the undersea pipeline from theIchthys Gas-Condensate Field to the Darwin Onshore
LNG Plant and building the LNG plant, Australia
Supply of business capital for exploration,
development, production and sales of oil in ZapadnoYaraktinsky and Bolshetirsky blocks, Russia
Exploration, development, production and sales of oilin the Offshore 3/05 Block and 3/05A Block, Angola(Thousands ofeuros)

49.99%

Exploration, development, production and sales of oilin Block 14, Offshore Angola

6,852

37.50%

Financing for oil and natural gas exploration,
development, production and sales in the Frade Blockin Offshore North Campos, Brazil

13 other equity-method affiliates

Subsidiaries of Equity-Method Affiliates
6
Company name

Frade Japão Petróleo Limitada
2 other subsidiaries of equity-method affiliates*Rounding off fractions less than the unit.

Issued capital*

103,051(Thousands ofreais)

Voting rights
held by us (%)

Main business

0.00%

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

Business Risks

The following is a discussion on key items that can be considered potential risk factors relating to the business of INPEXCORPORATION, its subsidiaries and affiliates (the “Group”). From the standpoint of information disclosure to investors andshareholders, we proactively disclose matters that 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 theGroup’s businesses.
Unless stated otherwise, forward-looking statements in the discussion are the judgment of the Group as of June 28, 2017 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 NATURAL GAS DEVELOPMENT BUSINESS(1) Risk of failure in exploration, development or
production
Payment of compensation is ordinarily necessary to acquireparticipating interests. Also, surveying and exploratory drilling
expenses (exploration expenses) become necessar y at thetime of exploration activities for the purpose of discoveringresources. When resources are discovered, it is necessary tofurther invest in substantial development expenses according tovarious conditions, including the size of the recoverable reserves,development costs and details of agreements with oil-producing
countries (including gas-producing countries; hereinafter thesame shall apply).
There is, however, no guarantee of discovering resources
on a scale that makes development and production feasible.
The probability of such discoveries is considerably low despite
various technological advances in recent years, and even whenresources are discovered the scale of the reserves does notnecessarily make commercial produc tion feasible. For thisreason, the Group conservatively recognizes expenses related to
exploration investment in our consolidated financial statements.
The Group maintains financial soundness by booking 100% as
expenses in the case of concession agreements (including mining
rights awarded in Japan as well as permits, licenses and leases
awarded overseas) and by booking 100% of exploration project
investment as allowances in the case of production sharing
agreements. In addition, if there are impossibilities of recovery
of investment in a development project, we also book thecorresponding amount of investment in the development projectas allowances while considering the recovery possibility of eachproject.
To increase recoverable reserve and production volumes,
the Group plans to always t ake an interes t in promisingproperties and plans to continue exploration investment. At thesame time, we plan to invest in development projects, including
the acquisition of interests in discovered undeveloped fields andproducing fields, so as to maintain an overall balance between
assets at the exploration, development, and production stages.
A l t h o u g h e x p l o r a t i o n a n d d e ve l o p m e n t ( i n c l u d i n g
the acquisition of interes t s) are neces sar y to secure thereserves essential to the Group’s future sustainable businessdevelopment, each type of investment involves technologicaland economic risks, and failed exploration or development could
have an adverse effect on the results of the Group’s operations.

(2) Crude oil, condensate, LPG and natural gas reserves
1) Proved reserves
INPE X CO R P O R ATI O N (t h e “C o m p a ny ”) c o m mi s s i o n e d

DeGolyer and MacNaughton, an independent petroleum
engineering consultant in the United States, to assess the main
proved reserves of the Group of which projects with a significant
amount of future development investment might materiallyaffect future performance. An assessment of other projects wasundertaken by the Company. The definition of proved reserves isbased on the U.S. Securities and Exchange Commission’s (SEC)
Regulation S-X, Rule 4-10(a), which is widely known among U.S.
investors. Regardless of whether the deterministic approachor probabilistic approach is used in evaluation, proved oil
and gas reserves are estimated quantities that geological andengineering data demonstrate with reasonable certainty to be
recoverable from known reservoirs under existing economic
and operating conditions, from the date of evaluation throughto the expiration date of the agreement granting operatingrights (or in the event of evidence with a reasonable certainty ofagreement, extension through to the expiration of the projected
extension period). For definition as “proved reserves,” operators
must have a reasonable degree of certainty that the recovery ofhydrocarbons has commenced or that the project will commence
within an acceptable period of time. This definition is widely
regarded as being conservative. Nevertheless, the strictness ofthe definition does not imply any guarantee of the production of
total reserves during a future production period. In this context,
when probabilistic methods are employed, there should be atleast a 90% probability that the quantities actually recovered will
equal or exceed the sum of estimated proved reserves.
For f ur ther det ails on proved reser ves of cr ude oil,condensate, LPG and natural gas held by the Group, including
affiliates accounted for under the equity method, please see
the section “Oil and Gas Reserves and Production Volume” on
P. 82.
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 reser ves and thepossible reserves of which projects with a significant amountof future development investment might materially affect the
future performance, similar to proved reserves. An assessmentof other projects was undertaken by the Company, based on
the Petroleum Resources Management System 2007 (PRMS)
published by four organizations: the Society of Petroleum
Engineers (SPE), the World Petroleum Congress (WPC), theAmerican Association of Petroleum Geologists (A APG), andthe Society of Petroleum Evaluation Engineers (SPEE). Probablereserves, as defined by PRMS guidelines established by thefour organizations, are reserves of oil and gas volumes outside
proved reserves that are less likely to be recovered than proved
reserves but more certain to be recovered than possible reserves
based on analyses of geological and engineering data. In thiscontext, when probabilistic methods are employed, there
should be at least a 50% probability that the quantities actually
recovered will equal or exceed the sum of estimated proved
and probable reserves. In addition, possible reserves are also
defined in accordance with PRMS guidelines as reserves of oil
and gas volumes which are not categorized as proved reserves
or probable reserves and which are less likely to be recovered
than probable reserves based on analyses of geological andengineering data. In this case, it is unlikely that the actual
quantity of oil and gas recovered will exceed the sum of proved
reserves, probable reserves and possible reserves. Furthermore,when probabilistic methods are employed to calculate possible
reserves, there should be at least a 10% probability that thequantities recovered will equal or exceed the sum of proved
reserves, probable reserves and possible reserves. Probablereserves and possible reserves can be upgraded to proved
reser ves af ter the addition of new technical data or when
uncertainty has been reduced due to clarification of economic
conditions or operational conditions. Nevertheless, probablereserves and possible reserves do not offer a guarantee of the
production of total reserves during a future production periodwith the same certainty as proved reserves.
For fur ther details on probable reser ves and possible
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 “Oil and Gas Reserves andProduction Volume” on P. 82.
3) Possibility of changes in reserves
A reserve evaluation depends on the available geological andengineering data from oil and gas reservoirs, the maturity ofdevelopment plans and a considerable number of assumptions,factors and variables including economic conditions as of thedate 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 and other conditions made newly available throughprogress in production and operations. As a result, there is apossibility 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, recovery of investments due
to contractual conditions and remuneration fees may affectthe economic entitlement. This may cause reserves to increaseor decrease. In this way, the assessed value of reserves could
fluctuate because of various data, assumptions and changes ofdefinition.

(3) In the oil and natural gas development business theperiod from exploration to sales is highly capital intensive
and funds cannot be recovered for a long time
Considerable time and expense is required for explorationac tivities. Even when promising resources are discovered
through exploration, substantial expenses including production
facility construction costs, and an extended period of time, arenecessary 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 and development investment until
the recovery of funds through production and sales. In particular,
the large-scale Ichthys LNG and other projects being pursued by
the Company requires a very large amount of investment, andthe financing of these projects could be impacted by changes inthe economic and financial environment. Following the discoveryof resources, a delay in the development schedule or the loss ofthe economic viability of the properties during the development
process leading up to production and the commencement ofsales could have an adverse effect on the Group’s operational
results. Such delays or losses may occur due to changes inthe business environment including a delay in the acquisitionor modification of government approvals, the occurrenceof unanticipated problems related to geological conditions,fluctuations in the price of oil or gas, fluctuations in foreignexchange rates, or escalating prices of equipment and materials.
In the case of LNG projects, such delays or losses may occur due
to an inability to complete such procedural requirements as FID
owing to the lack of any long-term contractual agreement withprospective purchasers with respect to production.

(4) Operatorship
In the oil and natural gas development business, companies
frequently form business partnerships for the purpose of thedispersion of risk and financial burden. In such partnerships,
one of the companies becomes the operator, which performs
the actual work and bears the responsibility for operations onbehalf of the partners. The companies other than the operator,
as non-operators, participate in the business by providing apredetermined amount of funds and either carefully examining
the exploration and development plan devised and implemented
by the operator, or participating in some operations.
The integration of INPEX CORPORATION and Teikoku OilCo., Ltd., was completed on October 1, 2008. The resultant
company possesses abundant operational capabilities thanks
to the integration of the former two companies’ know-how basedon extensive operation experience in exploration, development
and production both within Japan and overseas as well as theirhigh level proprietary technologies.
The Group intends to actively pursue operator projects,
focusing on the large-scale Ichthys LNG and other projects
taking into consideration the effective application of businessresources as well as the balance between operator and nonoperator projects, based on the Group’s technical capability,
which has been considerably enhanced by the above-statedbusiness integration. Although the Company lacks operator
experience in LNG development projects, it has significant
expertise as an operator in the development and productionof crude oil and natural gas both in Japan and overseas as well
as a wealth of know-how and knowledge accumulated overmany years as a participant in LNG and other projects in suchcountries as Indonesia and Australia. In addition, we believe thatby utilizing the services of specialized subcontractors and highly
experienced external consultants, a practice similar to foreign
oil companies including the majors, it will be possible to executebusiness appropriately as an operator including LNG projects.
Engaging in projec t coordination as an operator will6

contribute to the expansion of oppor tunities of block anda c r eag e a c q ui s i t io n t h r o u g h e n ha n c e m e nt of te c h nic alcapabilities 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 in financial burden. Inability toadequately cope with such risks could have an adverse effect on
the Group’s results of operations.

(5) Project partners
In the oil and natural gas development business, as previously
mentioned, several companies often engage in joint businessfor the purpose of dispersion of risk and financial burden. In
such cases, the partners generally enter into a joint operating
agreement among themselves to decide on the decision-making
procedure for execution of the joint 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 ofother participating interests, 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 this financial burden
may adversely affect the project.

(6) Disaster and accident risks
Oil and natural 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 riskthat costs will be incurred, excluding compensation covered byinsurance, due to facility damage, as well as the risk of a major
accident or disaster involving loss of life. In addition, a costburden for recovery or opportunity loss from the interruption ofoperations could occur. For the domestic natural gas business,
the Company has continued to procure as source gas natural gas
regasified from imported LNG since January 2010. Furthermore,
the Company has procured impor ted LNG as source gas inconnection with its Naoetsu LNG Terminal from August 2013. An
inability to procure natural gas regasified from imported LNG
and other imported gas as source gas due to troubles concerning
suppliers or the Company’s Naoetsu LNG Terminal may interferewith the Company’s ability to supply to its customers. This couldin turn have an adverse effect on the Company’s domestic

natural gas business.
W i t h re g ar d to e nv iro n m e nt al p ro b le m s, t h e re i s apossibility of soil contamination, air pollution, and freshwaterand seawater pollution. The Group has established a “Health,
Safety and Environment Policy,” and as a matter of course
abides by the environmental laws, regulations, and standards ofthe countries in which we operate and give due consideration
to the environment in the conduct of business, based on our
independent guidelines. In the event of an operating accident ordisaster which impacts the environment, there is the possibilityof incurring a response or cost burden for recovery from thatincident, of incurring obligation of payment for procedural
costs, compensation or other cost related to the start of civil,
criminal or government procedures, or of incurring loss from theinterruption of operations. Furthermore, in the event of changes
to or the strengthening of the environmental laws, regulations,and standards (including support measures for the promotion ofnew, renewable 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 ordisaster be attributable to willful misconduct or negligence on
the part of the Group, the occurrence of a cost burden could
have an adverse effect on financial results. Also, such accident
or trouble would result in receiving administrative punishment or
result in damage to the Group’s credibility and reputation as anoil and natural gas development company, and could therefore
have an adverse effect on future business activities.

(7) Risk in Relation to Mine Abandonment
The Group books in it s account s, as an asset retirement
obligation, the estimated present value of costs related tomine abandonment that will become necessary after finishing
operation and production in oil and gas production facilities andthe like in accordance with agreements with the authorities ofoil-producing countries, applicable laws and regulations and thelike. If it is later found that the estimated present value of thosecosts falls short due to a change in the procedures used formine abandonment, a rise in expenses for procuring drillingmaterials and equipment or any other reason, the Group will
be required to increase the amount of that asset retirement
obligation, which could adversely affect the financial condition
and results of operations of the Group.

2. EFFECTS OF FLUCTUATIONS IN CRUDE OIL PRICES, NATURALGAS PRICES, FOREIGN EXCHANGE AND INTEREST RATES ON
FINANCIAL RESULTS(1) Effects of fluctuations in crude oil prices and natural
gas prices on financial results
A large percentage of crude oil prices and natural gas prices
in overseas businesses are determined by international market
conditions. In addition, those prices fluctuate significantly inresponse to the influence of a variety of factors including global
or local supply and demand as well as trends and conditionsin the global economy and financial markets. The vast majorityof these factors are beyond the control of the Company. In

this regard, INPEX is not in a position to accurately predict
movements in future crude oil and natural gas prices. The
Group’s sales and profits are subject to the effects of such pricefluctuations. Such effects are highly complex and are caused by
the following factors.
1) Although a majority of natural gas selling prices in overseas
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 basis ofcrude oil prices and natural gas prices at the time sales arebooked, actual crude oil transaction prices and the averageoil price during the accounting period do not necessarily
correspond.
Since the natural gas business in Japan uses domestically
produced natural gas and imported LNG as feedstock, changes
in the market price for LNG have an effect on feedstock prices
and sales prices. There is also the possibility that changes in thecompetitive environment associated with electric power and gas
system reforms will have an effect on natural gas sales prices andsales volumes.
Also, should the recover y of an amount invested in abusiness asset held by the Group be no longer expected—due
to a decrease in profitability associated with changes in thebusiness environment on the basis of changes in future market
conditions—since the Group would reduce that business asset’sbook value to reflect the level of recoverability and the amountof that reduction would be deemed impairment loss, there is thepossibility that there could be an adverse effect on the Group’s
results of operations.

(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) aredenominated in foreign currencies (primarily in U.S. dollars), andprofit and loss is subject to the effects of the foreign exchange
market. In the event of appreciation in the value of the yen, yendenominated sales and profits decrease. Conversely, in the eventof depreciation in the value of the yen, yen-denominated sales
and profits increase.
On the other hand, when borrowing necessar y funds,
the Company borrows in foreign currencies. In the event ofappreciation in the value of the yen, a foreign exchange gain on
foreign-currency denominated borrowings is recorded as a resultof fiscal year-end conversion; in the event of depreciation in thevalue of the yen, a foreign exchange loss is incurred. For thisreason, the exchange risk associated with the above businessis diminished and the impact of fluctuations in exchange rates
on profit and loss tends to be mitigated. Moreover, although
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 a result,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 explorationand development operations through borrowing. Much ofthese borrowings are with variable-rates, long term borrowings
based on the U.S. dollar six-month LIBOR rate. Accordingly, theCompany’s profits are subject to the influence of fluctuations
in U.S. dollar interest rates. Furthermore, although the Grouphas devised methods to reduce a portion of interest rate risk,these methods do not cover all risks of interest rate fluctuation
incurred by our Group and do not entirely remove the effect offluctuations in interest rates.

3. OVERSEAS BUSINESS ACTIVITIES AND COUNTRY RISKThe Group engages in a large number of oil and natural gas
development projects overseas. Because the Group’s businessactivities, including the acquisition of participating interests,
are conducted on the basis of contracts with the governmentsof oil-producing countries and other entities, steps taken byoil-producing countries to further tighten controls applicable
to home country natural resources, suspension of operation
due to conflicts and other factors, and other such 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,
res tr ic tion of economic ac tivities by global communit y,government control of foreign exchange or foreign remittances,and the balance of international payments), the applicationof OPEC production ceilings in OPEC member countries andchanges in the legal system and taxation system of thosecountries (including the establishment or abolition of laws or
regulations and changes in their interpretation or enforcement)
as well as lawsuits could have a significant impact on the Group’sbusiness or results unless the impact is compensated by insurance.
Additionally, against the background of rising development
costs and other changes in the business environment, theprogress of oil and gas projects, and the need to addressenvironment al is sues, the gover nment s of oil- producing
countries may seek to renegotiate the fiscal conditions including
conditions of existing oil contracts related to par ticipatinginterests. In the event that the fiscal conditions of contracts were
to be renegotiated, this could have an adverse effect on theGroup’s business performance.

4. DEPENDENCE ON SPECIFIC GEOGRAPHICAL AREAS OR
PROPERTIES(1) Production volume
The Group engages in stable production of crude oil and natural
gas in the Offshore Mahakam Block (Indonesia), the ADMA
Block (United Arab Emirates), the Minami Nagaoka Gas Field(Japan) and so on. Through a process of business integration,
the Group had established a wide ranging, diversified yetbalanced portfolio that encompassed the Asia-Oceania regions(particularly Japan, Indonesia, and Australia), the Middle East
and Africa, Eurasia including Caspian Sea area and the Americas.
For the year ended March 31, 2017 however, the Middle East
and Africa regions accounted for about 52% and the Asiaand Oceania regions accounted for about 31% of the Group’s
production volume, making up the vast majority of the Group’s
operations.

6Looking ahead, the Group will endeavor to further enhance
the balance of its asset portfolio on a regional basis. However,the Group currently relies heavily on specific geographical areasand properties for its production volume, and the occurrence inthese properties of an operational problem or difficulty could
have an adverse effect on the Group’s operational results.

(2) Contract expiration dates in principal business areas
Expiration dates are customarily stipulated in the agreements
related to participating interests, which are prerequisites for
the Group’s overseas business activities. Should an agreementin which an expiration date is stipulated not be extended, reextended or renewed, or should the terms and conditions beless favorable (including a reduction in the proportion of theGroup’s interest) than those existing at the time of extension,re- extension or renewal, there could be an adverse effect on
the Group’s results. For example, although the initial contract
expiration date in the produc tion sharing contrac t for the
Offshore Mahakam Block of Indonesia—the Group’s principal
geographical business area—was March 30, 1997, an extension
was approved in 1991, and the current expiration date is
December 31, 2017. Also, the expiration date for the participatinginterest under the concession agreement at the ADMA Block in
Offshore Abu Dhabi, United Arab Emirates, is March 8, 2018.
(The interest in the Upper Zakum Oilfield, however, has been
extended to December 31, 2041. In addition, with regard to the
Satah Field and Umm Al-Dalkh Field, a basic agreement has beenreached with the Abu Dhabi National Oil Company [ADNOC]
on an extension to December 31, 2042.) Although it remains
INPEX Group policy to work with our business partners toward
the extension, re-extension or renewal of these agreements,
should an existing agreement not be extended, re-extended or
renewed as a result of agreement negotiations with the national
petroleum company of an oil-producing country, or in the eventof agreement terms and conditions (including a reduction in theGroup’s participating interest) that are more disadvantageousthan the situation at the time of the extension, re-extension
or renewal, this could have an adverse effect on the Group’sbusiness or results. Even should the agreements stipulating
expiration dates be extended, re-extended or renewed, we
anticipate that the remaining recoverable reserves at that time
will have decreased due to production developments. Although
the Group is striving to acquire interests that can substitutethese properties, failure to acquire participating interests in oil
and gas fields to fully substitute for these properties could havean adverse effect on the Group’s results. In addition, the period
for exploration in oil and gas fields currently under exploration
is fixed by contracts, 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 thedevelopment stage by the expiration of the current contract,efforts will be made through negotiations with the government of
the oil- or gas-producing country in question to have the periods
extended. However, there remains the possibility that suchnegotiations may not be successfully concluded, in which event
the Company would be forced to withdraw from operations in theoil or gas field concerned. Also, as a rule, when there has been amajor breach of contract on the part of one party, it is customary
for the other party to have the right to cancel the agreement
before the expiration date. The agreements for properties inthese principal geographical business areas contain similar
provisions. The Group has never experienced early cancellation ofan agreement due to breach of contract, and we do not anticipate
such an occurrence in the future. Nevertheless, a major breachof contract on the part of a party to an agreement could result incancellation of an agreement before the expiration date.
A n d i n t h e ove r s e a s n a t u r a l g a s d e ve l o p m e n t a n d
production activities, in many cases we are selling and supplying
gas based on long-term sales and supply contracts in which
expiration dates are stipulated. We plan to make efforts withpartners to extend or re-extend the expiration date before thedeadline stipulated in these contracts. Nevertheless, inability
to extend the contracts, or the occurrence 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.

5. PRODUCTION SHARING CONTRACTS(1) Details of production sharing contracts
The Group has entered into produc tion sharing contrac ts
with countries including Indonesia and Caspian Sea area, andtherefore holds numerous par ticipating interests in thoseregions.
Production sharing contracts are agreements by which one
or several oil and natural gas development companies serve ascontractors that undertake at their own expense explorationand development work on behalf of the governments of oilproducing 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 inthe production of oil or natural gas, the contractors recover the
exploration and development costs they incurred by means ofa share in the production. The remaining production (crude oiland gas) is shared among the oil-producing country or nationaloil 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 natural gas, sales
are conducted by Indonesia and 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
contracts
When a company in the Group owns participating interests under
production sharing contracts, as mentioned above, in the role ofcontractor it invests technology and funds in the exploration anddevelopment of the property, recovers the invested costs fromthe 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 contracts
are recorded on the balance sheet as assets for which future
recovery is anticipated under the item “Recoverable accounts
under produc tion sharing.” Af ter the star t of produc tion,
recovered costs on the basis of those agreements are deductedfrom this balance sheet item.
As production received under production sharing contracts
is divided into the cost recovery portion and the compensationp or tion, t he met ho d of c alc ulating cos t of s ales is als odistinctive. 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 the amount of the compensation
portion is calculated and this 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 cost of
sales.

6. 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 18.94% of the Company’s commonshares issued and a Class A Stock as of June 28, 2017, theCompany 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 the Japanese government. Moreover, we believethat no such relationship will develop in the future. Furthermore,
there is no concurrent posting or secondment to the Company ofofficers or employees from the Japanese government.

(2) Ownership and sale of the Company’s shares by theJapanese government (the Minister of Economy, Tradeand Industry)
The Ministry of Economy, Trade and Industry (METI) holds 18.94%
of the Company’s common shares issued. METI succeeded tothe shares that had been held by Japan National Oil Corporation(JNOC) following the dissolution of JNOC on April 1, 2005.
With regard to the liquidation and disposition of the oil andgas upstream assets owned by JNOC, the Policy Regarding
the Disposal of Oil and Gas Development-Related Assets Heldby Japan National Oil Corporation (hereinafter, the “Report”)
was announced on March 18, 2003 by the Japan National Oil
Corporation Asset Evaluation and Liquidation Deliberation
Subcommit tee of the Advisor y Commit tee on Energy andNatural Resources, an advisory body of the Ministry of Economy,
Trade and Industry. The Report describes the importance ofappropriate timing in selling the shares on the market, taking into
consideration enterprise value growth. In addition, METI may, in
accordance with the Supplementary Provision Article 13 (1) 2 of
the “Special Measures Act for Reconstruction Finance Keeping
After the Great East Japan Earthquake” (“the Reconstruction
Finance Keeping Act“ (provisional translation, the same shallapply hereinaf ter)) enacted December 2, 2011, sell of f theCompany’s shares in Japan or overseas after examining thepossibility of disposal of the said shares based on a review of theholdings from the perspective of energy policy. This could havean impact on the market price of the Company’s shares.
METI also holds one share of the Company’s Class A Stock.
As the holder of a Class A Stock, METI possesses veto rights
over certain resolutions of the Company’s general shareholders’meetings and meetings of the Board of Directors. For details on
the Class A Stock, please refer to “8. CLASS A STOCK” on P. 80.

7. TREATMENT OF SHARES OF THE GROUP’S PROJECT COMPANYOWNED BY JAPANESE GOVERNMENT AND JOGMEC(1) Treatment of shares of the Group’s projectcompany previously owned by Japan National Oil
Corporation (JNOC)
In the aforementioned Report, INPEX CORPORATION (prior to
the integration with Teikoku Oil; reorganized on October 1, 2008)
was identified as a company that should comprise part of a corecompany, and is expected to play a role in efficient realizationof a stable supply of energy for Japan through the involvement
by a national flagship company. In response to the Report, theCompany (also, the Group since our acquirement of Teikoku Oil
on October 1, 2008) has sought to promote efficient realizationof a stable supply of energy for Japan while taking advantage
of synergy with the efforts of active resource diplomacy on thepart of the Japanese government, and has aimed to maximize
shareholder value by engaging in highly transparent and efficientbusiness operations.
As a result, with regard to the integration by means oftransfer of shares held by JNOC proposed in the Report, INPEXCORPORATION and JNOC concluded the Basic Agreement
Concerning the Integration of Assets Held by JNOC into INPEXCORPORATION of February 5, 2004 (hereinafter the “Basic
Agreement”) and a memorandum of understanding related
to Basic Agreement (hereinafter “MOU”). On March 29, 2004,
INPEX CORPORATION and JNOC entered into related contracts
including the Basic Contract Concerning the Integration ofAssets Held by JNOC into INPEX CORPORATION (hereinafter
the “Basic Contract”), achieving the agreement on the details
including the treatment of the project companies subject to theintegration and shareholding ratios.

I n 2 0 0 4 I N P E X C O R P O R AT I O N a c c o m p l i s h e d t h e
integration of Japan Oil Development Co., Ltd. (JODCO), INPEXJava Ltd. (disposal was completed on September 30, 2010) and
INPEX ABK, Ltd. which are three of four companies covered by
the Basic Agreement. Although INPEX Southwest Caspian Sea
Ltd. (hereinafter “INPEX Southwest Caspian”) would become awholly owned subsidiary of INPEX CORPORATION by means of ashare exchange and the procedures were undertaken, the shareexchange contract was invalidated owing to failure to accomplish
the terms and conditions of the share exchange contract and theplanned share exchange was cancelled. Following the dissolutionof JNOC on April 1, 2005, the Minister of Economy, Trade andIndustry succeeded to the INPEX Southwest Caspian shares
held by JNOC. The Company continues to study the possibility
to acquire the shares. However, the METI’s future treatmentof these shares is undecided and, depending on the result ofreview in accordance with the Reconstruction Finance Keeping
Act, 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 Nor th Makassar, Ltd. (liquidation proceedings
completed on December 19, 2008), INPEX Masela, Ltd., and
INPEX North Caspian Sea, Ltd. was agreed between INPEXCORPORATION and JNOC in the MOU of February 5, 2004.
Regarding the treatment of shares of SODECO, refer to thesection “(2) Treatment of the shares of Sakhalin Oil and Gas
Development (SODECO) owned by the Japanese government”
below. With regard to the transfer to INPEX CORPORATION of6the shares in the above 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 thepossibility of appropriate asset evaluations are in place. However,
the transfer of shares held by JNOC in the above companies has
not been decided and the shares in the above project companies
were succeeded to by the Japan 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 Industr y
succeeded. JOGMEC states in its “medium-term objective” and“medium-term plan” that the shares succeeded to from JNOC
will be disposed of at an appropriate time and in an appropriatemanner, but the timing and manner of the disposal for the shares
held by JOGMEC have not been decided, and it is possible that
the Company will be unable to acquire the shares.

(2) Treatment of the shares of Sakhalin Oil and Gas
Development (SODECO) owned by the Japanese
government
The Japanese government (the Minister of Economy, Tradeand Industry) owns 50% of the shares of SODECO. SODECO
was established in 1995 to engage in an oil and natural gas
exploration and development project located on the northeast
continental shelf off Sakhalin Island. SODECO owns a 30.0%
interest in the Sakhalin-1 Project, of which ExxonMobil of theUnited States is the operator. In October 2005, Phase 1 ofthis project started with the goal of advanced production ofoil and natural gas. Furthermore, there is a plan for additional
development operations (Phase 2) for the purpose of the fullscale production of natural gas. The Company holds 6.08% of
SODECO shares issued and outstanding.

In the previously mentioned Report, SODECO, along withINPEX CORPORATION and JODCO, has been identified as acompany that should comprise part of a core company in Japan’s
oil and natural gas upstream industry in the future.
In accordance with the Report, it is assumed that privatesec tor shareholders, including INPEX CORPOR ATION, will
acquire shares of SODECO issued and outstanding to which the
Minister of Economy, Trade and Industry succeeded and thatwere previously held by JNOC (50.0%). The Company plans tohold a maximum of 33% of the SODECO shares to become its
largest shareholder. In the event that the consent of SODECO’s
joint-venture par tner s, the relevant Rus sian gover nment
entity, or other parties is necessary for the acquisition of theshares, 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 ownershipinterest in oil and natural gas assets in Russia, as well as in Asiaand Oceania, the Middle East, Caspian Sea area, and otherregions, and we expect the acquisition to contribute to theachievement of a more balanced overseas asset portfolio for theGroup.
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 andwill be realized. Also, even in the event that the acquisition isrealized, the conditions and time of acquisition are undecided
and, depending on the result of review in accordance with theReconstruction Finance Keeping Act, the acquisition by theCompany could be unavailable.

8. CLASS A STOCK(1) Overview of the classified share

1) Reason for the introduction
The Company was established as the holding company througha stock transfer between INPEX CORPORATION and Teikoku
Oil Co., Ltd. on April 3, 2006. Along with this, a classified shareoriginally issued by INPEX CORPORATION (prior to the merger)
was transferred and at the same time the Company issued aclassified share with the same effect (hereinafter the “Class A
Stock”) to the Minister of Economy, Trade and Industry. The
classified share originally issued by INPEX CORPORATION
was the minimally required and a highly transparent measure
to eliminate the possibility of management control by foreign
capital while not unreasonably impeding the efficiency andflexibility of management based on the concept in the Reportdiscussed in the above section 7. “TREATMENT OF SHARES OF
THE GROUP’S PROJECT COMPANY OWNED BY JAPANESEGOVERNMENT AND JOGMEC.” INPEX CORPOR ATION is
identified as a company that should comprise part of a corecompany for Japan’s oil and gas upstream industr y and is
expected to play a role in efficient realization of a stable supplyof energy for Japan as a national flagship company. On thebasis of the concept of the Repor t, following a speculativeacquisition or an attempt at management controlled by foreign
capital, Class A Stock is designed and issued to be highly
transparent while not unreasonably impeding the efficiency andflexibility of management and to keep the effects of any such

speculative acquisition to the necessary minimum. At the sametime, Class A Stock maintains the Company’s role in the efficient
implementation of a stable supply of energy for Japan as acore business, so that management is not conducted in a way
contradictory to that role and no negative impact is felt.
2) Shareholders’ meeting resolutions, dividends, distributionof residual assets, and redemption
Unless otherwise provided by laws or ordinances, the Class A
Stock does not have any voting rights at the Company’s generalshareholders’ meetings. With regard to cash dividends paid
and the distribution of residual assets, the Company concluded
a stock split at a ratio of 1:400 of common stock with October
1, 2013, as the effective date. For Class A Stock (unlisted) nostock split was conducted. The Articles of Incorporation specify
that dividends of Class A Stock are equivalent to dividends ofa common stock prior to the stock split. The Class A Stock will
be redeemed by resolution of the Board of Directors of theCompany if the holder of the Class A Stock requests redemption
or if the Class A Stock is transferred to a party other than thegovernment of Japan or an independent administrative bodythat is fully funded by the government of Japan.
3) Veto rights in the Articles of Incorporation
The Articles of Incorporation of the Company provide that an
approval resolution of the meeting of the holder of the Class A
Stock is necessary in addition to resolutions of the Company’s
general shareholders’ meetings and resolutions of meetings ofthe Board of Directors for the decisions on certain important
mat ters such as the appointment or removal of Direc tors,
disposition of material asset s, changes to the Ar ticles ofIncorporation, business integration, capital reduction or company
dissolution in connection with the business of the Company.
Accordingly, the Minister of Economy, Trade and Industry, as theholder of the Class A Stock, has veto rights over these importantmatters. With regard to the cases in which the Class A Stock vetorights are exercisable, please refer to “4) Criteria for the exercise ofveto rights provided in the criteria for the exercise of the Class A
Stock holder’s voting rights”, below.
4) Criteria for the exercise of veto rights provided in the criteria
for the exercise of the Class A Stock holder’s voting rights
Criteria concerning the exercise of the veto rights have been
established in a Ministry of Economy, Trade and Industry Notice(No. 220, 2008) (hereinafter the “Notice”). The criteria stipulate
the exercise of veto rights only in the following specific cases.
• When resolutions pertaining to appointment or removal of
Directors and integration are not voted down and it is judgedthat the probability is high that the Company will engage inmanagement inconsistent with the role that a core company
should perform for efficient realization of a stable supply ofenergy to Japan.
• With regard to decisions related to the disposal of all or partof significant assets, when resolutions pertaining to dispositionof material assets are not voted down and the objects ofdisposition are oil and natural gas exploration or production
rights or rights similar thereto or shares or ownership interestin the Company’s subsidiary whose principal assets are said
rights and it is judged that the probability is high that theCompany will engage in management inconsistent withthe role that a core company should perform for efficient
realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Company’s
Articles of Incorporation relating to changes in the Company’sbusiness objectives, reduction in the amount of capital, or
dissolution are not voted down and it is judged that theprobability is high that the Company will engage in managementinconsistent with the role that a core company should perform
for efficient realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Articles ofIncorporation granting voting rights to any shares other than thecommon shares of the Company are not voted down and could
have an effect on the exercise of the voting rights of the Class A
Stock.

It is provided that the above criteria shall not be limited in theevent that the Notice is changed in the light of energy policy.

(2) Risk in connection with the Class A Stock
Following a speculative acquisition or an attempt at management
controlled by foreign capital, Class A Stock is designed andissued to be highly transparent while not unreasonably impeding
the efficiency and flexibility of management and to keep theeffects of any such speculative acquisition to the necessary
minimum. At the same time, Class A Stock maintains theCompany’s role in the efficient implementation of a stable supplyof energy for Japan as a core business, so that management
is not conducted in a way contradictory to that role and no
negative impact is felt. Nevertheless, the anticipated risks inconnection with the Class A Stock include 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 andIndustry could exercise the veto rights in accordance with theabove criteria provided in the Notice. As the said criteria havebeen provided from the standpoint of efficient realization of astable supply of energy to Japan, it is possible that the exerciseof the veto rights by the Minister of Economy, Trade and Industry
could conflict with the interest of other shareholders who holdthe Company’s common shares. Also, it is possible that the said
criteria could be changed in the light of energy policy.
2) Impact of the exercise of veto rights on the price ofshares of common stock
As mentioned above, as the holder of the Class A Stock has theveto rights over certain important matters in connection with thebusiness of the Company, the actual exercise of the veto rights
over a certain matter could have an impact on the price of theCompany’s shares of common stock.
3) Impact on the Company’s degree of freedom in businessand business judgment
As the Minister of Economy, Trade and Industry holds the Class
A Stock with the previously mentioned veto rights, the Company
needs a resolution of the meeting of the holder of the Class
A Stock concerning the above matters. For this reason, theCompany’s degree of freedom in management in those matters
could be restricted by the judgment of the Minister of Economy,
Trade and Industry. Also, attendant on the need for a resolutionof the meeting of the holder of the Class A Stock concerning theabove matters, a certain period of time is required for procedures
such as the convening and holding of meetings and resolutions
and for the processing of formal objections, if necessary.

9. CONCURRENTLY SERVING OUTSIDE DIRECTORSThe Board of Directors of the Company is currently composed of
15 members, six of whom are outside directors.
Four of the six outside directors have many years’ experienceand knowledge of the Company’s business and are able tooffer objective, professional advice regarding operations. For
this reason, they were asked to join the Board of Directors tocontribute to the development of the Company’s business. Threeof the directors concurrently serve as director or advisors ofJapan Petroleum Exploration Co., Ltd., Mitsubishi Corporation,
Mitsui Oil Exploration Co., Ltd. and JXTG Holdings, Inc. (hereinafter“shareholder corporations”), respectively.

At the same time, however, the shareholder corporations are
involved in businesses that overlap with those of the Company.
The Company therefore recognizes that it must pay particularattention to corporate governance to avoid conflicts of interest inconnection with competition and other matters.
To this end, all Company directors, including the threeoutside directors described above, are required to sign a written
undertaking to carry 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 mannerfor dealing with conflict of interest, and confidentiality.

6Oil and Gas Reserves and Production Volume

1. OIL AND GAS RESERVES
Proved reserves
The following tables list the proved reser ves of crude oil,condensate, LPG and natural gas of INPEX CORPORATION,
its consolidated subsidiaries and equity-method affiliates (the“Group”) on main projects. Disclosure contents for proved
reser ves are determined in accordance with the rules andregulations of the U.S. Financial Accounting Standards Board (theJapan
Crude oil(MMbbl)Gas(Bcf)

Proved developed and undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2015
19
765
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates0(0)Interim production(1)(44)
As of March 31, 201618
721
Equity-method affiliates
As of March 31, 2015——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2016——
Proved developed and undeveloped reserves
As of March 31, 2016
18
721
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2016
18
721
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates(0)(15)
Interim production(1)(46)
As of March 31, 201717659
Equity-method affiliates
As of March 31, 2016——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2017——
Proved developed and undeveloped reserves
As of March 31, 201717659
Proved developed reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201717659
Equity-method affiliates——
As of March 31, 2017
Proved undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2017——
Equity-method affiliates
As of March 31, 2017——

Asia & Oceania“FASB”), and are presented in accordance with the AccountingStandards Codification Topic 932 “Extractive Activities —Oiland Gas” (“Topic 932”). The Group’s proved reserves as of March
31, 2017, were 2,210 million barrels for crude oil, condensate andLPG, and 5,891 billion cubic feet for natural gas, for a total of 3,304
million boe.
Eurasia(Europe & NIS)

Middle East &AfricaAmericas

Total

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)

Gas
(Bcf)

204
—
—
1
(17)
187

5,123
—
—
(73)
(243)
4,807

192
—
—
3
(12)
184

27
—
—
(6)
—
21

695
—
975
37
(32)
1,675

—
—
—
—
—
—

13
—
—
(0)
(2)
10

343
—
—
(160)
(32)
151

1,123
—
975
41
(64)
2,075

6,258
—
—
(240)
(319)
5,700

2
—
—
(0)
(0)
1

302
—
—
44
(22)
325

—
—
—
—
—
—

—
—
—
—
—
—

87
2
—
9
(32)
67

—
—
—
—
—
—

1
—
—
(0)
(1)
—

0
—
—
(0)
(0)
—

90
2
—
9
(33)
69

302
—
—
44
(22)
325

189

5,132

184

21

1,742

—

10

151

2,143

6,025

187
0
—
8
(11)
184

4,807
3
—
35
(222)
4,624

184
—
—
44
(11)
217

21
—
—
106
(2)
125

1,675
—
—
134
(64)
1,746

—
—
—
—
—
—

10
2
—
(0)
(2)
10

151
—
—
(37)
(16)
99

2,075
3
—
185
(89)
2,173

5,700
3
—
89
(286)
5,506

1
1
—
0
(0)
2

325
99
—
(19)
(20)
385

—
2
—
—
—
2

—
—
—
—
—
—

67
—
—
(1)
(34)
32

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

69
3
—
(1)
(34)
36

325
99
—
(19)
(20)
385

186

5,008

219

125

1,778

—

10

99

2,210

5,891

18

250

212

125

1,086

—

8

73

1,341

1,107

1

245

2

—

32

—

—

—

35

245

166

4,374

5

—

659

—

2

26

832

4,400

1

140

0

—

0

—

—

—

1

140

Notes: 1. Based on SEC disclosure standards, the Group discloses proved reserves in each country containing 15% or more of its proved reserves. As of March 31, 2017, the Group held proved
reserves in Australia of approximately 171 million barrels for crude oil and approximately 4,369 billion cubic feet for natural gas, for a total of approximately 988 million boe.
2. Proved reserves (as of March 31, 2017) of the following blocks and fields include the portion attributable to non-controlling interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%), Americas: Horn River Area (54.91%)
3. MMbbl: Million barrels
4. Bcf: Billion cubic feet
5. Crude oil includes condensate and LPG

Standardized measure of discounted future net cash flows and their changes relating to proved oil and gas reserves
for the year ended March 31, 2017
Disclosure contents for the standardized measure of discounted
future net cash flows and their changes relating to proved
reserves for the year ended March 31, 2017 are determined inaccordance with the rules and regulations of the FASB, and arepresented in accordance with Topic 932.
In calculating the standardized measure of discounted
future cash inflows, the arithmetic average of oil and gas prices
at the first day of each month during the current fiscal year

is applied to the estimated annual future production fromproved reserves. Future development and production costs are
estimated based upon the assumptions of constant oil and gas
prices and the continuation of existing economic, operating andregulatory conditions. Future income tax expenses are calculated
by applying the year-end statutory tax rates to estimated future
pretax cash flows less the tax basis of the properties involved
based upon laws and regulations already legislated at year-end.

The discount is computed by applying a prescribed discount rateof 10% to the estimated future net cash flows.
The translation of U.S. dollar amounts into yen amounts iscomputed by applying the year-end exchange rates (TTM) of¥112.69 and ¥112.20 to the U.S. dollar as of March 31, 2016 and2017, respectively.
Since these figures are calculated in accordance with therules set forth by the FASB, which have the following aspects,
March 31, 2016
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows

they do not represent the fair market value nor the Group’s
estimation for the present value of the cash flows of reserves ofcrude oil, condensate, LPG and natural gas.
• No economic value is attributed to potential reserves.
• A prescribed discount rate of 10% is applied.
• Oil and gas prices are subject to constant fluctuations despite
the assumptions of constant oil and gas prices of Topic 932.

Total

¥14,328,314(6,088,070)(5,531,024)
2,709,219(1,728,279)
980,941

Equity-method affiliates
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Share of equity-method investees’ standardized measure of
discounted future net cash flows
Total consolidated and equity-method affiliates in standardized
measure of discounted future net cash flows

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
AfricaJapan¥ 955,158 ¥ 3,742,129(211,896)(1,716,381)(238,524)(334,222)
504,739
1,691,527(289,832)(1,065,735)
214,907625,792¥ 809,247 ¥ 8,753,540(511,299)(3,612,235)(27,372)(4,930,907)
270,576
210,399(131,228)(233,386)
139,347(22,987)

Americas¥ 68,239(36,260)—
31,979(8,098)23,881

624,922(339,324)(196,338)
89,260(42,538)

—
—
—
—
—

265,685(136,523)(52,679)
76,483(41,347)

—
—
—
—
—

359,237(200,362)(143,658)
15,216(1,305)—(2,439)—(2,439)113

46,723—35,136—

13,912(2,325)¥ 1,027,663¥ 214,907

660,929¥ 139,347(9,075)¥ 21,556

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
AfricaAmericas¥¥Note: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)

March 31, 2017
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows

Total¥14,741,958(6,107,307)(5,640,443)
2,994,209(1,703,796)
1,290,413

Equity-method affiliates
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Share of equity-method investees’ standardized measure of
discounted future net cash flows
Total consolidated and equity-method affiliates in standardized
measure of discounted future net cash flowsJapan¥ 807,066 ¥ 3,461,061(205,172) (1,575,183)(197,443)(229,642)
404,450
1,656,236(223,457)(906,048)
180,994
750,188¥ 986,542 ¥ 9,428,165(488,261) (3,808,367)(76,036) (5,137,321)
422,245
482,477(212,187)(355,021)
210,057
127,456¥ 59,125(30,323)—
28,801(7,083)
21,718436,409(244,249)(132,993)
59,168(31,947)

—
—
—
—
—

250,066(148,254)(44,227)
57,584(32,659)

10,539(5,956)(2,315)
2,268
(291)

175,804(87,531)(86,451)
1,823
886

—
(2,507)—(2,507)
117

27,220—24,925

1,977

2,709

(2,391)¥ 1,317,633¥ 180,994

775,113¥ 212,034

130,165¥ 19,327¥¥

Note: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)

INPEX CORPORATION and Consolidated
Subsidiaries
Standardized measure at beginning of the period
As of April 1, 2016
Changes resulting from:
Sales and transfers of oil and gas produced, netof production costs
Net changes in oil and gas prices and production
costs
Development costs incurred
Changes in estimated future development costs
Revisions of previous quantity estimates
Accretion of discountNet change in income taxes
Extensions, discoveries and improved recoveries
OtherStandardized measure at end of the period
As of March 31, 2017

Millions of yen
Eurasia
Middle East &(Europe & NIS)
Africa

Total

Japan

Asia &
Oceania¥1,027,663¥214,907¥ 625,792¥139,347¥ (22,987)¥23,881¥ 46,723(524,974)(42,940)(132,557)(36,591)(194,922)(7,831)(110,133)

Americas

Equity-method
affiliates(11,168)(28,955)(45,984)

24,73260,325406(21,696)

393,977(110,918)
193,213
122,860
227,578
1,977(2,575)

3,521(1,212)(4,134)
18,78821,953—(934)

241,185(124,205)
43,36081,34761,551—(301)

48,234
4,730
21,40516,003(7,153)—(650)

70,091
5,103
115,777
1,066
92,902—100

3,047(2,177)
3,096
1,878
—
—
(587)

27,898
6,843
13,7103,778
58,325
1,977(203)¥1,317,633¥180,994¥ 750,188¥210,057¥ 127,456¥21,718¥ 27,220

Note: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)

6

Probable reserves and possible reserves
The following tables list the probable and possible reserves of crude oil, condensate, LPG and natural gas of the Group on main
projects. Our probable reserves as of March 31, 2017, were 521 million barrels for crude oil, condensate and LPG, and 4,827 billion
cubic feet for natural gas, for a total of 1,389 million boe. In addition, the Group’s possible reserves as of March 31, 2017, were 99
million barrels for crude oil, condensate and LPG, and 2,323 billion cubic feet for natural gas, for a total of 540 million boe.

March 31, 2017
Probable reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

March 31, 2017
Possible reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericasInterest inreserves heldby equitymethod
affiliates

Subtotal

Total

2

125

129

257

0

513

8

521

63

4,709

3

—

1

4,776

51

4,827

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericasInterest inreserves heldby equitymethod
affiliates

Subtotal

Total

2

78

1

6

7

93

7

99

63

2,202

—

—

4

2,268

54

2,323

Notes: 1. MMbbl: Million barrels
2. Bcf: Billion cubic feet

2. OIL AND GAS PRODUCTION
The following tables list average daily production for crude oil, natural gas, and the total of crude oil and natural gas by region. The
proportional interests in production by the equity-method affiliates are not broken down by geographical regions.
The Group’s production for the year ended March 31, 2017, was 348.3 thousand barrels per day for crude oil, condensate and LPG,
and 922.7 million cubic feet per day for natural gas, for a total of 521.3 thousand boed.
Years ended March 31,

2012

2013

2014

2015

2016

2017

Crude oil, condensate and LPG (Mbbld):Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interests in production by equity-method affiliates
Total
Annual production (MMbbl)

3.8
62.5
25.0
84.3
0.1
175.7
75.4
251.2
91.9

3.9
58.0
25.1
84.4
0.1
171.5
74.4
245.9
89.8

3.6
45.8
26.1
84.4
0.1
160.0
84.9
244.9
89.4

3.2
40.6
27.0
84.8
0.5
156.1
86.6
242.7
88.6

3.2
47.8
31.6
161.1
5.5
249.2
90.0
339.2
124.2

3.5
35.8
29.6
176.3
5.6
250.7
97.6
348.3
127.1

Natural gas (MMcf/d):
Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interests in production by equity-method affiliates
Total
Annual production (Billions of cubic feet)

127.6
665.0
—
—
72.4
865.0
62.7
927.7
339.5

133.7
586.4
—
—
90.9
811.0
52.4
863.4
315.1

125.5
602.8
—
—
107.4
835.7
40.7
876.4
319.9

113.9
596.5
—
—
103.2
813.7
66.4
880.0
321.2

119.7
666.8
—
—
87.3
873.8
59.1
932.9
341.4

132.0
614.8
5.3
—
116.5
868.6
54.1
922.7
336.8

Crude oil and natural gas (Mboed):Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interests in production by equity-method affiliates
Total
Annual production (MMboe)

27.7
189.5
25.0
84.3
13.1
339.7
86.5
426.2
156.0

29.0
169.4
25.1
84.4
16.2
324.0
83.8
407.8
148.8

27.2
159.9
26.1
84.4
19.0
316.7
92.1
408.8
149.2

24.6
154.3
27.0
84.8
19.0
309.7
98.4
408.1
148.9

25.7
174.0
31.6
161.1
21.0
413.4
100.5
513.8
188.1

28.3
152.5
30.6
176.3
26.5
414.1
107.2
521.3
190.3

Corporate Information(As of March 31, 2017)

Corporate Data
Company Name
Established
CapitalCompany Headquarters

Number of Employees (Consolidated) 3,228
Main BusinessResearch, exploration, development, production and sales of oil,natural gas and other mineral resources, other related businesses
and investment and lending to the companies engaged in these
activities, etc.

INPEX CORPORATION
April 3, 2006
¥290,809,835,000
Akasaka Biz Tower, 5-3-1 Akasaka,
Minato-ku, Tokyo 107-6332, Japan

Organization Chart (As of July 1, 2017)
General Meeting of
Shareholders

Board of Directors

Audit & Supervisory
Board (Member)

Nomination and Compensation
Advisory Committee

Audit Unit

Technical Division

INPEX Advisory
Committee

HSE Unit

Global Energy Marketing Division

Ichthys Project Division

Compliance Committee

General Administration
Division

Domestic Energy Supply &Marketing Division

Domestic Exploration &Production Division

CSR Committee

Corporate Strategy &Planning Division

Asia, Oceania & Offshore
Japan Project DivisionCorporate HSE
Committee

New Ventures Division

America & Africa
Project Division

Information Security
Committee

Finance & Accounting Division

Eurasia & Middle East
Project Division

INPEX Value Assurance
System Committee

Logistics & IMT Division

Audit & Supervisory
Board Members’ Office
Executive
Committee

President

Masela Project Division

Stock Data
Authorized Shares:
3,600,000,000 common stocks
1 Class A Stock

Total Number of Shareholders and Issued Shares
Common Stocks:
43,726 shareholders / 1,462,323,600 sharesClass A Stock*: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 Class A Stock in addition to the approval of theshareholders’ meetings or Board of Directors.

Major Shareholders (Common Stocks)

Shareholding by Shareholders Type

Percentage of
total commonshares*1 (%)

Name

Percentage of
Number of total commonsharesshares* (%)

Minister of Economy, Trade and Industry

276,922,800

18.94

Japan Petroleum Exploration Co., Ltd.

106,893,200

7.31

Japan Trustee Services Bank, Ltd. (Trust Account) 51,887,100

3.55

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

51,688,000

3.53

JX Holdings, Inc.

43,810,800

3.00

Minister of Economy,
Trade and Industry*2

Mitsui Oil Exploration Co., Ltd.

40,154,000

2.75

Foreign Corporations and Other

GOVERNMENT OF NORWAY

39,531,495

2.70Japan Trustee Services Bank, Ltd.
(Trust Account 5)

Individuals and Other

21,684,700

1.48

Treasury Shares

The Bank of New York Mellon SA/NV 10

21,290,334

1.46

THE BANK OF NEW YORK,TREATY JASDEC ACCOUNT*1 The percentages of total common shares are for total number of issued common shares.
*2 Excludes one Class A Stock

17,261,016

1.18

Shareholder type

Number of Number ofshareholders
sharesFinancial Institutions(Including Trust Accounts)

84

255,826,100

17.49

Securities Companies

58

26,656,659

1.82

Other Domestic Corporations

382

229,359,642

15.68

1

276,922,800

18.94

829

628,662,610

42.99

42,371

42,929,289

2.94

1

1,966,500

0.13* The percentages of total common shares are for total number of issued common shares.

Home Page

The Company’s Web site provides investors with the most up-todate IR information, including ﬁnancial statements.
www.inpex.co.jp/english

Inquiries

For IR inquiries, as well as to offer comments and opinions about
this report, please contact below.
Corporate Strategy & Planning DivisionCorporate Communications Unit
Investor Relations Group
Phone: +81-3-5572-0234, Fax: +81-3-5572-0235
Web site: www.inpex.co.jp/english/ir/inquiries.html

This Report was printed using environmentally conscious
methods and vegetable oil-based ink.
Printed in Japan

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