INPEX CORPORATION

Annual Report 2014
Year ended March 31, 2014

Our Mission
The mission of INPEX is to provide a stableand efficient supply of energy to customers by
exploring and developing oil and natural gas
resources both domestically and throughout
the world. Through our business, we aim tobecome an integrated energy company, which
contributes to our community and makes it
more livable and prosperous.

INPEX is the largest oil and gas E&P
company in Japan. The Company currently
is engaged in more than 70 projects spread
across 27 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. On the international stage, the Company is positioned as a mid-tier E&P player just behind the world’s oil majors. The Ichthys
LNG Project being one of its key initiatives, INPEX is actively engaged in oil and natural gas projects in Japanand overseas. In addition to securing the stable and efficient supply of energy, the Company is working diligently to ensure sustainable growth in its corporate value.
This Annual Report 2014 is based on the overarching theme of “From Development to Delivery.” In theSpecial Report contained in this report, we provide an update on the Ichthys LNG Project and other details ofour business including our natural gas supply chain. In this manner, we provide stakeholders with a comprehensive outline of our endeavors.

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).

INPEX CORPORATION Annual Report 2014001

Annual Report 2014 Contents
1 Management Message ............................................ 003

6 Sustainability & Governance ................................. 065
Sustainability .............................................................................................. 066
Corporate Governance .......................................................................... 070

2 Highlights ..................................................................................... 013
Financial and Operating Highlights .................................................. 014
Business Topics ......................................................................................... 018

7 Financial & Corporate Information .............. 079
Message from the Senior Vice President,
Finance & Accounting Division ................................................... 080

3 Market Trend andManagement Policy..................................................... 021

12-Year Financial Information .............................................................. 082

Business Flow in Oil and
Gas Development and Our Strengths ....................................... 022

Management’s Discussion and Analysis ofFinancial Condition and Results of Operations ................... 087

Business Environment in Oil and Gas Development .................. 026

Consolidated Financial Statements/
Notes to Consolidated Financial Statements....................... 094

The Medium- to Long-Term Vision of INPEX
and Investment Plans..................................................................... 028

Background Information: Oil and Gas
Accounting Policies and Treatment ......................................... 084

Business Risks ............................................................................................ 120

Company Management Content in Business Model ................. 030

Oil and Gas Reserves and Production Volume ........................... 128

Comparison with Global Oil Companies ........................................ 032

Oil and Gas Glossary .............................................................................. 132
Index/Unit Conversion ........................................................................... 134

4 Special Report:
Ichthys LNG Project and
Gas Supply Chain................................................................. 033

Corporate Information ........................................................................... 135

5 Project Overview .............................................................. 045
Segment Overview .......................................................... ........................ 046
Project Overview by Region
Asia & Oceania ................................................................................. 048
Eurasia ................................................................................................ 054
Middle East & Africa ..................................................................... 056
Americas ............................................................................................ 058
Japan .................................................................................................. 062

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 yourown 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 informationor any other reason.
FORWARD-LOOKING STATEMENTS
This Annual Report includes forward-looking information that reflects the Company’splans 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. Suchrisks, uncertainties and other factors may cause the Company’s actual results, performance, achievements or financial position to be materially different from any future
results, performance, achievements or financial position expressed or implied by suchforward-looking information. Such risks and uncertainties include, without limitations,fluctuations in the following:• the price of and demand for crude oil and natural gas;
• exchange rates; and• the costs associated with exploration, development, production and other related
expenses.
The Company undertakes no obligation to publicly update or revise any informationin this Annual Report (including forward-looking information).
NOTES REGARDING FIGURES
Financial figures in this Annual Report have been basically rounded to the nearest unit
(millions, billions, etc.) for convenience. The “Project Overview by Region” section(starting on p. 48) basically describes the operating situation as of June 30, 2014. 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.

002

INPEX CORPORATION Annual Report 2014

1

Management
MessageMessage from the President

Develop
DeliveryFrom
toFor the year ended March 31, 2014,

ｗe made solid progress on activities undertaken for future growth.

INPEX maintained stable volumes of production, substantially increased its
proved reserves and made steady progress across several major projects.
In the current year, INPEX will gear up its activities to achieve growth targets.

Gaining a Strong Sense of Accomplishment That Significant
Progress Is Being Made Across Several Major Projects
In addition to stable production,
performance trends benefited from continuous weak Japanese yen
For the year ennded March 31, 2014, net sales and net income
increased by 9.7
7% and by 0.4% compared with the previous period,to ¥1,334.6 billlion and ¥183.7 billion, respectively.
y Despite they.
absence of the one-off
f gain on transfer of mining rights recorded
ff
in the previouss period, and the downturn in crude oil prices,
these favorable
e results were largely attributable to stable production volume
es and the positive flow-on eff
f ect of the weak yen.
ff
In the year ended March 31, 2013, INPEX incurred certain losses
as a result of fl
fluctuations in foreign currency exchange rates.
In the period under review, however,r the Company brought tor,account unrealized gains on the redemption of foreign currency
denominated bonds mainly due to depreciation in the value ofthe yen. From the perspective of its profit and loss, INPEX also
saw the gap between assets and liabilities denominated in foreign currencies narrow and the currency exchange risk tended
to neutralize as a result. Taking these factors into consideration,
the weak yen had a favorable impact on both the Company’sbalance sheet and its profit and loss throughout the year ended
March 31, 2014.

Securing the stable production of crude oil and natural gas to support earnings
INPEX is mainlyy engaged in the development and production of
crude oil and natural gas. Accordingly,
y the vast majority of they,Company’s revvenue is derived from crude oil and natural gas
sales. Net prod
duction of crude oil and natural gas, the primarysource of earnings, edged up slightly to 409 thousand boed in
the period undder review. Buoyed by contributions from suchprojects as the Ichthys LNG Project in Australia, INPEX has identified the mediu
um- to long-term target of increasing production
volume to one million boed by the early 2020s. Meanwhile, inthe period leadding up to the start of commercial production at

004

INPEX CORPORATION Annual Report 2014

the Ichthys LNG Project, the Company must look to increase theproduction of crude oil and natural gas at existing fields while
generating production at new fields. At the Company’s gas fieldin the offshore Mahakam Block in Indonesia, a major source of
current earnings, INPEX saw little deterioration in productionlevels with volumes essentially unchanged from the previous
year. Moreover, additional crude oil production began in January 2014 at the large-scale ACG Oil Field in Azerbaijan reinforcing the Company’s earnings capabilities.

1Management
Messagement
We will accelerate the pace ofactivities aimed at achieving
growth targets while maintaining
production of oil and natural gas.

Toshiaki
Kitamura
President & CEO

INPEX CORPORATION Annual Report 2014005

Increase in proved reserves through the extension of the concession agreement in
the Upper Zakum Oil Field helping to secure reserve volume growth
The volume of reserves is the lifeline of any E&P company. Not
only does it govern the level of current earnings, but it also
provides the source of future profits. The Company’s proved
reserves, estimated quantities of crude oil and natural gas thatcan, with reasonable certainty, be collected, as of March 31,
2014, increased by approximately 340 million barrels, or 16%,year on year. This is largely attributable to the extension of theconcession agreement in the large-scale Upper Zakum Oil Field
located in the offshore area of Abu Dhabi in the United ArabEmirates for a further approximately 15 years.
As a result of this increase in proved reserves, the three-year
average reserve replacement ratio, which is an indication of theamount of oil added to proved reserves compared with the total
amount of oil produced over a given period, reached 370% for
the period under review. Oil and gas E&P companies in generalcommonly set an RRR target of 100% or more. At 370%, INPEX’s
current RRR is not only a record high since the Company’s public
listing but also represents a level that far exceeds the oil majors.
In addition, the reserves-to-production ratio, which measuresthe current number of production volume years of reserve volumes held, was 17.1 years for proved reserves and 30.2 years on
the basis of proved and probable reserves as of March 31, 2014.
These levels are above the average of the oil majors.

Favorable revisions to financial terms and conditions at theUpper Zakum Oil Field also helped to push up the Company’ net
income. INPEX in fact has a long history in the area with an operating and technology development track record in Abu Dhabi
that spans four decades. On a personal note, I am convincedthat the Abu Dhabi government’s decision to extend the concession agreement and favorably revise financial terms and conditions is a reflection of the high esteem in which INPEX is held.
Our persistence and hard work coupled with attention to detailis therefore a major and highly significant factor in efforts to fulfill
our social mission of ensuring the stable supply of energy.
Proved Reserves and Reserve Replacement Ratio (3-year average)
See p. 32 for Comparison with Global Oil Companies

Reserve Replacement Ratio(3-year average) (%)

370%

2.19
282%

Proved Reserves(billion boe)

2.53

billion boe

2.43

255%

1.31

25%
2011

2012

2014

2013

Long-Term Net Production Volume Forecasts
Target for the early 2020s
Around 700 thousand boedfrom existing projects fromproduction start-up of
the Ichthys LNG Projectand other factors

409

1 million boedNew
projects

Existing
projects

Existing
projects

thousandboed

2014 (actual)006

INPEX CORPORATION Annual Report 2014

Early 2020s

1Management
MessageTangible progress towardcommencing production at the Ichthys LNG Project
The attention to detail that has attracted wide acclaim in Abu
Dhabi is a key feature of the Ichthys LNG Project in Australia.
The Ichthys LNG Project is the first large-scale LNG project to be
operated by a Japanese company. Accordingly, this project is anextremely important key to the Company’s future growth. Since
the final investment decision (FID) was made in January 2012,
development activities have proceeded smoothly both in termsof cost and schedule.
At that time, our level of expertise as an operator of an
LNG project of this size was limited. Prior to making an FID, wenaturally took steps to complete all due diligence including ananalysis of risks. We also took time to look closely at other LNG
projects of a similar nature. Considerable attention was given
to detailed discussions with contractors, as well as frequent andthorough reviews of technology design documentation leading
up to the tender phase. The success we have therefore had in
advancing the project without any major difficulty is due in largepart to these earnest and comprehensive preparatory measures.
Ground was broken for all major facilities of the Ichthys LNG
Project during the period under review. As of June 2014, half of
all construction work had been completed. Details of progress areprovided in the Special Report (4see p. 34) of this Annual Report.

Looking ahead, steps will be taken to install a module in connection with the gas liquefaction plant. This will be followed by several
important phases including the drilling of production wells and thelaying of pipelines. Taking into consideration progress to date andplans for the immediate future, the Ichthys LNG Project is steadily
taking shape.
When the Project enters a period of full production, the Company’s net production volume is expected to increase by around
1.5 times its current level. From a profit perspective, net income
is projected to jump by a factor that exceeds this upswing in
production volume. With approximately 70% of the LNG produced to be transported to Japan, INPEX will substantially boost
its contributions to the stable supply of energy to Japan. I haveoften referred to this project as the Company’s highest priority.
Success will inevitably determine the level of our growth going
forward, and it represents an important first step in achieving our
Medium- to Long-Term Vision. Looking back, INPEX first ventured to Australia during the mid-1980s. Since then, we haveaccumulated a wealth of knowledge, expertise and geographical advantages. Taking full use of this intellectual capital, we
will work diligently through to production with a sense of bothurgency and anticipation.

Construction of the Naoetsu LNG Terminal completed ahead ofschedule helping to strengthen a gas supply chain
The Company’s natural gas business in Japan is another prominent example of its know-how accumulated over many years andgeographic competitive advantage. During the period immediately following the Second World War through to the presentday, INPEX boasts an unbroken track record for the continuous
and uninterrupted supply of natural gas in Japan. The volume ofannual natural gas sales in Japan has today reached 1.8 billion
m3. This is equivalent to the amount of gas consumed by nearlyfive million households (32 m3 per month per household) andplaces the Company fourth within Japan’s gas sector.
In its natural gas business in Japan, INPEX began construction on the Naoetsu LNG Terminal in 2009. The terminal was completed ahead of schedule in December 2013 and operations havecommenced. Despite confronting severe winter conditions and anumber of other difficulties, this initiative was completed withoutmajor incident. Looking ahead, the Naoetsu LNG Terminal will
receive shipments from the Ichthys LNG Project. This will allow the
Company to maintain and operate a comprehensive gas supply
chain. Undertaking the development and production of natural
gas both in Japan and overseas in its own right, while transporting
supplies to end users through its own LNG terminal and pipeline network, will place INPEX in an unprecedented and globallyunique position. We are also in sight of our medium- to long-termtarget of domestic gas supply volume of 2.5 billion m3 per year. It
is now just under two years before the Ichthys LNG Project comes
online. The fact that we were able to commence operation at the
Naoetsu LNG Terminal ahead of schedule is therefore a major
step forward for the Company.

With about two years before the Ichthys LNG Project
comes online, we will go about our daily activities inan earnest and structured manner with an increased
sense of urgency and anticipation.
INPEX CORPORATION Annual Report 2014

007

Working in Unison, INPEX Is Moving Steadfastly
Toward Achieving Its Medium- to Long-Term Vision
Maintaining a sound financial position whilesteadily undertaking investments geared toward growth
Our overarching vision is to position ourselves to become a topclass international oil and gas E&P company through sustainablegrowth in the oil and gas development business. In May 2012,
INPEX took steps to identify the priority targets to be overcome
and management policies that need to be pursued in order toachieve its Medium- to Long-Term Vision. The Company istherefore pursuing the following three strategic growth targets,
namely to
1 Achieve net production volume of one million boed as a partof efforts to continuously enhance its E&P activities,
2 Strengthen its gas supply chain in a bid to secure domesticgas supply volume of 2.5 billion m3/year, and3 Reinforce its renewable energy initiatives with the aim of
ensuring next-generation growth.
Looking at the specifics of the first strategic growth target–
continuous enhancement of our E&P activities–we are endeavoring to increase our production volume while securing reserve
volumes through the reinvestment of cash flows generated
from production operations at oil and gas fields. To this end,
and under our Medium- to Long-Term Vision, we have plans toinvest a total of ¥3.5 trillion over the five-year period from theyear ended March 31, 2013, to the year ending March 31, 2017,
in order to achieve net production volume of one million boed.
In the year ended March 31, 2014, the Company’s investments

amounted to ¥962.9 billion. Combined with investments totaling¥653.3 billion in the year ended March 31, 2013, our aggregate
investment over this two-year period came to ¥1,616.0 billion.
While more than half of the Company’s investments are directedto the Ichthys LNG Project, construction work and activities
continue to proceed smoothly and essentially in line with plansallowing us to maintain an unchanged investment plan.
Recognizing that the Company is currently operating withina period that requires active investment in the Ichthys and otherlarge-scale projects, INPEX must undertake the procurement offunds in order to meet these requirements. Accordingly, maintaining a sound financial position and increasing the balance of
net assets are of the utmost importance. The balance of our net
assets increased as of March 31, 2014, with profit margins on a
net assets basis falling short (ROE 7.0%) of the high profit levels
secured in the previous period. Meanwhile, we have been successful in maintaining our strong financial position and, in particular, our long-term financial targets of an equity ratio of 50% ormore and a net debt to net total capital employed ratio of 20%
or less. As of March 31, 2014, INPEX’s equity ratio was 69.1%
with net debt to net total capital employed coming in at negative 31.9%. On this basis, we are confident that the Company
maintains a high degree of financial stability.

Operating conditions inJapan and overseas surrounding the energy sector
The oil and natural gas development business is characterized
by the lengthy period required to recoup initial investment. In
addition to maintaining a sound financial position, it is therefore
imperative to consistently undertake an accurate assessmentof global operating conditions surrounding the energy sector.
Looking at recent trends, growing resource nationalism andaggressive efforts by developing nations to secure resources
are intensifying competition making it all the more difficult tosecure development opportunities. At the same time, development project operating conditions are becoming increasingly
harsh due to rising construction and personnel costs. Despite
this environment, INPEX must continue to steadfastly engage insuch large-scale projects as the Ichthys LNG Project and establish a robust international reputation as a global oil development company. Moreover, we must overcome this competitiveenvironment and forge an undeniable position as a promisingmarket player.

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INPEX CORPORATION Annual Report 2014

Turning to other aspects of the energy environment, shale
gas LNG originating from the United States is expected to playa major role in meeting the growing future demand for energy.
The specific characteristics of shale gas were discussed in lastyear’s annual report. Recognizing the significant hurdles thatneed to be overcome in order to successfully bring a shale gas
LNG project to production, I believe that only competitive projects will win out over the competition. This belief applies equallyto shale gas LNG and existing LNG projects.
On the domestic front, the Cabinet of Japan approved a
new Strategic Energy Plan in April 2014. Under this plan, crude
oil and natural gas are identified as important sources of energy.
At the same time, the overall direction of the plan remains consistent with the Company’s Medium- to Long-Term Vision. Withan increased sense of responsibility, INPEX will continue to carryout its business activities as a core company in Japan involved
closely in the development of crude oil and natural gas.

1Management
Message

Building a global workforce as a part of efforts to ensurea robust operating platform and promoting initiatives aimed at sharing knowledge
In this section of its 2012 Annual Report, INPEX provided a breakdown of its five-year ¥3.5 trillion investment plan and details ofprospects regarding the procurement of funds. Just short of two
years since putting in place our Medium- to Long-Term Vision,
I would now like to talk about our efforts to develop the management platform necessary to properly carry out our businessactivities amid the ongoing growth of our operating scale.
In May 2012, INPEX established the New Ventures Division to oversee the acquisition of overseas projects as one initiative aimed at achieving its Medium- to Long-Term Vision. In
May 2013, the Company set up the Gas Supply & Infrastructure
Division for the integrated management of gas supply facilities
in Japan. Each of these initiatives was aimed at strengthening
our organization. Meanwhile, the increasing global nature of
employee nationalities and workplace locations is a reflection ofprogress being achieved in the Ichthys, Abadi and other largescale projects. At the same time, we are witnessing the growing need for more sophisticated knowledge and skills. Taking
these factors into consideration, INPEX has commenced steps
to put in place a common global human resources management
platform. In addition to identifying measures aimed at securing the necessary professional personnel to ensure the successof large- scale projects, this initiative is designed to promote
human resources development and to provide employees withthe essential skills and technological capabilities required to succeed on the frontline. In building a sound human resources management platform, INPEX is also looking to ensure the cross-border transfer of talented personnel and to establish a mechanismthat will ensure the optimal application of human resources.
The hurdles that need to be overcome increase in line withthe size of the project. Against this backdrop, it is vital that theGroup comes together as one to collectively lift the level of
its expertise. Management and employees alike must bring tobear their individual experience and skills as a multiplier effectthat bolsters the Group’s overall capabilities. With this in mind,
INPEX has put in place a structure to facilitate the sharing of
knowledge and to make the most of the Group’s intellectual
capital. This structure enables the knowledge and know-how
gained through exploration projects, as well as the health, safety
and environment (HSE) experience accumulated through projects conducted worldwide, to be commonly shared throughout
the Group. I make it a point when visiting our many operatingbases in Japan and around the world to check on how effectively
this structure is helping to lift our overall capabilities. Recently,
I have noticed that our technological standards and the interaction among personnel have improved significantly under thisstructure.

INPEX Values serving to unite
the Group under a common global foundation
On a consolidated basis, INPEX maintained a total workforce of
2,874 employees as of March 31, 2014. Of this total, around half
work in locations outside of Japan. In addition, non-Japanesenationals including Australian and Indonesian nationals make up
approximately 40% of all INPEX employees. As the Company’s
structure becomes increasingly diverse, made up of individuals
from a wide range of cultures and countries, the need to put
in place a set of common global-level values also becomes
extremely important. For this reason, in April 2014 we identified five core values that represent our shared understandingof the type of behavior that we strive to demonstrate. These
values are 1 safety, 2 integrity, 3 diversity, 4 ingenuity and 5
collaboration. These INPEX Values are the culmination of morethan a year’s deliberation and debate and integrate the individual value standards of those countries in which we operate
including Japan, Australia and Indonesia. Taking into consideration our stated goal of becoming a top-class international oil
and gas E&P company, it is vital that the Group comes together
under the umbrella of a single set of common and uniform value
standards that extend beyond and across different nationalities
and work locations.

Condensate produced
from the Ichthys fieldat the time of exploration.

INPEX CORPORATION Annual Report 2014009

In conjunction with the establishment of the INPEX Values, it isvital that the Group as a whole engage in detailed operations
from the perspective of its personnel policies and systems.
These parallel activities place us in a better position to ensurethat each and every employee goes about his or her duties witha strong sense of fulfillment and pride. With this in mind, INPEX
places considerable emphasis on creating a workplace environment in which its employees are able to excel and to provide
all possible support irrespective of culture, nationality, genderor age. Our efforts in this area have attracted wide-ranging
acclaim from a number of sources. INPEX has, for example, been
selected as a “Nadeshiko Brand.” This designation is granted
to companies that are considered exceptional in encouraging
women’s success in the workplace. In real terms, the numberof female employees has increased from 252, or around 13% of
the total number of employees, as of March 31, 2010, to 535,
approximately 19%, as of March 31, 2014. Moving forward, andin line with its position as a global company, INPEX will continue
its quest to become a company that is rich in diversity and willcontinue to promote personnel policies and systems that enable
employees to fulfill their potential while engaging in diversity
management.

Relationships with Stakeholders
based on Longstanding Ties of
Mutual Trust
Maintaining safety throughtangible and intangible endeavors
Having spoken about efforts to maintain and expand the volume of production and reserves, and outlined the vital role thatparticipation in large-scale projects plays in ensuring ongoinggrowth, I would now like to focus on our most important priority – “safety.” By its very nature, risks of a major incident arepart and parcel of the oil and natural gas E&P sector. Accordingly, safety should be the No. 1 concern for all operators. Just
as a vehicle requires all four wheels to rotate in the same direction if it is to advance, I strongly believe that a combinationof tangible and intangible measures is essential to achieving
safety. “Safety first” is the most important principle of the five
INPEX Values and forms the core of a strong health, safety andenvironment (HSE) culture. This mind-set and the commitmentof each individual to suspend operations at the slightest hint of

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INPEX CORPORATION Annual Report 2014

1

gible measures conform to international standards. In the eventthat an incident occurs, we take all appropriate steps, including the establishment of communication channels, as well as
employee education and training, to ensure that we ascertain
and share information while undertaking proper onsite action ina timely and proper manner.

Management
Messagepotential danger is in my opinion the intangible quality necessary to ensure safety. Of equal importance, of course, are tangible measures, most notably the mechanisms that give shape
to the Companyʼs safety endeavors. With this in mind, INPEX
adheres strictly to a policy of HSE management. As a company
that operates on the world stage, it is imperative that our tan-

Securing the support of stakeholders isessential to achieving our management goals
Of equal importance is the support of all stakeholders including shareholders and investors. Taking into consideration thelong investment span that characterizes work in the oil development industry, building longstanding ties of mutual trust withbusiness partners is an inherent essential prerequisite. In similar
fashion, I would like to see INPEX nurture equally strong ties ofmutual trust with its shareholders and investors. Since assuming
the position of president in June 2010, I have made it a point topersonally attend and participate in meetings with institutional
investors in Japan, large-scale briefings with individual investors
and visits to overseas institutional investors. The feedback andopinions of shareholders and investors gained through regularmeetings are an invaluable point of reference when making
management decisions. Thanks to this process, I have a sensethat our relationships with shareholders and investors have
improved considerably.

The Company is also vigorously engaged in investor relations activities aimed at individual investors. In October 2013,
INPEX conducted a 1:400 stock split of its common shares. The
Company also reset its share trading unit at 100 shares. These initiatives have made it easier for individuals to invest in this Company. From a separate angle, the number of oil and gas development companies in Japan is limited. With few domestic industry
peers, it is difficult for investors to gain an in-depth knowledgeof activities and to readily make comparisons. Accordingly, weare placing considerable emphasis on increasing communication
with all investors and engaging in IR activities that focus on thetrends and characteristics of the industry, as well as the Company’s mission.

Raising the Level and Pace of Our Efforts
throughout the Year Ending March 31, 2015
Performance and production volume forecasts
for the year ending March 31, 2015
Performance forecasts for the year ending March 31, 2015,
the current year, are based on the assumption that crude oil
prices will fall slightly below levels recorded in the year ended
March 31, 2014. At the same time, forecasts factor in aggressive exploration investment. As a result, we project a decrease
in revenue and earnings in the year ending March 31, 2015. In
specific terms, consolidated net sales are expected to come inat ¥1,316.0 billion with net income totaling ¥178.0 billion, as ofAugust 2014.
Net production volume, which is directly linked to earnings, is forecast to increase slightly year on year to 411 thousand
boed. As of June 30, 2014, INPEX holds 78 oil and natural gas
projects in 27 countries. Of this total, 34 projects are currently

in production, led by the mainstay Offshore Mahakam Project inIndonesia. Naturally, maintaining and increasing production ateach existing project is an important priority for the Company.
Recognizing the country risks inherent in oil development operations, it is also important to build a geographically well-balanced
asset portfolio. As I have mentioned, INPEX’s production assets
are spread across the world. The amount of production volume
varies by region. Having said this, production will commence at
the Lucius Oil Field in the U.S. Gulf of Mexico during the second half of this year boosting volumes in the Americas, whichcurrently remain low compared to other regions. In addition tocontributions to cash flow, we anticipate an improvement in thebalance of our production assets by region.

INPEX CORPORATION Annual Report 2014011

Raising the level and pace of our efforts tosecure growth throughout the year ending March 31, 2015
At the time our Medium- to Long-Term Vision was put in placein May 2012, I emphasized the importance of the first five-year
period to the year ending March 31, 2017. The year ending
March 31, 2015, is indeed the halfway point of this five-year
period. In the first year, we sprinted out of the starting box toensure a sound start. The second year was a period in which
to solidify the gains that were made. In this the third year, wemust now raise the level and pace of our endeavors as we aim toachieve our growth targets.
Several projects are scheduled to commence during thecurrent year. In last year’s annual report, I talked about the virtuous cycle of growth. By steadily harvesting the seeds that wehave sown, we will apply an even stronger spin to this cycle. We
will progressively complete several large-scale projects moving
forward. A prime example is the Ichthys LNG Project, where wehave passed the halfway point toward completion. We will also
actively engage in exploration investment in a bid to sow theseeds of the future. We plan to invest ¥105.0 billion in exploration during the current year, a record high for the Company, withthe drilling of 21 exploratory wells scheduled mainly in Asia andOceania. Naturally, we will place our first priority on safety andengage in prudent drilling activities. The expectations of successnevertheless remain high.

After the start-up of Ichthys, we will provide returns to shareholders commensuratewith a top-class international oil and gas E&P company
INPEX held its 8th Ordinary General Meeting of Shareholders inJune 25, 2014, with more than 600 shareholders in attendance. A
number of questions were raised concerning the Company’s participation in large-scale projects and conditions throughout the
LNG market. It was clear that shareholders held high expectations
for the Ichthys LNG Project and the Company’s future growth.
During the first half of 2013, INPEX’s share price trended
downward. As if coinciding with the stock split in the lowering of the Company’s share trading unit, the share priceshowed signs of a recovery during the second half. I
believe that the increase in production and proved
reserve volumes, as well as the progress of individual projects including the Ichthys LNG Project,is having a positive effect on our corporate value.
Complementing our business endeavors, we willcontinue to actively engage in the disclosure of
information and IR activities throughout the year
ending March 31, 2015, to ensure that our sharesare properly valued.

INPEX is implementing a balanced approach between
investments and the payment of dividends according to its
shareholder return policy. In the lead-up to production at theIchthys LNG Project, cash flows derived from producing projects are being channeled into reinvestments. In this context,
the focus of our activities is directed toward investment. As aresult, we plan to pay an annual dividend of ¥18 per share for theyear ending March 31, 2015, unchanged from the period underreview. However, as production commences at the Ichthys LNG
Project, we will provide returns to shareholders commensuratewith a top-class international oil and gas E&P company.
As I have mentioned, the current year is the halfway point
to realizing our Medium- to Long-Term Vision with around two
years before the Ichthys LNG Project comes onstream. With thisin mind, we will accelerate the pace of our endeavors. The entire
INPEX Group is dedicated to bringing concrete shape to thegains achieved during the previous period and will raise the levelof its activities to ensure further growth and development.
August 2014
President & CEO

Toshiaki Kitamura

Bringing concrete shape to the gains
already achieved, we will raise the levelof our endeavors going forward.

012

INPEX CORPORATION Annual Report 20142

Highlights

Financial and Operating Highlights(Compared with the year of establishment and the year ended March 31, 2013)

Results
Backed by stable production volumes, INPEX has maintained high levels of earnings. In the year ended March
31, 2014, consolidated net sales hit a record high. In the
period under review, net income also increased year on year.
Despite such negative factors as the absence of the one-off
gain on transfer of Ichthys mining rights reported in the year
ended March 31, 2013, and the downturn in crude oil prices,
this positive result reflected among other things the favorable flow-on effects of the weak yen.

Exploration and Development Expenditures

Development expenditures are for the most part directed
toward the production of crude oil and natural gas from theCompany’s reserve volume. Although these expenditures
have generally totaled around ¥200 billion each year, thisamount has increased of late since making a final investment
decision in connection with the Ichthys LNG Project in January 2012. Exploration expenditures aimed at discovering new
resources are expanding in line with aggressive exploration
activities undertaken since the year ended March 31, 2013.

Production and Reserve Vo
V lumes
INPEX has continued to maintain stable levels of productionffvolume, which serv
r e as the wellspring for the Company’s profrv
its and earnings. With the commencement of production inconnection with the Ichthys LNG Project, the Company’s net
production volume is projected to increase from its current
level of 400 thousand boed to 700 thousand boed. Thereafffter,
r INPEX is targeting one million boed by the early 2020s.
r,
Proved reserv
r es naturally decline in line with production
rv
activity (around 150 million barrels per year in the Compar proved reserv
r,
r es
rv
nyy’s current case). In overall terms, however,increase with new discoveries and the addition of resources.
INPEX is more than off
ffs
ff
fsetting any decline in reserv
r e volumes
rv
with additions and upgrades in its partr icipation in large-scalert
projects.

Crude Oil Prices, Foreign Currency Exchange
Rates and the Company’s Share Price

Fluctuations in the price of crude oil and foreign currency
exchange rates have a significant impact on the Company’s
profits and earnings. The price of Brent crude oil, which stoodat around US$60 –$70 per barrel in the year ended March 31,
2007, fluctuated dramatically before and after the financial crisis
in 2008. Since 2011, the price of crude oil has hovered at thehigh level of US$100 per barrel.
The Japanese yen exchange rate against the U.S. dollar
was weak during the year ended March 31, 2007, fluctuating
between ¥110 and ¥120. The yen then entered a period of prolonged appreciation up to 2013. Since the end of 2012, the yen
has exhibited a weak trend.

014

INPEX CORPORATION Annual Report 20142
Highlights

INPEX CORPORATION Annual Report 2014015

Financial and Operating Highlights (Five-Ye
Y ar Comparative Graphs)
Ye
As of or years ended March 31
Please refer to p. 81 for notes of major indices.

Profitability Indices} See p. 8 of Fact Book 2014 for more about profitability indices.

Net Sales (by product)

Net Income, EBIDAX■Crude oil ■Natural gas ■Other(¥ billion)
1,400
1,200
1,000

1,076.2
27.5

600

943.1

840.4

800

398.3

27.1

650.4

326.4

400

28.9

1,186.7

1,216.5

31.4

30.6

356.2

726.2

20.4

400

486.9

0

0

2009

2010

2011

2012

2014

2013

2009

Despite the impact of the yen’s appreciation, net sales increased owing mainly to firm
trends in crude oil prices between the period from the year ended March 31, 2010, tothe year ended March 31, 2012. In the year ended March 31, 2014, net sales reached
an all-time high largely reflecting the decline in the value of the yen.

Efficiency Indices} See p. 9 of Fact Book 2014 for more

ROE

Net ROACE

20

11.9

8.1

5

(¥ billion)
3,000

1,500

11.2

8.6
9.3

0

7.9

2012

-1,5002014

2013

Net ROACE is a profit ratio that includes net debt. With the Company’s negative net
debt position, net ROACE is higher than ROE.

Performance Indices

20

20.00
17.50

17.50

10

13.0
% 10.00 12.1
%

7.50
5

13.2
%

14.7
%

10.00

6.25

14.0
%

7.50

10.00

7.50

7.50

14.3
%

2010

-349.2-31.2%-30.6%-688.8-815.3-874.1-725.3

0

2009

2010

-48.9%
2011-60.7%
2012-43.9%

2013-31.9%
2014

-25
-50
-75

The Company’s net debt is negative because the sum of cash and cash equivalents
and public bonds is greater than the sum of interest-bearing debt. INPEX continues
to maintain financial strengths.

2011

2012

8.75
8.75

9.00

2013

20

15

15

10

10

5

5

0

0

2014

Note: The Company conducted a stock split at a ratio of 1:400 of its common stock on October 1,
2013. Cash dividends per share figures for each consolidated fiscal year have been retroactively
adjusted to reflect the impact of the stock split.

INPEX CORPORATION Annual Report 2014

PER

(Times)20

The Company, which is currently in an investment (Ichthys, etc.) phase, is placing
considerable emphasis on balancing the needs for growth and ensuring appropriate
returns to shareholders. After commencing production at the Ichthys LNG Project,
INPEX will provide a sound level of return to its shareholders befitting a top-classinternational oil and gas E&P company.

016

25

-324.1

15.1

PBR

15.5

11.1
9.00

0

2009

50

18.00

15.00

13.75

69.1% 75

1,387.5

Price Earnings Ratio (PER), Price Book-Value Ratio (PBR)■Cash dividends per share (2nd quarter end)
■Cash dividends per share (Fiscal year end) Payout ratio （%）

15

125
100

} See p. 12 of Fact Book 2014 for more about performance indices.

Cash Dividends per Share, Payout Ratio
(Yen)

68.9%

2,481.3
2,179.3
1,996.9
74.5%
71.1%
68.6%

7.0

0

2011

71.9%

（%）
150

2,791.1

500

-500

2010

■Net assets excluding minority interests Equity ratio■Net debt
Net debt/Net total capital employed

1,000 1,271.1-1,000

2009

2014

2013

more about stability indices.

2,000

10.8

7.6

2012

} See p. 11 of Fact Book 2014 for

2,500

16.0
10.5

2011

Net Assets Excluding Minority Interests, Equity Ratio,
Net Debt, Net Debt/Net Total Capital Employed

（%）

14.6

2010

EBIDAX is an index that is commonly used by resource development companies. It
is a measure of profit before interest payments, depreciation and amortization, andexploration expenses. EBIDAX provides an indication of the level of profit generated
without the impact of accounting treatment applied by individual companies.

Stability Indicesabout efficiency indices.

Return on Equity (ROE), Net ROACE

10

183.7

183.0

128.7

107.2

100

350.9

274.9

242.5

194.0
145.1

200

15

275.9

200

558.0

402.2

362.6

300

858.8

788.1

■Net income ■EBIDAX(¥ billion)
500

1,334.6

455.4

397.8

429.1

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

10.5

10.0

10.6

1.3

1.2

1.2

0.9

0.7

0.7

2009

2010

2011

2012

2013

2014

Despite the Company’s steady performance and stable cash dividend payment
record, PER and PBR until the previous year-end have remained entrenched at a low
level. More recently, both PER and PBR have exhibited a recovery trend.

} See p. 13 of Fact Book 2014 forReserve/Production Indices, Exploration and Development Expenditures■Crude oil ■Natural gas （％）
Reserve replacement ratio (3-year average) 400(Million boe)
3,000

282%

1,598

1,200

1,475

550
1,048

600

980

35%

61%

409
899

2,532

1,254
1,451

1,259
929

981

320

240

255%

1,308

495

5,000

1,278

3,176

2012

2013

1,945

1,907

2,000

80

1,000

1,598

26.7

0

years 2,432 years

1,475

1,308

8.5

years

2009

2,188

14.7
years

15.6

30.2 2,532
years

20

17.1

10

years

years

years

2010

27.5

27.4

years

10.0

years

2014

40

30

29.8
years

0

2011

4,095

1,823

2,818

4,477

32.3

25%

2010

4,256

4,126

2,929

3,000 years

160

0

2011

2012

2014

2013

Reserve replacement ratio (3-year average) = Proved reserves increase including acquisitions in the year
/ Production volume in the year

Reserves to production ratio (Years) = Reserves as of the end of the year / Production in the year

Proved reserves increased substantially for both the year ended March 31, 2012, andthe year ended March 31, 2014, after a final investment decision (FID) for the Ichthys
LNG Project was made and the concession agreement in the Upper Zakum Oil Fieldin the ADMA Block was extended. The RRR for the year ended March 31, 2014, was370%, the highest level recorded since INPEX publicly listed its shares.

The reserves-to-production ratio measures the current number of production volume
years of reserve volumes held. The Company’s current reserves-to-production ratio is17.1 years for net proved reserves and 30.2 years on the basis of proved and probable reserves. Both figures indicate sound levels of reserves.

Average Expenses per BOE Produced,
Exploration and Development Cost per BOE (3-year average)

Net Production (by product, barrels of oil equivalent)

Average expenses per boe produced
Exploration and development cost per boe (3-year average)(US$/boe)
80

2

50

4,404

4,000

10.8

0

2009

4,774

Highlights

1,800

2,188

■Proved reserves ■Probable reserves
Reserves (proved + probable) -to-production ratio (Years)
Proved reserves-to-production ratio(Million boe)

370%

2,432

2,400

more about reserve/production indices.

Net Proved and Probable Reserves, Reserves-to-Production Ratio

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

78.6

450

405

405

182

187

223

218

2009

2010

360

60

■Crude oil ■Natural gas(Thousand boed)

423

426

184

175

239

2011

408

409

162

164

251

246

245

2012

2013

2014

55.4
270
40

28.3

180

0

12.4

11.2

11.4

2009

2010

2011

18.3

16.4

17.9
11.2

11.7

2012

2013

2014

20

6.3

90

0

Exploration and development cost per boe (3-year average) = The sum of total costs incurred for
exploration and development of oil and gas fields and total costs incurred for acquisitions divided by
the sum of proved reserve extensions, acquisitions and revisions.

The Company’s development expenditures have increased of late in line with thetransition to the Ichthys development phase. However, buoyed by the upswing
in proved reserves, exploration and development expenditures per barrel haveremained at a favorable level since the year ended March 31, 2012.

Net production volumes have remained at a stable level as the deterioration in existing production at oil and gas fields has been offset by the commencement of production at new oil fields. Looking ahead, production volume is projected to increase to
700 thousand boed as production commences at the Ichthys LNG and other projects.

The Environment
Volume of Water Consumption, Total GHG Emissions

Exploration Success Ratio (3-year average),
Number of Exploratory Wells（％）

Exploration success ratio (3-year average) （Number）■Number of exploratory wells
40

80

60

56.3%

64.5%
46.8%

24
40

59.5%
50.6%

15,000

512

473
439

10,000

392

381

700

500

14,292
300

20

15

13
20

2

0

2011

2012

2013

100

4,000
10

7

2010

651

30

45.0%

19

2009

Volume of water consumption (Thousand t-CO2)
Total GHG emissions(Thousand m3)
20,0000

2014

Exploration success ratio (3-year average) = The number of net productive exploratory wells drilled / The
number of net exploratory wells drilled. (An exploratory well is a well drilled to find a new field, to find a
new reservoir in a field previously found to be productive of oil or gas in another reservoir or to extend thelimits of a known reservoir.) The number of wells represents the completion of drilling operations for the
subject year. However, data for the year ended March 31, 2014, included operations currently in progress.

The number of exploratory wells in a working state has increased due to vigorous
exploration investment.

2,000

1,248

1,115

1,283

1,436

2009

2010

2011

2012

50

1,749
0

0

2013

2014

Volume of water consumption and total GHG emissions from our operator projects in Japan and overseas.

The volume of water consumption has jumped substantially in line with the commencement of operations mainly at the Naoetsu LNG Terminal. The vast majority of thisincrease largely reflects higher levels of seawater use for heating and cooling. Seawaterthat has been used is released back into the sea after taking steps to minimize theimpact on ecosystems. Greenhouse gas (GHG) emissions are showing a slight increase
due to a variety of factors including construction progress at the Ichthys LNG Project.

INPEX CORPORATION Annual Report 2014017

Business Topics
The Company issued press releases on the following business topics
during the period from April 1, 2013, to July 31, 2014.

Exploration Projects
2013 April Acquired an interest in the offshore Mozambique Exploration Block Areas 2 & 5
April Signed a new production-sharing contract for the 11-106 contract area of the Joint
Petroleum Development Area in the Timor Sea
May Acquired an interest in the offshore Uruguay Exploration Block Area 15
May Executed a cooperation agreement with Rosneft for exploration blocks in the Seaof Okhotsk, Russia
June Confirmed gas condensate in the Southern Offshore Vietnam Blocks 05-1b & 05-1c
June Won the tender for the offshore Western Australia Exploration Block WA-494-P
Aug. Confirmed the presence of crude oil through exploratory drilling at Walker Ridge inthe U.S. Gulf of Mexico
Sep. Participated in exploration activities in Irkutsk, Russia
Oct. Awarded an additional offshore exploration license in the U.K. Continental Shelf(27th Seaward Licensing Round)Dec. Entered into a licensing agreement for the Kanumas Area, Greenland
2014 May Won the tender for the offshore Western Australia Exploration Block WA-502-P
June Won the tender for the offshore Western Australia Exploration Block WA-504-P

Development andProduction Projects
2013 April Received approval for the recommencement of production at the Frade Oil Field,
BrazilSep. Commenced crude oil production at the
Kashagan Oil Field, Republic of Kazakhstan
Oct. Commenced production at the Sebuku
Block of the Ruby Gas Field, Indonesia
2014 Jan. Extended the concession agreement
for the Upper Zakum Oil Field, Offshore
Abu Dhabi, United Arab Emirates, andimproved financial terms and conditions
Jan. Commenced additional crude oil production at the ACG Oil Fields, the Caspian Sea,
Azerbaijan (Chirag Oil Project)

Ichthys LNG Project } Pleasee refer to the Special Report from p. 34 for details.
2013 June Entered into a contract for two new vessels, one to service the offtake and deliveryof LNG and the other as a time charter } P
Pleaselease rreferefer toto thethe SSpecialpecial F
FeatureeatureJune Held a steel-cutting ceremony for a floatingstorage and offloadingon production,
page 34 of details.
(FPSO) facility

May Commenced production at the SouthNatuna Sea Block B of the South Belut Gas
Field, Indonesia
July Acquired an additional interest in the
Lucius Oil Field, the U.S. Gulf of Mexico

June Agreed to transfer a partial equity interest in the Ichthys LNG Project to CPC
Corporation, Taiwan
Sep. Held a ceremony to open an accommodation facility for employees working at an
onshore gas liquefaction plant2014 Feb. Commenced full-scale operations on the assembly of an FPSO facility
April Began operations on the assembly of an offshore central processing facility (CPF)
June Announced that the Ichthys LNG Project had reached the halfway markJune Commenced installation works on a gas transport pipeline
July Launched the hull of the FPSO facility for the Ichthys LNG Project
July Commenced the installation of modules for the construction of an onshore gasliquefaction plant

Upper Zakum Oil Field, U.A.E.

Other LNG Projects
2013 May Announced changes to interests in the Abadi LNG Project (INPEX’s interest wentfrom 60% to 65%)
June Signed a Memorandum of Understanding in connection with the Vladivostok LNG
Project, Russia

018

Major Corporate Topics
2013 May Obtained new credit ratings from Moody’s

Nov. Awarded the exclusive right to move forward with the planning necessary to build the
LNG export infrastructure at Grassy Point for the shale gas LNG business in Canada

May Announced the establishment of the Gas Supply & Infrastructure Division as a part of theCompany’s organizational changes

2014 May Signed a heads of agreement (HOA) with Tokyo Electric Power Company, Inc., andShizuoka Gas Company, Ltd., for the sale and purchase of LNG from the Prelude
FLNG project

Oct. Conducted a stock split and lowered its sharetrading unit

INPEX CORPORATION Annual Report 2014

Strengthening Renewable Energy
and Other Initiatives } Please refer to p. 64 for details.
2013 April Started power generation via mega-solar Joetsu in Niigata, Japan
July Commenced drilling of exploratory wells for the development ofgeothermal energy in Hokkaido and Akita, Japan
Sep. Commenced a joint study for geothermal energy development in
Bandaisan, Fukushima, Japan
2014 March Decided to construct a second mega-solar Joetsu

2June Engaged in joint commissioned work entailing support operations
for production tests of methane hydrate

Highlights

Exploratory well drilling
work for geothermal energy
development in the Amemasudake region (July 2013)

Naoetsu LNG Terminal and Gas Pipeline in Japan } Please refer to pp. 62-64 for details.
2013 July Concluded extension work on the Naoetsu and Shin Nagaoka lines
July Signed an LNG sales and purchase agreement with Chubu ElectricPower Company, Inc., for INPEX’s Naoetsu LNG terminal, Japan
Aug. First LNG carrier arrived at the Naoetsu LNG Terminal
Dec. Concluded construction and commenced operations at the Naoetsu
LNG Terminal
2014 Feb. Commenced feasibility study on the extension of the existing natural gas trunk pipeline Shin Tokyo Line (Stage 5)
April Proceeded with construction of the natural gas trunk pipeline(Toyama Line: operations scheduled to commence in mid-2016)
Naoetsu LNG Terminal

2014

Jan. Established a wholly owned subsidiary and opened a local office in Singapore
March Selected as a Nadeshiko Brand in fiscal 2013 in recognition of the Company’s efforts to promote women in the workforce
June Established a wholly owned subsidiary and opened a local office in Norway
July JAPAN-GTL Consortium received the 2014 ENAA Engineering Commendation Award by the Engineering Advancement Association of Japan for
its JAPAN-GTL Process

INPEX CORPORATION Annual Report 2014019

Production Start-up Schedule100

In addition to the Ichthys LNG Project, plans are in place to commence production
at a number of projects currently under development or where preparations fordevelopment are under way.

Toward net production
volume of 1 million boed

Increase to around 700 thousand
70
boed with the start-up of production
at the Ichthys and other projects

Maintaining and expanding
net production volume(More than 400 thousand boed)Toy

Umm LuLu andNasr oil fields,
U.A.E.
Lucius Oil Field,
Coniston
U.S. Gulf of
Unit,
MexicoAustralia

Crude
oil

ence

mm

co
ions

erat

e op

Lin
ama

Ichthys LNG Project,
Australia

LianziOil Field,
AngolaToward domestic natural
gas supply volume of
2.5 billion m3/year

Prelude FLNG
Project,
Australia

JoslynAbadi LNG Shale Gas
Project/
Oil Sands
Project,Indonesia Cordova area, Project,
CanadaCanadaNaturalgas

Year Ending March 31, 2015, toYear Ending March 31, 2016

From the Year Ending March 31,
2017, Onward

New production is scheduled to commence at
crude oil projects in such regions as the Americas, the Middle East, and Africa up to the startup of production at the Ichthys LNG Project.

Beginning with the commencement of production at theIchthys project scheduled for the end of 2016, plans arein place for production to commence thereafter at the
Prelude, Abadi and other LNG projects.

Natural gas production volumes areprojected to increase mainly from
LNG projects. LNG projects are also
expected to contribute to the production of LPG and condensate.

INPEX CORPORATION Annual Report 2014

In addition to the start-up of theIchthys and other large-scale
projects, INPEX is looking toachieve net production volumeof one million boed by the early2020s through a variety of measures including further exploration investment and the acquisition of assets.

Unconventional resources including shale gas and oil sands from
Canada offer the expectation of
future growth.

Multiple new crude oil projects
are scheduled to commence production. Plans are also in place
to increase production volumes
at existing projects including theUpper Zakum Oil Field.

020

The Early 2020s

Expectations of further increases in
production will arise as resources
are uncovered at the 30-plus exploration projects being conductedacross regions worldwide.

3

Market Trend andManagement Policy

Business Flow in Oil and
Gas Development and Our Strengths
The business activities of the oil and gas industry can be envisioned as the flow of a river. The upstream consists of exploration, 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 entails handling upstream operations including the exploration, drilling,
production and sale of crude oil and natural gas. As shown in thebusiness flow at right, upstream business activities can be further
classified into 1 acquisition of blocks, 2 exploration,
3 appraisal, 4 development, 5 production and 6 sales.
The Company’s Oil andNatural Gas Projects
ln production
Projects that entail the production
and sales of oil and natural gas
Under development
Projects for which the Company has
made a final investment decisionand is undertaking development
activities with a view to production
Discovered/Preparation for development
Projects that entail the discoveryof resources through explorationand evaluation

Under exploration
Projects where exploration andevaluation activities are in progresswith resources yet to be discovered

Other projects

Signing ceremony of contract

We collect extensive information on
legal system and country risks related
to areas in which oil and natural gas
are expected to exist. We then apply
and bid for mining rights and/or
exploration and development rights
and enter into a contract for exploration and development.

022

INPEX CORPORATION Annual Report 2014

78 projects in 27 countries(As of June 30, 2014)

Other
Under
exploration

Japan
Americas118

Number of
Middle projects by
East &
region4230

Africa10 Eurasia
7

1

Asia &
Oceania

Number of
projects bydevelopment
stage

34

In production

8
Discovered/Preparation fordevelopment

5

3

Under
development

Market Trend andManagement Policy

Geophysical surveys

In addition to geological surveys, we
utilize geophysical surveys conducted
through satellite images and seismic
waves in order to assess the potential subsurface accumulations of oil
and natural gas. Furthermore, we drill
exploratory wells in order to confirm
the presence of oil and gas.

Drilling of appraisal wells

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

INPEX CORPORATION Annual Report 2014

023

024

INPEX CORPORATION Annual Report 2014

Christmas tree

To pipeline

High pressure separator

Refrigeration unit
Carbon gas
separator

Water, oil,sand
1

Water, oil

CO2

2

3

Refining/treatment of natural gas

Aft
f er separating oil and removft
ing impurities (e.g., carbon gas,hydrogen), we ship natural gasthat can be used as a product.

3
Market Trend andManagement Policy

INPEX CORPORATION Annual Report 2014025

Business Environment in Oil and Gas Development
The forecast is for further expansion of global
primary energy demand, including oil and natural gas, to be centered on developing countries,
such as China and India. Of that demand, thatfor natural gas is expected to see a significant
increase. Due to such factors as rising resource
nationalism, however, the securing of new oiland natural gas interests will continue to bebiased toward frontier regions where development is beset with difficulties.

Europe/Eurasia
Natural gas

Crude oil17.28 MMbbl/d99.9 billion
cf/d

Crude oil production volume
1 MMbbl/dNatural gas
production volume
10 billion cf/d

Middle East
Natural gas

Crude oil

55.0 billion
cf/d28.36 MMbbl/d

Asia/Pacific

AfricaCrude oil8.82
MMbbl/dNatural gas

19.8 billion
cf/dNatural gas

Crude oil47.3 billion cf/d

8.23 MMbbl/d

Representation of main oil and natural gas production areas

Global Proved Reserves and Reserves-to-Production Ratio
Global proved reserves of crude oiland natural gas total approximately
1.7 trillion barrels and 6.6 quadrillion
cubic feet, respectively. By region,
the Middle East holds the largest
reserve volumes of both crude oiland natural gas in existence. There
are also extensive proved reservesof crude oil in South and Central
America and North America and ofnatural gas in Europe and Eurasia.

Proved Reserves by Region and Reserves-to-Production Ratio (PR ratio) (As of December 31, 2013)
Asia/Paciﬁc 2.5%

Africa7.7%
Europe/Eurasia

8.8%

North
America

1,687.9
47.9%

13.6%
South andCentral America

19.5%

Middle East

PR ratio

53.3 years

South
and Central
America

6.3%
AfricaCrude oilbillion bbl

North America

7.6%

Natural gas

Asia/
Paciﬁctrillion cf

6,557.8

8.2%
Europe/Eurasia

30.5%

4.1%

Middle East

43.2%

PR ratio

55.1 years
Source: BP Statistical Review of World Energy 2014026

INPEX CORPORATION Annual Report 2014

North America

Oil and Natural Gas
Demand in Japan

Crude oil16.83
MMbbl/dNatural gas

87.0 billion
cf/d

LNG Import Trend in Japan(Million tons/year)100

2013: 87.49 million tons

80
60
40
20
0

1995

2000

2005

2010

Demand for LNG is increasing in Japan. This reflects the upswing in
LNG use for thermal power generation in the wake of the shutdowns
Source: Ministry of Finance trade statistics
of nuclear power plants.

3
Market Trend andManagement Policy

Japan’s Primary Energy Supply (2012)
Hydroelectricity

3.3%

Renewables,
etc.

1.8%

Nuclear
power

0.7%
Coal

23.2%
Natural gas

22.8%

Oil

48.3%

Although the demand for oil
has declined in Japan in recent
years, oil that is broadly used
as a source of heat and power,
as well as in the production ofmaterials, even now accounts
for more than 40% of Japan’s
primary energy demand.

South andCentral America

Source: Energy & Economic Statistics in Japan 2013

Production Volume by Region
There are many countries and regions that produce oil and natural gas, but countries thathave large-scale production, have opened their mining areas to foreign oil companies orare capable of exporting LNG are limited to just a few. Due to the rise in resource nationalism, the securing of new oil and natural gas interests by energy development companies
has in recent years continued to be biased toward frontier regions where development isbeset with difficulties. Among these regions, however, are promising areas where largescale reserve volumes are to be expected.

Natural ggasas

Crude oil17.1 billion
ion
cf/d

7.29
MMbbl/dProduction volume source: BP Statistical Review of World Energy 2014

Global Energy Demand
Oil and natural gas account for
more than half of the amount of
global primary energy consumption. The main focus is on otherforms of energy, such as solar,hydro, biomass and geothermal, as
these are renewable within a shorttime of first use and emit less CO2
during power generation whencompared with finite fossil fuels.

World Primary Energy Consumption (2013)
Hydroelectricity

Renewables

6.7%

2.2%

Oil

Hydroelectricity

Oil

4.4%

Total

32.9%

12.73

Natural gas
Biomass

Nuclear power
Other renewable energy

4,000

Natural gas to grow

3,000

1.6% annuallybillion toe

30.1%

Coal

(Million toe)
5,000

Nuclear
power

Coal

World Primary Energy Demand by Fuel

2,000

Natural gas

23.7%

1,000
0

2010
Source: BP Statistical Review of World Energy 2014

2020

2035

Source: IEA World Energy Outlook 2013 in the New Policies Scenario

INPEX CORPORATION Annual Report 2014027

The Medium- to Long-Te
T rm Vision ofTe
INPEX and Investment Plans
Three Gror wth Taro
T rgets

In May 2012, the Company formulated the INPEX
Medium- to Long-Term Vision that clarified such aspects
as key initiatives up to the fiscal year ending March2017 toward medium- to long-term growth targets
and the achievement of those targets. The Medium- to
Long-Term Vision defined three growth targets andthree management policies and clearly specified the
key initiatives over the following five-year period.

For details, please refer to thebooklet entitled “MEDIUMTO LONG-TERM VISIONOF INPEX: Ichthys and Our
Growth Beyond,” or refer tothe following Web site:

Bec

MEDIUM- TO LONG-TERM
VISION OF INPEX:
Ichthys and Our Growth
Beyond4www.inpex.co.jp/en/vision

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.

1

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

028

INPEX CORPORATION Annual Report 2014eom

We have set three growth targets necessary forsustainable growth and will conduct key initiatives
over the next five years to achieve them.

op
T
a

las
C
-

ational Oil and
n
r
e
t
Ga
s In

1

s

Continuous Enhancement of
E&P Activities

Achieve net production
volume of 1 million boedby the early 2020s

2

Investment for Growth andReturn for Shareholders
Investment over

five years¥3.5 trillion

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

Dividend Payout Ratio
（%）
20

15

14.7%

14.3%

2013

2014

13.2%

10

Including exploration
expenditures ofaround14.0%

5¥300 billion
0

From the year ended March 31, 2013,
to March 31, 2017

2011

2012

an
o me
c
e
B

Integrated Ener
gy

2

yw

Strengthening
Gas Supply Chain

Co
mp
an
it h
t
na

l
ura
ga

e co
s th
sa

re

3

ny
pa
m
Co

3

Reinforcement ofRenewable Energy Initiatives

Market Trend andManagement Policy

Achieve domestic gas supply
volume of 2.5 billion m3/ yearby the early 2020s
E&(3.0 billion m³/year in the long term)P

Promote efforts to commercialize
renewable energies andreinforce R&D activities
for the next generation

Maintain Financial Strength
Equity Ratio, Net Debt/
Net Total Capital Employed
（%）
70

60
50
40

Funding Source

Equity ratio

69.1%(As of March 31,
2014)

Target: 50% or higher

30
20
10
0
-10
-20
-30
-40

Target:20%
or less
Net debt/
Net total capital
employed-31.9%(As of March 31, 2014)

Own funds
Approximately ¥1.5 trillionof cash available on hand
(As of March 31, 2014)

Cash flows
Future operating cash flows
obtained per 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 2014029

Company Management Content in Business Model
A principal issue of the oil and gas development business is the ability to put in place a continuous cycle thatentails the reinvestment of earnings for sustainable growth. In specific terms, this cycle involves 1 aggressive
exploration and development investment; 2 increasing reserves; 3 maintenance/growth of production
volume; and 4 accounting of revenue attributable to sales.
Over the five-year period from the year ended March 31, 2013, to the year ending March 31, 2017, INPEX
intends to invest a total of ¥3.5 trillion and to continuously enhance its E&P activities. In specific terms, the Comompany will work diligently to achieve net production volume of 1 million boed by the early 2020s.

2 Increasing Reserves

1 Aggressive Exploration andDevelopment Investment

T realize its growth targets, the Company will actively proTo
moteboth exploration investment intended to maintain/m
expand reserve volume and development investment toproduce oil and natural gas from reserve volume holdings.
The scale of investment is planned to be ¥3.5 trillion
over the five-year period from the year ended March 2013
to that ending March 2017 (up until the start of production at Ichthys). Investment in Ichthys will account for morethan half of the ¥3.5 trillion. As development operation at
Ichthys is progressing smoothly for the most part, investment is being advanced in line with the investment plan.
The value of the yen has weakened compared with the foreign currency exchange rate assumptions adopted at thetime investment plans were formulated in May 2012. As aresult, the amount of future investment has increased on a
yen basis. However, as the Company’s investments are forthe most part denominated in U.S. dollars, there has been
no change from the initial U.S. dollar–based investment
amount of the ¥3.5 trillion.

At the end of March 2014, the Company’s reserves wereproved reserves of 2.5 billion boe, probable reserves of
1.9 billion boe and possible reserves of 600 million boe.
If reserve production is shown in terms of how many years
reserve volumes will last at the current production volume, proved reserves will last 17.1 years, and 30.2 years
if combined with probable reserves. Showing what levelof recovery in interim production volume could be possible by increasing the interim reserve volume, the reserve
replacement ratio (three-year average) has reached 370%.
Also holding a wealth of contingent resource amounts,
the Company expects to expand its medium- to long-term
proved and probable reserves by launching new projects
and improving the recovery rate from its existing oil andgas fields.

Our Reserves■Proved reserves(MMboe)

5,082
4,126

4,256

4,095

2,818

1,823

1,907

Investment Results and Investment Plan for
the Next Three Years
1,125.0(¥ billion)

962.9■Development expenditures*■Exploration expenditures■Other capital expenditures**

2,432

2,188

4,477

605

1,945

2014/3
Reserves-toProduction
Ratio

2014/334.3 years

30.2 years

2,532

17.1 years

1,308

2011/3 2012/3 2013/3 2014/3

794.0
653.3

■Probable reserves■Possible reserves ■Contingent resources

650.0

Reserve Replacement Ratio (3-year average)
(%)
400

990.0

370%

854.7
682.0
576.7

576.0

282%

300

255%

200

54.0
22.6

71.0
37.2

105.0
30.0

91.0
21.0

55.0
19.0

2013/3

2014/3

2015/3

2016/32017/3(Actual)(Actual)* Development expenditures include investment in the Ichthys downstream business*** Mainly investment in the Naoetsu LNG Terminal and the domestic pipeline network, etc.

030

INPEX CORPORATION Annual Report 2014

100

35%
25%

0 61%

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

4 Accounting of Revenue
Attributable to Sales
3 Maintenance/
Growth of Production Volume

Net Sales (by product), Net Income■Crude oil sales ■Natural gas sales ■Other sales

1,334.6(¥ billion)

28.9

455.4

409 thousand boed

397.8
429.1

Japan

1%

Middle East
& Africa

356.2

Crude oil

Asia & Oceania

558.0

thousand bbl/d

Europe & Eurasia

19%

11%

Mainly from oilfields in U.A.E.

194.0

Japan

12%

14%

Natural gas

876

Asia &
Oceania

Gas fields including
the MinamiNagaoka Oil Field,
Niigata Prefecture

million cf/d

73%

Gas fields including
the Mahakam Oil
Field, Indonesia

Medium- to Long-Term Production Volume Targets(Thousand boed)

Around 700 thousand boed fromexisting projects from thecommencement of production at theIchthys LNG Project and other factors

409

411

421

Target for
the early 2020s
1 million boed

472

(Actual)Existing
projects

Existing
projects

2014/3 2015/3 2016/3 2017/3

New
projects■Japan ■Asia & Oceania ■Eurasia■Middle East & Africa ■Americas

183.0

128.7

Oil fields in
Caspian Sea

Americas

858.8

788.1

726.2

1%

245

68%

30.6

31.4

943.1

Net Production (Year ended March 31, 2014)
Americas1,316.0

20.4

1,216.5

1,186.7■Net income

3Market Trend andManagement Policy

The Company’s net production volumes for the year ended
March 31, 2014, were 245 thousand barrels per day ofcrude oil, 876 million cubic feet per day of natural gas (164thousand boed) for a combined oil and natural gas total of409 thousand boed. We expect to increase that figure to411 thousand boed for the year ending March 2015.
Concerning our medium- to long-term production volume forecasts, we plan to maintain and expand production
volume due to the contributions from production at startup production projects and existing projects until the startof production at the Ichthys LNG Project. After that, due
to such factors as the start of production at Ichthys, we will
increase net production volume of existing projects to the
700 thousand boed level and aim to achieve one million
boed in the early 2020s by, for example, increasing the production volume of new projects.

The Company maintains robust revenue based on the stable production of its revenue sources, crude oil and naturalgas. For the year ended March 31, 2014, net sales reached
an all-time high due to the effects of the yen’s depreciation.
The Company’s business revenues are greatly
affected by changes in crude oil prices and exchange
rates (U.S. dollar). The yearly average price of crude oil(ICE Brent) in the year under review was US$107 per barrel. On foreign currency exchanges, the yen remained atthe ¥100 to the U.S. dollar mark for the year. The chart
below shows the Company’s sensitivity with regard to its
consolidated net income forecasts for the current year in
the event of changes in crude oil prices and exchange
rates. A rise in crude oil prices and yen depreciation
would have a positive effect on net income.

Early 2020s

2011/3

2012/3

2013/3

183.7

2014/3178.0

2015/3(Forecast as of August 2014)

Sensitivities of Crude Oil Price and Foreign Exchange Fluctuation
on Consolidated Net Income for the Year Ending March 31, 2015*1
Crude oil price; $1/bbl increase (decrease)*2 +2.5 (-2.5) billion yen
Exchange rate; ¥1 depreciation(appreciation) against the U.S. dollar+0.8 (-0.8) billion yen

Flow effect on net income fromoperating activities*3+2.1 (-2.1) billion yen

Stock effect on net income (valuation for assets -1.3 (+1.3) billion yen
and liabilities denominated in U.S. dollar)*4*1: The sensitivities represent the impact on net income for the year ending March 31,
2015 against $1/bbl increase (decrease) of Brent crude oil price on annual average and¥1 depreciation (appreciation) against the U.S. dollar. These are based on the financial
situation at the beginning of the fiscal year. These are information purpose only andthe actual impact may be subject to change in production volumes, capital expenditures and cost recoveries, and may not be constant, depending on crude oil prices andexchange rates.
*2: This is a sensitivity on net income by fluctuation of crude oil price and is subject to theaverage price of crude oil (Brent) in the fiscal year.
*3: This is a sensitivity on net income from operating activities by fluctuation of the yen
against the U.S. dollar and is subject to the average exchange rate in the fiscal year.
*4: This is the impact of foreign exchange differences for foreign currency-denominatedassets and liabilities, and is affected by the difference between the exchange rate at theend of the fiscal year and the end of the previous fiscal year. In this fiscal year, as foreign
currency-denominated debt is greater than foreign currency-denominated assets due toan increase in foreign currency debt, exchange valuation gains will occur when the yen
is appreciated against foreign currency, while exchange valuation losses will occur when
the yen becomes weaker against foreign currency. In addition, because of the impact ofdeferred tax accounting, when the yen is appreciated against the U.S. dollar to a certain
extent, the above sensitivities may show different trend.

INPEX CORPORATION Annual Report 2014031

Comparison with Global Oil Companies
Oil companies that conduct upstream activities can be divided into three categories: 1 national oil
companies of governments in oil-producing countries that possess oil and natural gas assets,
2m
major international oil companies known as the “oil majors” and 3 companies that specialize iin upstream activities and are second in scale to the oil majors. INPEX is currently positioned
the mid-tier of international oil and gasthat are second to the oil majors.
in th
g E&P companiespj

Reserve Volume Comparison with Global Peers
Our reserve replacement ratio and reservesto-production ratio were superior to thoseof the oil majors and other international oil
and gas E&P companies, and they represent our growth potential.

Reserve Replacement
Ratio (3-year average)

Reserves-to-Production Ratio
370％

17.1 years
13.4 years
11.0 years

Average of majors:
BP, Chevron, ConocoPhillips, ENI, ExxonMobil, TOTAL, Shell
Average of E&P that disclose the data:
Anadarko, Apache, BG, Occidental, Santos, Statoil, Talisman,
Woodside

108％

112％

Oil majors(Average)

International E&P(Average)

Oil major(Average)

INPEXInternational E&P(Average)

Proved Reserves, Net Production Volume and the Market Valueof the Major International Oil and Gas E&P Players
Comparing net production volumes and reserve volume, INPEX is positioned in the
mid-tier of international oil and gas E&P companies that are ranked second to theoil majors. Looking ahead, the Company plans to join the leading group of international oil and gas E&P companies in the early 2020s through a variety of initiatives
including increasing its net production volume and upgrading its reserve volume.

Seeking to establish
a firm position as aninternational oil andgas E&P company
by the early 2020s

Proved reserves and production volume indicated in this chart are from documents disclosed by the major E&P companies infiscal 2013. The size of the circle shows the market value of each company as of March 31, 2014.

1,000

900

Anadarko (US)Apache (US)

600

500

BG (UK)
400

Talisman (CA)

INPEX
INP
PEX

300

Probable reserves to
upgrade to proved
through the shift ofdevelopment

200

100

Woodside (AU)Santos (AU)

0

0.5

1.0

1.5

Proved reserves: 2.53 billion boe

2.0

2.5

INPEX CORPORATION Annual Report 2014

3.0

3.5

4.0

Probable reserves: 1.95 billion boe

Proved and probable reserves (Billion boe)032

Occidental (US)700

409 thousand boed

Net production volume (Thousand boed)

800

To achieve 1 MMboed of net
production by the early 2020s
through medium- to long-term
investment

INPEX

4

Special ReportSpecial Report:
Ichthys LNG Project and Gas Supply Chain

Delivering energy
from the ancient seabed ofAustralia for the future of Japan

Off the shores of Australia, roughly 6,000 km due south of Japan, work
has been progressing on the development of the large-scale Ichthys LNG
Project with the goal of starting production by the end of 2016. Natural
gas fields deep under the seafloor off the shores of Australia lie waiting
to supply Japan with approximately 10% of its annual LNG imports. Construction on the Naoetsu LNG Terminal in Niigata Prefecture has been
completed, the final piece of the supply structure for natural gas comingfrom Australia to Japan.

Ichthysgas-condensate
field

A U S T R A L I A

034

INPEX CORPORATION Annual Report 2014

Ancient Times

Modern Times

Roughly 200 km off the shores of Australia and Western Australia, at depths of
4,000 and 4,500 m, there are two geologic reservoirs of gas. These reservoirsof gas cover approximately 600 square
km, roughly the same area as the 23
wards of Tokyo. One or two hundred million years ago, at the height of the Jurassic period, these geologic stratum wereformed. Over a long period, these massive gas fields gradually came into being
and now lie sleeping under the sea off
the shores of Australia.

In the mid-1980s, INPEX entered
the field of offshore resource
development in Australia, accumulating knowledge, experience and research over the next
decade. In open bidding during
1997, INPEX placed the winningbid for the Ichthys block (WA285-P Block) after confirming
its considerable potential, andobtained operator rights to thearea in August 1998.

• First drilling campaign(2000-2001)• Second drilling campaign(2003-2004)• Appraisal well drilling(2007-2008)
Seismic survey
recording work
(1998, 2001, 2010)

4
Special Report

Ichthys geologic stratum(graphic representation)

Gas was discovered in the Brewster Member 4,000 m undergroundand the Plover formation 4,500 m
underground.
(rendering)

2000 – 2004

2007– 2008

2009– 2011

In 2000 and 2001, INPEX conducted thefirst drilling campaign, drilling three exploratory wells that all confirmed the presenceof gas and condensate. INPEX then conducted three-dimensional seismic surveys.
In the second drilling campaign in 2003
and 2004, three more exploratory wells
were drilled, confirming the existence ofmassive gas and condensate fields under
the seafloor.

In 2007 and 2008, INPEX
drilled two wells to assess
recoverable reserves of gas
and condensate at Ichthys.
INPEX also decided on Darwin as the location to build
the LNG plant.

From 2009 until the final investment decision (FID) was
made in January 2012, the following preparatory development work was undertaken.
• In 2009, front-end engineering and design (FEED) work began.
• From July to September 2010, conducted a public review of theEnvironmental Impact Statement (EIS).
• May 2011, acquired the pipeline license.
• In 2011, obtained environmental approvals from the Northern
Territory Government and the Federal Government.
• Signed LNG sales contracts with eight LNG buyers, finishing
contractual agreements for the purchase of the entire annual
LNG production volume of 8.4 million tons.

INPEX CORPORATION Annual Report 2014035

Development Concept of the Ichthys LNG Project
Offshore Production Facilities
Product from development wells is collected in the subsea production system (SPS) andthen sent to the offshore central processing facility (CPF) through flowlines and flexible
risers. Gas and condensate are separated at the CPF, and the condensate is stored at a
floating production, storage and offloading (FPSO) facility until transfer to a tanker for
shipment. The gas, however, is transferred to an onshore liquefaction plant via a gas
export pipeline (GEP).

Shipment tanker
Floating production, storageand offloading (FPSO) facility

Condensate

Condensate is received from the CPF,
stored (storage capacity: 1 million barrels)and shipped (daily volume: 85,000
barrels at peak). Some natural gas ispressurized and returned to the CPF.

Natural gas(pressurized and returned to CPF)

Production well

Subsea production
system (SPS)

A total of 50 wells will be
drilled into the gas field.

Product

Production manifold

Equipment installed on theseabed that links together
several production wells.

2012

2013

In January 2012, INPEX made a final investment decision(FID) and began development work. In March, INPEX
was granted a production license, and in May, held asteel cutting ceremony
for the onshore gasliquefaction plant in
Darwin. In December,
INPEX signed project
financing arrangements
totaling US$20 billion.

In January, a steel cutting ceremony was held for the offshore central processing
facility (CPF). In February, liability insurance was arranged for related construction
facilities during the construction period. In June, INPEX signed contracts for thebuilding and ownership of LNG carriersand contracts for time charters to transport LNG. A steel cutting ceremony was
also held for the offshore floating production, storage and offloading (FPSO) facility, construction commenced on modules
for the offshore facilities and onshore
gas liquefaction plant, and construction started on bridges and tanks for the
FPSO steel cutting ceremony (June 2013)
onshore facilities.

Ceremony for the FID (January 2012)036

INPEX CORPORATION Annual Report 2014

Onshore Facilities
Onshore facilities comprise the gas liquefaction plant,
storage and product shipment facilities. Plans call forthe construction of the onshore facilities at Blaydin
Point, situated between the city of Darwin and the bay.

Central processing
facility (CPF)

Processes the product received
via the flexible risers from theproduction wells, separating it
into gas and condensate.

Pipes that send product fromthe seafloor to the CPF.

Product

Condensate and LPG is extracted fromnatural gas delivered by pipeline, andthe remaining natural gas is cooled tonegative 162 C and liquefied in twoliquefaction facilities. Cooling and liquefaction of natural gas (turning it into
LNG) reduces the volume to 1/600 theoriginal volume, making transportation more efficient.
Shipments from the onshore gasliquefaction plant will total 8.4 million
tons of LNG annually, 1.6 million tonsof LPG annually and 15,000 barrels ofcondensate daily (at peak).

4
Special Report

Flexible risers

Onshore gasliquefaction plant

Gas Export Pipeline (GEP)The GEP is a 42-inch natural gas pipeline that will run
from the CPF to the onshore gas liquefaction facility in
Darwin. The pipeline is being laid at a maximum depthof 250 m over a total length of 889 km.

Natural gas
Natural gas

Flowlines

Product

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

LNG: 8.4 million tons/year
LPG: 1.6 million tons/year
Condensate: about 100,000 barrels daily (at peak)
CAPEX

US$34 billion

Participatinginterests

INPEX 66.070% (operator)*, TOTAL 30%,
Tokyo Gas 1.575%, Osaka Gas 1.200%,
Chubu Electric Power 0.735%, Toho Gas 0.420%

Schedule

January 2012 final investment decision (FID),
plans to start production by the end of 2016
*Of this figure, 2.625% is being transferred to CPC.

Darwin

Northern
T rritory
Te

Timor Sea

Project Outline
Production
volumeapprox. 889 km

Location of Ichthys gass-co
ondensate fielld• Browse basin on nortthwestern continenttal
shelf offf coast of western Australia
ff• About 200 km
m offff western Australia
Block area
• WA-50-L/51-L block: 1,079 km2• WA-285
5-P
P block: 995 km2

City
y of Darwin(IN
NPEX Daarwin off
f ice)
ff

Watter dep
pt h• Block watter depth: 170­340 m• Water depth of marine production facilities:
about 250 m
10
00 km

200 kmThe Portof Darwin

Wicckham Point(Darwin LNG
G)Blladiin Poiint(Onshore facillity constructio
on site)Middle Arm
Peninsula

INPEX CORPORATION Annual Report 2014

037

2

3

1 4

5

6 7

Work Status in 2014 (as of July 2014)
Projects to advance important work are becoming moretangible in 2014.
In February, full-scale assembly work began on thehull of the floating production, storage and offloading(FPSO) facility, and assembly of the offshore central
processing facility (CPF) began in April. In June, work
progress crossed the 50% mark, less than two years andsix months after the final investment decision in January
2012. At the end of June, the gas export pipeline (GEP)
laying started. In July, development work progressedwith the launch of the FPSO hull and the start of themodule arrival for the onshore gas liquefaction plant.

038

INPEX CORPORATION Annual Report 2014

Onshore facilities

Completed Accommodation Village
for construction workers
Completed dredging of Darwin bay
Modules started to arrive foronshore gas liquefaction plant
Other

Work progress at 50% (June)

8

9 10

4
Special Report

11

12

13

Offshore production facilities

Started work assembling FPSO hullStarted work assembling CPF
To start drilling production wells
Gas export pipeline

Completed coating of steel pipes
Started laying gas export pipeline

14

1: Aerial photo of onshore gas liquefaction plant under construction in Darwin
2: Cutting-edge Castrone pipeline laying ship for deep-sea work; able to lay subsea
42-inch diameter pipelines
3: ENSCO 5006 drilling rig for production wells; plans call for drilling of production
wells to start in 2014
4: LNG tank at an onshore gas liquefaction plant under construction
5: FPSO assembly construction
6: Gas export pipeline laying work in progress in the Darwin coastal waters
7: FPSO hull launch
8: Plant module assembly work in progress at an onshore gas liquefaction plant
9: Landing facilities under construction for onshore gas liquefaction plant
10: Jetty for product shipment under construction at an onshore gas liquefaction plant
11: Accommodation Village for up to 3,500 construction workers for onshore gas liquefaction plant
12: Subsea production system under construction in the United Kingdom.
13: CPF under construction; Ichthys CPF measures 150 m by 110 m, with a total displacement of 140,000 tons, making it one of the largest in the world
14: Hull of the CPF

INPEX CORPORATION Annual Report 2014039

Procurement, construction anddevelopment work ramping up forstart of production by the end of 2016

Ratio of Lump-Sum Contracts:
Approximately 75%

Substantial Condensate and LPG

Approximately 75% of the amounts contracted with
the EPC contractors are lump-sum contracts, which
are serving to reduce the risk of cost overruns.

In addition to the 8.4 million tons of LNG per year, theproduction volume of the project calls for a maximumof 100,000 barrels of condensate a day and 1.6 million
tons of LPG per year.

Cooperation with
Oil Major

Features and strengthsof the Ichthys project

Development work is being advancedwith oil major TOTAL, which has a vast
amount of experience in LNG projects.

Painstaking Pre-Development
Preparation
Having extended the front-end engineering anddesign (FEED) activities by one year, sufficientengineering work has been undertaken andraised the accuracy of the cost estimates.

Sales of Entire LNG Production
Volume Completed
The signing of sales and purchase agreements
covering the entire production volume was completed
before the final investment decision (FID).

Secure Funding
Contracts with Reliable
EPC Contractors

In December 2012, the Company
signed project financing arrangements for US$20 billion,
thereby concluding its funding.

The Company secured highly reliable EPC contractors with track records in LNG projects.

Onshore gas liquefaction plant under construction

Completed onshore gas liquefaction plant (rendering)2015 – 2016 Year-End(plant module construction, infrastructuredevelopment and facility construction atplant site, etc.)

Construction and equipment
installation of offshore facilities(CPF and FPSO construction,
gas export pipeline laying, etc.)

Plant construction
with module andother installation

Connection to
offshore facilities

Production well drilling

040

INPEX CORPORATION Annual Report 2014

Transport and saleof productConstruction andinfrastructure development

Start of production

Major Work Flow Until Start of Production

Commissioning

Construction and equipment installation
will continue at both offshore and onshore
facilities. Modules will then be installed atonshore facilities and connected to offshore facilities, followed by trial production
operations. After production commences,
LNG, LPG and condensate products will beshipped and sold to customers.

LNG produced at Ichthys (INPEX portion) is
transported from Australia to Japan via
the Naoetsu LNG Terminal
Naoetsu LNG
Terminal

As an LNG carrier for the Naoetsu LNG
Terminal, the Sayaendo-type LNG carrier
is currently being built with a tank capacityof 155,300 m3.

A

J

B
I

In February 2013, INPEX completed insurance
arrangements related to the construction periodsof the project’s onshore and offshore facilities.

Transportation days:
one-way is about 10 days
(Reference: It takes about
30 days from the U.S. Gulf
of Mexico to Japan)

Addressing risks and making
steady progress on projects(8.4 million
tons/year)
H
G F

C
D

To be delivered
to Japan(approx. 70% of
the total)

4ESpecial Report

Insurance Arrangements for
Facilities during Construction
Period Completed

Transportation distance:
about 7,000 km

LNG buyers(Million tons/year)

A Tokyo Electric Power
1.05

F Kyushu Electric Power
0.30

B Tokyo Gas
1.05

G Toho Gas
0.28

C Kansai Electric Power
0.80

H INPEX0.90

D Osaka Gas
0.80

I TOTAL (France)
0.90

E Chubu Electric Power
0.49

J CPC (Taiwan)
1.75

Upside potential insurrounding areas
The 11 exploration blocks surrounding Ichthys could leadto greater value in the future for the Ichthys LNG Project.

Ichthys LNG
Terminal
Route from Australia to Japan (Naoetsu LNG Terminal) (rendering)

many people are engaged
How do you go about managing the
Q How
in the framework for advancing Q operations of each base, which span
the development work?

Ichthys

Q&A

A

Seiya Ito

Director, Managing Executive Officer,
Senior Vice President of Ichthys Project Division

Excluding the EPC contractors, there
are 1,800 people on the Ichthys LNG
Project overall, of whom 40 are seconded from the oil major TOTAL (as ofJune 30, 2014). It is expected that thiswill increase up to a maximum of around2,000 for the overall project.

the world?

A

For the Ichthys LNG Project, we have assigned
a person in charge at each base. In addition tocarrying out detailed operations management,
we ascertain and manage the overall project
operations from the Perth office on the basis ofregular operational reports from each base. In
addition, a Technical Directorate and a Project
Coordination control overall operations in across-organizational manner.

INPEX CORPORATION Annual Report 2014041

Naoetsu LNG Terminal andNatural Gas Pipeline Network
in Japan

Outline of Naoetsu LNG Terminal Facilities
Unloading arms (wharf)

Two LNG tanks

Unloading equipment for moving LNG from Massive LNG storage tanks about 80 m in diamLNG carriers to onshore facilities.
eter and 50 m in height.

Full view of the Naoetsu LNG Terminal

Naoetsu LNG Terminal
INPEX’s portion of the Ichthys LNG Project will mostly
be received at the Naoetsu LNG Terminal. Construction
on the Naoetsu LNG Terminal began in July 2009, andit commenced operations in December 2013. Although
six months or so have passed since starting operations,the terminal has operated stably without any major incidents. Up until LNG is received from the Ichthys LNG
Project, INPEX will purchase a total of roughly one million tons of LNG, the equivalent of 17 LNG tanker vessels, from Chubu Electric Power Co., Ltd., and supply
natural gas to Japan.

042

INPEX CORPORATION Annual Report 2014

RGB (return gas blowers)

ORV (open rack vaporizer)

BOG compressors

Equipment that returns boil-off gas (BOG)
to LNG carriers, to modify pressure balance.

Equipment that warms LNG up to a natural
gas state. Seawater is used as a heating
medium.

Equipment that compresses
BOG from LNG tanks to makeraw materials.

LNG from overseas(Ichthys, etc.)

Naoetsu LNG
Terminal

Minami-Nagaoka
Gas Field, etc.

Domestic
Natural Gas

Domestic Natural Gas /Regasified LNG

Natural gas
transport pipelines

4
Special Report

LPG tanks
Storage tanks for LPG used to modify the calorific value ofnatural gas.

Location

12 Yachiho, Jyoetsu,
Niigata Prefecture

Area

Approx. 25 ha

Gas production 7.5 million m³/d
capacity(LNG 240 tons/hour)
LNG tanks
LNG receiving
capacity

180 thousand kl

Building a Gas Supply Chain (rendering)2(upgrade possible)

approx.
1.5 million tons/year

Central Control RoomAll equipment and operations within the terminal
facility are monitored and controlled from a central
location.

Building a Gas Supply Chain
Since the 1960s, INPEX has maintained apipeline network for the transport of naturalgas. This pipeline network now extends a
total of 1,400 km, crossing seven prefecturesand one metropolis in the Kanto-Koshinetsu
region.
To address domestic demand for natural gas, which is likely to grow strongly,
INPEX is building out a gas supply chainthat will link together the following:
1 Natural gas received at the Naoetsu
LNG Terminal, etc.;

2 Natural gas mainly in Niigata Prefecture;and3 Natural gas transport pipelines.

INPEX will be the first company in Japan
to be involved in every facet of natural gas
operations from upstream to downstream
activities including development, production, liquefaction, transportation, gasification and supply, as well as the ownershipand operation of its own overseas gas fields.
While building a gas supply chain, INPEX
will work to expand its natural gas businessfurther over a broader region.

INPEX CORPORATION Annual Report 2014043

Successful start-up of theIchthys LNG Projo ect and othersojBecome a top-classinternational oil
and gas E&P
company after
the oil majors

Establishment of our
natural gas supply chain
with the Naoetsu LNG Te
T rminal anda domestic natural gas pipeline network

Future Growth
The Ichthys LNG Project will produce natural gas fromunder the sea of ancient Australia. INPEX is also building
a gas supply chain for delivering natural gas throughout
Japan. We are taking solid steps toward our Medium- to
Long-Term Vision that targets net production volume ofone million boed and domestic gas supply volume of 2.5
billion m3 in the early 2020s.
The launch of this large-scale project will propel INPEX
into the top ranks of the internationally competitive oil andgas E&P companies. By building a natural gas supply chain
using gas infrastructure in Japan, INPEX is evolving into an
integrated energy company that reliably supplies energy.

044

INPEX CORPORATION Annual Report 2014

Long-Term Outlook for Net Production Volume andDomestic Gas Supply Volume
Net production volume of one million boed
Domestic gas supply volume (billion m3)

1.63

1.65

1.72

1.76

1.75

1.80
Domestic gas supply volume

Newprojects

2.5 billion m3
Net production volume (thousand boed)

Existing
projects

405

405

423

426

408

409

411

421

472

Daily
volumeabout
700,000
barrels

2009

2010

2011

2012

2013

2014

2015

2016

2017

Early 2020s

5

Project Overview

Segment Overview

Asia & Oceania

Eurasia

INPEX’s core region. INPEX has its largest number of projects and owns its
largest reserves in this region. INPEX isproceeding with large-scale LNG projects, including Ichthys and Abadi.

INPEX owns the large-scale ACG
and Kashagan oil projects and has
acquired a number of exploration
projects in recent years.

p. 48

p. 54

5

1,245

1,296

7

Number of countries

▶

1,551

▶

Other project
In production

1

13

Under exploration

21

Number of projects
Under development

42

3

3

5

3

191

190

188

2014

210

2013

207

2012

■Net production

211

2011

167

2010

201

2009

214

(million boe)

195

■Proved reserves

185

Production/Reserves

179

367

466

530

Discovered/Preparation for development

7046

INPEX CORPORATION Annual Report 2014

28

25

25

26

84,32547,07685,541
41,752

96,34142,601

2013

2014

68,31936,461

2012

27

2014

73,57439,769

2013

25

2012

2010

2009

2010

2011

485,069

485,275

2012

2011

2009

73,68834,465
2011

299,599

483,187

406,828

2010

264,8492009

281,623■Operating income (¥ million)

235,814

191,070■Net sales (¥ million)

352,383

Net sales/
Operating income

285,408435,824(thousand boed)

2013

2014

Middle East &Africa▶

p. 56

A substantial contribution is fromthe ADMA Block in the United
Arab Emirates. Oil projects are themainstay.

AmericasJapan

INPEX focuses on the potential of
shale gas in Canada. The Lucius projectin the U.S. Gulf of Mexico is planned
to start production in the latter halfof 2014.

INPEX engages in natural gas production
and sales via, for example, the MinamiNagaoka Gas Field in Niigata Prefecture,
its pipeline network, and the Naoetsu
LNG Terminal. INPEX also focuses on
unconventional types of energy, such as
geothermal development.

7

1

▶

7

1

4

10

2

6

857

2

▶

p. 62

Minami-Nagaoka
Gas Field

18

Naoetsu LNG
Terminal

11

Natural gas
pipeline network(Approx. 1,400 km)
etc.

1

505

518

583

636

682

1

p. 58

174

25

28

29

27

93,95932,555

130

138

30

2014

93,42333,883

117

32

2013

2009

2010

2011

2012

2013

2014

2011

126

137

65
20

68

2012

11,435(7,646)

2011

17

36

2010

5,945
(6,089)

30

18

2010

21

40

2009

2009

2013

5,525
(5,518)

2013

2014

2012

(3,035)357,3432012

21

621,513421,184

354,136

120,268

118,937

113,662

104,525

22,771

12,673

1,028

28,5682014

24,607

2011

25,9592010

2010

243,113205,572

303,819

350,735

463,151
318,691
2009

2009

16,692

2014

17
38

168

2013

10,079(1,340)158

2012

520,835

2011

155

135

2010

500,033

132

2009

Project Overview

146

5

2011

2012

2013

2014

INPEX CORPORATION Annual Report 2014047

Project Overview by Region

Asia & Oceania
INPEX is engaged in activities in the Offshore Mahakam Block in Indonesia, which is contributing significantly to earnings, and the large-scale Ichthys and Abadi LNG projects, where development and preparation for development are ongoing. In the Asia and Oceania region, theCompany is also actively advancing more than 20 exploration projects with growth potential.

048

INPEX CORPORATION Annual Report 2014

1 Offshore Mahakam Block and Attaka Unit
INPEX entered into a production sharing
contract (PSC) with the Indonesian Government in October 1966, at that timeacquiring a 100% interest in the Offshore
Mahakam Block. The Attaka Unit wasestablished in April 1970 through theunitization of part of the adjacent blocks
owned by INPEX and Unocal (now Chevron), with each company taking a 50%
interest. Production of crude oil and natural gas has continued since 1972. INPEX
farmed out 50% of its interest in the
Offshore Mahakam Block to CFP (nowTOTAL) in July 1970. This venture subsequently made a series of discoveries in
the Bekapai (oil), Handil (oil), Tambora (oiland gas), Tunu (gas), Peciko (gas), Sisi andNubi (gas), as well as the South Mahakam(gas), fields, each of 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 in Japanby tanker from the Santan and Senipah
terminals. Most of the natural gas is supplied to the Bontang LNG Plant, and thenshipped as LNG to customers in Japanand elsewhere.
The Offshore Mahakam Block has
begun to see output decline after morethan 40 years of production. In 2012,
impediments at production wells led to alarge drop in output, in addition to natural attrition. Thereafter, successful steps
were taken to control the decline in production. In addition to measures aimed
at counteracting sand problems, INPEX
accelerated the pace at which it undertook development well drilling. Production volumes have remained stable since
2013.
The PSC for the Offshore Mahakam
Block expires at the end of 2017.
Together with TOTAL (the operator), we
have been engaged in negotiations with
the Indonesian authorities to secure acontract extension beyond 2018.

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2013)

Venture company(established)

Interest owned(*Operator)

Offshore Mahakam

Crude oil: 72 Mbbl/d
In production Natural gas: 1,391 MMcf/d
LPG: 12 Mbbl/d

INPEX CORPORATION(February 21, 1966)

INPEX 50% TOTAL* 50%

Attaka Unit

Bontang LNG Plant
Santan Terminal

INPEX 50% Chevron* 50%

Attaka Unit
Attaka Field

Badak Field
Nilam Field

Tunu Field

Tambora Field
Sisi Field

Handil Field

Nubi Field

Senipah Terminal

5

Bekapai Field

Project Overview

Balikpapan

Peciko Field

Offshore
Mahakam BlockSouth Mahakam Field

Gas field

Oil field

Oil and gas field
1

2
1, 2: Shipping terminal

INPEX CORPORATION Annual Report 2014049

2 South Natuna Sea Block B
In July 1977, INPEX acquired a 17.5%
interest in the South Natuna Sea Block
B in Indonesia. Later, in January 1994,
INPEX increased its total interest in theblock to 35% with the purchase of anadditional interest. Crude oil production
began in 1979, and supplies of natural
gas to Singapore via Indonesia’s firstinternational pipeline commenced in
2001. Additional deliveries of natural gas
from this pipeline to Malaysia started in
2002. These supply milestones contributed to the extension of the PSC covering the block until 2028.
Production operations in the Belanak
oil and gas field, which is part of SouthNatuna, utilize a world-class floating production, storage and offloading (FPSO)
system. Production of crude oil and condensate began in December 2004, with
LPG production commencing in April
2007. After 2006 at this same block, production began at the Hiu Gas Kerisi Oiland Gas, North Belut Gas and Bawal Gas
fields. Most recently, production commenced at the South Belut Gas Field in
April 2014.
Contract area
(block)Project status(production on the basis of all fields andaverage rate of FY2013)

South Natuna
Sea B

In production

Crude oil: 31 Mbbl/dNatural gas: 333 MMcf/d
LPG: 12 Mbbl/dNatuna Sea

North Belut
BelidaBawal

KerisiSouth Natuna Sea
Block B

South BelutNatuna Island

Hiu
Sembilang

BelanakGas field

Oil field

Oil and gas field

Venture company(established)

Interest owned(*Operator)

INPEX Natuna, Ltd.
(September 1, 1978)

INPEX Natuna 35%
ConocoPhillips* 40%
Chevron 25%

FPSO vessel

3 Sebuku Block Ruby Gas Field
In September 2010, INPEX obtained a
15% interest in the Sebuku Block off theshore of South Makassar, Indonesia. Thereafter, work began to develop the Ruby
Gas Field in the block, and productionof 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 then mainly sent via inland pipeline to a
fertilizer plant in East Kalimantan.

050

Bontang LNG Plant
Santan Terminal

Fertilizer plant
Attaka Field

Tunu Field

Senipah Terminal
Balikpapan
Kalimantan

Peciko Field
South Mahakam Field
Makassar Strait

Sebuku BlockGas field
Oil field

Sulawesi

Ruby Gas Field

Contract area
(block)Project status(production on the basis of all fields andaverage rate of FY2013)

Venture company(established)

Interest owned(*Operator)

SebukuIn production (Natural gas: 35 MMcf/d)

INPEX South
Makassar, Ltd.

INPEX South Makassar 15％
PEARL OIL (Sebuku) Ltd.* 70%
TOTAL 15%

INPEX CORPORATION Annual Report 2014

Offshore production facility in the Ruby Gas Field

4 Abadi LNG Project
INPEX acquired a 100% interest in the
Masela Block in November 1998 throughan open bid conducted by the Indonesian Government. INPEX proceeded with
exploratory activity as the operator, andthe first exploratory well drilled in 2000
discovered the Abadi Gas Field. Subsequently, six appraisal wells were drilled(two in 2002 and four in 2007–2008), allof which confirmed the presence of gas
and condensate reservoirs.
The Indonesian Government granted
its approval to the plan of development
for Stage-I (POD-1) for a “floating LNG”
with a capacity of 2.5 million tons per yearof LNG in December 2010. Thereafter,

INPEX undertook FEED works for subsea production facilities from November
2012 to January 2014. In addition, INPEX
continues to engage in FLNG FEED work,
which began from January 2013. After
FEED work is completed, we will turn ourattention to contractor selection and LNG
marketing in preparation for making a final
investment decision.
We continue to study the feasibilityof developing the entire field based on
proven reserves of gas. Aiming to increase
the amount of exploitable reserves, INPEX
undertook the drilling of three additional
appraisal wells and one exploratory wellfrom June 2013 to June 2014.

Tanimbar Island
INDONESIA

Abadi Gas Field Arafura Sea
AUSTRALIA
Timor Sea

DarwinContract area (block)

Project status

Venture company (established)

Interest owned (*Operator)

MaselaPreparation for development

INPEX Masela, Ltd.
(December 2, 1998)

INPEX Masela* 65% Shell 35％

Gas field

5
Project Overview

1

3

2

4
1, 3: Drillship for Abadi LNG Project 2: Production test 4: Floating LNG (rendering)

INPEX CORPORATION Annual Report 2014051

5 Prelude FLNG Project (WA-44-L Block)
In June 2012, we acquired from Shell a
17.5% interest in the Prelude FLNG Project, which is located in WA-44-L, approximately 475 km north-northeast of Broome,
off the coast of Western Australia. A production, liquefaction and shipment project using FLNG, the Prelude FLNG Project

consists of the Prelude and Concerto gas
fields and will produce approximately 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, which willbe the world’s first FLNG project, in May
2011. Development of the Prelude FLNG
Project is currently under way, with thestart of production targeted at around 10
years from when the Prelude Gas Field
was first discovered in early 2007.
Through its participation as a project partner in the Prelude FLNG Project,
INPEX is gaining experience and knowledge about FLNG, which it expects toleverage in the Abadi LNG Project inIndonesia.
Timor Sea

Concerto Gas Field

WA-44-L

Prelude Gas Field

Ichthys Gas-Condensate Field

AUSTRALIA

Gas field

FLNG vessel

Contract area (block)WA-44-L

Project status

Venture company (established)

Interest owned (*Operator)

Under development

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

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

6 Berau Block Tangguh LNG ProjectMI Berau B.V., jointly established by INPEX
and Mitsubishi Corporation, acquired aninterest in the Berau Block in October
2001. In October 2007, MI Berau Japan
Ltd., a joint venture with Mitsubishi Corporation, acquired a stake in KG Berau
Petroleum Ltd., effectively increasing theCompany’s interest to around 7.79% in
the Tangguh LNG Project.
In March 2005, the Indonesian Government approved an extension of the
production sharing contract (PSC) andproject development plans for the Tangguh LNG Project through 2035. Development work commenced thereafter,

and the first shipments of LNG began in
July 2009.

Papua Province (Indonesia)

Kaimana

Berau BlockGas field
Shipping facility

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2013)

Venture company(established)Berau
In production
Tangguh Unit

052

Crude oil: 6 Mbbl/dNatural gas: 986 MMcf/d

INPEX CORPORATION Annual Report 2014

MI Berau B.V.
(August 14, 2001)

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

7 Van Gogh Oil Field, Ravensworth Oil Field and Others

Van Gogh FPSOINPEX acquired interests in offshore
Western Australia WA-155-P (Part I) in
July 1999, after which the Van Gogh andRavensworth oil fields were discovered.
The Australian Government granted
production licenses for the WA-35-L andWA-43-L blocks, at which oil productioncommenced in February and August of
2010, respectively. The developmentof the Coniston Unit, which saddles
WA-35-L and WA-55-L, was started in
December 2011, and work targeting thecommencement of crude oil productionin early 2015 is under way.

Indian Ocean

WA-35-L & WA-55-L
Barrow Island
Unitization(Coniston Unit)
Van Gogh Oil Field

WA-35-L
WA-155-P (Part II)
WA-155-P (Part I)
Ravensworth Oil Field

ExmouthProject status
Venture(production on the basis of allcompany
fields and average rate of FY2013) (established)

Interest owned(*Operator)

WA-35-L (Van Gogh Oil Field)

In production (Crude oil: 9 Mbbl/d)

INPEX Alpha 47.499% Apache* 52.501%

WA-43-L (Ravensworth Oil Field)

In production (Crude oil: 10 Mbbl/d)

WA-35-L & WA-55-L
Unitization area (Coniston Unit)

Under development

WA-35-L (excluding Van Gogh Oil Field)
WA-155-P (Part Ⅱ)

Under exploration

WA-155-P (Part Ⅰ)

AUSTRALIA

Oil field

Contract area
(block)INPEXAlpha, Ltd.
(February 17,
1989)

Onslow

WA-43-L

INPEX Alpha 28.5% BHPBP* 39.999% Apache 31.501%
INPEX Alpha 47.499% Apache* 52.501%
INPEX Alpha 47.499% Apache* 52.501%
INPEX Alpha 18.670% Apache* 40.665% OMV 27.110% JX 7.000% Tap 6.555%
INPEX Alpha 28.5% Apache 71.5%

8 Bayu-Undan Project (JPDA03-12 Block) and Kitan Oil Field (JPDA06-105 Block)

EAST TIMOR

Abadi Gas Field

The presence of oil was confirmed
through exploration drilling of the Kitan-1
and Kitan-2 wells in March 2008 in the
JPDA06-105 contract area, which INPEX
acquired in January 1992. Thereafter, weContract area
(block)obtained approval for the final development plan from the Timor Sea JPDA
authorities in April 2010. After development work, production at the Kitan Oil
Field commenced in October 2011.

Project status
Venture company(production on the basis of all(established)fields and average rate of FY2013)

Bayu-Undan
Unit

JPDA06-105
In production(Kitan Oil Field) (Crude oil: 12 Mbbl/d)Interest owned(*Operator)
INPEX Sahul 19.2458049%
ConocoPhillips* 61.3114766%
Santos 19.4427185%

JPDA03-12
In production
Crude oil: 36 Mbbl/dNatural gas: 572 MMcf/d
LPG: 21 Mbbl/d5
Project Overview

In April 1993, INPEX acquired an interestin JPDA03-12, a contract area located in
the Timor Sea JPDA, which is jointly managed by Australia and East Timor. Exploration within this contract area resulted
in the discovery of oil and gas fields. Of
these, studies revealed that the Undan
structure and the Bayu structure in theadjacent JPDA03-13 contract area were asingle structure. The interest holders unitized both contract areas in 1999, allowing joint development of the Bayu-Undan
Gas-Condensate Field to proceed. The
commercial production and shipment ofcondensate and LPG started in 2004, and
LNG in February 2006.

INPEX Sahul, Ltd.
(March 30, 1993)

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

INPEX Timor Sea, Ltd. INPEX Timor Sea 35%(November 25, 1991) Eni* 40% Talisman 25%

INDONESIAJPDA06-105 (Kitan Oil Field)
Timor Sea
Joint Petroleum Development Area

Darwin Gas Pipeline
Bayu-Undan Gas-Condensate Field
DarwinAUSTRALIA

Gas field

Oil field
Darwin LNG

INPEX CORPORATION Annual Report 2014053

Eurasia
The Company’s activities in this region revolve mainly around the ACG projects in Azerbaijan
and the Kashagan project in Kazakhstan, large-scale oil projects. The Company has been
aggressively exploring for resources with the acquisition of exploration projects near Shetland Island in the United Kingdom, Greenland and the Far East region of Russia.

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 theWest Block is about 1,275 km2 in area (fora 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, the Kashagan Oil Field was confirmed in 2000 andcommercial discoveries were announced
in 2002. After development work, theKashagan Oil Field began producing

crude oil in September 2013, but production was suspended due to gas leaks
from the pipeline.
Besides the Kashagan field, hydrocarbon reserves were also confirmed in fourother structures: Kalamkas, Aktote, Kairan

and Kashagan Southwest. Appraisal ofthese structures is continuing in parallelwith the development of the main Kashagan field with a view to expanding thetotal production of the contract area.

Onshore facility

054

Contract area (block)

Project status

Venture company (established)

Interest owned

Offshore
North Caspian Sea

Production undersuspension

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%

INPEX CORPORATION Annual Report 2014

2 ACG Oil Fields
INPEX acquired an interest of the AzeriChirag-Gunashli (ACG) Oil Fields ina region of the south Caspian Sea in
Azerbaijan in April 2003. At the ACG
Oil Fields, oil is being produced at the
Chirag Field, the Central Azeri Field,

the West Azeri Field, the East Azeri Field
and the Deepwater Gunashli Field. Additional development work on the Chirag
Oil Project since 2010 led to the start ofproduction of crude oil in January 2014.

Contract area
(block)Project status(production on
the basis of all fields
and average rate of FY2013)

Venture company(established)

Interest owned(*Operator)

ACG(Azeri, Chirag,
Gunashli)

In production(Crude oil: 651 Mbbl/d)

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

INPEX Southwest Caspian Sea 10.96%
BP* 35.78% Chevron 11.27%
SOCAR 11.65% Statoil 8.56%
ExxonMobil 8.00% TPAO 6.75%
Itochu 4.30% ONGC 2.72%

Marine production facilities

3 BTC Pipeline Project
The 1,770-km BTC pipeline stretches from
Baku in Azerbaijan on the coast of the Caspian Sea to Ceyhan in Turkey. Full-scale
operation commenced in June 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 2.5% BP* 30.1%
Azerbaijan (BTC) Limited 25% Chevron 8.9% Statoil 8.71%
TPAO 6.53% Eni 5% TOTAL 5% Itochu 3.4%
ConocoPhillips 2.5% ONGC 2.36%

5
Project Overview

Focus in 2014
KAZAKHSTAN

AtyrauRUSSIA

Offshore
North Caspian Sea
Contract Area
Black Sea
GEORGIA

Tbilisi

Caspian Sea

Baku
ARMENIA AZERBAIJAN

TURKEYBTC Pipeline

Participation in Offshore Explorationin Greenland Sea
INPEX won exploration licenses for the exploration blocks
located in the northeastern part of offshore Greenland,
jointly with Chevron and Shell. These blocks are a frontier
region where little exploratory drilling for crude oil andnatural gas has taken place yet, drawing the attention of
the worldwide oil development industry here in recent
years. We will survey the area through exploratory work
to discover oil and natural gas fields.

ACG Oil Fields

Block 9CeyhanGreenland
Mediterranean
Sea

SYRIA
IRAN
IRAQ

Block 14
Oil field

INPEX CORPORATION Annual Report 2014055

Middle East & Africa
In the Middle East, the mainstay ADMA Block in Abu Dhabi in the United Arab Emirates
contributes substantially, accounting for more than half of net production volume. In Africa,
production volumes from Offshore Angola Block 14, acquired during the year ended March
31, 2013, are also contributing to net production volume.

Focus in 2014
Contract Extension for Upper Zakum Oil Field
and Improved Financial Conditions
The concession contract for the Upper Zakum Oil Fieldin the Abu Dhabi Sea Block of the United Arab Emirates,in which INPEX is a participant, has been extended by 15
years or more to the end of 2041. In addition, financial
conditions were improved.
The ADMA Block (Upper Zakum Oil Field)

056

INPEX CORPORATION Annual Report 2014

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 by Japan National Oil Corporation (at that 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 five fields in the block.
In addition, a number of development
projects are under way to maintain andexpand oil output, such as redevelopmentof the Upper Zakum Oil Field involving theuse of artificial islands, as well as Phase 1

Project status

Venture company (established)

Das
IslandNasr Field
Umm Shaif Field
Upper Zakum/
Lower Zakum
Field

Zirku Island

Umm Al-Dalkh Field
Umm Lulu Field

U.A.E.

Abu Dhabi

Oil field
Oil field underdevelopment

Subsea pipeline

JODCO 12% ADNOC 60% BP 14.67% TOTAL 13.33%
In production

Umm Al-Dalkh Field

Satah Field

Interest owned

Umm Shaif, Lower Zakum Field
Upper Zakum Field

development and other work, with theaim of engaging in early production at the
Umm Lulu and Nasr oil fields.

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

Satah Field

JODCO 12% ADNOC 60% ExxonMobil 28%
JODCO 12% ADNOC 88%
JODCO 40% ADNOC 60%

Nasr Field, Umm Lulu Field

Under development

JODCO 12% ADNOC 60% BP 14.67% TOTAL 13.33%

2 Offshore Angola Block 14

Offshore Angola
Block 14The State ofCabindaCONGOANGOLA

undeveloped fields. In this manner, steps
are being taken to pursue exploration
potential within the block.

5
Project Overview

Participating through a joint venture company with TOTAL S.A., INPEX acquired a
9.99% indirect interest in the oil producing Angola Block 14 in February 2013.
Block 14 is located approximately 100
km offshore from Cabinda, Angola. It isan oil-producing block that includes discovered undeveloped fields. Crude oil
is currently being produced from threedevelopment areas. At the same time,energies are being channeled toward
the development of certain discovered

CONGO
Atlantic Ocean

Production facility

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2013)

Venture company(established)

Interest owned(*Operator)

Offshore Angola Block 14

In production (Crude oil: 131 Mbbl/d)Angola Block 14 B.V.
(April 19, 2012)

Angola Block 14 B.V. 20% (including 9.99% of
INPEX’s interest) Chevron* 31%
Sonangol 20% Eni 20% Galp 9%3 Offshore D.R. Congo Block
INPEX has participated in oil exploration and development projects offshore
the Democratic Republic of the Congo(DRC) since July 1970. Oil productioncommenced in 1975. The contract covering this block was extended until 2023 in
May 1995.

MibaleMotobaLukamiMoko

MwambeMisatoLibwa
The Democratic
Republic of the Congo

MuandaTshialaContract
area (block)

Project status
Venture company(production on the basis of all(established)fields and average rate of FY2013)

Offshore D.R. In production
Congo Block (Crude oil: 13 Mbbl/d)

Teikoku Oil (D.R. Congo)
Co., Ltd. (August 1, 1970)

Interest owned(*Operator)
Teikoku Oil (D.R. Congo) 32.28%
Perenco* 50% Chevron 17.72%

BananaGCO
Soyo
Atlantic Ocean

INPEX CORPORATION Annual Report 2014057

Americas
In Canada, INPEX participates in shale gas projects and oil sand projects. The Company isalso engaged in a major deepwater exploration project in the Gulf of Mexico (Lucius) that isslated to commence production in the latter half of 2014. The Company has a track recordthat spans more than 20 years as a development and production operator in Venezuela.
Moreover, INPEX has been advancing offshore oil field projects in Brazil.

058

INPEX CORPORATION Annual Report 2014

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 basins in
British Columbia, Canada, from Nexen Inc.
The shale gas projects in the Horn
River, Cordova and Liard basins containdiscovered and undeveloped shale gas.
We will proceed with full-scale development and are aiming for combined production at the Horn River and Cordova
projects of a maximum of 1,250 million
cubic feet per day (approximately 200
thousand boed).
The shale gas that is produced will
be converted into LNG with studies
under way to consider commercialization through exports from the Canadianwest coast. In November 2013, INPEX
and its project partners, Nexen Energy

and its project partners will continue toexplore the feasibility of a shale gas LNG
business fully aligned with the Government of British Columbia, local communities and other stakeholders.

ULC and JGC Corporation, were jointly
awarded the sole proponent right at
Grassy Point, British Columbia, Canada,by the Government of British Columbia
for the purpose of examining the viability of constructing an LNG plant. INPEX
Yukon Territories

Northwest Territories
British Columbia

Acquired area
Highway
Major pipelines

Cordova Area

Horn River Area

Liard Area

Contract area
(block)Project status

Venture company(established)

Interest owned(*Operator)

Horn River,
Cordova and Liard areas

In production (partly)

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

INPEX Gas British Columbia 40%
NEXEN* 60%

5Project Overview

1

2

3
1: Completion 2: Drilling site 3: Hydraulic fracturing site

INPEX CORPORATION Annual Report 2014059

2 Joslyn Oil Sands Project
In November 2007, INPEX acquired a
10% interest in the Joslyn Oil Sands
Upstream Project in Alberta, Canada.
Stage 1 development plans call for daily
Contract area
(block)OSL 7280060T24
OSL 7405070799
OSL 7404110452

Project status
Discovered/Preparation fordevelopment

production of 157 thousand barrels ofbitumen using open-cut mining. Currently, we are taking preliminary steps toconsider a development plan.

Venture company(established)

Interest owned(*Operator)

INPEX Canada, Ltd.
(November 28, 2006)

INPEX Canada 10%
TOTAL* 38.25％
Suncor 36.75% Occidental 15%

OSL7405070799
OSL 7280060T24

OSL
7404110452

Athabasca
River

Joslyn Oil Sands
Lease Block
Province of Alberta
Fort McMurray

3 U.S. Gulf of Mexico Projects
INPEX has participated in oil and gas
development projects in the shallow
waters of the U.S. Gulf of Mexico sinceApril 2006, producing crude oil from various blocks.
We participated in deepwater exploration blocks of Walker Ridge 95/96/139
in the Gulf of Mexico in February 2011. In
exploratory work since then, the Yucatan
North-1 exploratory well was drilled andencountered an oil bearing zone withapproximately 36 m net pay. We are anaContract area
(block)Ship Shoal Block 72
West Cameron Blocks 401/402
Main Pass Block 118
Louisiana Block SL20183
Blocks 874/875/918/919 (Lucius Oil Field)
Walker Ridge
Blocks 95/96/139

アメリカ合衆国

lyzing data obtained thus far and are working with our partners on more exploration
and appraisal activities.
In August 2012, INPEX acquired a
7.2% interest from Anadarko Petroleum
Corporation in the Lucius Oil Field in the
deepwater of the Gulf of Mexico. Development of the Lucius Oil Field has been
under way with the aim of commencing
production of crude oil and natural gas in
the latter half of 2014.

Project status(production on the basis of all
fields and average rate of FY2013)
In production
Crude oil: 0.5 Mbbl/dNatural gas: 7 MMcf/d

Venture company(established)

Main Pass
Block 118

MEXICO

Ship Shoal
Block 72
Walker Ridge
95/96/139

Blocks 874/875/918/919(Lucius Oil Field)
West Cameron Blocks 401/402

Interest owned(*Operator)
Teikoku Oil (North America) 25% PetroQuest* 42.5% Other 32.5%

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

Teikoku Oil (North America) 16.66667% Fieldwood* 83.33333%

INPEX Gulf of
Mexico Co., Ltd.
(April 28, 2010)

INPEX Gulf of Mexico 15% Shell* 70% Other 15%

Under development
Under exploration

Louisiana Block SL20183
Cuervito/
Fronterizo Blocks

Teikoku Oil (North America) 25% PetroQuest* 38% Other 37%
Teikoku Oil (North America) 25％ PetroQuest* 55% Other 20％
Teikoku Oil (North America) 7.2％ Anadarko* 27.8％ Other 65％

Towing the building frame of a production facility to the development site

060

INPEX CORPORATION Annual Report 2014

4 Copa Macoya and Guarico Oriental Blocks
INPEX was awarded a 100% interest ina central onshore area, the East Guarico
Block in Venezuela, in July 1992. INPEX
participated in oil and natural gas fieldrehabilitation, exploration and development activities as an operator. Thereafter,
the existing operational service agreements were changed to joint ventureagreements in 2006. Around the sametime, the East Guarico Block was newly
reconfigured into a gas business in the
Copa Macoya Block and a crude oil business in the Guarico Oriental Block. In
addition, the agreement period of both
agreements was extended to 2026 asa result of the change to joint ventureagreements.

Copa Macoya andGuarico Oriental Blocks
Georgetown
CaracasGUYANAVENEZUELA
BogotaCOLOMBIA

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2013)

Venture company(established)

Interest owned(*Operator)

Copa Macoya

In production
Crude oil: 1 Mbbl/dNatural gas: 58 MMcf/dTeikoku Oiland Gas Venezuela,
C.A. (June 7, 2006)

Teikoku Oil and Gas Venezuela* 70% PDVSA Gas 30%

Guarico Oriental

1

Teikoku Oil and Gas Venezuela 30% PDVSA CVP* 70%

2

1, 2: Gas plant

5 Frade Block
After its initial discovery in 1986, a
final investment decision was made forthe development of the Frade Oil Field in
June 2006. Following development work,commercial production started in June
2009, marking the first crude oil to be

produced in Brazil by an enterprise witha significant Japanese equity interest.
Production was temporarily suspended
in March 2012 due to the presence of asmall oil sheen but safely resumed at theend of April 2013.

Contract area
(block)Project status(production on the basis of
all fields and average rate of FY2013)

Venture company(established)

Interest owned(*Operator)

Frade Project

In production
Crude oil: 16 Mbbl/dNatural gas: 0.1 MMcf/d

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

Frade Japão Petróleo 18.2609%
Chevron* 51.7391% Petrobras 30%

BM-ES-23

Under exploration

INPEX Petróleo Santos Ltda. (January 19, 2007)

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

Vitoria

Project Overview

Frade Japão Petróleo Limitada (FJPL), a
joint venture established by INPEX andSojitz Corporation, acquired an interestin the Frade Block in Brazil’s offshore
Northern Campos basin in July 1999.

5

BM-ES-23

BRAZIL
Atlantic Ocean

CamposFrade Project

Macae

Oil field

FPSO vessel

INPEX CORPORATION Annual Report 2014061

JapanINPEX is active in the Minami-Nagaoka Gas Field in Niigata Prefecture, one of the largest of
its kind in Japan, and participates in other oil and natural gas projects. In addition, the Company operates a domestic trunk pipeline of approximately 1,400 km. INPEX was also involvedin the construction of the Naoetsu LNG Terminal, which began operations in December 2013.

Yabase Oil Field
Akita
District Off
f ice
ff

Akita Prefecture

Naoetsu LNG Terminal
Higashi-Kashiwazaki Gas Field
Sekihara Gas Field (underground storage)
Niigata Marketing
OfficeNiigata City

Toyama Line (Under construction)
T
Kashiwazaki
City

Itoigawa
City

Toyama City

Minami-Kuwayama Oil Field
Nagaoka City

Joetsu City

ToyamaPrefecture

Shin Oumi Line

Natural Gas Business in Japan

Domestic Natural Gas /Regasified LNG

Nagano City

(Minami-Nagaoka Gas Field, etc.))

Tomi BS*

Matsumoto City

Fujioka BS*

Shin Tokyo Line

Chino City
Tomioka City

Kofu Line

Second Suruga Trunk Line
Sodeshi LNG Terminal[Shizuoka Gas]

Showa Town

Minamifuji Line

Fuji City

Sano City

Iruma LineOme City

Konosu City

Oil and gas fields

SaitamaPrefecture

Other project

Adachi-ku, Tokyo
Metropolitan
Tokyo

GotembaCity(INPEX, Shizuoka Gas, Tokyo Gas)

Tochigi
Prefecture

Ryomo Line

Honjo City
Yamanashi
Prefecture
Kofu City

Shizuoka Line

Shizuoka
Shizuoka
City
Prefecture

Isesaki Power Control Center

Gunma
Prefecture

Karuizawa
Town

NaganoPrefecture

Niigata
Prefecture

Domestic Natural Gas

Tokyo LineT

Matsumoto Line

Niigata District Office
Minami-Aga Oil Field

Natural gas
pipeline network

Head Office (Akasaka, Minato-ku)

Regasified
LNG
Technical Research Center* BS・・・Booster station

Chiba City

(Kitakarasuyama, Setagaya-ku)

Itazuma Power Control Center

Sammu City
Chiba
Prefecture

Major office or
district officeNaruto Gas Field
Chiba District Office0

Focus in 2014
Methane Hydrate Resource Development in Japan
A type of unconventional natural gas, methane hydrate is a solid crystal structurewith methane trapped inside. Deposits of methane hydrate have been confirmed
along the coastline of Japan, but extracting it from low-temperature, high-pressure
geological formations is technologically challenging. Experts have said that moretime is needed to develop economically viable technologies.
INPEX participates in research and survey activities led by the national government and is a member on the exploratory committee. Leveraging its technologies
accumulated in upstream operations, INPEX has been contributing to solving thetechnological challenges for extracting methane hydrate, especially in the field of
subsea production equipment.

062

INPEX CORPORATION Annual Report 2014

Methane hydrate (combustible ice)

100 km1 Natural Gas Business in JapanAt the Naruto Gas Field in Chiba Prefecture, natural gas is being produced fromwater-soluble gas fields. After extracting
natural gas from underground water (brinewater), the brine water is used to produce
iodine, which is exported to Europe, theUnited States and elsewhere.

Echigo Line

Sekihara Gas Field(underground storage)

Sea ofJapan

Minami-Nagaoka
Gas Field
Gas field(100 million Nm /year) Note: 41.86MJ per 1m

15

Ojiya City

Joetsu Line

18.0

16.5

17.2

17.6

17.5

2010/3

2011/3

2012/3

2013/3 2014/3

JoetsuShinkansen
Line

Kashiwazaki City

3

20

Shinetsu
HonsenNagaokaCity

HigashiKashiwazaki
Gas Field

Natural Gas Sales Volume in Japan3

Mitsuke
City

10
5
0

Breakdown of Natural Gas Sales by
End Purchasing Prefecture

1(Year ended March 31, 2014)
Chiba Prefecture 2.9%
Yamanashi Prefecture 3.8%
Tochigi Prefecture
4.0%

NaganoPrefecture
16.9%

Tokyo 1.2%
Akita Prefecture 0.8%
Shizuoka Prefecture
0.4%

Niigata
Prefecture
28.9%

Saitama
Gunma
Prefecture
Prefecture
17.7%
23.4%

5
2

Project Overview

Discovered in 1979 and in production
since 1984, the Minami-Nagaoka Gas
Field is one of the largest in Japan. After
processing, the natural gas is transported
through an about 1,400-km trunk pipeline network stretching across the Kanto
and Koshinetsu regions that surroundthe greater Tokyo metropolitan areaand delivered to city gas companies
and industrial customers along this network. Most users of the natural gas are in
Niigata Prefecture, due to its proximity to
the Minami-Nagaoka Gas Field, followedby customers in Gunma, Saitama andNagano prefectures.
INPEX has experienced steady growthin sales of natural gas volume due to sharp
rises in the prices of competing fuels, aswell as the highly environmentally friendly
attributes of natural gas. In addition to
its role as a fuel for thermal energy, natural gas is expected to be used for a wide
variety of applications, such as a fuel for
onsite power generation and co-generation, as well as a raw material for chemical products. INPEX targets annual salesof 2.5 billion m3 by the early 2020s and asmuch as 3.0 billion m3 over the long term,reflecting further capacity increases for our
Shin Tokyo Line and development of the
Toyama Line (extending from Itoigawa City,
Niigata Prefecture, to Toyama City, Toyama
Prefecture), construction of which began in
April 2012.

1: Natural gas pipeline that crosses a river(Shibumi River, Niigata Prefecture)
2: Drilling work at the Minami-Nagaoka Gas Field(Nagaoka City, Niigata Prefecture)

2 Construction of the Naoetsu LNG Terminal
The Sea of Japan

Naoetsu LNG Terminal

Naoetsu Oil Terminal

Thermalpower
stationTo

Saigata
Station▼With the commencement of Naoetsu
supply operations, we will be able toenhance the domestic capacity and stability of our supply structure by receiving LNG from our overseas projects, andby combining that supply with existing
domestic supplies from Minami-Nagaoka
and other fields.

az

iw

sh

Ka

i
ak

Naoetsu
Port
R8
Kuroi
StationHokuriku
Expressway
R253

Naoetsu Station
To Toyama▼

To Toyama▼

We expect domestic demand for natural gas to rise steadily and continue tobe firm due to factors such as the shift
to natural gas from oil as consciousness
about the environment and energy conservation increases, as well as rising oil
prices. To ensure stable supply to thedomestic natural gas market over thelong term, INPEX began constructing an
LNG terminal in Joetsu City in Niigata
Prefecture in July 2009. Construction wascompleted on schedule, and the terminal
received its first LNG carrier in August
2013. Key facilities finished their trial
runs faster than planned, leading to thecommencement of operations ahead ofschedule in December 2013.

R18
JoetsuInterchange▼ To Nagano

Full view of the Naoetsu LNG Terminal

INPEX CORPORATION Annual Report 2014063

3 Natural Gas Pipeline in JapanINPEX owns a natural gas pipeline in Japanthat stretches approximately 1,400 km,
connecting seven prefectures and one
metropolitan area in the Kanto and Koshinetsu regions.
INPEX has been updating its pipeline
network for transporting natural gas sincethe 1960s. The Company started constructing this pipeline network in 1959,
when it discovered the Kubiki Oil and Gas
Field in the Joetsu area of Niigata Prefecture, to supply natural gas from the Kubiki
Oil and Gas Field to city gas companies.
In 1962, we completed the pipeline (theTokyo Line), a long-distance, high-pressure pipeline that is the first of this kindin Japan. The pipeline runs from the Sea

of Japan to the Pacific Ocean, connecting
Joetsu City, Niigata Prefecture, to Adachi
Ward, Tokyo. With the discovery of the
Minami-Nagaoka Gas Field and subsequent start of production, together withefforts to address the resulting increase innatural gas demand, INPEX commenced
construction of the Shin Tokyo Line, whichruns parallel to the Tokyo Line, from themid-1990s. As of the end of June 2014,
the total high-pressure pipeline network
stretched over a length of approximately
1,400 km, roughly equivalent to the direct
distance from Sapporo to Fukuoka. Looking ahead, plans are in place for the completion of construction on the Toyama Line(about 102 km in length from Itoigawa

City in Niigata Prefecture to Toyama Cityin Toyama Prefecture) in mid-2016. INPEX
will continue to expand its network inorder to reliably and efficiently deliver
natural gas to customers who reside along
the pipeline. The Company will also work
diligently to increase its supply capabilities.

1

2

1: The Tokyo Line at the time of construction
2: Construction of the Toyama Line

4 Renewable Energy and Other Initiatives
Power Generation Businessin Japan
1. Koshijihara Electric Power Plant
INPEX constructed a high-efficiency gas
turbine combined cycle thermal power
plant with an output of about 55,000 kw
next to its Koshijihara plant in Niigata Prefecture, and began supplying electricity
on a wholesale basis to power producers and suppliers (PPS) in May 2007. Thispower plant uses natural gas and condensate produced from the Minami-Nagaoka
Gas Field as fuel to generate electricity.
Our strengths in this business are the ability to reliably procure fuel and the ability
to flexibly choose fuels based on energy
market conditions. By switching fuels in
response to seasonal fluctuations in gas
demand, we are able to increase the operating rate of the gas plant.
2. Solar Power Plant
In March 2013, the Company began
generating electricity at INPEX Mega
Solar Joetsu, a solar power plant with amaximum output of 2 MW, located on
the former site of an oil refinery that it
shut down in Joetsu City, Niigata Prefecture. In March 2014, INPEX decided
to construct a new solar power plantwith an output of 2 MW next to this site.
We estimate that these two solar power
plants will generate around 5,330,000
kWh annually, enough electricity topower 1,600 homes.

064

INPEX CORPORATION Annual Report 2014

INPEX
Mega Solar Joetsu,
Niigata Prefecture

Oyasu region,
Akita Prefecture

Koshijihara
Power Plant,
Niigata Prefecturre

Amemasuddake
region,Hokkaido
Prefecture

Power plant
Geothermal development
Solar power generation(mega solar)

Geothermal DevelopmentAreeas surrounding
thee Bandaisan region,
Fukushima Prefecture

Fumarolic testing at a geothermal well
(Teiseki Drilling Co., Ltd.)

Geothermal power is the generation ofelectricity with turbines powered by steam
produced from the thermal energy ofmagma underground.
Since 2011, INPEX and Idemitsu
Kosan Co., Ltd., have been jointly conducting geothermal surveys in the Amemasudake region of Hokkaido Prefecture
and the Oyasu region of Akita Prefecture.
The two companies were joined by Mitsui
Oil Exploration Co., Ltd., in 2012 and drilling of one survey well in the Amemasudake region and two survey wells in the
Oyasu region commenced during 2013.
We plan to continue conducting geothermal resource surveys by drilling survey
wells in both of these regions in 2014. In
addition, INPEX is a member of the geothermal resource survey group in Fukushima Prefecture and has been conducting land surveys in areas surrounding Mt.
Bandaisan since September 2013.

6

Sustainability &GovernanceSustainability

Sustainability
Five Key CSR Issues

INPEX aims to further enhance its reputation as a company essential tosociety by contributing 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 andbusiness. Each year, we take steps to evaluate the progress of our CSR
activities and to push forward all appropriate measures from a medium- tolong-term perspective.

Compliance
Comply with laws and social norms(including human rights)

1. Five Key CSR Issues
As a global energy company that aims toconstantly expand its upstream operations, in April 2012 the Company identified five key CSR issues that it would
tackle on a priority basis in a bid to gain
the trust of all stakeholders.
In this section of the annual report
2014, we provide details of the five key

CSR issues, provide details of progressin addressing each issue during the year
ended March 31, 2014, and explain ourplans from the year ending March 31,
2015. Please refer to the Company’s Sustainability Report 2014 for details of specific initiatives by issue.

HSE Initiatives
Practice safety management andenvironmental protection with respect
to operations

2．CSR Activity Road Map
For the continuous enhancement of CSR
management, we have established targets for 2016 and a medium-term action
plan called the CSR road map. Phase 1,
which came to a close in the year ended
March 31, 2013, was a period for establishing the foundation of the CSR promotion system, and we have put in placea philosophy and built a foundation for
CSR activities. The three-year period from

Establish the Foundation of
the CSR Promotion System
Launch organizations to promote CSR,
revise the CSR Policy,
y set out the keyy,
CSR issues and participate in–
014international initiatives
ch 2
Mar h 2016cr tor
(UNGC and EITI)
a
a
e
Y
M

Year

to

13
h 20

c
Mar

1

r
Yea

to

e
Phas

2

e
Phas

Deepen CSR Initiatives
with PDCACCA

the year ended March 31, 2014, to theyear ending March 31, 2016, constitutes
Phase 2 of the CSR road map in which wewill deepen the CSR initiatives. Phase 3of the CSR road map covers the periodthat coincides with the start of production at the Ichthys LNG Project. It is during this phase that we plan to engage in
CSR on a global scale.

arch
to M
Year beyond
and

2017

e
Phas

3

Community
Contribution
Build trust and contribute to local
communities (including education)

P

U
STEP

Promote CSR on a Global Scale
Ensure that the PDCA cycle is firmly entrenchedthroughout the Group, promote activities that are uniqueto the Group, engage in global-level reportting andenhance corporate value through these andd other initiatives

Greenhouse Gas
Countermeasures
Address climate change

Formulate the CSR Action Plan, work out the business activities ofeach department and enhance initiatives (establish a PDCA cycle)

About the Sustainability Report 2014
The INPEX Group publishes its Sustainability Report annually to keep its stakeholders informed of its CSR initiatives and activities. Focusing on the Company’s
five key CSR issues, the Sustainability Report 2014 has been compiled taking
into consideration the requirements of international disclosure guidelines.
INPEX also provides a Digest Edition of its Sustainability Report to provide
readers with an overall picture of its approach toward CSR. The full edition provides a more expansive understanding of the Group’s CSR activities. The Fully
Comprehensive Web Edition offers a total view of the INPEX Group’s efforts tofulfill its corporate social responsibility including details from previous reports.
Readers can access and order each of these reports via the Company’s CSR
Web site. } www.inpex.co.jp/english/csr/

066

INPEX CORPORATION Annual Report 2014

Employee Development
Develop and utilize humanresources as a global company

An overview of the five key CSR issues, vision, results for the year ended March 31, 2014,
and plans for the year ending March 31, 2015, and beyond are presented briefly as follows.

Overview of the Key CSR Issues

Vision• Observe international and social norms that
include laws, regulations and other rules
related to human rights• Go beyond simply complying with laws
and regulations to being properly attentive to various social norms including
those of where we operate

Put in place a Reconciliation Action Plan (RAP) asa part of efforts to promote cooperation with
the indigenous people of Australia (June 2013)• Ensure that directors and employees takethe initiative and engage in activities thatreflect high ethical standards to win thetrust of society• Reduce the environmental impact of daily
operations, take steps to mitigate environmental risks and engage in activities that help
to conserve biodiversity• Ensure the safety of all employees andrelated parties including contractors, andconduct operations without allowing major
accidents• Ensure safety across every facet of businessactivities• Make every effort to minimize environmental impact beyond legal and regulatory
requirements, and conduct operations
while being attentive to environmental
risks such as those posed by leakages andbiodiversity

The 2nd CEO Ichthys HSE forum held

•Strive to communicate with governments, local
residents, NGOs and other public stakeholders•Approach all stakeholders after fully grasping the needs of local communities and taking into consideration the impact of business activities; take all appropriate measures(including efforts to provide local residents
with relevant education)• Conduct business in a manner that contributes to the societal growth of communities
within which the Company operates while
respecting local cultures and customs, etc.

Indigenous trainees at work at the Ichthys LNG Project.
INPEX provides training programs for indigenous residents at
the Ichthys LNG Project and contributes to the development of
human resources throughout the local community.

• Engage in operations while taking into consideration the impact on climate change

6• Develop and supply a diverse range of energies that help to combat climate change
while promoting further advances in technologies

Sustainability & Governance• Promote research, development and practicalapplication of renewable energy and fossil fueltechnologies (including technologies that separate, capture and store CO2 (CCS)), as well as
technologies to generate methane; promote
the CO2 offset program (including forest protection and the planting of trees)
GHG Management Course organized by the Perth Office GHG
management team. The course was attended by four members
from the Company’s head office and five members from Jakarta.
Lectures were held by the GHG management team on
cutting-edge GHG management know-how. (November 2013)• Employ talented people, treat them with respect
and assign them to positions to which they aresuited without discrimination on the basis of culture, national origin, creed, race, gender or age• Actively develop and utilize human resources
suited to the conduct of operations globally• Achieve a proper balance between businessgrowth and employee satisfaction

INPEX was selected as a fiscal 2013 “Nadeshiko Brand.”This designation is granted to companies that are considered
exceptional in encouraging women’s success in the workplace.

INPEX CORPORATION Annual Report 2014067

Sustainability

Five Key CSR Issues (Continued)
Major Activity Fields

Results for the Ye
Y ar Ended March 2014

• Strengthen Compliance;
Respect Human Rights, etc.

• Distributed the revised Code of Conduct and conducted activities toraise awareness and understanding (conducted lectures in Indonesia)• Drew up Anti-Bribery and Anti-Corruption guidelines• Conducted Anti-Bribery and Anti-Corruption training in Australia• Conducted a monitoring program to ascertain the existence or otherwiseof compliance violation fines and found no incidences• Took steps to confirm the level of compliance by contractors with theCompany’s Code of Conduct (including environmental and safety policies and measures against anti social elements)• Conducted indigenous culture training in Australia (attended by 180 staff)• Promoted initiatives that comply with IFC Performance Standards acrossmajor projects• Analyzed gaps with respect to requirements under GRI-G4, IPIECA andother international guidelines in connection with disclosure items• Implemented the third-party verification of environmental performance data in Japan (GHG, energy consumption, water consumption,
wastewater discharged)• Conducted HSE audits of four operation units• Performed ocean environmental surveys prior to the commencement ofoperations at the Naoetsu LNG Terminal; conducted greenery activities
at the Naoetsu LNG Terminal (25% of the site)• Strengthen Environmental
Management; Maintain Safety
and Protect Biodiversity• Reduce the Impact of Operations on Local Communities;
Participate in Community
Events and Contribute toSociety

INPEX invited experts from outside the Company to conduct
human rights seminars for the benefit of employees inJapan. A total of 203 employees attended these seminars
between January and February 2014.

INPEX periodically implements surveys on the impact on
the environment of birds of prey in the areas around the
Toyama pipeline. (August 2013)• Submitted a project environmental impact assessment (AMDAL: Analysis
Mengenai Dampak Lingkungan) to the Indonesian Ministry of Environment•Disclosed details of a Social Impact Management Plan report withrespect to the Ichthys LNG Project and called for public comment• Undertook social contribution investments totaling ¥1.23 billion

INPEX conducts Tanimbar English Training in
Saumlaki City, Maluku Province, Indonesia.

• Address Climate Change• Promoted the establishment of frameworks for GHG management using
GHG working groups (examined trends at other companies; considered
the direction of each initiative item)• Conducted a GHG offset program (planted trees; undertook savannah
fire management) in Australia• Decided to expand the INPEX mega-solar Joetsu project• Continued to investigate studies concerning geothermal power generation in Hokkaido and Akita, JapanINPEX is implementing eco-drive programs for
its tank trucks and lorries.

• Recruit and Train a Global
Workforce; Promote Diversity

068

INPEX CORPORATION Annual Report 2014

• Took steps to consider establishing a base for personnel systems (establishment of a job category platform, etc.)• Assigned young engineer employees to project sites for training and for
conducting research• Undertook the first employee satisfaction survey in Australia• Implemented employee equal opportunity (EEO) training in Australia(350 staff attended in 2013)

Diversity•Percentage of foreign employees to total
employees: 37.7%•Maintain the percentage of physicallychallenged employees to total employees
at or above the legally required level (2%)•Employ three non-Japanese new graduates in Japan•Percentage of female employees to total
employees: 18.6%

Goals by the End of the Ye
Y ar Ending March 2016

• Draw up explanatory notes on the Code of Conduct• Draw up standards for drugs and alcohol (Indonesia)• Commence the implementation of Anti-Bribery and Anti-Corruption
guidelines and conduct training activities• Establish due-diligence procedures for Anti-Bribery and AntiCorruption (Indonesia)• Establish human rights due-diligence procedures (including safety
practices) at the time of contract execution• Continue to conduct human rights training for INPEX employees• Implement cross-cultural awareness training in South Korea, Singapore, China, the Philippines, Thailand, Perth and Darwin•Continue to enhance awareness toward compliance promotion•Build a framework and monitoring system at suppliers andcontractors to ensure respect for human rights•Enhance understanding and awareness of human rights
issues across the INPEX Group by implementing humanrights training globally• Enhance the disclosure of environmental performance data basedon the results of gap analysis• Continue to implement third-party verification• Continue to conduct HSE audits of the four operation units• Achieve no accidents; reduce the number of accidents(For the year ending March 2015, the accident index for the entire
company: LTIF 0.29, TRIR 1.40)• Continue to participate in the biodiversity protection working group• Continue to perform ocean environmental surveys and to conduct
greenery activities at the Naoetsu LNG Terminal• Ensure the strict implementation of environmental andsafety management based primarily on the second corporate HSE medium-term plan
• Continuously expand the boundary and scope of thirdparty verification concerning HSE performance data
• Prevent major accidents (LTIF target: 0.24, TRIR target: 1.59)• Continuously implement biodiversity conservation measures• Receive approval for the environmental impact assessment reporton the project in Indonesia• Finalize the Ichthys LNG Project Social Impact Management Plan
• Plan to undertake social contribution investments totaling ¥1.44
billion• Promote measures to support the development and selfsustenance of local communities• Solve problems through proper communications withstakeholders; actively participate in social contribution
activities• Draw up documentation for a GHG management framework for distribution across the Group• Identify medium- and long-term GHG emissions forecasts and prepare a GHG management medium-term plan
• Reduce unit energy consumption by 1% compared with the previous period• Continue to submit proposals for the introduction of natural gas
cogeneration systems• Continue implementing initiatives including concrete measures to
set up a task force team for the underground reinjection of CO2• Promote activities in accordance with the GHG management framework; continue the management of GHG
emissions• Continue the GHG offset program in Australia• Promote research and development into technologies
that help resolve issues relating to climate change• Continue surveys toward the commercialization of geothermal power generation• Promote global human resources activities• Draw up the INPEX Values• Release a strategy and action plan on diversity in Australia• Undertake a second employee satisfaction survey in Australia• Implement human resource development programs (global
training by job type and position)• Create a workplace environment in which all employees
can excel regardless of nationality, disability or age (increase
the recruitment of foreign nationals; maintain a percentage of physically challenged employees at or above thelegally required level)• Build a globally common human resources management
platform• Penetrate and establish the INPEX Values

INPEX CORPORATION Annual Report 2014

6
Sustainability & Governance

Plan for the Ye
Y ar Ending March 2015069

GovernanceCorporate Governance
INPEX works to enhance its corporate governance in order to raise its corporate value; continue
to exist as a corporation that is trusted by our shareholders, other stakeholders and all of society;and conduct responsible management as a global company.

Overview of the Corporate Governance Structure
INPEX has adopted a Board of Auditors structure, under which auditors audit the execution of operations, which are in turn carried out by directors well versed in their field. In
addition, the Company has introduced an Executive Officer System as a part of efforts
to further enhance the agility and efficiency of management. INPEX frequently engages
in negotiations with the governments of oil-producing countries and overseas oil companies. This necessarily requires directors and executive officers that have both a soundknowledge of the Company and their particular field of expertise. Accordingly, internal
directors in principle hold the concurrent position of executive officers. By adopting thisconcurrent 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 abilityof the Board of Directors to carry out its supervisory function, INPEX has appointed fiveof its 16-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. Moreover, four of the Company’s five auditors arealso appointed from external sources. In addition to putting in place a Board of Auditors,
INPEX has appointed ancillary staff to support the audit function and is reinforcing collaboration between auditors and the Audit Unit, as well as independent auditors.

Overview of the Corporate
Governance Structure
Organizational structure.................................................
................................... Company with statutory auditors

Directors
Number of directors as stipulated by
the Articles of Incorporation ............................ up to 16
Number of directors(number of outside directors) ................................ 16 (5)Term of office ........................................................... 1 year
Statutory auditors
Number of statutory auditors as stipulated by
the Articles of Incorporation .........................up to 5
Number of statutory auditors(number of outside auditors) ............................ 5 (4)Term of office ...............................................4 years
Number of independent
directors and auditors ......................................... 9(5 outside directors, 4 outside auditors)
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

Appoint/Dismiss

Compensation limit setup

Compensation limit setup

Appoint/
Dismiss

Board of Directors
Audit

Proposal/Advice/
ReportBoard ofAuditors

Coordinate

Independent
Auditors

Advisory Committee
ReportAccounting audit

Business Operation
SystemCoordinate

CSR Committee

ReportCompliance Committee
Corporate HSE
Committee

Executive
Committee
Appoint/Dismiss/Supervise

Appoint/Dismiss/Supervise

President& CEO
ReportInformation Security
Committee

Audit Unit

Accounting audit

Executive Officers
Divisions and Subsidiaries
Internal audit

070

INPEX CORPORATION Annual Report 2014

［1］Directors and the Board of Directors
Directors well versed in the performance of operations appointed
from within the Company deliberate on and determine important matters relating to the conduct of business in conjunction
with outside directors, who boast abundant experience and awide range of knowledge. In this manner, INPEX ensures thatdecisions are made in a rational, effective and objective manner.
The Company’s Board of Directors comprises 16 members,
five of whom are outside directors. In addition to a monthly meeting, the Board of Directors meets as necessary in order to discussand determine the execution of important matters. The Board
also supervises the execution 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 respondto changes in the Company’s operating environment in a timely
manner and to further clarify management responsibilities.

Furthermore, we expect positive results in terms of external negotiation and credits as a leading oil and gas E&P contributing to thestable and efficient supply of energy in Japan.
} See pp. 126­127 for Business Risks (8. Class A Stock)［4］Director Compensation
In the business of developing oil and natural gas, a considerable
amount of time is required between the launch of a businessventure and any investment recovery. Accordingly, INPEX does
not consider it appropriate to reflect short-term performance indirectors’ compensation. Compensation for directors consistsof monthly compensation (basic compensation), which is paid
based on the duties of each director, and a bonus based on the
Company’s performance. Compensation is determined by the
Board of Directors. Compensation paid to statutory auditors
consists solely of a fixed monthly compensation, which is determined through consultation between the statutory auditors.
The table below shows the amount of compensation paid
to directors and statutory auditors for the year ended March
31, 2014. From the current period, the bonus component paid
to outside directors and statutory auditors has been abolished.
Outside directors and statutory auditors are now paid a consolidated fixed compensation amount only. This takes into accountefforts to further bolster corporate governance.
Compensation Paid to Directors and Statutory Auditors(Year ended March 31, 2014)

Director classification

8th Ordinary General Meeting of Shareholders held on June 25, 2014［2］Executive Committee andExecutive Officer System［3］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. This share possesses influence on certain major corporate decisions. 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. For our company, the issuance of the Class A
Stock to the Minister of Economy, Trade and Industry is an effective
countermeasure to prevent outside control over the business of
our company or against hostile takeovers for speculative purposes.

Total amount ofcompensation paid bytype of compensation(¥ million)
Basic
compensation

Bonus

Number of
directors andstatutory
auditors
eligiblefor basiccompensation(person)Directors(excluding outside directors)

485

388

97

11

Statutory Auditors(excluding outside auditors)

26

26

­

1

Outside Directors andOutside Auditors

90

90

­

9

Notes: 1. The Company does not maintain a stock option plan.
2. The Company does not maintain an accrued retirement benefits plan.
3. The total amount of compensation paid includes a provision to accrued bonuses to directors for the year ended March 31, 2014.
4. In addition to the amounts of compensation paid presented in the table, an amount totaling ¥0.9 million was paid by a subsidiary company as compensation to an outside director
or auditor of the Company for the year ended March 31, 2014.

［5］Accounting Audit and6

Auditor Compensation

Sustainability & Governance

From the perspective of increasing the speed of decision making related to the execution of business, we have establishedan Executive Committee with attendance by full-time directors
and managing executive officers. The meetings are held weekly
and as necessary. At the Executive Committee, flexible 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.

Totalamount ofcompensation
paid(¥ million)

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 compensation
paid to the CPAs is determined in total based on the audit planand the number of auditing dates, after obtaining approval fromthe Board of Auditors.
Compensation Paid to the CPAs and Related Parties(Year ended March 31, 2014)

Name of the CPA firm

Ernst & Young ShinNihon LLC

Names of the CPAs

Kazuhiko Umemura, Satoshi Takahashi

Accounting audit
members

18 CPAs and 32 others

Compensation forauditing services¥221 million (INPEX: ¥146 million;
Consolidated subsidiaries: ¥75 million)

Compensation for
non-auditing services¥9 million (INPEX: ¥5 million;
Consolidated subsidiaries: ¥4 million)

INPEX CORPORATION Annual Report 2014071

GovernanceMonitoring of Management by
Outside Directors and Auditors［1］Outside Directors
Regarding the appointment of outside directors, we believe that it
is important to comprehensively consider a variety of factors. These
factors include the validity of business decisions and considerationof their efficacy, professionalism and objectiveness in the oversightfunction in addition to the perspective of independence.
Our Company ’s five outside directors possess broad knowledge and many years of experience as managers in such fields
as the resource/energy industry, finance and legal matters. Also,
four of the outside directors are shareholders of the Company
and serve as director or advisors of companies that conductbusiness in the same field. Therefore, we recognize the importance of paying special attention to the possibility of competition and other conflicts of interest. In response, we collect written
pledges from outside directors in order to ensure conformancewith the Companies Act when taking a proper response towardnoncompetition, the prevention of information leakage and theimplementation of appropriate measures toward transactions
with a conflict of interest. These written pledges are the same as
those submitted by internal appointees.

［2］Outside Auditors
When appointing outside auditors, we believe that it is important to comprehensively consider factors such as independence,
efficacy in the oversight function and professionalism.
Four of the five auditors are outside auditors who possessrich knowledge and experience in our Company’s business, aswell as in fields such as finance and accounting, and utilize thesequalities when performing auditing activities for our Company.
One of the outside auditors also holds the position of advisor at
Japan Petroleum Exploration Co., Ltd. (JAPEX), a company thatengages in the same type of business as the Company.

［3］Independence ofOutside Directors and Auditors

All of our Company’s outside directors (5) and outside auditors(4) satisfy the requirements* for independent directors and are
therefore designated as independent directors.
*It has been confirmed that the outside directors /auditors do not fall under theconditions stipulated in the Ordinance for Enforcement of the Securities Listings
Regulations, Article 211, Item 4, Sub-Item 5, and Article 226, Item 4, Sub-Item 5.
Furthermore, it has been confirmed that there is no risk of a conflict of interest withordinary shareholders.

［4］Board of Auditors and Statutory Auditors
INPEX has adopted a statutory auditor system. The Board of Auditors is composed of five auditors, including four outside auditors.
In addition to attending meetings of the Board of Directors and the Executive Committee, the statutory auditors review
the execution of business duties by directors and executive officers through reports given by and hearings for related departments. Furthermore, the statutory auditors meet on a regularand as needed basis with the Independent Auditors, and receive

Outside Directors

Kazuo Wakasugi

Yoshiyuki Kagawa

Seiji Kato

Rentaro Tonoike

Director (Outside)

Director (Outside)

Director (Outside)

Director (Outside)

Kazuo WakasugiYears of service as Director: 8 years, No. of shares owned: - shares
April 1953

June 2007

June 1984

June 2012

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)Vice-Minister for International Affairs, Ministry ofInternational Trade and Industry
September 1986 Advisor to Long-Term Credit Bank of Japan, Ltd.
(currently Shinsei Bank, Ltd.)
June 1993
Representative Director, Executive Vice President of
Mitsubishi Electric Corporation
May 1995
Advisor to Japan Petroleum Exploration Co., Ltd.
(“JAPEX”)
June 1995
Representative Director, President of JAPEX
June 1996
Director of Indonesia Petroleum, Ltd.
(INPEX Corporation)
June 2001
Representative Director, Chairman of JAPEX
April 2006
Director of INPEX Holdings Inc.
(currently the Company) (incumbent)
May 2007Counsellor of JAPEX
June 2013
Advisor of JAPEX (incumbent)

Yoshiyuki Kagawa
Years of service as Director: 7 years, No. of shares owned: - shares
April 1970
Joined Mitsui & Co., Ltd.
September 2001 Director of Mitsui Oil Exploration Co., Ltd.
October 2001 Chief Operating Officer of Energy Business Unit,
Energy Group of Mitsui & Co., Ltd.
April 2002
Managing Officer, Chief Operating Officer of Energy
Business Unit, Energy Group of Mitsui & Co., Ltd.
April 2003
Executive Managing Officer, Chief Operating
Officer of Energy Business Unit of Mitsui & Co., Ltd.
April 2005
Representative Director, Executive Vice President of
Mitsui Oil Exploration Co., Ltd.
June 2005
Representative Director, President, CEO of Mitsui Oil

072

June 2006

INPEX CORPORATION Annual Report 2014

Exploration Co., Ltd.
Representative Director, President, CEO and CCO of
Mitsui Oil Exploration Co., Ltd.
Director of INPEX Holdings Inc.
(currently the Company) (incumbent)
Senior Advisor of Mitsui Oil Exploration Co., Ltd.
(incumbent)

April 2006
April 2008

Seiji Kato
Years of service as Director: 4 years, No. of shares owned: - shares
April 1971
July 1997
April 2003
April 2006
April 2007
April 2008
June 2010
June 2011

Joined Mitsubishi Corporation
General Manager of LNG Business Department of
Mitsubishi Corporation
Senior Vice President, Division COO of Natural Gas
Business Division of Mitsubishi Corporation
Senior Vice President, Division COO of Natural Gas
Business Division B of Mitsubishi Corporation
Executive Vice President, Group COO of
Energy Business Group of Mitsubishi Corporation
Executive Vice President, Group CEO of
Energy Business Group of Mitsubishi Corporation
Director of the Company (incumbent)
Corporate Adviser of Mitsubishi Corporation(incumbent)

Rentaro Tonoike
Years of service as Director: 2 years, No. of shares owned: - shares
April 1978
April 2000
October 2003

Joined Nippon Mining Co., Ltd.
General Manager of Planning & Coordination Dept.,
Metal Division of Nippon Mining & Metals Co., Ltd.
General Manager (Group Companies Coordination) ofApril 2009

June 2012
June 2012

Yasuhiko Okada
Director (Outside)
Planning & Coordination Dept. of Nippon Mining &Metals Co., Ltd.
Executive Officer, General Manager(Planning & Coordination) of Planning & Coordination
Dept. of Nippon Mining & Metals Co., Ltd.
Executive Officer, General Manager(Planning & Coordination) of Planning & Coordination
Dept.; General Manager of Coordination Dept., Metals
Group; General Manager of Planning Dept., Copper
Division, Metals Group of Nippon Mining & Metals
Co., Ltd.
General Manager (Planning & Coordination) of
Planning & Coordination Dept.; General Manager of
Coordination Dept., Metals Group; General Manager
on Special Assignment, Copper Division, Metals Groupof Nippon Mining & Metals Co., Ltd., Department 1 of
JX Holdings, Inc.
Director of the Company (incumbent)
Director, Senior Vice President and Executive Officer of
JX Holdings, Inc. (incumbent)

Yasuhiko Okada
Years of service as Director: 2 years, No. of shares owned: - shares
April 1966
July 1994
May 1995
July 1999
June 2003
January 2012
June 2012

Joined Ministry of FinanceDirector-General for the Tokyo Regional Taxation
BureauSecretary-General of Executive Bureau, Securities andExchange 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; Partnerof Kitahama Partners (Tokyo Office) (incumbent)
Director of the Company (incumbent)reports from the Independent Auditors regarding audits. They
also conduct regular meetings with the internal audit department (Audit Unit) to receive reports regarding internal audits andthe evaluation of internal controls.
To strengthen the function of the statutory auditors andensure viable corporate governance, ancillary staff are appointed

to support statutory auditors. Steps are also taken to form partnerships between the statutory auditors, the Audit Unit and the
independent auditors. Moreover, we have constructed a system
to strengthen the monitoring function through periodic meetings
with representative directors and directors.

Outside Directors/Outside Auditors: Concurrently Held Positions and Reason for Appointment
Independent
director

Significant concurrently
held positions

Reason for appointment

Attendance at board meetings forthe year ended March 31, 2014

Kazuo Wakasugi

Advisor for Japan Petroleum Exploration Co.,
Ltd., a major shareholder in our company

To utilize in our company’s management his rich experienceand broad knowledge as a business executive

Board of Directors meetings 14/15

Yoshiyuki Kagawa

Senior Advisor of Mitsui Oil Exploration Co.,
Ltd., a major shareholder in our company

To utilize in our company’s management his rich experienceand broad knowledge as a business executive

Board of Directors meetings 14/15

Seiji Kato

Corporate Advisor of Mitsubishi Corporation,a shareholder in our company

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

Board of Directors meetings 14/15

Rentaro Tonoike

Director, Senior Vice President and Executive
Officer of JX Holdings, Inc., a major shareholder in our company

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

Board of Directors meetings 15/15

Yasuhiko Okada

Partner of Kitahama Partners

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

Board of Directors meetings 15/15

Haruhito Totsune―

Possesses rich knowledge and experience in financial fields

Board of Directors meetings 14/15
Board of Auditors meetings 13/14

Koji Sumiya―

To utilize in our company’s auditing procedures
his knowledge of finance

Board of Directors meetings 15/15
Board of Auditors meetings 14/14

Hiroshi Sato

Advisor of Japan Petroleum Exploration Co.,
Ltd., a major shareholder in our company

To utilize in our company’s auditing procedures his rich experience and broad knowledge in the oil development industry,
as well as his accounting-related knowledge

Board of Directors meetings 11/15
Board of Auditors meetings 10/14

Masaru Funai―

To utilize in our company’s auditing procedures his richexperience and broad knowledge in the energy industry, as
well as his accounting-related knowledge

Board of Directors meetings 15/15
Board of Auditors meetings 14/14

Outside auditors

Outside directors

Name

Statutory Auditors

Yoshitsugu Takai

Haruhito Totsune

Koji Sumiya

Hiroshi Sato

Masaru Funai

Statutory Auditor

Statutory Auditor (Outside)

Statutory Auditor (Outside)

Statutory Auditor (Outside)

Statutory Auditor (Outside)

Yoshitsugu Takai
Years of service as Statutory Auditor: 3 years,
No. of shares owned: 17,200 shares

March 2001
March 2002
March 2005
October 2008
June 2011

Joined Teikoku Oil Co., Ltd.
General Manager, Corporate Management Department
and LNG Project Department of Teikoku Oil Co., Ltd.
Senior General Manager, Corporate Management
Department and LNG Project Department of Teikoku
Oil Co., Ltd.
Director, General Manager, Accounting & Finance
Department of Teikoku Oil Co., Ltd.
Managing Director of Teikoku Oil Co., Ltd.
Senior Vice President, Logistics & IMT Division of theCompany
Statutory Auditor of the Company (incumbent)

Haruhito Totsune

April 2002
October 2005
October 2007
October 2008
May 2010
June 2010

Hiroshi Sato
April 1970
June 1999

July 1969
July 1995
July 1997
July 1998

June 2002

August 2004
June 2006
June 2007

Koji SumiyaYears of service as Statutory Auditor: 4 years,
No. of shares owned: 7,400 shares

April 1998
April 2000
April 2001
April 2002
April 2003
April 2005

June 2005

Years of service as Auditor: 8 years, No. of shares owned: - shares

Years of service as Statutory Auditor: 7 years,
No. of shares owned: 13,600 shares
Joined Ministry of Finance
Deputy Director-General of Financial Bureau
Director General of Japan Mint
Senior Executive Director of Japan FinanceCorporation for Small and Medium Enterprise
Corporate Advisor of KPMG AZSA & Co.
(currently KPMG AZSA LLC)
Statutory Auditor of INPEX Corporation
Statutory Auditor of INPEX Holdings Inc.
(currently the Company) (incumbent)

Joined The Export-Import Bank of Japan
Director General, International Finance Department I ofJapan Bank for International Cooperation
Director General, Policy Planning and Coordination
Department of Japan Bank for International Cooperation
Resident Executive Director, Osaka Branch of Japan
Bank for International Cooperation
Senior Executive Director of Japan Bank for International Cooperation
Managing Executive Officer of Japan Bank for International Cooperation, Japan Finance Corporation
Retired from Japan Bank for International Cooperation,
Japan Finance Corporation
Statutory Auditor of the Company (incumbent)

June 2005
April 2006
June 2006
June 2007
June 2010
June 2014

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

Masaru Funai
Years of service as Auditor: 4 years, No. of shares owned: - shares
April 1972

Joined Marubeni Corporation

April 2007

April 2009

April 2010
June 2010
April 2011

6

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 ofMarubeni 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 of Marubeni 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 theBoard, Executive Corporate Officer, General Affairs
Department, Human Resources Department, Risk
Management Department and Legal Department ofMarubeni 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 theBoard, Senior Operating Officer, Audit Department ofMarubeni Corporation
Statutory Auditor (part-time) of the Company (incumbent)
Senior Consultant of Marubeni Corporation

INPEX CORPORATION Annual Report 2014

Sustainability & Governance

April 1974
March 1999

April 1976
April 2001073

GovernanceInternal Committees
To further enhance the efficacy of the corporate governance function, INPEX has set up 1
the Advisory Committee to provide advice tothe Board of Directors. With the aim of putting
in place a structure and systems that allow the
Executive Committee to execute the operationsof the Company, INPEX established 2 the CSR
Committee and 3 the Compliance Committee.
Completing this system of committees, the Company maintains 4 the Corporate HSE Committee and 5 the Information Security Committee.

1 Advisory Committee
Board of Directors

Proposal/
Advice/ReportExecutive Committee

The Advisory Committee was established in October 2012 with the aimof enhancing corporate value andthe corporate governance function.
Comprised of external experts in a
broad spectrum of fields, the committee provides the Board of Directors with multifaceted and objective advice and recommendations
across a wide range of areas. Areasof discussion and advice include
international political and economic
conditions, an outlook of energy
conditions and ways in which tobolster corporate governance. (Thecommittee met twice during theyear ended March 31, 2014.)

ReportThe Advisory Committee deliberating on an important matter.

2 CSR Committee
In April 2012, INPEX established
the CSR Committee with the aims
of better fulfilling its corporatesocial responsibility and promoting activities that contribute to
the sustainable development ofsociety. The committee puts inplace fundamental policies andformulates important measuresdesigned to promote CSR. (Thecommittee met three times during
the year ended March 31, 2014.)

3 Compliance

4 Corporate HSE

5 Information Security

The Compliance Committee wasestablished in April 2006 with theaim of promoting compliance initiatives across the entire Group.
The committee formulates fundamental compliance policies applicable to the Group, deliberates
on important matters, and manages the manner in which compliance is practiced. (The committee
met four times during the year
ended March 31, 2014.)

In accordance with the HSE Management System, the Corporate
HSE Committee was established in
October 2007 to promote health,safety and environment (HSE) initiatives. In addition to formulating
corporate HSE policies and priority
targets for each period, the committee advances HSE activities
across the organization. (The committee met nine times during theyear ended March 31, 2014.)

The Information Security Committee was established in November
2007 to consider and determine allappropriate measures necessary tomaintain, manage and strengthen
information security. The committee also takes steps to address any
incident relating to information
security and to put in place preventive measures. (The committee
met three times during the year
ended March 31, 2014.)

Committee

Committee

Committee

Information Disclosure and Activities for
the Benefit of Shareholders and Investors
INPEX undertakes the early delivery of convocation notices for its general meeting of shareholders in an effort
to ensure that each meeting is conducted in a lively manner. Convocation notices for the Company’s 8th Ordinary General Meeting of Shareholders held in June 2014 were dispatched on June 3, 2014–more than three
weeks before the event. To facilitate the exercise of voting rights, INPEX implemented the exercise of voting
rights via the Internet. The Company also adopted a platform 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 a variety 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 foranalysts and institutional 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
more than five overseas IR road shows covering such regions as Europe, North America and Asia. Furthermore,
INPEX strives to participate 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 with recent news releases, every
effort is made to disclose pertinent information on the Company’s performance and financial position, as wellas trends in crude oil prices, foreign currency exchange rates, the Company’s share price and stock information.

074

INPEX CORPORATION Annual Report 20141

2

About the Advisory Committee

Committee Members

INPEX has appointed five directors from outside the Company
in a bid to enhance the transparency of its management. At thesame time, the Advisory Committee was established in October 2012. This committee, which comprises experts across awide range of fields, provides advice and recommendations
to the Board of Directors. The advice and recommendations
from domestic and overseas experts cover a broad spectrumof important issues relevant to the Company’s management.
These issues include political and economic conditions inJapan and abroad, conditions associated with energy andimportant CSR matters. By incorporating this input from theAdvisory Committee, the Company is taking positive steps toenhance its corporate value and corporate governance while
better fulfilling its goal of engaging in responsible management as a global company identified under its medium- tolong-term vision.

The Advisory Committee is made up of four experts, the Company’s three representative directors and the Senior Vice President of the Corporate Strategy & Planning Division.

Meetings
The Advisory Committee meets twice each year. Together with
the inaugural meeting in December 2012, the committee has met
a total of four times since its inception. Each meeting lasts 2–3
hours. The committee provides a forum for experts to engage inlively discussions with the Company’s directors.

Deliberations Undertaken over the Past Year
During the third and fourth meetings held in December 2013
and June 2014, respectively, external members gave the following presentations.
Committee member

Content of presentation

Ms. Kaori Kuroda

Current trends in CSR management

Dr. Tsutomu Toichi

Current situation and challenges for LNG procurement

Dr. Kent E. Calder

Prospects for U.S.-Russia Relations: A View from Washington

Dr. Masayuki Yamauchi

The Middle East, China and Japan ̶ Energy and Sea Lanes

After the presentations, committee members and the Company’s directors discussed a variety of issues focusing mainly on
the following items. The comments and advice put forward will
be reflected in the Company’s future management.
Advisory Committee members in attendance (front row from the left)

Dr. Masayuki Yamauchi Dr. Tsutomu Toichi
Professor Emeritus,
The University of Tokyo

Ms. Kaori Kuroda Dr. Kent Eyring Calder

Senior Adviser for
Executive Director,
Research, The Institute CSO Networkof Energy Economics, Foundation
Japan

Professor, Johns Hopkins
University; Director, theEdwin O. Reischauer Center
for East Asian Studies

Participants from INPEX (back row from the left)

Seiji YuiToshiaki Kitamura

Naoki Kuroda

Masatoshi Sugioka

Senior Vice President of Corporate
Strategy & Planning Division

President & CEO

ChairmanVice Chairman• The importance of completing all necessary steps in the conduct of the Group ‘s various
projects including due diligence with respect to human rights and harmonious coexistencewith the local community• Trends surrounding the effective conduct of LNG sales contracts in the context of nationalenergy policies• A review of issues relating to circumstances surrounding Ukraine in light of the political
dynamics between the United States and Russia, as well as the history of NATO, European
Union, and Eastern Europe expansion• Future U.S. and Chinese energy security policies toward the Middle East taking into
consideration the long-term review of the structure of energy supply and demand due to theemergence of the shale revolution and China’s growing presence

Internal System for Timely Disclosure

6
Sustainability & Governance

Board of Directors/
Executive Committee
Deliberation/Report on disclosure details
Authorization fordisclosure

President & CEO
Report3

Corporate Information Handling Officer

Deliberation/
Authorization ofurgent information for disclosure(Senior Vice President,
Corporate Strategy & Planning Division)

Disclosure based on organizational decision making(Audit Unit)

Internal
audit

1: Financial results presentation for the year ended March 31, 2014,
held on May 12, 2014
2: The Company’s IR booth at an IR fair for individual investors heldin August 2013
3: Toshiaki Kitamura, President & CEO, at an IR presentation meeting for individual investors in February 2014
4: IR tool package (available by mail in Japan and overseas)

Disclosure(Corporate Communications Unit)

Consultation/Confirmation

4

ReportIn charge of timely disclosure

Tokyo Stock Exchange,
Web Site,
Mass Media, etc.

ReportDivisions/Subsidiaries
Information including details of the Company’s disclosure policy and IR activities is posted on
the IR Web site (www.inpex.co.jp/english/ir/index.html).

INPEX CORPORATION Annual Report 2014075

Board of Directors(As of June 26, 2014)

1. Naoki Kuroda Chairman

2. Masatoshi Sugioka Vice Chairman

Years of service as Director: 8 years, No. of shares owned: 29,300 shares

Years of service as Director: 8 years, No. of shares owned: 31,300 shares

April 1963

April 1968
April 1994

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
June 1992
Director-General for the Agency of Natural Resources
and Energy
August 1993
Advisor to Bank of Tokyo Ltd. / Advisor to Mitsui Marine
Insurance, Ltd. (currently Bank of Tokyo-Mitsubishi UFJ,
Ltd. / Mitsui Sumitomo Insurance Co., Ltd.)
August 1995
Advisor to Sumitomo Corporation
June 1996
Managing Executive Director of Sumitomo Corporation
June 1999
Director of Indonesia Petroleum, Ltd.
(INPEX Corporation)
April 2001
Representative Director, Executive Vice President of
Sumitomo Corporation
August 2004
Senior Advisor to Sumitomo Corporation
September 2004 Representative Director, Executive Senior Vice
President of INPEX Corporation
June 2005
Representative Director, President of
INPEX Corporation
April 2006
Representative Director, President of INPEX Holdings
Inc. (currently the Company)
June 2010
Representative Director, Chairman of the Company(incumbent)

March 1995
March 1996
March 1999
March 2002
March 2005
April 2006
October 2008
June 2010

3. Toshiaki Kitamura President & CEO
Years of service as Director: 4 years, No. of shares owned: 19,000 shares
April 1972

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
July 2003
Director-General for Manufacturing Industries Bureau,
Ministry of Economy, Trade and Industry
June 2004
Director-General for Trade Policy Bureau, Ministry of
Economy, Trade and Industry
July 2006
Vice-Minister for International Affairs, Ministry of
Economy, Trade and Industry
November 2007 Adviser to Tokio Marine & Nichido Fire Insurance Co.,Ltd.
April 2008
Visiting Professor of Waseda University Graduate
SchoolAugust 2009
Executive Vice President of the Company
June 2010
Representative Director, President & CEO of theCompany (incumbent)
July 2002

1

2

3

4

5

6

7 8 9 10 11

Joined Teikoku Oil Co., Ltd.
General Manager of Engineering Department of
Teikoku Oil Co., Ltd.
Senior General Manager of Teikoku Oil Co., Ltd.
Director of Teikoku Oil Co., Ltd.
Managing Director of Teikoku Oil Co., Ltd.
Senior Managing Director of Teikoku Oil Co., Ltd.
Representative Director, President of Teikoku Oil Co.,
Ltd.
Representative Director of INPEX Holdings Inc.
(currently the Company)
Representative Director, Chief Technical Executive, incharge of HSE and Compliance of the Company
Representative Director, Vice Chairman, Chief
Technical Executive, in charge of HSE and Complianceof the Company (incumbent)

4. Seiji Yui

Director, Senior Executive Vice President
Years of service as Director: 8 years, No. of shares owned: 16,600 shares
April 1975
Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
September 1999 General Manager of Jakarta Office of INPEXCorporation
June 2000
Director, General Manager of Jakarta Office of INPEXCorporation
March 2003
Director, Coordinator of Exploration Department 1 andExploration Department 2 of INPEX Corporation
June 2003
Managing Director of INPEX Corporation
April 2004
Managing Director of Japan Oil Development Co., Ltd.
March 2006
Representative Director, Managing Director of JapanOil Development Co., Ltd.
April 2006
Director, Deputy Senior General Manager of Corporate
Strategy & Planning Division and Technology Divisionof INPEX Holdings Inc. (currently the Company)
March 2007
Managing Director, Senior General Manager ofTechnology and HSE Division, in charge of Oceania &America projects of INPEX Holdings Inc.
June 2007
Managing Director, Senior General Manager ofTechnology and HSE Division and Oceania & America
Project Division of INPEX Holdings Inc.
October 2008 Director, Senior Managing Executive Officer, SeniorVice President of Asia & Australasia of the Company
June 2012
Director, Senior Managing Executive Officer, SeniorVice President of Corporate Strategy & Planning
Division of the Company
June 2014
Director, Senior Executive Vice President, Senior Vice
President of Corporate Strategy & Planning Division of
the Company (incumbent)

5. Masaharu Sano

Director, Senior Managing Executive Officer
Years of service as Director: 8 years, No. of shares owned: 18,400 shares
April 1974
April 2000
March 2001
March 2001
March 2002
March 2005
April 2006
October 2008

076

INPEX CORPORATION Annual Report 2014

Joined Teikoku Oil Co., Ltd.
General Manager of Technical Planning Department of
Teikoku Oil Co., Ltd.
Senior General Manager of Teikoku Oil Co., Ltd.
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 OilCo., 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, SeniorVice President of The Americas & Africa Project
Division of the Company

June 2012

Director, Senior Managing Executive Officer, SeniorVice President of Technical Division of the Company(incumbent)

6. Shunichiro Sugaya

Director, Managing Executive Officer
Years of service as Director: 5 years, No. of shares owned: 14,400 shares
April 1976
April 1997

7. Masahiro Murayama
Director, Managing Executive Officer
Years of service as Director: 5 years, No. of shares owned: 13,700 shares
April 1976

Joined The Industrial Bank of Japan, Ltd.
(currently Mizuho Bank, Ltd., etc.)
June 1999
General Manager of Financial Institutions Banking
Division No. 2 of The Industrial Bank of Japan, Ltd.
June 2001
General Manager of Corporate Banking Department
No. 2 of The Industrial Bank of Japan, Ltd.
April 2002
General Manager of Corporate Banking Division No. 9
of Head Office of Mizuho Bank, Ltd. (currently Mizuho
Bank, Ltd.)
December 2002 General Manager of Syndicated Finance Structuring
Division No. 1 of Mizuho Bank, Ltd.
October 2003 General Manager of Syndicated Finance Distribution
Division No. 1 of Mizuho Bank, Ltd.
April 2004
Executive Officer, General Manager of SyndicatedFinance Distribution Division No. 1 of Mizuho Bank, Ltd.
October 2004 Executive Officer, General Manager of Loan Trading
Division of Mizuho Bank, Ltd.
April 2005
Managing Executive Officer, in charge of corporatebanking of Mizuho Bank, Ltd.
April 2008
Director, Deputy President of Mizuho Securities Co., Ltd.
April 2009
Council of Mizuho Securities Co., Ltd.
May 2009
Advisor to the Company
June 2009
Director, Managing Executive Officer, Senior Vice
President of Finance & Accounting of the Company(incumbent)Years of service as Director: 8 years, No. of shares owned: 13,700 shares
April 1977
April 2002

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
General Manager of Corporate Planning &Management Department of INPEX Corporation
June 2003
Director, General Manager of Corporate Planning &Management Department of INPEX Corporation
November 2004 Director, General Manager of Corporate Planning &Management Department and Public Affairs
Department of INPEX Corporation
September 2005 Director, Assistant Senior General Manager ofCorporate Strategy & Administration Division, General
Manager of Corporate Strategy & Planning Unit andPublic Affairs Unit of INPEX Corporation
April 2006
Director, Assistant Senior General Manager ofCorporate Strategy & Administration Division, General
Manager of Corporate Strategy & Planning Unit of
INPEX Corporation
April 2006
Director, Assistant Senior General Manager of Corporate Strategy & Planning Division of INPEX Holdings
Inc. (currently the Company)
July 2006
Director, Deputy Senior General Manager of Oceania &America Project Division of INPEX Corporation
October 2008 Director, Managing Executive Officer, Senior Vice
President of Ichthys Project of the Company (incumbent)

9. Wataru Tanaka
Director, Managing Executive Officer
Years of service as Director: 5 years, No. of shares owned: 23,000 shares
April 1977
June 2000
June 2003
June 2004
October 2004
February 2007
April 2007
October 2008
June 2009
June 2011

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
General Manager of Planning & New Ventures
Department of INPEX Corporation
Director, General Manager of Planning & New Ventures
Department of INPEX Corporation
Director, Coordinator in charge of the Middle East andCaspian Sea regions of INPEX Corporation
Director, Deputy General Manager of Tehran Office of
INPEX Corporation
Director, Coordinator in charge of Middle East projectsof INPEX Corporation
Director, Assistant Senior General Manager of General
Administration and Corporate Planning Division of
INPEX Corporation
Managing Executive Officer, Deputy Senior General
Manager of General Administration Division of theCompany
Director, Managing Executive Officer, Senior Vice
President of General Administration of the Company
Director, Managing Executive Officer, Senior Vice
President of General Administration Division(incumbent) and Corporate Strategy & Planning
Division of the Company

10. Takahiko Ikeda

Director, Managing Executive Officer
Years of service as Director: 5 years, No. of shares owned: 20,500 shares
April 1978
March 2002
March 2004
March 2005
April 2006

June 2007
October 2008
June 2014

Joined Teikoku Oil Co., Ltd.
General Manager of Production Department, Domestic
Operating Division of Teikoku Oil Co., Ltd.
Senior General Manager of Teikoku Oil Co., Ltd.
Director 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 of Domestic Projects of the Company
Director, Managing Executive Officer, Senior Vice
President of Gas Supply & Infrastructure Division of theCompany (incumbent)

6

11. Yoshikazu Kurasawa
Director, Managing Executive Officer

Sustainability & Governance

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
General Manager of Development Department ofIndonesia Petroleum, Ltd.
June 2001
Director, General Manager of Development
Department of INPEX Corporation
June 2002
Director, Coordinator in charge of Development
Department of INPEX Corporation
September 2005 Director, Senior General Manager of Asia Project
Division, Assistant Senior General Manager ofTechnology and HSE Division and Coordinator in
charge of Asia region / technology and HSE of INPEXCorporation
June 2007
Managing Director, Senior General Manager of Asia
Project Division of INPEX Corporation October 2008
Director, Managing Executive Officer, Senior Vice
President of Masela Project of the Company (incumbent)

8. Seiya Ito Director, Managing Executive Officer

Years of service as Director: 2 years, No. of shares owned: 9,500 shares
April 1982
February 2004

Joined Japan National Oil Corporation
Deputy General Manager of Planning & New Ventures
Department of INPEX Corporation
April 2005
General Manager of Planning & New Ventures
Department of INPEX Corporation
September 2005 General Manager of Business Development and Legal
Unit, General Administration & Corporate
Planning Division of INPEX Corporation
April 2006
General Manager of Overseas Project Planning and
Administration Unit, Corporate Strategy &Administration Division of INPEX Holdings Inc.
(currently the Company)
June 2007
Executive Officer, General Manager of Business
Development and Legal Unit, General Administration &Corporate Planning Division of INPEX Corporation
October 2008 Executive Officer, Assistant Senior General Manager ofCorporate Strategy & Planning, General Manager ofBusiness Development and Legal Unit of the Company
June 2011
Managing Executive Officer, Vice President ofCorporate Strategy & Planning of the Company
June 2012
Director, Managing Executive Officer, Senior Vice
President of New Ventures Division of the Company(incumbent)

INPEX CORPORATION Annual Report 2014077

Directors and Auditors
A C

ChairmanNaoki Kuroda

Director (Outside)

A C C H

Vice Chairman

Masatoshi Sugioka

Director (Outside)

A C

President & CEO

Toshiaki Kitamura(1)

A C C H I

Director

Seiji Yui

(1)

C H I

Director

Masaharu Sano

(1)

C H

Director

Shunichiro Sugaya(1)

Statutory Auditor (Outside)

C H

Director

Masahiro Murayama(1)

Statutory Auditor (Outside)

C H

Director

Seiya Ito(2) (4)(1)

Statutory Auditor (Outside)

Kazuo Wakasugi
Yoshiyuki Kagawa
Seiji Kato
Rentaro Tonoike
Yasuhiko Okada
Yoshitsugu Takai
Haruhito Totsune
Koji Sumiya
Hiroshi Sato
Masaru Funai(3) (4)

Director (Outside)
Director (Outside)
Director (Outside)
Statutory Auditor(2) (4)(2) (4)(2) (4)(2) (4)(3) (4)(3) (4)(3) (4)C C H I

Director

Wataru Tanaka(1)

Statutory Auditor (Outside)

C H

Director

Takahiko Ikeda

(1)

C H I

Director

Yoshikazu Kurasawa(1)(1) Concurrently hold the position of executive officer(2) Outside directors as defined in Article 2, Item 15, of the Companies Act(3) Outside auditors 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

Executive Officers
A C

President & CEO

Toshiaki Kitamura

A C C H I

Senior Executive Vice President

Seiji Yui

Senior Vice President of Corporate Strategy & Planning Division

C H I

Senior Managing Executive Officer

Masaharu Sano

Senior Vice President of Technical Division

C H

Managing Executive Officer

Shunichiro Sugaya

Senior Vice President of Masela Project Division

I

Managing Executive Officer

Masahiro Murayama

Senior Vice President of Finance & Accounting Division

C H

Managing Executive Officer

Seiya Ito

Senior Vice President of Ichthys Project DivisionC C H IManaging Executive Officer

Wataru Tanaka

Senior Vice President of General Administration Division

C H

Managing Executive Officer

Takahiko Ikeda

Senior Vice President of Gas Supply & Infrastructure DivisionC H IManaging Executive Officer

Yoshikazu Kurasawa

Senior Vice President of New Ventures Division

C I

Managing Executive Officer

Kazuo Yamamoto

Senior Vice President of Logistics & IMT Division

C H

Managing Executive Officer

Shuhei Miyamoto

Senior Vice President of America & Africa Project Division

C H

Managing Executive Officer

Kenji Kawano

Senior Vice President of Asia, Oceania & Offshore Japan Project Division

C H

Managing Executive Officer

Yasuhisa Kanehara

Senior Vice President of Eurasia & Middle East Project Division

C

Managing Executive Officer

Hiroshi Fujii

Vice President of Eurasia & Middle East Project Division

C

Managing Executive Officer

Shigeharu Yajima

Senior Vice President of Oil & Gas Business Division 1

C

Managing Executive Officer

Yoshinori Yamamoto

Senior Vice President of Oil & Gas Business Division 2

C HManaging Executive Officer

Kimiya Hirayama

Senior Vice President of Domestic Project Division

Executive Officer

Noboru Himata

Vice President of Finance & Accounting Division, General Manager of Finance Unit

Executive Officer

Takashi Kubo

Vice President of Logistics & IMT Division, General Manager of Logistics & Insurance Unit

Executive Officer

Toshihiko Fukasawa

Vice President of Domestic Project Division, General Manager of Planning & Coordination Administration Unit

Executive Officer

Hirohisa Ota

Vice President of Masela Project Division, General Manager of Technical Unit

Executive Officer

Hajime Kawai

Vice President of Masela Project Division, Vice President of Strategy & Coordination, Jakarta Office

Executive Officer

Atsushi Sakamoto

Vice President of Ichthys Project Division, Project Director of Onshore Technical Coordination, Perth Office

Executive Officer

Arihiro Kezuka

Vice President of Ichthys Project Division, General Manager of Technical Unit

Executive Officer

Nobuharu Sase

Vice President of Oil & Gas Business Division 1, General Manager of Oil Marketing Unit

Executive Officer

Tetsuro Tochikawa

Vice President of Technical Division, General Manager of Technical Planning Unit

Executive Officer

Yoshiro Ishii

Vice President of Corporate Strategy & Planning Division, General Manager of New Business Planning Unit

Executive Officer

Toshiya Oshita

Vice President of Technical Division, General Manager of Technical Resources Unit

Executive Officer

Kimihisa Kittaka

Vice President of Corporate Strategy & Planning Division, General Manager of Corporate Strategy & Planning Unit,
General Manager of Corporate Communications Unit

Executive Officer

Hideki Iwashita

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

Executive Officer

Tetsuo Yonezawa

General Manager of HSE Unit

Executive Officer

Hiroshi Nakamura

Vice President of General Administration Division, General Manager of Human Resources Unit

Member of Internal Committees (} Please refer to p. 74 for details.)
A Advisory Committee C CSR Committee C Compliance Committee H Corporate HSE Committee I Information Security Committee

078

INPEX CORPORATION Annual Report 2014

7

Financial &Corporate Information

Message from the Senior Vice President,
Finance & Accounting Division

I would like to take this opportunity to provide an overview of
the Group’s business results, highlights and financial position for the year ended
March 31, 2014, as well as details of its investment plans and funding.
losses with respect to its statement of income. As a result,
INPEX has been successful in taking more advantage of thebenefits to accrue from the weak yen from both the balance
sheet and income statement perspectives while at the sametime securing high levels of profits.

Financial Position

Masahiro Murayama
Director, Senior Vice President, Finance & Accounting Division

Business Results for
the Year Ended March 31, 2014
Consolidated net sales for the year ended March 31, 2014,
amounted to ¥1,334.6 billion, an increase of 9.7% comparedwith the previous period. From a profit perspective, consolidated net income edged up 0.4% year on year to ¥183.7 billion. Although the absence of the one-off gain on transfer ofmining rights totaling around ¥50.0 billion recorded in the previous period and the 2.4% year-on-year downturn in crude oil
prices (ICE Brent) had an unfavorable effect on performance,these negative factors were more than offset by the positiveflow-on effect of ¥212.0 billion attributable to the downturnin the value of the Japanese yen and other factors including
production volume stability. As a result, INPEX reported anincrease in both revenue and earnings for the period underreview. As the year ended March 31, 2013, came to a close, thevalue of the yen declined substantially. Taking this fluctuation
in foreign currency exchange rates into account, the Company
reported a loss on its foreign currency denominated loans andforeign exchange loss as other expenses. In principle, INPEX
strives to maintain a basic balance between its foreign currency denominated assets and liabilities. Although the Company benefitted from an unrealized gain on foreign currency
denominated bonds, this item is not reflected in the statementof income thereby eliminating any offset with the aforementioned foreign exchange loss. However, this unrealized gain isrecorded as an unrealized holding gain on securities in the net
assets section of the balance sheet. The value of the yen continued to fall throughout the year ended March 31, 2014. As
the Company realizes the unrealized gains attributable to theweak yen through the redemption of foreign currency denominated bonds, the Company has steadily balanced its foreign
currency denominated assets and liabilities related profits and

080

INPEX CORPORATION Annual Report 2014

Consolidated total assets as of March 31, 2014, stood at¥4,038.1 billion, up ¥422.0 billion compared with the previous
period-end. This largely reflected the increase in tangible fixed
assets of ¥367.2 billion mainly due to development-related
investments in the Ichthys LNG Project. Total off-balance-sheet
assets on a 100% basis of the Ichthys downstream operating company, in which INPEX holds a 66.07% equity share,amounted to ¥1,309.8 billion as of March 31, 2014. The balance of net assets as of the end of the period under review
came in at ¥2,996.0 billion, up ¥325.1 billion compared withthe balance as of March 31, 2013. This included net income
for the period of ¥183.7 billion and an increase in translation
adjustments of ¥175.9 billion. The available cash on hand asof March 31, 2014, was ¥1,466.1 billion and mainly earmarked
for investment through to the year ending March 31, 2017,as prescribed under the Company’s Medium- to Long-Term
Vision. For the most part, investments are generally madein U.S. dollars. Accordingly, INPEX has entered into various
financial instruments including forward currency contracts withapproximately ¥1,200 billion of cash available on hand held inthis major currency.
Turning to the Company’s overall financial position, theequity ratio stood at 69.1% as of March 31, 2014, with net debt
Analysis of Factors Contributing to an Increase/
Decrease in Net Income(¥ billion)

Major factors:• Absence of the gain on transfer ofIchthys mining rights (minus factor)• Foreign exchange gain (plus factor)• Gain on sales of marketablesecurities (plus factor)+118.1

+10.3
-64.1

-26.6
-37.0

183.0

Major factors:• Decrease in sales volume (-¥60.5 billion)• Decrease in unit prices (-¥23.3 billion)• Exchange rate fluctuation(depreciation of the yen) (+¥212.0 billion)

Net income Increase in Increase in Decrease in
OtherYear ended
net sales
the cost
incomeexploration
March 31, 2013of sales expenses andandthe allowance expenses
for exploration

Other

183.7

Net income
Year ended
March 31, 2014

Notesto net total capital employed coming in at negative 31.9%.
These levels are well in excess of the Company’s long-term
financial targets of an equity ratio of 50% or more and a net
debt to net total capital employed ratio of 20% or less. Looking
ahead, INPEX will take all necessary steps to prepare for future
investments while maintaining a robust financial position.

Investment Plans and Funding
INPEX will continue to undertake exploration and development investments aimed at future growth in line with theinvestment target of ¥3.5 trillion, covering the five-year period
from the year ended March 31, 2013, to the year ending March
31, 2017, outlined under the Medium- to Long-Term Vision formulated in May 2012. Recently, the Company has witnessed a
prolonged decline in the value of the yen. Against this backdrop, INPEX has revised its medium- to long-term assumptionof the yen/U.S. dollar exchange rate from ¥80 in May 2012to ¥100. As a result, the amount of investment has fluctuatedupward on a yen basis. On a U.S. dollar basis, the total amountof investment remains essentially unchanged. To meet these
U.S. dollar–based investment requirements, the Company will
look to procure U.S. dollar funds through external loans including project finance, operating cash flows and available cashon hand. As stated above, the vast majority of available cashon hand is currently denominated in U.S. dollars, and this isconsidered sufficient to meet the Company’s exploration anddevelopment investment needs for the next three years. Taking
this factor into account, INPEX is not expected to incur additional funding as a result of the yen’s depreciation.

Three-Year Period Investment and Funding Plans(¥ billion)* EBIDAX = Net income + Minority interests + Deferred tax + (1– Tax rate)(Interest expense – Interest income) + Exchange
profit and loss + Depreciation and amortization + Amortizationof goodwill + Recovery of recoverable accounts under production
sharing (capital expenditures) + Exploration expenses + Provision
for exploration projects + Provision for allowance for recoverable
accounts under production sharing* Net assets excluding minority interests = Net assets – Minority
interests* Equity ratio = Net assets excluding minority 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 – Minority interests)* ROE = Net income / Average of net assets excluding minority
interests at the beginning and end of the year
* Net ROACE = (Net income + Minority interests + (Interest
expense – Interest income) (1 – Tax rate)) / Average of sum of
net assets and net debt at the beginning and end of the 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. The probable reserves
include reserves of bitumen. Probable reserves as of March 31,
2007 are evaluated in accordance with the guideline establishedby SPE and WPC (1997 SPE/WPC).
Possible reserves are evaluated in accordance with PRMS. Possible reserves also include reserves of bitumen.
* 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.

■Development* ■Exploration ■Other Capital Expenditures**1,125.0

794.0
650.0
990.0

• Cash available on hand(¥1,466.1 billion)• Yearly operating cash flow
(Pre-exploration investment)

682.0
576.0

91.0

30.0

21.0

55.0
19.0

2015

2016

2017

(Project finance, etc.,
signed in December 2012 for
the Ichthys LNG Project)*Ichthys downstream business included in development expenditures**Investments mainly in the Naoetsu LNG Terminal and pipeline-related facilities in JapanINPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

105.0• External loans

Notes: 1 INPEX Holdings Inc. was established on April 3, 2006
through a stock transfer between INPEX CORPORATION
and Teikoku Oil Co., Ltd. and merged with these subsidiaries and changed the corporate name to INPEX CORPORATION on October 1, 2008.
2 INPEX Corporation settles accounts in March; Teikoku OilCo., Ltd. settled accounts in December up to the period
ended December 31, 2005.
3 Due to a change of the accounting period, amounts ofconsolidated financial statement of Teikoku Oil Co., Ltd.
of the period ended March 31, 2006 reflect the threemonth period from January 1, 2006 to March 31, 2006.
Per share data and Financial indicators for the period are
not listed here.
4 In consolidated financial statements of INPEX Corporation and Teikoku Oil Co., Ltd. announced for the periods
ended on or before March 31, 2006, amounts of less than
1 million yen are rounded down, while amounts are basically rounded to the nearest million.

081

12-Year Financial Information
Fig ure s give n for t he year s e n d e d o n or b efore Marc h 31, 20 0 6 re p re s e nt INPE X C or p or atio n an d it s
subsidiaries/Teikoku Oil Co., Ltd. and its subsidiaries; figures given for the years ended on or after March 31,
2007 represent INPEX Corporation (post integration) and its subsidiaries.
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a mat ter ofarithmetic computation only, at ¥102.92=US$1.00, the approximate exchange rate in effect as of March 31, 2014.

Millions of yen

As of or years ended March 31,(Results of operations)
Net sales
Cost of sales
Gross profit
Operating income
Income before income taxes andminority interests
Net income

2003/3
2002/12

2004/3
2003/12

2005/3
2004/12

2006/3
2005/12
2006/3

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil¥ 201,533
73,63095,99744,931
105,536
28,69997,2707,296
70,0507,491
27,911¥
5,233¥ 218,831
78,498105,758
47,062
113,072
31,436
93,876
8,739
94,773
11,04434,781¥
6,796¥ 478,586
84,032
197,094
48,455
281,492
35,576
268,662
13,533
258,631
16,67676,493¥9,276¥ 704,234
100,716
27,718257,903
55,47312,807446,330
45,243
14,910426,650
21,077
9,470
403,539
26,122
10,216
103,476¥ 15,485¥ 6,484

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil¥ 119,076
47,58529,869110,416
3,885
796
185,91445,188
338,747
203,986
27,27523,88257,007
41,342
254,463¥ 138,760¥ 106,952
50,16635,141
103,668
137,908754
245,295
71,691
525,298
226,280
28,894
20,661
185,410
46,101
310,991¥ 159,516¥ 238,419
45,65868,260114,220
138,631776
333,915
79,858779,227
240,513
122,91027,439209,738
44,986446,578¥ 168,086¥ 257,573
58,58665,86465,219125,418
126,497
136,757
811
1,028
512,887
108,949
115,268
972,437
293,767
308,659
179,600
28,99828,156250,236
65,23072,927542,600¥199,536¥207,574(Financial position)
Current assets
Tangible fixed assets
Intangible assets
Investments and other assets
Total assets
Current liabilities
Long-term liabilities
Net assets** The amount of Net assets as of the years ended on or before March 31, 2006 is retroactively adjusted in accordance with "Accounting Standard for Presentation of Net Assets in
Balance Sheet" (ASBJ Statement No.5).

(Cash flows)
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents at endof the year

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil¥¥

51,282
15,004(40,533)(27,166)
21,237(407)
78,41423,020¥44,464
19,955(218,121)(8,284)
151,120(5,914)54,582¥ 28,789¥ 131,206
19,225(119,956)(20,018)
9,791(5,824)
128,375¥ 22,234¥ 218,239
15,1189,872(252,399)(20,287)(4,705)
14,3507,845
5,480
114,967¥ 25,545¥ 36,175¥157,275.33*1
512.183,333*1
6.00
19,612.92*1¥
22.09¥214,163.98
543.624,000
7.50
40,255.92¥
30.22¥ 262,966.53—
646.905,500—
9.00
53,814.47¥—¥ 50.61(Per share data)
Net assets per share (Yen)
Cash dividends per share (Yen)
Earnings per share (EPS) (Yen)INPEX ¥143,389.73*1
Teikoku Oil
444.90
INPEX
3,333*1
Teikoku Oil
6.00
INPEX
15,726.17*1
Teikoku Oil ¥17.11*1 Retroactively adjusted for a three-for-one stock split in May 2004.
*2 Retroactively adjusted for a stock split at a ratio of 1:400 of common stock on October 1, 2013.

(Financial indicators)
Net debt / Net total capital
employed (%)
Equity ratio (%)
D/E ratio (%)

082

INPEX CORPORATION Annual Report 2014

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil(75.8)%
(2.3)
74.9
66.6
18.5
18.8%

12.0%
(9.1)
52.9
69.1
60.9
13.9%

(13.3)%
(5.5)
52.8
69.0
43.2
10.8%

(19.6)%
(1.0)

—

51.9
67.1
14.7%

—

43.6

—%

Thousands of
U.S. dollars

Millions of yen

2007/3

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

2014/3

943,080¥ 1,186,732¥ 1,216,533¥ 1,334,626$12,967,606

INPEX

¥

¥

969,713 ¥ 1,202,965¥ 1,076,165 ¥840,427¥

343,795

390,554

319,038

298,168

334,833

395,443426,326

490,417

4,765,031

625,918

812,411757,127542,259

608,247

791,289

790,207844,2098,202,575

559,077

714,211663,267

461,668

529,743

709,358

693,448

733,610

7,127,963

586,263

685,800

616,167

442,027

508,587

767,039

718,146

750,078

7,287,971

183,691$ 1,784,794

165,092¥

173,246¥

145,063¥

107,210¥

182,962¥

128,699¥

194,001¥

492,932¥

908,702¥ 1,106,504¥ 1,140,204$11,078,546

INPEX

¥

474,124¥565,111¥411,110¥492,855¥

219,227

254,481

297,636

358,094

379,862

383,698584,541

951,779

9,247,756

265,822265,481

253,681239,205

249,111233,318

380,156

439,179

4,267,188

648,934

722,828805,618

923,624

1,558,475

1,540,680

1,544,958

1,506,977

14,642,217

1,608,107

1,807,901

1,768,045

2,013,778

2,680,380

3,066,398

3,616,159

4,038,139

39,235,707

266,248

325,286

206,059

227,905

254,729

367,844414,977375,670

3,650,116

261,843

243,802

199,925

295,270

328,268

384,361

530,198

666,432

6,475,243¥ 1,080,016¥ 1,238,813¥ 1,362,061¥ 1,490,603¥ 2,097,383¥ 2,314,193¥ 2,670,984¥ 2,996,037$29,110,348

¥

¥

¥

213,514$ 2,074,563

INPEX

¥

¥

231,982¥363,995¥

230,352¥

241,373¥274,094

320,692

252,347(209,243)(261,767)(240,168)(251,812)(844,511)(280,864)(489,870)(395,555)(3,843,325)

13,794(45,228)(46,090)

68,937548,057

29,294137,069

48,961

475,719

189,417 ¥

222,270 ¥

162,845 ¥

216,395 ¥

182,025

117,531$ 1,141,965¥

249,233¥

199,859

¥

INPEX
2

¥1,091.17*

2¥1,227.92*

2¥1,350.25*

2¥1,473.87*¥1,367.40*2¥1,492.27*2¥1,699.10*2¥1,911.25*2

17.50*2

18.75*2

20.00*2

13.75*2

15.00*2

17.50*2

17.50*2

18.00*2¥ 176.06*2¥ 183.78*2¥ 154.00*2¥ 113.88*2¥ 102.08*2¥ 132.84*2¥ 125.29*2¥ 125.78*2$

18.57*2
0.17*2$

1.22*2(18.6)%(36.1)%(31.2)%(30.6)%(48.9)%(60.7)%(43.9)%(31.9)%(31.9)%

64.0

64.0

71.9

68.9

74.5

71.1

68.6

69.1

69.1

24.2%

16.8%

12.9%

17.3%

13.7%

14.6%

19.2%

20.9%

20.9%

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

INPEX

7

083

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

on the above PSC-related considerations is as follows:sales revenues for INPEX CORPORATION and its consolidated
subsidiaries (the “Group”). Two types of agreements govern• The Group records as net sales its share of total sales

the Group’s oil and gas operations. One is production sharing

relating to the oil and gas production that is allocated tocontracts (the “PSCs”) and the other is concession agreements.
The latter category also includes domestic mining rights, as well
as overseas permits, licenses and lease agreements.

contractors under the PSCs.
• The Group books as cost of sales the portion of “Recoverable
accounts under produc tion sharing” that is recovered
through the allocation of its share of the “cost recovery

1. Production sharing contracts
Production sharing contract is an agreement by which one
or sever al oil and gas development companies ser ve ascontractors that undertake at their own expense exploration anddevelopment work on behalf of the governments of oil-producing
countries or national oil companies and receive production fromthe projects as cost recovery and compensation.

Cost recovery and production sharing
The PSCs determine the allocation of oil and gas production
among the host country’s government (or related entity) and thecontractors such as the Group. The allocation formula generally
dif fers according to the terms of the individual PSC. The
overview below is specific to one type of PSC typical of many oil
and gas projects in Indonesia, a country with which the Grouphas concluded numerous PSCs.
Under this type of arrangement, the total production in any
given year or other accounting period is allocated at the end of
the period between three portions.

(1) “First tranche petroleum”: This is a prescribed portionof total production allocated between the host country’s
g ove r n m e nt a n d t he co nt r ac to r s i n li ne w i t h ag re e dpercentages.
(2) “Cost recovery portion”: This is the oil and gas equivalentof a) non-capital production-related expenditures incurred inthat period, plus b) the scheduled depreciation expenses inthat period for capital expenditures, as calculated under the
PSC. The equivalents 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 “costrecovery portion” decreases as unit prices increase, whereasthat of the “equity portion” (explained below) rises.
If the actual production for the period is insufficient tocover the quantity of oil and gas equivalent calculated forthe cost recover y por tion, the latter is capped at actual
production and any surplus amount is carried forward to thefollowing period, as stipulated in the PSC.
(3) “Equity portion”: This is any residual production that is left
after the first two portions have been allocated. It is allocatedbetween the host country’s government and the contractors
based on agreed percentages.
The calculation of items in the income statement based

084

INPEX CORPORATION Annual Report 2014

portion.”Recoverable costs under the PSCs
Exploration costs
The share of recoverable exploration costs incurred by theGroup under the terms of the relevant PSC is capitalized within”Recoverable accounts under production sharing.”
Development costs
The share of all development costs incurred by the Group thatis recoverable under the terms of the relevant PSC is recorded
within “Recoverable accounts under production sharing.”
Production costs
Any operating costs incurred during the production phase thatare recoverable under the relevant PSC are initially recorded
within “Recoverable accounts under production sharing.”
Administrative expenses
Any administrative expenses that are recoverable under the
relevant PSC are recorded within “Recoverable accounts under
production sharing.”
Interest on loans
Any interest expense that is recoverable under the relevant PSC
is recorded within “Recoverable accounts under production
sharing.”
As discussed above, in “Cost recover y and produc tion
sharing,” these costs are recovered either as capital or operating
expenditures.

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 incurred and amortized. Expenditures
or costs relating to the acquisition of rights to projects alreadyin the development or production phase are capitalized within“Exploration and development rights” and amortized based on
the unit-of-production method. These amortization costs arerecorded within “Depreciation and amortization.” Cost recovery
provisions in the PSCs do not generally cover these expenditures.

2. Concession agreements

Exploration costs
The Group’s share of exploration costs is expensed as incurred.

Conces sion agreement is an agreement or authorization

disposition of the oil and gas it extracts. Revenues are returned

Development costs
T he Group’s s hare of any develop ment cos t s related tomining facilities is capitalized within tangible fixed assets. The
depreciation of tangible fixed assets that are governed byconcession agreements is computed primarily using the unitof-production method for mining assets located outside Japanand the straight-line method for domestic facilities. Theseto the host country in the form of royalties, taxes, etc., on sales.

depreciation expenses are recorded within the cost of sales.

(including mining rights awarded in Japan, as well as overseas
permits, licenses and lease agreements) by which a government
entity or a national oil company of the country directly awards
mining rights to an oil company. The oil company makes its own
investment in exploration and development and has the right ofAcquisition costs
Costs relating to the acquisition of rights (recorded as intangible
as s et s under “Mining r ight s”) for projec t s gover ne d byconcession agreements are treated in the same way as projects
governed by the PSCs, as described above.

Production sharing contracts
Costs

Exploration
costs

Development
costsStatement of
IncomeProject under
exploration phase

Provision for allowance
for recoverable
accounts under
production sharing

Production costs(Operating costs)

Project underdevelopment andproduction phase
Recoverable
accounts under
production sharing
Project underdevelopment andproduction phase

Acquisition
costs

Exploration anddevelopment
rightsAdministrative expenses
The Group’s share of administrative expenses is expensed as
incurred.

Concession agreements

Assets on
Balance Sheet

Recoverable
accounts under
production sharing

Production costs
The Group’s share of operating costs that are incurred during the
production phase is recorded within the cost of sales.

Costs

Assets on
Balance Sheet

Statement of
IncomeExplorationcosts

All exploration costs
are expensed
as incurred

Exploration
expenses

Cost 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)
Other expenses(Amortization of
exploration anddevelopment rights)

Cost of sales(Depreciation andamortization)

Development
costs

Tangible fixed

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)assetsCRITICAL ACCOUNTING POLICIES AND ESTIMATESThe Group’s consolidated financial statements are preparedrational changes to such estimates could exert a material impact

in conformity with Japanese GAAP. The preparation of theseon the financial condition or operating results. Critical accounting

financial statements requires the application of estimates,

policies and estimates relating to the financial presentation are

judgments and assumptions that affect the reported values ofoutlined below.

reporting period. Actual results may differ from the previously— Allowance for recoverable accounts under
production sharing

estimated or assumed values.

Any expenditures made during the exploration, development

well as the reported amounts of revenues and expenses for the

Accounting estimates pursuant to the preparation of theand production phases of projects governed by the PSCs areconsolidated financial statements are deemed critical if thecapitalized within “Recoverable accounts under production

degree of uncertainty associated with such estimates is high, or if

sharing” if they are recoverable under the relevant PSC. A

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

assets and liabilities at the date of the financial statements, as

7085

reserve equal to exploration costs is recorded within “Allowancestage based on a schedule of investments in exploration.

for recoverable accounts under production sharing“ to provide

Although the Group believes that assessments relating to thefor potential losses from unsuccessful exploration. This reserve

schedule of investments are reasonable, changes to the schedule

typically remains unchanged on the balance sheet until it exceeds

could significantly affect future operating results.

the residual balance of 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— 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“Allowance for recoverable accounts under production sharing“

sales business individually estimated for each project. Although

to provide for probable losses on development activities, asassessments and accounting estimates are made on a reasonable

individually estimated for each project. Although assessments

basis, actual operating results can change depending on theand accounting estimates are made on a reasonable basis, actual

business status.

operating results can change depending on the project status.

— Unit-of-production method
Overseas mining facilities, mining rights and exploration anddevelopment rights that are acquired during the development
and production phase are mainly depreciated or amortizedbased on the unit-of-production method. This approach requires
the estimation of reserves. Although the Group believes thatthe 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 reasonableestimate of retirement costs incurred upon termination of theoperation with respect to oil and gas production facilities in casethat the Group is obliged to retire such facilities by 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 valueof retirement costs could significantly affect future operating
results.

— Allowance for investments in exploration companies
A reser ve is recorded to provide for probable los ses oninvestments made by the Group in entities engaged in oil andgas activities, as estimated based on the net assets of such
entities. Although the Group believes that the assessments andestimates 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 projec ts is provided for future
expenditures of consolidated subsidiaries at the exploration

086

INPEX CORPORATION Annual Report 2014

— Deferred tax assets
Deferred tax assets reflect temporary differences (including net
operating loss carry-forwards) arising mainly from the writedown of exploration expenditures, foreign taxes payable andexcess of tax allowable depreciation. Valuation allowances areprovided once it is judged that the non-realization of deferred
tax assets has become the more probable outcome. The effectof foreign tax credits is taken into account in the calculation ofsuch valuation allowances. The realization of deferred tax assets
is principally dependent on the generation of sufficient taxable
income, based on the available information. Adjustments todeferred tax assets could be required if future taxable 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 theaccounting 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 basedon various actuarial assumptions, including the discount rate,
employee turnover and retirement rates, remuneration growth
rates, and the long-term expected return on plan assets. Future
operating results could be significantly affected by deviation
between the base assumptions and actual results or the revisionof such assumptions which were to generate actuarial gains orlosses.

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

Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
BUSINESS ENVIRONMENT
During the year ended March 31, 2014, the Japanese economy
followed a gradual recovery trend, such as a pickup in consumer
spending and productive activity and improvement of low
employment, owing to the Government’s economic policy andBank of Japan’s monetary easing.
Under such business environment, Brent crude oil price,a t ypical indicator of international crude oil prices whichsignificantly affect the Group’s business, started the year ended
March 31, 2014, at US$111.08 per barrel. Although Brent crude oil
price fell to US$97.69 per barrel at one point due to stagnationin economic indicators in the U.S., the upward trend began
and rose to US$116.61 per barrel in late August, following thegrowing tension in Syria.
After mid-September, however, when military intervention
in Syria was avoided, Brent crude oil price grew weaker anddropped to US$103.46 per barrel in early November. Afterward,
against a background of the expectation of crude demand due tosuspension of crude oil production in some oilfields in Libya andimprovement in economic indicators in countries, the upward
trend began again and remained at US$110 per barrel level in
December.
Since the beginning of the year 2014, Brent crude oil pricesomewhat moved and finished at US$107.76 per barrel at the endof the year ended March 31, 2014.
Meanwhile, crude oil and petroleum product prices in thedomestic market changed correlating with the international
crude oil prices. Reflecting these circumstances, the averagesales price for crude oil for the year ended March 31, 2014 for
the Group was US$107.78 per barrel, which is US$2.33 lower thanthat for the year ended March 31, 2013.
The foreign exchange market, another important factor
that affects the business of the Group, began the year ended
March 31, 2014, with the yen trading at around ¥94 to the U.S.
dollar. The depreciation of the yen against the U.S. dollar steadily
continued to the ¥103 level in mid-May while the Policy Boardof the Bank of Japan decided to introduce the “quantitative andqualitative monetary easing” above market expectations at theMonetary Policy Meeting held in April.
When Chairman Bernanke of Federal Reserve Board implied
FRB would downscale its quantitative monetary easing, the yen
recovered to the ¥93 level due to the movement to avoid risky
assets. However, yen selling turned out dominant again after
interest rate of the U.S. rose and sideways movement continued
for a while after that.
In the face of U.S. economic recovery after November aswell as FOMC (Federal Open Market Committee) decision to
downscale the quantitative monetary easing in December, theyen depreciated against the U.S. dollar gradually to the ¥105.40
level.
Although the yen once appreciated to the ¥100 level as
investors avoided risky assets with concern over emerging
economies from the beginning of 2014, TTM closed at ¥102.92
to the U.S. dollar which turned out to be ¥8.93 lower than that on
March 31, 2013.
Reflecting these situations, the average sales exchange rate
for the Group for the year ended March 31, 2014, was ¥100.20 to
the U.S. dollar, which is ¥17.52 lower than that for the year ended
March 31, 2013.

PERFORMANCE OVERVIEW
Net sales

Net sales■Crude oil sales ■Natural gas sales ■Other sales(¥billion)
1,500

1,334.6
1,200

1,186.7

1,216.5

2012

2013

7

1,076.2
943.1

900

840.4

600

300

0

2009

2010

2011

2014

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

Consolidated net sales for the year ended March 31, 2014,
increased by ¥118.1 billion, or 9.7%, to ¥1,334.6 billion from
¥1,216.5 billion for the year ended March 31, 2013, due to thepositive effect of the depreciation of the yen against the U.S.
dollar, despite decreases in the sales price and sales volume ofcrude oil.
Compared with the year ended March 31, 2013, net salesof crude oil increased by ¥70.6 billion, or 9.0%, to ¥858.8 billion
from ¥788.1 billion, and net sales of natural gas increased by¥57.6 billion, or 14.5%, to ¥455.4 billion from ¥397.8 billion.
Crude oil sales volume decreased by 7,018 thousandbarrels, or 8.1%, to 79,171 thousand barrels compared with theyear ended March 31, 2013. This was mainly due to the decline
in production in the Van Gogh Oil Field and the Kitan Oil Field.
The sales volume of natural gas increased by 8 billion cubicfeet (Bcf), or 2.6%, to 327 Bcf compared with the year ended
March 31, 2013. Of this, the sales volume of overseas natural gas
increased by 7 Bcf, or 2.6%, to 260 Bcf compared with the year
ended March 31, 2013, mainly due to an increase in sales volume
in Americas region. The sales volume of domestic natural gas
increased by 45 million m3, or 2.6%, to 1,798 million m3 (equivalent
to 67 Bcf) compared with the year ended March 31, 2013. The
average sales price of overseas crude oil was US$107.78 per barrel,a decrease of US$2.33, or 2.1%, compared with the year ended
March 31, 2013. The average sales price of overseas natural
gas was US$13.09 per thousand cubic feet (Mcf), a decrease of
US$0.34, or 2.5%, compared with the year ended March 31, 2013.
The average sales price of domestic natural gas was ¥50.31 per
m3, an increase of ¥3.29 per m3, or 7.0%, compared with the year
ended March 31, 2013.
The increase of ¥118.1 billion in net sales was mainly derived
from the following factors: regarding net sales of crude oil andnatural gas, a decrease in sales volume pushing sales down of087

(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
Other
Other expenses
Interest expense
Equity in losses of affiliates
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Other
Income before income taxes and minority interests
Income taxes
Income before minority interests
Minority interests
Net income¥60.5 billion, a decrease in unit sales price pushing sales down of¥23.3 billion, and the depreciation of the yen against the U.S. dollar
contributing ¥212.0 billion to the increase, in addition, a decreasein net sales excluding crude oil and natural gas of ¥10.2 billion.

Cost of sales
Cost of sales for the year ended March 31, 2014, increased by¥64.1 billion, or 15.0%, to ¥490.4 billion from ¥426.3 billion
for the year ended March 31, 2013. This was mainly due to thedepreciation of the yen against the U.S. dollar.

2013

2014

ChangeRatio¥1,216,533
788,135
397,766
30,632426,326
790,207
20,12553,73422,900693,448
98,666
8,735
7,832
40
82,05973,968
1,518
1,042
15,131
12,45230,056
13,769718,146529,275
188,871
5,909¥ 182,962¥1,334,626
858,754455,414
20,458490,417844,20928,20657,34525,048733,61050,735
17,462
9,228
10,32013,72534,267
2,335
5,054
8,028
1,165
4,280
13,405750,078
563,137
186,941
3,250¥ 183,691¥118,093
70,61957,648(10,174)
64,09154,002
8,081
3,611
2,148
40,162(47,931)
8,727
1,396
10,280(68,334)(39,701)817
4,012(7,103)(11,287)(25,776)(364)
31,93233,862(1,930)(2,659)
¥
729

9.7%
9.0
14.5
(33.2)
15.0
6.8
40.2
6.7
9.4
5.8
(48.6)
99.9
17.8—(83.3)(53.7)
53.8
385.0(46.9)(90.6)(85.8)
(2.6)
4.4
6.4
(1.0)
(45.0)
0.4%

increased exploration activities in Japan and the Middle East &Africa region.

Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended
March 31, 2014, increased by ¥3.6 billion, or 6.7%, to ¥57.3
billion from ¥53.7 billion for the year ended March 31, 2013. Thiswas mainly due to increases in transport costs and personnel
expenses.

Depreciation and amortization
Exploration expenses
Exploration expenses for the year ended March 31, 2014,
increased by ¥8.1 billion, or 40.2%, to ¥28.2 billion from ¥20.1
billion for the year ended March 31, 2013. This was mainly due toDepreciation and amortization for the year ended March 31,
2014, increased by ¥2.1 billion, or 9.4%, to ¥25.0 billion from
¥22.9 billion for the year ended March 31, 2013. This was mainly
due to an increase in the depreciation of exploration andCost of sales

Operating income(¥billion)(¥billion)

490.4

500

800

426.3

663.3

395.4

400

319.0
300

600

709.4

693.4

2012

2013

733.6

529.7

334.8
298.2

461.7
400

200
200

100

0

0

2009

088

2010

2011

INPEX CORPORATION Annual Report 2014

2012

2013

2014

2009

2010

2011

2014

development rights for the ACG Oil Fields. The Group records
depreciation costs for production facilities that are covered byconcession agreements as cost of sales. In addition, under its
accounting treatment of the PSCs, the Group records capital
expenditures as “Recoverable accounts under produc tion
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.

year ended March 31, 2013. This was mainly due to decreases inprovision for exploration projects and in foreign exchange loss.

Income taxes

As a result of the above, operating income for the year ended
March 31, 2014, increased by ¥40.2 billion, or 5.8%, to ¥733.6
billion from ¥693.4 billion for the year ended March 31, 2013.

Total current income taxes and deferred income taxes for theyear ended March 31, 2014, increased by ¥33.9 billion, or 6.4%,
to ¥563.1 billion from ¥529.3 billion for the year ended March 31,
2013. 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 of 75.1%
in the year under review.

Other income

Minority interests

Other income for the year ended March 31, 2014, decreased by¥47.9 billion, or 48.6%, to ¥50.7 billion from ¥98.7 billion for theyear ended March 31, 2013. This was mainly due to a decrease ingain on transfer of mining, despite an increase in gain on sales ofmarketable securities.

Minority interests for the year ended March 31, 2014, decreasedby ¥2.7 billion, or 45.0%, to ¥3.3 billion from ¥5.9 billion for theyear ended March 31, 2013.

Operating income

Other expenses
Other expenses for the year ended March 31, 2014, decreased by¥39.7 billion, or 53.7%, to ¥34.3 billion from ¥74.0 billion for the

Net income
As a result of the above, net income for the year ended March
31, 2014, increased by ¥0.7 billion, or 0.4%, to ¥183.7 billion from
¥183.0 billion for the year ended March 31, 2013.

FINANCIAL POSITION
Total assets as of March 31, 2014, increased by ¥422.0 billion,or 11.7%, to ¥4,038.1 billion from ¥3,616.2 billion as of March
31, 2013. Current assets increased by ¥33.7 billion, or 3.0%, to¥1,140.2 billion from ¥1,106.5 billion due to an increase in time
deposits and others. Fixed assets increased by ¥388.3 billion,or 15.5%, to ¥2,897.9 billion from ¥2,509.7 billion as of March 31,
2013, due to increases in construction in progress, recoverable
accounts under production sharing, long-term time deposits andothers.
Meanwhile, total liabilities increased by ¥96.9 billion, or
10.3%, to ¥1,042.1 billion from ¥945.2 billion as of March 31,
2013. Current liabilities decreased by ¥39.3 billion, or 9.5%,
to ¥375.7 billion from ¥415.0 billion as of March 31, 2013, due
to a decrease in income taxes payable and others. Long-term

liabilities increased by ¥136.2 billion, or 25.7%, to ¥666.4 billion
from ¥530.2 billion as of March 31, 2013, due to an increase inlong-term debt and others.
Net as set s increased by ¥325.1 billion, or 12.2%, to¥2,996.0 billion from ¥2,671.0 billion as of March 31, 2013. Total
shareholders’ equity increased by ¥157.8 billion, or 6.7%, to¥2,497.7 billion from ¥2,340.0 billion as of March 31, 2013. Total
accumulated other comprehensive income increased by ¥152.0
billion to ¥293.4 billion from ¥141.3 billion as of March 31, 2013,and minority interests increased by ¥15.2 billion, or 8.0%, to¥204.9 billion from ¥189.7 billion as of March 31, 2013.

Net income

Total assets(¥billion)(¥billion)

200

150

194.0

183.0

183.7

4,500

4,038.1

4,000
3,500

145.1

3,066.4

3,000

107.2

2,680.4

2,500

100

2,000

1,768.0

2,013.8

1,500
50

1,000
500

0

0

2009

2010

2011

2012

2013

2014

2009

2010

2011

2012

2013

2014

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

128.7

7

3,616.2089

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 and/or development.

• 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, 2013 and 2014.
(Millions of yen)

Year ended March 31, 2013

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥
62
Development
2,145
2,207
Subtotal* 1
Equity-method Affiliates
Exploration—
Development—
Subtotal—
22,324
Other capital expenditures* 2
Total* 3¥24,531

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 32,599
198,700
231,299¥ 231
52,16352,394¥12,515
29,51542,030¥ 8,577
11,964
20,541¥ 53,984
294,487
348,471—397
397
282,374¥514,070————¥52,394

8
298
306
79
¥42,415

—
878
878
13
¥21,432

8
1,573
1,581
304,790¥654,842*1 Figures include an equity-method affiliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic pipelines for sales of natural gas and the Naoetsu LNG Terminal, and the Group’s shareof investment in the Ichthys downstream entity (Ichthys LNG Pty Ltd, an equity-method affiliate).
*3 The amount capitalized for the asset retirement costs corresponding to asset retirement obligations for the year ended March 31, 2013, was ¥2,708 million.

(Millions of yen)

Year ended March 31, 2014

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥ 3,384
Development
1,071
4,455
Subtotal* 1
Equity-method Affiliates
Exploration—
Development—
Subtotal—
37,036
Other capital expenditures* 2
Total* 3¥41,491

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 36,689
338,123
374,812¥107
58,80458,911¥16,590
50,041
66,631¥14,232
18,601
32,833¥ 71,002
466,640
537,642

—
1,517
1,517
388,271¥764,600

194
—
194
—
¥59,105

105
11,791
11,896—¥78,527

—
1,198
1,198
—
¥34,031299
14,506
14,805425,307¥977,754*1 Figures include an equity-method affiliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic pipelines for sales of natural gas and the Naoetsu LNG Terminal, and the Group’s shareof investment in the Ichthys downstream entity (Ichthys LNG Pty Ltd, an equity-method affiliate).
*3 The amount capitalized for the asset retirement costs corresponding to asset retirement obligations for the year ended March 31, 2014, was ¥10,651 million.

090

INPEX CORPORATION Annual Report 2014

Total investments for the year ended March 31, 2014, increased by ¥322.9 billion, or 49.3%, to ¥977.8 billion (including ¥14.8 billion for
exploration and development by equity-method affiliates) from ¥654.8 billion for the year ended March 31, 2013. This was mainly due to anincrease in development expenditures for the Ichthys Project (including the downstream business) and WA-44-L (the Prelude FLNG Project) in
the Asia & Oceania region.
The table below shows the Group’s operating expenses by segment for the years ended March 31, 2013 and 2014.
(Millions of yen, %)Years ended March 31,

2014

2013

INPEX CORPORATION and Consolidated SubsidiariesJapan¥ 9,491
Asia & Oceania
63,851
Eurasia (Europe & NIS)
7,152
Middle East & Africa
23,055
Americas868
Subtotal
104,417Equity-method Affiliates
Asia & Oceania
525
Eurasia (Europe & NIS)—
Middle East & Africa
1,724
Americas
1,746
Subtotal
3,995
Total
¥108,412

9.1%
61.2
6.8
22.1
0.8
100.0

¥ 10,286
82,7199,521
31,921
1,916
136,363

7.5%
60.7
7.0
23.4
1.4
100.0

13.1
—
43.2
43.7
100.0
—%

1,224
—
7,156
2,199
10,579¥146,942

11.6
—
67.6
20.8
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, 2013 and 2014. 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, %)Years ended March 31,

INPEX CORPORATION and Consolidated Subsidiaries
Asia & Oceania¥ 82,219
Eurasia (Europe & NIS)
1,024
Middle East & Africa—
Americas94,088Subtotal
177,331
Equity-method Affiliates
Asia & Oceania—
Eurasia (Europe & NIS)—
Middle East & Africa
42,228Americas—
Subtotal
42,228
Total¥219,559

2014

2013
46.4%
0.6
—
53.0
100.0

¥16,091913—
26,64343,647

36.9%
2.1
—
61.0
100.0

—
—
100.0
—
100.0
—%

—
—
—
—
—
¥43,647

—
—
—
—
—
—%

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Total expenditures on acquisitions of upstream oil and gas projects for the year ended March 31, 2014, decreased by ¥175.9 billion to¥43.6 billion from ¥219.6 billion for the year ended March 31, 2013, due to decreases in the Asia & Oceania, Middle East & Africa, andAmericas regions.

091

— 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, 2013 and 2014.
(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 year2013
¥ 568,318
22,044130,998
53,9195,102
54,087
107,938
27,790590,566¥(112,871)

2014¥ 590,566
42,086172,234
73,1799,386
67,073
129,6714,717
685,990¥(123,484)

The amount posted as “Cost recovery—operating expenditures”

increased compared with the year ended March 31, 2013. Thisin recoverable accounts under production sharing is greater

was mainly due to an increase in operating expenses in thethan that posted as operating expenses. Along with operating

Offshore Mahakam Block and the South Natuna Sea Block B.

expenses, this is because a por tion of the exploration andCost recovery for the year ended March 31, 2014, increased

development cos t s, which are incur red and recover ablecompared with the year ended March 31, 2013. This was mainly

within the year, is included in the “Cost recovery—operating

due to an increase in cost recovery in the Offshore Mahakam

expenditures” account.

Block, the South Natuna Sea Block B and the ACG Oil Fields.

E xploration cos t s for the year ended March 31, 2014,

In addition, other deduction was mainly due to the decrease

increased compared with the year ended March 31, 2013. Thisin recoverable accounts under production sharing related to thewas mainly due to an increase in exploration expenditures in thebusiness withdrawal.

Asia & Oceania region such as the Masela Block.

The allowance for recoverable accounts under production

Development costs for the year ended March 31, 2014,

sharing as of March 31, 2014, increased compared with March

increased compared with the year ended March 31, 2013. This31, 2013. This was mainly due to additional allowance provisions

was mainly due to an increase in development expenditures inin connection with an increase in recoverable accounts under

the Offshore Mahakam Block, the South Natuna Sea Block B andproduction sharing with respect to exploration expenditures in

the Masela Block.

the Asia & Oceania region.

Operating expenses for the year ended March 31, 2014,— 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 since the year ended March 31, 2013.

basic policy is to utilize internal cash flow and external equity

The Group’s basic liquidity policy is to maintain sufficientfinancing to fund exploration projects and to utilize internal cash

cash on hand at all times to fund expenditures for existing andflow and external loans to fund development projects and thenew oil and gas projects in a timely manner, while also keeping a

construction of gas infrastructure. The Group currently receives

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

loans from the Japan Bank for International Cooperation,

In line with this policy, excess cash reserves are invested in low-

Japanese commercial banks and others. The Japan Oil, Gas

risk, highly liquid financial instruments. The Group’s strategy is toand Metals National Corporation (JOGMEC) guarantee system

improve capital efficiency over the long term through businesscovers these loans. In addition, the Development Bank of Japan

expansion while continuing to maintain a sound financial positionand various Japanese commercial banks provide loans for thewith sufficient liquidity.

construction of domestic gas infrastructure.

092

INPEX CORPORATION Annual Report 2014

— Maturities of long-term debt
The aggregate annual maturities of long-term debt subsequent to March 31, 2014, are summarized as follows:(Millions of U.S. dollars and Millions of yen)
Long-term debt denominated inYears ending March 31,

U.S. dollars

2015
2016
2017
2018
2019
2020 and thereafter
Total$ 116.2
154.6
258.6
258.6
458.6
3,408.7$4,655.3

Yen

Total yen equivalent

5,672
7,831
34,102
9,149
8,730
34,697¥100,181¥ 17,627
23,74460,71935,76555,931
385,515¥579,301¥— Cash flows
Cash flows for the years ended March 31, 2013 and 2014, are summarized as follows:(Millions of yen)

Years ended March 31,

Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Cash and cash equivalents at end of the year

Net cash provided by operating activities
Net cash provided by operating activities for the year ended
March 31, 2014, was ¥213.5 billion, a decrease of ¥38.8 billion
from ¥252.3 billion for the year ended March 31, 2013. This was
mainly due to increases in income taxes paid and recoverable
accounts under production sharing (operating expenditures),despite an increase in income before income taxes and minority
interests.

Net cash used in investing activities

2013¥252,347(489,870)
137,069¥199,859

2014¥213,514(395,555)
48,961¥117,531

decreases in payments for purchase of mining rights and longterm loans made, despite an increase in payments for purchasesof tangible fixed assets.

Net cash provided by financing activities
Net cash provided by financing activities for the year ended
March 31, 2014, was ¥49.0 billion, a decrease of ¥88.1 billion from¥137.1 billion for the year ended March 31, 2013. This was mainly
due to decreases in proceeds from long-term debt and proceedsfrom minority interests for additional shares.

Net cash used in investing activities for the year ended March 31,
2014, was ¥395.6 billion, a decrease of ¥94.3 billion from ¥489.9
billion for the year ended March 31, 2013. This was mainly due to

CONSOLIDATED FINANCIAL FORECAST FOR THE YEAR ENDING
MARCH 31, 2015 (Announced on August 6, 2014)
Net sales for the year ending March 31, 2015, are expected
to decrease due to the forecasted decline in the crude oil pricecompared with the year ended March 31, 2014 and others.
Operating income, income before income taxes and minority
interests and net income for the year ending March 31, 2015,
are also expected to decrease due to an increase in exploration
expenses and others.
The aforementioned forecasts are based on an average oil
price of US$106.2 per barrel for Brent crude oil and an averageexchange rate of ¥100.5 to the U.S. dollar for the year ending
March 31, 2015.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Consolidated net sales for the year ending March 31, 2015,
are expected to decrease by ¥18.6 billion, or 1.4%, to ¥1,316.0
billion compared with the year ended March 31, 2014. Operating
income for the year ending March 31, 2015, is expected todecrease by ¥98.6 billion, or 13.4%, to ¥635.0 billion comparedwith the year ended March 31, 2014. Income before income taxes
and minority interests are expected to decrease by ¥49.1 billion,
or 6.5%, to ¥701.0 billion compared with the year ended March
31, 2014. Net income is expected to decrease by ¥5.7 billion, or
3.1%, to ¥178.0 billion compared with the year ended March 31,
2014.

093

Consolidated Balance Sheet
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2014

Thousands of
U.S. dollars(Note 3)

Millions of yen

ASSETS
Current assets
Cash and cash equivalents
Time deposits (Note 12)
Accounts receivable—trade (Note 4)
Marketable securities (Notes 4 and 5)
Inventories
Deferred tax assets (Note 7)
Accounts receivable—other (Note 4)
OtherLess allowance for doubtful accounts
Total current assets
Tangible fixed assets
Buildings and structures (Note 6)
Wells (Note 6)
Machinery, equipment and vehicles (Note 6)Land
Construction in progress
Other
Less accumulated depreciation and amortization
Total tangible fixed assets
Intangible assets
Goodwill (Note 16)
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
Long-term time deposits (Note 12)
Deferred tax assets (Note 7)
Other investments (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.

094

INPEX CORPORATION Annual Report 2014

2013

2014

2014

¥ 199,859¥ 117,531$ 1,141,965

284,469

555,948

5,401,749

117,412110,396

1,072,639

281,129

177,709

1,726,671

15,40925,485

247,619

10,111

7,745

75,252

94,333

121,121

1,176,846

118,701

41,913

407,239(14,919)(17,644)(171,434)

1,106,504

1,140,204

11,078,546

240,218

294,6212,862,621

247,173

264,4392,569,365

305,836

356,157

3,460,523

19,56019,737

191,770

359,430

626,520

6,087,447

19,067

29,050282,258

1,191,284

1,590,524

15,453,984(606,743)(638,745)(6,206,228)

584,541

951,779

9,247,756

87,841

81,080787,796

118,869

125,622

1,220,579

167,179

221,4112,151,292

6,267

11,066

107,521

380,156

439,179

4,267,188

590,566

685,990

6,665,274(112,871)(123,484)(1,199,806)

477,695

562,506

5,465,468

673,129

476,4074,628,906

7,264

33,092

321,531287,273

364,1033,537,728

40,076

13,822

134,299

65,434

61,159594,238

(794)

(885)

(8,599)(5,119)(3,227)(31,354)1,544,958

1,506,977

14,642,217

2,509,655

2,897,935

28,157,161¥3,616,159¥4,038,139$39,235,707

Thousands of
U.S. dollars(Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2013

2014

¥

¥

2014

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)

41,4028,561

46,811
21,954$454,829
213,311

152,681

91,198886,106

Accounts payable—other (Note 6)

133,233

131,905

1,281,626

Provision for exploration projects

26,857

9,817

95,385

127

111

1,079

Accrued bonuses to officers
Asset retirement obligations (Note 15)

3,813

2,353

22,862Other (Note 7)

48,30371,521

694,918

414,977375,670

3,650,116

Total current liabilities
Long-term liabilities
Long-term debt (Notes 4, 6, 11 and 12)

466,909561,674

5,457,384

Deferred tax liabilities (Note 7)

34,98854,960534,007

Accrued retirement benefits to employees (Note 14)

8,580

—

—

Provision for loss on business

3,705

6,978

67,800Accrued special repair and maintenance

278

234

2,274

Liability for retirement benefits (Note 14)

—

7,793

75,719Asset retirement obligations (Note 15)

13,582

25,954

252,177

Other (Note 6)

2,156

8,839

85,882

Total long-term liabilities

530,198

666,432

6,475,243

Total liabilities

945,175

1,042,102

10,125,359

Common stock
Authorized: 2013 —
9,000,001 shares2014 — 3,600,000,001 shares
Issued:2013 —
3,655,810 shares2014 — 1,462,323,601 shares
Capital surplus

290,810

290,8102,825,593

679,288679,288

6,600,155

Retained earnings
Less: Treasury stock: 2013 —
4,916 shares2014 — 1,966,400 shares
Total shareholders’ equity

1,375,107

1,532,876

14,893,859(5,248)(5,248)(50,991)

2,339,957

2,497,726

24,268,616

34,742

44,737434,677

Net assets (Note 9)

Unrealized holding gain on securities

16,244(17,579)(170,802)

Translation adjustments

90,350266,225

2,586,718

Total accumulated other comprehensive income

141,336

293,383

2,850,593

Minority interests

189,691

204,928

1,991,139

2,670,984

2,996,037

29,110,348¥3,616,159¥4,038,139$39,235,707

Total net assets
Contingent liabilities (Note 18)
Total liabilities and net assets

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Unrealized gain (loss) from hedging instruments (Note 11)095

Consolidated Statement of Income and Consolidated Statementof Comprehensive Income
Consolidated Statement of Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2014

Thousands of
U.S. dollars(Note 3)

Millions of yen

Net sales
Cost of sales
Gross profit
Exploration expenses
Selling, general and administrative expenses (Notes 13, 14 and 16)
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Gain on sales of marketable securities
Other
Total other income
Other expenses
Interest expense
Equity in losses of affiliates
Provision for allowance for recoverable
accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Other
Total other expenses
Income before income taxes and minority interests
Income taxes (Note 7)
Current
Deferred
Total income taxes
Income before minority interests
Minority interests
Net income

096

INPEX CORPORATION Annual Report 2014

2013

2014

2014

¥1,216,533
426,326
790,207
20,12553,73422,900693,448¥1,334,626
490,417844,20928,20657,34525,048733,610$12,967,606
4,765,031
8,202,575
274,058
557,180
243,374
7,127,963

8,735
7,832
40
82,05998,666

17,462
9,228
10,32013,72550,735

169,666
89,662100,272
133,356
492,956

1,518
1,042

2,335
5,054

22,68849,10615,131

8,028

78,002

12,45230,056
13,76973,968718,146

1,165
4,280
13,40534,267750,078

11,31941,586130,247
332,948
7,287,971

539,208(9,933)529,275
188,871
5,909¥ 182,962

514,016
49,121
563,137
186,941
3,250¥ 183,691

4,994,326
477,273
5,471,599
1,816,372
31,578$ 1,784,794

Consolidated Statement of Comprehensive Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2014
Thousands of
U.S. dollars(Note 3)

Millions of yen

Income before minority interests
Other comprehensive income
Unrealized holding gain on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Share of other comprehensive income of affiliates accounted
for by the equity-method
Total other comprehensive income (Note 8)
Comprehensive income (Note 8)
Total comprehensive income attributable to:Shareholders of INPEX CORPORATION
Minority interests

2013

2014

2014

¥188,871¥186,941$1,816,372

27,787
16,769105,692

9,982(20,888)
176,31196,988(202,954)
1,713,088(6,674)(64,847)

158,731345,672

1,542,275
3,358,647

329,4228,120¥

335,737
9,935

$

¥

(1,577)
148,671
337,542

3,262,116
96,531

See accompanying notes to consolidated financial statements.

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014097

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

Millions of yen
Shareholders’ equity

For the year ended March 31, 2013

Balance as of April 1, 2012

Common stock

Capital surplus

Retained earnings

Total shareholders’equityTreasury stock¥290,810¥679,288¥1,219,527¥(5,248)

Cash dividends paid——

(27,382)—(27,382)

Net income
Net changes in items otherthan those in shareholders’equity——182,962—

182,962

—

—

—

—

—

—

—

155,580—

155,580¥290,810¥679,288¥1,375,107¥(5,248)¥2,339,957

Total changes during theperiodBalance as of March 31, 2013

¥2,184,377

Millions of yen
Accumulated other comprehensive income

For the year ended March 31, 2013

Unrealized holding Unrealized gain fromgain on securities hedging instruments

Balance as of April 1, 2012098

Translation
adjustments

Total accumulated other
Minority interests
comprehensive income

Total net assets¥ 6,953¥ 4,118¥(16,196)¥ (5,125)¥134,941

Cash dividends paid

—

—

—

—

—

(27,382)

Net income
Net changes in items otherthan those in shareholders’equity

—

—

—

—

—

182,962

27,78912,126

106,546

146,461

54,750201,211

Total changes during theperiod27,78912,126

106,546

146,461

54,750356,791

Balance as of March 31, 2013¥34,742¥16,244¥ 90,350¥141,336¥189,691¥2,670,984

INPEX CORPORATION Annual Report 2014

¥2,314,193

Millions of yen
Shareholders’ equity

For the year ended March 31, 2014

Common stock

Capital surplus

Retained earnings

Total shareholders’equityTreasury stock¥290,810¥679,288¥1,375,107¥(5,248)

Cash dividends paid——

(25,922)—(25,922)

Net income
Net changes in items otherthan those in shareholders’equity——183,691—

183,691

—

—

—

—

—

—

—

157,769—

157,769¥290,810¥679,288¥1,532,876¥(5,248)¥2,497,726

Balance as of April 1, 2013

Total changes during theperiodBalance as of March 31, 2014

¥2,339,957

Millions of yen
Accumulated other comprehensive income

For the year ended March 31, 2014

Unrealized gain
Unrealized holding(loss) from hedging
gain on securities
instruments

Translation
adjustments

Total accumulated other
Minority interests
comprehensive income

Total net assets¥34,742¥ 16,244¥ 90,350¥141,336¥189,691

Cash dividends paid

—

—

—

—

—

(25,922)

Net income
Net changes in items otherthan those in shareholders’equity

—

—

—

—

—

183,691

9,995(33,823)

175,875

152,047

15,237167,284

9,995(33,823)

175,875

152,047

15,237325,053¥44,737¥(17,579)¥266,225¥293,383¥204,928¥2,996,037

Balance as of April 1, 2013

Total changes during theperiodBalance as of March 31, 2014

¥2,670,984

Thousands of U.S. dollars (Note 3)
Shareholders’ equity

For the year ended March 31, 2014

Common stock

Capital surplus

Retained earnings

Total shareholders’equityTreasury stock$2,825,593$6,600,155$13,360,931$(50,991)

Cash dividends paid——

(251,866)—(251,866)

Net income
Net changes in items otherthan those in shareholders’equity——1,784,794—

1,784,794

—

—

—

—

—

—

—

1,532,928—

1,532,928$2,825,593$6,600,155$14,893,859$(50,991)$24,268,616

Balance as of April 1, 2013

Total changes during theperiodBalance as of March 31, 2014

$22,735,688

Thousands of U.S. dollars (Note 3)
Accumulated other comprehensive income

For the year ended March 31, 2014

Unrealized gain
Unrealized holding(loss) from hedging
gain on securities
instruments

Translation
adjustments

Total accumulated other
Minority interests
comprehensive income

Total net assets$ 157,832$ 877,866$1,373,261$1,843,092

—

—

—

—

—

(251,866)

Net income
Net changes in items otherthan those in shareholders’equity

—

—

—

—

—

1,784,794

97,114(328,634)

1,708,852

1,477,332

148,047

1,625,379

97,114(328,634)

1,708,852

1,477,332

148,047

3,158,307$434,677$(170,802)$2,586,718$2,850,593$1,991,139$29,110,348

Total changes during theperiodBalance as of March 31, 2014

$25,952,041

See accompanying notes to consolidated financial statements.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information$337,563

Cash dividends paid

Balance as of April 1, 2013099

Consolidated Statement of Cash Flows
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2014

Thousands of
U.S. dollars(Note 3)

Millions of yen

2013

2014

2014

¥718,146¥750,078$7,287,971

Depreciation and amortization

51,91650,917494,724

Amortization of goodwill
Provision for allowance for recoverable accounts under
production sharing
Provision for exploration projects

6,761

6,761

65,692

16,354

14,883

144,608

21,132(17,318)(168,267)

Provision for accrued retirement benefits to employees

2,285

—

—

Other provisions

5,547

5,024

48,815

Cash flows from operating activities
Income before income taxes and minority interests

Liability for retirement benefits
Interest and dividend income(777)(7,550)(26,691)(259,337)

Interest expense

1,518

2,335

22,688Foreign exchange loss

16,33014,105137,048

Equity in losses of affiliates
Recovery of recoverable accounts under production sharing(capital expenditures)
Recoverable accounts under production sharing(operating expenditures)
Accounts receivable—trade

1,041

5,053

49,09654,087

67,073651,700(21,079)(60,491)(587,748)

2,795

6,277

60,989Inventories(3,232)(10,014)(97,299)

Accounts payable—trade

11,0305,413

52,594

Accounts receivable—other

4,910(35,288)(342,868)

Accounts payable—other(900)(18,142)(176,273)

Advances received(24,636)

2,168

21,065

Other(72,531)(5,247)(50,981)774,907756,119

7,346,667

19,652

26,932

261,679

SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

100—(16,567)

INPEX CORPORATION Annual Report 2014

(1,344)(2,381)(23,134)(540,868)(567,156)(5,510,649)¥252,347¥213,514$2,074,563

Thousands of
U.S. dollars(Note 3)

Millions of yen

2013

2014

2014

Payments for time deposits¥(299,460)¥(211,332)$(2,053,362)

Proceeds from time deposits

134,162276,248

2,684,104

Payments for long-term time deposits(252,082)(484,081)(4,703,469)

Cash flows from investing activities

Proceeds from long-term time deposits
Payments for purchases of tangible fixed assets

5,000

130,757

1,270,472(189,153)(323,651)(3,144,685)

Proceeds from sales of tangible fixed assets

116

677

6,578

Payments for purchases of intangible assets(4,256)(6,171)(59,959)

Payments for purchases of marketable securities(17,710)——Proceeds from sales and redemptions of marketable securities

366,633

285,452

2,773,533

Payments for purchases of investment securities(90,831)(24,637)(239,380)

Proceeds from sales and redemptions of investment securities
Investment in recoverable accounts under production sharing(capital expenditures)
Increase in short-term loans receivable

70,90262,433606,617(82,696)(104,073)(1,011,203)(85)(4,187)(40,682)Long-term loans made(141,222)(37,158)(361,038)

Collection of long-term loans receivable

119,238

75,464

733,230

Payments for purchase of mining rights(176,232)(42,734)(415,216)

67,806

11,438111,135(489,870)(395,555)(3,843,325)

991

2,691

26,146

Proceeds from long-term debt

121,572

74,742726,215

Repayment of long-term debt

(4,682)(7,760)(75,398)

Other
Net cash used in investing activities
Cash flows from financing activities
Increase in short-term loans

Proceeds from minority interests for additional shares

55,852

10,28999,971

Cash dividends paid

(27,385)(25,935)(251,992)

Dividends paid to minority shareholders(4,992)(4,992)(48,504)

Other(4,287)

(74)

(719)

Net cash provided by financing activities

137,069

48,961

475,719

Effect of exchange rate changes on cash and cash equivalents

51,49850,752

493,121

Net decrease in cash and cash equivalents(48,956)(82,328)(799,922)

Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents from newly consolidated
subsidiary
Decrease in cash and cash equivalents resulting from exclusion ofsubsidiaries from consolidation
Cash and cash equivalents at end of the year

249,233

199,859

1,941,887

440

—

—

(858)

—

—

¥ 199,859¥ 117,531$ 1,141,965

See accompanying notes to consolidated financial statements.

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014101

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, 2014.

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 12companies, 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 minority
interests at fair value as of the date of acquisition is accounted for as
goodwill and amortized over 20 years on a straight-line 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

102

INPEX CORPORATION Annual Report 2014

during the period. The components of net assets excluding minority
interests are translated at their historical exchange rates. The
differences arising from the translation are presented as translation
adjustments and minority interests in the accompanying 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.

(r) Asset retirement obligations(i) Allowance for investments in exploration(s) Hedge accounting

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.

The deferred hedge accounting method is used for hedging
transactions. The allocation method is applied to foreign exchange
forwards that meet certain criteria. The special treatment is applied
to the interest rate swaps that meet certain criteria. In addition,
derivative transactions are limited to the scope of actual demand, andthe Company does not engage in speculative derivative transactions.

(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.

Asset retirement obligations are provided by a reasonable estimateof retirement costs incurred upon termination of the operation withrespect to oil and gas production facilities in case that the Company
is obliged to retire such facilities by oil and gas contracts or laws andregulations with the countries in which the Company operates or has
working interests.

(t) Research and development expenses
Research and development expenses are charged to income as
incurred.

(k) Intangible assets (except leased assets)(u) Income taxes

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 by the straight-line method.
Capitalized computer software costs are amortized by the straightline method over a period of five years.

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.

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

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

(n) Accrued bonuses to officers
Accrued bonuses to officers are provided at the expected payment
amount for the fiscal year.

(o) Provision for loss on business
Provision for loss on business is provided for future potential
losses on oil and gas development, production and sales businessindividually 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

Effective the year ended March 31, 2014, the Company has appliedthe “Accounting Standard for Retirement Benefits” (AccountingStandards Board of Japan Statement No. 26, issued on May 17, 2012)
and the “Guidance on Accounting Standard for Retirement Benefits”(ASBJ Guidance No. 25, issued on May 17, 2012), except for certain
provisions described in the main clause of Section 35 of the standard
and in the main clause of Section 67 of the guidance.
The Company has changed its treatment to record retirement
benefit obligations less plan assets as “Liability for retirement
benefits”.
As a result of the change, the consolidated balance sheet as ofMarch 31, 2014 shows liability for retirement benefits of ¥7,793
million ($75,719 thousand). The change does not affect accumulated
other comprehensive income because actuarial gains and losses arecharged or credited to income as incurred.

(w) Standards issued but not effective• ”Accounting Standard for Retirement Benefits" (ASBJ Statement
No.26, issued on May 17, 2012)• ”Guidance on Accounting Standard for Retirement Beneﬁts" (ASBJ
Guidance No.25, issued on May 17, 2012)(Overview)
Revisions apply mainly to the accounting treatments of unrecognizedactuarial gains and losses as well as unrecognized prior service costs,
the calculation methods for retirement benefit obligations as well
as service costs, and broaden disclosures taking into consideration
improvements to financial reporting and international trends.
(Scheduled Effective Date)
The revisions to the calculation method for retirement benefit
obligations and current service costs will be applied from the
beginning of the year ending March 31, 2015.
(The impact of the adoption of the revised accounting standard andguidance)
The impact of the adoption of the revised accounting standard andguidance on operating income and income before income taxes andminority interests in the year ending March 31, 2015 will be immaterial.
• ”Revised Accounting Standard for Business Combinations” (ASBJ
Statement No.21, issued on September 13, 2013)• ”Revised Accounting Standard for Consolidated Financial

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information(Method of attributing expected retirement benefits to proper
periods)
When calculating retirement benefit obligations, the straight-line
method is used for attributing expected retirement benefits toperiods through March 31, 2014. 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.
(Method of recognizing actuarial differences)
Actuarial gains and losses are charged or credited to income as
incurred.

(v) Adoption of new accounting standard

103

Statements” (ASBJ Statement No.22, issued on September 13,
2013)• ”Revised Accounting Standard for Business Divestitures” (ASBJ
Statement No.7, issued on September 13, 2013)• ”Revised Accounting Standard for Earnings Per Share” (ASBJ
Statement No.2, issued on September 13, 2013)• ”Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No.10, issued on September 13, 2013)• ”Revised Guidance on Accounting Standard for Earnings Per Share”(ASBJ Guidance No.4, issued on September 13, 2013)(Overview)
Revisions of these accounting standards mainly apply to (i) the
accounting treatment of any changes in a parent’s ownership interestin a subsidiary when the parent retains control over the subsidiary, (ii)the accounting for acquisition-related costs, (iii) the presentation of
net income, the change of name from ”minority interests” to ”noncontrolling interests” and (iv) the transitional treatments for theseaccounting standards.
(Scheduled Effective Date)
The revised accounting standards and guidance are scheduled totake effect from the beginning of the year ending March 31, 2016.
The transitional treatment will be applied to business combinations
executed at or after the beginning of the year ending March 31,
2016.
(The impact of the adoption of the revised accounting standards andguidance)
The impact of the adoption of revised accounting standards andguidance on consolidated financial statements are now underevaluation.

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¥102.92=US$1.00, the approximate exchange rate in effect as of March 31, 2014. 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 forthe principal on certain outstanding amounts of the Company’s
long-term loans. The Development Bank of Japan and Japanesecommercial banks 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 of104

INPEX CORPORATION Annual Report 2014

these 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 derivative transactions management outline. For derivativetransactions exposed to market price fluctuation, market values ofthese derivatives are regularly reported to the Executive Committee,

and the Company only transacts with financial institutions with highcredit 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, 2013 and 2014 is as follows:
Millions of yen
March 31, 2013

Acquisition cost

Carrying value

Securities with carrying values exceeding their acquisition costs¥ 11,937¥ 21,926
Stock
Bonds:
356,284
357,528
Public bonds
60,05060,152
Corporate bonds
33,64837,549Other debt securities
205,185
228,948
Other
667,104
706,103
Subtotal
Securities with acquisition costs exceeding their carrying values
40,45137,824Stock
Bonds:
29,13728,982Public bonds
35,00034,966
Corporate bonds
104,588
101,772
Subtotal¥771,692¥807,875
Total

Unrealized gain
(loss)¥ 9,989
1,244
102
3,901
23,76338,999(2,627)(155)(34)(2,816)¥36,183

Millions of yen
March 31, 2014

Acquisition cost

Carrying value

Securities with carrying values exceeding their acquisition costs¥ 16,699¥ 29,652
Stock
Bonds:
166,875
167,554
Public bonds
70,31670,353
Corporate bonds
25,09931,444
Other debt securities
139,524
169,346
Other
418,513468,349
Subtotal
Securities with acquisition costs exceeding their carrying values
35,69032,324Stock
Bonds:
2,025
2,025
Public bonds
37,71534,349Subtotal¥456,228¥502,698
Total

Unrealized gain
(loss)

Thousands of U.S. dollars
Unrealized gain
Acquisition cost
Carrying value(loss)¥12,953$ 162,252$ 288,107$125,855

679
37
6,345
29,822
49,836

1,621,405
683,210
243,869
1,355,655
4,066,391

1,628,002
683,570
305,519
1,645,414
4,550,612

6,597
360
61,650289,759484,221(3,366)

346,774

314,069(32,705)(0)(3,366)¥46,470

19,676366,450$4,432,841

19,676
333,745$4,884,357(0)(32,705)$451,516(b) Information regarding sales of securities classified as other securities for the years ended March 31, 2013 and 2014 is as follows:Year ended March 31, 2013

Proceeds
from sales

Bonds
Public bonds
Total¥121,781¥121,781

Year ended March 31, 2014

Proceeds
from sales

Bonds
Public bonds
Other
Total

¥ 72,563
76,307¥148,870

Millions of yen
Gain on
sales

¥187
¥187
Millions of yen
Gain on
sales

¥

182
10,307¥10,489

Loss on
sales

¥—
¥—

Loss on
sales

¥—
—
¥—

Proceeds
from sales$ 705,043
741,420$1,446,463

Thousands of U.S. dollars
Gain on
sales

$

1,768
100,146$101,914

Loss on
sales

$—
—
$—

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014105

(c) Components of securities for which it is extremely difficult to determine fair value as of March 31, 2013 and 2014 are summarized as follows:
Millions of yen
March 31,

Other securities
Unlisted securities
Preferred securities
Stocks of subsidiaries and affiliates
Total

Thousands of U.S. dollars

2013

2014

2014

¥ 30,728
5,000
110,655¥146,383¥ 33,842
5,000
112,576¥151,418$ 328,819
48,581
1,093,820$1,471,220

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 among unlisted securities and stocks of subsidiaries and affiliates, an allowance for investments in exploration isprovided at an estimated amount based on the financial position of the investees.
(d) Redemption schedule for securities with maturity dates classified as other securities as of March 31, 2014 is as follows:
Millions of yen
March 31, 2014

Bonds
Public bonds
Corporate bonds
Other debt securities
Other
Total

1 year or lessMore than 1
year but lessthan 5 years¥ 66,000
18,50015,45066,004¥165,954¥ 80,000
51,80015,43866,096¥213,334

Thousands of U.S. dollars

More than 5More than 10
years but less
1 year or lessyears
than 10 years¥22,500———¥22,500

¥—
—
—
—
¥—

More than 1
year but lessthan 5 years$ 641,275
179,751
150,116
641,314$1,612,456

More than 5More than 10
years but lessyears
than 10 years$ 777,303
503,303150,000
642,208$2,072,814$218,616———$218,616

$—
—
—
—
$—

(e) Loaned securities classified as investment securities as of March 31, 2013 and 2014 are as follows:
Millions of yen
March 31,

2013

Investment securities¥—

Thousands of U.S. dollars

2014

2014

¥20,064$194,948

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT(a) Short-term borrowings as of March 31, 2013 and 2014 are as follows:
Millions of yen
March 31,

Short-term borrowings from banks and others(Interest rates ranging from 0.950% to 2.174% and from
0.839% to 1.963% at March 31, 2013 and 2014)

Thousands of U.S. dollars

2013

2014

2014

¥1,170¥4,327$42,042(b) Long-term debt as of March 31, 2013 and 2014 is as follows:
Millions of yen
March 31,

Loans from banks and others, due through 2028
(Interest rates ranging from 0.509% to 2.700% and from 0.366%
to 2.500% at March 31, 2013 and 2014)
Less: Current portion

Thousands of U.S. dollars

2013

2014

2014

¥474,300¥579,301$5,628,653

7,391¥466,909

17,627¥561,674

171,269$5,457,384(c) Assets pledged as of March 31, 2013 and 2014 are as follows:
Millions of yen
March 31,

Buildings and structures
Wells
Machinery, equipment and vehicles
Investment securities
Other
Total

106

INPEX CORPORATION Annual Report 20142013

¥ 2,091
1,214
8,974
7,395
227
¥19,901

Thousands of U.S. dollars

2014¥ 2,082
181
8,027
790
222
¥11,3022014$ 20,229
1,759
77,992
7,676
2,157$109,813

(d) The above assets were pledged against the following liabilities:
Millions of yen
March 31,

Short-term borrowings
Accounts payable—other
Long-term debt
Other
Total

Thousands of U.S. dollars

2014

2013

2014

¥ 946
385
492
17
¥1,840

¥ 997
5,119
1,437
17
¥7,570$ 9,192
3,741
4,780
165
$17,878(e) In addition, assets pledged as collateral for the Ichthys LNG Project Finance and the BTC Pipeline Project Finance are as follows:(Ichthys LNG Project Finance)
Millions of yen
March 31,

Cash and cash equivalents
Accounts receivable—other
Other (Current assets)
Land
Construction in progress
Investment securities
Long-term loans receivable
Total

¥

2013

3,602
160
64,631
133
172,378
15,758—¥256,662¥

Thousands of U.S. dollars

2014

7,835
—
5,430
146
382,224—
27,309¥422,944$

2014

76,127—52,7591,419
3,713,797—
265,342$4,109,444(BTC Pipeline Project Finance)
Millions of yen
March 31,

Investment securities

Thousands of U.S. dollars

2014

2013

¥6,378¥5,2402014$61,970(f) The aggregate annual maturities of long-term debt subsequent to March 31, 2014 are summarized as follows:
Years ending March 31,

Millions of yen

Thousands of U.S. dollars

2015
2016
2017
2018
2019
2020 and thereafter
Total¥ 17,627
23,74460,71935,76555,931
385,515¥579,301$ 171,269
230,703589,963
347,503
543,442
3,745,773$5,628,653

7Financial &Corporate Information

INPEX CORPORATION Annual Report 2014107

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 33.3% for the years ended March 31, 2013 and 2014.
(a) The effective tax rates reflected in the consolidated statement of income for the years ended March 31, 2013 and 2014 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

2013

2014

33.3%

33.3%

0.6
(0.7)
2.6
69.3
(22.1)(10.7)
0.3
(0.2)
1.3
73.7%

0.6
(0.7)
0.6
73.5
(15.1)(15.7)
0.3
(2.0)
0.3
75.1%

(b) The significant components of deferred tax assets and liabilities as of March 31, 2013 and 2014 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
Accrued retirement benefits
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
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
Unrealized gain from hedging instruments
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

108

INPEX CORPORATION Annual Report 2014

2013

2014

¥ 90,332
3,205
6,992
2,579
33,28846,021
43,238
2,659
—
1,140

¥ 94,419
3,196
10,0401,054
32,221
62,175
11,649
—
2,369
2,148

2014
$

917,402
31,05397,551
10,241
313,068
604,110113,185—
23,01820,871

795

8,385

81,471

5,574
5,974
21,642
263,439(195,665)
67,774

10,8293,901
18,788261,174(188,518)
72,656105,218
37,903
182,550
2,537,641(1,831,695)
705,946

27,04884,960825,496

3,551

955

9,279

5,377

4,671

45,385

1,759

1,795

17,441

11,274
1,424
10,442
4,780
65,655¥ 2,119

11,218
1,807
—
4,821
110,227¥ (37,571)

108,997
17,557—
46,842
1,070,997$ (365,051)

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, 2013 and 2014 are as follows:
Millions of yen
Years ended March 31,

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

Thousands of U.S. dollars

2013

2014

2014

¥ 29,075(138)
28,937(1,150)27,787¥ 20,843(10,473)
10,370(388)
9,982$ 202,517(101,759)
100,758(3,770)96,98824,873(8,104)
16,769(31,329)
10,441(20,888)(304,402)
101,448(202,954)

105,692

176,311

1,713,088(1,964)387(1,577)¥148,671(14,316)
7,642(6,674)¥158,731(139,099)
74,252(64,847)$1,542,275

9. NET ASSETSThe Company conducted a stock split at a ratio of 1:400 of common
stock with October 1, 2013 as the effective date. As a result, 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 of March 31, 2014.
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 material assets or businessintegration;• Appointment and removal of directors• Disposition of material assets• Amendments to the Article of Incorporation with respect to (i) the
purpose of the Company’s business and (ii) the granting of voting
rights to the Company’s shares other than common stock• Business integration• Capital reduction• 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.
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, 2014
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
Yen

U.S. dollars

Years ended March 31,

2013

2014

Net assets per share¥1,699.10¥1,911.25$18.57

17.50

18.00

0.17

¥ 125.29¥ 125.78$ 1.22

Cash dividends per share
Net income per share

2014

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

Diluted net income per share is not presented because there are no dilutive potential of shares of common stock.
Net assets per share are computed based on the net assets excluding minority interests and the number of common stock outstanding at theyear 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.
The Company conducted a stock split at a ratio of 1:400 of common stock with October 1, 2013 as the effective date. Net assets per share,
cash dividends per share and net income per share are calculated based on the assumption that the stock split was conducted on April 1, 2012.

710911. DERIVATIVE TRANSACTIONS(a) Derivatives not subject to hedge accounting
There is no derivative not subject to hedge accounting as of March 31, 2013 and 2014.

(b) Derivatives subject to hedge accounting
Contract amounts and fair value regarding derivatives subject to hedge accounting as of March 31, 2013 and 2014 are as follows:
Millions of yen
March 31, 2013

Principal items hedged

Contract amounts

Due after one year

Fair value

Forecasted
transactions inforeign currencies¥157,614¥—¥31,329

Long-term debt¥

¥4,760*2Foreign exchange forwards *1
Buy (USD)(Deferred hedge accounting)Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

4,820

Millions of yen
March 31, 2014

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*2

Thousands of U.S. dollars
March 31, 2014

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

Principal items hedged

Contract amounts

Due after one year

Long-term debt

$46,250$46,250

Fair value*2*1 Fair value is the price obtained from the counterpar ty financial institutions.
*2 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, 2013 and 2014 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, 2013

Carrying value

Estimated fair value

Time deposits¥ 284,469¥ 284,502

Long-term time deposits

287,273

289,007

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

8,561
¥466,909

8,507¥456,404

Millions of yen

Thousands of U.S. dollars

March 31, 2014

Carrying value

Estimated fair value

Carrying value

Estimated fair value

Time deposits¥555,948¥560,455$5,401,749$5,445,540

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

364,103367,841

3,537,728

3,574,048

21,954

21,744

213,311211,271¥561,674¥551,721$5,457,384$5,360,678(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 the same method as long-term time
deposits. 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.

(Long-term time deposits)
The fair value of long-term time deposits 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 deposit is entered into.

110

INPEX CORPORATION Annual Report 2014

(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 selling, general and administrative expenses amounted to ¥99 million and ¥40 million ($389
thousand) for the years ended March 31, 2013 and 2014, respectively.

14. RETIREMENT BENEFITS
Retirement benefits for the year ended March 31, 2013 are as follows:(a) Retirement benefit obligations
Millions of yen

Retirement benefit obligations
Plan assets at fair value¥(19,388)
10,808

Unfunded retirement benefit obligations
Unrecognized actuarial gain or loss
Accrued retirement benefits to employees(8,580)—¥ (8,580)(b) Retirement benefit expenses
Millions of yen

Service cost
Interest cost

¥ 877
301

Expected return on plan assets(235)

Amortization of actuarial gain or loss
Other*
Retirement benefit expenses

2,211
473
¥3,627*“Other” consists of the amount of contribution to defined contribution plan.

(c) The assumptions used in accounting for the above plans are as follows:
Discount rate
Expected return rate on plan assets
Period for amortization of actuarial gain or loss

1.0%
2.5%
Amortized as incurred

Retirement benefits for the year ended March 31, 2014 are as follows:(a) Defined benefit plans (excluding plans included in (b))(Reconciliation of beginning and ending balances of the retirement benefit obligations)Thousands of U.S.
dollars

Balance at beginning of the year
Service cost
Interest cost

¥18,743948
185$182,112
9,211
1,798

Actuarial loss (gain)
Retirement benefits paid
Balance at end of the year

25
(456)
¥19,445

242(4,430)$188,933

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Millions of yen

111

(Reconciliation of beginning and ending balances of plan assets at fair value)

Millions of yen

Thousands of U.S.
dollars

Balance at beginning of the year
Expected return on plan assets
Actuarial gain (loss)¥10,611265
1,024$103,099
2,575
9,949

Contributions to the plans
Retirement benefits paid
Balance at end of the year

541
(320)
¥12,121

5,257(3,109)$117,771(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¥19,445(12,121)$188,933(117,771)

Net liability (asset) on consolidated balance sheet

7,324

71,162

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

7,324¥ 7,324

71,162$ 71,162

Millions of yen

Thousands of U.S.
dollars

Retirement benefit obligations (funded plans)
Plan assets at fair value(Details of retirement benefit expenses)

Service cost
Interest cost

¥948
185

$9,211
1,798

Expected return on plan assets
Amortization of actuarial gain or loss
Retirement benefit expenses for defined benefit plans

(265)
(999)
¥(131)(2,575)(9,707)$(1,273)(Plan assets)
Components of plan assets

General accounts
Stock

44%
40%

Bonds
Other
Total

15%
1%
100%

(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.
(Basis of the actuarial assumptions)

1.0%
2.5%

Discount rateLong-term expected return rate on plan assets(b) Defined benefit plans applying simplified methods(Reconciliation of beginning and ending balances of liability for retirement benefits)

Millions of yen

112

Thousands of U.S.
dollars

Balance at beginning of the year
Retirement benefit expenses
Retirement benefits paid

¥448
100
(57)

$4,353972(554)

Contributions to the plans
Other
Balance at end of the year

(35)
13
¥469

(340)
126
$4,557INPEX CORPORATION Annual Report 2014

(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

Retirement benefit obligations (funded plans)
Plan assets at fair value

¥278
(216)

$2,702(2,099)Retirement benefit obligations (unfunded plans)

62
407

603
3,954

Net liability (asset) on consolidated balance sheet

469

4,557

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

469
¥469

4,557
$4,557(Retirement benefit expenses)

Millions of yen¥100

Retirement benefit expenses under simplified methods

Thousands of U.S.
dollars$972(c) Defined contribution plans
The Group’s contributions for defined contribution plans were ¥957 million ($9,298 thousand).

15. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2013 and 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2013

2014

2014

Balance at beginning of the year

¥13,142711
429¥17,395
6,209
782$169,015
60,328
7,598

New obligations
Accretion expenses
Obligations settled
Change in estimates *1
Other *2
Balance at end of the year

(359)

(198)

(1,924)

1,997
1,475
¥17,395

2,275
1,844
¥28,307

22,105
17,917$275,039*1 ”Change in estimates” for the year ended March 31, 2014 mainly reflects increasing site restoration and decommissioning costs of certain
subsidiaries which became evident in the year ended March 31, 2014.
*2 ”Other” mainly includes the change due to foreign exchange rates fluctuation.

16. GOODWILL
The changes in the carrying amount of goodwill for the years ended March 31, 2013 and 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2013

2014

2014

Balance at beginning of the year
Goodwill acquired during the year
Amortization of goodwill
Balance at end of the year

¥94,602—(6,761)¥87,841¥87,841—(6,761)¥81,080$853,488—(65,692)$787,796

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014113

17. LEASES
Future minimum lease payments subsequent to March 31, 2014 for operating lease transactions are summarized as follows:(a) As lessee
Millions of yen

Thousands of U.S. dollars¥ 4,398
11,492¥15,890$ 42,732
111,660$154,392

Millions of yen

Thousands of U.S dollars

20152016 and thereafter
Total(b) As lessor

¥104
277
¥381

2015
2016 and thereafter
Total$1,0102,692$3,702

18. CONTINGENT LIABILITIESAs of March 31, 2014, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of affiliates in theaggregate amount of ¥25,186 million ($244,714 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, 2014 was ¥17,531 million ($170,336 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, 2014, was¥600,030 million ($5,830,062 thousand).

19. SEGMENT INFORMATION
Segment information for the years ended March 31, 2013 and 2014(a) Overview of reportable segments
The reportable segments for the Group’s oil and gas development activities are composed of individual mining area and others for which
separate financial information is available in order for the Board of Directors to make Group management decisions. Since the Group operates
oil and 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 gas in each segment. In addition, the Company conducts marketing activities for petroleum products andothers 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.”(c) Information on sales and income (loss), assets and other items by reportable segment
Millions of yen

114

Eurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaYear ended March 31, 2013

Japan

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
assets¥118,937
118,937
28,568265,467¥485,275
485,275
281,623
690,763¥ 85,541
85,541
41,752526,519¥520,835
520,835
357,343
266,649

17,603

17,033

9,066

—

—

—

1,857

46,818¥ 24,656¥203,853

INPEX CORPORATION Annual Report 2014¥

Americas

¥

Total

5,945
5,945
(6,089)188,209¥1,216,533
1,216,533
703,197
1,937,607

5,850

1,012

—

(192)

—

53,243

1,024¥ 20,595

Adjustments *1 Consolidated *2¥——(9,749)1,678,552¥1,216,533
1,216,533
693,4483,616,159

50,564

1,352

51,916

(192)

6,953

6,761

4,159

106,077—

106,077¥108,373¥ 358,501

1,486¥ 359,987¥

Millions of yen
Eurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas¥ 11,435 ¥1,334,626
11,435
1,334,626(7,646)
743,759
265,348
2,413,674

Adjustments *1 Consolidated *2

Year ended March 31, 2014

Japan

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
assets¥120,268
120,268
22,771
286,414¥ 485,069
485,069
264,849
1,038,265¥ 96,341
96,34142,601
535,046¥621,513
621,513421,184
288,601

18,838

8,822

10,417

6,772

4,672

49,521

1,396

50,917

—

—

—

—

(192)

(192)

6,953

6,761

2,000

39,124—65,184

2,015

108,323—

108,323¥ 42,404¥ 285,903

4,073¥ 35,195¥ 51,583¥ 419,158417¥ 419,575

¥

Total

¥

— ¥1,334,626—
1,334,626(10,149)
733,610
1,624,465
4,038,139¥

Thousands of U.S. dollars
Eurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas$ 111,106 $12,967,606
111,106
12,967,606(74,291)
7,226,574
2,578,197
23,451,943

Adjustments *1 Consolidated *2

Year ended March 31, 2014

Japan

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
assets$1,168,558
1,168,558
221,250
2,782,880$ 4,713,068
4,713,068
2,573,348
10,088,078$ 936,077
936,077
413,923
5,198,659$6,038,797
6,038,797
4,092,344
2,804,129

183,035

85,717

101,215

65,79945,394

481,160

13,564

494,724

—

—

—

—

(1,866)(1,866)67,55865,692

19,433

380,140—

633,346

19,5781,052,497—

1,052,497$ 412,009$ 2,777,915

39,574$ 341,965$ 501,195$ 4,072,658

4,052$ 4,076,710

$

Total

$

— $12,967,606—
12,967,606(98,611)
7,127,963
15,783,764
39,235,707$*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 statements of income.

(d) Products and service information(Sales to third parties)

Millions of yen

Crude oil
Natural gas (excluding LPG)
LPG
Other
Total

Thousands of U.S. dollars

2013

2014

2014

¥ 788,135
370,528
27,23830,632¥1,216,533¥ 858,754
431,187
24,227
20,458¥1,334,626$ 8,343,898
4,189,536
235,396
198,776$12,967,606

Years ended March 31,(e) Geographical information(Sales)Millions of yen

Japan
Asia & Oceania
Other
Total

Thousands of U.S. dollars

2013

2014

2014

¥ 634,788
564,253
17,492¥1,216,533¥ 682,353
620,339
31,934¥1,334,626$ 6,629,936
6,027,390
310,280$12,967,606

Years ended March 31,(Tangible fixed assets)

Millions of yen

Thousands of U.S. dollars

March 31,

2013

2014

Japan
Australia
Other
Total

¥235,674
227,358
121,509¥584,541¥248,247
520,976
182,556¥951,779

2014$2,412,039
5,061,951
1,773,766$9,247,756(Sales to major customers)

Millions of yen

Thousands of U.S. dollars

Years ended March 31,

2013

2014

2014

PERTAMINA
Idemitsu Kosan Co., Ltd.

¥206,282¥132,908¥217,519¥156,151$2,113,476$1,517,208

Segment
Asia & Oceania
Middle East & Africa

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information(f) Information by major customer

7

115

20. RELATED PARTY TRANSACTIONSThere are the following related party transactions for the years ended March 31, 2013 and 2014.

(a) Affiliated company
Year ended March 31, 2013
Amounts
Description of
the business Transaction detail
Millions of yen
relationship

Name ofrelatedparty

Location

Ichthys
LNG Pty
Ltd

Transportation,
Serve theliquefaction and sales ofofficer
Western$482,700 oil and natural gas through Indirectly
concurrently,
Australia,
pipeline in WA-50-L
66.07%
thousandcapitalAustralia
block in offshore Western
subscription
Australia

Capitalinvestment

Nature ofoperations

Votinginterest

Amounts
Title of accountLoans of funds*
Collection ofloans*¥141,153

Debt guarantee

128,864—

Exploration, development,
Angola€18
production and sales of Indirectly Capital Subscription for
Hague,
Block 14
Netherlands thousand oil in Block 14 in offshore 49.99% subscription new shares
B.V.
Republic of Angola¥ 37,621—

Millions of yen

Short-term loans
119,139 receivable¥58,700——¥* The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.

Year ended March 31, 2014
Name ofrelatedparty

Ichthys
LNG PtyLtd

Location

Capitalinvestment

Nature ofoperations

Votinginterest

Descriptionof thebusinessrelationshipAmounts

Amounts
Transaction
detailTransportation,liquefaction andServe the Interest
sales of oil andWestern
officer income*$482,700
Indirectly
natural gas throughAustralia,
concurrently,
66.07%
thousandpipeline in WA-50-L
Australia
capitalblock in offshore
subscription
Western Australia

Title of
Millions of Thousands of account Millions of Thousands ofyen
U.S. dollars
yen
U.S. dollars¥

Debt
guarantee

7,976¥600,030$

Current
assets:other(accrued
77,497 revenue)¥ 2,133$ 20,725

Longterm loans
receivable

27,309265,342$5,830,062

—

¥

—

$

—

* The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.

(b) Note related to the parent company or significant affiliated companies
The significant affiliated company for the year ended March 31, 2013 and 2014 is Ichthys LNG Pty Ltd. The summary of its financial information
are as follows:
Millions of yen

2013

Total current assets¥ 47,429¥

Total fixed assets

550,378

1,262,541

Total current liabilities

227,942

57,265556,403

Total long-term liabilities

336,847

1,229,360

11,944,812

Total net assets

33,01923,154

224,971

Net sales
Net loss before income taxes
Net loss

116

Thousands of U.S. dollars

Years ended March 31,

INPEX CORPORATION Annual Report 2014¥2014
47,238

2014$

458,978
12,267,208

—

—

—

1,511

3,367

32,715

694

¥

2,018

$

19,607

Independent Auditorʼs Report

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, 2014, 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. Thosestandards 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 fairpresentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour 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, 2014, and their consolidated financial performance and cash flows for the year thenended 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
for the convenience of readers, and, in our opinion, the accompanying consolidated financial statements
have been properly translated on the basis described in Note 3.

7
Financial &Corporate Information

June 25, 2014
Tokyo, JapanINPEX CORPORATION Annual Report 2014117

Subsidiaries and Affiliates
As of March 31, 2014

Consolidated Subsidiaries
Company name

Voting rights
held by us (%)

Main business

INPEX Natuna, Ltd.

5,000

100.00%Exploration, development, production and sales ofoil and natural gas in the South Natuna Sea Block B,
Indonesia

INPEX Sahul, Ltd.

4,600

100.00%Exploration, development, production and sales ofoil and natural gas in the JPDA03-12 Block and BayuUndan gas-condensate field in the Timor Sea JPDA

INPEX Alpha, Ltd.

8,014

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

INPEX Tengah, Ltd.

1,020

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

INPEX Browse, Ltd.

418,190

100.00%Financing for oil and natur al gas explor ation anddevelopment in the WA-285-P Block and others, Australia

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

100.00%Exploration and development of oil and natural gas in
the Ichthys gas-condensate field (WA-50-L), Australia

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

100.00%Exploration of oil and natural gas in the WA-494-P
Block and others, Australia

INPEX Masela, Ltd.

35,42851.93%

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

INPEX South Makassar, Ltd.

1,097

100.00%Exploration, development, production and sales of oil
and natural gas in the Sebuku Block in the Makassar
Strait, Indonesia

INPEX Timor Sea, Ltd.

6,712

100.00%Exploration, development, production and sales of oil
and natural gas in the JPDA06-105 Block in the Timor
Sea JPDA(Thousands of
U.S. dollars)

100.00%Exploration and development of oil and natural gas in
the Prelude gas field (WA-44-L) and others, Australia

INPEX Babar Selaru, Ltd.

1,107

51.02%

Exploration of oil and natural gas in the Babar Selaru
Block, Offshore Indonesia

INPEX Offshore North West Sabah, Ltd.

2,045

100.00%Exploration of oil and natural gas in the deepwater
Block S located offshore Sabah, Malaysia

INPEX Southwest Caspian Sea, Ltd.

53,59451.00%

Exploration, development, production and sales of oilin the ACG Oil Fields, Azerbaijan

INPEX North Caspian Sea, Ltd.

50,68045.00%

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

Japan Oil Development Co., Ltd.

18,800100.00%Exploration, development, production and sales ofoil in the ADMA Block in Offshore Abu Dhabi, United
Arab Emirates

INPEX ABK, Ltd.

2,500

100.00%Exploration, development, production and sales of oilin the Abu Al Bukhoosh Block in Offshore Abu Dhabi,
United Arab Emirates

10100.00%Exploration, development, production and sales of oilin the Offshore D.R. Congo Block100.00%Inves t ment in oil ex plor ation, develop ment,
production and sales in Block 14, Offshore Angola

100.00%Exploration, development, production and sale ofnatural gas in the Copa Macoya Block and exploration,
development, production and sale of oil in the Guarico
Oriental Block, Bolivarian Republic of Venezuela

INPEX Oil & Gas Australia Pty Ltd

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

118

Issued capital*(Millions of yen)

802,688245,186

400,000

475,600

INPEX Angola Block 14 Ltd.

(Thousands of
U.S. dollars)

Teikoku Oil and Gas Venezuela, C.A.

(Thousands ofbolivars)

Teikoku Oil (North America) Co., Ltd.

(Thousands of
U.S. dollars)

100.00%Exploration, development, production and sales of oil
and natural gas in the Lucius oil field and others, in the
US Gulf of Mexico

INPEX Canada, Ltd.

20,580100.00%Exploration and development of oil including oil sandsin the Joslyn project, Canada

Teikoku Oil (Suriname) Co., Ltd.

7,257

56.78%

Exploration of oil in the Offshore Block 31, Suriname

INPEX CORPORATION Annual Report 2014

1,620

19,793

Company name

INPEX Gas British Columbia Ltd.

Issued capital*(Millions of yen)

1,043,488(Thousands
Canadian dollars)

Teiseki Pipeline Co., Ltd.

100
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 (%)

Main business45.09%

Exploration, development, production and salesof natural gas in the shale gas blocks of Horn River,
Cordova and Liard basins in British Columbia, Canada

100.00%Natural gas transportation, pipeline operation,
maintenance and management

100.00%Investment in Darwin LNG Pty Ltd, which constructs
and operates the undersea pipeline and LNG plantconnecting Bayu Undan Gas/Condensate Field andDarwin (Australia)

100.00%Investment in the pipeline construction andmanagement business that connects Baku (Azerbaijan),
Tbilisi (Georgia) and Ceyhan (Turkey)

INPEX Trading, Ltd.

50

100.00%

Sales, agency and brokerage of crude oil and market
research and sales planning in connection with oil andnatural gas sales

Saitama Gas Co., Ltd.

60

62.67%

City gas sales

37 other subsidiaries

Equity-Method Affiliates
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(Thousands of
U.S. dollars)

66.07%Engaged in laying the undersea pipeline from theIchthys gas-condensate field to the Darwin Onshore
LNG Plant and building the LNG plant, Australia

Angola Japan Oil Co., Ltd.

8,000

19.60%

Exploration, development, production and sales of oilin the Offshore 3/05 Block, Angola

INPEX Offshore North Campos, Ltd.

6,852

37.50%

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

49.99%

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

Company name

MI Berau B.V.
Ichthys LNG Pty Ltd

Angola Block 14 B.V.

Issued capital*(Millions of yen)

888,601(Thousands of
U.S. dollars)

482,700

18(Thousands ofeuros)

14 other equity-method affiliates

Subsidiaries of Equity-Method Affiliates
7
Frade Japão Petróleo Limitada

Issued capital*

103,051(Thousands
reais)

Main business

0.00%

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

Financial &Corporate Information

Company name

Voting rights
held by us (%)

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

INPEX CORPORATION Annual Report 2014

119

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 26, 2014 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

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INPEX CORPORATION Annual Report 2014

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.
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. 128.
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 thefour 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. 128.
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(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 amalgamation of the former t wo companies’ knowhow based on extensive operation experience in exploration,
development and production both within Japan and overseas aswell as their high level proprietary technologies.
The Group intends to actively pursue operator projects
focusing on the two large-scale LNG Ichthys and Abadi projects
taking into consideration the effective 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.
Engaging in projec t coordination as an operator willcontribute to the expansion of oppor tunities of block anda c r eag e a c q ui s i t io n t hro 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

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

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 development of the Ichthys and the Abadi, large-scale
LNG projects, being pursued by the Company requires a verylarge amount of investment, and the financing of these projects
could be impacted by changes in the economic and financial
environment. Following the discovery of resources, a delay inthe development schedule or the loss of the economic viabilityof the properties during the development process leading up
to production and the commencement of sales could have an
adverse effect on the Group’s operational results. Such delays
or losses may occur due to changes in the business environment

including a delay in the acquisition or modification of government
approvals, the occurrence of unanticipated problems related
to geological conditions, fluctuations in the price of oil or gas,fluctuations in foreign exchange rates, or escalating prices ofequipment and materials. In the case of LNG projects, suchdelays or losses may occur due to an inability to complete suchprocedural requirements as FID owing to the lack of any longterm contractual agreement with prospective purchasers withrespect to production.

121

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 will take steps to procure imported LNG as source
gas in connection with its Naoetsu LNG Terminal from August
2013. An inabilit y to procure natural gas regasified fromimported LNG and other imported gas as source gas due totroubles concerning suppliers or the Company’s Naoetsu LNG
Terminal may interfere with the Company’s ability to supply to
its customers. This could in 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 l e m s, t h e re is 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.
In November 2011, an oil sheen was discovered spreading in
the vicinity of the Frade oil field, in which an approximately 18.3%
interest is held by Frade Japão Petróleo Limitada (“FJPL”), which
is a subsidiary of INPEX Offshore North Campos, Ltd. (which isan equity-method affiliate of INPEX CORPORATION and in which
INPEX CORPORATION holds a 37.5% interest).

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INPEX CORPORATION Annual Report 2014

In March 2012, Chevron Brasil Upstream Frade Ltda., theFrade oil field project operator (“Chevron”), also identified asmall, new oil seepage emanating from a location different fromthat of the November 2011 oil seep. As a result, Chevron andits partner companies, including FJPL, temporarily suspended
production in the Frade oil field with production resuming on
April 30, 2013.
Relevant Brazilian agencies filed multiple lawsuits against,
and other notices with, Chevron, the operator of the field andother companies requesting compensation for damage and asuspension in operations and other measures in connection withthe oil seeps in November 2011 and March 2012. For example,
two lawsuits were filed by Brazil’s Federal Prosecution Service
against Chevron and other companies demanding damages
in the amount of 20 billion real (about 9 hundred billion yen at
the rate of one real to about 45 yen) as well as the temporary
suspension of operations in relation to each of the incidents in
November 2011 and March 2012.
On September 13, 2013, Chevron signed an agreement
to settle the aforementioned two lawsuits filed by Brazil’sFederal Prosecution Service. On September 27, 2013, the firstFederal Cour t of the Capital of the State of Rio de Janeiro
approved this agreement and handed down a ruling dismissing
the aforementioned two lawsuits. On November 11, 2013, thesame court issued a certificate certifying that its ruling became
final and binding. As a result of this, whilst some incidental
or connected proceedings remain outstanding pending theconclusion of future judgments to be made by the courts, theaforementioned two lawsuits are effectively considered to beconcluded. The INPEX group (including FJPL) is not a direct party
to any of these lawsuits or other actions, but if Chevron is madeto pay settlement money or bear any other financial burden asa result of signing the agreement related to these lawsuits or
actions, FJPL will be required to bear financial burden equivalent
to the portion of interest held by FJPL in accordance with the
Joint Operating Agreement for the Frade oil field, and, in such acase, FJPL would be liable to pay 17 million real (about 8 hundred
million yen at the same rate as set out above).
Additionally, in September 2013, INPEX CORPORATION’s
consolidated subsidiary, INPEX North Caspian Sea, Ltd. (“INCS”)
in which INPEX CORPORATION holds a 45% interest, began
crude oil production at the Kashagan oil field within the Offshore
North Caspian Sea Block in the Republic of Kazakhstan, in which
INCS holds a 7.56% interest. However, shortly after crude oil
production had begun, such production was suspended due tothe discovery of a leak from the gas pipeline. In response to thegas leak, North Caspian Operating Company, the operator, andAgip KCO, the company responsible for operations management(together, the “Operators”), flared the gas remaining in thegas pipeline at the produc tion facilities and emitted it. In
connection with this activity, the Atyrau Region of the Ministryof Environment Protection of the Republic of Kazakhstan issued
a notice on March 7, 2014, in relation to its monetary claim foran amount of 134.3 billion Kazakhstani Tenge (about 75 billion
yen at the rate of one Kazakhstani Tenge to about 0.56 yen), tothe Operators for the alleged violation of environmental laws.
The Operators are currently in dispute seeking revocation of
the notice. If the amount is ultimately assessed against the
Operators, there is a possibility that INCS will be required toshare responsibility in proportion to its interest under the Joint
Operating Agreement (about 5.7 billion yen).

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(2) The effect of fluctuations in exchange rates 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.
For the domestic natural gas businesses, the Company
has continued to purchase as source gas natural gas regasified
from imported LNG as a raw material in addition to natural
gas produced in Japan since January 2010. The price of theCompany’s natural gas sold in Japan is comprised of a fixed priceportion as well as a portion that reflects fluctuations in the priceof imported LNG. In addition to the direct impact of trends inthe market prices of LNG and competing energy sources on that
portion that reflects fluctuations in the price of imported LNG,
contract negotiations held each fiscal year with end purchasers
could have an indirect effect on the fixed price portion.

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 RISKof 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)
could have a significant impact on the Group’s business 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.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

The 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 application123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, 2014 however, the Middle East
and Africa regions accounted for about 41% and the Asiaand Oceania regions accounted for about 41% of the Group’s
production volume, making up the vast majority of the Group’s
operations.
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 theGroup’s overseas business activities. Although March 30, 1997
was the initial contract expiration date in the production sharing
contract for the Offshore Mahakam Block of Indonesia, theGroup’s principal geographical business area, an extension wasapproved in 1991, and the current expiration date is December
31, 2017. On the basis of the concession agreement for the
ADMA Block, the concession expiration date is March 8, 2018
(However, the expiration date for the Upper Zakum Oil Field
has been extended to December 31, 2041.) Although the Groupplans to make efforts together with partners to further extend
these agreements, inability to re-extend the agreements or
unfavorable contract terms and conditions at the time of reextension could have an adverse effect on the Group’s results.

Even should the agreements be re-extended, we anticipate
that remaining recoverable reserves may decrease at the timeof re-extension. Although the Group is striving to acquireinterests that can substitute these properties, failure to acquireparticipating interests in oil and gas fields to fully substitute forthese properties could have an 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 caseof fields where oil and/or gas reserves are found that are deemed
to be commercialized, and the Company is unable to decideon the transition to the development stage by the expiration of
the current contract, efforts will be made through negotiations
with the government of the oil- or gas-producing country inquestion to have the periods extended. However, there remains
the possibility that such negotiations may not be successfully
concluded, in which event the Company would be forced towithdraw from operations in the oil or gas field concerned. Also,
as a rule, when there has been a major breach of contract on
the part of one party, it is customary for the other party to havethe right to cancel the agreement before the expiration date.
The agreements for properties in these principal geographicalbusiness areas contain similar provisions. The Group has neverexperienced early cancellation of an agreement due to breachof contract, and we do not anticipate such an occurrence in the
future. Nevertheless, a major breach of contract on the partof a party to an agreement could result in cancellation of anagreement 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

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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 odistinctive. That is to say, the full amount of production received
is temporarily charged to cost of sales as the cost of received
production, and subsequently 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 26, 2014, 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” below.

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)

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

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,

125

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 of
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 supply

126

INPEX CORPORATION Annual Report 2014of energy for Japan as a national flagship company. On the basisof the concept of the Report, the Company issued the Class
A Stock because it can be considered an effective means ofpreventing risks such as a speculative hostile takeover.
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. The holder of the Class A Stock will
receive the same amount of dividends, interim dividends, anddistributions of residual assets as a holder of common stock.
The Class A Stock will be redeemed by resolution of the Boardof Directors of the Company if the holder of the Class A Stockrequests redemption or if the Class A Stock is transferred to a
party other than the government of Japan or an independentadministrative body that is fully funded by the government ofJapan.
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 ofthe 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.
4) Criteria for the exercise of veto rights provided in theguidelines
Guidelines concerning the exercise of the veto rights havebeen established in a Ministry of Economy, Trade and Industry
Notice (No. 220, 2008) (hereinafter the “Notice”). The guidelines
stipulate the exercise of veto rights only in the following specificcases.
• 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.
• When resolutions pertaining to disposition of material assets
are not voted down and the objects of disposition are oil andnatural gas exploration or production rights or rights similar
thereto or shares or ownership interest in the Company’s
subsidiary whose principal assets are said rights and it isjudged that the probability is high that the Company will
engage in management inconsistent with the role that a corecompany should perform for efficient realization of a stablesupply of energy to Japan.
• When resolutions pertaining to amendments to the Company’s
Articles of Incorporation relating to changes in the Company’sbusiness objectives, capital reduction, or dissolution are notvoted down and it is judged that the probability is high that
the Company will engage in management inconsistent withthe role that a core company should perform for efficient
realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Articles ofIncorporation granting voting rights to any shares other thanthe common shares of the Company are not voted down andcould have an effect on the exercise of the voting rights of theClass A Stock.
It is provided that the above guidelines 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
Although the Class A Stock was issued as a minimally required
measure to eliminate the possibility of management controlled
by foreign capital while not unreasonably impeding the efficiency
and flexibility of management, anticipated risks in connection
with the 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 and Industry
could exercise the veto rights in accordance with the above
guidelines provided in the Notice. As the guidelines have been
provided from the standpoint of efficient realization of a stablesupply of energy to Japan, it is possible that the exercise of theveto rights by the Minister of Economy, Trade and Industry could
conflict with the interest of other shareholders who hold theCompany’s common shares. Also, it is possible that the above
guidelines could be changed in the light of energy policy.
2) Impact of the exercise of veto rights on the 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 DIRECTORSAt 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 direc tors, including the four
outside 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.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

The Board of Directors of the Company is composed of 16
members, five of whom are outside directors.
The four outside directors have many years of management
experience in the Company’s business and are able to offer
objective, professional advice regarding operations. For thisreason, they were asked to join the Board of Direc tors tocontribute to the development of the Company’s business.
The four outside directors concurrently serve as director
or advisors of Japan Petroleum Exploration Co., Ltd., Mitsubishi
Corporation, Mitsui Oil Exploration Co., Ltd. and JX Holdings,
Inc. (hereinafter “shareholder corporations”), respectively.

127

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, 2012
16
651
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates
07Interim production(1)(49)
As of March 31, 201315609
Equity-method affiliates
As of March 31, 2012——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2013——
Proved developed and undeveloped reserves
As of March 31, 2013
15
609
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2013
15
609
Extensions and discoveries
7261
Acquisitions and sales——
Revisions of previous estimates(0)(8)
Interim production(1)(46)
As of March 31, 201421816
Equity-method affiliates
As of March 31, 2013——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2014——
Proved developed and undeveloped reserves
As of March 31, 2014
21
816
Proved developed reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201414557
Equity-method affiliates——
As of March 31, 2014
Proved undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 20146259
Equity-method affiliates
As of March 31, 2014——

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, 2014 were 1,278.38 million barrels for crude oil, condensate
and LPG, and 6,735.2 billion cubic feet for natural gas, for a totalof 2,531.85 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)

255
—
(24)
(1)
(21)
208

6,509
—
(698)
(92)
(212)
5,507

188
—
—
4
(9)
183

—
—
—
42
—
42

371
—
—
23
(31)
363

—
—
—
—
—
—

0
—
9
(0)
(0)
9

195
63
7
55
(24)
296

831
—
(15)
26
(63)
779

7,354
63
(691)
12
(284)
6,454

2
0
—
0
(0)
3

439
11
—
(116)
(19)
314

—
—
—
—
—
—

—
—
—
—
—
—

147
—
10
12
(27)
142

—
—
—
—
—
—

1
—
—
5
—
6

0
—
—
0
—
0

150
0
10
17
(27)
151

439
11
—
(116)
(19)
315

211

5,821

183

42

505

—

15

297

929

6,768

208
—
—
8
(17)
199

5,507
3
—
12
(217)
5,306

183
—
—
13
(10)
186

42
—
—
(15)
—
27

363
408
—
2
(31)
742

—
—
—
—
—
—

9
—
—
(0)
(0)
9

296
22
—
7
(37)
288

779
414
—
23
(59)
1,157

6,454
286
—
(4)
(300)
6,437

3
—
—
(1)
(0)
2

314
—
—
(1)
(15)
298

—
—
—
—
—
—

—
—
—
—
—
—

142
—
—
3
(30)
115

—
—
—
—
—
—

6
—
—
(1)
(0)
5

0
—
—
0
(0)
1

151
—
—
1
(31)
121

315
—
—
(1)
(15)
298

201

5,603

186

27

857

—

13

289

1,278

6,735

22

399

39

—

543

—

0

140

619

1,096

1

182

—

—

100

—

5

1

106

183

178

4,906

147

27

199

—

9

149

539

5,341

1

116

—

—

15

—

—

—

15

116

Note 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, 2014, the Group held proved
reserves in Australia of approximately 170.98 million barrels for crude oil and approximately 4,641.4 billion cubic feet for natural gas, for a total of 1,036.09 million boe.
2. Proved reserves (as of March 31, 2014) of the following blocks and fields include the portion attributable to minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%), Americas: Copa Macoya (30%), Horn River Area (54.91%)
3. MMbbl: Million barrels
4. Bcf: Billion cubic feet
5. Crude oil includes condensate and LPG

128

INPEX CORPORATION Annual Report 2014

Standardized measure of discounted future net cash flows and their changes relating to proved oil and gas reserves
for the year ended March 31, 2014
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, 2014 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.

March 31, 2013
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
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

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¥93.99 and ¥102.92 to the U.S. dollar as of March 31, 2013 and2014, respectively.
Since these figures are calculated in accordance with therules set forth by the FASB, which have the following aspects,
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.

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

Total

Japan

Americas¥12,788,034(4,119,855)(5,057,270)
3,610,909(2,264,436)
1,346,473¥960,873(176,309)(277,685)
506,879(244,270)
262,609¥6,238,258(2,242,999)(2,078,271)
1,916,987(1,369,592)
547,396¥1,702,492(438,236)(265,673)
998,583(545,223)
453,359¥3,736,754(1,188,643)(2,417,554)
130,557(80,178)
50,379¥149,658(73,669)(18,087)
57,903(25,172)
32,731

1,696,889(566,833)(974,897)
155,159(63,444)

—
—
—
—
—

168,545(76,271)(47,627)
44,647(31,381)

—
—
—
—
—

1,470,807(446,072)(925,608)
99,127(28,798)

57,537(44,490)(1,662)
11,385(3,265)91,715—

13,266—70,3308,119¥ 1,438,188¥262,609¥ 560,661¥ 453,359¥ 120,708¥ 40,850

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

March 31, 2014
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 consolidated and equity-method affiliates in standardized
measure of discounted future net cash flows¥17,341,495(5,214,355)(7,756,030)
4,371,111(2,724,139)
1,646,972

Japan¥1,216,700 ¥ 6,010,999(232,106) (2,022,074)(390,578) (1,791,151)
594,016
2,197,774(353,477) (1,399,641)
240,539
798,133¥1,830,647 ¥ 8,114,992(475,798) (2,430,435)(294,204) (5,270,507)
1,060,645
414,050(638,328)(301,903)
422,316
112,146¥168,157(53,942)(9,589)104,627(30,790)
73,837

1,502,675(559,626)(807,541)
135,508(34,528)

—
—
—
—
—

172,531(100,520)(37,642)
34,369(18,128)

—
—
—
—
—

1,283,450(422,426)(768,867)
92,158(13,834)

46,694(36,681)(1,032)8,981(2,566)

100,980—

16,242—78,324

6,414¥ 1,747,952¥ 240,539

814,375¥ 422,316

190,471¥ 80,252¥¥

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

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

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

129

INPEX CORPORATION and Consolidated
Subsidiaries
Standardized measure at beginning of the period
As of April 1, 2013
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, 2014

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

Total

Japan

Asia &
Oceania¥1,438,188¥262,609¥ 547,396¥453,359¥ 50,379¥32,731¥ 91,715(940,350)(64,803)(307,805)(87,312)(240,554)(5,615)(234,260)(767,958)(67,001)(370,213)(47,267)(249,342)(1,478)(32,656)

503,931(49,289)
857,625
176,596389,751
3,398
136,061—(4,216)48,17424,516
16,311—
24,950377,559
9,002
99,41083,103308,170—
51,511

49,610(19,356)(32,763)
48,49814,459—43,087

31,463(21,508)
724,450
5,944(196,868)
3,398
4,786

27,595(2,474)
6,518
5,756
7,794
—
3,011

17,704(10,737)
11,837
8,779
239,886—
8,714¥1,747,952¥240,539¥ 798,133¥422,316¥ 112,146¥73,837¥ 100,980

Americas

Equity-method
affiliates

Notes: 1. Reserves of the following blocks and fields include the portion attributable to minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)
2. Extensions, discoveries and improved recoveries include acquisition and sales.

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, 2014 were 853.66 million barrels for crude oil, condensate and LPG, and 6,026.9 billion
cubic feet for natural gas, for a total of 1,945.44 million boe. In addition, the Group’s possible reserves as of March 31, 2014 were 121.34
million barrels for crude oil, condensate and LPG, and 2,556.0 billion cubic feet for natural gas, for a total of 604.76 million boe.

March 31, 2014
Probable reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

March 31, 2014
Possible reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericas

Subtotal

INPEX CORPORATION Annual Report 2014

Total

2

176

368

190

89

825

29

854

80

5,724

126

—

49

5,979

48

6,027

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericas

SubtotalInterest inreserves heldby equitymethod
affiliates

Total

2

87

4

2

10

105

16

121

65

2,349

—

—

36

2,450

106

2,556

Notes: 1. MMbbl: Million barrels
2. Bcf: Billion cubic feet
3. Bitumen reserve volumes are included in the net probable and possible reserves of crude oil, condensate and LPG for the Americas.

130Interest inreserves heldby equitymethod
affiliates

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, 2014 was 244.9 thousand barrels per day for crude oil, condensate and LPG,
and 876.4 million cubic feet per day for natural gas, for a total of 408.8 thousand boed. Our method for calculating the conversion ofnatural gas volumes to barrels of oil equivalent (boe) was changed effective the year ended March 31, 2012.
2009

2010

2011

2012

2013

2014

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

4.9
44.7
24.8
81.0
2.7
158.1
65.1
223.2
81.5

4.5
47.7
26.9
73.3
5.5
158.0
60.4
218.3
79.7

3.9
65.1
27.9
73.0
2.3
172.2
67.4
239.6
87.5

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

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

164.9
842.8
—
—
82.3
1,090.0—
1,090.0
397.8

155.1
880.5
—
—
86.9
1,122.6—
1,122.6
409.7

128.7
836.0
—
—
81.1
1,045.9
56.6
1,102.5
402.4

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

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

32.4
185.1
24.8
81.0
16.4
339.7
65.1
404.9
147.8

30.4
194.5
26.9
73.3
20.0
345.1
60.4
405.4
148.0

25.3
204.4
27.9
73.0
15.8
346.5
76.8
423.3
154.5

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

Years ended March 31,

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014

131

Oil and Gas Glossary■ BarrelIn the case of oil, one barrel is equal to
42 gallons (approx. 159 liters).

■ Barrel of Oil Equivalent (BOE)

BOE is mainly used to convert a cubic
volume of natural gas (i.e., cubic feet)
into a cubic volume (i.e., a barrel) of crude
oil. It is a standard unit of thermal energy
based on the energy released in the combustion of one barrel of crude oil.
■ Brent Crude

A type of crude oil that holds a major
position in the market for crude oil
prices. Brent crude is a light oil with low
sulfur content and is mainly extracted
from the Brent oil field located in the
North Sea of the United Kingdom.

■ Concession Contract

A contract that directly grants mining
rights (including mining rights in Japanand permits, licenses and leases in othercountries) to oil companies through acontract or approval from the government of oil-producing countries or fromnational oil companies. The oil company
itself makes the investment and holds
the right for disposition for the acquired
oil and gas. Oil-producing countries
receive taxes or royalties from sales.
} See pp. 100–101 for Accounting Methods for

Types of Agreements.

■ Condensate

Generally, a type of crude oil extracted
as a liquid from gas fields. Liquid (oil)that exists as a gas underground butthat condenses when extracted to thesurface is referred to as condensate oilor simply as condensate.

■ Contingent Resources

Other than proved reserves, probablereserves and possible reserves, contingent resources are quantities that are
estimated to be potentially recoverable
in the future from known accumulation,
but which are not currently considered
to be commercially recoverable due toone or more contingencies.

132

INPEX CORPORATION Annual Report 2014

■ CoreCylinder rock samples extracted fromunderground geological formations inwells during various types of exploratory drilling. Normally, the samples
are extracted by core drilling.

■ EPC Contractor

The oil and gas exploration and development business involves the participation of a number of contractors, suchas drilling contractors and geophysicalexploration subcontractors. Of these,an engineering, procurement and construction (EPC) contractor is in charge ofengineering, procurement and construction work.

■ Exploratory Wells

A well drilled to search for still unknown
oil fields. These wells are often referred
to as “wild cat wells.” Drilling wells to
confirm the dimensions of a new oil field
and to acquire an overall image of an oil
field is a part of exploration, and wells forthis purpose are referred to as exploratory wells.

■ FEED

FEED is an acronym for Front End Engineering Design. FEED work is done
prior to engineering, procurement andconstruction (EPC) work. FEED work
involves field studies and budgeting,including technical issue identificationand cost outlines, upon which biddingfor EPC work is based.

■ Final Investment Decision (FID)

The FID refers to the final decision toinvest in an oil or natural gas project.
An FID triggers the shift to a development phase (design, procurement andconstruction operations). The necessary
approvals, procurement of funds, sales
plan and other key issues need to beaddressed at the time a final investment
decision is made.
■ Floating LNG

A floating LNG is created by installingan LNG plant on a large vessel. Thisdevelopment method allows for natural
gas to be processed into liquid at thatplant and then directly offloaded to an
LNG carrier.

■ FPSOFPSO refers to a floating production,
storage and offloading system whererefined crude oil and condensate arestored in tanks within a vessel. From
here, the vessel offloads oil directly totankers.

■ International Energy Agency (IEA)

An autonomous organization comprisedof the main oil-consuming countries
established in 1974 under the OECD forcollective action on energy.

■ LNG (Liquefied Natural Gas)

After removing impurities such as moisture, sulfur compounds and carbon
dioxide from natural gas with a chief
constituent of methane, the gas is liquefied by cooling to ultra-low temperatures (-162 Celsius). This process compresses the volume of the gas to 1/600,
thus making it possible to transportlarge quantities in a single shipment.

■ LPG (Liquefied Petroleum Gas)

LPG is an oil product that is a mixtureof hydrocarbon gases with a carbon
number of 3 or 4, for example, propane, propylene, butane, butylene ora mixture of these as main constituents. Although LPG is a gas at ambient
temperature and normal pressure, it isliquefied through exposure to low pressures or temperatures (cooling).

■ Lump-Sum Contract

A contract agreeing upon and approving
a fixed total for construction and work.
It is distinguished from a cost-plus-fee
contract, which promises in advance thepayment of a certain fee added to a certain amount of actual incurred expenses.
■ Methane Hydrate
As one type of unconventional gas,methane hydrate is a solid crystalline
structure in which methane molecules
are trapped within a latticework formedby the hydrogen bonding of water molecules. Methane hydrate is stable under
low-temperature, high-pressure conditions, so it can be found within thepermafrost layer in Siberia, Canada andAlaska, as well as in the ocean at depthsof 500 meters or more.

■ Net Production Volume

Net production volume is the net economical portion of total production volume. Specifically, it is the volume of oil
and natural gas that can be sold after
deducting portions allocated to thegovernments of oil-producing countries
in accordance with production sharing
agreements, and portions allocated tointerest owners in accordance with concession agreements.

■ Oil Majors

The Oil majors are also known as majorinternational oil companies. ExxonMobil (US), Royal Dutch Shell (UK/Netherlands), BP (UK), Chevron (US) and
TOTAL (France) are well known as thefive oil majors. Each of these companies
possesses an integrated system including departments for conducting both
upstream and downstream business.

■ Oil Sands

Sandstone beds that contain an extremely
viscous tar-like crude oil that has no fluidity in its initial state. This is as opposed toconventional crude oil, which can be easily
pumped upward using a well. Dependingon the level of viscosity, crude oil extracted
from oil sand is referred to as bitumen or
extra heavy crude oil.
} See p. 69 for the Joslyn Oil Sands Project.

■ Operator

In the case of multiple parties to a contract regarding blocks of oil/gas andassociated E&P work, a joint operating
agreement is entered into between theparties and it is necessary to achieve
agreement on the rights and obligations for all items required when conducting operations. At that time, theparty responsible for the execution
and management of the operations isreferred to as the operator. In contrast,
parties other than the operator arereferred to as non-operators.

■ Primary Energy

The definition of probable reserves is inaccordance with regulations (PRMS)
formulated by the Society of Petroleum
Engineers (SPE) through support fromthe World Petroleum Council (WPC),
the American Association of Petroleum
Geologists (AAPG) and the Society ofPetroleum Evaluation Engineers (SPEE).
The rule defines probable reserves as
the estimated quantities of crude oiland natural gas that can be added toproved reserves and commercially collected based on geological and engineering data.

■ Production Sharing Contract (PSC)

A contract in which one or more companies involved in the development of oil
and natural gas acts as a contractor andundertakes operations for explorationand development on behalf of the governments of oil-producing countries or
national oil companies. The contractor is
responsible for the costs associated withthe operations. Corresponding amounts
for cost recovery and compensation arereceived from production by a contractor.
} See pp. 100–101 for Accounting Methods for

Types of Agreements.

■ Proved Reserves

The definition of proved reserves is inaccordance with SEC Regulation S-X
Rule 4-10 (a), a rule that is well known
among investors in the United States.
The rule defines proved reserves as theestimated quantities of crude oil andnatural gas that can, with reasonablecertainty and under current economic
and operating conditions, be collectedfrom a given date forward based on
geological and engineering data.

■ Renewable Energy

A collective term used for energy
acquired from within natural phenomena
replenished repeatedly on earth such as
solar, wind, hydro, oceans and biomass,
as opposed to fossil fuels such as coaland oil, which are forecast to run out inthe future. There is no fear of renewableenergy running out, and it does not generate air pollution. Technology to use
renewable energy as an energy source isundergoing development.

■ Reserves-to-Production Ratio

The reserves-to-production ratio (R/P
ratio) is calculated by subtracting the
production for a given year from thereserves at the end of that year. The
resulting figure is an indication of thenumber of years production can be continued if annual production continues at
the amount for that year.

■ Rig

Machinery for drilling a well that is used tosearch for and produce oil and natural gas.

■ Royalty

Royalty refers to a specific share of
production reserved by the owner ofunderground minerals (e.g., a state ora municipality) when granting mining
rights, without taking responsibility for
production costs. In some cases, theshare increases according to increases
in production. Royalties may be paid in
kind or in cash.

■ Secondary energy

Electric power, city gas, coke, etc., which
are acquired by converting and processing primary energy sources, are referred
to as secondary energy.

■ Shale Gas

Shale gas is a kind of natural gas thatis considered to be an unconventional
natural gas. It refers to gas that is foundin hard shale beds and not in the usual
gas fields of conventional natural gas.
It is necessary to excavate the horizontal wells, using the hydraulic fracturingmethod to create a crack in the shale
bed so that the gas can be extracted.
In recent years, due to advancementsin these gas mining technologies, theproduction of shale gas is making great
strides, particularly in North America.

■ Unconventional Natural Gas

Natural gas not produced from regularoil and gas fields. Includes gas (tightgas sands, coal bed methane, biomass
gas and shale gas) that has alreadyundergone partial commercial production and gas (e.g., methane hydrate anddeep gas) expected to undergo futurecommercial production.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Energy recovered directly from naturesuch as coal, oil, natural gas, fuelwood,hydroelectricity, nuclear power, wind
power, current power, geothermal andsolar energy.

■ Probable Reserves (our company)

133

Index/Unit Conversion

Financial/Accounting

Non-Financial Information

12-Year Financial Information ............................................. 82­83
Background Information(Oil and Gas Accounting Policies and Treatment) ...... 84­86
Consolidated Balance Sheet .............................................. 94­95
Consolidated Statement of Cash Flows ......................... 100­101
Consolidated Statement of Income...............................................96
Dividends/Return for Shareholders ...............................12, 16, 28
Finance and Funding ...........................................................29, 81
Financial and Operating Highlights.............................. 14­15, 16
Investment Plan ............................................................ 28­31, 81
MD&A (Management’s Discussion and Analysisof Financial Condition and Results of Operations) .......... 87­
Net Sales/Operating Income by Segment ......................... 46­47
Notes to Consolidated Financial Statements ................. 102­116
Subsidiaries and Affiliates .............................................. 118­119

Business Model and Strengths ............................... 22­25, 30­31
Comparison with Peers (Production and Reserve Volume)........32
Gas Supply Chain ......................................................................43
Market Environment, Business Environment ...................... 26­27
Message from the President................................................. 4­12
Number of Projects ............................................................ 46­47
Oil and Gas Demand .................................................................27
Oil Price, Exchange Rate and INPEX Share Price ............... 14­15
Press Releases .................................................................... 18­20
Production Volume ............................................... 17, 46­47, 131
Reserves ............................................. 6, 17, 30, 46­47, 128­130Strategies and Management Plan
(Medium- to Long-Term Vision of INPEX) ............... 8, 28­29

Projects
Abadi LNG Project (Indonesia) .................................................51
ACG Oil Fields (Azerbaijan) .......................................................55
ADMA Block (U.A.E.) ................................................................57
Bayu-Undan Project(Timor Sea Joint Petroleum Development Area (JPDA)) ...53
Berau Block Tangguh LNG Project (Indonesia)..........................52
BTC Pipeline Project ..................................................................55
Copa Macoya and Guarico Oriental Blocks (Venezuela) ...........61
Frade Block (Brazil) ....................................................................61
Geothermal ..............................................................................64
Ichthys LNG Project (Australia) .......................................... 34­41
Joslyn Oil Sands Project (Canada) ............................................60
Kitan Oil Field (JPDA) ...............................................................53
Naoetsu LNG Terminal .......................................................42, 63
Natural Gas Business in Japan ..................................................63
Offshore Angola Block 14 (Angola) ...........................................57
Offshore D.R. Congo Block (Democratic Republic of Congo)...57
Offshore Mahakam Block and Attaka Unit (Indonesia) ..............49
Offshore North Caspian Sea Contract Area
(Kashagan Oil Field (Kazakhstan)) ......................................54
Power Generation Business in Japan .......................................64
Prelude FLNG Project (Australia) ..............................................52
Sebuku Block Ruby Gas Field (Indonesia) .................................50
Shale Gas Project (Canada) .......................................................59
South Natuna Sea Block B (Indonesia) ......................................50
Van Gogh Oil Field and Ravensworth Oil Field (Australia) ........53

ESG (Environment/Social/Governance)
Advisory Committee..................................................................75
Board of Directors,
Auditors and Executive Directors .................... 72­73, 76­78
Business Risks ................................................................. 120­127Class A Stock ............................................................ 71, 126 –127
Compensation for Directors and Auditors.................................71
Corporate Governance....................................................... 70­78
CSR Initiatives ..................................................................... 66­69
Disclosure Structure and IR Activities ................................. 74­75
Internal Committees ..................................................................74
Number of Employees ............................................... 14­15, 135
Total GHG Emissions .................................................................17
Volume of Water Sources Used .................................................17

Unit Conversion
Crude oil

Natural gas

1 kl

6.29 barrels

1 cf

1 ton

7.4 barrels

1 barrel

6,000 cf (natural gas)100,000 barrels/day
4 million tons/year (LNG)

Sale gas

LPG

LNG

1 ton
10.5 barrels(crude oil)

1 ton
8.8 barrels (crude oil)
1,400 m3 (natural gas)
53 million Btu*

1,000 Btu*

1 billion m3

700,000 tons (LNG)

100 million cf/day
700,000 tons/year (LNG)
1 trillion cf 1 million tons
(LNG) (20 million tons)

1m

3

37.32 cf

20 years*British thermal unit
Note: Unit-equivalent figures are estimates. Conversion figures used for production and reserves in this Annual Report may be different from the above conversion figures. We do notguarantee those figures’ accuracy as applied to dealing or verification.

134

INPEX CORPORATION Annual Report 2014

Corporate Information(As of March 31, 2014)

Corporate Data
Company Name
INPEX CORPORATION
Established
April 3, 2006
Capital¥290,809,835,000
Company Headquarters
Akasaka Biz Tower, 5-3-1 Akasaka, Minato-ku,
Tokyo 107-6332, Japan

Number of Employees (Consolidated) 2,874
Main BusinessResearch, exploration, development, production and sales of oil, natural gas and othermineral resources, other related businesses
and investment and lending to the companies
engaged in these activities, etc.

Organization Chart (As of June 30, 2014)
General Meeting of
Shareholders

Board of Directors

Board of Auditors

INPEX Advisory
Committee

Executive
Committee

President

CSR Committee

Audit Unit

Technical Division

Masela Project Division

HSE Unit

Oil & Gas Business Division 1

Ichthys Project Division

General Administration
Division

Oil & Gas Business Division 2

Domestic Project DivisionCorporate Strategy &Planning Division

Asia, Oceania & Offshore
Japan Project Division

Gas Supply &Infrastructure Division

New Ventures Division

America & Africa
Project Division

Finance & Accounting Division

Eurasia & Middle East
Project Division

Compliance Committee
Corporate HSE
Committee
Information Security
Committee

Logistics & IMT Division

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

Total Number of Shareholders and Issued Shares
Common Stocks: 39,546 shareholders / 1,462,323,600 shares*1
Class A Stock*2:
1 shareholder (Minister of Economy,
Trade and Industry) / 1 share

1 Class A Stock*1 Implemented a stock split at a rate of 1:400 of common stock at the effective date ofOctober 1, 2013.
*2 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 the shareholders’ meetings or Board of Directors.

Major Shareholders (Common Stocks)

Shareholding by Shareholder Type

Name

Number of Percentage ofshares total shares* (%)

Minister of Economy, Trade and Industry

276,922,800

18.94

Japan Petroleum Exploration Co., Ltd.

106,893,200

7.31

Mitsui Oil Exploration Co., Ltd.

53,154,000

3.63Japan Trustee Services Bank, Ltd. (Trust Account) 45,528,500

3.11

JX Holdings, Inc.

3.00

43,810,800

The Master Trust Bank of Japan, Ltd.
41,004,300(Trust Account)
The Chase Manhattan Bank, N.A. London Secs
40,224,357
Lending Omnibus Account

2.80

Shareholder type

CBNY - Orbis Funds

28,738,943

1.97

JP Morgan Chase Bank 385632

21,032,265

1.44

State Street Bank and Trust Company 505223

19,446,693

1.33

Number of Percentage ofsharestotal shares*1 (%)

Financial Institutions(Including Trust Accounts)

106

205,871,300

14.08

Securities Companies

48

12,812,864

0.88

Other Domestic Corporations

405

244,083,824

16.69

1

276,922,800

18.94

691

678,718,803

46.41

38,29441,947,609

2.87

1

1,966,400

0.13

Minister of Economy,
Trade and Industry*2
Foreign Corporations and Other
Individuals and Other

2.75

Number ofshareholders

Treasury Stock*1 Percentage of total shares are for all issued and outstanding shares.
*2 Excludes one Class A Stock* Percentage of total shares are for all issued and outstanding shares.

Home Page

Inquiries

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

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/en/ir/inquiries

This Report was printed using environmentally conscious
methods, vegetable oil-based ink.

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