INPEX CORPORATION

Annual Report 2016
Year ended March 31, 2016

About INPEX

INPEX is the largest oil andgas E&P company in Japan.
The Company currently is
engaged in approximately 70
projects spread across morethan 20 countries worldwide.
As a company that is engaged in oil and natural gas exploration, development and production activities worldwide,
INPEX boasts the highest reserve and production volumes
among companies in Japan. The Company is positioned
as a mid-tier E&P player just behind the world’s oil majors.
The Ichthys LNG Project in Australia being one of its key
initiatives, INPEX is actively engaged in oil and natural gas
projects in Japan and overseas. In addition to securing
a stable and efﬁcient supply of energy, the Company isworking diligently to ensure sustainable growth in its corporate value.

Annual Report 2016 Contents
1 Message from the President .................. 01
2 Financial and Operating Highlights ..... 06
3 Market Trend and Management Policy

Business Model and Strengths............... 08

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

4 Project Overview

Segment Overview................................... 14
Project Overview by Region
Asia & Oceania .................................. 16
Eurasia ................................................. 24
Middle East & Africa.......................... 26
Americas ............................................. 28
Japan ................................................... 30

5 Sustainability & Governance

Sustainability ............................................. 32
Corporate Governance ........................... 36

6 Financial & Corporate Information

Our Mission

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

10-Year Financial Information ................. 44
Background Information:
Oil and Gas Accounting
Policies and Treatment...................... 46

Management’s Discussion andAnalysis of Financial Condition
and Results of Operations ............... 48
Consolidated Financial Statements/
Notes to Consolidated
Financial Statements ......................... 54

Independent Auditor’s Report ............... 73
Subsidiaries and Afﬁliates ....................... 74
Business Risks............................................ 76
Oil and Gas Reserves
and Production Volume ................... 84
Corporate Information ............................. 87

DISCLAIMER

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

FORWARD-LOOKING STATEMENTS

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

NOTES REGARDING FIGURES

Financial ﬁgures in this Annual Report have been basically rounded to the nearest unit (e.g., millions, billions) for convenience. The “Project Overview by Region” section(starting on p. 16) basically describes the operating situation as of June 30, 2016. Figures in parentheses denote negative amounts. Natural gas production volume forprojects in production is not the volume at wellheads, but corresponds to sales to buyers.
INPEX CORPORATION is listed on the First Section of the Tokyo Stock Exchange under the securities code 1605. The Company is also included in the Nikkei Stock
Average (Nikkei 225) and the JPX-Nikkei Index 400 (JPX400).

1
Messagefrom the President

Message fromthe President
Looking Back at the Past YearFor the ﬁscal year ended March 31, 2016, in a harsh market environment with declining crude oil prices, net sales
decreased 13.8% year on year to ¥1,009.6 billion, while
net income attributable to owners of parent dropped
78.4% to ¥16.8 billion. Brieﬂy reviewing oil price trends
over the past year, although the oil price rose as far as a
mid-US$60 per barrel in early May 2015, the price subsequently fell, dropping by an average of more than 40%
during the ﬁscal year. Under these circumstances, INPEX
was forced to record an impairment loss for some projects already in production.
On the other hand, net production volume, which is a
key pillar supporting the Company’s earnings, increased
about 26% year on year to roughly 514 thousand BOED.
Proved reserves, which represent a source of future earnings, rose 34% compared to the previous ﬁscal year-end
to about 3.26 billion BOE. The increases are both dueto the contribution from ADCO Onshore Concession in
Abu Dhabi, U.A.E. acquired in April 2015. Summarizing
the progress of major projects now underway, development work on offshore and onshore facilities for the
Ichthys LNG Project is steadily moving forward along aschedule that was updated in September of last year. In
light of an increase in natural gas reserves, we submitted
a revised development plan for the Abadi LNG Project in
September 2015 and received a notice from government
authorities calling for a review of the development plan
based on onshore LNG. Moving forward, we will negotiate with government authorities for the optimal development of the project with the goal of early start-up of
development.
INPEX, an oil and gas E&P company, has a responsibility to fulﬁll its social mission through its business activities, irrespective of short-term ﬂuctuations in demand.
Bearing in mind that crude oil prices could remain low fora certain period of time, after taking countermeasures forthat, we will continue to make necessary investments infuture growth and undertake various initiatives to maintain the stable dividends of the past.

Toshiaki Kitamura
President & CEO

INPEX CORPORATION Annual Report 2016

01

Cost Reduction Initiatives
Crude oil prices, which had remained at morethan $100 per barrel until the middle of 2014,
dropped to under $30 per barrel at the beginning of 2016, a mere year and a half later.
Recently, oil prices have bounced back somewhat and it appears that prices will continue toconverge toward a new equilibrium point overthe medium to long term. However, what weneed is to shift away from the over $100 per
barrel era mindset that has continued for the
past several years.
The Company is dealing with a senseof urgency regarding the current state of oil
prices, which have dropped sharply in a shortperiod of time. Speciﬁcally, from the perspective of importance and urgency we must:
Continue to implement and steadily
carry out according to schedule importantdevelopment projects that support Company
growth, such as the Ichthys LNG Project, andinvestments that we should pursue.
Reduce production costs and development and exploration expenditure, and in particular review the schedule and costs of exploration projects to reduce investments.
Maintain stable dividends to all shareholders.
With these three policies, we are committed to minimizing the impact on oil pricedecline performance for the foreseeable future.
Since the ﬁscal year ended March 31,
2015, we have continuously worked to reduceinvestments and in the ﬁscal year ended March
31, 2016, even though we invested steadilyin Ichthys, we reduced investments in otherprojects. As a result, total investments cameto approximately $8.1 billion, a roughly $1.3
billion decrease (about 14%) compared with
about $9.4 billion in the ﬁscal year ended
March 31, 2015. In the ﬁscal year ending March
31, 2017, we will continue to reduce investments and expect total investments to reachabout $6.3 billion, an almost 22% reduction
from that of the year ended March 31, 2016.
In addition, projects in production thatdeveloped high cost structures in the last few
years have cut back their production costs. In
major production projects such as the Offshore
Mahakam Block in Indonesia and the ACG Oil
Fields in Azerbaijan, after reviewing the unit
price of work contracts and reducing indirect
costs, we signiﬁcantly lowered production
costs. With the reduction of production costs
per barrel, and the impact of increased production volume, in the ﬁscal year ended March 31,
2016, the $11.2 per barrel cost of the previous
ﬁscal year was lowered to $7.8 per barrel. Net
income attributable to owners of parent in theﬁscal year ended March 31, 2016 decreased
substantially due to an impairment loss, but at
the same time, we believe these investments
and cost reduction efforts contributed by propping up proﬁts.

Shifts in Investment-Reduction Measures

Production Cost per BOE***

Development*(US$ million)

Exploration

Other capital expenditures**(US$/BOE)

9,381

11.2
8,084

7.8

6,320

8,464

30% YOY
reduction

7,325
6,060

662
255

2015/3 (Actual)327432
2016/3 (Actual)

160
100

2017/3 (Forecast)*Includes investments in Ichthys downstream business**Mainly investments in Naoetsu LNG Terminal and domestic pipeline network

02

INPEX CORPORATION Annual Report 20162015/3 (Actual)***Excluding royalties

2016/3 (Actual)

1
Messagefrom the President

Aiming to Achieve Our Growth Targets
We have set three growth targets for sustainablegrowth.
To begin with, if we report our growth target’s ﬁrst pillar of “Continuous Enhancement of
E&P Activities” from the standpoint of the indicators for that progress, reserves (total of crude
oil and natural gas) as of March 31, 2016 were
net proved reserves of about 3.26 billion BOE
and net probable reserves of about 1.71 billion
BOE. The total of proved and probable reserves
was roughly 4.97 billion BOE, an increase ofabout 23%, or 0.93 billion BOE compared withthe previous year-end. Following the increasein proved reserves, the reserve replacement
ratio (RRR) (proved reserve increase during
year/ production volume during year, 3-year
average) rose substantially, from 100% in theprevious ﬁscal year, to 321% this ﬁscal year.
Moreover, net production volume (total of
crude oil and natural gas) increased about
106,000 barrels per day, or about 26% year on
year, to roughly 514,000 barrels per day. These
increases in reserves and production volumes
were achieved due to the acquisition of a participating interest of the Abu Dhabi onshore
ADCO Block which is in production.
Looking at the progress of Continuous
Enhancement of E&P Activities by individual
project, development work on the Australia
Ichthys LNG Project has steadily progressedin preparation for the start of production in

the third quarter (July–September) of 2017.
As for offshore facilities, we continue to move
forward with the construction of an offshore
central processing facility (CPF) and a ﬂoating production storage and ofﬂoading (FPSO)
facility. The installation of all topside modules
has already been completed for both of these.
At present, we are performing internal construction and commissioning. In April 2016, wecompleted the onsite installation of the chainthat will anchor the CPF and FPSO offshore.
Other offshore work that we continue to perform is production well drilling.
We have delivered and installed all modules for the ﬁrst train (natural gas liquefaction
facilities) for onshore facilities and are now
conducting connection and joint work.
Although we are simultaneously moving
forward on both offshore and onshore facilities and pursuing a variety of tasks, we arepreparing to sequentially operate each facility
and are working diligently to begin production
while paying the utmost care to safety.
Based on the fact that the natural gas
reserves of the Indonesian Abadi LNG Project increased due to the drilling of additional
appraisal wells and the results of subsequentstudies, we reviewed the development plans
for an FLNG with a 2.5 million ton annual LNG
production capacity and submitted a revisedplan to government authorities in September

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

Net Production

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

2.19

2.53
370

2.43

3.26
321

514

(Thousand BOED)

4%

408

Americas 5%

Middle East/
Africa 41%

255
Eurasia 7%

Asia/Oceania 41%

100

2013/3

2014/3

2015/3

2016/3

Japan 6%

2015/348%

Main increase
factors:
Acquisitionof ADCOOnshore, etc.
6%

36%

5%

2016/3

INPEX CORPORATION Annual Report 2016

03

04

2015 based on an FLNG with a 7.5 million ton
annual LNG production capacity. In April 2016,
we received a notice from the government
calling for a review of the development planfor onshore LNG. Under a policy that seeks the
project’s early start-up, the Company operates
on the basis of selecting the most technologically and economically rational choices andmoving the project forward. In line with thisbasic policy, we are now reviewing how optimal development, including the onshore LNG
development system, can be achieved. We will
discuss this with our partner, Royal Dutch Shell,and Indonesian government authorities.
With respect to the Offshore Mahakam
Block in Indonesia, in December 2015, wereached a basic agreement with Pertamina and
TOTAL regarding a basic approach to INPEX
and TOTAL’s participation from 2018 andthereafter. Together with TOTAL we continue tonegotiate with Pertamina.

the 1.7 to 1.8 billion cubic meters of the past
several years, bringing us one step closer to our
medium- to long-term target. In April 2016 in
Japan, full deregulation of electric power retailsales was implemented, but in anticipation offull deregulation, the Company has promoted
a gas supply proposal for natural gas thermal
power generation for its pipeline network.
INPEX has already agreed to several 100,000
kilowatt-class power generation plant projects
and natural gas sales and some of the projects
have begun to supply. In the years ahead, we
believe that gas supply to these natural gas thermal power generation plants will help increase
sales volume. Moreover, since July 2015, INPEX
began proposing wholesale electric powersales jointly with Chubu Electric Power Co.,
Inc. to city gas companies that INPEX provides
natural gas to. In the future, we want to ﬂexibly
respond to the diverse needs of customers bystrengthening the supply chain.

Next, the second pillar of our growth target“Strengthening Gas Supply Chain,” construction of the Toyama Line, one of our priority
initiatives, has continued since 2012 and is
expected to be completed by the middle ofthis year. In January of 2016, the Company
signed a basic natural gas sales and purchaseagreement with Nihonkai Gas Co., Ltd., andafter the Toyama Line is completed, the supplyof natural gas to customers along this pipeline
will ﬁnally begin.
The Company’s medium- to long-term target for sales volume of domestic natural gas is
2.5 billion cubic meters annually by the early2020s. With the completion of the Toyama
Line, sales volume for the ﬁscal year ending
March 31, 2017 is expected (initial forecast) tobe 1.96 billion cubic meters, greatly exceeding

Finally, I will explain the third pillar of our growthtarget “Reinforcement of Renewable Energy
Initiatives.” With respect to renewable energy,
we continue to focus on initiatives for the commercialization of geothermal power and wehave conducted joint research for the commercialization of geothermal power in Akita,
Hokkaido, and Fukushima prefectures. In June
2015, we participated in the geothermal power
generation business in the Sarulla Geothermal
Field located in Sumatra, Indonesia, and will
begin operating the ﬁrst power plant in 2016
and plan to begin selling power to Indonesia’s
government-owned electricity company. As an
integrated energy company that contributes
to society, INPEX will focus on next-generation
growth and pursue possibilities for the commercialization of renewable energy.

INPEX CORPORATION Annual Report 2016

1
Messagefrom the President

OutlookIn the ﬁscal year ending March 31, 2017, taking
into account the possibility that recent low oil
prices will continue, we will again clearly classify investments that we should pursue andareas of investment and cost reduction. We will
make a Company-wide effort to strengthen intoa strong corporate structure, while addressing
the harsh market environment.
As for returns to shareholders, the yearend dividend for the ﬁscal year ended March
31, 2016 was ¥9.0 per share, and combinedwith the interim dividend, the full-year dividend was ¥18.0 per share. In accordancewith our basic policy of maintaining a balance
between sustainably raising corporate value
by reinvesting in projects and returning proﬁts
to shareholders, for the year ending March 31,
2017, we plan to pay an interim and year-end
dividend of ¥9.0 per share each, for a full-year
dividend of ¥18.0 per share, thus paying thesame dividend paid in the ﬁscal year ended
March 31, 2016. After the start of productionof the Ichthys LNG Project, we would like toensure the proper return of proﬁts to shareholders after taking into account the mediumto long-term business outlook, what other toptier oil and gas exploration and production
companies are returning, and other factors.
To raise sustainable growth and mediumto long-term corporate growth, we are fulﬁlling our social responsibilities in cooperation
with all stakeholders including shareholders.

At the same time, we are taking steps to further enhance corporate value with the aimof making transparent, fair, quick and decisive decisions. In the ﬁscal year ended March
31, 2016, we formulated Corporate Governance Guidelines on November 27, 2015 as a
response to the Corporate Governance Code,which applied to all listed companies on June
1, 2015. These guidelines set forth our basic
views on corporate governance and establish
our relationship with stakeholders including
shareholders, enhance information disclosure,deﬁne our corporate governance system andour policy of constructive dialogue with shareholders.
Energy resources are, needless to say, essential
to society and the importance of their longterm stable development and efﬁcient use
will remain unchanged. The Company’s social
mission is to work hard to become an energy
business and achieve sustainable growth, while
taking an interest in further mounting environmental issues.
We will continue our policy of raising corporate value through the stable and efﬁcient
supply of energy and enhancing competitiveness as an international oil and gas E&P
company. As we work to achieve these goals,
we would greatly appreciate your continued
understanding and support.
June 2016
President & CEO
Toshiaki Kitamura

INPEX CORPORATION Annual Report 201605

Financial and Operating Highlights (Five-Year Comparative Graphs)

As of or years ended March 31. Please refer to p. 45 for notes of major indices.

Proﬁtability Indices

Net Sales (by product)
Crude oil

Natural gas

Other

Net Income Attributable to Owners of Parent,
EBIDAX(¥ billion)(Earnings before interest, depreciation and amortization, and exploration)
Net income attributable to owners of parent

943.1

1,186.7

1,216.5

31.4
429.1

30.6
397.8

28.9
356.2

1,334.6
20.4
455.4

858.8

788.1

726.2

1,171.2
18.9
421.9

730.4

558.0

2011

2012

2013

2014

2015

1,009.6

EBIDAX (¥ billion)

128.7
274.9

194.0
362.6

183.0
350.9

183.7
402.2

77.8
303.1

16.8
217.9

2011

2012

2013

2014

2015

2016

13.6
316.8
679.2

2016

Efﬁciency IndicesStability Indices

Return on Equity (ROE)

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

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

9.3

1,996.9

2,179.3

74.5

71.1

2,481.3

2,791.1

3,066.7

68.6

69.1

68.2

2,932.9
67.1

7.9

7.6

7.0
-688.8-874.1-815.3

2.7
0.6
2011

2012

2013

2014

2015

2016

-48.9
2011

-60.7

2012

-43.9
2013

-725.3-31.9
2014-472.2-16.8

2015-239.3-8.1

2016

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

Cash Dividends per Share, Payout Ratio
Cash dividends per share(2nd quarter end)

Payout ratio (%)

15.00

17.50
10.00

PER

Cash dividends per share (Yen)(Fiscal year-end)

17.50

18.00

18.00

18.00

8.75

9.00

9.00

9.00

7.50

PBR (Times)

74.3
24.9

156.7
15.5

7.50

7.50

14.7

13.2

2011

2012

8.75

14.0
2013

9.00

14.3
2014

9.00

33.8
2015

2016

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

06

INPEX CORPORATION Annual Report 2016

10.5

10.0

1.2

0.9

0.7

0.7

0.6

0.4

2011

2012

2013

2014

2015

2016

9.00

10.6

Reserve/Production Indices

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

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

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

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

1,308

2,432

255

1,451

2,532
370

3,264
1,121

2,434

321
1,254

1,259

1,221

2,143

4,126
2,818
26.7

4,256
1,823
27.4
2,432

409

1,278

981

899

1,213
100

929

1,308

1,907
27.5

2,188
14.7

4,477
1,945

4,044

30.2

1,610

2,532

2,434

17.1

16.4

27.2

2012

2013

2014

2015

2016

Average Expenses per BOE Produced,
Exploration and Development Cost per BOE (3-year average)
Average expenses per boe produced (Excluding royalty)
Exploration and development cost per boe (3-year average)

78.6

26.4
3,264
17.4

9.0

9.8

58.2

2011

2012

2013

2014

2015

2016

Net Production (by product, barrels of oil equivalents)
Crude oil

Natural gas (Thousand boed)(US$/boe)

423

11.2

7.9

426

408

409

408

514
175

7.8

184

175

162

164

165
339

6.2
239

6.3
2011

2

4,970
1,705

8.5

25
2011

15.6

4,095

Financial andOperating Highlights

282

2,188

2012

246

245

243

16.9

11.2
2013

251

11.7

2014

2015

2016

2011

2012

2013

2014

2015

2016

The Environment
Volume of Water Sources Used, Total GHG Emissions

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

Volume of water sources used (Thousand m3)
Total GHG emissions (Thousand t-CO2)

Exploration success ratio (3-year average) （％）
Number of exploratory and appraisal wells （Number）

13

7

2

15

59.5

15

13

791
1,749

52.9

50.6

1,283

46.8

2012

2013

392

381

2011

2012

1,994

605

1,436
513

2,006

1,373

45.3

45.0
2011

650

2014

2015

2016

2013

2014

2015

2016

INPEX CORPORATION Annual Report 201607

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

INPEX’s Strength 1

Dynamic Growth Scenario

Ichthys LNG Project

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

INPEX’s Strength 2

A Balanced Portfolio andStrong Reserve Volume/
Resources

4.97 billion boe(Proved and probable reserves)

INPEX has secured a balanced portfolio while establishing appropriate risk management by combining different projects to ensure an optimal balance across such
key parameters as the oil and natural gas ratio, regional
distribution as well as exploration, development andproduction activities. Turning to the Company's reserve
volume, the source of its corporate value, INPEX holds
a proved and probable reserve volume of 4.97 billion
boe as well as an abundance of possible reserves andcontingent resources that are not included in probablereserves. Looking ahead, we expect to expand proved
and probable reserves over the medium to long term.

08

INPEX CORPORATION Annual Report 2016

Growth of
Production
VolumeIncreasing
Reserves

INPEX’s Strength 3

Natural Gas Supply Chain
Domestic natural gas pipeline network

1,400 km

Proactive
Exploration andDevelopment
Investment

Market Trend andManagement Policy

Accountingof Revenue
Attributable
to Sales3

INPEX owns a natural gas pipeline network in Japan ofaround 1,400 km. Plans are in place for work to be completed on the Toyama Line some time during the middle of the year. On completion, the total length of thepipeline network will total 1,500 km. The Naoetsu LNG
Terminal commenced operations in December 2013,
bringing one step closer the realization of a natural gas
supply chain that links natural gas assets in Japan andoverseas and the domestic market. By receiving LNG
from the large-scale Ichthys project and other sources,
the Company will build a global gas supply chain andplan further value-added improvements.

INPEX’s Strength 4Strong Financial Base
Equity ratio:

67.1%

Net debt/Net total
capital employed:-8.1%

A healthy balance sheet and cash reserves are essential for oil and gas E&P companies. This reﬂects boththe high degree of risk associated with E&P activities
and the need to have sufﬁcient funds on hand to takeadvantage of major investment opportunities. INPEX
has secured a strong ﬁnancial position. As of March 31,
2016, our company had an equity ratio of 67.1% and aratio of net debt to net total capital employed of –8.1%.
(Cash and deposits were greater than interest-bearing
debts.) Compared to the oil majors and other global
peers, this represents a sound level of ﬁnancial strength.

INPEX CORPORATION Annual Report 201609

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

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

Signing ceremony of a contract

Sales

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

Major oil and natural gas
producing regions (image)

Production

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

10

INPEX CORPORATION Annual Report 2016

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

Exploration

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

3
Market Trend andManagement Policy

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

Drilling of appraisal wells

Development

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

INPEX CORPORATION Annual Report 2016

11

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

Three Growth Targets

1

We have set three growth targets necessary for sustainable growth andwill conduct key initiatives to achieve them.

2

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

1 million boed

Strengthening
Gas Supply Chain
Achieve domestic gas supply volume of

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

Three Management Policies

We are positioning ourselves to become a top-class international oil andgas E&P company and are improving and building our management baseto evolve into an integrated energy company.

1

2

Securing/Developing Human
Resources and Building
an Efﬁcient Organizational
Structure

Investment for Growth andReturn for Shareholders
Investment

Dividend Payout Ratio

Over five years （%）•Recruit and utilize personnel in and outside ofJapan to develop global professionals.
•Establish an efﬁcient business execution
system to facilitate decision making.

¥3.5
trillion

200

Including
exploration
expendituresof around

100

¥300
billionFrom the year ended
March 31, 2013, to
March 31, 2017

12

1,000

400

0

Apache (US)

0.5

1.0

Woodside (AU)
1.5

2.0

Proved reserves: 3.26 billion boe

Proved and probable reserves (Billion boe)

INPEX CORPORATION Annual Report 201613.2%

14.0% 14.3%

33.8%

0

2012/3

2013/3

2014/3

2015/3

2016/3

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

any
n
mp
tio
osi &P copEfirm gasAnadarko (US)dhablis oil an
a
t
s
nal
oe
INPEX
g t atio s
kin tern 2020
e
e
n
i
S
y
arl
an
Probable reserves toas the e
upgrade to provedbythrough the shift ofdevelopment

Santos (AU)200

50

Occidental (US)To achieve 1 MMboedof net production by800
the early 2020s
through medium- to
600 long-term investment
514 thousand boed

Proved reserves and production volume indicated in this chart are from documents disclosed by the major E&P companies in ﬁscal
2015. The size of the circle shows the market
value of each company as of March 31, 2016.
Currently, INPEX is positioned as a mid-tier
E&P player. As our operations expand throughnew milestones including the start of production at the Ichthys LNG Project in Australia, wewill endeavor to secure a foothold among theworld’s oil majors by the early 2020s.

Net production volume (Thousand boed)

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

156.7%

150

2.5

3.0

3.5

4.0

4.5

5.0

Probable reserves: 1.71 billion boe

5.5

Our Vision

Becomea Top-Class

3

International Oil and Gas
E&P Company
Reinforcement ofRenewable Energy Initiatives

for the next generation

Maintain Financial Strength

Funding Source

50

Approximately ¥992.8 billionof cash available on handOwn funds
Target: 50% or higher
Equity ratio

67.1%(As of March 31, 2016)20

Target: 20% or less0

Net debt/Net total
capital employed-8.1%(As of March 31, 2016)(As of March 31, 2016)

Cash flows

Future operating cash ﬂows
obtained each year

Become an Integrated
Energy Company

3Market Trend andManagement Policy

Promote efforts tocommercialize
renewable energies andreinforce R&D activities

with natural gas as the core

3

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

Bank loans•Lending from JBIC
•Guarantee from JOGMEC•Project ﬁnance

MEDIUM- TO LONG-TERM VISION OF INPEX:
Ichthys and Our Growth Beyond

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

INPEX CORPORATION Annual Report 201613

Segment Overview

Asia &
Oceania

Eurasiau p. 24

In production
Under development

39
1

1

4

14

2

2

Preparation for development

6

3

1,145

1,296

Number of projects

22

1,218

7

1,245

Number of countries

1,551

u p. 16

Under exploration

14

INPEX CORPORATION Annual Report 2016

188
32
66,852
13,832

197
27

2016

94,05032,228

191
26

2015

96,34142,601

190
25

188

185

210

2014

85,541
41,752

178,225
2015

25

2014

2013

84,32547,076

2013

28
2012

2012

68,31936,461

2011

2011

2011

2012

2013

2014

2015

2016

302,871

485,069

Operating income (¥ million)

2016

97,204

166
2015

409,776167
2014

264,849179
2013

485,275201
2012

281,623

Net sales (¥ million)

235,814

Net sales/Operating income

406,828

2011

483,187

Net production (thousand boed)

299,599

Proved reserves (million boe)214

Reserves/Production

367

Other

2016

Middle East
& Africa

AmericasJapanu p. 28

u p. 30

1,742

u p. 26

6

9

7

7

5
1

15

9

1

Naoetsu LNG
Terminal

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

783

857

2

Minami-Nagaoka
Gas Field

26
109,601
12,096

153

25
129,522163

27120,268
22,771174

29
118,937
28,568130

28113,662
24,607138

25
104,525
25,959

117

23
36

2015

13,727（14,002）

74

2014

21

2013

13,351（15,303）

65

2012

20

2011

2015

11,435（7,646）

68

2016

17

2015

2014

5,945
（6,089）

2014

18
36

2013

2013

5,525
（5,518）

2012

21
30
2015

2011

2012

12,673（3,035）

2014

2016

2011

2011

2012

2013

2014

2015

2016

2016

16,693

290,866

357,3432013

333,213354,1362012

421,184

350,735
243,1132011

2016

516,513169
2015

524,528168
2014

621,513

158
2013

520,8352012

500,033

2011

155

135

248

505

518

Project Overview

583

4

2016

INPEX CORPORATION Annual Report 201615

Project Overview by Region

Asia & Oceania

In the Asia and Oceania region, INPEX holds participating interests 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 preparatory development activities areunder way. The Company is also actively advancing more than 20 exploration projects withgrowth potential across the region.

16

INPEX CORPORATION Annual Report 2016

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

quently made a series of discoveries
in the Bekapai (oil), Handil (oil), Tambora (oil and gas), Tunu (gas), Peciko(gas), Sisi and Nubi (gas), as well as theSouth Mahakam (gas), ﬁelds, each ofwhich has continued to produce crude
oil and natural gas. The crude oil andcondensate produced from theseﬁelds are shipped mainly to oil reﬁneries and power companies in Japanby tanker from the Santan and Senipah
terminals. Most of the natural gas issupplied to the Bontang LNG Plant,
and then shipped as LNG to customers in Japan and elsewhere.

Project status(production on the basis of all fields and average rate of FY2015)
In production

Crude oil: 73 Mbbld
Natural gas: 1,452 MMcf/d
LPG: 7 Mbbld

Bontang LNG Plant

The Offshore Mahakam Blockhas begun to see output decline after
more than 40 years of production. In
2012, impediments at production
wells led to a large drop in output, in
addition to natural attrition. Thereafter,
successful steps were taken to control
the decline in production by advancing efforts to counter sand problems
and accelerate the pace at which theCompany undertakes development
well drilling. Despite these endeavors, production is still expected todecrease gradually in the future.

Venture company(established)

Interest owned(*Operator)

INPEX CORPORATION(February 21, 1966)

INPEX 50% TOTAL* 50%
INPEX 50% Chevron* 50%

Attaka Unit

Santan Terminal

Attaka Field

Badak Field
Nilam Field

4

Tunu Field

Tambora Field
Handil Field

Project Overview

Sisi Field
Nubi Field

Senipah Terminal

Bekapai Field

Balikpapan

Peciko Field

Offshore
MahakamBlock

INDONESIASouth Mahakam Field
Gas field

Oil field

Oil and gas field

1

2

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

INPEX CORPORATION Annual Report 201617

2 South Natuna Sea Block B

FPSO vessel

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 ofnatural gas to Singapore via Indonesia’s ﬁrst international pipeline commenced in 2001. Additional deliveriesof 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 ofSouth Natuna, utilize a world-classﬂoating production, storage and offloading (FPSO) system. Production of
crude oil and condensate began in
December 2004, with LPG productioncommencing in April 2007. After 2006
at this same block, production began at
the Hiu Gas, Kerisi Oil and Gas, North
Belut Gas and Bawal Gas ﬁelds. Most
recently, production commenced at
the South Belut Gas Field in April 2014.

Natuna Sea

South Natuna Sea
Block B

North Belut
BelidaKerisiBawal

NatunaIslandSouth Belut
Hiu
BelanakGas field

Oil field

Oil and gas field

Project status
Contract area
(production on the basis of all fields and(block)average rate of FY2015)

Venture company(established)

Interest owned(*Operator)

Crude oil: 22 Mbbld
South Natuna
In production Natural gas: 253 MMcf/d
Sea B
LPG: 9 Mbbld

INPEX Natuna, Ltd.
(September 1, 1978)

INPEX Natuna 35%
ConocoPhillips* 40%
Chevron 25%

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

18

Bontang LNG Plant
Santan Terminal

Fertilizer plant
Attaka Field
Tunu Field

Senipah Terminal
Balikpapan

Peciko Field

Kalimantan

South Mahakam Field
Makassar Strait

INDONESIA

Sebuku BlockGas field
Oil field

Sulaewesi

Ruby Gas Field
Offshore production facility in the Ruby Gas Field

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2015)

Venture company(established)

Interest owned(*Operator)

SebukuIn production (Natural gas: 91 MMcf/d)

INPEX South Makassar, Ltd.
(May 17, 2010)

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

INPEX CORPORATION Annual Report 2016

4 Abadi LNG Project
INPEX acquired a 100% interest in
the Masela Block in November 1998
through an open bid conducted by theIndonesian government and subsequently went about exploratory activities as the operator, discovering theAbadi Gas Field through the ﬁrst exploratory well drilled in 2000. The Company
subsequently drilled two appraisal wells
in 2002 and four in 2007–2008, all ofwhich conﬁrmed the presence of gas
and condensate reservoirs.
In December 2010, Indonesianauthorities approved the initial planof development (POD-1) deploying
a floating LNG (FLNG) plant with anannual processing capacity of 2.5
million tons, and from November 2012
to November 2014, INPEX undertook
SURF (subsea, umbilical, riser andflowline) and FLNG FEED work.
INPEX also drilled three appraisal
wells between 2013 and 2014 withthe aim of expanding the volume ofrecoverable reserves. Evaluations ofthese wells resulted in the confirmationof a substantially greater volume ofnatural gas reserves, which was certified
by the Indonesian authorities. Having
considered ways to optimize a planof development centered on a largescale FLNG, for example by increasing
reserve volume and concept selection
studies, the Company submitted arevised plan for the development
based on an FLNG plant with anannual LNG processing capacity of
7.5 million tons to the Indonesianauthorities in September 2015. In April
2016, however, the Company received
a notification from the Indonesianauthorities instructing it to re-proposea plan of development based on
onshore LNG. The Company's policyof aiming for the early start-up of
development remains unchanged, and
INPEX will pursue the implementationof the project in the most economicallyand technically rational way, in close
cooperation with its partner Shell andthe Indonesian authorities.

Project status

Venture company (established) Interest owned (*Operator)

MaselaPreparation fordevelopment

INPEX Masela, Ltd.
(December 2, 1998)

INDONESIA

Abadi Gas Field

Arafura Sea

AUSTRALIA

Timor Sea

DarwinGas field

4
Project Overview

Contract area (block)

Tanimbar Island

INPEX Masela* 65%
Shell 35％
1

2
1: Production test 2: Drillship for the Abadi LNG Project

INPEX CORPORATION Annual Report 201619

5 The Ichthys LNG Project and Surrounding Blocks
Project Overview
In 1997, INPEX placed an open tender bid to acquire the petroleum
exploration permit WA-285-P, locatedapproximately 200 km northwest ofWestern Australia’s Kimberley coast.
This bid was accepted in August 1998.
During the initial phase of exploration, which began in March 2000, theCompany drilled three exploratory
wells that conﬁrmed the presenceof gas and condensate. As part of asecond drilling campaign, INPEX conducted three-dimensional seismic
surveys while drilling an additional
two wells. These activities helped to
identify the existence of sufﬁcient
recoverable reserves of gas and condensate to warrant commercial development. From 2009, the Company
undertook front-end engineering anddesign (FEED) operations, acquired
government approval and engaged
in LNG marketing and other related
activities. A ﬁnal investment decision(FID) was made in January 2012, triggering the start of fully ﬂedged development work.

Status of Development Work
As of March 2016, project progress
rate was approximately 84%. Looking at the status of offshore facilities,
work continues on the construction ofa central processing facility (CPF) anda ﬂoating production, storage andofﬂoading (FPSO) facility. Installationof the topside modules for both offshore facilities has been completed.
Currently, internal construction workand commissioning are under way.
The installation of the chains anchoring the CPF and FPSO on the ocean
was completed in April 2016. As
regards other offshore-related work,
the laying of the 890-km-long gas
export pipeline (GEP) that will connect the Ichthys gas-condensate ﬁeld
with onshore facilities in Darwin wascompleted in November 2015. The
drilling of production wells remains
ongoing. With regard to the onshore
facilities, the Company has ﬁnishedthe delivery and installation of all themodules of 1st train (natural gas liquefaction facilities) and is currently
carrying out connection work. As ofJune 2016, the installation of 90%of the more than 200 modules had
been completed. In moving toward
the commencement of operations ofboth the offshore and onshore facilities, the Company is paying maximum
attention to safety while making progress with a variety of tasks.
Surrounding Exploration Blocks
INPEX holds 12 exploration blocks inthe vicinity of the Ichthys gas-condensate ﬁeld and is currently engaging
in exploration activities. Of this total,
evaluation work on the gas alreadydiscovered at the three WA-56-R,
WA-281-P, and WA-274-P blocks isunder way. In the event that substantial amounts of crude oil and natural
gas are conﬁrmed as a result of this
exploration and evaluation activity,
synergies and other effects with the
Ichthys LNG Project are expected tofurther expand business.

2

1

3

4

1: FPSO under construction 2: ENSCO5006 drilling rig for a production well 3: Subsea wellhead assembly installation operations 4: CPF under construction

20

INPEX CORPORATION Annual Report 2016

Contractarea(block)WA-50-L
Timor Sea

WA-51-L

WA-513-P
WA-504-P

WA-285-P

AC/P36

WA-274-P/
WA-58-R

Under
development

INPEX Ichthys
Pty. Ltd.
(April 5, 2011)

Under
exploration

WA-343-P

WA-343-P

WA-57-R

WA-56-R

WA-502-P

WA-56-R

WA-514-P

AC/P36
WA-494-P

Under
exploration

WA-281-P

IchthysWA-50-L
WA-51-L

Under
exploration(Oil/gas reservoirs conﬁrmed)

WA-57-R
WA-502-P
WA-504-P
AUSTRALIA

WA-513-P

Ichthys gas-condensate field

WA-514-P

Under
exploration

INPEX Ichthys Pty* 62.245%
TOTAL 30.000%
CPC 2.625%
Tokyo Gas 1.575%
Osaka Gas 1.200%
Kansai Electric Power 1.200%
Chubu Electric Power 0.735%
Toho Gas 0.420%
INPEX Browse E&P Pty* 60%
TOTAL 40%

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

Under
exploration

voirs conﬁrmed)

Interest owned(*Operator)

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

(Oil/gas reservoirs conﬁrmed)

Under
WA-274-P/ exploration(Oil/gas reserWA-58-R

WA-285-P
WA-494-P

WA-281-P

VentureProject status company(established)

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

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

4
Project Overview

5

6

7

8

9

5: Gas export pipeline laying work 6: Onshore gas liquefaction plant under construction 7: Operations to install an FPSO’s ﬂare tower
8: Onshore liquefaction plant module installation operations 9: Onshore gas liquefaction plant

INPEX CORPORATION Annual Report 201621

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

the world’s ﬁrst FLNG project, in May
2011. Development of the Prelude
FLNG Project is currently under way,with the start of production targetedat around 10 years from when the Prelude Gas Field was ﬁrst discovered inearly 2007.

Timor Sea

Concerto Gas Field

WA-44-L

Prelude Gas Field

Ichthys
Gas-Condensate Field

AUSTRALIA

Gas field

FLNG vessel

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

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%

7 Tangguh LNG Project (Berau Block)
MI Berau B.V., jointly established by
INPEX and Mitsubishi Corporation,acquired an interest in the Berau Blockin October 2001. In October 2007,
MI Berau Japan Ltd., a joint venturewith Mitsubishi Corporation, acquireda stake in KG Berau Petroleum Ltd.,effectively increasing the Company’s
interest to around 7.79% in the Tangguh LNG Project.
In March 2005, the Indonesian
Government approved an extensionof the production sharing contract(PSC) and project development plans
for the Tangguh LNG Project through2035. Development work commenced
thereafter, and the first shipments of
LNG began in July 2009.
Papua Province (Indonesia)

Berau BlockGas field
Shipping facility

Venture company Interest owned
Contract area Project status(block)(production on the basis of all fields and average rate of FY2015) (established)(*Operator)
Berau
TangguhUnit

22

In production

Crude oil: 6 Mbbld
Natural gas: 1,035 MMcf/d

INPEX CORPORATION Annual Report 2016

Ml Berau 22.856% BP* 48.000％
Nippon Oil Exploration (Berau) 17.144% KG Berau 12.000%

MI Berau B.V.
(August 14, 2001) MI Berau 16.3% *BP 37.16% CNOOC 13.9%
Nippon Oil Exploration (Berau) 12.23% KG Berau 8.56%
LNG Japan 7.35% Talisman 3.06% KG Wiriagar 1.44%

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

Indian Ocean

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

Barrow Island

Van Gogh Oil Field

WA-155-P（Part II）

Ravensworth Oil Field
Onslow

WA-43-L
Exmouth

AUSTRALIA

Van Gogh FPSO vessel

Project status(production on the basis of all
fields and average rate of FY2015)

Contract area (block)WA-35-L (Van Gogh Oil Field)
WA-35-L & WA-55-L Unitization area

Oil ﬁeld

In production (Crude oil: 15 Mbbld)

WA-43-L (Ravensworth Oil Field)

In production (Crude oil: 11 Mbbld)

WA-155-P (PartⅡ)

Under exploration

Venturecompany(established)

Interest owned(*Operator)
INPEX Alpha 47.499% Quadrant* 52.501%

INPEX
Alpha, Ltd.
(February17, 1989)

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

4

In April 1993, INPEX acquired aninterest in JPDA03-12, a contract area
located in the Timor Sea JPDA, which
is jointly managed by Australia andEast Timor. Exploration within thiscontract area resulted in the discoveryof oil and gas ﬁelds. Of these, studies revealed that the Undan structure
and the Bayu structure in the adjacent
JPDA03-13 contract area were a single
structure. The interest holders unitizedboth contract areas in 1999, allowing

Project Overview

9 Bayu-Undan Project (JPDA03-12 Block)joint development of the Bayu-Undan
Gas-Condensate Field to proceed.
The commercial production and shipment of condensate and LPG started
in 2004, and LNG in February 2006.

EAST TIMORINDONESIA
Abadi Gas Field
Timor Sea
Joint Petroleum Development Area

Darwin Gas Pipeline
Bayu-Undan
Gas-Condensate Field

DarwinAUSTRALIA

Gas field

Oil field

Bayu-Undan offshore facility

Project status
Contract area
(production on the basis of all(block)fields and average rate of FY2015)
JPDA03-12
Bayu-Undan
Unit

In production

Crude oil: 21 Mbbld
Natural gas: 586 MMcf/d
LPG: 13 Mbbld

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

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

INPEX CORPORATION Annual Report 201623

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 in 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
an interest in the Offshore North Caspian Sea Contract Area in Kazakhstan’s
territorial waters. The Offshore North
Caspian Sea Contract Area consistsof two blocks: the East Block is about
4,300 km2 and the West Block is about
1,275 km2 in area (for a total of about
5,575 km2). The Kashagan Oil Field,
which is in the East Block, is locatedin the Caspian Sea at depths of 3–5 m
and is approximately 75 km southeastof Atyrau, Kazakhstan.
Since the ﬁrst exploratory well
was drilled in September 1999, theKashagan Oil Field was conﬁrmed
in 2000 and commercial discoveries were announced in 2002. Afterdevelopment work, the Kashagan Oil
Field began producing crude oil in
September 2013, but production was
suspended due to gas leaks from thepipeline.
Besides the Kashagan ﬁeld, thepresence of hydrocarbon reserves

was also conﬁrmed in the surrounding
Kalamkas, Aktote and Kairan structures. Appraisal of these three structures is continuing in parallel with thedevelopment of the main Kashaganﬁeld with a view to expanding the total
production of the contract area.

Offshore facility

24

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 2016

2 ACG Oil Fields
INPEX acquired an interest in the Azeri-Chirag-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, the Central Azeri, the West
Azeri, the East Azeri, the Deepwater
Gunashli and the West Chirag.

Project status
Contract(production on
Venture company
area
the basis of all fields(established)(block)and average rate of FY2015)
ACG

In production(Crude oil: 632 Mbbld)

Offshore production facilities

KAZAKHSTANInterest owned(*Operator)

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

AtyrauRUSSIA

Offshore
North Caspian Sea
Contract Area

GEORGIA

Project Overview

Black Sea

4

Caspian Sea

Tbilisi

Baku

ARMENIA
TURKEYAZERBAIJANBTC Pipeline
ACG Oil Fields
CeyhanMediterranean
Sea

IRAN

IRAQ

SYRIA

Oil ﬁeld

3 BTC Pipeline Project
The 1,770-km BTC pipeline stretchesfrom 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 producedin the ACG Oil Fields in Azerbaijan.

Contract area
(block)Venture company(established)

Interest owned(*Operator)

BTC Pipeline

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

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

Shipping terminal

INPEX CORPORATION Annual Report 201625

Middle East & Africa

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

1 ADMA Block

Zirku Island

Contract area (block)Umm Shaif, Lower Zakum, Umm Lulu Field, Nasr Field
Upper Zakum Field
Umm Al-Dalkh Field
Satah Field

26

INPEX CORPORATION Annual Report 2016

In May 2004, INPEX made Japan Oil
Development Co., Ltd. (JODCO), a
wholly owned subsidiary by acquiring all of the JODCO shares held byJapan National Oil Corporation (atthat time) through a share exchange.
JODCO owns an interest in the ADMA
Block located offshore Abu Dhabi in the
United Arab Emirates. Oil production
currently spans seven ﬁelds in the block.
In addition, a number ofdevelopment projects are under way
to maintain and expand oil output,
such as redevelopment of the Upper
Zakum Oil Field involving the use of
Project statusartificial islands, as well as Phase 2
development and other work, with theaim of engaging in overall production at
the Umm Lulu and Nasr oil fields.

Satah Field
Das
IslandNasr Field
Umm Shaif Field

Zirku Island

Upper Zakum/
Lower Zakum
Field

Umm Al-Dalkh Field
Umm Lulu Field
Abu Dhabi

U.A.E.

Oil field

Subsea pipeline

Venture company (established) Interest owned

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

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

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

Abu Dhabi

United Arab Emirates

Crude oil pipelines
Oil field in production

Undeveloped oil fields

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

Contract area (block)

Project status

Venture company (established)

Interest owned

ADCO

In production

JODCO Onshore Limited (April 15, 2015)

JODCO 5%, etc.

4

Onshore pipeline

Project Overview

Concession agreement signing ceremony held in April 2015

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

Offshore
AngolaBlock 14

Production facility

Contract area
(block)Project status
Venture company(production on the basis of all fields and average rate of FY2015) (established)

Offshore
In production (Crude oil: 109 Mbbld)
Angola Block 14

Atlantic
Ocean
The State ofCabinda

Democratic
Republic of
Congo

ANGOLA

Interest owned(*Operator)

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

INPEX CORPORATION Annual Report 201627

Americas

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

28

INPEX CORPORATION Annual Report 2016

1 Shale Gas Project in Canada
In August 2012, INPEX acquired a 40%
interest in the shale gas projects in theHorn River, Cordova and Liard basinsin British Columbia, Canada, from
Nexen Inc.
In the coming years, the Company will proceed with development
work in the basins, which are currently
partly in production, and implement
studies to consider commercialization
to export shale gas as LNG from the
Canadian west coast.

Shale Gas Project

CANADA

British Columbia
Prince Rupert

Edmonton

Calgary

Contract area (block)

Project status

Horn River,
In production
Cordova and Liard areas (partly)

Venture company (established)
VancouverInterest owned (*Operator)

INPEX Gas British Columbia Ltd. INPEX Gas British Columbia40%
Oil field
Victoria(November 28, 2011)
Nexen* 60%

2 U.S. Gulf of Mexico Projects and Others
In August 2012, INPEX joined the
deepwater Lucius Oil Field in the Gulf
of Mexico and acquired a 7.2% interest
from U.S.-based Anadarko Petroleum
Corporation. Oil and gas production
at the Lucius Oil Field has proceeded
steadily since its commencement inJanuary 2015.

The Company first participated in
the deepwater Walker Ridge 95/139
exploration block project in the Gulf
of Mexico in February 2011. Having
confirmed the presence of crude oilin an exploratory well, the Company isdrilling a follow-up appraisal well.

Project status(production on the basis of all fields andaverage rate of FY2015)

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

In production

Walker Ridge Blocks
95/139Crude oil: 71 Mbbld
Natural gas: 74 MMcf/d

Ship Shoal
Block 72
Walker Ridge 95/139

MEXICO

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

4

Venture company(established)

Interest owned(*Operator)

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

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

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

Under exploration(Oil/gas reservoirs conﬁrmed)

UNITED STATES

Cuervito/
Fronterizo
Blocks

Project Overview

Contract area
(block)アメリカ合衆国

INPEX Gulf of Mexico 12.29% Shell* 42.37%
Anadarko* 25％ Other 6.34%(Operator: Anadarko (Block 95); Shell (Block 139))

3 Brazil (Frade Block, Other)
A joint venture established by INPEXand Sojitz Corporation, Frade Japão
Petróleo Limitada (FJPL) acquired aninterest in the Frade Block in Brazil’s
offshore Northern Campos basin in July
1999. Commercial production started
in June 2009. Crude oil production
was temporarily suspended in March2012 due to the presence of a small oil
sheen but safely resumed at the endof April 2013.
Having also acquired a 15% interest in the BM-ES-23 concession in the

Espírito Santo Basin off the southeast
coast of Brazil in February 2010, theCompany is advancing exploration
activities together with other companies, including the operator, Petrobras. Up to now, the presence ofquality oil and gas deposits has been
conﬁrmed at the same concession asa result of exploratory and appraisal
well drilling. In 2015, the Company
drilled two appraisal wells and is conﬁrming the presence of oil deposits at
one of them.

Contract
area (block)

Project status
Venture company(production on the basis of all fields and average rate of FY2015) (established)

Frade
Project

In production

BM-ES-23

Under exploration (Oil/gas reservoirs conﬁrmed)

Crude oil: 23 Mbbld
Natural gas: 2 MMcf/d

Vitoria

BM-ES-23

BRAZIL
Atlantic Ocean

CamposFrade Project

Macae

Oil field

Interest owned(*Operator)

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

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

INPEX Petróleo Santos Ltda.
(January 19, 2007)

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

INPEX CORPORATION Annual Report 201629

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 network.
INPEX also commenced operation at Naoetsu LNG Terminal in December 2013.

Yabase Oil Field

Akita Prefecture

Higashi-Kashiwazaki Gas Field

Naoetsu
LNG Terminal

Sekihara Gas Field(underground storage)
Niigata Cityy

Niigata Marketing
OfficeToyama Line

ToyamaCity

Minami-Aga Oil Field

Kashiwazaki
City

Itoigawa
City

Minami-Kuwayama Oil Field
Nagaoka City

Minami-Nagaoka Gas Field

Joetsu City

ToyamaPrefecture

Shin Oumi Line

Domestic
Natural Gas

Niigata
Prefecture

Domestic Natural Gas /Regasified LNG

Nagano City

Tokyo LineTomi BS*

Matsumoto City

Gunma Prefecture

Fujioka BS*

Shin Tokyo Line
Karuizawa
Town

Matsumoto Line

NaganoPrefecture

Chino City

Kofu Line

Second Suruga Trunk Line
Sodeshi LNG Terminal[Shizuoka Gas]

Shizuoka Shizuoka City
Prefecture
Minamifuji Line

Isesaki Power Control Center

Tomiokam
City
Honjo City

Yamanashi
Prefecture

Showa
S
Town

Ome City

Shizuoka Line

(INPEX, Shizuoka Gas, Tokyo Gas)

Konosuno Cityy

Oil and gas fields

SaitamaPrefecture

Regasified
LNG

Technical Research Center

Natural gas
pipeline network

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

Chiba City

(Kitakarasuyama, Setagaya-ku)
Sam u City
Samm
Sa

Itazuma Power Control Center

Other project

Adachi-ku, Tokyo

Metropolitan
Tokyo

Gotembamb
City
Fuji Ci
City
Cit

Sano City

Iruma Line

Kofu City

Tochigi
Prefecture

Ryomo Line

Major officeNaruto Gas Field

Chiba
Prefecture0

100 kmNatural Gas Business in Japan
In its natural gas business in Japan, thenatural gas produced from the Companyheld Minami-Nagaoka Gas Field (Niigata
Prefecture) as well as the LNG and otherproducts received at the Naoetsu LNG

30

INPEX CORPORATION Annual Report 2016

Terminal (Niigata Prefecture), which
commenced operations in December
2013, are transported through a trunk
pipeline network of approximately
1,400 km stretching across the Kanto

and Koshinetsu regions, and sold tocustomers including city gas companies
and large-scale plants along the
aforementioned network.

INPEX has experienced steady
growth in sales of natural gas volume
due to sharp rises in the prices of competing fuels, as well as the highly environmentally friendly attributes of natural gas. Natural gas is expected to be
used for a wide variety of applications,
not only as a fuel for thermal energy but
also as a fuel for onsite power generation and co-generation, as well as a raw
material for chemical products. INPEX
is targeting annual sales of 2.5 billion
m3 by the early 2020s and as much as
3.0 billion m3 over the long term.
To achieve these targets, INPEX
is advancing construction work on the
Toyama Line (extending from Itoigawa
City, Niigata Prefecture, to Toyama City,
Toyama Prefecture) with a view to begin
operations in mid-2016. Also, in thelead-up to the full deregulation of electric power retail sales in April 2016, theCompany commenced electric power
supplies to city gas companies along
its network through Diamond Corpo-

ration, a subsidiary of Chubu ElectricPower Co., Inc., and implemented innovative initiatives relating to its electric
power business.
At the Naruto Gas Field in Chiba
Prefecture, natural gas is being produced from water-soluble gas ﬁelds. In
addition, after extracting the natural gas
from underground water (brine water),the brine water is used to produce
iodine, which is exported to Europe,
the United States and elsewhere.

Echigo LineSea ofJapan

Sekihara Gas Field(underground storage)

MitsukeCity

Shinetsu
HonsenNagaokaCity

JoetsuShinkansen
Line

Kashiwazaki City

Minami-Nagaoka
Gas Field
Gas ﬁeld

Ojiya City
Joetsu Line

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

17.2

17.6

17.5

18.0

17.9

2011/3

2012/3

2013/3

2014/3

2015/3 2016/ 3

17.5

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

4

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

Geothermal Development

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

Project Overview

Renewable Energy and Other Initiatives
Company to drill two survey wells in the
Bandai region in 2016.
Moreover, INPEX took steps toparticipate in the Sarulla Geothermal
Independent Power Producer (IPP)
Project in Indonesia from June 2015.
The project involves constructing aworld-class geothermal power plant,with a capacity of around 330 MW, in
the Sarulla Geothermal Field locatedin the island province of North Sumatra, and providing generated power toIndonesia’s government-owned electricity company over a period of 30
years. Construction of the power generation plant began in 2014. The Company is aiming for the progressive startof commercial operations from 2016.

Sarulla Geothermal IPP Project

INPEX CORPORATION Annual Report 201631

Sustainability

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

1. Material CSR Issues

As a global energy company that aims to constantly expand
its upstream operations, in April 2012 the Company identiﬁed the material CSR issues that it would tackle on a priority basis in a bid to gain the trust of all stakeholders. In May
2015, we reviewed the overall initiatives conducted over thethree-year period for each of the ﬁve Material Issues identiﬁed three years earlier. At the same time, we reexamined theMaterial Issues in light of such factors as events that affectour business activities accompanying progress in our main
projects and changes in the concerns of shareholders. We
then re-identiﬁed our Material CSR Issues adding “Governance” as a sixth area of concern. In this section of the annual report 2016, we provide details of the material CSR issues and the progress of these for the year ended March 31,
2016, as well as explain our goals for the year ending March
31, 2017. Please refer to the Company’s Sustainability Report2016 for details of speciﬁc initiatives by issue.

3. CSR Promotion System

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

CSR Promotion System

General Meeting of Shareholders

2. CSR Activity Road Map

For the continuous enhancement of CSR activities, we haveestablished a medium-term action plan called the CSR road
map in April 2013. Phase 3 of the CSR road map covers theperiod of the year ending March 31, 2017. It is during thisphase that we plan to engage in CSR on a global scale.

Phase

1

Year to March
2013

Phase

2

Year to March2014 -Year to
March 2016

3

Year to March2017 andbeyondCompliance
Committee

Executive
Committee

Audit &
Supervisory Board

Launch organizations to promote CSR, revise
the CSR Principles, set out the material CSR
issues and participate in international initiatives(UNGC and EITI)

Deepen CSR Initiatives with PDCA
Formulate the CSR Action Plan, work out
the business activities of each department andenhance initiatives (establish a PDCA cycle)

Ensure that the PDCA cycle is ﬁrmly entrenchedthroughout the Group, promote activities
that are unique to the Group, engage inglobal-level reporting and enhance corporate
value through these and other initiatives

STEP UP

32

Board ofDirectors

Establish the Foundation of
the CSR Promotion System

Promote CSR on a Global Scale

Phase

Advisory Committee

INPEX CORPORATION Annual Report 2016

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

CSR Promotion
Council

4. Relationship with Stakeholders

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

8 Oil and Gas

ProducingCountries

We develop long-term relationships based on mutual
trust with oil and gas producing countries and contribute to mutual development by serving as a bridge
between the producing
countries and other countries including Japan.

1 Project Partners

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

We engage in day-to-day
regular communication with
contractors to carry out construction and operation withmaximum consideration forsafety and the environment.

3 Customers

7 Employees

We contribute to the growthand development of our customers by providing a stableand efﬁcient energy supply
and delivering safety, peaceof mind, and efﬁciency.

We provide opportunities
for employees to growinto professionals who canthrive in an international
business
environment
through wide-ranging work
experience and interaction
with people from diverse
backgrounds in a global
corporation.

4 Shareholders

6 NGOsand Investors

5 Local Communities

We seek to coexist with local communities asa good corporate citizen through respectful
dialogues.

We strive for highly transparent information disclosure and aim to increase
corporate value by securing
stable supplies of energy
and meeting the expectations of shareholders andinvestors.

5
Sustainability & GovernanceWe strive to build a networkof NGOs in wide-ranging
ﬁelds including environment, human rights, andsocial contribution andseek to create partnerships
to solve environmental andsocial problems.

2 Contractors

About the Sustainability Report 2016
INPEX publishes its Sustainability Report annually to keep its stakeholders informed of its CSR initiatives and activities. To help our stakeholders efﬁciently and effectively understand the value that
our Company creates, we have prepared the Sustainability Report 2016 in printed booklet, PDF andonline formats based on the Material CSR Issues identiﬁed following our review in 2015.
Readers can access and order each of these reports via the Company’s CSR Web site.
} www.inpex.co.jp/english/csr/

INPEX CORPORATION Annual Report 201633

Sustainability

Material CSR Issues

An overview of the Material CSR Issues, main initiatives, results for theyear ended March 31, 2016, and goals for the year ending March 31,
2017, are presented brieﬂy as follows.

Main Initiatives

Governance•Strengthening of
the governance framework•Strengthening of the risk
management system

Strive to improve management
efﬁciency, transparency, andsoundness and engage in
responsible management as a
global company.
Advisory Committee

Compliance•Observance of laws, regulations
and social norms•Respect for human rights•Fair business practices

In the conduct of business activities,
observe laws, regulations andinternational norms, including thoserelated to human rights, and the social
norms in areas where we operate.
A CSR Training Session

HSE•Safety assurance,
health management•Prevention of major incidents•Environmental management andpreservation•Conservation of biodiversity

Strive to continuously strengthen
safety assurance, environmental
preservation, and healthmanagement in operations.
Visiting an FPSO Construction Site

Local
Communities

Strive to reduce impacts on local
communities where we operate andcontribute to the development oflocal communities through respectfulcommunication with them.

•Dialogue with the communities inwhich we operate•Participation in local communities
and contribution to theirdevelopment

Participants in an Economic Development
Forum at the Site of Operations

Addressing
Climate Change
Appropriately manage greenhousegas emissions, strive to commercialize renewable energies, and reinforce new technology R&D activities.

•Management of greenhouse gas
emissions•Promotion of renewable energy
businesses•New technology R&D

INPEX Mega Solar Joetsu

Employees
Develop human resources
appropriate for global operations
and pursue business development
through a corporate culture of respect
for individual values and diversity.

34

INPEX CORPORATION Annual Report 2016

•Development and recruitment of
global human resources•Promotion of diversity•Creation of employee-friendly
workplace environment

Recruiting TeamFiscal 2016 Goals•Established Basic Policy on Corporate Governance•Reviewed and provided training on the HQ BCP for Earthquakes
to all employees•Evaluate the effectiveness of the Board meetings as awhole and disclose a summary of the evaluation results•Review the HQ BCP for Earthquakes and provide relevant
education and training to employees•Conducted ABC (Anti-bribery and Anti-corruption) -related risk
assessment at the head ofﬁce and three overseas ofﬁces•Revised the ABC Guidelines and prepared to
institute subordinate regulations•Conducted compliance training for new employees andmid-career hires•Conducted CSR training (e-learning) with a human rights component(participation rate: 82%)

•Continue ABC-related risk assessment atoverseas ofﬁces•Widely disseminate and strengthen implementationof the ABC Guidelines•Engage in activities in preparation for developmentof global compliance systems•Continue to conduct CSR training•HSE audits were conducted at the Gas Supply & Infrastructure
Division, the Abadi LNG Project and other LNG projects in Japan;
the levels of compliance achieved were conﬁrmed at over 90%•LTIF / TRIR accomplished 0.15 / 1.12; there was also a fatal accident•5 times of Level 3 crisis management exercises conducted•Promote HSE reviews, introduction of risk-based HSE audit•Incident reduction target: LTIF 0.17 / TRIR 0.91 or less
•Implementation of ICS based emergency response
procedure through Level 3 exercises•Provided information on operational status and actions for safety
through brieﬁngs at the Naoetsu LNG base and publishednewsletter for local communities•Held regular brieﬁngs and released publications in Australia•INPEX Group social investment expenditures: 1.71 billion yen•Implemented strategic community partnerships with NGO’s in Australia•Provided opportunities to more than 1,000 local businesses and a
3,000-person local workforce in the construction of
the Ichthys LNG Project•Welcomed 12 interns chosen from science majors•Sponsored courses at graduate schools in Japan andsupported students•Continue to engage stakeholders•INPEX Group social investment planned expenditures:
2.76 billion yen•Continue to support community programs•Continue to provide local employment and procurement
opportunities in the Ichthys LNG Project•Continue summer internship for undergraduate andgraduate science students•Continue to sponsor courses at graduate school in Japan•Prepared a position paper on climate change•Joined a geothermal power generation project in Sarulla Indonesia•Conducted short-term fumarolic testing in a geothermal energy
development survey in the Amemasudake area of Hokkaido•Participated in establishment of Geological Carbon Dioxide
Storage Technology Research Association•Start phase-one commercial operation of the geothermal
power generation project in Sarulla, Indonesia•Promote commercialization of the geothermal power
generation business in Japan•Continue to promote CCS commercialization•Held global HR meetings•Implemented measures to instill the INPEX Values(questionnaire survey, Values Person interviews)•Deﬁned diversity and inclusion at INPEX•Formulated an employer action plan in accordance with the Action
Plan to Promote Women’s Participation and Advancement in Ｗorkplace•Actively hired females, foreign nationals, and persons with disabilities•Conducted a diversity awareness survey in Japan•Continue instilling the INPEX Values•Continue holding global HR meetings•Implement the employer action plan in accordance with
the Action Plan to Promote Women’s Participation andAdvancement in Ｗorkplace•Continue to promote diversity (hiring of females, foreign
nationals, and persons with disabilities)

INPEX CORPORATION Annual Report 2016

5
Sustainability & GovernanceFiscal 2015 Results

35

GovernanceCorporate Governance(As of June 28, 2016)

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

Overview of the Corporate Governance Structure

INPEX has adopted an Audit & Supervisory Board Member organizational structure,under which Audit & Supervisory Board members audit the execution of operations,which are in turn carried out by directors well versed in their ﬁeld. In addition, theCompany has introduced an Executive Ofﬁcer System to pursue the managementwith agility and efﬁciency. INPEX frequently engages in negotiations with the governments of oil-producing countries and overseas oil companies. This necessarily
requires internal directors and executive ofﬁcers who have knowledge, expertiseand international experience relating to the Company’s business and both a soundknowledge of the Company and their particular ﬁeld of expertise. Internal directors
in principle hold the concurrent position of executive ofﬁcers. By adopting this concurrent organizational structure, the Company’s Board of Directors is better placed
to execute operations in an efﬁcient manner. At the same time, this structure helps toensure effective operating oversight.
In addition to enhancing the transparency of management and bolstering
the ability of the Board of Directors to carry out its supervisory function, INPEX has
appointed ﬁve of its 14-member Board of Directors from outside the Company.
Through this initiative, steps have been taken to ensure that management issues are
considered and deliberated with a greater degree of objectivity from an independent
standpoint. Moreover, four of the Company’s ﬁve Audit & Supervisory Board members
are also appointed from external sources. In addition to putting in place an Audit &Supervisory Board, INPEX has set up the Audit & Supervisory Board Members’ Ofﬁceand deployed dedicated staff and is reinforcing collaboration between Audit & Supervisory Board members and the Audit Unit, as well as independent auditors.

Overview of the Corporate
Governance Structure
Organizational structure ....................................................
Company with Audit & Supervisory Board Member
Directors
Number of directors as stipulated by
the Articles of Incorporation ............................ up to 16
Number of directors(number of outside directors) ................................14 (5)Term of ofﬁce .............................................................. 1 year
Audit & Supervisory Board members
Number of Audit & Supervisory Board members
as stipulated by the Articles ofIncorporation ...................................................up to 5
Number of Audit & Supervisory Board members(number of outside Audit & Supervisory
Board members) ................................................ 5 (4)Term of ofﬁce.................................................. 4 years
Number of independent directors and auditors ...9(5 outside directors,
4 outside Audit & Supervisory Board members)
Rights plan and other measures to protect
against a takeover ............................................ None
Other ........................ Issuance of a Class A Stock to
the Minister of Economy, Trade and Industry

Corporate Governance Framework (Diagram)
General Meeting of Shareholders
Appoint/Dismiss Compensation
limit setup
Audit

Proposal/Advice/Report

Appoint/Dismiss Compensation
limit setup

Advisory Committee
ReportCoordinate

Board of Directors
5 Outside Directors

Compliance Committee

Coordinate

ReportCSR Committee
Corporate HSE
Committee
Information Security
Committee

Audit & Supervisory
Board Members’
OfficeCoordinate

Executive
Committee

Appoint/
Dismiss/
Supervise

Appoint/
Dismiss/
Supervise

President & CEO

ReportCoordinate

Audit Unit

Executive Officers
Divisions and Subsidiaries

INPEX CORPORATION Annual Report 2016

Accounting
audit

Independent
Auditors

INPEX Value Assurance
System Committee

36

Coordinate

Accounting audit

ReportBusiness Operation
SystemAudit & Supervisory
Board (Member)

Appoint/
Dismiss

Internal audit

[1] Directors and the Board of Directors

The responsibilities of the Board of Directors shall be to fully
exercise its supervisory function, secure fairness and transparency in management, and ensure sustainable growth andincrease corporate value over the mid- to long term throughimplementation of effective corporate governance, with recognition of its ﬁduciary responsibility to shareholders.
The Company’s Board of Directors comprises 14 members, ﬁve of whom are outside directors. In addition to amonthly meeting, the Board of Directors meets as necessary inorder to discuss and determine matters concerning management strategy, important business execution, and also supervises the execution of duties by directors. In addition, the termof ofﬁce for directors was set at one year from June 2012. Thisinitiative helps to enhance the ability of directors to respond tochanges in the Company’s operating environment in a timely
manner and to further clarify management responsibilities.

[2] Executive Committee andExecutive Ofﬁcer System

From the perspective of increasing the speed of decision making related to the execution of business, we have establishedan Executive Committee. The meetings are held weekly and asnecessary. At the Executive Committee, 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.

[3] Formulation of
Corporate Governance Guidelines[4] Class A Stock

According to the stipulations of the Articles of Incorporation,
INPEX issues a Class A Stock to the Minister of Economy, Tradeand Industry. The Class A Stock does not possess voting rights
at shareholders’ meetings. However, it is possible for the holderof the Class A Stock to exercise veto rights for certain major
corporate decisions. We think the holding of Class A Stock by} See pp. 82­83 for Business Risks (8. Class A Stock)[5] Director Compensation

In the business of developing oil and natural gas, a considerable amount of time is required between the launch of abusiness venture and any investment recovery. Accordingly,
INPEX does not consider it appropriate to reﬂect short-term
performance in directors’ compensation. Compensation for
directors consists of monthly compensation (basic compensation), which is paid based on the duties of each director, and abonus based on the Company’s performance. Compensation
is determined by the Board of Directors. Compensation paid to
Audit & Supervisory Board members consists solely of a ﬁxed
monthly compensation, which is determined through consultation between the Audit & Supervisory Board members.
The table below shows the amount of compensation paid
to directors and Audit & Supervisory Board members for theyear ended March 31, 2016. From the year ended March 31,
2014, the bonus component paid to outside directors andAudit & Supervisory Board members has been abolished. Outside directors and Audit & Supervisory Board members are now
paid a consolidated ﬁxed compensation amount only. This takes
into account efforts to further bolster corporate governance.
Compensation Paid to Directors andAudit & Supervisory Board Members (Year ended March 31, 2016)

Director classification

Directors (excluding outside directors)

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

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

413

357

55

11

27

27

-

2

96

96

-

13

5
Sustainability & Governance

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

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

Notes: 1. The Company does not adopt a stock option plan. 2. The Company does not maintainan 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, 2016.

[6] Accounting Audit andAuditor Compensation

In accordance with the Companies Act and the Financial Instruments and Exchange Act, we accept accounting audits from
Ernst & Young ShinNihon LLC. The amount of auditor compensation is determined in total based on the audit plan and thenumber of auditing dates, after obtaining approval from the
Audit & Supervisory Board.
Compensation Paid to the CPAs and Related Parties(Year ended March 31, 2016)

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

Ernst & Young ShinNihon LLC
Kazuhiko Umemura, Toru Kimura
20 CPAs and 26 others¥257 million (INPEX: ¥165 million;

Consolidated subsidiaries: ¥92 million)¥15 million (INPEX: ¥4 million;
Compensation for non-auditing services Consolidated
subsidiaries: ¥11 million)

INPEX CORPORATION Annual Report 201637

GovernanceMonitoring of Management by Outside Directors
and Audit & Supervisory Board Members[1] Outside Directors

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

[2] Outside Audit &Supervisory Board Members

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

[3] Independence of Outside Directors
and Outside Audit & Supervisory
Board Members

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

[4] Audit & Supervisory Board andAudit & Supervisory Board Members

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

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

Outside directors

HiroshiSato

Yoshiyuki
Kagawa

Jun
Yanai
Isao
Matsushita

Outside Audit &Supervisory Board members

YasuhikoOkada

38

Hideyuki
ToyamaKoji
SumiyaIndependent
directors/
Significant concurrently held positions
auditors

Reason for appointment

Attendance at board meetings forthe year ended March 31, 2016

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

Board of Directors meetings 13/13

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

Board of Directors meetings 16/16

Advisor of Mitsubishi Corporation,a shareholder in our company

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

Senior Executive Advisor of JX Holdings, Inc.,a major shareholder in our company

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

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

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 16/16―

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

Board of Directors meetings 13/13
Audit & Supervisory Board meetings 14/14―

Possesses extensive experience and knowledge in financial matters

MichiroYamashita

Managing Executive Ofﬁcer in charge ofFinance & Accounting Department, Vice
President of Asia & Oceania Division of JAPEX,
a major shareholder in our company

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

Board of Directors meetings 16/16
Audit & Supervisory Board meetings 18/18

MasaruFunai―

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

INPEX CORPORATION Annual Report 2016

Board of Directors meetings 11/13
Audit & Supervisory Board meetings 12/14
Board of Directors meetings 16/16
Audit & Supervisory Board meetings 18/18

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

3 CSR Committee

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

4 Corporate HSE

Committee

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

1 Advisory Committee
Board of Directors

Executive Committee

5 Information Security

Committee

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

6 INPEX Value Assurance

System Committee

The Advisory Committee was establishedin October 2012 with the aim of enhancing corporate value and the corporate
governance function. Comprised ofexternal experts in a broad spectrum ofﬁelds, the committee provides the Boardof Directors with multifaceted and objective advice and recommendations acrossa wide range of areas. Areas of discussion
and advice include international politicaland economic conditions, an outlook ofenergy conditions and ways in which tobolster corporate governance.

2 Compliance Committee

The Compliance Committee was established in April 2006 with the aim of promoting compliance initiatives acrossthe entire Group. The committee formulates fundamental compliance policies
applicable to the Group, deliberates onimportant matters and manages the manner in which compliance is practiced.

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

Information Disclosure and Activities for
the Beneﬁt of Shareholders and Investors

5

tutional investors. Video archives of these ﬁnancial results presentations are provided on the Company’s IR Web site together
with a simultaneous interpretation in English. In general, INPEX
undertakes overseas IR road shows covering such regions as
Europe, North America and Asia. Furthermore, INPEX strives toparticipate in conferences attended by domestic and overseas
investors while engaging in one-on-one meetings.
The Company’s Web site (IR section: www.inpex.co.jp/
english/ir/) features a host of IR tools including ﬁnancial reports,ﬁnancial results presentations and annual reports. Together withrecent news releases,
every effort is made todisclose pertinent information on the Company’s performance andﬁnancial position, as wellas trends in crude oil
prices, foreign currency
exchange rates, theCompany’s share priceIR fair in August 2015
and stock information.

INPEX CORPORATION Annual Report 2016

Sustainability & Governance

INPEX undertakes the early delivery of convocation notices for
its general meeting of shareholders in an effort to ensure thatshareholders have sufﬁcient time to consider agenda items
tabled for resolution at each Ordinary General Meeting of
Shareholders. The Convocation Notice for INPEX’s 10th Ordinary General Meeting of Shareholders held in June 2016 wasposted on the Company’s Web site more than three weeks prior
to the meeting on May 27, 2016. The Convocation Notice itself
was dispatched on June 6, 2016. 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 andEnglish, on its Web site and TDnet (Timely Disclosure network).
Turning to the Company’s IR activities, INPEX participates in
events such as IR fairs for individual investors and meetings in avariety of venues including the branch ofﬁces of securities ﬁrms.
More than 10 information meetings for individual investors are
generally held each year. Video archives of certain meetings arealso made available on the Company’s Web site. INPEX holds
biannual meetings on its ﬁnancial results for analysts and insti-

39

Directors, Audit Supervisory Board Members andExecutive Ofﬁcers(As of June 28, 2016)

Toshiaki Kitamura
President & CEO

Years of service as Director: 6 years, Number of shares owned: 26,900 shares

Masaharu Sano

Masahiro Murayama

Seiya Ito

Years of service as Director: 10 years, Number of shares owned: 23,300 shares

Years of service as Director: 7 years, Number of shares owned: 19,600 shares

Years of service as Director: 10 years, Number of shares owned: 17,700 shares

Shunichiro Sugaya

Takahiko Ikeda

Yoshikazu Kurasawa

Years of service as Director: 7 years, Number of shares owned: 18,300 shares

Years of service as Director: 7 years, Number of shares owned: 24,600 shares

Years of service as Director: 4 years, Number of shares owned: 14,400 shares

Director, Senior Executive Vice President

Director, Managing Executive Ofﬁcer

Director, Senior Managing Executive Ofﬁcer

Director, Managing Executive Ofﬁcer

Kimihisa Kittaka

Director, Managing Executive Ofﬁcer*

Years of service as Director: - year, Number of shares owned: 4,100 shares

40

INPEX CORPORATION Annual Report 2016

Director, Senior Managing Executive Ofﬁcer

Director, Managing Executive Ofﬁcer

Nobuharu Sase

Director, Managing Executive Ofﬁcer*

Years of service as Director: - year, Number of shares owned: 20,200 shares

Hiroshi Sato

Yoshiyuki Kagawa

Jun Yanai

Isao Matsushita

Yasuhiko Okada

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

Years of service as Director: 9 years,
Number of shares owned: - share

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

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

Years of service as Director: 4 years,
Number of shares owned: - share

Kazuo Yamamoto

Hideyuki Toyama

Koji SumiyaYears of service as Audit & Supervisory
Board Member: 1 year,
Number of shares owned: 9,000 shares

Years of service as Audit & Supervisory
Board Member: 1 year,
Number of shares owned: - share

Years of service as Audit & Supervisory
Board Member: 6 years,
Number of shares owned: 7,600 shares

Director (Outside)

Director (Outside)

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member (Outside)

Director (Outside)*

Audit & Supervisory
Board Member (Outside)

Director (Outside)*

Director (Outside)

Michiro Yamashita

Masaru Funai

Years of service as Audit & Supervisory
Board Member: 1 year,
Number of shares owned: - share

Years of service as Audit & Supervisory
Board Member: 6 years,
Number of shares owned: - share

Audit & Supervisory
Board Member(Outside)

Audit & Supervisory
Board Member(Outside)

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

Toshiaki Kitamura
Masaharu Sano
Masahiro Murayama
Seiya Ito
Shunichiro Sugaya
Takahiko Ikeda
Yoshikazu Kurasawa
Kimihisa Kittaka*Nobuharu Sase*

（1）
（1）
（1）
（1）
（1）
（1）
（1）
（1）
（1）

Director (Outside)
Director (Outside)
Director (Outside)
Director (Outside)
Director (Outside)
Audit & Supervisory Board Member
Audit & Supervisory Board Member (Outside)
Audit & Supervisory Board Member (Outside)
Audit & Supervisory Board Member (Outside)
Audit & Supervisory Board Member (Outside)

Hiroshi Sato
Yoshiyuki Kagawa
Jun Yanai*
Isao Matsushita*
Yasuhiko Okada
Kazuo Yamamoto
Hideyuki Toyama
Koji Sumiya
Michiro Yamashita
Masaru Funai

（2）
（4）
（2）
（4）
（2）
（4）
（2）
（4）
（2）
（4）
（3）
（4）
（3）
（4）
（3）
（4）
（3）
（4）

5

President & CEO
Senior Executive Vice
President

Senior Managing Executive
OfﬁcerSenior Managing Executive
OfﬁcerManaging Executive Ofﬁcer
Managing Executive Ofﬁcer
Managing Executive Ofﬁcer

Toshiaki Kitamura
Masaharu Sano

Senior Vice President, Technical Headquarters In
charge of HSE & Compliance of the company

Masahiro Murayama Senior Vice President, Finance & Accounting

Vice President, Technical Headquarters
General Manager, Technical Planning & Coordination Unit

Executive Ofﬁcer

Yoshiro Ishii

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

Executive Ofﬁcer

Toshiya Oshita

Vice President, Technical Headquarters
General Manager, Technical Resources Unit

Executive Ofﬁcer

Hideki Iwashita
Tetsuo Yonezawa

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

Executive Ofﬁcer
Executive Ofﬁcer

Hiroshi Nakamura

Vice President, General Administration
General Manager, Human Resources Unit

Executive Ofﬁcer

Tsuyoshi Watanabe

Vice President, General Administration
General Manager, General Administration Unit

Executive Ofﬁcer

Nobusuke Shimada

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

Senior Vice President, Gas Supply & Infrastructure
Senior Vice President, New Ventures
Senior Vice President,
Corporate Strategy & Planning

Atsushi Sakamoto

Managing Executive Ofﬁcer

Vice President, Ichthys Project

Senior Vice President, Masela ProjectManaging Executive Ofﬁcer

Managing Executive Ofﬁcer

Vice President, Masela Project

Shunichiro Sugaya
Takahiko Ikeda
Yoshikazu Kurasawa

Managing Executive Ofﬁcer

Managing Executive Ofﬁcer

Vice President, Masela Project

Tetsuro Tochikawa

Senior Vice President, General Administration
Nobuharu Sase
Senior Vice President, the Americas & Africa
Shuhei Miyamoto
Senior Vice President, Asia & Australasia
Kenji Kawano
Yasuhisa Kanehara Senior Vice President, Eurasia & the Middle East
Vice President, Eurasia & the Middle East
Hiroshi Fujii
Senior Vice President, Oil & Gas Business
Shigeharu Yajima
Yoshinori Yamamoto Senior Vice President, Domestic Oil & Gas Business
Senior Vice President, Domestic Projects
Kimiya Hirayama
Senior Vice President, Logistics & IMT
Takashi Kubo

Managing Executive Ofﬁcer

Executive Ofﬁcer

Hirohisa Ota
Hajime Kawai
Arihiro Kezuka

Executive Ofﬁcer
Executive Ofﬁcer

Managing Executive Ofﬁcer

Managing Executive Ofﬁcer

Executive Ofﬁcer

Vice President, Finance & Accounting
General Manager, Finance Unit

Senior Vice President, Ichthys Project

Kimihisa Kittaka

Managing Executive Ofﬁcer

Noboru Himata

Seiya ItoManaging Executive Ofﬁcer
Managing Executive Ofﬁcer

Executive Ofﬁcer

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

Sustainability & Governance

Executive Officers

General Manager, HSE Unit

* Newly appointed Directors and Audit & Supervisory Board members(1) Concurrently hold the position of executive ofﬁcer(2) Outside directors as deﬁned in Article 2, Item 15, of the Companies Act(3) Outside Audit & Supervisory Board members as deﬁned in Article 2, Item 16, of the Companies Act(4) Independent directors/auditors as deﬁned in Article 436, Item 2, Sub-Item 1, of the Securities
Listings Regulations for the Tokyo Stock Exchange

INPEX CORPORATION Annual Report 201641

Toshiaki Kitamura

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
July 2002
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 Advisor to Tokio Marine & Nichido Fire Insurance Co., Ltd.
August 2009
Senior Executive Vice President of the Company
June 2010
Representative Director, President & CEO of the Company(incumbent)

April 2006

April 1972

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

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

Masahiro Murayama
April 1976

Joined The Industrial Bank of Japan, Ltd.
(currently Mizuho Bank, Ltd., etc.)
General Manager of Financial Institutions Banking
Division No. 2 of The Industrial Bank of Japan, Ltd.
June 2001
General Manager of Corporate Banking Department No. 2of The Industrial Bank of Japan, Ltd.
April 2002
General Manager of Corporate Banking Division No. 9
of Head Ofﬁce of Mizuho Corporate Bank, Ltd. (currently
Mizuho Bank, Ltd.)
December 2002 General Manager of Syndicated Finance Structuring
Division No. 1 of Mizuho Corporate Bank, Ltd.
October 2003
General Manager of Syndicated Finance Distribution
Division No. 1 of Mizuho Corporate Bank, Ltd.
April 2004
Executive Ofﬁcer, General Manager of Syndicated FinanceDistribution Division No. 1 of Mizuho Corporate Bank, Ltd.
October 2004
Executive Ofﬁcer, General Manager of Loan Trading
Division of Mizuho Corporate Bank, Ltd.
April 2005
Managing Executive Ofﬁcer, in charge of corporatebanking of Mizuho Corporate Bank, Ltd.
April 2008
Director, Deputy President of Mizuho Securities Co., Ltd.
May 2009
Advisor to the Company
June 2009
Director, Managing Executive Ofﬁcer, Senior Vice Presidentof Finance & Accounting of the Company
June 2016
Director, Senior Managing Executive Ofﬁcer, SeniorVice President of Finance & Accounting of the Company(incumbent)
June 1999

Seiya Ito
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 of Corporate
Strategy & Administration Division, General Manager ofCorporate Strategy & Planning Unit and Public Affairs Unitof INPEX Corporation
April 2006
Director, Assistant Senior General Manager of Corporate
Strategy & Planning Division, General Manager of Corporate Strategy & Planning Unit and Senior Fellow of Public
Affairs Unit of INPEX Holdings Inc. (currently the Company)
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
June 2016
Director, Senior Managing Executive Ofﬁcer, Senior Vice
President of Ichthys Project of the Company (incumbent)

October 2008
June 2011
June 2012

Kimihisa Kittaka
April 1981

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
Director-General for Consumer Policy, Ministry of
Economy, Trade and Industry
July 2008
Director-General for Kyushu Bureau of Ministry of
Economy, Trade and Industry
November 2010 Joined the Company and assumed the post of Senior
Coordinator of Business Development & Legal Unit,
Corporate Strategy & Planning Division
June 2011
General Manager of Corporate Strategy & Planning
Unit, and of Corporate Communications Unit, Corporate
Strategy & Planning Division of the Company
June 2012
Executive Ofﬁcer, Vice President of Corporate Strategy &Planning Division, General Manager of Corporate Strategy& Planning Unit, and Corporate Communication Unit of
the Company
June 2016
Director, Managing Executive Ofﬁcer, Senior Vice Presidentof Corporate Strategy & Planning Division of the Company(incumbent)
October 2007

Nobuharu Sase

April 1981
Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
September 2005 General Manager of Secretary Unit, Corporate Strategy &Administration Division of INPEX Corporation
April 2006
General Manager of Secretary Unit, General
Administration Division of INPEX Holdings Inc.
(currently the Company)
October 2008
Assistant Senior General Manager of General Administration
Division, General Manager of Secretary Unit of the Company
June 2010
Executive Ofﬁcer, Vice President of Oil & Gas Business
Division No.1, General Manager of Oil Marketing Unit of
the Company
June 2016
Director, Managing Executive Ofﬁcer, Senior Vice Presidentof General Administration Division of the Company(incumbent)

Hiroshi Sato
April 1970
June 1999
June 2002
June 2005
April 2006
June 2006
June 2007
June 2010
June 2014
June 2015

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
Exploration Co., Ltd.
June 2006
Representative Director, President, CEO and CCO of Mitsui
Oil Exploration Co., Ltd.
June 2007
Director (Outside) of INPEX Holdings Inc.
(currently the Company) (incumbent)
June 2012
Senior Advisor of Mitsui Oil Exploration Co., Ltd.

Jun Yanai
April 1973
July 1997
May 2001
April 2004
April 2005

April 1976
April 1997

April 2008

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

Yoshikazu Kurasawa
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

INPEX CORPORATION Annual Report 2016

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
Audit & Supervisory Board Member (part-time) of INPEX
Holdings Inc. (currently the Company)
Managing Director & Executive Ofﬁcer of JAPEX
Senior Managing Director & Executive Ofﬁcer of JAPEX
Executive Vice President & Executive Ofﬁcer of JAPEX
Advisor of JAPEX (incumbent)
Director (Outside) of the Company (incumbent)

Yoshiyuki Kagawa

Shunichiro Sugaya
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 of INPEX Corporation
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)

42

June 2007

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

April 2011
April 2013
June 2013
April 2014
April 2016
June 2016
June 2016

Joined Mitsubishi Corporation
General Manager of Petroleum Products Supply
Department of Mitsubishi Corporation
Senior Assistant to Group CEO of Energy Business Groupof Mitsubishi Corporation
Senior Vice President, Senior Assistant to Group CEO of
Energy Business Group of Mitsubishi Corporation
Senior Vice President, Division COO, of Petroleum
Business Division of Mitsubishi Corporation
Executive Vice President, Group COO of Energy BusinessGroup of Mitsubishi Corporation
Executive Vice President, Group CEO of Energy BusinessGroup of Mitsubishi Corporation
Member of the Board, Executive Vice President, GroupCEO of Energy Business Group of Mitsubishi Corporation
Member of the Board, Senior Executive Vice President,Group CEO of Energy Business Group of Mitsubishi
Corporation
Member of the Board, Senior Executive Vice President,Group CEO of Energy Business Group, Chief ComplianceOfﬁcer of Mitsubishi Corporation
Member of the Board, Senior Executive Vice President of
Mitsubishi Corporation
Advisor of Mitsubishi Corporation (incumbent)
Director (Outside) of the Company (incumbent)

Isao Matsushita
April 1970
April 1994

Joined Nihon Kogyo Co., Ltd.
General Manager of Beijing Ofﬁce of Japan Energy
Corporation
June 1996
General Manager of Petroleum Overseas of Japan Energy
Corporation
June 1998
Senior General Manager of Finance Department of Japan
Energy Corporation
June 1999
Senior General Manager, Principal of Corporate Planning
Department (in charge of Finance) of Japan Energy
Corporation
April 2001
Executive Ofﬁcer, Assistant to General Manager of Corporate Planning Department and Principal of Corporate
Planning Department (in charge of Finance) of Japan
Energy Corporation
September 2002 Member of the Board of Nippon Mining Holdings, Inc.,in charge of Finance Group
June 2003
Executive Board Member of Nippon Mining Holdings, Inc.
April 2004
Executive Vice President, in charge of Supply and Demand
Department, Logistics Department and Crude Material
Department of Japan Energy Corporation
June 2004
Member of the Board, Executive Vice President, in charge of
Supply and Demand Department, Logistics Department andCrude Material Department of Japan Energy Corporation
April 2005
Member of the Board, Senior Executive Vice President,
in charge of Sales Planning Department (Car Energy andHome Energy), Speciﬁed Sales Dealership Department,
Broad Area Sales Department, Retail Sales Department
and LP Gas Department of Japan Energy Corporation
June 2006
President and Representative Director of Japan Energy
Corporation

April 2010
July 2010

June 2012
June 2015
June 2016

Member of the Board of JX Holdings, Inc. (part-time)
Executive Vice President, Assistant to President (in chargeof Administration Department, Global Business Department, and Supply and Demand Department) of JX Nippon
Oil & Energy Corporation
Representative Director and President, President and Chief
Executive Ofﬁcer of JX Holdings, Inc.
Senior Executive Advisor of JX Holdings, Inc. (incumbent)
Director (Outside) of the Company (incumbent)

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

Joined Ministry of FinanceDirector-General for the Tokyo Regional Taxation Bureau
Secretary-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; Partner ofKitahama Partners (Tokyo Ofﬁce) (incumbent)
Director of the Company (incumbent)

Kazuo Yamamoto
April 1978
March 2002

Joined Teikoku Oil Co., Ltd.
General Manager of Petroleum Products Marketing
Department, Marketing Division of Teikoku Oil Co., Ltd.
August 2003
General Manager of Petroleum Products Marketing
Department and Power Business Department, Marketing
Division of Teikoku Oil Co., Ltd.
March 2004
Senior General Manager, General Manager of Petroleum
Products Marketing Department and Power Business
Department, Marketing Division of Teikoku Oil Co., Ltd.
March 2005
Director, General Manager of Technical Planning Department and Deputy General Manager of LNG PlanningOfﬁce of Teikoku Oil Co., Ltd.
April 2006
General Manager of Technology Planning Unit, Technology
Division of INPEX Holdings Inc. (currently the Company)
October 2008
Executive Ofﬁcer, Assistant to General Manager of Technical Division, General Manager of Technical Planning Unitof the Company
November 2010 Executive Ofﬁcer, Assistant to General Manager of Technical Division, General Manager of Technical Infrastructure
Unit of the Company
June 2011
Managing Executive Ofﬁcer, General Manager of Logistics& IMT Division of the Company
June 2015
Audit & Supervisory Board Member (full-time) of theCompany (incumbent)

Hideyuki Toyama
April 1975
July 2001

Joined Ministry of FinanceDirector-General of Sapporo Regional Taxation Bureau,
National Tax Agency (NTA)
Executive Secretary of the Administration Ofﬁce of the
Director-General, Cabinet Legislation Bureau (CLB)
July 2005
Director-General of the Fourth Department, CLB
October 2006
Director-General of the Third Department, CLB
November 2012 Advisor, Aioi Nissay Dowa Insurance Co., Ltd.
January 2013
Registered as attorney-at-law (incumbent)
April 2013
Visiting Professor, Graduate School of Public Policy,
University of Tokyo (incumbent)
June 2015
Audit & Supervisory Board Member (full-time) of theCompany (incumbent)
July 2003

Koji Sumiya
April 1976
April 2001
April 2002
October 2005
October 2007
October 2008
May 2010
June 2010

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

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

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

Masaru Funai
April 1972
April 1998
April 2000
April 2001
April 2002
April 2003
April 2005

June 2005

April 2007

April 2009

April 2010
June 2010
April 2011

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

Financial &Corporate Information
10-Year Financial Information

44

Background Information: Oil and Gas
Accounting Policies and Treatment

46

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

48

Consolidated Financial Statements/
Notes to Consolidated Financial Statements

54

Independent Auditor’s Report73

Subsidiaries and Afﬁliates

74

Business Risks

76

Oil and Gas Reserves and Production Volume

84

Corporate Information

87

10-Year Financial Information
INPEX CORPORATION and Consolidated Subsidiaries

The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a mat ter ofarithmetic computation only, at ¥112.69=US$1.00, the approximate exchange rate in effect as of March 31, 2016.
Millions of yen

2007/3

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3¥   969,713¥ 1,202,965¥ 1,076,165¥   840,427¥   943,080¥ 1,186,732¥ 1,216,533

Cost of sales    343,795    390, 554    319,038    298,168    334,833    395,443    426,326

Gross profit    625,918    812,411    757,127    542,259    608,247    791,289    790,207

Operating income    559,077    714,211    663,267    461,668    529,743    709,358    693,448    586,263    685,800    616,167    442,027    508,587    767,039    718,146¥   165,092¥   173,246¥   145,063¥   107,210¥   128,699¥   194,001¥   182,962¥   474,124¥   565,111¥   411,110¥   492,855¥   492,932¥    908,702¥ 1,106,504

Tangible fixed assets    219,227    254,481    297,636    358,094    379,862    383,698    584,541

Intangible assets    265,822    265,481    253,681    239,205    249,111    233,318    380,156

Investments and otherassets    648,934    722,828    805,618    923,624  1,558,475  1,540,680  1,544,958  1,608,107  1,807,901  1,768,045  2,013,778  2,680,380  3,066,398  3,616,159

Current liabilities    266,248    325,286    206,059    227,905    254,729    367,844    414,977

Long-term liabilities    261,843    243,802    199,925    295,270    328,268    384,361    530,198¥ 1,080,016¥ 1,238,813¥ 1,362,061¥ 1,490,603¥ 2,097,383¥ 2,314,193¥ 2,670,984¥   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)

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

68,937    548,057     29,294    137,069¥   189,417¥   222,270¥   162,845¥   216,395¥   182,025¥   249,233¥   199,859¥1,091.17*¥1,227.92*¥1,350.25*¥1,473.87*¥1,367.40*¥1,492.27*¥1,699.10*

17.50*

18.75*

20.00*    13.75*    15.00*    17.50*    17.50*¥  176.06*¥  183.78*¥  154.00*¥  113.88*¥  102.08*¥  132.84*¥  125.29*(Results of operations)
Net sales

Income before income
taxes
Net income attributableto owners of parent(Financial position)
Current assets

Total assets

Net assets(Cash ﬂows)
Cash flows fromoperating activities
Cash flows frominvesting activities
Cash flows fromfinancing activities
Cash and cash equivalents
at end of the period(Per share data)
Net assets per share(Yen)
Cash dividends per
share (Yen)
Earnings per share (EPS)(Yen)* Retroactively adjusted for a stock split at a ratio of 1:400 of common stock on October 1, 2013.

(Financial indicators)

44

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

Equity ratio (%)

64.0

64.0

71.9

68.9

74.5

71.1

68.6

D/E ratio (%)

24.2%

16.8%

12.9%

17.3%

13.7%

14.6%

19.2%

INPEX CORPORATION Annual Report 2016

Thousands of
U.S. dollars

Millions of yen

2014/3

2015/3

2016/3

2016/3¥ 1,334,626¥ 1,171,227¥ 1,009,564$ 8,958,772

490,417525,444526,758

4,674,399

844,209645,783

482,806

4,284,373

733,610534,886

390,139

3,462,055

750,078

540,023

328,887

2,918,511

77,820¥16,777$¥ 1,140,204¥ 1,342,410¥

984,345$ 8,734,981

951,779

1,497,622

1,752,615

15,552,533

439,179

458,770

541,4714,804,961

1,506,977

1,200,352

1,091,411

9,685,074

4,038,139

4,499,154

4,369,842

38,777,549

375,670

365,212319,128

2,831,910

666,432

845,238

871,9117,737,253¥ 2,996,037¥ 3,288,704¥ 3,178,803$28,208,386

¥

¥

¥

183,708$ 1,630,207¥

183,691

213,514¥

216,749

148,877(395,555)(81,087)(543,534)(4,823,267)

48,961(4,178)

156,726

1,390,771

117,531¥260,978¥

53,813$

477,531¥1,911.25*¥

2,099.95¥

2,008.34

$

17.82

¥

18.00*¥ 125.78*

18.00

18.00
¥

53.29

¥

11.49

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

0.16
$

0.10

(16.8)%(8.1)%(8.1)%

69.1

68.2

67.1

67.1

20.9%

22.1%

25.3%

25.3%

Financial &Corporate Information(31.9)%

6

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

INPEX CORPORATION Annual Report 201645

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

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

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

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

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

Production sharing contracts

Exploration
costs
Development
costs
Production costs(Operating costs)
Acquisition
costs

46

Non-recoverable costs under the PSCs

Acquisition costs

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

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

Acquisition costs

Costs relating to the acquisition of rights (recorded as intangible assets under“Mining rights”) for projects governed by concession agreements are treatedin the same way as projects governed by the PSCs, as described above.

Exploration costs

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

Development costs

The Group’s share of any development costs related to mining facilities iscapitalized within tangible fixed assets. The depreciation of tangible fixed
assets that are governed by concession agreements is computed primarily
using the unit-of-production method for mining assets located outside Japanand the straight-line method for domestic facilities. These depreciation
expenses are recorded within the cost of sales.

Production costs

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

Administrative expenses

Exploration costs

Costs

terms of the relevant PSC is capitalized within “Recoverable accounts under
production sharing.”
Development costs
The share of all development costs incurred by the Group that is recoverable
under the terms of the relevant PSC is recorded within “Recoverable accounts
under production sharing.”
Production costs
A ny oper ating cos t s incur red during the produc tion phase that arerecoverable under the relevant PSC are initially recorded within “Recoverable
accounts under production sharing.”
Administrative expenses
Any administrative expenses that are recoverable under the relevant PSC arerecorded within “Recoverable accounts under production sharing.”

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

Concession agreements

Assets on
Balance Sheet

Statement of
IncomeCosts

Assets on
Balance Sheet

Statement of
IncomeProject under
exploration phase

Provision for allowance
for recoverable
accounts under
production sharing

Explorationcosts

All exploration costs
are expensed
as incurred

Exploration
expenses

Development
costs

Tangible fixed
assetsCost of sales(Depreciation andamortization)

Production costs(Operating costs)

All production costs
are expensed
as incurred

Cost of sales(Operating expenses)

Acquisition
costs

Mining rights

Cost of sales(Depreciation andamortization)

Recoverable
accounts under
production sharing
Project underdevelopment andproduction phase
Recoverable
accounts under
production sharing
Project underdevelopment andproduction phase
Exploration anddevelopment
rightsINPEX CORPORATION Annual Report 2016

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)

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

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

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

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

— Allowance for investments in exploration companies
A reserve is recorded to provide for probable losses on investments madeby the Group in entities engaged in oil and gas activities, as estimatedbased on the net assets of such entities. Although the Group believes thatthe assessments and estimates relating to such investments are reasonable,changes in actual production volumes, prices or foreign exchange rates could
significantly affect future operating results.

— Provision for exploration projects
A provision for exploration projects is provided for future expenditures of
consolidated subsidiaries at the exploration stage based on a schedule ofinvestments in exploration. Although the Group believes that assessments
relating to the schedule of investments are reasonable, changes to theschedule could significantly affect future operating results.

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

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

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

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

6
Financial &Corporate Information

INPEX CORPORATION Annual Report 201647

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
BUSINESS ENVIRONMENT
During the year ended March 31, 2016, the Japanese economy
continued on a path of gradual recovery driven by improvements
in corporate earnings and the employment rate, although there
were weaknesses in certain segments of the economy including
exports and consumer spending.
Under such business environment, Brent crude oil price,a common benchmark of international crude oil prices whichsignificantly influence the Group's per formance, star ted at
US$57.10 per barrel on April 1, 2015, and reached a high of
US$67.77 per barrel in early May due to fac tors including
decreased shale oil produc tion forecasts in the U.S., andan upward revision in crude oil demand forecast s by theInternational Energy Agency (IEA). The index then took on a
downward trajectory, dropping to US$42.69 per barrel in earlyAugust due to sluggish crude demand in China amid concerns ofan economic slowdown there.
Thereafter, the index rose to US$53.05 per barrel due toheightened geopolitical risk brought on by Russia’s militaryintervention in Syria. The index then began dropping again
in early December as OPEC deferred a decision on reducing
production, and dropped to US$27.88 per barrel in mid-January
marking its lowest point in twelve years as a result of sluggish
crude demand worldwide and concerns of crude oil oversupply
as sociated with the lif ting of sanc tions agains t Ir an andobservations of an expansion in crude oil exports there.
However, the index then bounced back and finished at
US$39.60 per barrel on March 31, 2016, owing to growing
expectations of crude oil output adjustments by OPEC andnon-OPEC countries triggered by the consensus among four oil
producing countries including Saudi Arabia and Russia to freeze
crude oil output.
Meanwhile, in Japan, the prices of crude oil and petroleum
products shifted in correlation with international oil prices. The

Group’s average crude oil sales price for the year ended March
31, 2016 reflected this shift and fell to US$47.95 per barrel, down
US$36.05 from the year ended March 31, 2015.
The foreign exchange market, another important factor
that affects the business of the Group, began to trade at the¥120 level to the U.S. dollar. Beginning of the period, the yen
has remained in steadiness roughly ¥118 to ¥120 level to the
U.S. dollar. In late-May, the director of European Central Bank
remarked that he would accelerate the quantitative monetaryeasing before the off period in summer. In addition to that, thesuggestion by Chairman of Federal Reserve Board Yellen, whichshowed a possibility to move the rise in interest-rate forward,
also brought the dollar buying to the higher ¥125 level for awhile.
However, the depreciation in the Chinese stock market inAugust, and the decline in the rate of Chinese Yuan increased theconcern over the Chinese economy. Furthermore, the movementof the risk aversion in the market brought the yen buying
dominant and the yen appreciated to the lower ¥116 for a while.
Afterward, on the situation where the interest-rate appreciationof 25 basis point by FRB in December and the additionalmonetary easing (partly introduction of the negative interest rate)by Bank of Japan were determined, the dollar appreciated to thelower ¥120. However, the concern over the world economy andthe decline of the expectation of the additional rise in interestrate depreciated the dollar across the board. TTM closed at¥112.69 to the U.S. dollar which turned out to be ¥7.58 higher
than that on March 31, 2015.
Reflecting these situations, the average sales exchange rate
for the Group for the year ended March 31, 2016, was ¥120.55 to
the U.S. dollar, which is ¥12.62 lower than that for the year ended
March 31, 2015.

PERFORMANCE OVERVIEW
Net sales
Consolidated net sales for the year ended March 31, 2016,
decreased by ¥161.7 billion, or 13.8%, to ¥1,009.6 billion from
¥1,171.2 billion for the year ended March 31, 2015, due to adecrease in sales price of crude oil and natural gas.
Compared with the year ended March 31, 2015, net sales ofcrude oil decreased by ¥51.2 billion, or 7.0%, to ¥679.2 billion from¥730.4 billion, and net sales of natural gas decreased by ¥105.1
billion, or 24.9%, to ¥316.8 billion from ¥421.9 billion.
Crude oil sales volume increased by 36,669 thousand barrels,or 45.5%, to 117,227 thousand barrels compared with the year
ended March 31, 2015. The sales volume of natural gas increasedby 28 billion cubic feet (Bcf), or 9.0%, to 337 Bcf compared with theyear ended March 31, 2015. Of this, the sales volume of overseas
natural gas increased by 29 Bcf, or 12.0%, to 272 Bcf comparedwith the year ended March 31, 2015. The sales volume of domestic
natural gas decreased by 37 million m3, or 2.1%, to 1,750 million

48

INPEX CORPORATION Annual Report 2016

m3 (equivalent to 65 Bcf) compared with the year ended March 31,
2015. The average sales price of overseas crude oil was US$47.95
per barrel, a decrease of US$36.05, or 42.9%, compared with theyear ended March 31, 2015. The average sales price of overseas
natural gas was US$6.58 per thousand cubic feet (Mcf), a decreaseof US$4.78, or 42.1%, compared with the year ended March 31,
2015. The average sales price of domestic natural gas was ¥52.29
per m3, a decrease of ¥5.27 per m3, or 9.2%, compared with theyear ended March 31, 2015.
The decrease of ¥161.7 billion in net sales was mainly derived
from the following factors: regarding net sales of crude oil andnatural gas, an increase in sales volume contributing ¥362.1 billion
to the increase, a decrease in unit sales price pushing sales downof ¥612.8 billion, the depreciation of the Japanese yen against
the U.S. dollar contributing ¥94.4 billion to the increase, and adecrease in net sales excluding crude oil and natural gas of ¥5.4
billion.

(Millions of yen, %)Years ended March 31,

Net sales
Crude oil
Natural gas
Other
Cost of sales
Gross profit
Exploration expenses
Selling, general and administrative expenses
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Gain on sales of marketable securities
Foreign exchange gain
Other
Other expenses
Interest expense
Equity in losses of affiliates
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Loss on disposal of fixed assets
Impairment loss
Other
Income before income taxes
Income taxes
Net income (loss)
Net loss attributable to non-controlling interests
Net income attributable to owners of parent

Cost of sales

Cost of sales for the year ended March 31, 2016, increased by¥1.3 billion, or 0.3%, to ¥526.8 billion from ¥525.4 billion forthe year ended March 31, 2015. This was mainly due to thedepreciation of the Japanese yen against the U.S. dollar.

Exploration expenses

Exploration expenses for the year ended March 31, 2016,
decreased by ¥17.1 billion, or 73.5%, to ¥6.2 billion from ¥23.2
billion for the year ended March 31, 2015. This was mainly due toa decrease in exploration activities in the Americas region.

Selling, general and administrative expenses

Selling, general and administrative expenses for the year ended
March 31, 2016, decreased by ¥1.8 billion, or 2.8%, to ¥61.4
billion from ¥63.1 billion for the year ended March 31, 2015. Thiswas mainly due to a decrease in taxes.

Depreciation and amortization

Operating income

As a result of the above, operating income for the year ended
March 31, 2016, decreased by ¥144.7 billion, or 27.1%, to ¥390.1
billion from ¥534.9 billion for the year ended March 31, 2015.

2016

ChangeRatio¥1,009,564
679,241
316,761
13,562526,758
482,806
6,166
61,387
25,114
390,139
69,934
10,751
10,82625,9872,964
19,406
131,186
4,199
20,69625,026335
13,28845,88521,757
328,887354,393(25,506)(42,283)¥    16,777¥(161,663)(51,181)(105,099)(5,383)
1,314(162,977)(17,073)(1,752)595(144,747)(31,830)
(476)
4,156
7,841
(16,598)(26,753)
34,559
1,252
7,252
5,577
(500)
7,030
10,753
3,195(211,136)(110,033)(101,103)(40,060)¥ (61,043)(13.8)%(7.0)(24.9)(28.4)
0.3(25.2)(73.5)(2.8)
2.4(27.1)(31.3)
(4.2)
62.3
43.2
(84.8)(58.0)
35.8
42.5
53.9
28.7
(59.9)
112.3
30.6
17.2
(39.1)(23.7)——(78.4)%¥31.8 billion, or 31.3%, to ¥69.9 billion from ¥101.8 billion for theyear ended March 31, 2015. This was mainly due to a decreasein foreign exchange gain, despite increases in gain on sales ofmarketable securities and dividend income.

Other expenses

Other expenses for the year ended March 31, 2016, increased by¥34.6 billion, or 35.8%, to ¥131.2 billion from ¥96.6 billion for theyear ended March 31, 2015. This was mainly due to the following
factors: posting impairment loss for certain projects due to adrop in oil prices and increases in equity in losses of affiliates andloss on disposal of fixed assets.

Income taxes

Total current income taxes and deferred income taxes for theyear ended March 31, 2016, decreased by ¥110.0 billion, or
23.7%, to ¥354.4 billion from ¥464.4 billion for the year ended
March 31, 2015. The Group pays the majority of its taxes outside
Japan. In addition to the high corporate tax rates imposed ina number of regions, the Group is generally unable to deduct
expenses incurred in Japan for such taxes. Despite the positiveeffects attributable to the application of the foreign tax credit
system, this situation resulted in a high effective income tax rate.

Net loss attributable to non-controlling interests

Net loss attributable to non-controlling interests for the year
ended March 31, 2016, increased by ¥40.1 billion to ¥42.3 billion
from ¥2.2 billion for the year ended March 31, 2015.

6
Financial &Corporate Information

Depreciation and amortization for the year ended March 31,
2016, increased by ¥0.6 billion, or 2.4%, to ¥25.1 billion from¥24.5 billion for the year ended March 31, 2015. The Group
records depreciation costs for production facilities that arecovered by concession agreements as cost of sales. In addition,
under its accounting treatment of the PSCs, the Group records
capital expenditures as “Recoverable accounts under production
sharing” instead of capitalizing these costs within tangible fixed
assets and depreciating them. Costs that are recovered in any
given year based on the terms of the PSCs are included in thecost of sales.

2015¥1,171,227
730,422421,860
18,945525,444645,783
23,23963,13924,519534,886
101,764
11,227
6,670
18,146
19,562
46,15996,627
2,947
13,444
19,449835
6,258
35,132
18,562
540,023
464,426
75,597(2,223)¥    77,820

Net income attributable to owners of parent

As a result of the above, net income attributable to owners ofparent for the year ended March 31, 2016, decreased by ¥61.0
billion, or 78.4%, to ¥16.8 billion from ¥77.8 billion for the year
ended March 31, 2015.

Other income

Other income for the year ended March 31, 2016, decreased by

INPEX CORPORATION Annual Report 2016

49

FINANCIAL POSITION
Total assets as of March 31, 2016, decreased by ¥129.3 billion,
or 2.9%, to ¥4,369.8 billion from ¥4,499.2 billion as of March
31, 2015. Current assets decreased by ¥358.1 billion, or 26.7%,
to ¥984.3 billion from ¥1,342.4 billion due to a decrease inmarketable securities and others. Fixed assets increased by¥228.8 billion, or 7.2%, to ¥3,385.5 billion from ¥3,156.7 billion asof March 31, 2015, due to increases in tangible fixed assets andintangible assets and others.
Meanwhile, total liabilities decreased by ¥19.4 billion, or
1.6%, to ¥1,191.0 billion from ¥1,210.5 billion as of March 31,
2015. Current liabilities decreased by ¥46.1 billion, or 12.6%, to¥319.1 billion from ¥365.2 billion as of March 31, 2015. Long-term

liabilities increased by ¥26.7 billion, or 3.2%, to ¥871.9 billion
from ¥845.2 billion as of March 31, 2015.
Net as set s decreased by ¥109.9 billion, or 3.3%, to¥3,178.8 billion from ¥3,288.7 billion as of March 31, 2015. Total
shareholders’ equity decreased by ¥12.5 billion, or 0.5%, to¥2,537.0 billion from ¥2,549.5 billion as of March 31, 2015. Total
accumulated other comprehensive income decreased by ¥121.3
billion, or 23.4%, to ¥395.9 billion from ¥517.2 billion as of March
31, 2015, and non-controlling interests increased by ¥23.9 billion,or 10.8%, to ¥245.9 billion from ¥222.0 billion as of March 31,
2015.

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 ofdevelopment drilling and any production facilities.
• Operating expenses include the costs of well operations,maintenance and the supervision of production activities.
This category also includes the administrative expenses forthe project (or contract area) if it contains a field in active
production.
• Discrepancies exist between the standards stipulated in

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

The table below shows the Group’s exploration and development costs and other expenditures (excluding capitalized interest costs
and asset retirement costs corresponding to asset retirement obligations capitalized under fixed assets) by segment for the years
ended March 31, 2015 and 2016.
(Millions of yen)

Year ended March 31, 2015

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥    519
Development
2,851
Subtotal* 1
3,370
Equity-method Affiliates
Exploration—
Development—
Subtotal—
Other capital expenditures* 2
27,016¥30,386
Total* 3

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 47,681
436,119
483,800¥ 2,839
45,65748,496¥ 1,982
74,38676,368¥19,628
22,912
42,540¥    72,649
581,925
654,574—963
963
348,112¥832,875

445
—
445
—
¥48,941

7
13,094
13,101—¥89,469

—
835
835
—
¥43,375

452
14,892
15,344375,128¥1,045,046*1 Figures include an equity-method affiliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic gas infrastructure, the Groupʼs share of investment in the Ichthys downstream entity(Ichthys LNG Pty Ltd, an equity-method affiliate) and others.
*3 The amount capitalized for the asset retirement costs corresponding to asset retirement obligations for the year ended March 31, 2015, was ¥60,888 million.

50

INPEX CORPORATION Annual Report 2016

(Millions of yen)

Year ended March 31, 2016

Japan

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

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 23,981
418,496
442,477¥     058,89058,890¥   1,372
113,849
115,221¥11,495
1,807
13,302¥ 39,340
599,394
638,734—
155
155
281,399¥724,031

343
—
343
—
¥59,233

4
14,695
14,699—¥129,920

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

Total investments for the year ended March 31, 2016, decreased by ¥57.7 billion, or 5.5%, to ¥987.3 billion (including ¥16.0 billion for
exploration and development by equity-method affiliates) from ¥1,045.0 billion for the year ended March 31, 2015. This was mainly due to adecrease in expenditures in the Asia & Oceania region.
The table below shows the Group’s operating expenses by segment for the years ended March 31, 2015 and 2016.
(Millions of yen, %)Years ended March 31,

2016

2015

INPEX CORPORATION and Consolidated SubsidiariesJapan¥ 11,075
104,938
Asia & Oceania
13,384
Eurasia (Europe & NIS)
Middle East & Africa
39,927
Americas
3,229   Subtotal
172,553
Equity-method Affiliates
Asia & Oceania
1,034—
Eurasia (Europe & NIS)
Middle East & Africa
8,290
Americas2,321   Subtotal
11,645
Total¥184,198

6.4%
60.8
7.8
23.1
1.9
100.0

¥ 12,380
75,25910,761
56,178
1,938
156,516

7.9%
48.1
6.9
35.9
1.2
100.0

8.9
—
71.2
19.9
100.0
—%

1,390
—
7,676
9,762
18,828¥175,344

7.4
—
40.8
51.8
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, 2015 and 2016. 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,

2016
—%
—
—
100.0
100.0
—
—
—
—
—
—%

¥

—
—
134,516—
134,516

—%
—
100.0
—
100.0

—
—
—
—
—
¥134,516

—
—
—
—
—
—%

6
Financial &Corporate Information

INPEX CORPORATION and Consolidated Subsidiaries
Asia & Oceania¥        —Eurasia (Europe & NIS)—
Middle East & Africa—
Americas18,424
   Subtotal
18,424Equity-method Affiliates
Asia & Oceania—
Eurasia (Europe & NIS)——
Middle East & Africa
Americas—   Subtotal—
Total¥18,4242015

Total expenditures on acquisitions of upstream oil and gas projects for the year ended March 31, 2016, increased by ¥116.1 billion to¥134.5 billion from ¥18.4 billion for the year ended March 31, 2015, mainly due to an increase in the Middle East & Africa region.

INPEX CORPORATION Annual Report 201651

— 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, 2015 and 2016.
(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 year2015
¥ 685,990
41,237
131,985
98,2507,332(75,586)(146,930)(38,987)
703,291¥(121,707)

2016¥ 703,291
30,970104,519
70,365
9,745(64,200)(107,133)(19,785)
727,772¥(131,766)

The amount posted as “Cost recovery—operating expenditures”

Operating expenses for the year ended March 31, 2016,

in recoverable accounts under production sharing is greater

decreased compared with the year ended March 31, 2015. This

than that posted as operating expenses. Along with operating

was mainly due to a decrease in operating expenses in the

expenses, this is because a por tion of the exploration andOffshore Mahakam Block.

development cos t s, which are incur red and recover able

Cost recovery for the year ended March 31, 2016, decreased

within the year, is included in the “Cost recovery—operatingcompared with the year ended March 31, 2015. This was mainly

expenditures” account.
E xploration cost s for the year ended March 31, 2016,

due to a decrease in cost recovery in the Offshore Mahakam
Block.

decreased compared with the year ended March 31, 2015. ThisIn addition, other deduction was mainly due to the decrease

was mainly due to a decrease in exploration expenditures in thein recoverable accounts under production sharing related to the

Asia & Oceania region.

business withdrawal from certain exploration blocks.

Development costs for the year ended March 31, 2016,

The allowance for recoverable accounts under production

decreased compared with the year ended March 31, 2015. Thissharing as of March 31, 2016, increased compared with March 31,

was mainly due to a decrease in development expenditures in2015. This was mainly due to additional provision for allowance in

the Offshore Mahakam Block.

connection with exploration expenditures.

— Funding sources and liquidity

52

Oil and gas exploration and development projects, as well as the

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

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

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

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

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

31, 2016.

financing to fund exploration projects and to utilize internal cash

The Group’s basic liquidity policy is to maintain sufficient

flow and external loans to fund development projects and the

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

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

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

Japanese commercial banks and others. The Japan Oil, Gas

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

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

expansion while continuing to maintain a sound financial position

construction of domestic gas infrastructure.

with sufficient liquidity.

INPEX CORPORATION Annual Report 2016

— Maturities of long-term debt
The aggregate annual maturities of long-term debt subsequent to March 31, 2016, are summarized as follows:(Millions of U.S. dollars and Millions of yen)
Long-term debt denominated inYears ending March 31,

U.S. dollars

Yen

Total yen equivalent

2017
2018
2019
2020
2021
2022 and thereafterTotal$   258.6
258.6
458.6
658.6
704.0
2,236.5$4,574.9¥ 34,144
10,272
17,36543,314
24,397
91,341¥220,833¥ 63,287
39,416
69,047
117,533
103,731343,372¥736,386— Cash flows
Cash flows for the years ended March 31, 2015 and 2016, 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 (used in) 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, 2016, was ¥183.7 billion, a decrease of ¥33.0 billion
from ¥216.7 billion for the year ended March 31, 2015. This was
mainly due to a decrease in income before income taxes owing
to a decrease in sales prices of crude oil and natural gas.

Net cash used in investing activities
Net cash used in investing activities for the year ended March 31,
2016, was ¥543.5 billion, an increase of ¥462.4 billion from ¥81.1
billion for the year ended March 31, 2015. This was mainly due to2015¥216,749(81,087)(4,178)¥260,9782016¥183,708(543,534)
156,726¥ 53,813

increases in payments for long-term time deposits and paymentsfor purchases of mining rights.

Net cash provided by (used in) financing activities
Net cash provided by financing activities for the year ended
March 31, 2016, was ¥156.7 billion. This was mainly due toincreases in proceeds from long-term debt and proceeds from
non-controlling interests for additional shares. Meanwhile, net
cash used in financing activities for the year ended March 31,
2015, was ¥4.2 billion.

6
Financial &Corporate Information

INPEX CORPORATION Annual Report 201653

Consolidated Balance Sheet
INPEX CORPORATION and Consolidated Subsidiaries
March 31, 2016

Thousands of
U.S. dollars(Note 3)

Millions of yen

ASSETS
Current assets
Cash and cash equivalents
Time deposits (Note 13)
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 (Note 6)
Less accumulated depreciation and amortization
Total tangible fixed assets
Intangible assets
Goodwill (Note 18)
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
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.

54

INPEX CORPORATION Annual Report 2016

2015

2016

2016

¥  260,978¥   53,813$   477,531

661,706

718,715

6,377,806

77,20956,462501,038

162,289——

31,65235,916

318,716

4,956

2,852

25,308110,315

84,650751,176

46,21145,013

399,441(12,906)(13,076)(116,035)

1,342,410

984,3458,734,981

300,484

298,7142,650,759

291,524

298,855

2,652,010

366,422399,6653,546,588

19,87019,674

174,585

1,173,409

1,407,490

12,489,928

29,14329,000257,343

2,180,852

2,453,398

21,771,213(683,230)(700,783)(6,218,680)

1,497,622

1,752,615

15,552,533

74,31967,558599,503

134,810146,262

1,297,915

238,316

318,438

2,825,788

11,325

9,213

81,755

458,770

541,4714,804,961

703,291

727,772

6,458,177(121,707)(131,766)(1,169,278)

581,584

596,006

5,288,899

284,090

213,731

1,896,628

126,517

4,231

37,545120,270

202,8421,800,000

22,84913,105116,292

76,16871,358633,224(8,399)(7,815)(69,349)(2,727)(2,047)(18,165)

1,200,352

1,091,411

9,685,074

3,156,744

3,385,497

30,042,568¥4,499,154¥4,369,842$38,777,549

Thousands of
U.S. dollars(Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2015

2016

¥

¥

2016

Current liabilities
Accounts payable—trade
Short-term borrowings and current portion of
long-term debt (Notes 4, 6 and 13)
Income taxes payable (Note 7)

53,47447,351$

420,188

33,206

68,469607,587

60,18542,845380,202

Accounts payable—other (Note 6)

113,568

79,621

706,549

Provision for exploration projects

9,492

4,782

42,435

70

56

497

Accrued bonuses to officers
Asset retirement obligations (Note 17)

1,094

2,234

19,824

Other (Note 7)

94,12373,770654,628

365,212319,128

2,831,910

Total current liabilities

Long-term liabilities
Long-term debt (Notes 4, 6, 12 and 13)

643,951

673,099

5,973,014

Deferred tax liabilities (Note 7)

77,91856,045497,338

Provision for loss on business

9,080

4,737

42,036

228

293

2,600

Accrued special repair and maintenance
Liability for retirement benefits (Note 16)

6,700

7,462

66,217

Asset retirement obligations (Note 17)105,234

100,829894,747

Other (Note 6)

2,127

29,446

261,301

845,238

871,9117,737,253

1,210,450

1,191,039

10,569,163

Common stock
Authorized: 2015 — 3,600,000,001 shares2016 — 3,600,000,001 shares
Issued:2015 — 1,462,323,601 shares2016 — 1,462,323,601 shares
Capital surplus

290,810

290,8102,580,620

679,288676,273

6,001,180

Retained earnings
Less: Treasury stock 2015 — 1,966,400 shares2016 — 1,966,400 shares
Total shareholders’ equity

1,584,645

1,575,136

13,977,602(5,248)(5,248)(46,570)2,549,495

2,536,971

22,512,832

46,0494,959

44,006

Total long-term liabilities
Total liabilities

Net assets (Note 10)

Unrealized holding gain on securities(36,423)(6,660)(59,100)

Translation adjustments

507,560

397,6223,528,458

Total accumulated other comprehensive income

517,186

395,921

3,513,364

Non-controlling interests

222,023

245,9112,182,190

3,288,704

3,178,803

28,208,386¥4,499,154¥4,369,842$38,777,549

Total net assets

6
Financial &Corporate Information

Unrealized gain (loss) from hedging instruments

Contingent liabilities (Note 20)
Total liabilities and net assets

INPEX CORPORATION Annual Report 201655

Consolidated Statement of Income and Consolidated Statement ofComprehensive Income
Consolidated Statement of Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2016

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 14, 16 and 18)
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Gain on sales of marketable securities
Foreign exchange gain
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
Loss on disposal of fixed assets
Impairment loss (Note 15)
Other
Total other expenses
Income before income taxes
Income taxes (Note 7)
Current
Deferred
Total income taxes
Net income(loss)
Net loss attributable to non-controlling interests
Net income attributable to owners of parent

2015

2016

2016

¥1,171,227
525,444645,783
23,23963,13924,519534,886¥1,009,564
526,758
482,806
6,166
61,387
25,114
390,139$8,958,772
4,674,399
4,284,373
54,717544,742
222,859
3,462,055

11,227
6,670
18,146
19,562
46,159101,764

10,751
10,82625,9872,964
19,406
69,934

95,40396,069230,606
26,302
172,207620,587

2,947
13,444

4,199
20,69637,262
183,654

19,44925,026

222,078835
6,258
35,132
18,562
96,627
540,023335
13,28845,88521,757
131,186
328,887

2,973
117,916
407,179
193,069
1,164,131
2,918,511

448,659
15,767464,426
75,597(2,223)¥   77,820

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

3,164,300(19,451)
3,144,849(226,338)(375,215)$  148,877

Consolidated Statement of Comprehensive Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2016
Thousands of
U.S. dollars(Note 3)

Millions of yen

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

56

INPEX CORPORATION Annual Report 2016

2015

2016

¥ 75,597¥   (25,506)$   (226,338)

2016

1,315
244,018(41,094)(129,079)(364,664)(1,145,434)(13,951)

29,310260,094

231,382306,979(140,863)(166,369)(1,250,004)(1,476,342)

301,622¥   5,357(104,488)¥   (61,881)(927,216)$   (549,126)

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

For the year ended March 31, 2015
Balance as of April 1, 2014
Cumulative effects of changes inaccounting policies
Restated balance
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Net changes in items other than those inshareholders' equity
Total changes during the period
Balance as of March 31, 2015

For the year ended March 31, 2015
Balance as of April 1, 2014
Cumulative effects of changes inaccounting policies
Restated balance
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Net changes in items other than those inshareholders' equity
Total changes during the period
Balance as of March 31, 2015

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

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

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

Capital surplus¥679,288

290,810679,288

1,533,112

Treasury stock¥(5,248)

236

Total shareholders’ equity¥2,497,726
236(5,248)2,497,962—(26,287)
77,820—¥290,810

Unrealized holding
gain on securities¥44,737(26,287)
77,820—¥679,288

51,533¥1,584,645
Millions of yen
Accumulated other comprehensive income
Unrealized gain (loss) fromTranslation
Total accumulated otherhedging instruments
adjustments
comprehensive income¥(17,579)¥266,225¥293,383—¥(5,248)

Non-controllinginterests¥204,928

51,533¥2,549,495

Total net assets¥2,996,037
236

44,737(17,579)

266,225

293,383

204,928

2,996,273—(26,287)
77,8201,312(18,844)

241,335

1,312¥46,049(18,844)¥(36,423)

241,335
223,803
17,095
292,431¥507,560¥517,186¥222,023¥3,288,704
Millions of yen
Shareholders’ equity
Retained earnings
Treasury stock
Total shareholders’ equity¥1,584,645¥(5,248)¥2,549,495

Common stock¥290,810

Capital surplus¥679,288

290,810679,288

223,803

17,095

240,898—
1,584,645(5,248)(3,015)(3,015)(26,286)
16,777—¥290,810

Unrealized holding
gain on securities¥46,0492,549,495(26,286)
16,777(3,015)¥676,273(9,509)¥1,575,136
Millions of yen
Accumulated other comprehensive income
Unrealized gain (loss) fromTranslation
Total accumulated otherhedging instruments
adjustments
comprehensive income¥(36,423)¥507,560¥517,186—¥(5,248)

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

Total net assets¥3,288,704—

46,049(36,423)

507,560

517,186

222,023

3,288,704(3,015)(26,286)
16,777(41,090)

29,763(41,090)¥ 4,959

29,763¥ (6,660)(109,938)(121,265)

23,888(97,377)(109,938)(121,265)
23,888(109,901)¥397,622¥395,921¥245,911¥3,178,803
Thousands of U.S. dollars (Note 3)
Shareholders’ equity
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity$6,027,935$14,061,984$(46,570)$22,623,969

Common stock$2,580,620—
2,580,620

6,027,935

14,061,984(46,570)(26,755)(26,755)(233,259)
148,877—$2,580,620

Unrealized holding
gain on securities$408,634

22,623,969(233,259)
148,877(26,755)$6,001,180(84,382)$13,977,602
Thousands of U.S. dollars (Note 3)
Accumulated other comprehensive income
Unrealized gain (loss) fromTranslation
Total accumulated otherhedging instruments
adjustments
comprehensive income$(323,214)$4,504,038$4,589,458—$(46,570)

Non-controllinginterests$1,970,210(111,137)$22,512,832

6

Total net assets$29,183,637

Financial &Corporate Information

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

Common stock¥290,810

Millions of yen
Shareholders’ equity
Retained earnings¥1,532,876—
408,634(323,214)

4,504,038

4,589,458

1,970,210

29,183,637(26,755)(233,259)
148,877(364,628)

264,114(975,580)(1,076,094)

211,980(864,114)(364,628)$ 44,006

264,114$ (59,100)(975,580)$3,528,458(1,076,094)$3,513,364

211,980$2,182,190(975,251)$28,208,386

See accompanying notes to consolidated financial statements.

INPEX CORPORATION Annual Report 201657

Consolidated Statement of Cash Flows
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2016

Millions of yen

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

58

INPEX CORPORATION Annual Report 2016

Thousands of
U.S. dollars(Note 3)

2015

2016

2016

¥ 540,023
52,52035,132
6,761¥ 328,887
86,79145,885
6,761$ 2,918,511
770,175
407,179
59,996

20,307

29,844

264,833

(600)
3,419
(873)
(17,896)
2,947
3,973
13,444(18,146)(4,399)(4,353)
945(21,580)
3,465
15,085
20,696(25,987)(39,036)(38,628)
8,386(191,499)
30,748133,863
183,654(230,606)

75,58664,200569,704(60,764)(45,833)(406,717)

25,202(797)
6,310(1,440)(11,247)(126)(3,940)669,795
28,194(2,376)(478,864)
216,749

15,193(2,551)(4,389)41,632(13,746)
2,882
9,625
549,053
31,447(3,206)(393,586)
183,708

134,821(22,637)(38,948)
369,438(121,981)
25,57585,411
4,872,242
279,058(28,450)(3,492,643)
1,630,207(326,026)
698,139(112,181)(448,381)
245(15,446)
214,527(26,767)
68,938(544,331)
790,267(439,989)(476,789)
1,132(26,898)
175,585(6,877)
27,701(4,830,340)
7,012,751(3,904,419)(4,230,979)
10,045(238,690)
1,558,124(61,026)
245,816(70,430)(60,442)(536,356)(3,825)(111,388)260(18,424)
69,672(81,087)(4,120)(215,710)
384,759(134,516)(13,306)(543,534)(36,560)(1,914,189)
3,414,314(1,193,682)(118,076)(4,823,267)

1,490
27,713(18,684)
16,730(26,288)(4,992)(147)(4,178)
11,963
143,447
117,531¥ 260,978

92
127,120(26,869)
87,279(26,298)(4,524)(74)
156,726(4,065)(207,165)
260,978¥ 53,813

816
1,128,050(238,432)
774,505(233,365)(40,146)(657)
1,390,771(36,073)(1,838,362)
2,315,893$ 477,531

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, 2016.

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 49 companies for which the closing date differed from theconsolidated closing date, including but not limited to, INPEX Sahul,Ltd. and INPEX Masela, Ltd., the financial statements for the year
ended December 31 were used. However, the necessary adjustments
have been made to the financial statements of those companies toreflect any significant transactions made between the Company's
closing date and that of the consolidated subsidiaries. For the 10companies, including but not limited to, Japan Oil Development,
Co., Ltd., INPEX Southwest Caspian Sea, Ltd., INPEX North CaspianSea, Ltd., INPEX Holdings Australia Pty Ltd, and INPEX Ichthys Pty
Ltd, the financial statements for the year ended on the consolidated
closing date were used, even though their closing date is December
31.
The excess of cost over underlying net assets excluding noncontrolling interests at fair value as of the date of acquisition is
accounted for as goodwill and amortized over 20 years on a straightline method.

(b) Cash equivalents

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

(c) Foreign currency translation(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(e) Derivatives

Derivatives are stated at fair value.

(f) Inventories

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

(g) Allowance for doubtful accounts

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

(h) Recoverable accounts under production
sharing and related allowance

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

(i) Allowance for investments in exploration

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

6
Financial &Corporate Information

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

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.

(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.

INPEX CORPORATION Annual Report 201659

(k) Intangible assets (except leased assets)

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

(l) Leased assets

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

(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 crude oil and natural gas development, production and sales
business individually estimated for each project.

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

(q) Accounting for retirement benefits(Method of attributing expected retirement benefits to proper
periods)
When calculating retirement benefit obligations, the benefit formula
method is used for attributing expected retirement benefits toperiods through March 31, 2016. 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 for actuarial differences)
Actuarial gains and losses are charged or credited to income as
incurred.

(r) Asset retirement obligations

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

(s) Hedge accounting

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

(t) Research and development expenses

Research and development expenses are charged to income as
incurred.

(u) Income taxes

differences between financial reporting and the tax bases of theassets and liabilities and are measured using the enacted tax rates
and laws which will be in effect when the differences are expected toreverse.

(v) Adoption of new accounting standard

Effective from the year ended March 31, 2016, the Company
has applied the "Revised Accounting Standard for Business
Combinations" (Accounting Standards Board of Japan Statement
No.21, issued on September 13, 2013), "Revised AccountingStandard for Consolidated Financial Statements" (ASBJ Statement
No.22, issued on September 13, 2013), "Revised AccountingStandard for Business Divestitures" (ASBJ Statement No.7, issued
on September 13, 2013), and other standards. Accordingly, any
difference arising from changes in the Company's ownership interestin a subsidiary when the Company retains control over the subsidiary
is recognized in capital surplus, and acquisition-related costs are
expensed in the fiscal year in which the costs are incurred. As forbusiness combinations executed at or after the beginning of the year
ended March 31, 2016, adjustments to the allocation of acquisition
costs after the confirmation of the provisional accounting treatment
are reflected in the consolidated financial statements for the fiscal
year which includes the acquisition date. In addition, the presentation
method of net income was amended and "minority interests" wasrenamed "non-controlling interests". To reflect these changes inpresentation, consolidated financial statements for the year ended
March 31, 2015 have been reclassified.
The Company has applied these standards from the beginningof the year ended March 31, 2016 in accordance with transitional
treatments as stated in Section 58-2(4) of the "Revised AccountingStandard for Business Combinations", Section 44-5(4) of the "Revised
Accounting Standard for Consolidated Financial Statements", andSection 57-4(4) of the "Revised Accounting Standard for Business
Divestitures". As a result, capital surplus decreased by ¥3,014 million
as of March 31, 2016.
The impact on the profit and loss for the year ended March 31,
2016 was immaterial.

(w) Standards issued but not effective• “Implementation Guidance on Recoverability of Deferred Tax
Assets“ (ASBJ Guidance No.26, issued on March 28, 2016)(Overview)
With regard to the treatment of the recoverability of deferred tax
assets, necessary reviews on the following treatments have been
conducted basically following the framework of the Japanese Instituteof Certified Public Accountants (JICPA) Audit Committee Report
No.66 “the Auditing Treatment on Determining the Recoverabilityof Deferred Tax Assets,“ whereby companies are classified into fivecategories and deferred tax assets are estimated based on each ofthese categories.
(i) Treatment of companies that do not fulfill any of the requirementsfrom (Category 1) to (Category 5)(ii) Requirements for classification as (Category 2) and (Category 3)(iii) Treatment of unscheduled deductible temporary difference forcompanies applicable to (Category 2)(iv) Treatment of the reasonable estimable period for the futuretaxable income before adjustments including temporary differences
for companies applicable to (Category 3)(v) Treatment of cases where a company fulfilling the requirements of(Category 4) is also applicable to (Category 2) or (Category 3)(Scheduled Effective Date)
The guidance is scheduled to take effect from the beginning of theyear ending March 31, 2017.
(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.

Deferred tax assets and liabilities are determined based on the

3. U.S. DOLLAR AMOUNTS
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at¥112.69=US$1.00, the approximate exchange rate in effect as of March 31, 2016. 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.

60

INPEX CORPORATION Annual Report 2016

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 ofthese shares are held for the purpose of investment. As for bonds,
the Company mainly holds bonds with short-term maturities byconsidering medium- to long-term cash outflow forecast and market
price fluctuation risk.

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

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

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

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

(Management of derivative transactions)

For the above derivative transactions, the Company follows
its 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, 2015 and 2016 is as follows:
Millions of yen
March 31, 2015

Acquisition cost

Carrying value

Securities with carrying values exceeding their acquisition costs¥ 34,624¥ 52,082
Stock
Bonds:
31,17831,243Public bonds
39,30039,313
Corporate bonds
12,54918,243
Other debt securities
73,496
106,738
Other
191,147
247,619
Subtotal
Securities with acquisition costs exceeding their carrying values
17,765
15,375Stock
Bonds:
17,60017,598
Corporate bonds
35,36532,973
Subtotal¥226,512¥280,592
Total

Unrealized gain
(loss)¥17,45865
13
5,694
33,24256,472(2,390)(2)(2,392)¥54,080

6
Financial &Corporate Information

INPEX CORPORATION Annual Report 2016

61

Millions of yen
March 31, 2016

Acquisition cost

Carrying value

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

Unrealized gain
(loss)

Acquisition cost

¥ 8,307$129,399$203,115$ 73,716

92,509
10,82548,806
21,848200,053

48,886
44,112
296,11380
22,26496,060(5,622)(5,622)¥ 5,203

298,838
298,838$498,891

248,949
248,949$545,062(49,889)(49,889)$ 46,171

Securities with carrying values exceeding their acquisition costs¥14,582¥22,889
Stock
Bonds:
5,500
5,509
Corporate bonds
2,462
4,971
Other
22,54433,369Subtotal
Securities with acquisition costs exceeding their carrying values
33,67628,054
Stock
33,67628,054
Subtotal¥56,220¥61,423
Total(b) Information regarding sales of securities classified as other securities for the years ended March 31, 2015 and 2016 is as follows:Year ended March 31, 2015

Proceeds
from sales

Millions of yen
Gain on
sales

Bonds
Public bonds
Other
Total

¥ 91,741
84,072¥175,813¥   358
18,053¥18,411

Year ended March 31, 2016

Proceeds
from sales

Millions of yen
Gain on
sales

Bonds
Public bonds
Corporate bonds
Other
Total

¥ 31,205
30,906102,667¥164,778¥     59
931,633¥31,701

Loss on
sales

¥ 9
—
¥ 9

Proceeds
from sales

Thousands of U.S. dollars
Gain onsales$   276,910
274,257
911,057$1,462,224$     52480
280,708$281,312

Loss on
sales

¥—
3
—
¥ 3

Loss on
sales

$—
27
—
$27

(c) Components of securities for which it is extremely difficult to determine fair value as of March 31, 2015 and 2016 are summarized as follows:
Millions of yen
March 31,

Other securities
Unlisted securities
Stocks of subsidiaries and affiliates
Total

Thousands of U.S. dollars

2015

2016

2016

¥ 33,410
132,377¥165,787¥ 32,239
120,069¥152,308$  286,086
1,065,480$1,351,566

These securities are not included in (a) as they have no quoted market prices and it is extremely difficult to determine their fair value. For sharesof exploration companies, an allowance for investments in exploration is provided at an estimated amount based on the financial position of theinvestees.
(d) Redemption schedule for securities with maturity dates classified as other securities as of March 31, 2016 is as follows:
Millions of yen
March 31, 2016

Bonds
Corporate bonds

62

1 year or lessMore than 1
year but lessthan 5 years¥—¥5,500INPEX CORPORATION Annual Report 2016

Thousands of U.S. dollars

More than 5More than 10
years but less
1 year or lessyears
than 10 years

¥—

¥—

$—

More than 1
year but lessthan 5 years$48,806

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

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT(a) Short-term borrowings as of March 31, 2015 and 2016 are as follows:
Millions of yen
March 31,

Short-term borrowings from banks and others(Interest rates ranging from 0.600% to 19.000% and from0.784% to 19.000% at March 31, 2015 and 2016)

Thousands of U.S. dollars

2015

2016

2016

¥6,763¥5,182$45,984(b) Long-term debt as of March 31, 2015 and 2016 are as follows:
Millions of yen
March 31,

Loans from banks and others, due through 2028
(Interest rates ranging from 0.362% to 2.500% and from
0.360% to 2.012% at March 31,2015 and 2016)
Less: Current portion

Thousands of U.S. dollars

2015

2016

2016

¥670,394¥736,386$6,534,617

26,443¥643,951

63,287¥673,099

561,603$5,973,014(c) Assets pledged as of March 31, 2015 and 2016 are as follows:
Millions of yen
March 31,

2015

Buildings and structures
Wells
Machinery, equipment and vehicles
Other (tangible fixed assets)
Investment securities
Other (investments and other assets)
Total

Thousands of U.S. dollars

¥

2016

—
—
—
—
15,039—¥15,039¥ 1,975
49
6,969
12
8,314
217
¥17,536

$

2016

—
—
—
—
133,455—$133,455

Investment securities include ¥14,459 million (¥7,377 million at March 31, 2015) pledged as collateral for liabilities of affiliates.
(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

2016

2015

2016

¥ —
532
—
—
¥532

¥ 491
509
1
17
¥1,018

$ —
4,721
—
—
$4,721(e) In addition, assets pledged as collateral for the Ichthys LNG Project Finance are as follows:
Millions of yen
March 31,

Cash and cash equivalents
Inventories
Other (Current assets)
Land
Construction in progress
Long-term loans receivable
Total

¥

2015

3,875
4,729
2,462
161
752,019
9,681¥772,927¥

Thousands of U.S. dollars

2016

1,507
8,862
15,113
150
945,518—¥971,150$

2016

13,37378,641
134,1111,331
8,390,434—$8,617,890(f) The aggregate annual maturities of long-term debt subsequent to March 31, 2016 are summarized as follows:
Years ending March 31,

Millions of yen

Thousands of U.S. dollars

2017
2018
2019
2020
2021
2022 and thereafter
Total¥ 63,287
39,416
69,047
117,533
103,731343,372¥736,386$ 561,603
349,774
612,716
1,042,976
920,499
3,047,049$6,534,617

6Financial &Corporate Information

INPEX CORPORATION Annual Report 2016

63

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 30.8% and 28.8% for the years ended March 31, 2015 and 2016, respectively.
(a) The effective tax rates reflected in the consolidated statement of income for the years ended March 31, 2015 and 2016 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

2015

2016

30.8%

28.8%

0.2
(0.3)
11.0
79.1
(17.2)(18.4)
0.4
1.0
(0.6)
86.0%

0.8
(0.7)
8.8
95.3
(15.4)(13.3)
0.6
1.1
1.8
107.8%(b) The significant components of deferred tax assets and liabilities as of March 31, 2015 and 2016 are as follows:
Thousands of U.S.
dollars

Millions of yen
March 31,

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

64

INPEX CORPORATION Annual Report 2016

2015

2016

2016

¥  86,644
3,640
10,432783
39,929106,328
16,4431,857
2,619¥  77,785
2,583
8,524
573
32,102
119,972
12,316
2,070
1,338$   690,257
22,92175,641
5,085
284,870
1,064,620
109,291
18,36911,873

27,46715,802140,226

22,8584,150
10,814
23,625357,589(276,397)
81,192

11,8303,958
14,60523,597
327,055(276,292)
50,763104,978
35,123
129,603
209,397
2,902,254(2,451,788)
450,466(112,046)(83,019)(736,702)

(329)

(234)

(2,076)(4,099)(2,840)(25,202)(2,382)(1,732)(15,370)(8,415)(2,541)(8,464)(138,276)¥ (57,084)(5,026)(248)(6,331)(99,430)¥ (48,667)(44,600)(2,201)(56,181)(882,332)$ (431,866)

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, 2015 and 2016 are as follows:

2015

Years ended March 31,

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

Millions of yen

2016

Thousands of
U.S. dollars

2016¥ 26,405(24,356)
2,049
(734)
1,315

¥ (15,819)(27,568)(43,387)
2,293(41,094)$  (140,376)(244,636)(385,012)
20,348(364,664)

244,018—
244,018(128,941)(138)(129,079)(1,144,210)(1,224)(1,145,434)(28,436)
2,238
12,247(13,951)¥231,382

8,668
(154)
20,79629,310¥(140,863)

76,919(1,367)
184,542
260,094$(1,250,004)

9. SIGINIFICANT NON-CASH TRANSACTIONS
Significant non-cash transactions for the year ended March 31, 2015 and 2016 are as follows:
For the year ended March 31, 2015
Significant asset retirement obligations newly recorded were ¥69,254million.
For the year ended March 31, 2016
None

10. NET ASSETS
The total number of the Company's shares issued consisted of
1,462,323,600 shares of common stock and 1 Class A stock as ofMarch 31, 2016.
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.
The Company conducted a stock split at a ratio of 1:400 ofcommon stock with October 1, 2013 as the effective date, but
for Class A stock, no stock split was conducted. The Articles ofIncorporation specifies that dividends of Class A stock are equivalent
to dividends of a common stock prior to the stock split. The cash
dividends of Class A stock for the year ended March 31, 2016
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.

11. AMOUNTS PER SHARE
Amounts per share as of March 31, 2015 and 2016 are as follows:
Years ended March 31,¥2,099.95
18.00¥   53.29

Yen

2016

¥2,008.34
18.00¥    11.49

U.S. dollars

2016

6

$17.820.16$ 0.10Financial &Corporate Information

Net assets excluding non-controlling interests per share
Cash dividends per share
Net income per share

2015

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

INPEX CORPORATION Annual Report 201665

12. DERIVATIVE TRANSACTIONS(a) Derivatives not subject to hedge accounting
Contract amounts, fair value and valuation gain (loss) regarding derivatives subject to hedge accounting as of March 31, 2015 is as follows:
Millions of yen
March 31, 2015

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

Contract amounts

Due after one year

¥35,264

Fair value¥—

Valuation gain (loss)

¥180

¥180

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

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

Contract amounts

Due after one year

¥37,451

Fair value¥—

Valuation gain (loss)¥(270)¥(270)

Thousands of U.S. dollars
March 31, 2016

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

Contract amounts

Due after one year

$332,336

Fair value$—

Valuation gain (loss)$(2,396)$(2,396)* Fair value is the price obtained from the counterpar ty financial institutions.

(b) Derivatives subject to hedge accounting

Contract amounts, fair value and valuation gain (loss) regarding derivatives subject to hedge accounting as of March 31, 2015 and 2016 are as
follows:
Millions of yen
March 31, 2015

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

Principal items hedged

Contract amounts

Long-term debt

Due after one year

¥4,760Fair value¥4,760*Millions of yen
March 31, 2016

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

Principal items hedged

Contract amounts

Due after one year

¥4,760Long-term debt

Fair value¥4,760*Thousands of U.S. dollars
March 31, 2016

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

Principal items hedged

Contract amounts

Due after one year

Long-term debt

$42,240$42,240

Fair value** ‌Fair value of derivatives for which special treatment of interest rate swaps is applied is included in the estimated fair value of the longterm debt as disclosed in Note 13. (a) since the interest rate swap is treated together with long-term debt subject to hedging.

13. 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 12 as of March 31, 2015 and 2016 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, 2015

Carrying value

Estimated fair value

Time deposits¥661,706¥667,326

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

33,20632,938¥643,951¥633,604

Millions of yen

Thousands of U.S. dollars

March 31, 2016

Carrying value

Estimated fair value

Carrying value

Estimated fair value

Time deposits¥718,715¥723,322$6,377,806$6,418,688

68,46968,361

607,587

606,629¥673,099¥663,985$5,973,014$5,892,138

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

(Time deposits)

The fair value of current portion of long-term time deposits included in time deposits, is calculated by applying a discount rate to the totalof principal and interest. The discount rate is based on the assumed interest rate if a similar new deposit is entered into. For the other time66

INPEX CORPORATION Annual Report 2016

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

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

The estimated fair value of current portion of long-term debt is calculated by the same method as long-term debt. For short-termborrowings, the relevant carrying value is used since these items are settled in a short periods of time and its fair value is almost the same as
the carrying value.

(Long-term debt)

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

14. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in general and administrative expenses and cost of sales amounted to ¥86 million and ¥755
million ($6,700 thousand) for the years ended March 31, 2015 and 2016, respectively.

15. IMPAIRMENT LOSSThe Company groups mining area and other assets as a basic unit that generates cash inflows independently of other groups of assets.
Due to impact from deteriorating business environments based on such factors as the drop in oil prices, the Company reduced the respective
carrying amounts of the assets listed below to recoverable amounts, posting the reductions as impairment loss.
For the year ended March 31, 2015
Use

Assets related to Joslyn
Oil Sands Lease Block

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

Location

Alberta, Canada

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

Impairment loss
Millions of yen

Other (Tangible fixed assets)¥13,359

Mining rights

14,232

Subtotal

27,591

Wells
Machinery, equipment and vehicles
Construction in progress
Other (Investments and other assets)
Subtotal

348
630
6,111
452
7,541
¥35,132

The recoverable amount of the assets related to JPDA06-105 Block (Kitan Oil Field) is reasonably estimated by discounting the future cash flows
at a rate of 7%.
The recoverable amount of the assets related to Joslyn Oil Sands Lease Block is estimated at zero.

6
Financial &Corporate Information

INPEX CORPORATION Annual Report 201667

For the year ended March 31, 2016
Use

Location

Impairment loss

Classification

Millions of yen

Thousands of U.S. dollars¥ 2,335$ 20,721

Wells

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

U.S. Gulf of Mexico

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

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

Machinery, equipment and vehicles

4,379

38,859Mining rights

19,736

175,135

Subtotal

26,450234,715

Wells

2,702

23,977

Machinery, equipment and vehicles

2,517

22,336

Construction in progress

2,185

19,389Subtotal

7,404

65,702

392

3,478

2,858

25,362

Machinery, equipment and vehicles

745

6,611

Mining rights

471

4,180

Other

104

923

Subtotal

4,570

40,554

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

Assets related to
Copa Macoya Block

Wells
British Columbia, Canada

Bolivarian Republic ofVenezuela

Buildings and structures

73

648

Wells

945

8,386

Machinery, equipment and vehicles
Construction in progress

77

683

2,587

22,957

3

27

3,685

32,701

Other
Subtotal

76

674

Wells

1,202

10,666

Machinery, equipment and vehicles

Buildings and structures
Assets related to
Abu Al Bukhoosh Block

UAE

1,294

11,483

Construction in progress

577

5,120

Other

43

382

Subtotal

3,192

28,325

Other

584

5,182

Total

¥45,885$407,179

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

16. RETIREMENT BENEFITS
Retirement benefits for the years ended March 31, 2015 and 2016 are as follows:(a) Defined benefit plans (excluding plans included in (b))(Reconciliation of beginning and ending balances of the retirement benefit obligations)
Millions of yen

Balance at beginning of the period
Cumulative effects of changes in accounting policies
Restated balance
Service cost
Interest cost
Actuarial loss (gain)
Retirement benefits paid
Balance at end of the period

Thousands of U.S. dollars

2015

2016

2016

¥19,445(246)
19,199
1,014
198
176
(608)
¥19,979¥19,979—
19,979
1,047
204
(187)
(543)
¥20,500$177,292—
177,292
9,291
1,810(1,659)(4,819)$181,915(Reconciliation of beginning and ending balances of plan assets at fair value)
Millions of yen

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

68

INPEX CORPORATION Annual Report 2016

Thousands of U.S. dollars

2015

2016

2016

¥12,121
303
1,305
544
(333)
¥13,940¥13,940
348
(916)
567
(387)
¥13,552$123,702
3,087(8,128)5,032(3,434)$120,259

(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

2015

2016

2016

Retirement benefit obligations (funded plans)
Plan assets at fair value
Net liability (asset) on consolidated balance sheet¥19,979(13,940)
6,039¥20,500(13,552)
6,948$181,915(120,259)
61,656

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

6,039¥ 6,039

6,948¥ 6,948

61,656$ 61,656(Details of retirement benefit expenses)
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss (gain)
Retirement benefit expenses for defined benefit plans

Thousands of U.S. dollars

2016

2015

¥1,047
204
(348)
729
¥1,632¥1,014
197(303)(1,128)¥ (220)2016$ 9,291
1,810(3,087)
6,469$14,483(Plan assets)
Components of plan assets

2015

2016

General accounts
Stock
Bonds
Other
Total

40%
43%
17%
0%
100%

43%
39%
18%
0%
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-tern return rate on various assets of which plan assets are composed.
(Basis of the actuarial assumptions)

Discount rateLong-term expected return rate on plan assets

2015

2016

1.0%
2.5%

1.0%
2.5%

(b) Defined benefit plans applying simplified methods(Reconciliation of beginning and ending balances of liability for retirement benefits)
Millions of yen

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

Thousands of U.S. dollars

2016

2015

¥661
86
(32)
(13)
(188)
¥514

¥469
257
(71)
(20)
26
¥661

2016
$5,865
763
(284)
(115)
(1,668)$4,561(Reconciliation between retirement benefit obligations and plan assets at fair value and liability for retirement benefits and asset for retirement
benefits on the consolidated balance sheet)
Millions of yen

Thousands of U.S. dollars

2016

2015

2016

Retirement benefit obligations (unfunded plans)
Net liability (asset) on consolidated balance sheet

¥297
(234)
63
598
661

¥280
(225)
55
459
514

$2,485(1,997)
488
4,073
4,561

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

661
¥661

514
¥514

4,561
$4,561Retirement benefit obligations (funded plans)
Plan assets at fair value

6

Millions of yen

2015
Retirement benefit expenses under simplified methods¥257

Financial &Corporate Information(Retirement benefit expenses)
Thousands of U.S. dollars

2016
¥86

2016
$763

(c) Defined contribution plans
The Group's contributions for defined contribution plans amounted to ¥1,442 million and ¥1,913 million ($16,976 thousand) for the years ended
March 31, 2015 and 2016, respectively.

INPEX CORPORATION Annual Report 201669

17. ASSET RETIREMENT OBLIGATIONS(a) Asset retirement obligations recognized in the consolidated balance sheet
The changes in asset retirement obligations for the years ended March 31, 2015 and 2016 are as follows:

Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2015

2016

2016

Balance at beginning of the period¥ 28,307¥106,328$943,544

New obligations

58,342

10,10389,653

Accretion expenses

1,329

1,793

15,911

Obligations settled

(389)

(503)

(4,464)

14,919(7,166)(63,590)

Change in estimates *1
Other *2
Balance at end of the period

3,820(7,492)(66,483)¥106,328¥103,063$914,571*1 “Change in estimates“ for the year ended March 31, 2015 mainly reflects increasing site restoration and decommissioning costs whichbecame evident and revised rate of discount of certain subsidiaries in the year ended March 31, 2015.
“Change in estimates“ for the year ended March 31, 2016 mainly reflects the change in the estimated period of use of certain subsidiaries inthe year ended March 31, 2016.
*2 “Other“ mainly includes the change due to foreign exchange rates fluctuation.

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

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

18. GOODWILL

The changes in the carrying amount of goodwill for the years ended March 31, 2015 and 2016 are as follows:

Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2015

2016

2016

Balance at beginning of the period
Goodwill acquired during the period
Amortization of goodwill
Balance at end of the period¥81,080—(6,761)¥74,319¥74,319—(6,761)¥67,558$659,499—(59,996)$599,503

19. LEASES

Future minimum lease payments subsequent to March 31, 2016 for operating lease transactions are summarized as follows:(a) As lessee

Millions of yen

Thousands of U.S. dollars¥ 4,933
10,860¥15,793$ 43,775
96,371$140,146

Millions of yen

Thousands of U.S dollars

20172018 and thereafter
Total(b) As lessor
20172018 and thereafter
Total

¥ 94
48
¥142

$  834426$1,26020. CONTINGENT LIABILITIESAs of March 31, 2016, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of affiliates in theaggregate amount of ¥492,898 million ($4,373,928 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, 2016 was ¥7,643 million ($67,823 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, 2016, was¥901,540 million ($8,000,177 thousand).

21. SEGMENT INFORMATION

Segment information for the years ended March 31, 2015 and 2016(a) Overview of reportable segments
The reportable segments for the Group's oil and natural gas development activities are composed of individual mining area and others forwhich separate financial information is available in order for the Board of Directors to make Group management decisions. Since the Group
operates oil and natural gas businesses globally, the Group's reportable segments are the mining areas and others by geographical region,
categorized in“Japan“,“Asia & Oceania“ (mainly Indonesia, Australia and East Timor),“Eurasia (Europe & NIS)“ (mainly Azerbaijan),“Middle East
& Africa“ (mainly UAE) and“Americas.“
The Company produces oil and natural gas in each segment. In addition, the Company conducts marketing activities for petroleum products
and others in “Japan“ segment.

70

INPEX CORPORATION Annual Report 2016

(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
Year ended March 31, 2015
Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assetsEurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas¥129,522
129,522
16,693292,961¥  409,776
409,776
178,225
1,677,806¥ 94,050
94,05032,228557,564¥524,528
524,528
333,213
253,120¥ 13,351 ¥1,171,227
13,351
1,171,227(15,303)545,056
305,996
3,087,447

20,651

6,367

9,900

9,901

4,335

51,154

1,366

52,520

—

—

—

—

(192)

(192)

6,953

6,761

1,597

61,160—54,096

1,197

118,050—

118,050¥ 26,986¥  405,231¥ 12,412¥ 46,378¥ 46,491¥  537,498¥      419¥  537,917

Japan

Total

Adjustments *1 Consolidated *2¥       — ¥1,171,227—
1,171,227(10,170)
534,886
1,411,707
4,499,154

Millions of yen
JapanYear ended March 31, 2016
Sales to third parties¥109,601
Total sales
109,601
Segment income (loss)
12,096
Segment assets
338,026
Other items
Depreciation and
20,642amortization
Amortization of goodwill 	        —Investment to affiliates
accounted for by the
1,684
equity-method
Increase of tangible fixed
assets and intangible¥ 59,369
assetsEurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas¥  302,871
302,871
97,204
1,729,119¥ 66,852
66,852
13,832576,843¥516,513
516,513290,866
412,577¥ 13,727 ¥1,009,564 ¥        — ¥1,009,564
13,727
1,009,564 	        —1,009,564(14,002)399,996(9,857)
390,139
165,634
3,222,199
1,147,643
4,369,842

23,171

10,143

14,756

16,44085,152

1,639

86,791	        — 	        — 	        —

(192)

(192)

6,953

6,761

110,547 	        —110,547

73,328 	        —
¥  308,434¥ 24,156

Total

35,535 	        —¥210,659¥   4,798¥  607,416

Adjustments *1 Consolidated *2¥     1,652¥  609,068

Thousands of U.S. dollars
Year ended March 31, 2016
Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assetsEurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas$  972,588
972,588
107,338
2,999,610$ 2,687,648
2,687,648
862,579
15,344,032$  593,238
593,238
122,744
5,118,848$4,583,486
4,583,486
2,581,116
3,661,168$  121,812 $ 8,958,772 $         — $ 8,958,772
121,812
8,958,772 	        —8,958,772(124,252)
3,549,525(87,470)
3,462,055
1,469,820
28,593,478
10,184,071
38,777,549

183,175

205,61790,008130,943

145,887755,630

14,545

770,175

—

—

—

—

(1,704)(1,704)61,70059,996

14,944

650,705—

315,334—

980,983 	        —980,983$  526,835$ 2,737,013$  214,358$1,869,367$    42,577

Japan

Total

$ 5,390,150

Adjustments *1 Consolidated *2$     14,660$ 5,404,810*1 Adjustments include elimination of inter-segment transactions and corporate incomes, expenses and assets that are not allocated to areportable segment.
*2 Segment income is reconciled with operating income on the consolidated statement of income.

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

Crude oil
Natural gas (excluding LPG)
LPG
Other
Total

Millions of yen

Thousands of U.S. dollars

2015

2016

2016

¥  730,422
401,338
20,522
18,945¥1,171,227¥  679,241
306,206
10,555
13,562¥1,009,564$6,027,518
2,717,242
93,664
120,348$8,958,772

6(Sales)Years ended March 31,

Japan
Asia & Oceania
UAE
Other
Total

Millions of yen

Financial &Corporate Information(e) Geographical information
Thousands of U.S. dollars

2015

2016

2016

¥  627,068
514,864—
29,295¥1,171,227¥  491,204
378,394
102,493
37,473¥1,009,564$4,358,896
3,357,831
909,513332,532$8,958,772

INPEX CORPORATION Annual Report 2016

71

(Tangible fixed assets)

Millions of yen

Thousands of U.S. dollars

March 31,

2015

2016

2016

Japan
Australia
Other
Total

¥  252,747
985,771259,104¥1,497,622¥  291,248
1,209,075
252,292¥1,752,615$ 2,584,506
10,729,213
2,238,814$15,552,533(f) Information by major customer(Sales to major customers)

Millions of yen

Years ended March 31,

ADNOC

Thousands of U.S. dollars

2015

2016

2016

¥        —¥102,493$909,513(g) Information on impairment loss from fixed assets

Millions of yen

Segment
Middle East & Africa
Thousands of U.S. dollars

Years ended March 31,

2015

2016

2016

Asia & Oceania
Middle East & Africa
AmericasTotal¥ 7,541—
27,591¥35,132¥ 7,404
3,192
35,289¥45,885$ 65,702
28,325313,152$407,179

22. RELATED PARTY TRANSACTIONSThere are the following related party transactions for the years ended March 31, 2015 and 2016.

(a) Affiliated company
Year ended March 31, 2015
Location

Ichthys
LNG Pty
Ltd

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

Capitalinvestment

Nature ofoperations

Votinginterest

Amounts

Descriptionof thebusinessrelationship

Name ofrelatedparty

Transaction
detailMillions of yen

Amounts
Title of accountMillions of yen

Loans of funds
Collection ofloans*1¥110,363

Long-term loans
receivable¥120,042

Debt
guarantee*2¥958,503—¥     —

Year ended March 31, 2016
Descriptionof thebusinessrelationshipAmounts

Name ofrelatedparty

Location

Ichthys
LNG Pty
Ltd

Transportation,
Loans ofliquefaction andServe the funds
sales of oil andofficer Collection
Western$482,700
Indirectly
natural gas throughconcurrently, of loans*1
Australia,
62.25%
thousandpipeline in WA-50-L
capitalAustralia
block in offshore
subscription Debt
Western Australia
guarantee*2

Capitalinvestment

Nature ofoperations

Votinginterest

Transaction
detailAmounts
Title of
Millions of Thousands of account Millions of Thousands ofyen
U.S. dollars
yen
U.S. dollars¥    215,138$   1,909,113—¥      —$—

¥1,388,370$12,320,259—¥      —$—

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

(b) Note related to the parent company or significant affiliated companies
The significant affiliated company for the years ended March 31, 2015 and 2016 is Ichthys LNG Pty Ltd. The summary of its financial information
is as follows:
Millions of yen

Years ended March 31,

2015

Thousands of U.S. dollars

2016

2016

Total current assets
Total fixed assets
Total current liabilities
Total long-term liabilities
Total net assets¥    42,670
2,213,893
110,247
2,137,499
8,817¥    46,826
2,604,208
75,472
2,537,755
37,807$    415,529
23,109,486
669,731
22,519,789
335,495

Net sales
Net loss before income taxes
Net income (loss)—(2,902)¥       873—
(3,901)¥      (572)—(34,617)$      (5,076)

23. SIGNIFICANT SUBSEQUENT EVENTSThe Group received a reassessment notice on May 19, 2016 following a tax investigation on an overseas project. The additional tax is lessthan the estimated amount the Group recorded for the year ended March 31, 2016, and the Group will reverse the difference between theseamounts for the year ending March 31, 2017. This is expected to affect around ¥6.0 billion ($53,243 thousand) to the net income attributable toowners of parent for the year ending March 31, 2017.

72

INPEX CORPORATION Annual Report 2016

Independent Auditor’s 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, 2016, 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, 2016, 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.

6
Financial &Corporate Information

June 28, 2016
Tokyo, JapanINPEX CORPORATION Annual Report 201673

Subsidiaries and Afﬁliates
As of March 31, 2016

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,
Australia and East Timor

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.

421,690

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/WA-51-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.

43,43651.93%

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

10100.00%Exploration, development, production and sales of oil
and natural gas in the JPDA06-105 Block in the Timor
Sea JPDA, Australia and East Timor(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.

1,426

51.01%

Exploration of oil and natural gas in the Babar Selaru
Block in the eastern sea area, Indonesia

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

65.76%

Exploration, development, production and sales of oilin the ADCO Block in onshore Abu Dhabi, United ArabEmirates

100.00%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%Investment in exploration, development, production
and sale of natural gas in the Copa Macoya Block andexploration, development, production and sale of oil in the
Guarico Oriental Block, Bolivarian Republic of Venezuela

100.00%Exploration, development, production and sales of oil
and natural gas in the Lucius Oil Field and others, inthe U.S. Gulf of Mexico

10100.00%Exploration and development of oil including oil sandsin the Joslyn project, Canada

11,28952.70%

Exploration of oil in the Offshore Block 31, Suriname

INPEX Timor Sea, Ltd.
INPEX Oil & Gas Australia Pty Ltd

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

804,456
340,650

400,000

111(Thousands of
U.S. dollars)

10475,600

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)

INPEX Canada, Ltd.
Teikoku Oil (Suriname) Co., Ltd.
74

Issued capital*(Millions of yen)

INPEX CORPORATION Annual Report 2016

1,620

19,793

Company name

INPEX Gas British Columbia Ltd.

Issued capital*(Millions of yen)

1,043,488(Thousands ofCanadian 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 sales ofnatural gas in the shale gas blocks of the 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 the Bayu Undan Gas-Condensate Field
and Darwin (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

36 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)

62.25%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 and 3/05A 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)

15 other equity-method affiliates

Subsidiaries of Equity-Method Affiliates

Frade Japão Petróleo Limitada(Thousands ofreais)

103,051

6

Voting rights
held by us (%)

Main business

0.00%

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

Financial &Corporate Information

Company name

Issued capital*

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

INPEX CORPORATION Annual Report 201675

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 29, 2016 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 AT I O N (t h e “C o m p a ny ”) c o m mi s s io n e d

76

INPEX CORPORATION Annual Report 2016

DeGolyer and MacNaughton, an independent petroleum
engineering consultant in the United States, to assess the main
proved reserves of the Group of which projects with a significant
amount of future development investment might materiallyaffect future performance. An assessment of other projects wasundertaken by the Company. The definition of proved reserves isbased on the U.S. Securities and Exchange Commission’s (SEC)
Regulation S-X, Rule 4-10(a), which is widely known among U.S.
investors. Regardless of whether the deterministic approachor probabilistic approach is used in evaluation, proved oil
and gas reserves are estimated quantities that geological andengineering data demonstrate with reasonable certainty to be
recoverable from known reservoirs under existing economic
and operating conditions, from the date of evaluation throughto the expiration date of the agreement granting operatingrights (or in the event of evidence with a reasonable certainty ofagreement, extension through to the expiration of the projected
extension period). For definition as “proved reserves,” operators
must have a reasonable degree of certainty that the recovery ofhydrocarbons has commenced or that the project will commence
within an acceptable period of time. This definition is widely
regarded as being conservative. Nevertheless, the strictness ofthe definition does not imply any guarantee of the production of
total reserves during a future production period. In this context,
when probabilistic methods are employed, there should be atleast a 90% probability that the quantities actually recovered will
equal or exceed the sum of estimated proved reserves.
For f ur ther det ails on proved reser ves of cr ude oil,condensate, LPG and natural gas held by the Group, including
affiliates accounted for under the equity method, please see
the section “Oil and Gas Reserves and Production Volume” on
P. 84.
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 (AAPG), andthe Society of Petroleum Evaluation Engineers (SPEE). Probablereserves, as defined by PRMS guidelines established by thefour organizations, are reserves of oil and gas volumes outside
proved reserves that are less likely to be recovered than proved
reserves but more certain to be recovered than possible reserves
based on analyses of geological and engineering data. In thiscontext, when probabilistic methods are employed, there
should be at least a 50% probability that the quantities actually
recovered will equal or exceed the sum of estimated proved
and probable reserves. In addition, possible reserves are also
defined in accordance with PRMS guidelines as reserves of oil
and gas volumes which are not categorized as proved reserves
or probable reserves and which are less likely to be recovered
than probable reserves based on analyses of geological andengineering data. In this case, it is unlikely that the actual
quantity of oil and gas recovered will exceed the sum of proved
reserves, probable reserves and possible reserves. Furthermore,when probabilistic methods are employed to calculate possible
reserves, there should be at least a 10% probability that thequantities recovered will equal or exceed the sum of proved
reserves, probable reserves and possible reserves. Probablereserves and possible reserves can be upgraded to proved
reser ves af ter the addition of new technical data or when
uncertainty has been reduced due to clarification of economic
conditions or operational conditions. Nevertheless, probablereserves and possible reserves do not offer a guarantee of the
production of total reserves during a future production periodwith the same certainty as proved reserves.
For fur ther details on probable reser ves and possible
reserves of crude oil, condensate, LPG and natural gas held by
the Group, including affiliates accounted for under the equity
method, please see the section “Oil and Gas Reserves andProduction Volume” on P. 84.
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.

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.

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

INPEX CORPORATION Annual Report 2016

6
Financial &Corporate Information(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

For this reason, a long period of 10 years or more is required
from the time of exploration and development investment until
the recovery of funds through production and sales. In particular,
the large-scale Ichthys LNG and other projects being pursued by
the Company requires a very large amount of investment, andthe financing of these projects could be impacted by changes inthe economic and financial environment. Following the discoveryof resources, a delay in the development schedule or the loss ofthe economic viability of the properties during the development
process leading up to production and the commencement ofsales could have an adverse effect on the Group’s operational
results. Such delays or losses may occur due to changes inthe business environment including a delay in the acquisitionor modification of government approvals, the occurrenceof unanticipated problems related to geological conditions,fluctuations in the price of oil or gas, fluctuations in foreignexchange rates, or escalating prices of equipment and materials.
In the case of LNG projects, such delays or losses may occur due
to an inability to complete such procedural requirements as FID
owing to the lack of any long-term contractual agreement withprospective purchasers with respect to production.

77

contribute to the expansion of oppor tunities of block anda c r eag e a c q ui s i t io n t h r o u g h e n ha n c e m e nt of te c h nic alcapabilities and greater presence in oil-producing countries
and the industry. At the same time, there exist risks such as
constraints on the recruitment of personnel who have specialized
operational skills and an increase in financial burden. Inability toadequately cope with such risks could have an adverse effect on
the Group’s results of operations.

(5) Project partners
In the oil and natural gas development business, as previously
mentioned, several companies often engage in joint businessfor the purpose of dispersion of risk and financial burden. In
such cases, the partners generally enter into a joint operating
agreement among themselves to decide on the decision-making
procedure for execution of the joint business, or to decide on
an operator that conducts business on their behalf. A company
that is a partner in one property in which the Group is engaged
in joint business may become a competitor in the acquisition ofother participating interests, even though the relationship withthe partner may be good.
In undertaking the joint business, participants in principle
bear a financial burden in proportion to their interest share. Any
inability by a joint business partner to fulfill this financial burden
may adversely affect the project.

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

natural gas business.
W i t h re g ar d to e nv iro n m e nt al p ro b le m s, t he 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.

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

2. EFFECTS OF FLUCTUATIONS IN CRUDE OIL PRICES, NATURALGAS PRICES, FOREIGN EXCHANGE AND INTEREST RATES ON
FINANCIAL RESULTS(1) Effects of fluctuations in crude oil prices and natural
gas prices on financial results
A large percentage of crude oil prices and natural gas prices
in overseas businesses are determined by international market
conditions. In addition, those prices fluctuate significantly inresponse to the influence of a variety of factors including global
or local supply and demand as well as trends and conditionsin the global economy and financial markets. The vast majorityof these factors are beyond the control of the Company. In
this regard, INPEX is not in a position to accurately predict78

INPEX CORPORATION Annual Report 2016

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 averageoil 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.
Also, should the recover y of an amount invested in abusiness asset held by the Group be no longer expected—due
to a decrease in profitability associated with changes in thebusiness environment on the basis of changes in future market
conditions—since the Group would reduce that business asset’sbook value to reflect the level of recoverability and the amountof that reduction would be deemed impairment loss, there is thepossibility that there could be an adverse effect on the Group’s
results of operations.

(2) The effect of fluctuations in exchange rates on
financial results
As most of the Group’s business consists of E&P conducted
overseas, associated revenues (sales) and expenditures (costs) aredenominated in foreign currencies (primarily in U.S. dollars), andprofit and loss is subject to the effects of the foreign exchange
market. In the event of appreciation in the value of the yen, yen-denominated sales and profits decrease. Conversely, in the eventof depreciation in the value of the yen, yen-denominated sales
and profits increase.
On the other hand, when borrowing necessar y funds,
the Company borrows in foreign currencies. In the event ofappreciation in the value of the yen, a foreign exchange gain on
foreign-currency denominated borrowings is recorded as a resultof fiscal year-end conversion; in the event of depreciation in thevalue of the yen, a foreign exchange loss is incurred. For thisreason, the exchange risk associated with the above businessis diminished and the impact of fluctuations in exchange rates
on profit and loss tends to be mitigated. Moreover, although
the Company is taking measures to reduce a portion of the risks
associated with movements in foreign currency exchange rates,
these measures by no means cover all possible risks. As a result,the impact of fluctuations in foreign currency exchange rates
cannot be completely eliminated.

(3) The effect of fluctuations in interest rates on
financial results
The Group raises some of the funds necessary for explorationand development operations through borrowing. Much ofthese borrowings are with variable-rates, long term borrowings
based on the U.S. dollar six-month LIBOR rate. Accordingly, theCompany’s profits are subject to the influence of fluctuations
in U.S. dollar interest rates. Furthermore, although the Grouphas devised methods to reduce a portion of interest rate risk,these methods do not cover all risks of interest rate fluctuation
incurred by our Group and do not entirely remove the effect offluctuations in interest rates.

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

6(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

Financial &Corporate Information

4. DEPENDENCE ON SPECIFIC GEOGRAPHICAL AREAS OR
PROPERTIES(particularly Japan, Indonesia, and Australia), the Middle East
and Africa, Eurasia including Caspian Sea area and the Americas.
For the year ended March 31, 2016 however, the Middle East
and Africa regions accounted for about 48% and the Asiaand Oceania regions accounted for about 36% of the Group’s
production volume, making up the vast majority of the Group’s
operations.
INPEX CORPORATION Annual Report 201679

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

(2) Contract expiration dates in principal business areas
Expiration dates are customarily stipulated in the agreements
related to participating interests, which are prerequisites for
the Group’s overseas business activities. Should an agreementin which an expiration date is stipulated not be extended, reextended or renewed, or should the terms and conditions beless favorable (including a reduction in the proportion of theGroup’s interest) than those existing at the time of extension,re- extension or renewal, there could be an adverse effect on
the Group’s results. For example, although the initial contract
expiration date in the produc tion sharing contrac t for the
Offshore Mahakam Block of Indonesia—the Group’s principal
geographical business area—was March 30, 1997, an extension
was approved in 1991, and the current expiration date is
December 31, 2017. 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.) The Group’s
policy is to make efforts together with partners to extend, reextend or renew these agreements. With regard to the Offshore
Makaham Block, the Group signed a basic agreement, covering
aspects such as the basic concept for participation in the blockfrom 2018 onward, with project operator Total E&P Indonesie
and Indonesia’s state-owned oil corporation PT Pertamina in
December 2015 and officially entered into that agreement inJanuary 2016. Should, however, the existing agreement not be
extended, re-extended or renewed as a result of agreement
negotiations based on the aforementioned Januar y 2016agreement, or should the terms and conditions be less favorable(including a reduction in the proportion of the Group’s interest)
than those existing at the time of extension, re- extension or
renewal, these could have an adverse effect on the Group’s

results. Even should the agreements stipulating expiration dates
be extended, re-extended or renewed, we anticipate that theremaining recoverable reserves at that time will have decreased
due to production developments. Although the Group is striving
to acquire interests that can substitute these properties, failure
to acquire participating interests in oil and gas fields to fully
substitute for these 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 case of fields where oil and/or gas reserves are foundthat are deemed to be commercialized, and the Company isunable to decide on the transition to the development stage
by the expiration of the current contract, efforts will be madethrough negotiations with the government of the oil- or gasproducing country in question to have the periods extended.
However, there remains the possibility that such negotiations
may not be successfully concluded, in which event the Company
would be forced to withdraw from operations in the oil 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 forthe other party to have the right to cancel the agreement before
the expiration date. The agreements for properties in theseprincipal geographical business areas contain similar provisions.
The Group has never experienced early cancellation of anagreement due to breach of contract, and we do not anticipate
such an occurrence in the future. Nevertheless, a major breachof contract on the part of a party to an agreement could result incancellation of an agreement before the expiration date.
A n d i n t h e ove r s e a s n a t u r a l g a s d e ve l o p m e n t a n d
production activities, in many cases we are selling and supplying
gas based on long-term sales and supply contracts in which
expiration dates are stipulated. We plan to make efforts withpartners to extend or re-extend the expiration date before thedeadline stipulated in these contracts. Nevertheless, inability
to extend the contracts, or the occurrence of cases in which
extension is made but sales and supply volumes are reduced,
could have an adverse effect on the Group’s business or results.

5. PRODUCTION SHARING contracts(1) Details of production sharing contracts
The Group has entered into produc tion sharing contrac ts
with countries including Indonesia and Caspian Sea area, andtherefore holds numerous par ticipating interests in thoseregions.
Production sharing contracts are agreements by which one
or several oil and natural gas development companies serve ascontractors that undertake at their own expense explorationand development work on behalf of the governments of oilproducing countries or national oil companies and receive
production from the projects as cost recovery and compensation.
That is to say, when exploration and development work results inthe production of oil or natural gas, the contractors recover the
exploration and development costs they incurred by means ofa share in the production. The remaining production (crude oiland gas) is shared among the oil-producing country or nationaloil company and the contractors according to fixed allocation
ratios. (The contactors’ share of production after cost recovery
is called “profit oil and gas.” In the case of natural gas, sales
are conducted by Indonesia and the contractors receive cost

80

INPEX CORPORATION Annual Report 2016

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 29, 2016, 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 2016

6
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,
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

81

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 supplyof energy for Japan as a national flagship company. On thebasis of the concept of the Repor t, following a speculativeacquisition or an attempt at management controlled by foreign
capital, Class A Stock is designed and issued to be highly
transparent while not unreasonably impeding the efficiency and82

INPEX CORPORATION Annual Report 2016

flexibility of management and to keep the effects of any such
speculative acquisition to the necessary minimum. At the sametime, Class A Stock maintains the Company’s role in the efficient
implementation of a stable supply of energy for Japan as acore business, so that management is not conducted in a way
contradictory to that role and no negative impact is felt.
2) Shareholders’ meeting resolutions, dividends, distributionof residual assets, and redemption
Unless otherwise provided by laws or ordinances, the Class A
Stock does not have any voting rights at the Company’s generalshareholders’ meetings. With regard to cash dividends paid
and the distribution of residual assets, the Company concluded
a stock split at a ratio of 1:400 of common stock with October
1, 2013, as the effective date. For Class A Stock (unlisted) nostock split was conducted. The Articles of Incorporation specify
that dividends of Class A Stock are equivalent to dividends ofa common stock prior to the stock split. The Class A Stock will
be redeemed by resolution of the Board of Directors of theCompany if the holder of the Class A Stock requests redemption
or if the Class A Stock is transferred to a party other than thegovernment of Japan or an independent administrative bodythat is fully funded by the government of Japan.
3) Veto rights in the Articles of Incorporation
The Articles of Incorporation of the Company provide that an
approval resolution of the meeting of the holder of the Class A

Stock is necessary in addition to resolutions of the Company’s
general shareholders’ meetings and resolutions of meetings 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 the criteria
for the exercise of the Class A Stock holder’s voting rights
Criteria concerning the exercise of the veto rights have been
established in a Ministry of Economy, Trade and Industry Notice(No. 220, 2008) (hereinafter the “Notice”). The criteria stipulate
the exercise of veto rights only in the following specific cases.
• When resolutions pertaining to appointment or removal of
Directors and integration are not voted down and it is judgedthat the probability is high that the Company will engage inmanagement inconsistent with the role that a core company
should perform for efficient realization of a stable supply ofenergy to Japan.
• With regard to decisions related to the disposal of all or partof significant assets, when resolutions pertaining to dispositionof material assets are not voted down and the objects ofdisposition are oil and natural gas exploration or production
rights or rights similar thereto or shares or ownership interestin the Company’s subsidiary whose principal assets are said
rights and it is judged that the probability is high that theCompany will engage in management inconsistent withthe role that a core company should perform for efficient
realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Company’s
Articles of Incorporation relating to changes in the Company’sbusiness objectives, reduction in the amount of capital, or
dissolution are not voted down and it is judged that theprobability is high that the Company will engage in managementinconsistent with the role that a core company should perform
for efficient realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Articles ofIncorporation granting voting rights to any shares other than thecommon shares of the Company are not voted down and could
have an effect on the exercise of the voting rights of the Class A
Stock.
It is provided that the above criteria shall not be limited in theevent that the Notice is changed in the light of energy policy.

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

9. CONCURRENTLY SERVING OUTSIDE 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 2016

6
Financial &Corporate Information

The Board of Directors of the Company is composed of 14
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.

83

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, 2014
21
816
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates(0)(9)
Interim production(1)(42)
As of March 31, 201519765
Equity-method affiliates
As of March 31, 2014——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2015——
Proved developed and undeveloped reserves
As of March 31, 2015
19765
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2015
19
765
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates0(0)Interim production(1)(44)
As of March 31, 201618
721
Equity-method affiliates
As of March 31, 2015——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2016——
Proved developed and undeveloped reserves
As of March 31, 2016
18
721
Proved developed reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201612469
Equity-method affiliates——
As of March 31, 2016
Proved undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 20166252
Equity-method affiliates
As of March 31, 2016——

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, 2016 were 2,143 million barrels for crude oil, condensate andLPG, and 6,025 billion cubic feet for natural gas, for a total of 3,264
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)

199
18
(9)
12
(15)
204

5,306
182
(269)
121
(217)
5,123

186
13
—
3
(10)
192

27
—
—
0
—
27

742
—
—
(16)
(31)
695

—
—
—
—
—
—

9
3
1
(0)
(0)
13

288
63
1
29
(38)
343

1,157
34
(8)
(2)
(58)
1,123

6,437
245
(268)
140
(296)
6,258

2
0
—
(0)
(0)
2

298
20
—
9
(24)
302

—
—
—
—
—
—

—
—
—
—
—
—

115
5
—
(1)
(31)
87

—
—
—
—
—
—

5
—
—
(3)
(1)
1

1
—
—
(0)
(0)
0

121
5
—
(4)
(31)
90

298
20
—
8
(24)
302

206

5,425

192

27

783

—

13

343

1,213

6,561

204
—
—
1
(17)
187

5,123
—
—
(73)
(243)
4,807

192
—
—
3
(12)
184

27
—
—
(6)
—
21

695
—
975
37
(32)
1,675

—
—
—
—
—
—

13
—
—
(0)
(2)
10

343
—
—
(160)
(32)
151

1,123
—
975
41
(64)
2,075

6,258
—
—
(240)
(319)
5,700

2
—
—
(0)
(0)
1

302
—
—
44
(22)
325

—
—
—
—
—
—

—
—
—
—
—
—

87
2
—
9
(32)
67

—
—
—
—
—
—

1
—
—
(0)
(1)
—

0
—
—
(0)
(0)
—

90
2
—
9
(33)
69

302
—
—
44
(22)
325

189

5,132

184

21

1,742

—

10

151

2,143

6,025

19

324

52

—

1,055

—

5

111

1,143

904

1

259

—

—

63

—

—

—

64

259

168

4,483

132

21

620

—

5

40

931

4,796

0

66

—

—

4

—

—

—

4

66

Notes: 1. Based on SEC disclosure standards, the Group discloses proved reserves in each country containing 15% or more of its proved reserves. As of March 31, 2016, the Group held proved
reserves in Australia of approximately 171 million barrels for crude oil and approximately 4,392 billion cubic feet for natural gas, for a total of 992 million boe.
2. Proved reserves (as of March 31, 2016) of the following blocks and fields include the portion attributable to non-controlling interests.
		 Eurasia (Europe & NIS): ACG (49%), Kashagan (55%), Americas: Horn River Area (54.91%)
3. MMbbl: Million barrels
4. Bcf: Billion cubic feet
5. Crude oil includes condensate and LPG

Standardized measure of discounted future net cash flows and their changes relating to proved oil and gas reserves
for the year ended March 31, 2016
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, 2016 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

84

INPEX CORPORATION Annual Report 2016

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

The discount is computed by applying a prescribed discount rateof 10% to the estimated future net cash flows.
The translation of U.S. dollar amounts into yen amounts iscomputed by applying the year-end exchange rates (TTM) of¥120.27 and ¥112.69 to the U.S. dollar as of March 31, 2015 and2016, respectively.
Since these figures are calculated in accordance with therules set forth by the FASB, which have the following aspects,
March 31, 2015
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows

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

Total

¥16,826,527(5,420,750)(6,619,499)
4,786,278(2,740,756)
2,045,522

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

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
AfricaJapan¥1,373,830 ¥ 6,518,619(279,282)(2,143,400)(379,336)(1,792,785)
715,2122,582,434(414,963)(1,445,090)
300,249
1,137,344¥1,787,325 ¥ 6,935,269(563,719)(2,373,944)(235,731)(4,200,930)
987,875
360,395(552,389)(288,615)
435,486
71,780Americas¥211,485(60,405)(10,718)
140,363(39,699)
100,663

1,283,858(578,892)(538,253)
166,713(82,534)

—
—
—
—
—

384,759(117,127)(128,356)
139,276(78,062)

—
—
—
—
—

890,520(453,308)(409,898)
27,315(4,453)8,579(8,457)—122(19)84,179—61,214—

22,862103¥ 2,129,701¥  300,249¥ 1,198,557¥  435,486¥     94,643¥100,766

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

March 31, 2016
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows
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

Total

Japan

¥14,328,314(6,088,070)(5,531,024)
2,709,219(1,728,279)
980,941¥955,158(211,896)(238,524)
504,739(289,832)
214,907¥3,742,129(1,716,381)(334,222)
1,691,527(1,065,735)
625,792¥809,247(511,299)(27,372)
270,576(131,228)
139,347¥8,753,540(3,612,235)(4,930,907)
210,399(233,386)(22,987)¥68,239(36,260)—
31,979(8,098)23,881

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

—
—
—
—
—

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

—
—
—
—
—

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

46,723—35,136—

13,912(2,325)¥ 1,027,663¥214,907¥   660,929¥139,347¥    (9,075)¥21,556

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

Total

Japan

Americas

Equity-method
affiliates¥2,129,701¥300,249¥1,137,344¥435,486¥ 71,780¥100,663¥ 84,179(768,379)(54,884)(239,067)(60,447)(188,194)(22,991)(202,796)(2,528,189)(100,431)

342,036(164,656)
90,888203,264
1,894,806(37,108)(134,700)

2,363
2,442
(2,236)24,851
61,474—(18,923)(895,506)(380,907)(863,121)(32,889)(255,335)

198,989(197,855)(47,750)
115,398
625,755—(71,516)

40,430(30,972)
53,84541,40368,051—(27,540)

45,422
3,105
63,1387,386
879,129(37,108)(4,524)

4,054(1,536)(31,098)
7,814
6,755
—
(6,892)50,77860,161
54,988
6,411
253,642—(5,305)¥1,027,663¥214,907¥  625,792¥139,347¥ (22,987)¥ 23,881¥ 46,723

6
Financial &Corporate Information

INPEX CORPORATION and Consolidated
Subsidiaries
Standardized measure at beginning of the period
As of April 1, 2015
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, 2016

Millions of yen
Eurasia
Middle East &(Europe & NIS)
AfricaAsia &
Oceania

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

INPEX CORPORATION Annual Report 201685

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, 2016 were 796 million barrels for crude oil, condensate and LPG, and 5,074 billion
cubic feet for natural gas, for a total of 1,705 million boe. In addition, the Group’s possible reserves as of March 31, 2016 were 92 million
barrels for crude oil, condensate and LPG, and 2,388 billion cubic feet for natural gas, for a total of 545 million boe.

March 31, 2016
Probable reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

March 31, 2016
Possible reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericas

SubtotalInterest inreserves heldby equitymethod
affiliates

Total

2

132

387

258

4

783

13

796

69

4,778

175

—

9

5,031

43

5,074

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericas

SubtotalInterest inreserves heldby equitymethod
affiliates

Total

2

79

2

0

7

90

2

92

63

2,221

—

—

13

2,297

91

2,388

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

2. Oil and Gas Production
The following tables list average daily production for crude oil, natural gas, and the total of crude oil and natural gas by region. The
proportional interests in production by the equity-method affiliates are not broken down by geographical regions.
The Group’s production for the year ended March 31, 2016 was 339.2 thousand barrels per day for crude oil, condensate and LPG,
and 932.9 million cubic feet per day for natural gas, for a total of 513.8 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.

86

Years ended March 31,

2011

2012

2013

2014

2015

2016

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

3.9
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

3.2
40.6
27.0
84.8
0.5
156.1
86.6
242.7
88.6

3.2
47.8
31.6
161.1
5.5
249.2
90.0
339.2
124.2

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

128.7
836.0
—
—
81.1
1,045,956.6
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

113.9
596.5
—
—
103.2
813.7
66.4
880.0
321.2

119.7
666.8
—
—
87.3
873.8
59.1
932.9
341.4

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

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

24.6
154.3
27.0
84.8
19.0
309.7
98.4
408.1
148.9

25.7
174.0
31.6
161.1
21.0
413.4
100.5
513.8
188.1

INPEX CORPORATION Annual Report 2016

Corporate Information(As of March 31, 2016 )Corporate Data
Company Name
Established
CapitalCompany Headquarters

Number of Employees (Consolidated) 3,449
Main BusinessResearch, exploration, development, production and sales of oil,natural gas and other mineral resources, other related businesses
and investment and lending to the companies engaged in these
activities, etc.

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

Organization Chart (As of July 1, 2016)
General Meeting of
Shareholders

Board of Directors

Audit & Supervisory
Board (Member)
Audit & Supervisory
Board Members’ OfficeCompliance Committee

President

CSR Committee

Executive
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

INPEX Advisory
Committee

Corporate HSE
Committee
Information Security
Committee

New Ventures Division

America & Africa
Project Division

INPEX Value Assurance
System Committee

Finance & Accounting Division

Eurasia & Middle East
Project Division

Logistics & IMT Division

Stock Data

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

Total Number of Shareholders and Issued Shares
Common Stocks:
48,427 shareholders / 1,462,323,600 sharesClass A Stock*:1 shareholder (Minister of Economy,
Trade and Industry) / 1 share* The Company’s Articles of Incorporation stipulate that certain major corporate decisions
require a resolution by the holder of the Class A Stock in addition to the approval of theshareholders’ meetings or Board of Directors.

Major Shareholders (Common Stocks)

Shareholding by Shareholders Type

Percentage of
total commonshares*1 (%)

Name

Percentage of
Number of total commonsharesshares* (%)

Minister of Economy, Trade and Industry

276,922,800

18.94

Japan Petroleum Exploration Co., Ltd.

106,893,200

7.31

Japan Trustee Services Bank, Ltd. (Trust Account) 53,363,400

3.65

45,687,900

3.12

Mitsui Oil Exploration Co., Ltd.

44,954,000

3.07

Minister of Economy,
Trade and Industry*2

CBNY-GOVERNMENT OF NORWAY

44,178,795

3.02

Foreign Corporations and OtherJX Holdings, Inc.

43,810,800

3.00

Individuals and Other

23,134,396

1.58

Treasury Shares

State Street Bank and Trust Company 505223

22,410,446

1.53

The Bank of New York Mellon SA/NV 10

21,856,291

1.49*1 The percentages of total common shares are for total number of issued common shares.
*2 Excludes one Class A Stock

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

THE BANK OF NEW YORK,TREATY JASDEC ACCOUNT

Shareholder type

Number of Number ofshareholders
sharesFinancial Institutions(Including Trust Accounts)

95

254,566,927

17.41

Securities Companies

65

23,499,037

1.61

Other Domestic Corporations

397

235,729,449

16.12

1

276,922,800

18.94

763

622,909,747

42.60

47,10546,729,240

3.20

1

1,966,400

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

Home Page

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

Inquiries

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

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

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