Akasaka Biz Tower
5-3-1 Akasaka, Minato-ku, Tokyo
107-6332, Japan

https://www.inpex.co.jp/english

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

INPEX CORPORATION Annual Report 2021 For the period ended December 31, 2021

Annual Report

2021

For the period
ended
December 31,
2021

Basic management policy towards a net zero carbon society by 2050

As a pioneer in energy transformation (EX), INPEX will
provide a stable supply of diverse and clean energy
sources including oil and natural gas, hydrogen andrenewable power.

Vision for around 2030

Established

April 3, 2006

Capital¥290,809,835,000

Company
Headquarters

Akasaka Biz Tower,
5-3-1 Akasaka, Minatoku, Tokyo 107-6332,
Japan

Number of
Employees(Consolidated)

Audit & Supervisory Board(members)
Audit & Supervisory
Board Members’ Office

Audit Unit

HSE Unit

Legal Unit

Strategic Projects Office

General Administration DivisionCorporate Strategy & Planning Division

Finance & Accounting Division

Logistics & IMT Division

Technical Division

Global Energy Marketing Division

Domestic Energy Supply & Marketing Division

New Ventures & Global Exploration Division

Hydrogen & CCUS Development Division

26 INPEX Vision @2022 Long-term Strategy
34 INPEX Vision @2022 Medium-term Business Plan
2022–2024
38 Message from the Senior Vice President,
Finance & Accounting
40 11-Year Financial Information

18 Sustainability Highlights
20 Segment Overview
22 INPEX’s Business
24 INPEX at a Glance

Asia Projects Division

Oceania Projects Division

Research, 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.

Europe & Middle East Projects Division

02 A History of Value Creation
04 Value Creation Process
06 Message from theRepresentative Directors
08 Message from the
President & CEO
16 Financial and Operating
Highlights

Compliance Committee

Information Security Committee

Abu Dhabi Projects Division

26 Growth Strategies for Value Creation

INPEX Advisory Committee

President & CEO

INPEX Value Assurance
System Committee

Main Business

Stock Data
Authorized Shares

Total Number of Shareholders and Issued Shares

3,600,000,000 common stocks
1 Class A Stock

Common Stock 136,935/1,462,323,600 shares1
Class A Stock2 1 shareholder (Minister of Economy, Trade and Industry) / 1 share
1. The total number of issued common shares as of February 8, 2022 is 1,386,667,167 shares, as 75,656,433 own shares have beencancelled on the same day.
2. The Company’s Articles of Incorporation stipulate that certain major corporate decisions require a resolution by theholder of the Class A Stock in addition to the approval of the shareholders’ meetings or the Board of Directors.

Major Shareholders (Common Stock)

Shareholding by Shareholder Type
Percentage of
Number of
total common
common sharesshares* (%)

Name

IR

02 INPEX’s Vision and Value Creation

Executive Committee

Sustainability Committee

276,922,800
179,995,000
60,301,600
53,446,600
43,810,800
29,420,000
21,982,400
21,348,326

19.97
12.98
4.35
3.85
3.16
2.12
1.59
1.54

19,837,543

1.43

18,871,100

1.36*The shareholder ratio is calculated after subtracting treasury shares (75,656,400 shares).
The shareholder ratio is rounded off to the nearest whole number.

CONTENTS

Nomination and Compensation
Advisory Committee

Corporate HSE Committee

Americas Projects Unit

We are committed to contributing to thecreation of a brighter future for society
through our efforts to develop, produce
and deliver energy in a sustainable way.

Board of Directors

3,189

Minister of Economy, Trade and Industry, JapanThe Master Trust Bank of Japan, Ltd. (Trust Account)
Custody Bank of Japan (Trust Account)
Japan Petroleum Exploration Co., Ltd.
ENEOS Holdings, Inc.
JAPAN SECURITIES FINANCE CO., LTD.
SMBC Nikko Securities Inc.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
STATE STREET BANK WEST
CLIENT - TREATY 505234
THE BANK OF NEW YORK MELLON 140051

Our Mission

General Meeting of Shareholders

Company Name INPEX CORPORATION

Domestic Exploration & Production Division

As a pioneer in energy transformation (EX), INPEX will seek
to provide a stable supply of diverse and clean energy
sources including oil and natural gas, hydrogen and renewableenergy. Through these business activities, the company will
promote initiatives towards the realization of a net zerocarbon society and aim to increase the corporate value of the
INPEX Group as a whole.

Organization Chart (As of April 1, 2022)

Renewable Energy & Power Business Division

INPEX will transform net zero carbon from an ideal to reality.
Invest up to about 1 trillion JPY in the 5 net zero businesses andaim for these businesses to generate about 10% of operating
cash flow by 2030

Corporate Data

https://www.inpex.co.jp/english/ir/

CSR
https://www.inpex.co.jp/english/csr/
Sustainability Reporthttps://www.
inpex.co.jp/
english/csr/csr/

Shareholder type

Financial Institutions(Including Trust Accounts)
Securities Companies
Other Domestic
Corporations
Minister of Economy,
Trade and Industry1
Foreign Corporations
and Other
Individuals and Other
Treasury Shares

Number ofshareholders

Number of Percentage ofcommon total commonsharesshares2 (%)

73

340,173,947

23.26

60

95,172,669

6.51

887

145,059,176

9.92

1

276,922,800

18.94

1,125

425,402,780

29.09

134,7881

103,935,828
75,656,400

7.11
5.17

1. Excludes one Class A Stock
2. The shareholder ratio is rounded off to the nearest whole number.

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 GroupWeb site:www.inpex.co.jp/english/ir/inquiries.html

ABOUT OUR REPORTING

Communication Tool Map
Financial Information

Non-financial Information

Annual Reports
Securities Reports
Publications

Fact Books
Sustainability Reports
Corporate Brochures

OnlineCorporate Website

Securities Reports (available in Japanese only)
https://www.inpex.co.jp/ir/library/securities.html
Fact Books
https://www.inpex.co.jp/english/ir/library/factbook.html
Sustainability Reports
https://www.inpex.co.jp/english/csr/csr/
Corporate Brochures (available in Japanese only)
https://www.inpex.co.jp/company/pdf/brochure.pdf
Corporate Website
https://www.inpex.co.jp/english/

In editing this Annual Report, we have referred to
documents such as the International Integrated
Reporting Council’s (IIRC) International Integrated
Reporting Framework and the Guidance for Collaborative Value Creation issued by Japan’s Ministry of Economy, Trade and Industry (METI),
incorporating information with the aim of straightforwardly conveying our business activities within
the reporting period from both financial andnon-financial perspectives.
In this Annual Report we seek to more concretely present our vision, value creation process,strengths, initiatives towards a net zero carbon society, sustainability initiatives and other topics inline with INPEX Vision @2022, our Long-term Strategy and Medium-term Business Plan announced in
February in 2022. This Annual Report is intended
to function as a communication tool contributing
to dialogue with our stakeholders.
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 notlimited 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 andexpectations. Such forward-looking information isbased 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 could cause theCompany’s actual results, performance, achievements or financial position to be materially different from any future results, performance,
achievements or financial position expressed or
implied by such forward-looking information.
Such risks and uncertainties include, without limitations, fluctuations in the following:
the price of and demand for crude oil andnatural gas;exchange rates; andthe costs associated with exploration, development, production and other related expenses.
The Company undertakes no obligation to publicly
update or revise any information in this Annual Report (including forward-looking information).
NOTES REGARDING FIGURES
Financial figures in this Annual Report have been,in principle, rounded down. The “Project Overview by Core Business Areas” section (starting on
page 62) describes, in principle, the operating situation as of March 31, 2022. Figures in parentheses denote negative amounts. The natural gas
production volume for projects in production is
not the volume at wellheads but corresponds to
the gas volume sold to buyers. INPEX CORPORATION is listed on the Prime Market 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).

42 Management Foundation to
Advance Growth Strategies

42 Sustainability
52 Corporate Governance
60 Internal & Outside Officer Roundtable

62 Business and Financial Overview
62 Project Overview by Core Business Areas
74 Background Information: Oil and Gas
Accounting Policies and Practices
76 Management’s Discussion and Analysisof Financial Condition and Results ofOperations
82 Consolidated Financial Statements /Notes

104 Independent Auditor’s Report
108 Subsidiaries and Affiliates
110 Business Risks
117 Oil and Gas Reserves andProduction Volume
120 Corporate Information

INPEX’s Vision and Value Creation

A History of Value Creation
INPEX has developed as a company built around upstream businesses consisting of the exploration,
development and production of oil and natural gas. Going forward, we are committed to contributing to
the creation of a brighter future for society through the stable supply of diverse and clean energy
sources, from oil and natural gas to hydrogen and renewable energy, while sustainably increasing ourcorporate value.
1992

Teikoku Oil, Co., Ltd.

Launches an oil field
reactivation project inVenezuela

1950

1970

Yabase Oil Field (deep zone
development)

Production starts at HigashiKashiwazaki Gas Field

2006
Shizuoka Line iscompleted

From 1996
1959

Founded in
1941

1975
Production starts at Offshore
D.R. Congo Oil Field

Production starts at Kubiki
Oil and Gas Field

1960

1970

Expansion of domestic trunk
pipelines Shin Tokyo Line
Stage 1–3
Matsumoto, Iruma, Kofu Lines

1984
Production starts at
Minami-Nagaoka Gas Field
and Offshore Iwaki Gas Field

1980

1990

2000

1965

2003

2004

Production starts
at Minami-Aga Oil
Field

Production starts at
Ohanet Gas Field

Launches gas fielddevelopment services
in northeast Mexico

1962

1980

Tokyo Line iscompleted

Production starts at
West Bakr Oil Field

INPEX Corporation

Production starts one after another in oil fields in Offshore Mahakam Block

1974

1975

Production starts
at Bekapai Field

Production
starts at
Handil Field

1994
1972
Production starts
at Attaka Field

Production starts at Griffin oil
fieldsFounded in
1966
1970

1980

1990

Oil and gas fields in various
locations commences production

1984–1992

2004
Production starts at BayuUndan Gas-Condensate Field

2000

2003
Acquiresinterest in
ACG OilFields2000

2000

Discovers Abadi Gas Field and Ichthys Gas-Condensate Field

Discovers Kashagan Oil Field

1984: Tambora Field (oil and gas)/ 1990: Tunu and Widuri Fields/ 1992: Belida Field
Changes in 1966 North Sumatra Offshore Petroleum Exploration Co., Ltd. 1967 Japex Indonesia, Ltd. 1975 Indonesia Petroleum, Ltd.
corporate name 2001 INPEX CORPORATION

Japan Oil Development
Co., Ltd.

Established 1973

02

1980

1990

2000

2004

Participates in developmentof Umm Shaif and Lower
Zakum Oil Fields throughacquisition of interest in
ADMA Block

INPEX CORPORATION Annual Report 2021

Japan Oil Development
Co., Ltd. becomesa wholly owned
subsidiary of INPEX

1982

1985

1987

Production starts at Upper
Zakum Oil Field

Production starts at Umm
Al-Dalkh Oil Field

Production starts at Satah Oil
Field

INPEX’s Vision and Value Creation

Energy Situation in Japan and Worldwide
Amidst the lingering impact of COVID-19 that surfaced in 2019, the world economy is at last showing signs of a gradual
recovery. In line with this, and with demand for energy in fiscal 2021 also having been on track for recovery, it is widely
thought that the current fiscal year will see an even greater increase in demand. In addition, over the medium- to longterm, we anticipate energy demand to increase continuously due to the expansion of the world’s population and economic growth, mainly in emerging countries. For oil and natural gas, which account for the majority of energy needs,
demand is expected to rise in line with global economic recovery, and we believe that, over the medium to long term,
Asia will be a main driver behind demand that will continue to be firm. On the other hand, the 26th Conference of theParties to the United Nations Framework Convention on Climate Change (COP26) was held in 2021 to discuss thestrengthening of efforts to achieve the long-term goal of limiting the average temperature increase from pre-industrial
revolution levels to less than 2°C and further to 1.5°C in order to address climate change. In addition, major countries
such as the EU nations, the U.K. and Japan have announced so-called “net zero targets” to reduce greenhouse gas emissions to effectively zero in 2050.
We believe that the urgency of addressing carbon neutrality will increase as these discussions toward a net zero carbon society progress. We will also work to advance steadily toward achieving our own climate change response targets,
such as net zero carbon emissions on INPEX equity share basis by 2050, to contribute to realizing the Paris Agreement’s
climate change goals.

Other

42

Other

Natural gas,
LPG

%

40%

1%

Natural gas,
LPG

Crude oil
%

73

26%
Teikoku Oil Co., Ltd.
FY2005/12
Net salesINPEX
FY2021/12
Net sales¥100,716
million2012
Final investment
decision (FID) for
Ichthys LNG Project

Crude oil

18%

2013

2008

2006
Founded INPEX
Holdings, Inc.

Naoetsu LNG
Terminal iscompleted2016
Kashagan Oil Field
commences crude
oil shipments

34%

INPEX
FY2006/3
Net sales

millionFrom 2022
Formulates INPEX
Vision @2022, ourLong-term Strategy
and Medium-term
Business Plan withan eye toward2030 and 2050

2017
Extension of the
production sharing
agreement for the
ACG Oil Fields

Founded INPEXCORPORATION

Natural gas, LPG¥1,244,369

2021
Changes its
Japanese
corporate nameto Kabushiki
Kaisha INPEX

2015

2019

Acquires interest in
ADCO onshore
concession

Completes
financing for
Ichthys LNG Project

2014

2018

Extension of concessionagreement for Upper
Zakum Oil Field

Production starts at Ichthys
LNG Project

See page 26¥704,234
millionCrude oil%66

Business Development Strategy

Towards a Net Zero Carbon Society by 2050

Vision 2040
Delivering Tomorrow’s Energy Solutions

Medium-term Business Plan
2018-2022

Medium- to Longterm Vision of INPEX Outlines specific initiatives and targets for the
Ichthys and our growthover the next decade

five-year period between fiscal 2018 and fiscal 2022

Clarifies key initiatives and targets for the periodleading up to the Ichthys production start-up

Net sales

2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2019/12 2020/12 2021/12 2022/12**As of May 11, 2022 earnings report

INPEX CORPORATION Annual Report 2021

03

Value Creation Process
INPEX will proactively engage in energy structure reforms toward the realization of a net zero carbon society by 2050, while responding to the growing energy demands of Japan and the world and fulfilling theCompany’s responsibility for the development and stable supply of energy over the long term. By doing so,
INPEX will contribute to a brighter future for society and sustainably increase its corporate value.

Global Developments

External
Environment

Rising geopolitical risk
Increasing oil and gas prices
Spread of COVID-19 continues
Countries announcing net zero targets

InputsBusiness Processes

Human Capital

Investments for
exploration anddevelopment

 lobal and diverse
G
personnel
Number of employees:
3,189 (consolidated)

Upstream Oil andNatural Gas BusinessSocial and Relationship
Capital rude oil, natural gas, air,Cwater, land, natural energy

See page 22

Accounting ofrevenue attributableto salesGrowth ofproduction
volumeFinancial Capital
Equity ratio: 60.6%
 et D/E ratio (Inclusive ofN
Ichthys downstream IJV)
65.1%
Long-term credit ratings(as of June 30, 2022)

Moody’s A2 (stable),
S&P A− (stable),
R&I AA (stable),
JCR AA+ (stable)

Manufactured Capital

5 net zero businesses

Hydrogen/Ammonia

 &D activity expenses
R¥409 million
Establishment of INPEX
Research Hub for Energy
Transformation (I-RHEX)

CCUS

Carbon recycling
New business
Renewable energy

INPEX Vision @2022 Long-term
Strategy and Medium-term
Business Plan 2022–2024

See page 26

Sustainability
Management

See page 42

Sustainability Material Issues

Corporate GovernanceNote: Results for the fiscal year ended December 31, 2021

04

INPEX CORPORATION Annual Report 2021

Forestconservation

See page 23

 roduction, manufacturingPand supply facilities inJapan and around the world

Intellectual Capital

Increasing
reserves

Exploration, production and marketing of
crude oil and natural gas ood relationships withG
stakeholders in Japanand around the world

Natural Capital overnment policy to increase Japan’sG
independent development ratio of oil
and natural gas (Over 50% in 2030 andover 60% in 2040 )See page 52

Opportunities

Risk of disasters, accidents, system failures, etc.
Risk of failure in exploration, development or production
Risk of fluctuations in crude oil prices, natural gas
prices, foreign exchange and interest rates
Climate change risk
Country risks, etc.

Increasing importance of natural gas in energy transition
Opportunities for a more resilient and cleaner upstream businessVarious changes toward a net zero carbon society (e.g., increasing
demand for hydrogen, ammonia, CCUS and renewable energies)
Opportunities to develop new businesses that respond to society’s
new needs

Outcomes

Energy supply indispensable
to people’s livelihoods

Economic Values Improvement of enterprise value/

Note: Results for the fiscal year ended December 31, 2021

Oilshareholder value

Social Values

million cubicfeet per day

Management Foundation to
Advance Growth Strategies

thousandbarrels per day

Natural gas

1,251.3

 Generation of free cash flow Shareholder returns

Products

343.5

Growth Strategies for Value Creation

Outputs

INPEX’s Vision and Value Creation

Risks

Stable supply of energy to societyIncrease in Japan’s independent
development ratio of oil and natural gas
Contribution to local communities andcreation of employment opportunities
Reduction of workplace injuries andprevention of major accidents(Barrels of Oil Equivalent 240.8
thousand barrels per day)Renewable energy

396,390MWh xpanding supply of natural gas asE
a cleaner source of energy
Cleaner upstream operations throughhydrogen/CCUS businesses
Reduction of greenhouse gas emissions
Conservation of biodiversity

Business and Financial Overview

Powergenerated

Environmental Values

Greenhouse gas emissions
Scope1
Scope2

7,302
136
33

Net carbon
intensity

thousandtons- CO2e

Contribution to Achieving the SDGs*

thousandtons- CO2e
kgCO2e/boe*SDGs: Sustainable Development Goals

INPEX CORPORATION Annual Report 2021

05

Message from the Representative Directors

Takayuki Ueda
Representative Director,
President and CEO

Toshiaki Kitamura
Representative Director
and Chairman

06

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation

Proactive engagement in energy
structure reforms to realize a net zerocarbon societyManagement Foundation to
Advance Growth Strategies
Business and Financial Overview

Representative Director
and Chairman

Growth Strategies for Value Creation

In the fiscal year ended December 31, 2021, despite being weighed down by a gradual reductionin the scale of OPEC+ production cuts and slackened crude oil supply and demand due to the
spread of a COVID-19 variant, oil prices remained on an upward trajectory due to factors such as
the rise in oil demand as an alternative fuel for power generation caused by soaring natural gas
prices worldwide and the accelerated normalization of economic activities. In this business environment, the Company achieved a V-shaped recovery from its fiscal 2020 loss, seeing its highest
profit since its integration in 2008.
In recent years, major countries around the world have announced so-called “net-zero” targets to reduce greenhouse gas emissions, effectively to zero, by 2050. We see the various changes taking place in Japan and overseas toward a net zero carbon society as both a new challenge
and an opportunity to take a further leap forward. In January last year, we formulated our Business Development Strategy—Towards a Net Zero Carbon Society by 2050 and have steadily promoted our efforts to that end. Subsequently, in February of this year, we formulated INPEX Vision@2022, our Long-term Strategy and Medium-term Business Plan, which consists of our long-term
strategy for 2030 and 2050 and our Medium-term Business Plan for the three years covering 2022
to 2024, as concrete measures, targets and paths to promote both stable energy supply and energy transition initiatives for the immediate future.
Based on INPEX Vision @2022, in addition to making our upstream oil and natural gas business, our core business, cleaner and more resilient, in order to achieve our GHG emission reduction target to respond to climate change and to achieve our vision, we are accelerating efforts in
our five net zero businesses including, CCS/CCUS, hydrogen, renewable energy, carbon recycling and new business opportunities, and forest conservation, making the most of our strengths,
such as with the technologies and operational experience we have accumulated in Japan andoverseas,.
Recently, the situation in Ukraine and other factors have increasingly given rise to uncertainty inthe situation surrounding energy, both in and outside of Japan. Nonetheless, we will work to meetthe energy demands of Japan and the world, and contribute to environmental conservation, economic and social development and more, by providing a stable supply of diverse energy both domestically and internationally, and in a cleaner form. No matter what the era, we will strive tomaintain our role as a major player in the energy sector and aim to be a pioneer in energy transformation, proactively responding to changes that lead toward a net zero carbon society. We will also
actively work to reform our energy structure toward the realization of a net zero carbon society in
2050. In tandem with this, at our global oil and gas production sites, which form our core business,
we will strive to ensure a stable supply of energy by continuing production in a safe and stablemanner, while putting in place a variety of ongoing measures to prevent the spread of COVID-19.
We would like to take this opportunity to ask for the continued and unwavering support andunderstanding of all our stakeholders.
Representative Director,
President and CEO

INPEX CORPORATION Annual Report 2021

07

Message from the President & CEO

Takayuki Ueda
Representative Director,
President and CEO

08

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation

As a pioneer in energy transformation,
we provide a clean and stable supply ofenergy essential to society.

Growth Strategies for Value Creation

Around the world, the movement toward a net zero carbon society is gaining momentum. INPEX has announced INPEX Vision @2022, which consists of its long-term strategy for 2030 and 2050, as well as its threeyear Medium-term Business Plan starting in 2022, in order to fulfill its responsibility to society in meeting
diverse energy needs in Japan and abroad, and to seize the initiative on energy structure reform that leads toa net zero carbon society by 2050.

Overview of the fiscal year ended December 31, 2021

The global economy remained mired in uncertain circumstances
due to COVID-19, while the price of crude oil rose
Management Foundation to
Advance Growth Strategies

generation due to factors such as soaring global natural
gas prices and the accelerated normalization of economic activity. Meanwhile, regarding foreign exchange
rates, which also affect our business performance, thedollar–to–yen rate started the fiscal year at the ¥103 level, and the yen depreciated to the ¥110 per dollar levelin the first half of the year. Yen depreciation continued
in the second half, and the year-end exchange rates(TTM) fell ¥11.50, to ¥115.02 per dollar from the end of
the previous year, and the average exchange rate for
the Group’s net sales during the period was ¥110.11 perdollar, or ¥3.26 lower than in the previous year.

Business and Financial Overview

During this fiscal year, uncertain conditions persisted in
the global economy due to the impact of COVID-19, although indications of a rebound could be seen on account of economic measures taken by countries aroundthe world as well as the progress made in vaccination
programs. Against this backdrop, the price of Brent
crude oil, a benchmark index for the Group, started theperiod at US$51.09 per barrel. Although burdened bya gradual reduction in the scale of OPEC+ production
cuts and easing crude oil supply and demand due tothe spread of a COVID-19 variant, the price at the period end was US$77.78, having swung upward due to rising demand for oil as an alternative fuel for power
Brent crude oil price/Exchange rate
Crude oil priceExchange rate

(US$/bbl)(Yen/US$)

140

140

120

120

100

100

80

80

60

60

40

40

20

20

0

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

0

Note: Data for 2022 are through to the end of March.

INPEX CORPORATION Annual Report 2021

09

Message from the President

Bouncing back from loss with a V-shaped recovery, and the highest
net profit since the 2008 business integration
As for the consolidated financial results for the fiscal
year ended December 31, 2021, net sales rose 61.4%
year on year, to ¥1,244.3 billion, operating income increased 137.7% to ¥590.6 billion, and ordinary income
was up 155.6% to ¥657.6 billion. The result was that despite the posting of an impairment loss of ¥14.1 billion,
net income attributable to owners of parent madea V-shaped recovery from a loss of ¥111.6 billion in theprevious fiscal year, rising to ¥223.0 billion and marking
the highest profit since our integration in 2008.
Regarding dividends, we paid out an annual dividendof ¥48 per share of common stock, an increase of ¥24
from the previous fiscal year.

For our net production volume (combining crude oiland natural gas in barrels of oil equivalent), the production volume per day for the fiscal year ended December
31, 2021 was approximately 584 thousand barrels. We
intend to continue our focus not only on quantitative
expansion but more on qualitative growth, such as intechnological capabilities. In addition, proved reserves(combined crude oil and natural gas reserves in barrelsof oil equivalent), a key source of our future earnings,
are now at approximately 3.65 billion barrels.

Consolidated Financial Highlights
Net Sales(¥ billion)

1,244.3

Operating income

Ordinary income(¥ billion)(¥ billion)

Net income (loss) attributableto owners of parent
657.6

590.6

(¥ billion)

223.0

771.0

257.3

248.4

−111.62020/122021/122020/122021/122020/122021/122020/122021/12

FY2021 Net Production
Americas 2%

Japan 1%

8 thousand
BOE/day

3 thousand
BOE/day

Oil,
Condensate
and LPG
Middle East/
Africa343.5

thousand BOE/day

Americas 2%

52 thousand
BOE/day

Middle East/
Africa15%

Eurasia(Europe/NIS)

67%

15%

Eurasia

Americas 2%

50 thousand
BOE/day

231 thousand
BOE/day(Europe/NIS)
26 thousand
BOE/day

Natural Gas

1,251.3
Asia/
Oceania87%

million cf/day(240.8 thousand BOE/
day)

1,089 thousand
BOE/day

INPEX CORPORATION Annual Report 2021

Japan 4%13 thousand
BOE/day

23 thousand
BOE/day40%

231 thousand
BOE/day

Oil and Gas Total

584.3

thousand BOE/day

26 thousand
BOE/day

2%

10

Asia/
Oceania

Japan 9%110 thousand
BOE/day

Eurasia

Asia/
Oceania

9%262 thousand
BOE/day(Europe/NIS)
55 thousand
BOE/day45%

INPEX’s Vision and Value Creation
Growth Strategies for Value Creation
Management Foundation to
Advance Growth Strategies

Management environment and background to the new corporate policy

Medium- to long-term business environment
On the other hand, as global warming has become
an issue of shared concern around the world, majorcountries such as those in the EU, the U.K., and Japan
have announced “net zero targets” to essentially eliminate greenhouse gas emissions by 2050, and policies
are being developed to simultaneously promote economic recovery after the impact of COVID-19 and to respond to climate change, while moving forward onplans to make social structures more energy efficientand cleaner. The Japanese government has declared its
plans for carbon neutrality by 2050 and, having set
greenhouse gas reduction targets, is greatly accelerating its efforts to become carbon neutral by promoting
cleaner technologies such as hydrogen, ammonia, andCCUS* in the oil and natural gas sector and introducing
renewable energies.

Business and Financial Overview

The global economy is finally showing signs of a modest recovery, even as the effects of the 2019 COVID-19
outbreak linger and the situation in Ukraine and otherglobal concerns continue to evolve dramatically. As
a result of measures taken to prevent the spread of infections at production and operation sites of crude oiland natural gas around the world where we are engaged, stable production has continued. We also believe that future demand for oil and natural gas willtrend higher in line with a global economic recovery,
and we expect firm demand over the medium to longterm, especially in Asia, due to a rising global population and economic growth, mainly in emerging countries. In addition, we recognize that oil and natural gas
are indispensable energy sources for people’s daily lives
and economic activities in that they contribute to fuelsupply, not only in times of peace, but also in emergencies. In Japan as well, the challenge is to increase theratio of independently developed oil and natural gas toensure a stable energy supply.

*CCUS: Carbon dioxide Capture, Utilization and Storage

INPEX CORPORATION Annual Report 2021

11

Message from the President

Formulating a new management policy that takes into accountthe results of the previous Medium-term Business Plan
We consider various uncertainties, including the risk of
sudden changes in crude oil prices, to be our key risks
and recognize the importance of continuously bolstering our resiliency and efficiency (efficient investments
and portfolios) while minimizing risk. As a company responsible for the stable supply of energy, it is our duty
to maintain appropriate investment levels and to meetthe energy needs of Japan and the world, mainly in theoil and gas business, which is our core business area. In
addition to this, we are actively working on the development of various energy technologies and the utilizationof our know-how to achieve net zero carbon in the
future.
Based on this way of thinking, in May 2018 we formulated and promoted our Vision 2040 and the Medium-term Business Plan 2018–2022. As a result, we havestrengthened our portfolio and improved production
efficiency in the oil and gas business by, among otherthings, achieving stable operations with Ichthys, and wehave made headway in our response to energy transitions, including renewable energy, by, among otherthings, acquiring offshore wind power generation projects in the Netherlands. In terms of financial performance, in the fiscal year ended December 31, 2021 weposted our highest net profits since our establishment,with cash flow from operations approaching ¥450

billion, while production volume in the second half ofthe fiscal year ended December 31, 2021 grew to a levelof 640 thousand barrels per day (average annual production of 584 thousand barrels per day). With thesebusiness results, we have achieved much of the goals of
our Medium-term Business Plan.
At the same time, we recognize that addressing climate change and moving toward a net zero carbon society is an important management issue. In January
2021 we announced our Business Development Strategy—Towards a Net Zero Carbon Society by 2050 to set
climate change response targets and as a statement ofour determination to challenge and promote new business areas, and in April 2021 we changed our Japanesecompany name to Kabushiki Kaisha INPEX. To reflect
the specific business content in the 5 net zero businesses (for which our direction is indicated in our “Business
Development Strategy,”) as quickly as possible in theMedium-term Business Plan, and because the management targets in the previous 2018–2022 plan were largely achieved, as mentioned above, we have moved up
the completion of the previous plan that was to haveconcluded in the fiscal year ending December 31, 2022.
With that, in February 2022 we announced INPEX Vision@2022, our Long-term Strategy and Medium-term Business Plan 2022-2024.

Long-term Strategy and Medium-term Business Plan (INPEX Vision @2022)
We formulated our Long-term Strategy and Medium-term Business Plan “INPEX Vision @2022” while keeping in mind
the current management environment and recent changes in social conditions. INPEX Vision @2022 is divided into two
major parts: the first is our long-term strategy towards 2030 and 2050, and the second is our Medium-term Business
Plan 2022–2024, which outlines specific goals and paths for the three years from 2022 to 2024 as a phase in our strategy roadmap for roughly the next 10 years until 2030.

Long-term Strategy
 asic management policy towards a net
Bzero carbon society by 2050
First, in our Long-term Strategy, our vision for the longterm is brought together as “basic management policy
towards a net zero carbon society by 2050”. As a pioneer in Energy Transformation (EX), INPEX aims to contribute to the stable supply of diverse and clean energy
sources, from oil and natural gas to hydrogen and renewable power. Specifically, through our efforts in two

12

INPEX CORPORATION Annual Report 2021

business domains, namely, the 5 net zero businesses of(1) hydrogen and ammonia, (2) CCUS, (3) renewable energy, (4) carbon recycling and new business opportunities, and (5) forest conservation, and in the oil and gas
business, we will tackle the challenge of achieving net
zero carbon by 2050, growing into a dynamic, creativeand diverse company that can achieve sustainable
development.

these efforts, we aim to generate about 10% of operating cash flow*2 from the 5 net zero businesses by 2030.
*1 Estimate based on an assumed Brent crude oil price of US$60–70 per barrel*2 Cash flow from operations before exploration (Includes Ichthys downstream
IJV and differs from cash flows based on institutional accounting practice).
Cash flow from renewable energy business is estimated based on equity operating cash flow.

On the other hand, for the oil and gas business,
which is INPEX’s revenue base, our basic strategy is to1) select and concentrate on core business areas (regions), 2) shift to natural gas, and 3) make the businessmore resilient and cleaner.
Concerning our core business areas, we will concentrate resources, including funds and human capital, in
the five regions of Australia, Abu Dhabi, Southeast Asia,
Japan, and Europe, in the overall business, including
the 5 net zero businesses, in pursuit of improving business efficiency and generating further synergies. Bybuilding a balanced portfolio, we aim to reduce net carbon intensity by 30% or more by 2030 compared to
2019. In addition, we will resolutely promote initiatives
in the 5 net zero businesses and the oil and gas business, and will also pursue synergies between these twoareas by making structural improvements in technology,
marketing, Health, Safety and Environment (HSE) andhuman resources.

Growth Strategies for Value Creation
Management Foundation to
Advance Growth Strategies

As a specific path to 2030, during the nine years from2022 to 2030, we will strengthen and expand the oil andgas business as a revenue base while moving forward tothoroughly make the business cleaner through the introduction of CCUS, etc., and secure cash flow from­operations before exploration (including Ichthys downstream IJV) of roughly ¥5 trillion to ¥6 trillion*1. With stable cash flow, we will maintain a strong financial position
and realize adequate shareholder returns while investing approximately ¥3.8 trillion to ¥4.4 trillion*1 in growthover the next nine years. For the 5 net zero businesses,
we would like to allocate an investment amount of
about ¥700 billion to ¥1 trillion*1, or roughly 20% of thetotal, to achieve commercialization and establish
a position for ourselves as a major player.
In Niigata Prefecture, we will aim to construct a production demonstration plant for clean hydrogen andammonia with utilization of CCUS targeting 2024 for thestart of operations. At Ichthys, preparations are underway to implement CCS at the Ichthys LNG Project, withthe aim of starting actual CO2 injection operations in
the late 2020s. Furthermore, in the field of renewableenergies such as wind and geothermal power generation, our goal is to become a major player by accelerating business expansion in regions such as Europe andIndonesia. We will also promote the adoption of methanation in society and seek to participate in forest conservation projects that aim to absorb CO2. Through

INPEX’s Vision and Value Creation

Vision for around 2030

Business and Financial Overview

Ichthys LNG Project Onshore LNG Plant

INPEX CORPORATION Annual Report 2021

13

Message from the President

Medium-term Business Plan 2022–2024
The three-year Medium-term Business Plan beginningin 2022 is intended to be a period of first steps towardrealizing our long-term strategy “Vision for around2030,” and while being quick off the mark, we are positioning it as a time to gain further momentum.

Oil and gas businessIn the oil and gas business, our core business, we willcontinue to meet domestic and overseas energy demand and fulfill our responsibility for energy development and stable supply by making our business more
resilient via portfolio optimization and reduction of production costs, and by making it cleaner. Through stable
operations focused on our five core business areas (regions), we aim to achieve a net production level of over
700 thousand barrels per day by 2024. In addition, we
seek to cut net carbon intensity by 10% or more fromthe 2019 level, by 2024.

5 net zero businesses
While aggressively pursuing business in renewable energy, we will also steadily move forward on demonstration tests and joint research projects in hydrogen,
CCUS, and other fields, to strengthen our technologicalcapabilities and accumulate business know-how, andprepare for full-scale business investment and commercialization in the future.

Financial targets
The Company will generate stable and steady earnings
and cash flow by conducting safe and stable operations
at domestic and overseas projects in the oil and gas business, namely the Ichthys LNG Project and other projects.
On the other hand, given that the current businessenvironment makes it difficult to predict oil prices
among other factors, as key management indices forthe fiscal year ending December 31, 2024, we aim toachieve net income attributable to owners of parent of(a) ¥170 billion or (b) ¥240 billion, premised on an average Brent crude oil price of (a) US$60 per barrel and (b)US$70 per barrel, respectively. In addition, we are targeting ROE of (a) about 6% and (b) about 8% and willcontinuously improve management efficiency by implementing share buybacks and other measures, alongwith striving tirelessly to enhance the resilience of ourbusiness. In addition, to ensure financial soundness, wewill reduce debt, aiming for a net debt/equity ratio (including Ichthys downstream IJV) of 50% or less from thecurrent level of about 65%.

14

INPEX CORPORATION Annual Report 2021

Cash allocation
Assuming a Brent crude oil price of US$60 per barrel
and an exchange rate of ¥110/US$, we expect that thethree-year cash flow from operations before exploration(including Ichthys downstream IJV) from 2022 to 2024
will be roughly ¥1.8 trillion, which will be allocated in theorder of “debt reduction,” “shareholder returns,” and“investment for growth.” We would like to allocate
about ¥500 billion for debt reduction, about ¥200 billion
for shareholder returns, and about ¥1.1 trillion for investment in growth. Regarding investment for growth,
we would like to allocate approximately 20% to accelerate the 5 net zero businesses, with about ¥900 billion in
the oil and gas business and about ¥200 billion in the 5
net zero businesses.
Under the assumption of a Brent crude oil price of
US$70 per barrel and an exchange rate of 110/US$, we
expect a further increase of about ¥300 billion in cash
flow from operations before exploration (including Ichthys downstream IJV), which we intend to use strategically, by comprehensively considering the progress ofour business strategy, shareholder returns, financialbase and other factors.

Shareholder returns
In the past, our policy was to have the dividend payout
ratio 30% or higher, with stable dividends as a basis. Under our newly formulated Medium-term Business Plan,
we are targeting a total payout ratio of over 40% andsetting the minimum annual dividend per share at ¥30.
While maintaining the basis for stable dividends, theCompany’s basic policy is to strengthen shareholder returns in accordance with growth in financial performance, including through implementation of sharebuybacks, considering the business environment, financial base, and management conditions, etc. Based on
the above new returns policy, the Company plans to pay
an annual dividend of ¥54 per share of common stock
for the fiscal year ending December 31, 2022 (an interim
dividend of ¥27 and a year-end dividend of ¥27). This is
an increase of ¥6 from the actual dividend of ¥48 for the
fiscal year ended December 31, 2021.

Structural improvement
As part of our efforts to develop the technology infrastructure to realize net zero carbon, in April 2022 we established the INPEX Research Hub for Energy
Transformation (I-RHEX) within the Technical ResearchCenter, Technical Division. I-RHEX will serve as a resource center to apply oil and natural gas development

INPEX’s Vision and Value Creation

cultivating new customers, such as those in carbon-neutral LNG, and engaging in the microgrid business, inaddition to bolstering our existing wholesale electricity
business and so on.
In addition, we will also advance initiatives to further
improve HSE management, while for our human resources, our aim is to make INPEX Group “the bestplace to work.” To that end we will introduce a job-centric HR system, expand upon development support
measures, and promote workplace development suchas through working from home and a flextime work system. Moreover, we will flexibly update the Company’sorganizational structure in line with the business environment and management strategy, taking measures
such as newly establishing the Hydrogen & CCUS Development Division.

Growth Strategies for Value Creation

technology to clean energy technology as well as to research and develop advanced technologies such as
CCUS and low-cost hydrogen production. In tandemwith leveraging INPEX’s technical and human resources,
I-RHEX will conduct joint research and technology development through partnerships with industry, academia, and government in pursuit of an “openresource” center that can contribute to advancing theCompany’s business and the energy transformation ofsociety.
At the same time, as we move forward with energy
transformation, we must also further evolve the way
Group employees approach their work duties. Our marketing strategy seeks to reinforce our marketing capability to respond to an array of customer needs. We will
work to strengthen ties with existing customers while

Please see pages 26 to 37 for more on our Long-term Strategy and Medium-term
Business Plan (INPEX Vision @2022)

Assuming a crude oil price average of 85.00 US dollars
per barrel and an exchange rate average of 120 Japanese yen against the US dollar for the full year, for the fiscal year ending December 31, 2022, we expect toManagement Foundation to
Advance Growth Strategies

Consolidated financial forecast for the fiscal year ending December 31, 2022
generate net sales of 1,851.0 billion yen and a net income
attributable to owners of parent of 300.0 billion yen. (asof May 11, 2022 earnings report)

Toward INPEX’s sustainable growthaffordable, reliable, sustainable and modern energy forall,” and our aim is to ensure that all people in the world
have access to sustainable and modern sources of energy. The “sustainability management” practiced by INPEX is meant to provide to society indispensable
sources of energy that are cleaner, stable and efficientas an innovative pioneer that drives energy transformation, whatever the times may bring. This will, in turn,wholly contribute to achieving the SDGs.
The various changes in Japan and abroad encountered on the way to a net zero carbon society represent
new challenges for the Group, but also are opportunities for us to make a further leap forward. In promoting
INPEX Vision @2022 and providing differing forms ofvalue to society and the environment, we are striving toachieve sustainable growth and greater corporate value
for the INPEX Group. We would like to take this opportunity to ask for the continued and unwavering supportand understanding of all our stakeholders.

INPEX CORPORATION Annual Report 2021

Business and Financial Overview

In November 2021, we updated our previous “CSR Principles” as the “Sustainability Principles” in order to convey our guidelines for promoting sustainability
management, both internally and externally. The Sustainability Principles outlines INPEX’s main principles for
conducting its business, including the stable supply ofclean energy sources, efforts to engage in energy transformation, thorough safety management for all personnel associated with INPEX business operations, creationof environmental value, and compliance with laws andregulations. In addition, the CSR Group of the Corporate Strategy & Planning Unit was reorganized into the
Sustainability Group to serve as the linchpin for promoting sustainability within the Group. Today, companies
are expected to pursue sustainable growth throughtheir business, and at the same time, contribute to solving social and environmental sustainability issues. Oneof the 17 Sustainable Development Goals (SDGs) adopted at the UN Summit in 2015 is “Ensure access to15

Financial and Operating Highlights (Five-Year Comparative Graphs)
INPEX has changed its fiscal year-end from March 31 to December 31, effective from fiscal 2019.
The fiscal year ended December 31, 2019 is a transitional, nine-month accounting period from April 1, 2019 to December 31, 2019.

Profitability Indices
Net Sales
Crude oil (¥ billion)

Natural gas (¥ billion)

Other (¥ billion)

1,244.3

18.5

874.4

14.6
242.5

617.1

933.7

971.3

1,000.0

17.9
170.7

15.3
208.1

782.6

710.2

12.8
223.0 771.0
14.9
250.5

Net income (loss) attributable to owners of parent (¥ billion)
EBIDAX (¥ billion)

320.5

229.2
905.1

764.0

Net Income (Loss) Attributable to Owners of Parent,
EBIDAX (Earnings before interest, depreciation andamortization, and exploration)

46.1

227.2

294.8

223.0

123.5

96.1

40.3

354.6

285.4

534.4

505.5

−111.62017/3

2018/3

2019/3

2019/122020/122021/122017/3

2018/3

2019/3

2019/122020/122021/12EBIDAX = 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 – Gain on reversal of allowance forrecoverable accounts under production sharing + Impairment loss

Stability Indices
Net Assets Excluding Non-Controlling Interests, Equity Ratio,
Net Debt, Net Debt/Net Total Capital Employed, Net D/E Ratio
Net assets excluding non-controlling interests (¥ billion)
Net debt (¥ billion)
Equity ratio (%)
Net debt/Net total capital employed (%)
Net D/E Ratio

3,124.0
2,943.1 2,916.6 3,006.4 3,040.7
2,736.5
75.8
68.3
68.6
62.7
62.7
65.1
60.6
59.0
1,051.8 978.4
943.9
901.5
422.4
26.0
22.3
22.6
21.7
0.9 29.5
11.8
2017/3

2018/3

2019/3

2019/122020/12

Cash Flow from Operations,
Cash flow from operations before exploration investments
Cash flow from operations (¥ billion)
Cash flow from operations before exploration investments(¥ billion)

445.4
349.2
275.8

278.5

2017/3

2018/3

238.5

274.7

292.9

2019/122020/122021/12• 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)• Net D/E ratio includes Ichthys downstream Incorporated Joint Venture (Ichthys LNG
Pty Ltd) and differs from institutional accounting basis. Data after FY2020 is disclosed.

2019/3

Performance Indices

Return on Equity (ROE)

Cash Dividend per Share, Payout Ratio
7.6

2021/12

Cash flow from operations before exploration investments includes Ichthys
downstream Incorporated Joint Venture (Ichthys LNG Pty Ltd) and differs frominstitutional accounting basis. Data after FY2020/12 is disclosed.

Efficiency Indices
ROE (%)

586.8

Cash dividend per share (2nd quarter end) (Yen)
Cash dividend per share (Fiscal year-end) (Yen)
Payout ratio (%)

48
3.2
1.6

4.1

1.4

28

30
24
18

9

56.9
−3.9
2017/3

2018/3

2019/3

2019/122020/122021/12

ROE = Net income attributable to owners of parent/Average of net assets excluding non-controlling interests at the beginning and end of the year

16

INPEX CORPORATION Annual Report 2021

18

24
18

9

65.1

9

9

2017/3

2018/315
936.5
2019/312

35.5
2019/121212
2020/122031.2
2021/12• No payout ratio is shown for the year ended 2020/12, as a net loss was recorded in this year.

• Total payout ratio for FY2021/12 is 61.9% as a result of implementation of ¥70.0
billion in share buybacks

INPEX’s Vision and Value Creation

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

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

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

3,857
3,304

1,146

1,110

Probable reserves (Million boe)

4,086

4,010

3,730

1,112

3,645

1,030

3,857

2017/3

25.9

2,747

246

19.1

2,974

263

2,704

2,700

76
2018/3

2019/3

2019/122020/12

3,645

17.8

17.4

Growth Strategies for Value Creation

2,210

2,864

3,730

941

23.5
362

4,086

3,304

1,094

246

Proved reserves-to-production ratio (Years)

4,010

17.1

37
2021/122017/3

2018/3

2019/3

2019/122020/122021/12• The reserves cover most of INPEX group projects including the equity-method affiliates. The reserves of projects which are expected to be invested a large amount andaffect the Group’s future result materially are evaluated by DeGolyer & MacNaughton, and the others are done internally.

• The proved reserves are evaluated in accordance with SEC regulations.

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

Natural gas (Thousand boed)

Average production cost per boe produced (Excluding royalty) (US$/boe)
Exploration and development cost per boe (3-year average) (US$/boe)

22.9

586
521
450
173
121

16.4

15.7
7.7

8.4

5.9

5.9

5.7

5.3

5.2

5.4

2017/3

2018/3

2019/3

2019/122020/122021/127.1

348

PER (Times)

2018/3

573

584

234

242

241

352

331

344

2019/122020/122021/12

424
121

303

2019/3Business and Financial Overview

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

2017/3329

Management Foundation to
Advance Growth Strategies

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

Exploration Success Ratio (3-year average)
Exploration success ratio (3-year average) (%)

PBR (Times)

47.6

34.6

60.7

61.8

2019/3

2019/12

77.0

79.7

2020/122021/12

43.8
16.0

0.5

0.7

2017/3

2018/3

13.4

0.5

0.5

0.3

2019/3

2019/122020/12

6.5

21.0

0.4
2021/122017/3

2018/3

No Price Earnings Ratio (PER) is shown for the year ended 2020/12, as a net loss
was recorded in this year.
INPEX CORPORATION Annual Report 2021

17

Sustainability Highlights
Please refer to our Sustainability Report 2022 for more information about our ESG performance data.
Sustainability Reporthttps://www.inpex.co.jp/english/csr/csr/

Social Investment

LTIR, TRIR
LTIF

TRIR

Social Investment (¥ million)

2,239

2.90
2.24
1.74

1.85

1.78

0.28

0.23

0.32

0.26

2018/3

2019/3

2019/122020/12

1,345

1,408

2017/3

2018/3

2,196

2,012

1,615

0.97
0.11
2017/30.38
2021/122019/3

2019/122020/122021/12• LTIF (Lost Time Injury Frequency): Rate of injury resulting in fatalities or lost time
per million hours worked.

• TRIR (Total Recordable Injury Rate): Rate of total fatalities, lost work day cases,
restricted work day cases, and medical treatment cases per million hours worked.

Net Carbon Intensity

Number and Ratio of Directors
Directors (Inside)
Directors (Outside)
Ratio of Directors (Outside)

15

14

Net Carbon Intensity (kg-CO2e/boe)

15

14

14

13
5

6

6

36

40

40

39

43

9

9

9

8

8

8

2017/3

2018/3

2019/3

2019/122020/122021/12

6

5

6

43

41

2019/1235

33

2020/122021/122019/12 figures are for the period from January to December 2019 while the accounting period for the fiscal year ended December 31, 2019 is nine months from April to
December 2019.

External Evaluation
INPEX has engaged in active dialogue with stakeholders through information disclosure and responded to external
evaluations by third-party. The evaluations by external organizations and the major ESG Indexes for which INPEX has
been selected as a component stock are shown below.

18

FTSE4Good
Developed
Index,
FTSE4Good
Japan Index

FTSE Blossom
Japan,FTSE Blossom
Japan Sector
Index

MSCI ESG Leaders Indexes

S&P/JPX
CarbonEfficient Index

CDP Climate
Change2021 score:A- elected as “Industry Mover 2022” in theS
S&P Global Sustainability Award 2022

INPEX CORPORATION Annual Report 2021

MSCI Japan ESG Select Leaders Indexes
MSCI Japan Empowering Women Index(WIN)

THE INCLUSION OF INPEX CORPORATION (INPEX) IN ANY MSCIINDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICEMARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE ASPONSORSHIP, ENDORSEMENT OR PROMOTION OF INPEX BY MSCIOR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVEPROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOSARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

Recognized as Environmentally Sustainable
Company in Ministryof the Environment’s
ESG FinanceAward Japan

INPEX’s Vision and Value Creation

INPEX Green Bond 1st Annual Report(Period: October 2021–December 2021)
30 June 2022 INPEX CORPORATION

1. Annual report summary

Growth Strategies for Value Creation

INPEX has issued its inaugural INPEX Green Bond on 15 October 2021. It is designed to promote the reduction of CO2 based on the “Business Development Strategy—Towards a Net Zero Carbon Society by2050”, which formulated a long-term management policy envisioning a net zero carbon society by 2050.
9.67 billion JPY of the 10.00 billion JPY from the INPEX Green Bond proceeds have been allocated to
the following green projects that were verified against the Climate Bond Standard version 3.0 (CBSv3.0)
and other technical standards set by the Climate Bond Initiative (CBI) by 31 December 2021.
All projects are under construction or in operation as originally planned or scheduled as of 31 December
2021 and have achieved environmental benefits (CO2 reductions).

1) Green project enewable energy: Business related to the development, construction, operation and refurbishment
Rof renewable energy of wind, geothermal and solar

2) Verification criteria
CBSv3.0 and the following technical standards
The Marine Renewable Energy Sector Eligibility Criteria of the Climate Bonds Standard (July 2020)
Geothermal Energy and the Climate bond Standard (version1.0)
Green Bond Principles 2021 (GBP)
Green Bond Guidelines 2020, Ministry of the Environment (GBGLs)

2. Allocation status Table-1: INPEX Green Bond fund allocation (as of December 2021)

1

Amount of funds allocated(Refinancing amount)

Project category

INPEX Green Bond eligible projects

9.67 billion JPY(5.23 billion JPY)

Amount of funds
unallocatedManagement Foundation to
Advance Growth Strategies

No.

0.33 billion JPY*Unallocated amount (0.33 billion JPY) of funds is managed as cash deposits in accordance with the proceeds management procedures.

3. Project eligibility assessment results
INPEX has confirmed the continued compliance of the INPEX Green Projects listed in Table-1 against
CBSv3.0 and the relevant technical standards (see section 1.2) by the INPEX Renewable Energy & New
Business Division, the INPEX Corporate Strategy & Planning Division and the INPEX Finance & Accounting
Division. The INPEX Green Projects that were eligible for fund allocation have been already qualified bya CBI approved verifier in a pre-issuance verification of the bonds.

Business and Financial Overview

4. Environmental benefit Table-2: INPEX Green Bond environmental improvement benefits(Period: October 2021–December 2021)
No.

1

Project category

INPEX Green Bond eligible projects

Facility capacity(for INPEX share)

Environmental improvement
effects CO2 Reductions

415 MW (68.7 MW)

58,547 t-CO *2

All projects are under construction or in operation as planned or scheduled as of 30 June 2022.
Calculation method for environmental benefit: Estimated calculation based on the actual power generation for the period October 2021–
December 2021 (Calculated considering the period covered)* : Estimated CO2 reductions based on actual power generation from geothermal power		CO2 Reduction = Actual power generation (MWh) x CO2 Emission factor (t-CO2 /MWh)		CO2 Emission factor is calculated from the difference between the average CO2 emission factor of the country where the project is operated and theCO2 emission factor of the project.

5. Post-issuance verification
INPEX Green Bond has been confirmed that it conforms with CBSv3.0 and other related criteria by DNVBusiness Assurance Japan Co., Ltd., a CBI approved verifier, in accordance with the requirements of
CBSv3.0. The result of the post-issuance verification by the CBI approved verifier is publicly available on our
Annual Report.

INPEX CORPORATION Annual Report 2021

19

Segment Overview (Fiscal year ended December 31, 2021)
Eurasia
Net sales

Operatingincome116,959
30,909Proved reserves

Net production(BOE)(BOE per day)

324

Oslo
(Norway)

Londonmillionbarrels

55

million JPY
million JPY

thousandbarrels

Nur-Sultan(United Kingdom)(Kazakhstan)

NiigataTokyo

Abu Dhabi(United Arab Emirates)

Singapore(Singapore)

Jakarta(Indonesia)

Middle East & Africa
Net sales

OperatingincomeDarwin618,161
376,065(Australia)

million JPY
Perth(Australia)

million JPY

Proved reserves

Net production(BOE)(BOE per day)

2,230

millionbarrels

231

thousandbarrels

Key group company headquarters and offices in Japan and overseas
Note: Net Sales and operating income amounts are rounded down. Proved reserves is rounded off.

20

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation

Americas24,24010,276

Net sales

OperatingincomeNet production(BOE)(BOE per day)38

13

millionbarrels

million JPY
Growth Strategies for Value Creation

Proved reserves

million JPY

thousandbarrelsJapan
Net sales

Proved reserves

Net production(BOE)(BOE per day)130

millionbarrels

23

million JPY
San Antonio(USA)million JPY(USA)

thousandbarrels

OperatingincomeRio de Janeiro

363,989
175,542

Proved reserves

Net production(BOE)(BOE per day)924

millionbarrels

262

Business and Financial Overview

Asia & Oceania
Net sales

HoustonManagement Foundation to
Advance Growth Strategies

Operatingincome130,089
11,464(Brazil)million JPY
million JPY

thousandbarrels

INPEX CORPORATION Annual Report 2021

21

INPEX’s Business
INPEX is developing its oil and gas business and its net zero businesses. In the oil and gas business,
which is our core business, we will continue to fulfill our responsibilities for the development of sourcesof energy and their stable supply by promoting a more resilient and cleaner business. At the same time,in the 5 net zero businesses, we will expand each business at an accelerated pace and secure our position as a major and trusted player.

Oil and Gas BusinessOur core business is the upstream oil and gas business, which involves finding and extracting crude oil and natural
gas that exists underground.
The activities of the oil and gas business can be envisioned as the flow of a river. The upstream consists of the
exploration and development of oil and natural gas. The midstream is where products are transported. The downstream refers to refining and sales to users.

We collect extensive information on the local legal systems
and country risks related to areas in which oil and natural
gas are expected toexist. We then apply
and bid for mining
rights and/or exploration and development rights andenter a contract for
exploration and
Signing ceremony
development.
of a contract

1

The processed oil and natural gas
are sold to customers in Japan andoverseas by tanker when marinetransportation is required, or bypipeline when land transportation is necessary.

Acquisitionof Blocks

6

Marketing

LNG tanker

2
Exploration

Oil and Gas Business5

Production
The extracted oil and natural gas are processed to separate and remove impurities so that they can be sold as
products. Natural
gas is also liquefied
in the case of marinetransportation.

LNG plant

In addition to geological surveys, we utilize geophysicalsurveys conducted through satellite images and seismic
waves to assess thepotential subsurface
accumulations of oil
and natural gas. In
areas thought to bepromising we drill
exploratory wells to
confirm the presence of oil and gas.
Drilling rig

4

3

When the presence of oil and natural gas has been confirmed, we
drill appraisal wells to assess theextent of the oil and gas fields
and to evaluate the amount ofreserves, while also making
judgments regarding thecommercial viability.

Appraisal

Reservoir
evaluation(image)Development
After a final investment decision (FID) has been made,steps are taken to construct the facilities needed to produce and ship crude
oil and natural gas.
This includes facilities that separate resources into theirliquid and gaseousstates to remove impurities and pipelines to facilitate Facility
construction
transportation.

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
the bottom of seas and lakes, that was then subjected to extreme heat and pressure underground (organic origin theory). Crude oil and natural gas that have formed deep underground are lower in weight than the water in the earth, allowing them to gradually rise to the surface
over a long period of time. If the crude oil and natural gas encounter highly dense geological formations on the way to the surface, however, deposits form that become oil and gas fields.

22

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation

Net Zero Businesses
Net zero businesses provide solutions that contribute to the reduction of greenhouse gas emissions toward the realization of a net zero carbon society.

Carbon Capture, Utilization andstorage (CCUS) BusinessIn the CCS1 business, CO2 is separated and captured,placed in stable geological formations deep underground, and stored for a long period of time. In addition to CCS, in the CCUS2 business the captured CO2
is used to improve oil and natural gas recovery rates
or to convert CO2 into new products or energy.

Renewable
Energy BusinessHydrogen andammonia

5 net zero businesses

RenewableenergyCarbon recycling
and new business
opportunities

Forest conservation

Forest Conservation
Forest conservation refers to projects that reduce CO2
emissions or absorb CO2 through forest conservation
and afforestation. In addition, these projects are expected to have synergistic co-benefits such as preservation of precious biodiversity and water resources,
reduction of soil erosion, alleviation of poverty andimprovement of the livelihoods of local communities,
and will broadly contribute to the SDGs advocated by
the United Nations.

Carbon Recycling
and New Business
Opportunities
Carbon recycling refers
to the reuse of CO 2 asa valuable resource using
methanation, artificial
photosynthesis and othertechnologies.
Methanation is a technology for synthesizing
methane from CO 2 andhydrogen, which means it
can produce methane as
an energy source without
increasing CO2 emissions.
As for new business opportunities, we are engaged in research anddevelopment for the useof drones in facility inspections.

Business and Financial Overview

The renewable energy business generates electricity
using natural energy sources such as the wind, sun,and geothermal heat. Renewable energy emits significantly less CO 2 thanthermal power generated
by coal, oil, or LNG.

The hydrogen and ammonia business entails the
production and supply of hydrogen and ammonia,
energy sources that do not emit CO2 when combusted.
Among these, the blue hydrogen project isa business that sells hydrogen produced from oiland natural gas, and stores the CO2 emitted in the
production process into the ground by CCS/CCUS.
The ammonia business converts hydrogen into
ammonia for transportation and sale. Ammonia iseasier to liquefy than hydrogen and has establishedtransportation technology, making it promising as anenergy carrier for hydrogen, and demand is also
expected for its direct use as a fuel, including for mixed combustion withother fuels in thermal power
plants.

Management Foundation to
Advance Growth Strategies

Reduction of CO2
emissions from oil and gas
operations (CCUS)

Growth Strategies for Value Creation

Hydrogen and Ammonia Business

1 CCS: Carbon dioxide Capture and Storage
2 CCUS: Carbon dioxide Capture, Utilization and Storage

INPEX CORPORATION Annual Report 2021

23

INPEX at a Glance
Leveraging our strengths, we will promote both our oil and gas business and net 5 zero businesses,
while pursuing synergies between the two.

24

1

Stable energy supply to Japan andthe world through our global
business portfolio

2

Our medium- to long-term strategy to realize
energy transformation—INPEX Vision @2022

3

A corporate culture abounding with the spirit totackle challenges and embodied by global
human resources with diverse values

4

Exceptional technological acumen and a system
of R&D work to realize net zero carbon

We produce oil and natural gas on a daily basis in countries aroundthe world on a scale equivalent to approximately 10% of Japan’s annual energy consumption.

Production equivalent to

about

10

of Japan’s annual energy
consumption

As a pioneer in energy transformation, we are committed to transforming net zero carbon froman aspiration to reality by providing a stable supply of diverse and clean energy sources, fromoil and natural gas to hydrogen and renewable electricity.

To sustain and strengthen responsible management as a global company, we believe it important to diversify our workforce and develop human resources that can share global values. To
this end we promote a raft of HR policies that take a global perspective, and work to ensure
diverse human talent in order to maximize organizational performance.

INPEX Research Hub for Energy Transformation (I-RHEX) was established in the Technical Research Center to promote research and development with the aim of diverting and applying
oil and gas business technologies to clean energy technologies, as well as to acquire advanced
technologies in the CCS/CCUS, hydrogen and other businesses.

INPEX CORPORATION Annual Report 2021

%

41

%

584

By productfor fiscal
year ended
December 31,
2021

thousandbarrels
per day

Crude oil, condensate, LPG 59%
344 thousand barrels per day

9%55
thousandbarrels
per day

By region

13 thousandbarrels perday

Middle East,
Africa 40%

Asia,
Oceania 45%
262 thousandbarrels per day

231 thousandbarrels per day

2050

Reduce net carbon intensity

Challenge for30

Americas

INPEX Vision @2022
Long-term Strategy

2%

for fiscal
year ended
December 31,
2021

2030

by at least

Related pages

24 thousandbarrels per
day

Diverse human resource composition
Number of Group
employees

19.2%(611 employees)

Percentage of foreign
employees in the entire
Group, including overseas

Approx.

37.2%(1,185 people)

See page 26

Related pages
Sustainability
Featured Content 2
Human Resource
Development

Business and Financial Overview

3,189(as of December 31, 2021)

Approx.

See page 62

INPEX Vision @2022

Aim to achieve net zero greenhouse gas emissions (Scope 1 + 2, INPEX equity share basis)from operations by 2050.

Percentage of female
employees in the entire
Group, including overseas

Project Overview byCore Business Areas

Management Foundation to
Advance Growth Strategies

Aim to reduce net carbon intensity of greenhouse gas emissions (Scope 1 + 2) from operations by at least 30% in 2030, compared to2019.

See page 28

Related pages

net zero%Centaralize businessportfolio by setting corebusiness areas
Growth Strategies for Value Creation

241
thousandbarrels
per day

ended December 31,
2021

Japan 4%

INPEX’s Vision and Value Creation

Net production Eurasia
volume for fiscal year

Naturalgas

See page 48(As of December 31, 2021)

Number of partnerships with industry,
academia, and government

Approx.

R&D activity expenses¥409(Results for the fiscal

million year ended

December 31, 2021)

35(Fiscal year ended
December 31,
2021, cumulative)

R&D employees attached to TechnicalResearch Center35(As of April 1, 2022)

Related pages
INPEX Vision @2022
Medium-term Business
Plan 2022–2024

Initiatives towards Stronger
Management Foundation

See page 36

employees

INPEX CORPORATION Annual Report 2021

25

Growth Strategy for Value Creation

INPEX Vision @2022

Long-term Strategy
Vision for 2030 and 2050
We are committed to transforming net zero carbon from an aspiration to reality by 2030, and then on toward a net
zero carbon society by 2050. Oil and natural gas an essential energy source for economic and social activities, wewill work to ensure their stable supply. Natural gas, for which demand is expected to be strong, especially in Asia,
is a business that will be strengthened and expanded as a revenue base while moving to thoroughly make it cleaner

Medium-term Business Plan

Around 2030
Around 10% of operating CF5

HydrogenAmmonia

700t/year
Kashiwazaki
demonstration
project, etc.

5 net zerobusinesses

CCUS

Achievecommercializationand establish
a strong position(Maximize use ofgovernment
support andcollaboration withindustry, academia
and government,etc.)

Kashiwazaki
demonstration
project

6Kt/year
Renewable power
generating capacity

Renewableenergy500MW
Domestic technology
development
business

Methanation

400Nm /hOil & gasbusiness
Maintain andexpand stablesupplyStrengthen andexpand the businessas a revenue basewhile making it
cleaner throughCCUS, etc.

Approx.
400 times

Approx.
2–4 times

Approx.
25 times

1.5MMtCommercialization of 3 ormore projects

100Kt/year

1

CO2 injection

2.5MMt per year
Renewable power
generating capacity

1–2GW

Production business scale

10K Nm /h
3(60Kt/year)

3

REDD+ project3

Forestconservation

Approx.
150 times

Project
participation

Carbon credit acquisition

2MMt per year

GHG intensity reduction by
GHG intensity
reduction by

10% or more
Oil & gas

Investment ratio
for gas businessApprox. 50%

30% or more

Making thebusiness cleaner

Gas shift

All figures based on INPEX equity portion(vs. 2019)

Investment ratio
for gas businessApprox.

70%

Reinforced trading functions4

LNG handling volume
Approx.

10MMt

1: Ammonia volume shown in hydrogen equivalent
2: Hydrogen that is produced by splitting water using electricity generated from renewable energy
3: Concept defined at the 2010 United Nations Climate Change Conference that augments REDD (Reducing Emissions from Deforestation and forest Degradation) withthe active prevention of forest degradation through forest management and enhancement of carbon stocks through forestation.

26

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation

through the introduction of CCUS and other measures. In the 5 net zero businesses, we will aim to achieve commercialization and establish a strong position.

Basic management policy
towards a net zero carbon
society by 2050

2050

Monetization as
CCUS business

Scale up

Future productionof green hydrogen2
Around 2035

Expansion

Production businessscale 60K Nm3/h(360Kt/year)

Expansionof clean oil & gas

Be a company
rich in vitality,
creativity anddiversity, capableof sustainable
development

Business and Financial Overview

Expanded stable supply

Maintain stable energy
supply on the basis ofthoroughly making thebusiness cleaner

Sustained
efforts

Expanded sustainable
forest conservation
business

2050
Challenge fornet zeroManagement Foundation to
Advance Growth Strategies

Scale up

Growth Strategies for Value Creation

Supply of approx. 10%of domestic demand

Expand each business at an accelerated
pace and become recognized asa credible key player

Scale up

As a pioneer in energy transformation(EX), INPEX will provide a stablesupply of diverse and clean energy
sources including oil and natural gas,hydrogen and renewable power.

4: Inclusive of midstream and downstream business, etc.
5: Operating Cash flow before exploration (including Ichthys LNG Pty Ltd, the Ichthys Downstream Incorporated Joint Venture). Cash flow from renewable energy business is estimatedbased on equity operating cash flow.

INPEX CORPORATION Annual Report 2021

27

INPEX Vision @2022 Long-term Strategy

Centralize business portfolio by setting core business areas
We have designated the five regions of Australia, Abu Dhabi, Southeast Asia, Japan, and Europe as our core business areas, expanding upon our previously established core business areas in the oil and gas business to include
the new 5 net zero businesses. The Company will pursue synergies by leveraging business foundations such as existing business assets, networks, and technologies, while improving operational efficiency by focusing management
resources.
Oil & gas

Hydrogen/Ammonia

CCUS

Wind

Geothermal

Methanation

Forest conservation

EuropeOil & gas business:
Norway Business, etc.

EuropeEurope

Renewable energy:
Luchterduinen and
Borssele III/IV
offshore wind power
generation projects(the Netherlands)©Equinor

Japan Japan

Abu Dhabi
Abu Dhabi

Southeast
Southeast
Asia Asia

Abu Dhabi
Oil & gas business:
Zakum oil fields, Onshore
Concession, etc.
Hydrogen/Ammonia:
Clean ammonia
production joint study
CCUS:
CO2EOR Pursuing in
Abu Dhabi

Note: Icons on the map indicate that the company currently owns assets or has concrete plans.

28

INPEX CORPORATION Annual Report 2021

Australia
Australia

INPEX’s Vision and Value CreationJapan
Oil & gas business:
Minami-Nagaoka Gas Field, etc.
Hydrogen/Ammonia:
Integrated demonstration of hydrogen &ammonia production and usage(Kashiwazaki City, NiigataPrefecture, Japan)
CCUS:
CO2EOR demonstration at Minami-aga(Niigata Prefecture, Japan)

Growth Strategies for Value Creation

Renewable energy:
Floating offshore wind power business(Goto City, Nagasaki Prefecture, Japan)
Geothermal power generation business(The Oyasu area Akita Prefecture, Japan)
Carbon recycling/New business:
Technical development of Methanation

Southeast Asia
Oil & gas business:
Abadi LNG Project (Indonesia),
etc.

Management Foundation to
Advance Growth Strategies

CCUS:
CCUS studies for Abadi LNG
Project
Renewable energy:
Sarulla Geothermal Power Project,
Muara Laboh Geothermal Power
Project (Indonesia)
Forest conservation:
Rimba Raya Biodiversity Reserve
REDD+ project (Indonesia)

Business and Financial Overview

Australia
Oil & gas business:
Ichthys LNG Project, etc
Hydrogen/Ammonia:
Pursuing opportunities inhydrogen business
CCUS:
Aiming to implement CCS at
Ichthys LNG Project
Carbon recycling/New business:
Performance Validation of Artificial
photosynthesis
Forest conservation:
Afforestation and savanna fire
management

INPEX CORPORATION Annual Report 2021

29

INPEX Vision @2022 Long-term Strategy

Targets initiatives in the 5 net zero businesses
Hydrogen Ammonia

Develop a hydrogen business

Commercialize 3 or more projects by around 2030 and aim to produce andsupply 100 thousand tons or more of hydrogen/ammonia per year
Integrated demonstration of hydrogen & ammonia production andusage in Kashiwazaki City, Niigata Prefecture, Japan
Aim to construct a blue hydrogen1 & ammonia production plant and start operations by 2024
1: Hydrogen that is produced by reforming natural resources such as natural gas, where CO2 generated at the same time
is captured and stored by CCUS

Production

Hydrogen Production

Power Generation

Pipeline
GAS

Minami-Nagaoka
Gas Field

H2

HEAT

Enhanced
Gas Recovery

 ased on the results of the initiaB
tive on the left, aim to construct
a blue hydrogen production
plant utilizing INPEX natural gas
fields and existing infrastructure
and produce hydrogen on acommercial scale by around 2030
(100 thousand ton scale2)
2: Project based

DAC*
CO2

CO2

Oil

Ammonia production

H2

CO2

Gas

 ommercialization ofCblue hydrogen projectin Niigata Prefecture,
Japan

CO2

Sales
INPEX-operated
depleting gas fieldCore

Advanced
technologies
Market development*Direct Air Capture

Advanced

Clean ammonia production in Abu Dhabi
 im to construct a clean ammonia plant with a large-scale proA
duction capacity in cooperation with ADNOC3 and others andcommence supply from the second half of the 2020s, based on
the results of the joint study (ADNOC/JERA/JOGMEC) currently
being implemented
3: Abu Dhabi National Oil Company

CCUS lean hydrogen projects overseas (Australia,C
Abu Dhabi, Indonesia, etc.)
 romote business expansion through feasibility studies and colP
laboration, aiming at large-scale project development overseas.
Now pursuing opportunities in the hydrogen production, liquefaction, offloading and shipping business

Reduce CO2 emissions from oil & gas operations (CCUS)

Aim to become a leading company in the CCUS business by targeting an annual
CO2 injection volume of 2.5 million tons or more in around 2030 and promoting
technical development and commercialization
CO2EOR1 demonstration at Minami-aga(Niigata Prefecture, Japan)

CCS3 implementation at Ichthys LNG Project(Australia)

Commence CO2 injection tests by 2023 and establish CO2EOR
efficiency improvement technology2 currently under development, aiming to expand CCUS technology in Japan and deploy
CO2EOR technology at oil fields overseas

Introduce CCS to Ichthys in the late 2020s and begin injecting 2
million tons or more4 of CO2 per year as a first step
Play a leading role towards the realization of a CCS hub project inDarwin, Australia

1: Enhanced Oil Recovery
2: CO2 foam EOR Technology

CO2EOR scale up in Abu Dhabi
 ursue technical evaluations to increase CCUS capacity of ADP
NOC Onshore CO2EOR activities from the current 0.8 million tons
per year with ADNOC

Promotion of CCS/CCUS businessdevelopment in Japan and overseas
Conduct surveys of suitable CCS/CCUS locations and technicaldevelopment in Japan and overseas. Make full use of knowledge,
experience and assets in the oil and natural gas sector with theaim of commercializing the CCS/CCUS business

30

INPEX CORPORATION Annual Report 2021

3: Carbon Capture and Storage
4: Project basis (INPEX equity equivalent: 1.3 million tons per year)
100
km

200
km

Approx. 890 km

Timor Sea

Ichthys Field

Darwin
Northern
Territory

DarwinOfficeAustralia
Perth Office

Ichthys gas-condensate field location
Browse Basin, Australian North West Shelf
Approximately 200 km offshore Western Australia

INPEX’s Vision and Value Creation

Renewable energy

Enhance and emphasize renewable energy initiatives

Aim to secure 1–2 gigawatts of installed capacity, mainly in the offshore wind and geothermal power generation business/ Become a key player by accelerating businessexpansion using assets acquired through M&A and other means as a platform
Geothermal

Be a key player in the floating offshore wind power business

Aim for further expansion, mainly in Japan and Indonesia

Acquired shares of the Luchterduinen and Borssele III/IV offshore
wind power generation projects in
the Netherlands
Join leading wind power generation businesses in Europe and other prospective areas and secure
assets such as human resources toposition Europe as a platform of
the company’s renewable energy Luchterduinen offshore wind farmbusinessConsortium including INPEX selected as operator of floating offshore
wind power project off Goto City, Nagasaki Prefecture, Japan in June 2021
Aim to become a key player in the floating offshore wind power generation sector

 romote geothermal development
P
in Indonesia and consider further
development of the Muara Laboh
Geothermal Power Project, which
the company joined in December
2021
Decided to enter into the construction phase of the Oyasu Geothermal Power Project (Akita Pref.).
Continue development toward Muara Laboh Geothermal Power Project
start up in March 2027
Pursue new projects in Japan and Indonesia in addition to continuing
geothermal surveys at Amemasudake (Hokkaido)

Carbon recycling/New business

Growth Strategies for Value Creation

Wind power

Technical development
 ursue studies towards the practical application of various geothermal busiP
nesses such as next-generation geothermal development technologies, etc.

Promote carbon recycling and cultivate new business
opportunities

Promote the adoption of methanation in society and aim to supply about 60
thousand tons1 of synthetic methane per year through INPEX’s natural gas trunk
pipeline network by 2030 while pursuing further development
Artificial photosynthesis4

 onstruct a larger scale plant of 400 Nm3/h inCNagaoka City, Niigata Prefecture, based onpractical usage of results from a past demonstration project3, and commence production ofsynthetic methane in 2025 to be supplied tocustomers through INPEX gas pipelines
In pursuit of further development, construct a 10
thousand Nm3/h scale demonstration facility inAustralia and aim to ship synthetic methane toJapan for supply to customers via gas pipelines
in around 2030

 ow participating in the “Japan TechnologicalN
Research Association of Artificial Photosynthetic
Chemical Process (ARPChem)” of NEDO5 and in
charge of technical development for productionof solar hydrogen through catalytic reactionS teadily implement R&D with aims to ultimately
achieve 10% solar energy conversion efficiency
and plan to evaluate practical applicationP erformance validation conducted in Darwin,
Australia, the location of the Ichthys onshore
plant

Demonstration facility at
the Koshijihara Plant

2: Production of hydrogen through electrolysis and conversion to CH4 using highconcentrations of CO2 and CO2 generated during natural gas production
3: Built and operated an 8Nm3/h scale technology demonstration plant

Methane pyrolysis

Performance validation in
Darwin, Australia

4: A technology to split hydrogen from oxygen in water using a photocatalyst installed on the surface of an artificial photosynthetic panel; the hydrogen is thenused for fuel and raw materials, etc.
5: New Energy and Industrial Technology Development Organization

Also developing new business opportunities in the clean energy sector through an entrepreneurship program and collaboration with startups, universities, etc.

Business and Financial Overview

DronesConduct R&D studies for future commercialization

Forest conservation

Management Foundation to
Advance Growth Strategies

1: Equivalent to approx. 200 thousand households

Methanation2

In cooperation with Terra Drone Corp., a startup that we invest in, in viewof the realization of the “INPEX-Terra Drone Intelligent Drone Plan”,
a plan that aims to realize various initiatives including automation of inspection of equipment utilizing air mobility, we are promoting R&D to utilize drones for inspection of our facilities.

Promote forest conservation

Strengthen and expand projects aimed at CO2 absorption through forest
conservation, from supportive measures to project participation
 arget business participation inTforest conservation projectsA im to participate in projects in addition to acquiring credits from forest
conservation projects mainly basedon the leading REDD+ concept byutilizing INPEX’s track record incarbon credit acquisition throughsupporting the Rimba Raya Biodiversity Reserve REDD+ Project andafforestation and savanna fire management at Ichthys
Forests of Rimba Raya Biodiversity
Reserve REDD+ project area

 trengthen efforts to achieve net zero andS
Scope 3 reductions
 tably secure about 2 million tons of forestation credits per year from leadSing forest conservation projects
C omplement initiatives towards
net zero targets such as making
the oil and natural gas businesscleaner, implementing a natural
gas shift and promoting CCUS, hydrogen and ammonia, renewableenergy, carbon recycling, etc.
Reduce Scope 3 through marketing carbon-neutral LNG and gas to Orangutan conservation efforts(Currently building protection camp)customers
INPEX CORPORATION Annual Report 2021

31

INPEX Vision @2022 Long-term Strategy

Targets and initiatives in the oil and gas businessIn the oil and gas business, our core business, we aim to provide a stable supply of clean energy by promoting, in
an integrated manner, selection and concentration on core business areas, a shift to natural gas, and making thebusiness more resilient and cleaner.

Selection and concentration ofcore business areas

Improve business efficiency by concentrating resources such as capital and human resourcesin core business areas
 onsider all options including the saleCof non-core assets to build a well-balanced

portfolio

Oil and gas

Aim to achieve a stable supply of clean energy by focusing on core business areas, implementing a shift to natural gas and promoting resilienceand making the business cleaner in an integrated manner

Implementation of a shift to natural gas
 aise the gas investment ratio from the currentRlevel of around 50% to around 70% to increase the gas ratio of the portfolio. Throughthese efforts, contribute to raising Japan’s

independent development ratio

 xpand the scale of the natural gas developmentEbusiness mainly in Asia and Oceania to meet demand and consider feedstock supply forhydrogen and ammonia projects andbusiness transformation opportunities
In the oil business development, carefully selectprojects with an emphasis on early produc-tion, early cost recovery and GHG emissions intensity

Making the business more resilientand cleanerS trengthen the business framework to

generate profit even at low oil prices
through cost reduction and portfolio management

 im to achieve zero routine flaring by 2030
Aand thoroughly make projects cleaner by introducing CCUS, utilizing forest credits, intro­
ducing electricity based on renewables and savingenergyPromote the digitalization of operations to achieve

higher productivity and power saving

and help make businesses cleaner andmore resilient

Australia (Ichthys etc.)
At Ichthys, a core project, aim to further increase the current LNG production
capacity by 2024 to build a framework capable of stably producing 9.3 million
tons per year
Accelerate participation in exploration activities in the vicinity of the Ichthys
Field as well as development of discovered but undeveloped assets to further
ensure a sustained production volume in the long term, and then aim to further
increase production volume with a view to expand the Ichthys onshore production plant in around 2030

Ichthys onshore production plant

Abu Dhabi (Zakum oil fields, onshore oil fields etc.)
 romote the expansion of production capacity and early commercialization basedP
on Abu Dhabi’s overall production capacity expansion plan (5 million BD* by 2030)
Make existing businesses low carbon based on the UAE’s 2050 net zero plan and
ADNOC’s target to decrease GHG emissions intensity by 25% by 2030
At Onshore Block 4, pursue appraisal work on the multiple oil and gas columns
discovered through drilling the first appraisal well and aim to commence production at an early stage while continuing exploration activities* Barrels per Day

32

INPEX CORPORATION Annual Report 2021

Offshore production facilities (Lower Zakum)

INPEX’s Vision and Value Creation

Southeast Asia (Abadi, etc.)
 s for the Abadi LNG Project in Indonesia, conduct a comprehensive study ofAmeasures such as the introduction of CCUS to make the project cleaner and further reduce costs, and promote the project as competitive and clean with theaim of commencing production in the early 2030s
Pursue business opportunities in Vietnam, Malaysia and other countries inSoutheast Asia to acquire more natural gas resources
Abadi LNG Project drilling shipJapan
Growth Strategies for Value Creation

Conduct natural gas exploration activities at offshore Shimane and Yamaguchi
prefectures and Minami-Sekihara in 2022 and aim for the early development of
natural gas resources based on the results of these activities
Strengthen the resilience of the domestic natural gas trunk pipeline network byextending the New Tokyo Line, etc.
Consider expanding facilities at the Naoetsu LNG Terminal in line with the promotion of gas marketing and hydrogen/ammonia projects

Naoetsu LNG Terminal

Europe ecure stable revenue using the newly acquired Norwegian assets as a platform
Sand expand the business by promoting the development of discovered but undeveloped oil and gas fields and pursuing exploration opportunities in the vicinity
Deepen knowledge of clean energy technologies from the supply of clean electricity to offshore production facilities through floating offshore wind power generation, etc.*©EquinorManagement Foundation to
Advance Growth Strategies* Hywind Tampen Offshore Wind Power Generation (2022)

Rendering of Hywind Tampen as viewed from theplatform, upon completion

For project details, see Project Overview by Core Business Areas

See page 62

Cash allocation Long-term Strategy: nine years between 2022 and 2030

Business and Financial Overview

INPEX will secure approximately 5 trillion to 6 trillion yen in cash flow from operations before exploration (including the
Ichthys downstream IJV) over the nine years between 2022 to 2030, assuming a Brent crude oil price of 60 to 70 US dollars per barrel. Based on this cash flow, we will maintain a strong financial position and promote investments for sustainable growth, while providing adequate shareholder returns.
We will invest approximately 3.8 trillion to 4.4 trillion yen for growth over the nine years and allocate approximately 0.7
trillion to 1 trillion yen or about 20% of that investment to the 5 net zero businesses. Through investment in the 5 net zerobusinesses, we aim to achieve commercialization in these businesses and by 2030, grow them to generate about 10% of
our cash flow from operations (cash flow from operations before exploration including the Ichthys downstream IJV; cash
flow from the renewable energy business is estimated based on equity cash flow from operations).
Estimated cash allocation 2022–2030 (9 years)
Revenue

Expenditure<Debt reduction>

Maintain a strong financial position<Shareholder returns>

CF from operations
before exploration

Approx. ¥5–6 trillion

Adequate shareholder returns<Investment for growth>Approx. ¥3.8–4.4 trillion

Promote investment
for sustainable growth
Including ¥0.7–1 trillion
for 5 net zero businesses

5 net zero businesses
Achieve commercializationand establish a strong position(Maximize use of government support
and collaboration with industry,
academia, and government, etc.)

2030
Reduce net carbon
intensity by
30% or more

Oil and gas business
Maintain and expand stable supply
Strengthen and expand the businessas a revenue base while making
it cleaner through CCUS, etc.

Build
a well-balanced
portfolio*Includes Ichthys downstream IJV and differs from cash flows based on institutional accounting practice*Estimate based on an assumed crude oil (Brent) price of US$60–70 per barrel

INPEX CORPORATION Annual Report 2021

33

INPEX Vision @2022

Medium-term Business Plan 2022–2024
Positioning and Targets of Medium-term Business Plan 2022–2024
INPEX Vision @2022 consists of two parts: the Long-term Strategy and the Medium-term Business Plan 2022–2024.
The Long-term Strategy outlines our basic policy toward a net zero carbon society in 2050, as well as our “Vision foraround 2030,” which will be an important milestone toward 2050, and the specific measures we will take to get there.
The Medium-term Business Plan 2022–2024 spells out the specific policies and indicators to be taken in these initial
three years, which will be an important first step toward realizing our vision of where we want to be around 2030.

Medium-term Business Plan 2018–2022 Overview

Business targets

Shareholder returns

Financial targets

 chieved stable operations at Ichthys and strengthenedA
portfolio in the oil and gas businessSignificant progress madeon addressing energy transition,such as by entry into offshore wind power generation projects in the Netherlands
Net sales (JPY)Net income attributableto owners of parent (JPY)
Operating CF (based on
institutional accounting
practices) (JPY)Results for fiscal year ended
December 31, 2021

Targets for FY 2022/12 underMedium-term Business Plan 2018–2022

1,244.3 billion
223.0 billion

Around 1,300.0 billion

445.4 billion

Around 450.0 billion

7.6%
¥48

ROE
Annual dividend/share

Dividend payout ratio

Net production volume(Barrels of Oil Equivalent,
per day)

Minimum dividend ¥24

584 thousand

700 thousand barrels

barrels per day

37%

Production cost per
barrel (excluding royalty)

US$5.4/barrel

Gaining momentum toward realizing our“Vision for around 2030”

5% or higher

31.2%

Reserve Replacement
Ratio (3-year average)

We will accelerate our efforts over the three-year
period of our Medium-term Business Plan 2022–
2024 to realize the vision of the Company around2030, which is set forth in our Long-term Strategy.

Around 150.0 billionIn stages improve shareholder
returns in line with the growthof the financial results
Dividend payout ratioof 30% or higher(Total payout ratio* 61.9%)

Positioning of Medium-term
Business Plan 2022–2024

5 net zero businesses

Oil and gas business teadfastly implementSdemonstration andresearch activities
Prepare for full-scale
investment

 afely and stablyS
operate businesses
Contribute to thestable supply ofenergy and securerevenue and cash flow

Strong management foundation
 uild a strong financial position toBprepare for future investments and risks
and improve stakeholder returns
Strengthen R&D and reinforce organizational structure, etc.

per day

Maintain 100%
during period
Reduction toward
US$5/barrel* Including ¥70.0 billion in share buybacks

Management targets
 enerate stable and solid revenue and cash flow through stable operations ofG
Ichthys as well as other projects in Japan and around the world
Secure financial soundness by pursuing debt reduction, to prepare necessary
funds for expanding the 5 net zero businesses and oil and gas business
Sensitivity on net income attributable to owners of parent by fluctuations of crude oil price and foreign exchange is disclosed at the time of the annual financial forecast announcements.
1: Exchange rate assumption: 110 JPY/USD 2: Brent oil price per barrel
3: Includes Ichthys downstream IJV and differs from cash flows based on institutional accounting practices
4: We will constantly work to enhance the resilience of our business as well as improve management
efficiency through share buybacks and other measures.

 ontinue fulfilling our responsibility for the development andCstable supply of energy by making our core oil and gas businessmore resilient and cleaner and respond to the energy needs ofJapan and the world as a first step toward net zero carbon
1: Net carbon intensity = (equity share emissions volume (Scope 1+2) − offset)/net
production volume
2: Reduction of 2019 net carbon intensity (41.1kg/BOE) by over 30%
3: Barrels of Oil Equivalent per Day

Net debt/equity
ratio3240 billion

600 billion

700 billion

50% or less

Index

Targets for FY 2024/12

Net production
volumeProduction cost per
barrelLevel exceeding 700 thousand BOED

Net carbon intensity1
Safety trengthen shareholder returns in line with growth in financial performance, whileS
maintaining the basis for stable dividends
Aim for a total payout ratio of 40% or greaterImplement share buybacks based on business environment, financial position and management conditions, etc.
 et minimum annual dividend per share of 30 JPY even in case of short-term deterioration
Sof business environment, etc.
INPEX CORPORATION Annual Report 2021

170 billion

Around 6.0% Around 8.0%

ROE

4

Shareholder returns

34

USD 60 basis2 USD 70 basis2

Net income
attributable to ownersof parent (JPY)
Operating CF before
exploration3 (JPY)

Reduction towards USD5/barrel or below
Reduction of 10% (4.1kg/boe3) or more
over a 3-year period toward 2030 target2
Zero major accidents

Returns level

Business targets

Targets for FY 2024/121

Index

A total payout
ratio of 40%
or greater

30 JPY
minimum
dividend
Net profit levelSharebuybacks

Dividends

INPEX’s Vision and Value Creation

Milestones by core business area
We have identified Australia, Abu Dhabi, Southeast Asia, Japan, and Europe as our five core business areas and willcommit to ensure a stable supply of energy and to make our business more resilient and cleaner.

2022

2023

 nsuring stable supply and making the businessE
more resilient
Making the business cleaner

Australia

 aise LNG production capacity andRbuild a framework to stably supply 9.3
million tons per year by 2024

IchthysA ccelerate participation in and development of the exploration blocks of surrounding areas and discovered assets and aim to further grow production volume withan eye toward the expansion of Ichthys around 2030

Ichthys

New business opportunities/Renewable energy business
Expand forest conservation by 2024
CO2 reduction through CCS

Reduce flaring, improve operational efficiency

Existing production assets

Growth Strategies for Value CreationImplement appraisal well drilling and evaluation work toward conducting Ichthys CCS operations/ Play a leading role to realize a CCS
hub project in Darwin, Australia

New business/Renewable energy business

Abu Dhabi

2024

Introduce measures to minimize flaring during production and fuel gas consumption and promote low-carbon operations

Proactively participate in Australian renewable energy businesses/ Promote clean hydrogen projects

Increase production capacity across all producing assets including Abu Dhabi Onshore Concession (to 2MM BD), Upper Zakum (to1MM BD), Lower Zakum (to 450K BD) and Satah/Umm Al-Dalkh (to 45K BD)/ Further reduce production cost by optimizing personnel
allocation and introducing new technologies (AI, DX, etc.)

Existing exploration and development assets

At Onshore Block 4, work to assess the successful appraisal wells and proceed to commence production at an early stage

Make existing production assets cleaner

 ake operations cleaner in cooperation with ADNOC by supplying offshore facilities with clean power from onshore,M
etc./ In cooperation with ADNOC, increase CCUS capacity of Abu Dhabi Onshore Concession from the current 0.8
million tons per year

Clean ammonia and hydrogen businessImplement joint study in cooperation with ADNOC/JERA/JOGMEC with an aim to commence production by the second half of the2020s/Pursue clean hydrogen business opportunities

Aim to obtain approval of the plan of development re-revision incorporatingchanges centered on making the project more economically resilient andcleaner from the Indonesian government and concerned parties in 2023

Gas exploration and asset acquisition
Establish an Asian gas value chain

Carry out exploration and M&A activities in Vietnam, Malaysia, etc. to acquire additional natural gas resources in Asia

Promote demand creation centered on trading and midstream and downstream investment

Management Foundation to
Advance Growth Strategies

Southeast Asia

Abadi, Indonesia

Tangguh CCUS
Final investment decision (FID) to commence injection in 2026
(Planned)

Create clean energy business opportunities in Asia with a focus on Indonesia
Collaborate with governments and concerned parties on the selection of prospective CCS locations and development of legal frameworks/Invest in fuel switching and new fuelbusinesses to promote energy transition in Asian countries (natural gas, hydrogen and ammonia, biofuels, etc.)

Conduct gas exploration to supplement reserves
Exploratory drilling offshore Shimane and Yamaguchi
prefectures and Minami-SekiharaJapan

Improve resistance to low oil prices throughenhanced operational efficiency

Strengthen supply resilience
Complete the 5th stage extension of the Shin Tokyo
Line in the domestic gas pipeline network to enhance
the resilience of the domestic supply system by 2024
Reduce cost and improve technical capabilities by centralizing plants and conducting in-house maintenance, improve
plant reliability through suitable management

Promote hydrogen and CCUS site
demonstrations and commercialization

Commence CO2 injection tests
Establish CO2EOR efficiency improvement
technology to expand CCUS technology in Japanand deploy EOR technology at overseas oil fields

Construct and commence operations at a bluehydrogen & ammonia demonstration plant in
Kashiwazaki City, Niigata Prefecture

Take measures at production sites to make operations cleaner
Conduct methanation site demonstrations

Business and Financial Overview

Promote hydrogen and CCUS site
demonstrations and commercialization

Save energy consumption, introduce carbon neutral power, implement zero flare measures, etc.

C
 ommence methanation production at Minami-Nagaoka in 2025, supply synthetic methane using INPEX’s natural gas trunk
pipeline networkS ecure stable revenue using the newly acquired Norwegian assets as a platform, promote the development of nearby discovered but undeveloped assets and pursue
exploration opportunities in the vicinity

NorwayEuropeHywind Tampen offshore wind farmCommence power generation
Wisting Oil Field
Evaluate the introduction of hydropower from shore in
the development plan (FID scheduled at the end of 2022)
Deepen knowledge of clean energy technologies
Kashagan

OthersACG

Evaluate and implement additional development with strong investment efficiency, increase production capacity to 450 thousand BD/Improve operational efficiency

of facilities, increase production through additional development, and reduce unit costs through OPEX reduction, etc.
 ommence production of additional development project/ Maintain and reduce operational costs by optimizing personnel allocation, contracts, etc./ Accelerate crude oil
Cproduction (early value creation), use surplus capacity effectively (draw in crude oil produced from other projects, etc.)

Iraq Block 10 (Eridu Oil Field)
KashaganACGC arry out gas exploration, expand gas assets/ Pursue opportunities to enter renewable, hydrogen and CCUS businesses in Europe,leveraging the London and Oslo offices

Submit and receive approval for development plan/ Promote measures aimed at early-stage production

Promote GHG reduction based on GHG & Energy Management Strategy (GHG emissions reduction target)

Promote GHG reduction based on ACG Life of Field Strategy (Plan to set a GHG emissions reduction target)

Eagle Ford

Accelerate efforts as operator to make the business cleaner through continued flare reduction measures, etc.

INPEX CORPORATION Annual Report 2021

35

INPEX Vision @2022 Medium-term Business Plan 2022–2024

Initiatives towards Stronger Management Foundation
We resolutely promote initiatives in the 5 net zero businesses and the oil and gas business and pursue synergies
between these two areas by strengthening our management foundation in the four fields of technology, marketing,HSE, and human resources.

Strengthening technology

Reduce cost of hydrogenproduction technology andcombine hydrogen production
and CCUS technology

Systematize and enhance
CO2 capture and storage
technology

E&P coretechnology

CCS
CCUS

HydrogenAmmonia

Renewableenergiesv
De&D

Carbonrecycling

el
R
op
gh
tec
u
o
hnology thr

Accelerate development of digital infrastructure and use of digitaltechnologies/Expand R&D* personnel and funding* Research & Development

Establishment of the INPEX Research Hub for Energy Transformation (I-RHEX)As part of our efforts to develop a technical foundationto achieve net zero carbon emissions, we establisheda research hub called the INPEX Research Hub for Energy Transformation (I-RHEX) at our Technical ResearchCenter on April 1, 2022. I-RHEX will work with speed on
R&D in clean energy technology and focus on acquiring
technologies needed for the promotion of businesses
such as CCS and hydrogen/ammonia, which are essential to make the oil and gas business cleaner.
INPEX Technical Research Center where I-RHEX will be based

Message from I-RHEX Chief Lead
I-RHEX serves as an open hub for the application of oil and natural gas development technology to clean energy technology and for the R&D of advanced technologies such as CCUS and low-cost hydrogen production. I-RHEX seeks to accelerate INPEX’s energy transformation and contribute to energy transformation in society at large through wide
cooperation and collaboration with organizations such as companies, universities and research institutions, while capitalizing on technologies and human resources held by INPEX.
We will build a solid technical foundation for business development through basic, applied and demonstrative research in hydrogen, CCUS, renewable energies, carbon recycling and other fields.

Takeshi Yoshida

General Manager, Technical Research Center,
Technical Division and Chief Lead, I-RHEX

36

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation

Reinforcing marketing capabilities
INPEX strives to reinforce marketing capabilities responding to customer needs, make energy cleaner and diversify energy supply.

 einforce marketing capabilities
R
responding to customer needs einforce relations and joint initiatives
R
with existing customers and acquire business opportunities
Cultivate new customers/areas of businessReinforce trading, transportation capabilities

Diversify energy supply

 romote fuel switching by expandingPnatural gas businessFurther expand carbon neutral products
and marketing, expand carbon credit
portfolioPrepare for future transportation, marketingand sales of ammonia and hydrogen ursue new business models such as onP
site methanation and hydrogen supplyC onsider developing new business on
microgrids aimed at localized energy
production and consumption and reinforcing resilience, and strengthening
wholesale electricity businessEstablish a gas value chain in Asia throughinvestment in midstream to downstream
businesses such as LNG bunkering, receiving terminals, small lot distribution andpower generation

Growth Strategies for Value Creation

Make energy cleaner

Enhancing HSE
INPEX further enhances HSE management to achieve zero major accidents.

Demonstrate HSE leadership through management involvement
Contribute to low carbon operations through HSE management
HSE risks are managed to ALARP
Improve measures to prevent incidents
Prevent process leaks

Prepare against new threats*
 ddress global environmental issues andAcreate environmental value
Build countermeasures against infectious diseases* Geopolitical risks, cyberterrorism, large scale natural disasters, etc.

Human
resources

Create a most rewarding company towork for stablish a system operation to foster a sense of satisfaction
Eand conviction and a corporate culture that promotes thisEnhance employee development support
Create a workplace responsive to diversifying work styles andneeds of well being

Organizational Flexibly update the company’s organizational structure
according to the business environment andstructure
management strategy
 uild a framework to execute business operations more effiB
ciently and flexibly by restructuring the Hydrogen & CCUS Development Office into the Hydrogen & CCUS Development
Division and reinforcing organizational structure and personnel
Restructure the Eurasia, Middle East & Africa Projects Division
as the Europe & Middle East Projects Division to reflect the positioning of Europe as a core business area

Please see the section on sustainability for our HSE and human resources strategies.

See page 42
Business and Financial Overview

Cash Allocation

Management Foundation to
Advance Growth Strategies

Strengthening human resources and organizational structure

Medium-term Business Plan 2022–2024: 3 years between 2022 and 2024

Cash flow from operations before exploration (including the Ichthys downstream IJV) will be allocated to debt reduction, shareholder returns and investment for growth in that order.
Assuming a Brent crude oil price of 60 US dollars per barrel and an exchange rate of 110 Japanese yen against the US dollar, we
will secure approximately 1,800 billion yen in cash flow from operations
Expected cash allocation for 2022–2024 (3-year period)
before exploration (including the Ichthys downstream IJV) over the three
years between 2022 and 2024. We seek to reduce debt by approximately<Debt reduction>
500 billion yen, achieve a net debt level of approximately 1,500 billion yen
Approx. ¥500 billion(including the Ichthys downstream IJV), and aim for a net debt/equity ratio<Shareholder returns>of 50% or less. Regarding shareholder returns, we aim for approximately
Approx. ¥200 billion
200 billion yen over three years, following our shareholder return policy of
CF from operations
pursuing a total payout ratio of 40% or greater. We will invest 1,100 billion
before exploration
yen over three years for growth, allocating 900 billion yen of that amount<Investment for growth>
US$60/
Approx.
to the oil and gas business and 200 billion yen to the 5 net zero businessbarrel¥1,800 billion Approx. ¥1,100 billion
es. The 5 net zero businesses will account for roughly 20% of the investment to reflect our intention to accelerate these businesses.
5 net zero businesses
Under the assumption of a Brent crude oil price of 70 US dollars per
Approx. ¥200 billion
barrel and an exchange rate of 110 Japanese yen against the US dollar,
cash flow from operations before exploration (including the Ichthys down+¥300 billion+US$10/¥300 billion
stream IJV) is expected to increase further by approximately 300 billion
Approx. ¥2,100 billion
barrelyen. This additional cash flow will be strategically used by comprehensiveRevenue
Expenditure
ly considering our business strategy progress, shareholder returns, finan*T
hese
figures
includetheIchthysdownstream
IJV and differ
cial position and other factors.
from those based on institutional accounting practices.

INPEX CORPORATION Annual Report 2021

37

Message from the Senior Vice President, Finance & Accounting

While carefully assessing crude oil
price fluctuations, we strive to realize
our consolidated earnings forecasts
for the fiscal year ending December
2022 and build a resilient financialbase that can withstand low oil priceenvironments.

Daisuke Yamada
Director, Managing
Executive Officer,
Senior Vice President,
Finance & Accounting

Overview of financial results for the fiscal year ended December 31, 2021
In the fiscal year ended December 31, 2021, our financial results included net sales of 1,244.3 billion yen, an
operating income of 590.6 billion yen, an ordinary income of 657.6 billion yen and a net income attributableto owners of parent of 223.0 billion yen.
Our net income attributable to owners of parent
reached a record high since our business integration in
2008, making a V-shaped recovery after a loss in fiscal
2020.

Consolidated financial results for the fiscal year ended
December 31, 2021
FY 2020/12
Results

FY 2021/12
Results

771.0 billion 1,244.3 billion

Net sales (JPY)
Operating income(JPY)
Ordinary income(JPY)
Net income (loss)
attributable to ownersof parent (JPY)248.4 billion

590.6 billion

257.3 billion

657.6 billion(111.6 billion)

223.0 billion

Cash flows for the fiscal year ended December 31, 2021
Regarding cash flows for the fiscal year ended December 31, 2021, including those from the Ichthys downstream IJV, we secured cash flows of 586.8 billion yen
from operating activities before exploration expenditure in part because of the surge in oil prices. Cashflows from investing activities were 176.5 billion yen,with development and other relevant expenditureslargely remaining at the same levels as in the previous
fiscal year. We were therefore able to secure a free cash
flow of 410.3 billion yen in the fiscal year ended December 31, 2021. Cash flows from financing activities were
373.9 billion yen due to repayments of borrowings andother factors.

38

INPEX CORPORATION Annual Report 2021

Cash flows1 for the fiscal year ended December 31, 2021(¥ billion)

900

586.8

600

300

(176.5)199.0

FCF+410.3235.4(373.9)0

Available
funds as ofDec. 31, 2020

Cash flows
Cash flows
Cash flows
from operating from investing from financing
activities before
activities
activities2
exploration (incl. exploration
expenditure
expenditure)

Available
funds as ofDec. 31, 2021

1. Cash flows include those from the Ichthys downstream IJV (Ichthys LNG PtyLtd), an equity-method affiliate.
2. Including translation adjustments related to available funds

INPEX’s Vision and Value Creation

Consolidated financial forecast for the fiscal year ending December 2022 (as of May 11, 2022)(decrease) of 2.8 billion yen in net income attributableto owners of parent.
Consolidated financial forecast for the fiscal year ending
December 2022
FY 2021/12
Results

Net sales (JPY)
Operating income(JPY)
Ordinary income(JPY)
Net income (loss)
attributable to ownersof parent (JPY)FY 2022/12
Forecast

1,244.3 billion 1,851.0 billion
590.6 billion

924.0 billion

Growth Strategies for Value Creation

Assuming a crude oil price average of 85US dollars per
barrel and an exchange rate average of 120 Japanese
yen against the US dollar for the full year, we expect togenerate net sales of 1,851.0 billion yen and a net income attributable to owners of parent of 300.0 billion
yen, as outlined in our consolidated financial forecast
for the fiscal year ending December 2022.
Regarding the impact on the financial results for the
fiscal year ending December 31, 2022 from oil price andexchange rate fluctuations, we estimate as of the beginning of the fiscal year that a rise (fall) in the Brent crude
oil price by 1 US dollar per barrel would result in an increase (decrease) of 6.0 billion yen in net income attributable to owners of parent. Likewise, regarding theimpact of exchange rates, we estimate as of the beginning of the fiscal year that a ¥1 depreciation (appreciation) against the US dollar would result in an increase

657.6 billion 1,042.0 billion
223.0 billion

300.0 billion

Investment expenditure forecast for the fiscal year ending December 2022
Based on a close analysis of investment effect, our development expenditure and schedule of investments in
exploration project 404.0 billion yen in development expenditure, an approximately 2.2-fold increase from thefigure recorded in the previous fiscal year, and 43.0

billion yen in exploration expenditure, an approximately
5.8-fold increase over the year before. Note that development expenditure includes an expenditure of 120.0
billion yen for the 5 net zero businesses.

Management Foundation to
Advance Growth Strategies

Investment expenditure forecast for the fiscal year ending December 2022
FY 2021/12 Results

FY 2022/12 Forecast2

Development expenditureand others1 (JPY)183.6 billion

404.0 billion

Exploration expenditure (JPY)

7.4 billion

43.0 billion

Other capital expenditure (JPY)

7.0 billion

9.0 billion

Exploration expenses andProvision for explorations3(JPY)

Provision for
explorations6.4 billion

Exploration
expenses

0.8 billion

Allowance for
explorations39.9 billion
3.5 billion

Total 7.2 billion

Total 43.4 billion

0 billion

26.0 billion

Business and Financial Overview(Non-controlling interests
portion)4 (JPY)

Exploration
expenses

1. Includes Ichthys downstream and expenditures for acquisition of interests
2. Of the fiscal 2022 forecasts for development expenditure and others, 120.0 billion yen is attributable to expenditures
for the 5 net zero businesses.
3. The portion related to exploration activities in items “Provision for allowance forrecoverable accounts under production
sharing” + “Provision for exploration
projects,” in the Statement of Income
4. Portion corresponding to capital increase
from non-controlling interests, etc.

Financial strategy
INPEX will build a resilient financial base that can withstand low oil price environments over the period of theMedium-term Business Plan 2022–2024.
We will maintain a structure that supports stablebusiness operations and can readily respond to investment opportunities for future growth, and will constantly monitor trends on borrowing balance, investment andshareholder returns and manage financial balance
appropriately.
For financial discipline, our focus will be on flexibly
controlling leverage with net debt/equity ratio (including
the Ichthys downstream IJV) being between 65% to 50%(target at the end of the fiscal year ending December2024) based on the market environment and trends on

investment and shareholder returns.. We strive to maintain our current ratings (S&P A−, Moody’s A2, R&I AA
and JCR AA+) by securing 400.0 billion yen or more inliquidity on hand (cash and deposits + commitmentline).
Our financing policy is to adhere to financial discipline, maintain long-term, stable procurement and promote further diversification of procurement methods
toward our “Vision for around 2030.” We will closely
monitor the stance on oil and natural gas financing ofmajor domestic and foreign financial institutions, raise
the ratio of direct procurement (domestic and global
bonds) to a reasonable level according to market trends
and accelerate sustainable finance initiatives.
INPEX CORPORATION Annual Report 2021

39

11-Year Financial Information
INPEX CORPORATION and Consolidated Subsidiaries
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only,at ¥115.02=US$1.00, the approximate exchange rate in effect as of December 31, 2021.
Millions of yen

2012/3

2013/3

2014/3

2015/3

2016/3¥1,186,732¥1,216,533¥1,334,626¥1,171,227¥1,009,564

Cost of sales

395,443426,326

490,417525,444526,758

Gross profit

791,289

790,207844,209645,783

482,806

Operating income

709,358

693,448

733,610534,886

390,139

Income before income taxes

767,039

718,146

750,078

540,023

328,887¥194,001¥182,962¥183,691¥77,820¥16,777¥908,702¥1,106,504¥1,140,204¥1,342,410¥984,345

Tangible fixed assets

383,698584,541

951,779

1,497,622

1,752,615

Intangible assets

233,318

380,156

439,179

458,770

541,471

Investments and other assets

1,540,680

1,544,958

1,506,977

1,200,352

1,091,411

Total assets

3,066,398

3,616,159

4,038,139

4,499,154

4,369,842

Current liabilities

367,844414,977375,670

365,212319,128

Long-term liabilities

384,361

530,198

666,432

845,238

871,911¥2,314,193¥2,670,984¥2,996,037¥3,288,704¥3,178,803¥320,692¥252,347¥213,514¥216,749¥183,708(280,864 )(489,870 )(395,555 )(81,087 )(543,534 )

29,294137,069

48,961(4,178 )

156,726¥249,233¥199,859¥117,531¥260,978¥53,813¥1,492.27*¥1,699.10*¥1,911.25*¥2,099.95¥2,008.34

17.50*

17.50*

18.00*

18.00

18.00

125.78*¥53.29¥11.49

Results of operations
Net sales

Net income (loss) attributable toowners of parent
Financial position
Current assets

Net assets
Cash flows
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents at endof the period
Per share data
Net assets per share (Yen)
Cash dividends per share (Yen)
Earnings (loss) per share (EPS) (Yen)¥

132.84*¥

125.29*¥*Retrospectively adjusted for a stock split at a ratio of 1:400 of common stock on October 1, 2013.

Financial indicators
Net debt/Net total capital
employed3 (%)(60.7)%(43.9)%(31.9)%(16.8)%(8.1)%

Equity ratio4 (%)

71.1

68.6

69.1

68.2

67.1

D/E ratio5 (%)

14.6 %

19.2 %

20.9 %

22.1 %

25.3 %

Notes
1. Effective from the year ended December 31, 2019, the Company changed its consolidated fiscal year-end from March 31 to December 31. As a result of
this change, the year ended December 31, 2019 was a period of nine months from April 1 to December 31, 2019.
2. The amounts in millions of yen and in thousands of U.S. dollars, as of and for the year ended March 31, 2019 and prior periods are rounded to the nearest unit. On the other hand, such amounts as of and for the year ended December 31, 2019 and onwards are rounded down and therefore the totals do
not necessarily agree with the sum of the individual account balances for the corresponding period.

40

INPEX CORPORATION Annual Report 2021

Millions of yen

Thousands of
U.S. dollars

2019/121,2

2020/122021/122021/12¥874,423¥933,702¥971,389¥1,000,005¥771,046¥1,244,369$10,818,718

453,847

498,039

413,300

424,702439,852

568,921

4,946,278

420,576435,663

558,089575,303

331,194

675,448

5,872,439

336,453

357,363474,282498,641

248,471590,657

5,135,254

327,525

307,300

494,043

510,292

67,394643,457

5,594,305¥46,168¥40,363¥96,106¥123,550¥(111,699 )¥223,048$1,939,210¥942,960¥466,351¥457,712¥419,802¥387,093¥518,864$4,511,076

1,928,598

2,044,620

2,278,995

2,275,372

2,069,783

2,259,849

19,647,443

521,253

541,503

520,213535,330

441,837446,660

3,883,324

919,363

1,199,913

1,536,626

1,619,489

1,735,804

1,932,821

16,804,216

4,312,174

4,252,387

4,793,546

4,849,995

4,634,518

5,158,196

44,846,078

297,465

305,439

372,001

401,483

339,288348,888

3,033,281

807,166

788,079

1,163,961

1,151,334

1,293,890

1,462,897

12,718,631¥3,207,543¥3,158,869¥3,257,584¥3,297,176¥3,001,339¥3,346,409$29,094,148¥275,810¥278,539¥238,566¥274,730¥292,915¥445,457$3,872,865

53,484(351,908 )(682,006 )(288,740 )(417,189 )(130,727 )(1,136,558 )(65,428 )

34,742405,185(48,615 )

126,747(315,215 )(2,740,523 )¥316,791¥276,080¥239,653¥173,774¥172,405¥191,213$1,662,432¥2,015.38¥1,997.24¥2,058.95¥2,082.43¥1,874.08¥2,253.17$19.59

18.00

18.00

24.00

30.00

24.00

48.00

0.42

¥31.61¥27.64¥65.81¥84.61¥(76.50 )¥153.87$1.340.9 %11.8 %

21.7 %

22.3 %

26.0 %

22.6 %

22.6 %

68.3

68.6

62.7

62.7

59.0

60.6

60.6

23.4 %

24.0 %

38.0 %

36.8 %

45.1 %

37.8 %

37.8 %

Business and Financial Overview

2019/32

Management Foundation to
Advance Growth Strategies

2018/3Growth Strategies for Value Creation

2017/3

INPEX’s Vision and Value Creation

Millions of yen

3. Net debt/Net total capital employed = Net debt / (Net assets + Net debt)
4. Equity ratio = Net assets excluding non-controlling interests/Total assets
5. D/E ratio = Interest-bearing debt/(Net assets – Non-controlling interests)

INPEX CORPORATION Annual Report 2021

41

Management Foundation to Advance Growth Strategies

Sustainability
We engage in sustainability management aimed at achieving the sustainable development, production, andsupply of energy, with a focus on the Material Issues that are most important to both our business and our
stakeholders. We dedicate our efforts to sustainability and value creation throughout our value chain.

Leadership Organization
Chaired by the INPEX Representative Director, President &CEO, our Sustainability Committee was established to provide clear messaging on executive management’s vision forsustainability, for deliberating on basic policies for sustainability, and to drive forward groupwide and systematicsustainability practices. The members include the Representative Directors, the head of the General Administration Division, and the head of the Corporate Strategy & Planning
Division (Vice-Chair of the Sustainability Committee). The
Chairs of the Compliance Committee and the Corporate
HSE Committee also attend the meetings to facilitate collaboration with their respective committees. The Sustainability Committee convened two meetings in FY2021, and thematters deliberated upon were also discussed by the Executive Committee and the Board of Directors.
We have also created a groupwide consultation system
supported by the Sustainability Working Group and the Climate Change Strategy Working Group, which are subdivisionsof the Sustainability Committee comprising working-level
members from various divisions.

General Meeting of Shareholders

Nomination and Compensation
Advisory Committee

Board of Directors

INPEX Advisory Committee

Management Committee

Sustainability Committee
Compliance Committee

Information Security
Committee

Corporate HSE Committee

INPEX Value Assurance
System (IVAS) Committee

Audit &
Supervisory Board

Sustainability
Working Group
Climate Change
Strategy
Working Group

Identification of Material Issues and Prioritization Process
In April 2012, we identified five of the seven core sustainability themes in ISO 26000 as areas of high importance for INPEX and our stakeholders—that is, our Material Issues.
We reviewed the Material Issues in May 2015, consideringfactors such as the impact of business activities on the progress of our key projects and changes to stakeholder priorities. As a result, we redefined the Material Issues by adding
the sixth issue of ‘Governance’ and identified priority actions(Key Tasks) for each Material Issue area that have been incorporated into our PDCA cycle to enable continuous improvement. In FY2017, we reviewed and revised our Key Tasks

through a four-step prioritization process ( Issue identification and gap analysis,
Stakeholder dialogues,
Issue prioritization, andmanagement review), also incorporating
the perspectives of the United Nations Sustainable Development Goals (SDGs). We most recently reviewed our Key
Tasks in March 2022 following the issue of our Long-term
Strategy and Medium-term Business Plan (INPEX Vision@2022) announced in the previous month. We will continue to review the Key Tasks on regular basis.

Identification of Material Issues andPrioritization Process

INPEX Key Tasks
Strengthen our governance structure
Robust risk management system
Respect for Human Rights

GovernanceCompliance ompliance with laws, prevention ofC
bribery and corruption
Supply chain risk management
Prevention of major incidents

HSE

Local
Communities

Ensure occupational health and safety ater-related risk management andWbiodiversity conservation
 anage impact on local and indigeM
nous communities
Contribute to local economies

Climate Change

42

Employees

INPEX CORPORATION Annual Report 2021

 ursue climate change goals andPprovide TCFD recommended
disclosures
Promote five net zero businesses
Hydrogen/Ammonia
CCUS
Renewable Energy
Methanation
Forest Conservation
 leaner oil & gas business andCtransition to natural gas reate a rewarding company forCpersonnel

INPEX’s Vision and Value Creation

Risk Management
Our Policy
We strive to accurately identify and assess the complex anddiverse risks inherent in the business environment and to implement risk prevention measures and systems needed tominimize those risks. For instance, our risk management system is intended to cover our action plans not only for largescale natural disasters and pandemics, but also for risks
related to changes in the business environment—such as economic and social conditions, laws and regulations—and otherrisk factors inherent in our business processes—that is, in the

exploration, development, production, transportation, andsale of natural resources. We have implemented internal controls under Japan’s Financial Instruments and Exchange Law(known as “J-SOX”) based on the COSO framework. Each
Project Division also performs risk management related to occupational health, safety and environment under the HSE
Management System. Additionally, we analyze the impact offluctuations in oil prices and foreign exchange rates and disclose this information at every financial result briefing.

Growth Strategies for Value Creation

Risk Management Structure
Board of Directors
Long-term Strategy andMedium-term Management PlanINPEX Vision @2022

Nomination and Compensation Advisory Committee
INPEX Advisory Committee

Feedback

Approval

Exercise adequate supervisory functions and ensure fairness
and transparency in management

ReportingExecutive Committee

Information Security Committee
IVAS (INPEX Value Assurance
System) Committee

Department Level Action Plans andFiscal year plans & targets

Departments and subsidiaries

Risk identifcation
Plan

Organize risk management system/documents

Management Foundation to
Advance Growth Strategies

Compliance Committee
Sustainability Committee
Corporate HSE Committee

Approval

Corporate Level Action Plans

Discuss and decide plans for comprehensive management
and actions for material risks

Do

Risk action/management

Check

Risk monitoring/reporting

ActionRisk analysis/assessment

Business and Financial Overview

Major Business Risks
1. Characteristics and risks of the oil and natural gas development business(1) Risks of disasters, accidents, system failures, etc.
(2) Risk of failure in exploration, development or production(3) Dependence of production volume on specific regions
and mining areas(4) Risks related to contract deadlines, etc.
(5) Risk of change in reserves of crude oil, condensate, LPG,
and natural gas(6) Operatorship-related risks(7) Risks related to project partners(8) R isk attributable to a large capital investment andlengthy period of recovery of funds for the oil and natural gas development business(9) Risks related to future abandonment
Financial Results

2. Impact on financial results from fluctuations in crude oil
prices, natural gas prices, foreign exchange rates, andinterest rates(1) Impact on financial results from fluctuations in oil prices
and natural gas prices(2) Impact on financial results from fluctuations in foreignexchange rates(3) Impact on financial results from fluctuations in interest rates
3. Climate-related risks(1) Policy and regulatory risks(2) Technology risks(3) Market risks(4) Physical risks
4. Country risks in overseas business
https://www.inpex.co.jp/english/ir/library/presentation.html
Please see pages 110 to 116 for more on Business Risks

INPEX CORPORATION Annual Report 2021

43

Sustainability

Sustainability Material Issues: Targets and Achievements
Material Issues

Key Tasks

FY2022 Targets

Enhanced our corporate governance system through the proper
operation of the Board of Directors and continued to evaluate theeffectiveness of the Board of Directors and ran the PDCA cycle
Responded to revisions of the Companies Act and the Corporate
Governance Code, and to Tokyo Stock Exchange reforms

Enhance the corporate governance system through appropriate
operation of the Board of Directors, and continue to evaluate of
the effectiveness of the Board of Directors and run the PDCA cycle
Regularly report to the Board of Directors on progress and actionplans for INPEX projects (including Net Zero programs)
Promote efforts to optimize the Board of Directors (in terms of diversity,
size and composition) based on Nomination and Compensation Advisory Committee discussions of the vision for the INPEX Board of Directors

Discussed the nomination and remuneration of Directors with theappropriate involvement of the Nomination and Compensation
Advisory Board
Published a Director skill matrix
Established a subcommittee comprising independent directors andexternal lawyers to review our executive compensation system
Studied and formulated proposals by the subcommittee for reforming the executive compensation system

Optimize the number of Directors for more efficient discussions
and agile decision-making
Further enhance the Board of Directors’ diversity based on the
Directors skill matrix
Introduce and implement a new system of executive compensation aligned with key goals of the Medium-term Business Plan

Implemented global expansion of the tax governance structure

Strengthen management of global tax risks arising out of overseas sites’ operations and cross-border transactions, through appropriate management of the tax governance structure

Held 10 IVAS Committee meetings
Provided the Board of Directors with an executive summary of risk
assessment results for major projects

Hold IVAS Committee meetings as appropriate
Provide the Board of Directors with monthly progress reports andaction plans for INPEX projects (including Net Zero programs)

Held two Information Security Committee meetings
Held two training sessions on targeted email attacks
Conducted an e-learning lesson on information security
Monitored security and responded to issues through the internal security teamHold two Information Security Committee meetings
Hold two training sessions on targeted email attacks
Conduct an e-learning lesson on information security
Monitor security and respond to issues through the internal security teamPromoted Corporate headquarters-based business continuity
management (BCM) activities for earthquake scenarios, and provided BCM education and training for employees
Implemented and operated a COVID-19 crisis response system
under the Corporate Crisis Management Team

Promote Corporate headquarters-based BCM activities for earthquake scenarios and provide BCM training and education
Update and revise as needed the headquarters business continuity plan (BCP) for virulent infectious disease scenarios, based onreview of COVID-19 measures
Continue operating the Corporate Crisis Management Team for
COVID-19 and other pandemicrelated BCP teams, and develop and execute a plan for disbanding those teams after the pandemic subsides

Continued requirement for self-evaluation surveys (including
questions on human rights and anti-bribery/anti-corruption (ABC)
measures) by major domestic suppliers and contractors
Continued risk assessment of major suppliers and contractors (including with regard to human rights and ABC measures), and improved the methods used for risk assessment
Participated in Global Compact Network Japan’s supply chain working group

Publish our Supplier Code of Conduct
Introduce CSR assessments and audits for major domestic suppliers and contractors
Continue risk assessment of major suppliers and contractors, including with regard to human rights and ABC measures
Continue participating in the supply chain working group of the
Global Compact Network Japan

Strengthen supply chain risk assessment and compliance

Supply chain risk
management

Respect humanrightsPublished respective FY2020 Statements pursuant to the UK Modern Slavery Act and the Australian Modern Slavery Act
Continued conducting human rights training for new employees
Held a human rights seminar for major vendors conducted by an
external instructor

Publish respective FY2021 Statements pursuant to the UK Modern
Slavery Act and the Australian Modern Slavery Act
Continue conducting human rights training
Review human rights due diligence questionnaire
Conduct interview surveys with operating sites

Comply withlaws, prevent
bribery andcorruption

Facilitated thorough awareness of compliance and enhanced educationand training programs (including harassment prevention training fornon-managerial employees at domestic offices, and exchanges of insights and opinions with compliance teams in other companies)
Bolstered global compliance systems (including continued operation of the INPEX Global Hotline, etc.)
Widely disseminated and strengthened the implementation of
ABC regulations (including continued implementation of training
and due diligence activities)
Continued to conduct ABC risk assessments at domestic and overseas offices

Ensure thorough awareness of compliance and enhance education and training programs (including e-learning, complianceawareness surveys and training based on the survey results, andresponse to revisions of the Whistleblower Protection Act)
Bolster global compliance systems (including continued operation of the INPEX Global Hotline, etc)
Widely disseminate and strengthen the implementation of ABC
regulations (including continued implementation of training anddue diligence, etc.)
Continue to conduct ABC risk assessments at domestic and overseas offices

Fully comply with and appropriately response to the laws andregulations of the areas in which
we operate, including ABC laws,
judicial/administrative sanctions,international norms and ethics,
and full respect for human rights
Continue human rights due diligence

Achieved CDP Climate Change A- score for the second consecutive year
Revised our Corporate Policy on Climate Change
Set the goal for net zero carbon emissions by 2050
Formulated Guidelines for Climate Change Goals
Formulated the Guidelines for Transactions and Management of VCUs1

Continuously achieve a CDP Climate Change A- score
Reduce net carbon intensity by 10% (4.1kg/boe) or more between
2022 and 2024
Set and manage annual targets of emissions intensity on a projectbasis
Lay the groundwork for complying with ISSB2 climate disclosure
standards

Strengthen ourgovernancestructure

Governance

Strengthen risk
management
systemCompliancePursue climatechange goals andprovide TCFDrecommended
disclosures

ClimateChangeAdvancing five
net zerobusinesses

Cleaner oil &gas businessand transition tonatural gas

44

Medium- to Long-Term Targets,
Initiatives and Directions

FY2021 Achievements

Improve the effectiveness of theBoard of Directors, appropriately
disclose information (including
through dialogue with shareholders), cooperate with stakeholders,and continuously enhance corporate governance
Strengthen the corporate governancestructure, including enhancement of thesupervisory role of the Board of Directors
Deepen discussion by the Nomination
and Compensation Advisory Committee
toward achieving further diversity of theBoard of Directors, and provide feedbackon those discussions to the Board
Enhance discussion on business strategies supporting INPEX Vision @2022, its
associated Medium-term Business Plan,
and anticipated future business development, and monitor the progress madeContinue implementing and monitoring measures to manage criticalrisks and issues identified by eachdivision under the Medium-term
Business Plan

Reduce GHG emissions intensity
by 30% or more by 2030
Achieve zero routine flaring by 2030
Maintain methane emissions intensity (methane emissions/natural gas production) at its current
low level (approx. 0.1%)

FY2021 Achievements

Targets to FY2023-24

Targets to FY2030

Hydrogen/ammonia
Began study for the commercialization of a clean ammonia production project in Abu Dhabi
Launched hydrogen and ammonia production demonstration
project in Kashiwazaki, Niigata Prefecture

Hydrogen/ammonia
Commence operation of the hydrogen and ammonia production
demonstration project in Kashiwazaki, Niigata Prefecture in FY2024
Continue studying the commercialization potential of a clean ammonia production project in Abu Dhabi
Consider and launch new projects in Japan and overseas

Commercialize three or more projects
Aim for hydrogen/ammonia production and supply of 100,000
tons/year or more

CCUS
Approved a development plan inclusive of a CCUS project for the
Tangguh LNG project in Indonesia
Initiated a joint study to launch a CO2EOR pilot test at our Minami-aga Field Office

CCUS
Begin injection testing in FY2023 for Minami-aga CO2EOR pilot test
Advance preparations for introducing CCS at Ichthys LNG
Consider and launch new projects in Japan and overseas

Achieve annual CO2 injection volume of 2.5 million tons or more
Become a leading company in CCUS
by promoting technical development
and commercialization

Renewable energy
Ensured stable operation of photovoltaic power generation facilities
Joined the Muara Laboh Geothermal Power Plant project in Indonesia
Propelled existing geothermal power generation business in Japan
Continued environmental impact assessment and flow tests of all production and reinjection wells in the Oyasu region of Akita Prefecture
Joined new offshore wind power project off Goto City, Nagasaki
Prefecture, Japan
Joined offshore wind power project in the Netherlands

Renewable energy
Ensure stable operation of photovoltaic power generation facilities
Carry out studies for stable operation and additional development
at Muara Laboh Geothermal Power Plant project in Indonesia
Continue development of Oyasu Geothermal Power Project (Akita)
and geothermal surveys at Amemasudake (Hokkaido)
Seek out other opportunities for new geothermal projects in Japanand overseas
Move forward with development at offshore wind power project
off Goto City, Nagasaki Prefecture, Japan
Pursue development of promising offshore wind power projects
in Japan and overseas toward large-scale commercialization of
floating wind power generation

Aim to secure 1-2 gigawatt-scaleinstalled capacity, mainly in theoffshore wind and geothermal
power generation businessAccelerate business expansion using assets acquired through M&A
and other means as a platform

Carbon recycling & new business
Developed a drone-supported business concept with Terra Drone Corporation
Verified the effectiveness of an artificial photosynthesis in Darwin, Australia
Signed a membership agreement with innovation platform Plug and Play
Began technical development toward the practical application ofa methanation system at Nagaoka Field Office
Launched INPEX Challengers Program to promote creation of internal start-ups

Carbon recycling & new business
Employ drones in facility inspections
Pursue further R&D in artificial photosynthesis
Construct a plant for planned 2025 launch of synthetic methane
production as the methanation technical development projectContinue running the INPEX Challengers Program
Development of other new business projects

Promote the adoption of methanation in society
Supply about 60,000 tons of synthetic methane annually via ourpipeline network

Forest conservation
Acquired 1 million tons of VCUs from Indonesia’s Rimba Raya Biodiversity Reserve REDD+ project, and started support for construction of orangutan conservation camp

Forest conservation
Participate in and pursue development opportunities for forest
conservation projects
Acquire about 1.5 million tons of forestation credits per year fromleading forest conservation projects

Secure about 2 million tons offorestation credits per year fromleading forest conservation projects by 2030 through project participation, development, etc.

Maintained stable and efficient production operations at Ichthys LNG
Maintained a stable supply of natural gas and increased supply volume throughthe safe operation of gas fields, the Naoetsu LNG Terminal and the approximately 1,500-kilometer long, high-pressure gas pipeline network in JapanEngaged in activities to promote natural gas utilization
Started commercial operation of local smart energy projects using
gas cogeneration facilities
Started sale of carbon neutral gas
Continued to improve management of GHG emissions, including methane

Australia: Aim to further increase the current LNG production capacity to build
a framework capable of stably producing 9.3 million tons per year at Ichthys LNG
Abu Dhabi: Aim to further reduce production cost by optimizing personnel allocationand introducing new technologies, and supply offshore facilities with clean power
Norway: Commence power generation at Hywind Tampen, andevaluate the introduction of hydropower from shore in the Wisting
Oil Field development plan
Japan: Save energy consumption, introduce carbon neutral power,
implement zero flare measures
Further expand carbon neutral products and marketing

Increase gas ratio of portfolio byraising gas investment ratio toabout 70%
Make our projects and operations
cleaner by achieving zero routine
flaring, introducing CCUS and renewable electricity, conserving
energy, utilizing forestation credits, and other actions

INPEX CORPORATION Annual Report 2021

Medium- to Long-Term Targets,
Initiatives and Directions

Prevention ofmajor incidents

Enhanced the Corporate HSE Management System (revision/recompilation of the system’s various manuals to improve their conformance with our rules and standards).
Improved HSE assurance and governance by conducting four
Corporate HSE audits at operator sites in Japan and overseas
Provided HSE technical support in 26 operations, and HSE leadership training that included a new seminar for HSE skill development covering areas of safety, health and environment
Enhanced process safety and asset integrity management by conducting HSE reviews and providing technical support (bowtie analyses,
safety case reviews, etc.) at operator projects, and by commencing
measurement and monitoring of Tier 3 and Tier 4 leading indicators
Thoroughly implemented serious incident management by reporting, investigating, and statistically analyzing serious/high-potential
incidents, drawing lessons from them, and sharing our findings
Reinforced emergency and crisis response capabilities by continuing to respond to COVID-19 through the Corporate Crisis Management Team, share information, and make improvements, andby carrying out three Corporate-level crisis response trainings thatsimulated crises in Japan and overseas

Enhance the effectiveness of the Corporate HSE Management
System: complete standardization of Corporate HSE Procedures
and develop the next Corporate HSE Mid-term Plan
Strengthen HSE assurance and governance: conduct three Corporate HSE audits
Provide HSE technical support and foster HSE leaders: extend
HSE technical support to renewable energy and other projects,
and systematically provide HSE training
Enhance process safety and asset integrity management: conduct
HSE reviews, support safety case implementation, and prepare
related policies
Thoroughly implement serious incident management: report, investigate, and statistically analyze serious/high-potential incidents, draw lessons from them, and share our findings
Reinforce emergency and crisis response capabilities: strengthen
defenses against emerging threats such as cyberattacks and theincreased severity of natural disasters, and the platforms for security/crisis management

Securing
occupational
health andsafetyStrengthened HSE management at worksites by: analyzing HSE culture survey feedback to identify strengths/weaknesses of each division, and using the results to develop an action plan that will beincorporated in the next mid-term plan; and held annual HSE Forum
Reduced the number of incidents by: revising the reporting/investigation standards; developing the reporting system and promoting its use; reporting, statistically analyzing, benchmarking,drawing lessons from incidents, and sharing the findings; and introducing incident management-related safety leading indicators
Strengthened health management by: implementing measuresagainst COVID-19; conducting a health performance survey; holding health-related seminars; revising the Corporate Health Management Standard; and drafting health risk register standards

Strengthen HSE management at worksites: formulate/implement
action plan based on the results of the HSE culture survey; reinforce
coordination between Corporate and operator projects; and hold
HSE Forum
Reduce the number of incidents: issue incident bulletins; draw lessons from incidents; statistically analyze and benchmark incidents;
strengthen incident cause investigation; and promote introductionof safety leading indicators
Strengthen health management: maintain COVID-19 measures; assess state of occupational health management at operating sites;
carry out health programs; and enhance health risk assessments

Executed and reviewed our Corporate Environmental Management Plan, including initiatives for biodiversity conservation andwater management

Execute and review our Corporate Environmental Management
Plan, including initiatives for biodiversity conservation and water
management

Conservation of biodiversity
Updated the database of protected areas adjacent to domestic
and overseas project sites
Participated in forestation and biodiversity conservation activities
at domestic projects (some activities were not held due to
COVID-19 safety measures)Collected basic information on ecosystems, etc of peripheral areasof our domestic projects (Nagaoka, Joetsu, Kashiwazaki, Niigata)
Surveyed the current situation of biodiversity at overseas projects(bird surveys & rare species surveys)
Conducted biodiversity monitoring at overseas projects
Considered the establishment of a biodiversity conservation policy

Conservation of biodiversity
Update the database of protected areas adjacent to domestic andoverseas project sites
Participate in forestation and biodiversity conservation activities atdomestic projects
Conduct an ecosystem survey in peripheral areas of domestic
projects (Nagaoka)
Survey the current status of biodiversity at overseas projects
Conduct biodiversity monitoring at overseas projects
Establish the biodiversity conservation policy
Consider revisions to biodiversity conservation targets and KPIs

Water management
Updated water stress assessments in project areas
Assessed the current state of water balance of our businesses andcollected/ analyzed data on the volume of freshwater/seawater
intake and use
Considered the establishment of a water risk management policy
Responded to the CDP water security questionnaire

Water management
Update water stress assessments in project areas
Assess the current state of water balance of our businesses andcollect/analyze data on the volume of freshwater/seawater intake
and useConsider revisions to water risk management targets and KPIs

Japan
Maintained positive relationships with stakeholders through continuous dialogue, including appropriate response to inquiries
from local communities and publication of newsletters
Australia
Maintained positive relationships with government agencies, industry groups, and local stakeholders through more than 300
dialogues

Japan
Maintain positive relationships with stakeholders through continuous dialogue, including appropriate response to inquiries from local communities and publication of newsletters
Australia
Maintain positive relationships with stakeholders and communities through proactive engagement

GlobalInvested approximately 2 billion yen in social contribution initiatives
Australia
Continued to operate five programs through the Larrakia Ichthys
LNG Foundation Trust; approved and launched four new programs for supporting elderly people
Directly employed 36 Aboriginal and/or Torres Strait Islander
people and indirectly employed 100 through contractors, as ofthe end of FY2021
Procured more than A$10 million of good/services from 17 Aboriginal and Torres Strait Islander businesses from 2019 to 2021
Achieved our Reconciliation Action Plan targets for employment
and procurement

GlobalContinue investment in social contribution initiatives in responseto the needs of the communities in which we operate
Australia
Achieve targets set in Reconciliation Action Plan 2019-2022, anddevelop the next plan for 2023-2025
Continue to implement our social contribution strategy

GlobalContinued promoting INPEX Values, including by presenting theannual Values Awards and holding workshops
Japan
Continued implementation of our internal recruitment system (job board)
Introduced a new scheme to facilitate internal side work
Continued providing career consultation to young office workers andholding skill mapping interviews with young technical employees
Expanded career consultation to older workers
Implemented wellbeing workshops
Held seminars on psychological safety
Launched Breakthrough Leaders Program for fostering the next
generation of managers
Introduced online learning materials to enhance the English-language business communication skills of all employees
Started coaching sessions for participants in the general manager
training program
Revised work-from-home arrangements
Introduced “super flextime” system
Held two rounds of workplace COVID-19 vaccinations
Introduced team-building initiatives
Encouraged employees to take annual paid leave
Held health-related seminars
Received certifications by the 2021 Health & Productivity Stock
Selection Program, and the 2021 Certified Health & Productivity
Management Organizations Recognition Program
Constructed a new employee dormitory
Continued measures based on our General Employer Action Plan topromote women’s participation and advancement in the workplace
Received Gold rating in the 2021 Pride Index and Best PracticeAward from Work with Pride
Developed policies for same-sex partners and their children to enjoy the same treatment as the family members of other employees
Implemented unconscious bias training

GlobalRevise plans and measures for promoting INPEX Values
Resume opportunities for overseas office employees to be assigned to our headquarters
Japan
Continue/improve the internal recruitment system (job board)Continue/improve the scheme facilitating internal side work
Develop a comprehensive career development system, including
career training and consultation
Draw up measures for further building and instilling psychologicalsafety in the workplace
Establish a new leadership training program
Establish a new training program for employees receiving promotions
Launch Advanced Leaders Program to train candidates for general manager positions
Create a system for managing employee self-directed learning
Expand training, consultation, and other support for young employees in their first or second year on the job
Establish a new leadership training program for female employees
Continuously receive certifications by the Health & Productivity
Stock Selection Program and the Certified Health & Productivity
Management Organizations Recognition Program
Expand occupational physician team
Formulate policies to support patients with cancer/incurable disease
Conduct a third round of workplace COVID-19 vaccinations
Reduce the amount of overtime work (average of all employees)
from FY2021 level
Increase the rate of annual paid leave taken (average of all employees) from FY2021 level
Continue measures based on our General Employer Action Plan topromote women’s participation and advancement in the workplace
Continuously receive Gold rating in the Pride Index from Work with Pride,and establish a support program with the assistance of LGBT experts
Continue implementing unconscious bias training

Biodiversity
conservation &water risk
assessment

Conducting
Local
Communities assessments andmeasures toreduce impact
on local andindigenous
communities

Contribution to
local economies

Employees

Make INPEX thebest place towork

Achieve safe performance ofhigh-risk operations and full prevention of serious accidents bythorough practicing the life-saving rules and strengthening process safety management
Carry out actions that help improve HSE management(1) Senior executives demonstrate
HSE leadership(2) C ontribute to carbon-reduction
projects through HSE management(3) Perform thorough risk management(4) Strengthen accident prevention
efforts(5) Prevent leaks from facility processes(6) Prepare for emerging threats(7) Help to address global environmental challenges and create
environmental value(8) Reinforce infection control measures
Compliance of executive management, managers, and staff
with processes established underthe HSEMS
Aim to achieve zero incidents
and prevent major incidents bymore firmly embedding the culture of the INPEX Value “Safety
Number One”

Contribute to regional development
and the addressing of social issues
through our business activities,
while respecting human rights andthe cultures and customs of the areas in which we operate
Understand and respond to community needs through engagement with stakeholders in theareas in which we operate

Business and Financial Overview

FY2022 Targets

Management Foundation to
Advance Growth Strategies

FY2021 Achievements

Growth Strategies for Value Creation

Key Tasks

HSE

INPEX’s Vision and Value Creation

Material Issues

Implement programs and promote a corporate culture thatcultivates employee satisfaction/
engagement
Expand support for employee career development
Create a workplace environmentthat supports diverse workstyles
and employee wellbeing

1: Verified Carbon Units
2: International Sustainability Stanrdards Board

INPEX CORPORATION Annual Report 2021

45

Sustainability

FeaturedContent

1

Climate Change Response

Message from the Director in Charge of Climate Change Response
In February 2022, INPEX announced its Long-term Strategy and Medium-term Business Plan (INPEX VISION @2022). This
lays out the path to achieving the target of net-zero emissions by 2050 as announced in 2021.
Our basic policy for a net-zero carbon society by 2050 is summed up in the statement: “As a pioneer in energy transformation (EX), INPEX will provide a stable supply of diverse and clean energy sources, including oil and natural gas, hydrogen and renewable power.” We aim to transform net-zero carbon from an ideal to reality by around 2030.
Specifically, we will accelerate expansion of five net-zero businesses: (1) hydrogen and ammonia; (2) carbon capture,
usage and storage (CCUS); (3) renewable energy; (4) carbon recycling and new businesses; (5) forest conservation. At thesame time, we will maintain a stable supply of oil and natural gas while exerting our utmost effort to make these products cleaner.
To balance the two social demands of a net-zero carbon society and the world’s need for energy, we believe it is important to properly assess climate change risks and opportunities and to
manage them appropriately.
INPEX VISION @2022 is also reflected in our Corporate Position on
Climate Change (published December 2015, the latest revision made in
Kimihisa Kittaka
March 2022), available on our website.
Director, Senior Managing
We will continue to work with urgency to achieve our climate change Executive Officer, SeniorVice President,
goals.
Corporate Strategy &Planning, Legal Affairs

Disclosure in line with TCFD Recommendations
Efforts in achieving climate change response goals The “Corporate Position on Climate Change” (issued in December 2015, last
revised in January 2021) is available on our website.
INPEX’s information disclosure related to climate change is in line with the TCFD Recommendations.
Please refer to our Sustainability Report 2022 for more details.
Overview of TCFD Recommendations

INPEX’s disclosures

Governance

1 opportunities

Describe the board’s oversight of climate-related risks and overnance System for Climate ChangeG
Response

Disclose the organization’s governance in relation to climate-relatedrisks and opportunities

Describe management’s role in assessing and managing cli2 mate-related risks and opportunities essage from Director in Charge ofM
Climate Change ResponseGovernance Framework for Climate
Change Response

Describe the short-, medium- and long-term climate-related

Strategy
Disclose the actual andpotential impacts of climate-related risks andopportunities on the organization’s businesses,
strategy, and financial
planning where such information is material

Riskmanagement
Disclose how the organization identifies, assesses and manages
climate-related risks

1 risks and opportunities the organization has identified

Climate-related Risks and Opportunities

Describe the impact of climate-related risks and opportunities

2 on the organization’s businesses, strategy and financialL ong-term Strategy and Medium-term
Business Plan (INPEX Vision @2022)

Describe the resilience of the organization’s strategy, taking
3 into consideration different climate-related scenarios, including
a 2°C or lower scenario

INPEX Low-Carbon Society Scenarios
Assessment of Financial Impacts of
Climate-related Risks
Application of Internal Carbon Priceplanning

Describe the organization’s processes for identifying and as- ssessing and Managing Climate-relatedA
Risks and Opportunities

Describe the organization’s processes for managing climate-re-	Assessing and Managing Climate-related
Risks and Opportunities

1 sessing climate-related risks
2 lated risks

Describe how processes for identifying, assessing, and manag-

3 ing climate-related risks are integrated into the organization’sRisk Management Systemoverall risk management

Metrics andtargets
Disclose the metrics
and targets used to assess and manage relevant climate-relatedrisks and opportunities
where such information
is material

Disclose the metrics used by the organization to assess climate

1 change-related risks and opportunities in line with its strategy
and risk management process

Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG

2 emissions, and the related risks

Describe the targets used by the organization to manage cli-

3 mate change-related risks and opportunities and performanceagainst targets

Sustainability Report46

INPEX CORPORATION Annual Report 2021

 anaging GHG Emissions
MClimate Change Response and Directors’Compensation
 SG Performance Data: Climate Change
E<Target Management> fforts in Setting and Achieving Climate
E
Change Goals

https://www.inpex.co.jp/english/csr/csr/

INPEX’s Vision and Value Creation

Climate Change Response Goals

the value chain(Scope 1+2)

1 on INPEX equity share basis

Growth Strategies for Value Creation

INPEX has set three goals to help realize a net-zero carbon
Specific measures for achieving net-zero goals include:
society in accordance with the objectives of the Paris
promotion of carbon capture utilization and storage (CCUS);
Agreement.
bolstering renewable energy initiatives;promotion of
The first goal is to achieve net-zero emissions by 2050
CO2 absorption through forest conservation;
maintaining
pursuant to the Paris Agreement. The second is to achieve a
the intensity of methane emissions (methane emissions/natreduction of at least 30% in net carbon intensity (comparedural gas production) at its current low level (about 0.1%); andto 2019) by 2030 in the process of fulfilling the first goal.
zero routine flaring. Details of these initiatives are set out
Scope 1+2 emissions, which are emissions from INPEX’s
in our Long-term Strategy and Medium-term Business Planbusiness processes, come under these goals. The third goal
(INPEX VISION @2022) and INPEX’s Current Initiatives basedis to cooperate with all relevant stakeholders across the valon the Corporate Position on Climate Change.
ue chain to reduce the Scope 3 emissions fromScope 3
combustion of the oil and gas we sell. In our
2050
2030
REDUCTION
2022-2024 medium-term business plan, weWork together with all
have added the goal to reduce our emission inNET ZERO1 in
30% OR MORE2
relevant stakeholders toabsolute
emissions
reduction in net
tensity by 10% (4.1kg/boe) over three years inaddress challenges acrosscarbon intensity(Scope 1+2)
pursuit of our 2030 target.
2 in comparison with 2019

INPEX Emissions
Our net carbon intensity in 2021 was 33kg-CO2e/boe, a reduction of 20% in comparison with 2019.
2019

2020

2021

(thousand tons CO2e)

8,557

7,328

7,302

Scope2*(thousand tons CO2e)

204

148

136

(kg CO2e/boe)

41

35

33

0.10

0.07

0.04

3

Net carbon
intensity*4

Methane emissions
intensity*5(%)

Management Foundation to
Advance Growth Strategies

Scope1*3

3 INPEX’s equity share emissions
4 Net carbon intensity including offsets: ({Scope1 +Scope2} – offsets*6)/Production volume
5 Methane emissions intensity: Calculated as methane emissions/natural gas production (%), the formula used by the Oil and Gas Climate Initiative
6 The offsets include reduction contributions fromrenewable energy as well as CO 2 absorption
through forest conservation. Contributions fromrenewable energy are calculated based on Guidelines for Measurement, Reporting and Verificationof GHG Emission Reductions in JBIC’s GREEN (the“J-MRV Guidelines”)

Assessing and Managing Climate-related Risks and Opportunities

INPEX CORPORATION Annual Report 2021

Business and Financial Overview

As a general rule, INPEX assesses and manProcess of Assessing and Managing
ages climate-related risks and opportunities
Climate-related Risks
Document Types
Decision-making Authorities
in an annual cycle. Our overall response to
climate change is handled by the Climate“Corporate Position
Resolution by the Bosrd
Change Strategy Group within the Corpoon Climate Change”
of Directors
rate Strategy & Planning Division, Corpo(disclosed)
rate Strategy & Planning Unit.
Reporting to the Board of Directors
and Executive Committee,“INPEX’s Current Initiatives”
For climate-related risks, the Climate
CEO Approval, Prior Discussion at(disclosed)
Sustainability Committee
Change Strategy Working Group (WG),(once annually)
composed of some 30 members representReporting to the Executive Committee,
CEO Approval, Prior Discussion at
Preventive anding each of the divisions, conducts as­
Sustainability Committee (once annually),
Mitigation Measures
Drafting by Climate Change Strategy
sessments and devises preventive andWorking Group (once annually)
mitigation measures. These measures andCreating Proposals for
Monitoring Preventive and
Implementing Preventive
their incorporation into annual plan are disPreventive and
Mitigation Measuresand Mitigation Measures
Mitigation Measurescussed in Sustainability Committee.
Climate Change
Climate Change
Divisions and
The process of risk assessment follows
Stategy Group,
Strategy Group,
Subsidiaries
Corporate Strategy &Corporate Strategy &the procedure outlined in ISO31000 (2009),
Planning Unit
Planning Unit
an international risk management standard.
Hydrogen & CCUS Development and Renewable Energy
We update external and internal factors and share informaand New Business divisions at the core.
tion regarding the company’s status among WG members.
In addition, INPEX’s Current Initiatives based on the CorWe then identify risks and analyze their causes, preventive
porate Position on Climate Change includes initiatives relatmeasures, mitigation measures, and residual risks. The resided to the five net-zero businesses, the transition to natural
ual risks are assessed using the Risk Assessment Matrix
gas, and making upstream operations cleaner. These initiaBased on TCFD Recommendations, created by INPEX.
tives are considered by the Sustainability Committee, apAs outlined in our Long-term Strategy and Medium-term
proved by the CEO, and then reported to the Executive
Business Plan (INPEX Vision @2022), we take a compaCommittee and the Board of Directors.
ny-wide approach to climate-related opportunities, with our

47

Featured
Content

Sustainability

Human Resource Development

2

Our Policy
As a company operating across the world, INPEX views
workforce diversity and the development of a global
workforce capable of sharing common values as importantfor strong, sustainable and responsible business man­agement. To achieve these goals, our Human Resources (HR)division formulated the INPEX HR Vision, comprising four
key components, as shown below. With these four pillars at
the core, we are working to create an internationallycompetitive organization by applying a global perspective
as we implement HR initiatives to attract and develop our
personnel and improve team performance.

To further enhance efforts toward diversity—one of our
INPEX Values—we communicate our basic policy on diversity
and inclusion (D&I) to all stakeholders. Based on this policy,
we promote D&I with the aim of becoming an organization
where a diverse workforce—including women, people withdisabilities, LGBTQ+, and foreign nationals—can feel
comfortable and work actively. The company believes that
promoting D&I through these initiatives will improve its
organizational capabilities, broaden its appeal and enhance
its reputation globally.

INPEX HR VISION
Attraction and
1 Talent
Engagement

on People
2 Organization Effectiveness 3 Focus
Development

4 HR Excellence

Make INPEX the best place to work –“the employer of choice”

Maximize team performance throughHR Management Process

Support business strategy withworldclass functional expertise

 mployee satisfaction and opportunityEfor growth
Total Reward orkforce planning and organizationW
review
Optimized staffing planning within theorganization

Develop of future leaders and global
workforce capability
Development of future leaders
Talent management cycle
Diversified career development programs ffective, innovative, and trusted HR
Eprocesses and systems
Develop HR professionals
Global collaboration and sharing best practices

Human Resource Development
INPEX’s training curriculum is designed to help personnel
develop the required skills and mindset to work in a large
energy company and contribute to the business over thelong term. Group training, practical training (primarily
through overseas visits or appointments), and e-learning focused on developing business knowledge are the principal
modes of delivery.
In FY2021, as part of job-level-based training, we
strengthened our support for line management and conducted training sessions for all managers focusing on staff
development, leadership and teambuilding to improve organizational capabilities. For younger employees, after taking adequate precautions against COVID-19, we resumed
operational and practical training in the form of on-the-job
experience at overseas offices and other onsite training
abroad. The aim of these programs is to develop human resources capable of playing an active role at the global level.
For those who joined the company in FY2021, we combined face-to-face training with online sessions to help themadjust to the workplace as they learned the basics of working at INPEX. In doing so, we took steps to cultivate a senseof camaraderie among fellow recruits in a telework (workfrom home) setting, and regularly conducted pulse surveys
to help with job adjustment throughout the year. For young
employees performing technical work, the approach used isbased on a medium-to-long-term vision and includes interviews using skill maps relating to the individual’s specialist
field, with the ultimate goal of cultivating the next generation of leaders.
Career support takes the form of career training for employees aged 30, 40, and 55, and is intended to help themdevelop career autonomy through techniques such as
self-reflection and career experience inventory.
In 2021, we organized seminars to promote psychologicalsafety throughout the company, with some of our employees
taking the role of instructor. We believe that psychologicalsafety encourages personal growth as well as transmission of
new ideas at the team level to help build an innovative

Human Resource Development Curriculum
Flexibility

Adopting and acting on new ways of thinking

Agility

Making quick decisions and acting on them as thesituation demands

Transparency

Fully sharing information about the organization’s
intentions, responsibilities, decision rationales, etc.

Enhancing organizational
capabilities

Advancing the individual
On-site training atother locations

Business knowledge
training

Training in Japan and overseas

Globis Unlimited

Skills related to
specialist fields
Internal and externalseminarsOn-the-job training
Training for new graduates
in technical fields

Business strategy
Marketing
Organization management
Accounting
Finance
Critical thinking

Career training

Leadership training

Life shift
Career 50
Career 40
Career 30

Leadership I
Leadership II
Leadership III
Leadership AS

Training for
promoted employees
Newly appointed generalmanagers
Manager follow-up
Newly appointed managers
Before promotion to leader
positionOn selection basis
ALP
BLP
Study overseas
GSE overseas personnel
development system
Leadership training for women

Support for younger employees

EF English Live
Improving English proficiency

Third-year follow-up training
Second-year follow-up training
First-year follow-up training
Group training for new graduates
Mentoring/supporter systems

Personal development system
Support for acquiring qualifications

D&I training
Women’s advancement
Unconscious biasLGBT

Organizational culture reform
Psychological security

48

INPEX CORPORATION Annual Report 2021

Well-being

Communication

INPEX’s Vision and Value Creation

organization in which employees can exchange opinions ina free and uninhibited manner.
In FY2022, we introduced a job-based personnel systemand simultaneously overhauled our training regime with anemphasis on autonomy and leadership. We abolishedjob-level training and initiated leadership training targetinga wide cross-section of employees. We have also continued
to strengthen support for line management—the backboneof the organization—and encourage each employee topursue career autonomy. For younger employees, there is an
ongoing program during the first three years focused on acquiring the basic abilities needed to function in a work environment. In addition, we have introduced an e-learning
system designed to strengthen fundamental skills and provide training tailored to each individual. The aim of these
initiatives is to advance the individual and enhanceorganizational capabilities.

Developing Next-generation Leaders
A program to develop leadership skills was also inaugurated in Australia during FY2021. Approximately 300 teamleaders and managers participated in the three day training
program aimed at instilling the qualities and behavioral attributes expected of leaders.

Growth Strategies for Value Creation

In FY2021, we initiated the Breakthrough Leadership Program (BLP) under which selected individuals undergo training with aim to produce transformational leaders who will
ultimately be responsible for managing the company in the
future. Currently, about 20 are on the program. In FY2022, in
addition to the BLP, we plan to also start the Advanced
Leaders Program (ALP).

Breakthrough Leaders Program
The program lasting up to five years is tailored to each selected individual, who are deliberately and strategically subjected to an intensive
series of tough assignments (stretched tasks, leadership roles, new job areas etc,) over a short timeframe to accelerate their development.

HR Evaluation and Placement

Collaboration

SafetyWe rely on unity and team spirit tobuild strong professional working
relationships within INPEX as well as
within the communities in which we
operate.

Anzen dai ichi - ’Safety
Number One’ - is the way
we think, act and promote
safety at INPEX that forms
the core of a strong HSE
cultureIntegrity

Ingenuity
We embrace initiative andinnovative problem-solving
at every level of INPEX andcelebrate our successes at
every opportunity.

Management Foundation to
Advance Growth Strategies

Diversity

We are ethical, honest
and trustworthy in ourbusiness relationships
and professional in our
conduct at all times.

We proactively embrace our individual differences which iscentral to who we are at INPEX and what makes a uniqueand welcoming workplace environment.

enables employees to carve out their own careers. Further,a job return program was introduced in April 2020 providing
an opportunity to motivated employees who had resigned
due to unavoidable personal reasons to return to their jobs.
Based on the findings of the Global Engagement Survey
conducted from late 2019 through early 2020, we introduceda job-focused personnel system for senior management inApril 2022. The system is designed to clarify the job roles ofexecutives, define remuneration based on job responsibility,
and address line-management succession planning and related training.

Business and Financial Overview

INPEX aims to maximize performance across the organization by ensuring employees treat the organization’s objectives—based on the objectives drawn up by each division—as their own. This is to achieve the highest level of employee
motivation—by having each individual outline the specificprocesses leading to achievement of their own annual objectives—to reliably and efficiently realize the objectives ofthe organization as a whole.
An INPEX Values-based evaluation process is implemented at all sites, including Australia and Indonesia. One important assessment criterion used is the level to which INPEX
Values are demonstrated in daily operations. The process
enables employees with diverse backgrounds and values togo about their tasks with a shared understanding of the values expected of INPEX employees. It also encourages themnot only to achieve their own individual goals, but to deliver
results for the entire organization.
In addition, employees are given the opportunity oncea year to state the kind of work they would like to do or torequest a transfer. A new internal job posting scheme—designed to optimize job placement within the company whileboosting employee motivation—was also introduced in
FY2017, and in March 2021, INPEX established an internalside job system, providing opportunities for employees totake on new challenges across organizational or job-category lines. These are some of the initiatives adopted to revitalize the workplace while creating an environment that

Internal job posting scheme
For Job positions that are adequate for internal job postings, each divisions internally post job offers. And upon selection, suitable applicants are placed into the position.
Internal side job system
A system that enables employees to work for other divisions part time during office hours, without transfers or secondment.
Job return programA program that enables motivated employees who had resigned due to unavoidable personal reasons to return to their jobs once thereason of resignation is resolved and subject to meeting certain conditions.
Job-focused personnel system
Compared to the previous occupational ability based personnel system, which allocates work to individuals, job-focused personnel system links individuals to jobs. The system is designed to clarify the job roles and enables remuneration to be defined by job responsibility based on the right person in the right place. We built an INPEX version of the job-focused personnel system based on our vision,
with an objective to further strengthen the organization, by removing any consideration on personal elements such as age, promoting
recognition of each individual’s roles and responsibilities, establishing a fair and convincing evaluation system, as well as to make fulluse of our existing strengths such as integrity and teamwork.

INPEX CORPORATION Annual Report 2021

49

Sustainability

FeaturedContent2

Human Resource Development

Promoting Diversity
 romoting the Advancement of Female
P
Employees
INPEX is intent on creating an environment that enables
women to demonstrate their abilities to the full. In Japan, we
have drawn up a General Employer Action Plan based on
the Act on the Promotion of Female Participation and Career Advancement in the Workplace. Among other things,
this plan sets a target of hiring women to fill at least 25% of
new graduate positions, a target that has been met over thefour years from 2019 through 2022. Another example of thiseffort was the hosting in FY2021 of a seminar for managers
on the subject of unconscious bias, to deepen their understanding of unintentional bias related to gender. In FY2022,
INPEX’s in-house newsletter featured articles on the advancement of women in the company’s overseas offices
timed to coincide with International Women’s Day on March
8. Our goal is for women to fill 3% of management positions(as defined by INPEX’s grading system) by end-March 2023.
We will continue our positive-action drive with the aim of lifting this figure to 6% during FY2025 through more intensive
mid-career recruitment of women capable of performing
management roles.
Reflecting the efforts to empower women in management, INPEX has appointed one outside female director andone outside female auditor, and in March 2020, appointed afemale executive officer promoted within the organization
for the first time in the company’s history.

LGBTQ+
To promote understanding towards LGBTQ+, the company
has had an ongoing LGBT training program since FY2017,and in FY2018, held lectures for executives concerning
LGBTQ+.
Efforts have also been under way to upgrade internal systems. In FY2020, employees were given the right to refuse
requests to undertake business travel on the grounds thatthey are LGBT, and in FY2021, “family” was redefined to include same-sex partners and their children for the purposeof the company’s benefit program. Employees are also encouraged to start using names that reflected their gender
identity. In addition to an in-house LGBTQ+ consultation
desk, we set up a consultation desk managed by outside
professionals in FY2022. INPEX’s continuing positive actionin these areas has won it recognition for its pioneering efforts in the workplace. In FY2021, we received the Gold
Award (the highest rating) in the PRIDE Index evaluating initiatives related to LGBT and sexual minorities, along witha Best Practice Award.

Promoting Work-life Balance
INPEX promotes work–life balance, aiming to create an environment where all employees can work and demonstrate
their full potential in a way that befits their lifestyles. In linewith this objective, we introduced work-from-home arrangements for office-based staff in April 2020. Core time waseliminated from the flextime work policy in April 2021. We
continue to encourage employees to take consecutive days
off during summer and to recommend dates for taking paid
leave. These measures aim to give employees time for physical and mental refreshment.
To reduce overtime work, Wednesday is designated asa work–life balance day when employees are encouraged togo home early. If an employee’s overtime continuously exceeds a certain number of hours, the supervisor and the HR
Division will communicate with the employee to understandthe situation, jointly identify problems and figure out
solutions.
As a further measure to promote diversity and individuality, in FY2018, the company introduced a year-round casualbusiness dress code to make the work environment evenmore motivating for employees.

Treating Health as a Management Issue
INPEX Group Health Statement
In September 2018, the INPEX Group Health Statement was
released with the appointment of the President and CEO as
Chief Health Officer. At the Health Management Committeeof which members are INPEX, the labor union, health insurance union, and occupational physicians, we meet to identify
employee health issues and consider relevant solutions.
The committee is focused on and regularly conducts
measuring of effectiveness post the release of our INPEX
health management strategy map, has issued INPEX sevenhealthy behaviors, and is prompting employees to actively
improve lifestyle habits.
Also, a system is in place for employees to take leave atease when they get sick by expanding initiatives such as theaccumulated leave days and special sick leave days.

Mental Health Initiatives
INPEX conducts employee stress checks once a year to ascertain the mental and physical condition of each employee
and analyze the organizational environment in order to

50

INPEX CORPORATION Annual Report 2021

effect changes designed to improve the workplace atmosphere. The checks allow us to monitor the mental health of
employees at regular intervals, with a high 91% of employees completing the check in FY2021. For those with mental
health issues, the primary physician, occupational physician,nurse, HR department and the individual’s boss act in concert to provide follow-up care while the employee is on
leave and after their return to work.
To prevent employees from feeling isolated during thedrawn-out pandemic, we added the services of mental
health counselors to provide consultation to employees stationed overseas and to accompanying family members.
In FY2021, we started conducting one-on-one meetings
by HR employees and weekly pulse surveys for new graduates, while the system under which employees in training receive operational guidance and mental support from older
workers—referred to as “mentors” for employees in theirfirst year and as “supporters” for those in their second andthird years—is now well established.

INPEX’s Vision and Value Creation

Respect for Human Rights
Our Policy

Human Rights Due Diligence in Projects

Embedding Human Rights into Our Approach

INPEX invited an external human rights expert to conduct
a human rights risk assessment on our operated projects.
The key objectives of the assessment were as follows:	Identify salient human rights risks
Identify issues for human rights risk management
The assessment used the HRIA (Human Rights Impact Assessment) tool, which draws on RepRisk's database anddocuments from Verisk Maplecroft and other researchorganizations.
The salient human rights risks identified are:Child labor
Forced labor
Impact on cultural heritage and traditional culture
Infringement on the rights of the local community
Discrimination in recruitment and employment
Environmental damage impacting local community
This assessment also analyzed management system controls, including the PDCA cycle and monitoring, as well as
the ideal form of the INPEX Group Human Rights Policy.
In the first quarter of 2022, we conducted surveys and interviews at our sites in Japan and, for the first time, the USA.
The survey in Japan showed improvement in the management of child or forced labor risks. The assessment in the
USA considered salient human right risks and checked practices for managing those risks. While our assessments foundno material risks, we nonetheless continue to enhance ourhuman rights risk management.

Business and Financial Overview

	We recognize that human rights are important rights thatderive from the dignity of individuals, and we respect thehuman rights of individuals in relevant countries.
	We respect international human rights codes, and we arecareful to avoid to be involved in any act that may infringe
human rights.
	We do not discriminate based on factors such as race, skincolor, gender, sexual orientation, gender identity, age,
creed, religion, birth, nationality, disabilities, or educational background.
	We do not force employees to work against their will, andwe do not cause children to work.

Salient Human Rights Risks

Management Foundation to
Advance Growth Strategies

Our approach to human rights is outlined in the INPEXGroup Human Rights Policy approved by our Board of Directors. The director in charge of compliance, who is appointed
by the Board of Directors, chairs the Compliance Committee, and reports to the Board of Directors on humanrights-related risks and performance.
The INPEX Group Human Rights Policy, Sustainability
Principles, Business Principles, and Code of Conduct require
all INPEX Group executives and employees not only to comply with laws and regulations but also to respect social
norms and act with high moral values. Our Code of Conduct
makes the following statements concerning human rights.

For the projects in which INPEX serves as the operator, wemanage social and environmental risks—including humanrights-related risks—based on the IFC Performance Standards, which are a globally recognized benchmark for environmental and social risk management. Compliance withthese standards within Ichthys LNG operations is monitored
through regular reports and audits.
The set of standards includes IFC Performance Standard 2– Labor and Working Conditions, which covers child labor,
forced labor, working conditions, and grievance mechanisms.
For projects in which we participate as a non-operator, in
2020, we surveyed the operators of each project to confirm
the status of their human rights initiatives.

Growth Strategies for Value Creation

INPEX supports international standards such as the International Bill of Human Rights, the International Labor Standardsof the International Labor Organization, the United Nations
Guiding Principles on Business and Human Rights, and theprinciples of the United Nations Global Compact. In May
2017, we issued the INPEX Group Human Rights Policy toclearly define our commitment to respect human rights andprovide a compass for fulfilling our responsibilities in this regard. In accordance with that policy, we implement measures
to address the human rights of all stakeholders in each country and region where we operate, including stakeholders inour supply chains. Our Human Rights Policy prohibits allforced labor and child labor and affirms our respect for freedom of association and protection of the right to organize.
To comply with the United Kingdom Modern Slavery Act
2015, since FY2016 we have annually released a statement on
our website to disclose the policies, systems and measuresthat we have in place for preventing slave labor and humantrafficking within the Company and throughout the supply
chain.

The Compliance Committee—which consists of directors
and executive officers—is chaired by the director in chargeof compliance, and meets regularly to ensure strict compliance with corporate ethics and the Code of Conduct. The
General Administration Unit manages day-to-day responsibility for human rights and serves as the secretariat of theCompliance Committee. It also regularly holds liaison meetings of representatives from each business unit to promote
the above-mentioned human rights initiatives, including theprevention of harassment.
Sustainability Reporthttps://www.inpex.co.jp/english/csr/csr/
INPEX CORPORATION Annual Report 2021

51

Corporate GovernanceManagement (As of end of March, 2022)
Directors
Name

Title and Position

TermofofficeNumberof shares
held

Career summary and concurrently held positions

August 2009
June 2010
June 2018

Senior Executive Vice President, INPEX Corporation
Representative Director, President & CEO
Representative Director, Chairman (incumbent)

63,046

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
Director-General, Trade and Economic Cooperation
Bureau, METI
July 2003
Director-General, Manufacturing Industries Bureau,
METI
Director-General, Trade Policy Bureau, METI
June 2004
Vice-Minister for International Affairs, METI
July 2006
November 2007 Advisor to Tokio Marine & Nichido Fire Insurance Co.,Ltd.

April 2017
August 2017
June 2018

Councilor (part-time), INPEX Corporation
Senior Executive Vice President
Representative Director, President & CEO(incumbent)

29,246

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
Director-General, Minister’s Secretariat
Director-General, Manufacturing Industries Bureau,
METI
September 2012 Director-General, Trade Policy Bureau, METI
June 2013
Commissioner, Agency for Natural Resources andEnergyVice-Minister for International Affairs, METI
July 2015
Joined Teikoku Oil Co., Ltd.
Director and General Manager, Production, Domestic
Headquarters, Teikoku Oil Co., Ltd.
Managing Director, President of Domestic Operation Division
and General Manager of Niigata District Department
Director, Managing Executive Officer, Senior Vice
President of Domestic Projects, INPEX Corporation
Director, Managing Executive Officer, Senior Vice
President of Gas Supply & Infrastructure Division
Director, Managing Executive Officer, Senior Vice President of Technical Headquarters

June 2018

Director, Senior Managing Executive Offcer, Senior Vice Presidentof Technical Headquarters and in charge of HSE and ComplianceDirector, Senior Executive Vice President, Senior Vice
President of Technical Headquarters, HSE and ComplianceDirector, Senior Executive Vice President, SeniorVice President of Technical Headquarters, Hydrogen& CCUS Development Office, HSE and ComplianceDirector, Senior Executive Vice President, Senior Vice President,
Hydrogen & CCUS Development, HSE and Compliance (incumbent)

Joined Teikoku Oil Co., Ltd.
General Manager, Business Development Department,International Project Division & Domestic Offshore
Division.
Executive Officer, Vice President, Asia & Australasia,
General Manager of Planning & Coordination Unit andOffshore Japan Unit of the Company
Managing Executive Officer, Senior Vice President, Asia
& Australasia

June 2019

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
Director-General for Consumer Policy, METI
Director-General, Kyushu Bureau, METI
Joined INPEX Corporation
Executive Officer, Vice President of Corporate Strategy& Planning Division, General Manager of Corporate
Strategy & Planning Unit, and Corporate
Communication Unit

June 2016

April 1972

Toshiaki
Kitamura

Representative Director,
Chairman

Inside Director

11 yearsand 9monthsJuly 2002

April 1980

Takayuki
Ueda

Representative Director,
President & CEO

Inside Director

Takahiko
Ikeda
Inside Director

3 years
and 9monthsDirector, Senior Executive
Vice President,
13 yearsHydrogen & CCUS
and 6
Development,
months
HSE and Compliance

July 2010
August 2011

April 1978
March 2005
June 2007

46,890

October 2008
June 2014
April 2017

Kenji
KawanoInside Director

Kimihisa
Kittaka
Inside Director

Nobuharu
Sase
Inside Director

Daisuke
YamadaInside Director

Director, Senior Executive
Vice President,
Americas Projects Unit andStrategic Projects Office,Head of Overseas Projects

Outside Director

30,726

April 1981

22,240

October 2007
July 2008
November 2010
June 2012

April 1981
October 2008
June 2010

45,754

June 2016
January 2022

April 1984
April 2011

Director, Managing
Executive Officer, SeniorVice President,
Finance & Accounting

2 years

Director

5 years
and 9monthsApril 2012

10,391

April 2013
July 2013
April 1973
April 2004
April 2005

0April 2008
April 2011
April 2013

June 1973
April 2005

Director

4 years
and 9monthsApril 2008

0

October 2008

Independent Director

June 2009

AtsukoNishimura

April 1979
June 1997

Outside Director

Director

4 years
and 9months0

Independent Director

Tomoo
Nishikawa
Outside Director

April 1977

Director

2 years0

HidekaMorimoto
Outside Director

June 1979
August 1995

Director

Independent Director

INPEX CORPORATION Annual Report 2021−

0March 2021
January 2022

March 2020
January 2022
March 2022

June 2019
January 2021

Managing Executive Officer, Senior Vice President,
Asia Projects
Senior Managing Executive Officer, Senior Vice
President, Asia Projects
Senior Executive Vice President, Americas Projects
Unit and Strategic Projects Office Head of Overseas
Projects
Director, Senior Executive Vice President, Americas
Projects Unit and Strategic Projects Office, Head ofOverseas Projects (incumbent)
Director, Managing Executive Officer, Senior Vice
President, Corporate Strategy & Planning
Director, Managing Executive Officer, Senior Vice
President, Corporate Strategy & Planning, Legal
Affairs
Director, Senior Managing Executive Officer, SeniorVice President, Corporate Strategy & Planning,
Legal Affairs (incumbent)

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
Vice President of General Administration Division,
General Manager of Secretarial Unit
Executive Officer, Vice President of Oil & Gas Business
Division No.1, General Manager, Oil Marketing Unit
Director, Managing Executive Officer, Senior Vice
President, General Administration
Director, Senior Managing Executive Officer, SeniorVice President, General Administration (incumbent)
Joined The Industrial Bank of Japan, Ltd. (currently Mizuho Bank, Ltd.)
Executive Officer, General Manager of Industry
Research Division, Mizuho Corporate Bank, Ltd.
Executive Officer, General Manager of Industry
Research Division, Mizuho Bank, Ltd.
Managing Executive Officer, Deputy in charge of BranchBanking Group, Mizuho Bank, Ltd. Managing Executive Officer
in charge of Corporate Banking, Mizuho Corporate Bank, Ltd.
Managing Executive Officer in charge of BranchBanking Group, Mizuho Bank, Ltd.

April 2014
April 2018
May 2019
June 2019
March 2020

Managing Executive Officer, Head of Corporate Banking
Unit (Large Corporations), Mizuho Financial Group, Inc.
Senior Managing Executive Officer in charge of Digital
Innovation, Mizuho Financial Group, Inc. (resigned in March 2019)
Councilor, INPEX Corporation
Managing Executive Officer, Vice President, Finance & Accounting,General Manager, Finance Unit, Finance & Accounting Division
Director, Managing Executive Officer, Senior Vice
President, Finance & Accounting (incumbent)

June 2013
Joined Mitsubishi Corporation
Member of the Board, Senior Executive Vice President,
Senior Vice President, Senior Assistant to Group CEO,Group CEO, Energy Business Group, Mitsubishi Corporation
Energy Business Group, Mitsubishi Corporation
April 2014
Member of the Board, Senior Executive Vice President, Group
Senior Vice President, Division COO, Petroleum BusinessCEO and CCO, Energy Business Group, Mitsubishi Corporation
Division, Mitsubishi Corporation
June 2016
Corporate Advisor, Mitsubishi Corporation (incumbent)
Director (Outside), INPEX Corporation (incumbent)
Executive Vice President, Group COO, Energy Business Group, Mitsubishi Corporation June 2016
Executive Vice President, Group CEO, Energy Business Group, Mitsubishi Corporation (Concurrently held positions)
Senior Executive Vice President, Group CEO, Energy
Corporate Advisor, Mitsubishi Corporation
Business Group, Mitsubishi Corporation
Outside Director, Kintetsu World Express, Inc.
Joined Mitsui & Co., Ltd.
Managing Officer, Chief Operating Officer, Energy
Business Unit, Mitsui & Co., Ltd.
Executive Managing Officer, Chief Operating Officer,
Europe Middle East and Africa Unit, Mitsui & Co., Ltd.
Senior Executive Managing Officer, Chief Operating
Officer, Europe Middle East and Africa Unit, Mitsui &Co., Ltd.
Representative Director, Senior Executive Managing
Officer, Mitsui & Co., Ltd.

Joined Ministry of Foreign Affairs
Director, First Africa Division, Middle Eastern and
African Affairs BureauCounselor/Minister, Permanent Mission of Japan to theAugust 1999
United Nations
June 2001
Minister, Embassy of Japan in Belgium
September 2004 Professor, School of Law, Tohoku University
Administrative Vice President, Japan Foundation
June 2008

April 1972

Independent Director

52

October 2008
June 2012

Director, Senior Managing
5 years
Executive Officer, Senior
and 9
Vice President,
monthsGeneral Administration

Independent Director

Norinao
Iio−

Director, Senior Managing
Executive Officer, Senior
5 years
Vice President,
and 9
Corporate Strategy &monthsPlanning,
Legal Affairs

Jun Yanai
Outside Director

April 1980
March 2006

March 2020

Joined the Ministry of Construction (currently the Ministryof Land, Infrastructure, Transport and Tourism)
Attorney at Law admitted to practice in Japan; joinedAnderson Mori & Rabinowitz (currently Anderson Mori &Tomotsune), and later served as Partner
Completed a Master of Laws (LL.M.) at Harvard Law
SchoolPartner, Komatsu, Koma & Nishikawa (currently Asahi
Law Offices)

April 1981
Joined Environment Agency (currently Ministry of theEnvironment)
September 1997 Private Secretary, Director General of Environment Agency
Private Secretary, Minister of the Environment
February 2002
July 2008
Director, General Affairs Division, Ministry’s Secretariat
July 2009
Director, Personnel Division, Ministry’s Secretariat
August 2011
Councilor, Cabinet Secretariat and Director, Cabinet
Secretariat Nuclear Safety Regulation Organizational
Reform Office
September 2012 Deputy Director General, Nuclear Regulation Agency

August 2009
April 2010
April 2011
June 2011
June 2017

Representative Director, Senior Executive Managing
Officer, Chief Compliance Officer, Mitsui & Co., Ltd.
Representative Director, Senior Executive Managing
Officer, Mitsui & Co., Ltd.
Director, Mitsui & Co., Ltd.
Counselor, Mitsui & Co., Ltd.
Director (Outside), INPEX Corporation (incumbent)

Senior Councilor, Japan Oil, Gas and Metals
National Corporation
Ambassador Extraordinary and Plenipotentiary to
the Grand Duchy of Luxembourg
July 2016
Ambassador Extraordinary and Plenipotentiary in chargeof Women, Human Rights and Humanitarian Affairs
June 2017
Director (Outside), INPEX Corporation (incumbent)(Concurrently held positions)
Outside Director, TAISEI CORPORATION
April 2012

April 2014

Member of House of Representatives (for one term,
Kanagawa 3rd district)
Managing Partner, Sidley Austin Nishikawa Foreign
Law Joint Enterprise
November 2006 Auditor-Secretary, Tohoku University
Visiting Professor, Tohoku University
April 2008
Partner, Sidley Austin Nishikawa Foreign Law Joint
January 2020
Enterprise
March 2020
Director (Outside), INPEX Corporation (incumbent)

October 1996

October 2002

Ministry’s Secretariat, Ministry of the Environment
Administrative Vice-Minister, Ministry of theEnvironment (resigned in July 2019)
Professor, Faculty of Law, Waseda University(incumbent)
Chief Director, Institute for Promoting Sustainable
June 2020Societies (incumbent)(Concurrently held positions)
Outside Director, Takasago Thermal Engineering Co., Ltd.

July 2014
July 2017

April 2020100%
(16/16)(16/16)100%(16/16)

—

100%

100%
(16/16)100%(16/16)100%

100%(16/16)100%(16/16)100%(16/16)—

Corporate
management

GlobalFinance/
Legal/ Risk Sustainability Technology/
Accounting management
(ESG)
DX

EnergyHR
Sales/
development/
MarketingDiversity

Has abundant operational experience in the Company andalso has insights regarding management in general of oil &natural gas development companies and global business
management as well as administrative/operational matters.

Has operational experience in the Company and also has insights regarding management in general of oil & natural gas
development companies and global business management
as well as administrative/operational matters.

Has abundant business experience in the Company as wellas knowledge and experience about the business management and administrative/operational matters of oil & natural
gas development and development of various clean energy
such as hydrogen and CCUS.

Has abundant business experience in the Company as wellas knowledge and experience about the business management and administrative/operational matters of oil & natural
gas development companies.

Has abundant operational experience in the Company andalso has a wide range of knowledge and experience aboutbusiness management and administrative/operational matters of oil & natural gas development companies and ESG.

Has abundant business experience in the Company as wellas knowledge and experience about marketing and administrative/operational matters of oil & natural gas development companies.

Has business experience in the Company as well as knowledge and experience about administrative/operational matters of oil & natural gas development companies.

Expected to provide supervision of the execution of business from an international perspective and the necessarycomments and suggestions, etc. in the meetings of theBoard of Directors, etc. primarily by utilizing his experience
as a corporate executive and abundant experience and insight in the resource and energy industry.

Business and Financial Overview(16/16)

Reason for appointment

Management Foundation to
Advance Growth Strategies(16/16)Skill matrix

Growth Strategies for Value Creation

100%

INPEX’s Vision and Value Creation

Attendance A member ofat Board of Nomination andCompensation
Directors
Advisorymeetings
Committee

Expected to provide supervision of the execution of business from an international perspective and the necessarycomments and suggestions, etc. in the meetings of theBoard of Directors, etc. primarily by utilizing his experience
as a corporate executive and abundant experience and insight in the resource and energy industry.
Expected to provide supervision of the execution of businessfrom a diverse and global perspective and the necessarycomments and suggestions, etc. in the meetings of the Boardof Directors, etc. by utilizing her abundant experience asa diplomat and extensive insight on international conditions,in addition to expert knowledge as a university professor.
Expected to provide supervision of the execution of business froma diverse and global perspective and the necessary comments andsuggestions, etc. in the meetings of the Board of Directors, etc. byutilizing his abundant experience and insight as an international attorney, in addition to knowledge in a variety of fields such as expert
knowledge as a university professor.
Expected to provide supervision of the execution of business froma sustainability (ESG) perspective and the necessary comments andsuggestions, etc. in the meetings of the Board of Directors, etc. by utilizing his abundant experience and insight on the environment and energy policy developed through his career in the Ministry of theEnvironment, in addition to expert knowledge as a university professor.

INPEX CORPORATION Annual Report 2021

53

Corporate Governance

Audit & Supervisory Board Members
Name

Position

NoboruHimataInsideHideyuki
ToyamaOutsideIndependent

NumberTerm ofof shares
officeheld

Audit &
Supervisory 2 years
Board
and 9
Membermonths(full-time)

Audit &
Supervisory 6 years
Board
and 9
Membermonths(full-time)

18,300Career summary and concurrently held positions

April 1980
June 2003
June 2007
October 2008
June 2018
June 2019

Joined The Industrial Bank of Japan, Ltd. (currently Mizuho Bank, Ltd.)
Joined INPEX Corporation
Executive Officer, in charge of accounting, INPEX Corporation
Executive Officer, Vice President of Finance & Accounting, General
Manager of Finance UnitManaging Executive Officer, Vice President, Finance & Accounting,General Manager of Finance Unit
Audit & Supervisory Board Member (full-time) (incumbent)

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

Attendanceat Audit &Supervisory
Board meetings

Reason forappointment

100%

Has abundant businessexperience in the Company as well as knowledge and experience
about finance and accounting for oil & natural gas development
companies.

(16 out of 16)

April 1975
July 2001

0

Joined Export-Import Bank of Japan (currently Japan Bank forInternational Cooperation)
Senior Advisor for Global Environmental Affairs, Corporate Group, Japan
Bank for International Cooperation
November 2013 Director General, Nuclear & Renewable Energy Finance Department,
Energy, Natural Resources and Environment Finance Group
July 2014
Earned a Doctor of Social Science
Director General, New Energy & Power Finance Department I,
July 2015
Infrastructure and Environment Finance Group
September 2016 Executive Managing Director, Japan Institute for Overseas Investment
June 2017
Regional Executive Officer, Regional Head for the Americas, Japan Bankfor International Cooperation (stationed in New York)
June 2019
Audit & Supervisory Board Member (full-time), INPEX Corporation(incumbent)

100%(16 out of 16)

Has extensive experience and broad range
of insights in the fieldof finance and expertise and experience asa lawyer.

April 1987

October 2012

ShinyaMiyakeAudit &
Supervisory 2 years
Board
and 9
Membermonths(full-time)

OutsideIndependent0

Joined Marubeni Corporation
Executive Officer, General Manager of Finance Department, Marubeni
Corporation
Managing Executive Officer
Representative Director, Managing Executive Officer
Representative Director, Senior Managing Executive Officer
Representative Director, Senior Executive Vice President
Director, Senior Consultant
Consultant
Representative Director and President, MG Leasing Corporation (currently
Mizuho Marubeni Leasing Corporation)
June 2019
Audit & Supervisory Board Member, INPEX Corporation (incumbent)(Concurrently held positions)
Senior Adviser, Mizuho Marubeni Leasing Corporation (appointed April, 2022)
Outside Director, Concordia Financial Group, Ltd.

100%

(16 out of 16)

Has extensive experience and broad range
of insights in the fields
of international financing and finance.

April 1978
April 2007

MitsuruAkiyoshi
OutsideAudit &
2 years
Supervisory
and 9
Board
monthsMember0

Independent

April 2009
June 2010
April 2012
April 2014
April 2018
June 2018
April 2019

Joined Tokyo Broadcasting System, Inc. (currently Tokyo Broadcasting
System Television, Inc.)
Part-time Lecturer, Faculty of Education, Chiba University
Member of the Council for Regulatory Reform (PMO)
Member of the Ministry of Economy, Trade and Industry’s Advisory
Committee for Natural Resources and Energy (incumbent)
February 2008
Member of the Education Rebuilding Council (PMO)
Member of the Ministry of Land, Infrastructure, Transport and Tourism’s
March 2009
Council for Transport Policy
Visiting Professor, Chiba University (incumbent)
April 2013
January 2016
Policy advisor for the Japan Coast Guard (incumbent)
November 2017 Member of the Ministry of Health, Labour and Welfare’s Medical Ethics Council (incumbent)
February 2019
Member of the Ministry of Education, Culture, Sports, Science andTechnology’s Central Council of Education
Audit & Supervisory Board Member, INPEX Corporation (incumbent)
June 2019100%(16 out of 16)

April 1987

HirokoKiba

Audit &
2 years
Supervisory
and 9
Board
monthsMemberOutsideApril 2001
January 2007
July 2007

0

Independent100%(16 out of 16)

Has extensive experience and broad range of
insights in the fields of finance and management.

Has a wide and diverse range
of knowledge gained throughher service as a member ofthe Advisory Committee for
Natural Resources and Energy
and the Industrial Structure
Council, as well as abundant
experience and insights asa freelance newscaster anda university professor.

Executive Officers
Name

54

Position

Title

Position

Title

Koichi Ogino

Executive Officer

Vice President, Domestic Energy Supply & Marketing
General Manager, Gas Supplying Unit
Domestic Energy Supply & Marketing Division

Americas Projects Unit and Strategic Projects
Office, Head of Overseas Projects

Akihiro Watanabe

Executive Officer

Vice President, Asia Projects

Senior Vice President, Corporate Strategy &Planning, Legal Affairs

Munehiro Hosono

Executive Officer

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

Senior Vice President, General Administration

Akio Kawamura

Executive Officer

Vice President, Finance & Accounting

Yukiyo Ikeda

Executive Officer

Vice President, Europe & Middle East Projects

Hiroshi Kato

Executive Officer

Senior Vice President, Global Energy Marketing

Shinichi Takada

Executive Officer

Vice President, Oceania Projects
Vice President Ichthys Phase 2

Shoichi Kaganoi

Executive Officer

Vice President, Hydrogen & CCUS Development
General Manager, Technical Development &Coordination Unit
Hydrogen & CCUS Development Division

Tetsuhiro Murayama

Executive Officer

Vice President, Oceania Projects
Deputy General Manager, Perth OfficeSenior Vice President Corporate

Senior Vice President, Domestic Energy Supply &MarketingWataru Nojiri

Executive Officer

General Manager, HSE UnitManaging
Executive Officer

Senior Vice President, Europe & Middle East
Projects

Kei Fukui

Executive Officer

Vice President, General Administration
General Manager, General Administration Unit
General Administration Division

Yosuke HappoManaging
Executive Officer

Senior Vice President, Logistics & IMT

Koichi Okamoto

Executive Officer

Vice President, Global Energy Marketing

Hideki KurimuraManaging
Executive Officer

Senior Vice President, Technical Headquarters

Masaru Miyanaga

Executive Officer

Vice President, Domestic Energy Supply &Marketing

Hiromi Sugiyama

Managing
Executive Officer

Senior Vice President, Domestic Exploration &Production

Isao Takahashi

Executive Officer

Vice President, Abu Dhabi Projects General
Manager, Abu Dhabi Office

Takayuki Ueda

President & CEO

Takahiko Ikeda

Senior Executive
Vice President

Senior Vice President, Hydrogen & CCUS
Development, HSE and Compliance

Kenji Kawano

Senior Executive
Vice President

Kimihisa Kittaka

Senior Managing
Executive Officer

Nobuharu Sase

Senior Managing
Executive Officer

Hiroshi Fujii

Senior Managing
Executive Officer

Senior Vice President, Abu Dhabi Projects

Daisuke Yamada

Managing
Executive Officer

Senior Vice President, Finance & Accounting

Yoshiro Ishii

Managing
Executive Officer

Senior Vice President, Renewable Energy & New
Business

Toshiaki Takimoto

Managing
Executive Officer

Senior Vice President, New Ventures & Global
Exploration

Nobusuke Shimada

Managing
Executive Officer

Senior Vice President, Asia Projects

Hitoshi Okawa

Managing
Executive Officer

Senior Vice President, Oceania Projects General
Manager, Perth Office, President Director Australia

Kazuyoshi Miura

Managing
Executive Officer

Yuzo Sengoku

INPEX CORPORATION Annual Report 2021

Name

INPEX’s Vision and Value Creation

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 arein turn carried out by directors well versed in their field. In
addition, the Company has introduced an Executive Officer
System to pursue management with agility and efficiency.
INPEX frequently engages in negotiations with the governments of oil-producing countries and overseas oil companies. This necessarily requires internal directors andexecutive officers who have knowledge, expertise and international experience relating to the Company’s business andboth a sound knowledge of the Company and their particular field of expertise. Internal directors, in principle, hold theconcurrent position of executive officers. By adopting thisconcurrent organizational structure, the Company’s Board of
Directors is better placed to execute operations in an efficient manner. At the same time, this structure helps to ensure effective operating oversight. In addition to enhancing
the transparency of management and bolstering the abilityof the Board of Directors to carry out its supervisory function,
INPEX has appointed five of its 12-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 theCompany’s five Audit & Supervisory Board members are also
appointed from external sources. In addition to putting inplace an Audit & Supervisory Board, INPEX has set up the
Audit & Supervisory Board Members’ Office and deployed
dedicated staff and is reinforcing collaboration between Audit & Supervisory Board members and the Audit Unit, as wellas independent auditors.
Overview of the Corporate Governance Structure
Organizational structure

Audit & Supervisory
Board members

Number of independent
directors and auditors
Other

Growth Strategies for Value Creation

Directors

Company with Audit & Supervisory Board
Members
Number of directors as stipulatedby the Articles of Incorporation............. up to 16
Number of directors(number of outside directors)................. 12 (5)Term of office................................................ 1 year
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
9 (5 outside directors, 4 outside Audit &Supervisory Board members)
Issuance of a Class A Stock to the Minister of
Economy, Trade and Industry

Corporate Governance Framework
General Meeting of Shareholders

INPEX Advisory Committee

Recommendation/
Advice/Reporting

Outside Directors
Appointment/
Dismissal/
Supervision

ReportingBusiness
Operation
SystemCompliance Committee
Sustainability Committee
Corporate HSE Committee

Collaboration

Collaboration

Reporting

Audit & Supervisory
Board (Member)
Audit & Supervisory
Board Member (full-time)

Audit & Supervisory
Board Members’ Office

Collaboration

Auditing

Accounting
audit

Reporting

ReportingExecutive
Committee

ReportingAppointment/
Dismissal/
Supervision

President & CEO

ReportingAccounting
AuditorCollaboration

Audit Unit

Accounting
audit
Collaboration

Executive Officers
Divisions and Subsidiaries

Internal audit

Business and Financial Overview

Information Security
Committee
INPEX Value Assurance
System Committee

Auditing

Board of Directors

Appointment/
Dismissal

Management Foundation to
Advance Growth Strategies

Nomination and Compensation
Advisory Committee

Appointment/Dismissal/
Setting of range ofcompensation

Appointment/Dismissal/
Setting of range of compensation
ReportingCorporate Governance Guidelines
The mission of the Company is to contribute to the creationof a brighter future for society through our efforts to develop, produce and deliver energy in a sustainable way.
Through our business, we aim to become an integrated energy company that contributes to the community and makes
it more agreeable and prosperous. Based on this mission, toachieve sustainable growth and increase corporate value
over the medium to long term, the Company fulfills its social
responsibilities in cooperation with its shareholders and other stakeholders, and works to enhance its corporate governance for the purpose of conducting transparent, fair, timely

and decisive decision making. The INPEX Group made clear
its basic views and policies on corporate governance and,with the aim of 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. Please refer to our Web site for details.
www.inpex.co.jp/english/company/governance.html

INPEX CORPORATION Annual Report 2021

55

Corporate Governance

Overview of each Committee
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 and increase corporate value over the medium to long term throughimplementation of effective corporate governance, with recognition of its fiduciary responsibility to shareholders. The
Company’s Board of Directors comprises 12 members, five ofwhom are outside directors. In addition to a monthly meeting,the Board of Directors meets as necessary to discuss and determine matters concerning management strategy and important business execution, and to supervise the execution ofduties by directors. The term of office for directors is set at
one year. In addition to enhancing the ability of directors to
respond to changes in the Company’s global operating environment in a timely manner, this initiative helps to further clarify management responsibilities.

 udit & Supervisory Board Members andA
the Audit & Supervisory Board
The Audit & Supervisory Board is composed of five Audit &Supervisory Board members, four of which come from outside. 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 from and interviews with related departments.
Furthermore, the Audit & Supervisory Board members meeton a regular and as needed basis with the Independent Auditors to receive reports on audits from them and exchange
views on key audit issues. The Audit & Supervisory Board
members also exchange views with the internal audit department (Audit Unit) as it develops annual audit plans andreceive quarterly reports on internal audits conducted by the
Audit Unit. In addition, the full-time Audit & Supervisory
Board members are informed by the Audit Unit about internal audits and the evaluation of internal controls, as necessary. To strengthen the auditing function and ensure effective
corporate governance, the Audit & Supervisory Board Members’ Office has been set up with full-time staff assigned toit. In this manner, efforts are being made to promote collaboration between the Audit & Supervisory Board members,
the Audit Unit and the Independent Auditors. Moreover, wehave constructed a system to strengthen the monitoring
function through periodic meetings with representative directors and directors.

Internal Committees
Nomination and Compensation
Advisory Committee
INPEX Advisory Committee
Board of Directors
Compliance Committee
Sustainability Committee
Corporate HSE Committee
Executive Committee

To further enhance the efficacy of the corporate governancefunction, INPEX has set up
the Nomination and Compensation Advisory Committee,
the INPEX Advisory Committee,
the Compliance Committee andthe Sustainability
Committee. In addition, the Company maintains
the Corporate HSE Committee, the Information Security Committee and the INPEX Value Assurance System Committee toappropriately manage risks associated with business
operations.
Nomination and Compensation Advisory CommitteeNumber of meetings held in FY2021: 6

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

INPEX Advisory Committee Number of meetings held in FY2021: 1
The INPEX Advisory Committee was established in October 2012 withthe aim of enhancing corporate value and the corporate governancefunction. Comprising external experts in a broad spectrum of fields,
the committee provides the Board of Directors with multifaceted andobjective advice and recommendations across a wide range of areas.
Areas of discussion and advice include international political and economic conditions, an outlook of energy conditions and ways in which
to bolster corporate governance.

Compliance Committee

Number of meetings held in FY2021: 3

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

Sustainability Committee

Number of meetings held in FY2021: 2

In April 2012, the INPEX Group established the CSR Committee withthe aims of better fulfilling its corporate social responsibility and promoting activities that contribute to the sustainable development ofsociety. The committee discusses basic policies regarding sustainability and important matters pertaining to sustainability implementation
including corporate governance and climate change response.

 xecutive Committee and Executive Officer
E
SystemFrom the perspective of increasing the speed of decision
making related to the execution of business, we have established an Executive Committee. Meetings are held weekly
and as necessary. At the Executive Committee, flexible decision making is conducted for resolutions not affiliated with
the Board of Directors, and deliberation is held to contributeto decision making by the Board of Directors. We implemented an Executive Officer System 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, the same as for
directors.

Information Security Committee
INPEX Value Assurance System Committee

Corporate HSE Committee Number of meetings held in FY2021: 8
In accordance with the HSE Management System, the Corporate HSE
Committee was established in October 2007 to promote health, safety and environmental initiatives. In addition to formulating corporate
HSE policies and priority targets for each period, the committee advances HSE activities across the organization.

Information Security CommitteeNumber of meetings held in FY2021: 2

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

INPEX Value Assurance System CommitteeNumber of meetings held in FY2021: 11

The INPEX Value Assurance System Committee was established in
May 2014 to contribute to the Company’s decision-making processwith respect to confirmation of the status of preparations in connection with important milestones of major projects in which INPEX participates, and to improve and promote the value of the projects.

56

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation

Monitoring of Management by Outside Directors and Audit & Supervisory
Board Members
Outside Directors

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 Company’s five
Audit & Supervisory Board members are appointed from external sources. Audit & Supervisory Board members possessa rich knowledge and experience in the Company’s businessas well as in such fields as finance, legal affairs and management, which they use when performing auditing activities for
the Company.

Independence of Outside Directors andOutside Audit & Supervisory Board Members

Independence Standards for Outside Directors and Outside
Audit & Supervisory Board Members
The Company shall, based on the independence criteria set
forth by the Tokyo Stock Exchange, determine that an Outside Director or an Outside Audit & Supervisory Board Member is independent from the Company if he or she falls
under none of the following items.

Business and Financial Overview

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 ofefforts 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 andqualifications 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 ofthese standards.

Management Foundation to
Advance Growth Strategies

Outside Audit & Supervisory Board Members

Growth Strategies for Value Creation

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 effectiveness, expertise andobjectiveness in the oversight function in addition to theperspective of independence. As corporate managers, academics or other specialists, the Company’s five outside directors possess broad knowledge and many years ofexperience in such fields as resource/energy industry, financeand legal matters. One of the outside directors concurrently
serves as advisor to Mitsubishi Corporation, which is a shareholder of the Company. As INPEX and Mitsubishi Corporation are engaged in business activities in the same fields,
there is a possibility of conflicts of interest arising. Accordingly, the Company recognizes the necessity to pay particular attention to corporate governance. INPEX considers it
important for all its directors, including the outside director
who concurrently serves at Mitsubishi Corporation as mentioned above, to carry out their management duties while
maintaining a high level of awareness at all times on matters
including the obligation to prohibit competition under theCompanies Act, the appropriate handling of transactions
with conflicts of interest and the prevention of information
leakage. The Company has therefore obtained pledges confirming these points from all directors including the outside
director referred to above.

2. A person whose major business partner is the Company (*1)
or an executive thereof
3. A major business partner of the Company (*2) or an executive thereof
4. A legal professional, accountant, or consultant who receives money or other properties of more than ¥10 million
per year on average over the past three (3) years from theCompany or its subsidiary, excluding compensation for
Directors or Audit & Supervisory Board Members (if theperson receiving such properties is an organization suchas a legal entity or a partnership, a person who belongs tosuch organization)
5. An accounting auditor of the Company or its subsidiary (ifsuch accounting auditor is an accounting firm, a person
who belongs to such accounting firm)
6. A person who receives donations or subsidies of morethan ¥10 million per year on average over the past three (3)years from the Company or its subsidiary (however, if theperson receiving the donation or subsidies is an organization such as a legal entity or a partnership, a director orother officer managing the business of the organization towhich the amount of such donations or subsidies exceeds
the greater of ¥10 million per year or 30% of the total expenses per year of such organization, on average over the
past three (3) years)
7. A person who fell under any of items 1 through 6 above inthe past three (3) years
8. A relative within the second degree of kinship of a person
who falls under any of (a) through (d) below (excluding
persons who are not material (*3))(a) A person who falls under any of items 1 through 7
above(b) An executive of a subsidiary of the Company(c) A non-executive Director or an accounting advisor ofa subsidiary of the Company (limited to cases where
said Outside Audit & Supervisory Board Member is tobe designated as an Independent Audit & Supervisory
Board Member)(d) A person who fell under item (b) or (c) above or an executive of the Company in the most recent three (3)years (including a non-executive Director, if said Outside Audit & Supervisory Board Member is to be designated as an Independent Audit & Supervisory Board
Member)9. Other than each of the preceding items, a person who issubstantially judged by the Company to possibly cause aconflict of interest with ordinary shareholders of theCompany*1 “A person whose major business partner is the Company” refers to a business
partner whose business relationship with the Company may have an influence
on decision-making of business, etc. of said business partner to the same extent as said business partner’s parent company, subsidiary or affiliate. Specifically, this could be a so-called subcontractor whose consolidated net sales
from transactions with the Company account for a considerable part of thesaid subcontractor’s consolidated net sales, etc.
*2 “A major business partner of the Company” refers to a business partner
whose business relationship with the Company may have an influence on decision-making of business, etc. of the Company to the same extent as theCompany’s parent company, subsidiary or affiliate. Specifically, this could be
the counterparty in transactions with the Company whose consolidated net
sales from the transactions account for a considerable part of the Company’s
consolidated net sales, or a supplier who provides merchandise and services
which are essential to the business activities of the Company.
*3 Specifically, a “material” person is assumed to be an officer, general manager
or equivalent of each company/business partner in case of the persons referred to in items 1 through 3, and a certified public accountant who belongs
to each accounting firm or a lawyer who belongs to each law firm (including
so-called associates) in case of the persons who belong to organizations referred to in items 4 and 5.

1. A major shareholder of the Company (who directly or indirectly holds 10% or more of the Company’s voting rights)
or an executive thereof

INPEX CORPORATION Annual Report 2021

57

Corporate GovernanceEvaluation of the Effectiveness of the Board of Directors
With the aims of regularly verifying that the Board of Directors is functioning
appropriately and identifying issues to be resolved for continuous improvement, the Company undertakes an evaluation of the effectiveness of the Boardof Directors each year, and discloses a summary of the evaluation results.
Based on this policy, the seventh evaluation was conducted in fiscal 2021. The
evaluation method and summary of the results are as follows. Based on theseevaluation results, the Company will continue to strive to improve the effectiveness of the Board of Directors.

[Evaluation method]

Issuesidentified in
FY2020New issues

Process ofeffectivenessevaluation

Review of evaluation
results and identificationof issues by the Boardof Directors

Tabulation/analysisof results

Discussion among outside
directors, Audit andSupervisory Board members
and representative directors

 pdates on issues identified last year and the effectiveness evaluation method for fiscal 2021 were discussed at a meetingUwith outside directors and Audit & Supervisory Board members.
The method of self-evaluation by the Board of Directors, which was validated by a third-party evaluation organization during
the previous evaluation, was adopted.
To validate evaluation/analysis and improvement proposals, a policy of appointing a third-party evaluation organization
about once every three years was confirmed.

Further enhance discussions on management strategies based on changes in the business environment
Hold deeper discussions on the desired state of the Board of Directors
Further revitalize discussions at Board of Directors meetings
Secure opportunities for discussion on the desired state of governance in the Group
Evaluation
results

FY2021
evaluation
results

Action on issues

SurveyThe overall effectiveness of
the Board of Directors was
confirmed to be sufficient,
as in the previous fiscal year.

[Evaluation highlights]
The evaluation appreciated theinitiatives listed to the right andcalled for their continuation.

Self-evaluation of each director and Audit & Supervisory Board member
Composition, operation, roles and responsibilities of the Board of Directors
Operation of the Nomination and Compensation Advisory Committee
Improvement of the issues identified in the previous evaluation, etc.

Online briefings for part-time officers prior to Board of Directors meetings
 iscussion on topics that need to be discussed from medium- to long-term perspectives asDagenda items
Lectures and opinion exchange meetings for the Board of Directors by external experts, etc.

Hold in-depth discussions on management strategy, including net zero business plans and progress
Hold in-depth discussions on the desired state of the Board of Directors
Further revitalize discussions at Board of Directors meetings
Expand discussions on portfolio management

Based on the above evaluation results, the Company will continue to strive to improve the effectiveness of the Board of Directors.

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. Unless otherwise provided by laws or ordinances,
the Class A Stock does not possess voting rights at shareholders’ meetings. However, it is possible for the holder of the Class
A Stock to exercise veto rights for certain major corporate decisions. We believe the holding of Class A Stock by the Ministerof Economy, Trade and Industry will help prevent any incidenceof unusual management, allow INPEX to stably supply energy
as a core company for Japan’s oil & gas E&P and ensure that
the Company does not incur any negative impact from a speculative acquisition or an attempt at management control throughforeign capital. On this basis, INPEX’s role is assured. Furthermore, we expect positive results in terms of external negotiation and credits as a national flagship company efficiently
contributing to the stable supply of energy in Japan.

Director Compensation
Compensation for directors (excluding outside directors)
consists of basic compensation, which is paid according to
the duties of each director; bonuses, which serve as a shortterm incentive; and stock-based remuneration, which gives a
medium- to long-term incentive. Compensation for outside
directors is limited to basic compensation only from the perspective of independence of their duties.
Bonuses as a short-term incentive is linked to the Company’s net income attributable to owners of parent (hereinafter“net income”) and cash flows from operating activities before exploration, which are our major financial indices, aswell as a safety index (zero major accidents) that serves as a
non-financial index. The amount of compensation is calculated based on the evaluation weights in the table on the rightaccording to the degree of achievement of these targets,and the final amount of compensation fluctuates within therange of 0% to 200%.

58

INPEX CORPORATION Annual Report 2021

KPIs used to calculate bonuses for directors (excluding
outside directors)

Financial
indicesNon-financial
index

Bonus KPI

Evaluation weight

Net income

45%

Cash flows from operating
activities before exploration

45%

Safety index (zero major
accidents)

10%

Stock-based remuneration as a medium- to long-term incentive is paid to directors (excluding outside directors andnon-residents of Japan) and executive officers (excluding
non-residents of Japan) (hereinafter collectively the “eligible
directors and officers”). This remuneration system is called theBoard Incentive Plan Trust, and it combines performance-based elements aimed at raising the awareness among
the eligible directors and officers of their contribution to theCompany’s medium- to long-term business performance andenhancement of corporate value, and fixed elements aimed at

Stock-based remuneration KPI

Evaluation weight

Net income

30%

Cash flows from operating
activities before exploration

30%

ROE

10%

Total payout ratio

10%

Production cost per barrel

10%

Net carbon intensity

10%

Financial
indicesNon-financial
indicesCompensation for Directors and Audit & Supervisory
Board Members in FY2021
Total compensation by type(millions of yen)Classification

Number of
Total amount ofeligible directors
Performancecompensation
Non-monetary and Audit &
based
paid
Compensation Supervisory
Basic
Compensation(millions of yen) compensation
Board members(persons)
Stock-based
Bonus
remuneration

Directors(excluding outside directors)

536

384

140

11

8

Audit & Supervisory Board
members(excluding outside Audit &Supervisory Board members)

31

31

-

-

1

Outside directors and outside
Audit & Supervisory Board
members

159

159

-

-

10

Notes:
1. The monthly basic compensation for directors was set to not more than 47
million yen (including monthly compensation for outside directors of not morethan 6 million yen) at the 11th Ordinary General Meeting of Shareholders heldon June 27, 2017. The number of directors as of the date of this resolution was
15 (including six outside directors). This amount was revised to an annual
amount, including bonuses, of not more than 900 million yen (including anamount not more than 100 million yen for outside directors) at the 16th Ordinary
General Meeting of Shareholders held on March 25, 2022. The number of
directors as of the date of this resolution was 12 (including five outside directors).
2. The monthly basic compensation for Audit & Supervisory Board members was
resolved to be not more than 10 million yen at the 13th Ordinary General
Meeting of Shareholders held on June 25, 2019. The number of Audit &Supervisory Board members as of the date of this resolution was five. This
amount was revised to an annual amount of not more than 140 million yen at the
16th Ordinary General Meeting of Shareholders held on March 25, 2022. The
number of Audit & Supervisory Board members as of the date of this resolution
was five.
3. The amount of bonus is the amount based on the resolution made at the 16th
Ordinary General Meeting of Shareholders held on March 25, 2022 to pay a total
amount of 140 million yen to eight directors in office at the end of the businessyear under review, excluding outside directors.
4. At the 12th Ordinary General Meeting of Shareholders held on June 26, 2018, it
was resolved that a stock-based remuneration system be introduced for
directors (excluding outside directors and non-residents of Japan) and executive
officers (the BIP Trust). The number of directors (excluding outside directors andnon-residents of Japan) as of the date of this resolution was seven. The amountof the stock-based remuneration presented above represents the fees incurred
regarding the stock-based points granted during the business year under review
concerning the BIP Trust for directors. At the 16th Ordinary General Meeting of
Shareholders held on March 25, 2022, the maximum amount of money to becontributed per business year by the Company was revised to 434 million yen,and the maximum points granted per business year to those eligible for thesystem was revised to 806,000 points (equivalent to 806,000 shares of theCompany). The number of directors (excluding outside directors and nonresidents of Japan) as of the date of this resolution was seven.

Management Foundation to
Advance Growth Strategies
Business and Financial Overview

Regarding the compensation for directors, the Nomination andCompensation Advisory Committee deliberates on major matters in accordance with the policy for determining the amountand calculation method of compensation, etc. for directors andthe details of compensation, etc. for individual directors, andsubmits a report to the Board of Directors. Based on the reportfrom the Committee, the Board of Directors decides on thecompensation for directors within the limits and terms approved at the general meeting of shareholders. The amount ofcompensation to be paid to each director by type is decided
by the Representative Director, President & CEO, who shall be
entrusted to do so by a resolution of the Board of Directors, inaccordance with the deliberation by the Nomination and Compensation Advisory Committee, a majority of whose members
are outside officers, including independent outside directors.
Considering the external environment, social and economic
trends, and other factors surrounding the Company, the Nomination and Compensation Advisory Committee will carefully
deliberate on the appropriateness of the target values and calculation method for compensation and issue a report, basedon which necessary adjustments may be made to the amountof compensation for each director by a resolution of the Boardof Directors.

The adequacy of compensation for directors is verified by
the Nomination and Compensation Advisory Committee afteran external compensation research organization examines andanalyzes the level of compensation for each position in a peergroup of companies of the same size and similar industries.
The ratios of the basic compensation, bonuses and stockbased remuneration for inside directors are generally balanced
to follow the principle that the higher the position held by a director is, the higher the weight of his or her performance-based
compensation (bonuses and stock-based remuneration) is.

Growth Strategies for Value Creation

KPIs used to calculate performance-linked stock-based
remuneration for directors (excluding outside directors)
and executive officers

INPEX’s Vision and Value Creation

strengthening the awareness among the eligible directors andofficers of sharing interests with shareholders through the ownership of the Company’s shares. The performance-based portion of the stock-based remuneration is linked to theCompany’s key financial indices set forth in the Medium-term
Business Plan, namely, net income, cash flows from operating
activities before exploration, ROE and total payout ratio, as
well as to the production cost per barrel and net carbon intensity, which are our major non-financial indices. The amount ofcompensation is calculated based on the evaluation weights inthe table below according to the degree of achievement ofthese targets, and the final amount of compensation fluctuates
within the range of 0% to 200%. In the event that any of the eligible directors and officers commit a significantly improper orviolating act, the Company may cancel or forfeit their right toreceive the Company’s shares or other forms of compensation
under the system (malus) and demand the return of cash corresponding to the Company’s shares or other forms of compensation already delivered to them (clawback).

Accounting Audit and Auditor 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 planand the number of auditing dates, after obtaining approval
from the Audit & Supervisory Board.
(1) Status of accounting audit
Name of CPA firm
Cumulative accounting
audit period
Name of CPAs
conducting accounting
audit
Accounting audit
members

Ernst & Young ShinNihon LLC
46 yearsHiroaki Kosugi, Satoshi Takahashi
Takeshi Yoshida, Kentaro Moronuki
29 CPAs, 7 persons who passed an
accounting exam, etc., and 43 others(2) Compensation paid to the CPAs
Compensation forauditing services
Compensation for
non-auditing services¥353 million
INPEX: 270 million;
Consolidated subsidiaries: ¥82 million¥17 million
INPEX: ¥5 million;
Consolidated subsidiaries: ¥12 million(3) Compensation paid to the network firm (excluding (2))
Compensation forauditing services
Compensation for
non-auditing services¥132 million
INPEX: —;Consolidated subsidiaries: ¥132 million¥142 million
INPEX: ¥10 million;
Consolidated subsidiaries: ¥132 million

INPEX CORPORATION Annual Report 2021

59

Internal & Outside
Officer Roundtable

Kimihisa Kittaka
Director & Senior Managing
Executive Officer
Senior Vice President, Corporate
Strategy & Planning / Legal Affairs

Nobuharu Sase
Director & Senior Managing
Executive Officer
Senior Vice President, General
Administration

Mitsuru Akiyoshi
Audit & Supervisory Board
Member (Outside)

Atsuko Nishimura

Tomoo Nishikawa

Director (Outside)

Director (Outside)

INPEX has evaluated the effectiveness of its Board of Directors on an ongoing basis since FY2015, and hastaken action to enhance the Board’s performance by responding to the issues identified in the process. The
Company additionally issued the Long-term Strategy and Medium-term Business Plan (INPEX Vision @2022)
this past February. Further to these activities, a roundtable discussion was held among internal and outside
officers to examine the Board’s effectiveness and its role in leading INPEX forward.

Topic

The Effectiveness of the INPEX Board of Directors––––Sase: Ms. Nishimura, Mr. Nishikawa,and Mr. Akiyoshi, you have served in yourcurrent positions for four, two, and three
years, respectively. Based on what you’veseen in that time, what are your impressions of our Board of Directors’ composition, climate, and functioning? Also, has
the Board changed in any way?
Nishimura: Diverse challenges haveemerged during the several years that
I have been a director. Energy companies
have reached a turning point. Action needs
to be taken on climate change. COVID-19
has had a severe impact on society and theeconomy. Geopolitical risks are growing.
Because of the need to respond to theseand other challenges, the Board of Directors has devoted considerable time in its
meetings to the discussion of mediumand long-term strategies and ways to further enhance INPEX’s competitiveness andenterprise value—more time than is given
to discussion of specific projects.
Steps have been taken to improve how
meetings are held to ensure those medium-to-long-range issues can be fully explored and the Board can perform more
effectively. For instance, outside officers
are given enhanced pre-meeting briefings,
the agenda is streamlined, and informationis shared in a more timely manner.
Another positive change is that theBoard membership has been made morediverse. Five of the twelve directors andfour of the five auditors are from outside
the company. Having a Board made up ofpeople with diverse insights has enabled
us to have livelier, more meaningful discussions that incorporate many different perspectives. Also, efforts have been made to

60

INPEX CORPORATION Annual Report 2021

increase opportunities for outside Board
members to visit operating sites in Japanand overseas. Facility tours and chats withlocal employees have helped us to better
appreciate the importance of operatorshipin major projects. And, when visiting Australia, we’ve been able to meet with government representatives and indigenous
peoples, allowing us to directly hear thethoughts and expectations of local stakeholders. These opportunities have beenvery informative for us, so I hope that theCompany will continue to provide them.
Nishikawa: My impression is that the executive leadership and secretariat have beenworking in many ways to enhance theBoard’s performance. Changes such as
holding pre-meeting briefings and disclosing the content of Executive Committee
meetings have made the Board meeting
agenda more clear-cut and reduced thetime it takes for executive officers to bringoutside officers up to speed on each item.
This means we can optimize Board meeting time for important deliberations. I alsofeel a solid system of support has been put
in place, with the Company duly following
up on points raised by outside officers andstriving to make improvements where
needed.
As for the Board’s composition, I think it
has been made sufficiently diverse throughthe Company’s efforts, including anotherenhancement made earlier this year. Bringing together people with different backgrounds enables a wide range of insights
to be shared in our discussions, and theexecutive team really strives to tune in to
those insights. The result is each topic gets
explored and examined from diverse

angles. With regard to the ratio of members from outside, I think this should betailored to INPEX’S standing as both a listed company and a key player in the implementation of Japan’s energy policy.
Akiyoshi: I think that Board discussions
have become more energized over the
past three years. I’m extremely impressedby how the Board is proactive in engaging
the outside directors in its discussions, andthe eagerness with which the internal directors take part. I hope that INPEX willcontinue to cultivate a climate that encourages such open-minded discussion.
In terms of membership, I think that theBoard’s current size is a good size to enable meaningful discussion. As for its diversity, however, more work should be done
to appoint people who can help the Company tackle the challenges outlined in INPEX Vision @2022.
I also hope that the Company will keep
up its efforts to enhance the Board’s understanding of various topics—particularly
with regard to the technical knowledge
needed to advance decarbonization—andcontinue to provide us with opportunities
to exchange information and insights on
the current state of the energy market, including global supply and demand.
Sase: We will maintain our commitment todeepening the Board’s knowledge andunderstanding through actions such as
the enhanced pre-meeting briefings, andhosting lectures by various experts. Further, after the pandemic subsides, we will
provide the Board members opportunities
for site visits in Japan and overseas.

TopicINPEX’s Future, as Viewed through the Lens of the Business Environment

Akiyoshi: Within those five businesses,
I especially see potential in hydrogen/ammonia and CCUS, as they are areas where
INPEX can play to the strengths the Company has cultivated over the years.
Nishimura: INPEX’s future will be largely
decided by how we target our invest­
ments in the years ahead. To make theright choices, the Company needs to get a
precise handle on the changing environment and view everything from a longrange perspective.
Nishikawa: Instead of trying to go it alone,
INPEX should lead the energy industry andactively pursue collaboration with otherbusinesses and academia.
Sase: Thank you, everyone, for sharing
your valuable insights today. Your inputs
will help us in our efforts to further enhance the Board of Directors’ performance and accelerate the implementationof INPEX Vision @2022.

Business and Financial Overview

INPEX CORPORATION Annual Report 2021

Management Foundation to
Advance Growth Strategies

Nishikawa: The goal of achieving botha net zero carbon society and a stable energy supply is a daunting challenge for thewhole world. Meanwhile, the business environment is plagued with growing uncertainty. In a setting like this, it is impossible
for companies to make perfect businessdecisions. The most realistic approach,I think, is to build up an organization thatcan flexibly and agilely respond to the unexpected. As outside officers, our job is tohelp the Company construct this kind oforganization, by making sure that corporate governance is functioning as intended.
Of course, a company doesn’t run solely
on the efforts of its officers—it will be increasingly imperative for all employees todrive INPEX forward to success. For this tohappen, the Company’s leadership has totake certain actions, such as providing anadequate share of profits to employees.
INPEX also needs to be a company where
employees can experience the appeal andreward of being part of cutting-edge efforts to realize a net zero carbon society.
I really want the Company to work together
as one big team as it takes on the daunting
challenge at hand.
Sase: One of the Vision’s aims is to lay thefoundation to make INPEX “a most rewarding company to work for”. I firmly
recognize the importance of that aim andwant to help lead our Company to achieveit.
Akiyoshi: The realization of a stable energy
supply and a net zero carbon society isa global sustainability challenge that IN­
PEX is tackling head on. And it cannot be
solved unless employee engagement istaken to a higher level. I believe the hiring
and training of talent is intrinsically linked
to INPEX’s future and therefore a criticalactivity. I especially encourage the Company to get an early start on boosting its efforts for talent acquisition.
Nishimura: I also think securing outstanding talent is an important issue for INPEX.
I currently teach at a university, so I haveopportunities to interact with young people. They show a sense of ownership toward global challenges. Many of themwant to be part of the efforts to solve those
problems in some way or another. I thinkthat INPEX should boldly showcase its
standing as a company that can help theworld to overcome global challenges andachieve the SDGs. I think the Vision willstrongly appeal to younger generations, so
I would like INPEX to more actively promote it outside the Company.
Nishikawa: I think that one effective way ofdeveloping our younger talent would be toprovide them with regular opportunities tostudy and share insights with peers andmid-level workers at companies in other industries. A surprisingly large number ofpeople know very little about industries
outside their own, so I believe that learning
about other domains would be a richsource of ideas that our employees could
put to use in their jobs.
Kittaka: It think that it’s necessary for us
as executive managers to proactively
leverage INPEX’s strengths in ways that
foster employee solidarity. We need tohave our outside officers provide their diverse insights to help us evolve the five
net zero businesses into strengths.

Growth Strategies for Value Creation

Nishimura: The Board spent a large
amount of time discussing the Vision,
based on ample information provided to
all directors and Audit & Supervisory Board
members. The discussions that eventually
led to the Vision’s release this past February expanded on talks the Board had whenhammering out the Business Development
Strategy issued in 2021. I believe that the
Vision provides a roadmap that will enable
INPEX to surmount the energy market’s
growing instability and complexity. Whilethe importance of maintaining a stablesupply of energy is increasing, the trend
toward decarbonization will continue overthe medium and long term, and the movement toward greater ESG investment will
likewise pick up steam. The Vision chartsa course for INPEX to successfully navigate
this setting and play a leading role in developing and stably supplying a clean, diverse mix of energy. That’s the future that
the Vision articulates for INPEX. It won’t always be smooth sailing, but as the Company rapidly expands its business portfolio
under the Vision, the Board will make evenmore concerted efforts to share information with executive management in a timely manner so that all business decisions will
be grounded in a solid understanding of
the Company’s situation. Although it’s only
been a few months since it was unveiled,
I feel INPEX is already ambitiously moving
to bring ‘a new wind’ to the energy market
by putting the Vision into action. For example, INPEX has carried out prudent organizational restructure and establisheda new technology center—the INPEX Research Hub for Energy Transformation(I-RHEX). This bold start has me very excited for INPEX’s future.
As for the Company’s sustainability,
I think it will be largely underpinned by theefforts and achievements made toward the
Vision’s goal of sustainably supplying theenergy needed by society. Of course, thiscommitment to sustainability is not limited

to business—it encompasses ESG and allother aspects of the Company’s operation.
Therefore, this pursuit will require constanteffort.

INPEX’s Vision and Value Creation––––Kittaka: In February this year, INPEX
set forth its Long-term Strategy and Medium-term Business Plan (INPEX Vision@2022, hereafter “the Vision”). Ms.
Nishimura, Mr. Nishikawa, and Mr. Akiyoshi—as three of our outside officers, youwere actively involved in the discussions
to formulate the Vision. Please tell us yourthoughts on the Vision, and the future of
INPEX. Also, as the Vision comprehensively deals with sustainability, pleaseshare what you think about the sustainability of INPEX.

61

Business and Financial Overview

Project Overview by Core Business Areas

Australia

In the Oceania region, INPEX is the operator of Ichthys,a large-scale liquefied natural gas (LNG) project, and isactively involved in exploration projects, seeking further
growth in the region.

In production
Under development
Preparation for development
Under explorationOP

Operator project
Key group company
headquaters and offices

Darwin2 Prelude FLNG Project(WA-44-L)
1 Ichthys LNG Project OP(WA-50-L/WA-51-L)

EP(A)318

OP

3 Bayu-Undan Project(PSC-TL-SO-T 19-12(former JPDA03-12))

WA-35-L & WA-55-L(Coniston Oil Field)

WA-35-L (Van Gogh Oil Field)
WA-43-L(Ravensworth Oil Field)

AUSTRALIA

Van Gogh Oil Field,
Ravensworth Oil Field
and others

Bayu-Undan Project 3(PSC-TL-SO-T 19-12 (former JPDA03-12))

Perth

PSC-TL-SO-T 19-11
WA-74-R
WA-85-R

AC/P66 OP
AC/P36 OP

WA-81-R
WA-79-R
WA-84-R
WA-80-R
WA-86-R
WA-533-P OP

WA-343-P OP
WA-56-R OP

2 Prelude FLNG Project(WA-44-L)

WA-285-P OP
WA-494-P OP

1 Ichthys LNG Project(WA-50-L/WA-51-L)

CPF Ichthys
Explorer1

WA-281-P

OP

WA-532-P OP

Ichthys LNG ProjectIn 1998, INPEX acquired an exploration permit in the block where the Ichthys Gas-Condensate Field is now located, and following development studies including exploration, evaluation, and front-end engineering design (FEED) work, INPEX announced
its final investment decision (FID) in January 2012. Following the completion and commissioning of production facilities, INPEX
commenced production in July 2018 and later began shipping condensate, LNG, and liquefied petroleum gas (LPG). Stable production has continued since the launch of production in 2018, and 117 LNG cargoes were shipped from the plant in 2021. Maintenance required for safe and stable operations will be conducted for approximately one month, from July to August 2022.
Shipments of approximately 10 LNG cargoes per month are expected in fiscal 2022 as well. We are improving the production
process to further increase the current annual LNG production capacity of 8.9 million tons and building a framework to stably
supply 9.3 million tons per year by 2024.
Contract area
(block)WA-50-L/
WA-51-L

Project
statusIn production

Production capacity

Venture company(established)

LNG: Approximately 8.9 million tons per year
INPEX Ichthys
LPG: Approximately 1.65 million tons per year
Pty Ltd
Condensate: Approximately 100 thousand barrels(April 5, 2011)
per day (at peak)Interest owned(*Operator)
INPEX Ichthys Pty Ltd* 66.245%
TotalEnergies 26.000% CPC 2.625%
Tokyo Gas 1.575% Osaka Gas 1.200%
Kansai Electric Power 1.200%
JERA 0.735% Toho Gas 0.420%

Introduction of CCS
While maintaining and expanding LNG production, INPEX addresses climate change by considering CCS projects for capture,underground injection and storage of the CO2 emitted from our production operations. Specifically, we plan to drill appraisal
wells in northern Australia for implementation of CCS. We will introduce CCS to Ichthys in the late-2020s and aim to start injection of 2 million tons of CO2 per year as a first step.
Surrounding exploration blocks
INPEX holds interests in 17 exploration blocks in the vicinity of the Ichthys Gas-Condensate Field and has discovered gas in several of these blocks. Expecting various synergies, including effectively using existing facilities, we will accelerate participation in
exploration activities in the vicinity of the Ichthys Field as well as the development of discovered but undeveloped assets to further ensure a sustained production volume in the long term, and then aim to further expand production volume visualizing the
expansion of Ichthys in around 2030.

62

INPEX CORPORATION Annual Report 2021

Project
statusVenture company(established)

Under
exploration(blocks underappraisal on
the discovery
of gas andcondensate)

Interest owned(*Operator)
INPEX Browse E&P Pty Ltd 40% Santos* 60%

INPEX’s Vision and Value Creation

Contract area
(block)WA-84-R/WA-85-R/
WA-86-R
WA-56-R
WA-80-R
WA-281-P
WA-74-R/WA-79-R/
WA-81-R/

INPEX Browse E&P Pty Ltd* 60% TotalEnergies 40%
INPEX Browse E&P Pty Ltd 26.6064% Santos* 63.6299% Beach 9.7637%
INPEX Browse E&P Pty Ltd 29.5% Santos* 70.5%
INPEX Browse E&P Pty Ltd 40% Santos* 60%
INPEX Browse E&P Pty Ltd INPEX Browse E&P Pty Ltd* 62.245% TotalEnergies 30.000%
CPC 2.625% Tokyo Gas 1.575% Osaka Gas 1.200%(October 21, 2013)
Kansai Electric Power 1.200% JERA 0.735% Toho Gas 0.420%

WA-285-P
WA-494-P/
WA-532-P/
WA-533-P
WA-343-P
AC/P36INPEX Browse E&P Pty Ltd* 100%
Under
exploration

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

AC/P66INPEX Oil & Gas
Australia Pty Ltd(February 28, 2012)

2

INPEX Browse E&P Pty Ltd* 100%

Prelude FLNG Project (WA-44-L)

In June 2012, INPEX acquired a 17.5% interest in the Prelude FLNG (floating LNG) Projectfrom Shell during the project’s development stage. The Prelude FLNG Project involves the
production of approximately 3.6 million tons per year of LNG, 400 thousand tons per year of
LPG at peak and approximately 1.3 million tons of condensate per year at peak from the
Prelude Gas Field located in Block WA-44-L, approximately 475 kilometers north-northeastof Broome, off the coast of Western Australia. Shell as the operator of the Prelude FLNG
Project announced its final investment decision (FID) in May 2011. Following the completionand commissioning of production facilities, gas production from the wellhead commenced
in December 2018. The first condensate cargo was shipped in March 2019 followed by the
first LNG cargo in June 2019.

WA-44-L

Project
status

Timor Sea

Concerto Gas Field

Prelude Gas Field
Ichthys Gas-Condensate
Field
40km

0

Venture company(established)

Production capacity

LNG: Approximately 3.6 million tons per year
LPG: Approximately 400 thousand tons per year
(at peak)In production
Condensate: Approximately 1.3 million tons per
year (at peak)

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

WA-44-L

AUSTRALIA

Gas field

Interest owned(*Operator)

Management Foundation to
Advance Growth Strategies

Contract area
(block)3

Growth Strategies for Value Creation

EP(A)318

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

Bayu-Undan Project (PSC-TL-SO-T 19-12 (former JPDA03-12))

Contract area
(block)Bayu-Undan Unit

Project
statusVenture company(established)

Production volume**

Crude oil: 12 Kbbld
In production Natural gas***: 456 MMcf/d
LPG: 6 Kbbld

INPEX Sahul, Ltd.
(March 30, 1993)

EAST TIMOR INDONESIA
AUSTRALIA

Bayu-Undan
Gas-Condensate Field
DarwinGas Pipeline
DarwinAUSTRALIA
050km

Gas field

Business and Financial Overview

In 1993, INPEX acquired an interest in the former JPDA03-12 contract area, which was jointly
managed by Australia and East Timor. Exploration within this contract area resulted in the
discovery of oil and gas fields. Of these, studies revealed that the Undan structure and theBayu structure, located in the adjacent former JPDA03-13 contract area, were a single structure. The interest holders unitized both contract areas into one in 1999, which is now known
as the Bayu-Undan Gas-Condensate Field and produces and ships condensate, LPG and
LNG. As a result of the ratification of a maritime boundary treaty between Australia and East
Timor, a new production sharing contract (PSCTL-SO-T 19-12) was bound with East Timor in
2019. As part of action on climate change, the project is considering a CCS project for capture, underground injection and storage of the CO2 emitted from the Barossa Gas Field located in waters northwest of Australia and other oil and gas fields around it, by reusing the
production facilities of the Bayu-Undan Gas-Condensate Field after the termination of production there, along with the Darwin LNG facilities.

Oil field

Map includes provisional maritime
boundaries

Interest owned(*Operator)
INPEX Sahul 11.378120% Santos* 43.437907%
SK E&S 25.000000% Eni 10.985973%
Tokyo Timor Sea Resources (JERA/Tokyo Gas)
9.1980000%** Daily production volume on the basis of all fields and average rate of fiscal year ended December 31, 2021*** Not the volume at wellheads but corresponds to the gas volume sold to buyers

Other projects
Contract area
(block)WA-35-L & WA-55-L (Van Gogh Oil Field,
Coniston Oil Field)

Project status

Venture company

INPEX Alpha, Ltd. 47.499% Santos* 52.501%
In production

INPEX Alpha, Ltd.

Under
exploration

INPEX Offshore TimorLeste, LTD.

WA-43-L (Ravensworth Oil Field)
PSC-TL-SO-T 19-11

Interest owned(*Operator)

INPEX Alpha, Ltd. 28.5% BHPBP* 39.999%
Santos 31.501%
INPEX Offshore Timor-Leste, LTD. 35.47%
Eni* 40.53% Timor Gap 24%

INPEX CORPORATION Annual Report 2021

63

Project Overview by Core Business Areas

Abu Dhabi

In production
Under development
Under exploration
OP

In Abu Dhabi in the United Arab Emirates, INPEX works on, in addition to exploration
activities, further expanding production capacity through various production projects
continuing steady production.

Operator project
Key group company
headquaters and offices

SYRIA

IRAQ

AFGHANISTAN

IRAN

Block 10JORDAN

2 Abu Dhabi Offshore Oil Fields
KUWAIT
PAKISTAN

3 Onshore Block 4

OP

Abu Dhabi

UNITED
ARAB
EMIRATESSAUDIARABIA

OMAN

YEMEN

1 Abu Dhabi Onshore Concession

1

Abu Dhabi Onshore Concession

INPEX acquired a 5% interest in the ADCO Onshore Concession in Abu Dhabi in April 2015 following its participation in a bid.
INPEX also concluded a 40-year agreement, effective January 1, 2015, with the Supreme Petroleum Council of the Emirate of
Abu Dhabi and Abu Dhabi National Oil Company (ADNOC). The concession contains one of the world’s largest deposits of oil.
Stable production of crude oil is currently under way from twelve deposits, and plans are being considered to further increase
the daily production capacity from its current two million barrels per day.
0
Oil fields in production

60km

Abu Dhabi

Undeveloped oil fields
Crude oil pipelines

United Arab Emirates

Saudi Arabia
Oil processing facility

Contract area
(block)Abu Dhabi Onshore
Block

64

Project status
In production

INPEX CORPORATION Annual Report 2021

Venture company(established)
JODCO Onshore Limited(April 15, 2015)

Interest owned
JODCO 5% ADNOC 60%
TotalEnergies 10% BP 10% CNPC 8%
NPIC 4% GS 3%

INPEX’s Vision and Value Creation

2

Abu Dhabi Offshore Oil Fields

INPEX has been engaged in the development and production of oil fields offshore Abu Dhabi in the United Arab Emirates since1973. In January 2014, we extended our concession agreement for the Upper Zakum Oil Field by 15 years. Subsequently, in November 2017, we agreed on the plan to increase the oil field’s production capacity to one million barrels per day and extended
our concession agreement by a further ten years. In February 2018, we newly acquired an interest in the Lower Zakum Oil Field
concession and extended our existing concession agreements for the Satah and Umm Al-Dalkh Oil Fields by 25 years. INPEX isnow engaged in the development and production of four oil fields offshore Abu Dhabi, namely the Upper Zakum Oil Field,
which is one of the largest in the world, as well as the Lower Zakum, Satah, and Umm Al-Dalkh Oil Fields. The crude oil produced in the Upper Zakum, Satah and Umm Al-Dalkh Oil Fields is transported to Zirku Island, about 60 kilometers from the Upper Zakum Oil Field. There, the crude oil is processed before being stored and shipped as Upper Zakum Crude Oil. The crude
oil produced in the Lower Zakum Oil Field is transported to Das Island, about 90 kilometers away, where it is processed before
being stored and shipped as Das Crude Oil. INPEX was appointed as the asset leader of the Lower Zakum Oil Field concession
by ADNOC. As asset leader, INPEX plays a leading role in advancing development and is working closely with ADNOC and its
partners to lift the oil field’s production capacity to 450 thousand barrels per day.

Growth Strategies for Value Creation

60km

0

Satah Field
Upper Zakum Oil Field
Lower Zakum Oil Field

Das Island

Abu Dhabi

Zirku Island
Umm Al-Dalkh Field

Oil field
Subsea pipeline

United Arab Emirates
Zirku Island

Project
statusTarget production
capacity

Venture company(established)

Lower Zakum Oil
Field

Approximately 450
thousand barrels per day

Upper Zakum Oil
Field

Approximately 1 million
In production barrels per day

3

Interest owned
JODCO 10% ADNOC 60%
Consortium of three Indian companies 10%
CNPC 10% TotalEnergies 5% Eni 5%

JODCO Lower Zakum Limited(January 25, 2018)

JODCO 12% ADNOC 60%
ExxonMobil 28%

Japan Oil Development Co., Ltd.
Approximately 25(JODCO)
thousand barrels per day / (February 22, 1973)
Approximately 20
thousand barrels per day

Satah Field/
Umm Al-Dalkh Oil
FieldsManagement Foundation to
Advance Growth Strategies

Contract area
(block)JODCO 40% ADNOC 60%

Onshore Block 4

IRAQBusiness and Financial Overview

INPEX participated in the first-ever block bid round conducted by the Abu Dhabi National Oil Company (ADNOC) in Abu Dhabi
in the United Arab Emirates in 2018 and was exclusively awarded Onshore Block 4 as the operator. After drilling exploratory
wells from May to August 2021, we have discovered multiple oil and gas reservoirs. We aim to move to development and commence production at an early stage following appraisal activities.

IRAN

Onshore Block 4
Abu Dhabi

SAUDI ARABIAOMANSAUDI ARABIAUNITED ARAB
EMIRATES

Block0Contract area
(block)Onshore Block 4

Project status
Under exploration

OMAN

100km

Venture company(established)
JODCO Exploration Limited(February 6, 2019)

Interest owned
JODCO 100%

INPEX CORPORATION Annual Report 2021

65

Project Overview by Core Business Areas

Southeast Asia

In production
Under development
Preparation for development
Under exploration
Renewable energy project

In Southeast Asia, INPEX focuses on Abadi, a large-scale LNG project,and other projects such as the Muara Laboh Geothermal Power Project.

OP

Operator project
Key group company
headquaters and offices

THAILANDVIETNAMPHILIPPINESCAMBODIA

3 Block 05-1b/05-1c(Sao Vang and
Dai Nguyet Gas Field)

MALAYSIA

PALAU

SK-10
Sarulla Geothermal Project4 Muara Laboh Geothermal
Power Project

Singapore

2 Tangguh LNG Project(Berau Block)

SINGAPORE

Sebuku Block(Ruby Gas Field)

Jakarta

INDONESIA

1 Abadi LNG
Project OP

Abadi LNG Project
drilling ship

1

Abadi LNG Project

The Abadi LNG Project is based on an onshore LNG development scheme that INPEX as
INDONESIA
the operator is preparing for development alongside Shell in the Masela Block offshore InArafura Sea
donesia. The project is expected to produce approximately 9.5 million tons of LNG per year
and up to approximately 35 thousand barrels of condensate per day. The project will also
supply 150 million cubic feet of natural gas per day via pipeline to address local demand for
Abadi Gas Field
natural gas. INPEX acquired a 100% interest in the Masela Block in November 1998 throughan open bid conducted by the Indonesian authorities. INPEX subsequently conducted exTimor Sea
ploration activities as the operator, discovering the Abadi Gas Field through the first exploratory well drilled in 2000. Following exploration, evaluation activities and development
AUSTRALIA
Gas field
studies, INPEX conducted Pre-FEED work from March to October 2018 based on an onDarwin
200km
0shore LNG development scheme envisaging an annual LNG production capacity of 9.5 million tons. INPEX submitted a revised plan of development in June 2019 and received
approval from the Indonesian authorities in July 2019. Alongside the approval of the revised development plan, the Indonesianauthorities also approved an extension of the term of the Masela Block Production Sharing Contract (PSC) until 2055. Subsequently, detailed survey work in the planned construction site for the LNG plant and its surrounding areas was underway until it
was suspended due to the impact of the COVID-19 pandemic. Considering the need to contribute to a net zero carbon society,
INPEX is conducting a comprehensive study of measures such as the introduction of CCUS to make the project cleaner and further reduce costs and promote the project as a competitive and clean project with the aim of commencing production in theearly 2030s.
Contract area
(block)Masela66

Venture company(established)
Preparation for development INPEX Masela, Ltd. (December 2, 1998)
Project status

INPEX CORPORATION Annual Report 2021

Interest owned(*Operator)
INPEX Masela* 65%, Shell 35%

INPEX’s Vision and Value Creation

2

Tangguh LNG Project (Berau Block)

MI Berau B.V., jointly established by INPEX and Mitsubishi Corporation, acquired an interestin the Berau Block in October 2001. In October 2007, MI Berau Japan Ltd., also a joint venture with Mitsubishi Corporation, acquired a stake in KG Berau Petroleum Ltd., effectively
increasing INPEX’s interest in the Tangguh LNG Project to around 7.79%. In March 2005, Indonesian authorities approved an extension of the PSC and project development plans for
the Tangguh LNG Project until 2035. Following development work, the first shipments of
LNG began in July 2009. The final investment decision (FID) to expand the Tangguh LNG
Project was made in July 2016. The Tangguh LNG expansion project will add a third LNG
processing train, which is currently under construction, with production capacity of 3.8 million tons per annum, to the existing two trains with production capacity of 7.6 million tons
per annum.
Project
status

Production volume**

Venture company(established)Berau
In production
Tangguh Unit

Crude oil: 6 Kbbld
MI Berau B.V.
Natural gas***: 1,114 MMcf/d (August 14, 2001)

Berau BlockGas field
050kmInterest owned(*Operator)
Ml Berau 22.856% BP* 48.0%
Nippon Oil Exploration (Berau) 17.144% KG Berau 12.0%

Growth Strategies for Value Creation

Contract area
(block)Papua Province (Indonesia)

MI Berau 16.3% BP* 40.22% CNOOC 13.9%
Nippon Oil Exploration (Berau) 12.23% KG Berau 8.56%
LNG Japan 7.35% KG Wiriagar 1.44%** Daily production volume on the basis of all fields and average rate of fiscal year ended December 31, 2021*** Not the volume at wellheads but corresponds to the gas volume sold to buyers

3

Block 05-1b/05-1c (Sao Vang and Dai Nguyet Gas Field)

In 2004, INPEX acquired Blocks 05-1b and 05-1c, located 350 kilometers southeast of Ho Chi Minh City, Vietnam. In 2010, an exploration well was drilled in the Dai Nguyet (DN) structure leading
to the discovery of gas and condensate accumulations. In 2014,
another exploration well was drilled in the Sao Vang (SV) structure
which also led to the discovery of gas and condensate accumulations. In 2017, a development plan for the SV/DN gas field wasapproved by the Vietnamese government, and sales of gas fromthe Sao Vang Gas Field commenced in November 2020. Development work will also continue on the Dai Nguyet Gas Field.
Project
statusVIETNAMTHAILAND

Block 05-1b/05-1c

MALAYSIA

Gas field

0Management Foundation to
Advance Growth Strategies

Contract area
(block)Sao Vang and Dai Nguyet Gas Field

CAMBODIA

10km

Venture company(established)

Production volume**

Natural gas: 1.5 billion m3 per year
(expected)
Block 05-1b/05-1c In production
Crude oil and condensate: 2.8 million
bbl per year (expected)

Interest owned(*Operator)
Teikoku Oil (Con Son) Co., Ltd. 36.92%
Teikoku Oil (Con
Idemitsu Gas Production (Vietnam) Co., Ltd.*Son) Co., Ltd.
43.08%(October 29, 2004)
Vietnam Oil and Gas Group (PetroVietnam) 20%** Production on the basis of all fields

4

Muara Laboh Geothermal Power ProjectContract area
Project
Venture company(block)status(established)
Muara Laboh Geothermal In commercial INPEX GEOTHERMAL,
Power Project
operation
LTD. (May 26, 2021)

Indonesia
Sumatra Island

Business and Financial Overview

INPEX joined the Muara Laboh Geothermal Power Project in December 2021. The Project isbased in the Muara Laboh Geothermal Block in the Solok Selatan region in Indonesia’s West
Sumatra province, and is operated jointly by major European integrated energy company
ENGIE, Sumitomo Corporation and PT Supreme Energy, a private Indonesian geothermal
power generation business developer. The Muara Laboh Geothermal Power Plant is currently in commercial operation with a rated output of approximately 85 megawatts and produces
a volume of electricity equivalent to what is consumed annually by approximately 420,000
households in Sumatra, Indonesia. Electricity generated by the plant using geothermal resources is planned to be marketed to Indonesian national power company PT PLN (Persero)
over a 30-year period from the start of commercial operations in December 2019.

Kalimantan
IslandMuara Laboh
Geothermal Power Plant
Java Island

Interest owned(*Operator)
PT Supreme Energy Muara Laboh* (Share owned: INPEX GEOTHERMAL
30% Sumitomo Corporation 50% PT Supreme Energy 20%)

Other projects
Contract area
(block)Sebuku Block

Project
statusVenture company

Interest owned(*Operator)

In production

INPEX South Makassar, Ltd.

INPEX South Makassar, Ltd. 15% Pearl Oil* 70% TotalEnergies 15%

SK-10

In production

JX Nippon Oil & Gas Exploration(Malaysia) Limited

JX Nippon Oil & Gas Exploration (Malaysia) Limited* 75% Petronas 25%
Share in JX Nippon Oil & Gas Exploration (Malaysia) Limited 15%

Sarulla Geothermal
Project

In commercial
INPEX Geothermal Sarulla, Ltd.
operation

Sarulla Operations Ltd.* (Share owned: INPEX Geothermal Sarulla 18.2525%
Kyushu Electric Power 25% Itochu 25% Medco Energy International 18.9925%
Ormat Technologies 12.75%)
INPEX CORPORATION Annual Report 2021

67

Yabase Oil Field
Akita Prefecture

Project Overview by Core Business AreasJapan

INPEX is active in the Minami-Nagaoka Gas Field in Niigata Prefecture, one of the largest of
its kind in Japan and operates a natural gas pipeline extending approximately 1,500 kilometers
and an LNG receiving terminal.
East Japan Station
Sekihara Gas Field(underground storage)

0

100km

Niigata City

Naoetsu LNG Terminal

Toyama Line

Itoigawa City

Toyama City

Minami-Aga Oil Field

Nagaoka City
Joetsu City

Toyama Prefecture

Shin Oumi Line

Domestic
Natural Gas

Tokyo Line

Gunma
Prefecture

Tomi BS*

Matsumoto City

Shin Tokyo Line
Matsumoto Line
Nagano Prefecture

Karuizawa
Town

Sodeshi LNG Terminal[Shizuoka Gas]

Shizuoka Prefecture
Shizuoka City

Shizuoka Line
Gotemba City

Kofu City

Iruma Line

Sano City

Head Office (Akasaka, Minato-ku)
Ome City

Minamifuji Line

Adachi-ku, Tokyo

Naruto Line

Sammu City

Minami-Nagaoka
Gas Field
Ojiya City
Joetsu LineOil and gas fields

Chiba City

Technical Research Center(Kitakarasuyama, Setagaya-ku)[INPEX, Shizuoka Gas, Tokyo Gas]

Gas field

Shinetsu
HonsenNagaoka City
JoetsuShinkansen
Line

Kashiwazaki City

Konosu City

SaitamaPrefecture
MetropolitanTokyo

MitsukeCity

Sekihara
Gas Field(underground storage)

Fujioka BS*

Ryomo Line

Regasified LNG
Fuji City

Echigo LineSea of Japan

Honjo City

Kofu Line
Showa
City

Minami-Nagaoka Gas Field

Tochigi Prefecture

Chino City
Tomioka City

Yamanashi
Prefecture

Niigata
Prefecture

Domestic Natural Gas/
Regasified LNG

Nagano City

Second Suruga Trunk Line

Minami-Kuwayama Oil Field

Kashiwazaki City

Naruto Gas Field

Other project
Natural gas pipeline network*BS … Booster station
Major office

Chiba Prefecture

Domestic Natural Gas Business
In Japan, the natural gas produced from the INPEX-operated Minami-Nagaoka Gas Field (Niigata Prefecture), as well as the re-gasified LNG and other products received and manufactured at the Naoetsu LNG Terminal (Niigata Prefecture), which commenced
operations in December 2013, is transported through a natural gas trunk pipeline network of approximately 1,500 kilometers
stretching across the Kanto, Koshinetsu and Hokuriku regions, and sold to customers including city gas companies and large-scale
plants located along the network.
To improve resistance to low oil prices through enhanced operational efficiency, INPEX aims to reduce cost and improve technical capabilities by consolidating plants and conducting in-house maintenance, and raise plant operation rates through suitable
management. In terms of domestic natural gas pipelines, the Company seeks to improve the resilience of the supply system in Japan by completing the Shin Tokyo Line extension by 2024.
INPEX has experienced steady growth in sales of natural gas volume due to efforts to expand its supply infrastructure, as well as
the highly environmentally friendly attributes 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 fuel for natural
gas electric power plants and a raw material for chemical products.
In the Japanese energy market, INPEX faces challenging business conditions as competition continues to intensify. INPEX is focusing on developing its business to better address the diversifying needs of
Natural Gas Sales Volume in Japancustomers by implementing initiatives conducive to a net zero carbon society(100 million Nm/year)
Note: 41.86 MJ per 1 m
as well as measures to strengthen the Company’s resilience. These include
making proposals for the introduction of carbon neutral gas, onsite methana22.0
21.2 21.7
20.7
tion and hydrogen supply, in addition to conversion from other fuels to gas.
19.1
18.0
17.9 17.5
Efforts are also made to help city gas providers serving as gas wholesalers by
17.5
15.1
supporting their initiatives to respond to local expectations and needs throughour INPEX 4U Challenge Lab, and to promote the electric power sales business, including the microgrid business conducive to localized energy production and consumption and reinforcing resilience. At the Naruto Gas Field in
Chiba Prefecture, natural gas is being produced from water-soluble gas fields.
In addition, after extraction of the natural gas from underground water (brinewater), the brine water is used to produce iodine, which is exported to Europe,
2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2019/12 2020/12 2021/12
the United States and elsewhere.
(9 months)

Domestic Exploration Projects
INPEX plans to explore natural gas in Minami-Sekihara (Niigata Prefecture) and offshore Shimane and Yamaguchi Prefectures in2022. Exploratory drilling is expected to start in Minami-Sekihara in November 2022. The exploratory drilling in offshore Shimane
and Yamaguchi Prefectures commenced in May 2022.

68

INPEX CORPORATION Annual Report 2021

1-b

In production

Under exploration

Renewable energy project

EuropeKey group company headquarters and offices

FINLANDSWEDEN

1-a

In Europe, our focus is placedon the upstream business in
Norway and other areas, aswell as wind power projects in
the Netherlands.

NORWAY

Other projects

Oslo

PL1130ESTONIA

2 Offshore Wind Power Generation
LATVIA
Business in the Netherlands
LITHUANIAUNITED
KINGDOM
LondonGERMANYBELARUSPOLANDCZECH REP.

1-a

UKRAINE

PL1129
0

100km

1-b

PL1016

PL1133

PL1170Growth Strategies for Value Creation

PL318C*
PL318*
PL318B*

PL882BINPEX’s Vision and Value Creation

INPEX Idemitsu Norge AS

Other
projects

PL537B*
PL537*

PL882*
PL1153

PL057
PL089

PL609*
PL609B*
PL609D*

PL636
PL636B
PL636C
PL090C
PL090JS*
PL090B
PL090F
PL090G
PL090
PL090E
PL090I*

PL090HS
PL293B**Blocks where oil/gas accumulations were confirmed
60km

0

0

100km

Management Foundation to
Advance Growth Strategies

1*Blocks where oil/gas accumulations were confirmed

Snorre Project and others

In January 2022, INPEX acquired 50.5% of shares in Idemitsu Snorre Oil Development Co., Ltd. (new corporate name: INPEX
Norway Co., Ltd.), which had been held by Idemitsu Kosan Co., Ltd. and Osaka Gas Summit Resources Co., Ltd. Through its
wholly owned Norwegian subsidiary INPEX Idemitsu Norge AS (IIN), INPEX Norway currently owns 10 oil and gas assets in production, including the Snorre Project, as well as interests in multiple promising discovered but undeveloped oil and gas fields
and exploration licenses. The new addition is expected to help optimize INPEX’s upstream business portfolio.
The Snorre Project, IIN’s flagship asset, is expected to draw approximately 35% of its entire power from the Hywind Tampen
floating wind farm currently under construction. Furthermore, Wisting Oil Field development plan located in PL537 and 537b are
considering reducing CO2 emissions from oil and gas field production plants by using power from onshore hydropower generation.
Gas field

Oil field

Oil field

Business and Financial Overview

PL057

Snorre

Sygna
PL089

PL537B*

VigdisTordis

PL537*

Statfjord

Wisting*Blocks where oil/gas accumulations were confirmed
60km

0

100km

0

©Equinor

Rendering of Hywind Tampen as viewed from theplatform, upon completion

Contract area
(block)
PL057
PL089
PL537, PL537B

Project status
In production (Snorre)

Venture company(established)

INPEX Idemitsu
In production (Snorre, Tordis, Vigdis, Norge AS(September 25,
Statfjord Øst, Sygna)
Under exploration (blocks where oil/ 1989)
gas accumulations were confirmed)

Interest owned(*Operator)
INPEX Idemitsu Norge AS 9.6% Equinor* 31.0%
Petoro 30.0% Wintershall Dea 24.5% Vår 4.9%
INPEX Idemitsu Norge AS 9.6% Equinor* 41.5%
Petoro 30.0% Vår 16.1% Wintershall Dea 2.8%
INPEX Idemitsu Norge AS 10.0% Equinor* 35.0%
Lundin 35.0% Petoro 20.0%

INPEX CORPORATION Annual Report 2021

69

2

Offshore Wind Power Generation Business in the Netherlands

INPEX entered in December 2021 a stock transfer agreement with Diamond Generating Europe B.V. (DGE-NL), a Dutch registered, wholly owned second generation subsidiary of Mitsubishi Corporation, and, after approval by concerned parties, acquired
a 50% stake in the Luchterduinen offshore wind farm in February 2022 and a 15% stake in the Borssele III/IV offshore wind farm in
March 2022, both operating off the coast of the Netherlands. The Luchterduinen offshore wind farm is located 23 kilometers offshore Noordwijk and has been in commercial operation since September 2015 with an output scale of 129 megawatts producedby 43 3-megawatt units. The Borssele III/IV offshore wind farm is located 22 kilometers off the coast of Westkapelle and has
been in commercial operation since January 2021 with an output scale of 731.5 megawatts produced by 77 9.5-megawatt units.

Luchterduinen
Offshore Wind Farm
United Kingdom

Netherlands

Borssele III/IV
Offshore Wind Farm

Belgium

Germany

Luchterduinen Offshore Wind FarmContract area
(block)Luchterduinen (Q10)
Borssele III/IV (B34)

Project
statusVenture company(established)

Shareholders

INPEX Renewable Energy
In commercial
Europe Limited
operation(November 17, 2021)

INPEX Renewable Energy Europe Limited 50% Eneco 50%
INPEX Renewable Energy Europe Limited 15% Eneco 10%
Shell 20% Luxcara 10% Partners Group 45%

Other projects
Contract area
(block)Project status

Venture company

PL090, PL090E

In production (Fram)

INPEX Idemitsu Norge AS 15.0% Equinor* 45.0% Vår 25.0% Neptune 15.0%

PL090BIn production (Byrding)

INPEX Idemitsu Norge AS 15.0% Equinor* 70.0% Neptune 15.0%

PL090GIn production (Fram H-Nord)

INPEX Idemitsu Norge AS 40.0% Equinor* 45.0% Neptune 15.0%

PL090CIn production (Vega)

INPEX Idemitsu Norge AS 15.0% Wintershall Dea* 45.0% Spirit 25.0%
Neptune 15.0%

PL636, PL636C

In production (Duva)

INPEX Idemitsu Norge AS 30.0% Neptune* 30.0% PGNiG 30.0% Sval 10.0%

PL882, PL882B

INPEX Idemitsu Norge AS 20.0% Neptune* 45.0% Petrolia NOCO 20.0%
Concedo 15.0%

PL090IINPEX Idemitsu Norge AS 15.0% Equinor* 45.0% Vår 25.0% Neptune 15.0%

PL090JS
PL293B

Under exploration(blocks where oil/gas accumulations wereconfirmed)

INPEX Idemitsu Norge AS 40.0% Equinor* 40.0% Neptune 15.0%
Wellesley 5.0%
INPEX Idemitsu
Norge AS

INPEX Idemitsu Norge AS 10.0% Equinor* 51.0% DNO 29.0%
Longboat 10.0%

PL318, PL318B,
PL318CINPEX Idemitsu Norge AS 20.0% Equinor* 60.0% Petoro 20.0%

PL609, PL609B,
PL609DINPEX Idemitsu Norge AS 15.0% Lundin* 55.0% Wintershall Dea 30.0%

PL090F

INPEX Idemitsu Norge AS 40.0% Equinor* 45.0% Neptune 15.0%

PL090HSINPEX Idemitsu Norge AS 15.0% Equinor* 45.0% Spirit 25.0%
Neptune 15.0%

PL636BINPEX Idemitsu Norge 30.0% Neptune* 30.0% PGNiG 30.0% Sval 10.0%

PL1133
PL1153

INPEX Idemitsu Norge 10.0% Lundin* 35.0% Equinor 35.0% Petoro 20.0%

Under exploration

INPEX Idemitsu Norge 30.0% Aker BP* 40.0% Wintershall Dea 30.0%

PL1170INPEX Idemitsu Norge 10.0% Lundin* 35.0% Equinor 35.0% Petoro 20.0%

PL1130PL1016
PL112970

Interest owned(*Operator)

INPEX CORPORATION Annual Report 2021

INPEX Norge AS* 60.0% M Vest 20.0% Wintershall Dea 20.0%
INPEX Norge AS

INPEX Norge AS 40.0% OMV* 60.0%
INPEX Norge AS 30.0% Wintershall Dea* 40.0% Lundin 30.0%

INPEX’s Vision and Value Creation

Other Areas
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 Kashagan Oil Field is located within this area in the Caspian Sea where the water reaches depths of 3–4 meters, approximately 75 kilometers southeast of Atyrau, Kazakhstan. The shipment of crude oil commenced in October 2016. INPEX andits partners have achieved the project’s initial production volume target of 370 thousand barrels per day and are currently working to increase the daily production volume to 450 thousand barrels.

Growth Strategies for Value Creation

KAZAKHSTAN

Offshore North Caspian
Sea Contract Area

Kairan Structure

Caspian Sea
Aktote structure
Kashagan Oil Field
RUSSIAKAZAKHSTAN

Oil field
Gas field
Block

TURKEY

0

CHINA
IRAN

20km

INDIA

Offshore facility

Project
statusVenture company(established)

Offshore North CaspianSea

In production

Interest owned

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

Management Foundation to
Advance Growth Strategies

Contract area
(block)INPEX North Caspian Sea 7.56% Shell 16.81% Eni 16.81%
ExxonMobil 16.81% TotalEnergies 16.81% CNPC 8.33%
KMG 16.87%

ACG Oil Fields
INPEX acquired an interest in the Azeri- Chirag-Deepwater Gunashli (ACG) Oil Fields in the south Caspian Sea offshore 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, theDeepwater Gunashli and the West Chirag locations. In September 2021, cumulative crude oil production reached 4.0 billion barrels. INPEX and its partners are working on development to commence production with a new platform in 2023.

Caspian Sea

AZERBAIJAN

Business and Financial Overview

Baku

ACG Oil fields
Deepwater
Gunashli Field
Chirag Field
Azeri Field

KAZAKHSTANRUSSIAUZBEKISTANAZERBAIJAN

Oil field
Block
Pipelines

TURKMENISTAN
IRAN

0

50km

Offshore production facility

Contract area
(block)ACG

Project
status

Production volume**

In production Crude oil: 458 Kbbld

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

Interest owned(*Operator)
INPEX Southwest Caspian Sea 9.31%
BP* 30.37% MOL 9.57% SOCAR 25.00%
Equinor 7.27% ExxonMobil 6.79%
TPAO 5.73% Itochu 3.65% ONGC 2.31%** Production volume on the basis of all fields and average rate of fiscal year ended December 31, 2021

INPEX CORPORATION Annual Report 2021

71

Project Overview by Core Business Areas

Tight Oil Project (Eagle Ford shale play)
INPEX is steadily producing and marketing crude oil and gas in the Eagle Ford Shale Oil Project acquired in the State of Texas in
the United States in April 2019. Most of the assets are located in Karnes County, Texas, considered to be a highly productive
area for crude oil within the Eagle Ford shale play, which has long hosted a concentration of tight oil and shale gas development
activity. INPEX is the operator of the project, with the exception of a portion of the assets.

San Antonio

San Antonio

DallasGonzalesHouston

040km

WilsonKarnesAtascosa

La Salle
Shale oil project
Eagle Ford shale play(by courtesy of Gulf Tex)

Drilling operations site

Contract area
(block)Project
status

Production volume*

Venture company(established)

Eagle Ford shale play, southern
Texas, US

In production

Crude oil: 6 Kbbld
Natural gas: 10 MMcf/d

INPEX Eagle Ford, LLC(March 5, 2019)

Interest owned
With the exception of some areas,
INPEX holds a 100% interest as theoperator* Production volume on the basis of all fields and average rate of fiscal year ended December 31, 2021

Other projects
Contract area
(block)Project status

Interest owned(*Operator)

Keathley Canyon Blocks
874/875/918/919 (Lucius Oil
Field, Hadrian North Oil Field)

In production

INPEX Americas, Inc.

INPEX Americas, Inc. 10.10769%
Occidental* 63.81835% Other 26.07396%

Keathley Canyon Block 921/965
Walker Ridge Block 881/925

Under exploration

INPEX US Offshore, LLC

INPEX US Offshore 40% Occidental* 60%

BM-ES-23

Under exploration (blocks
where oil/gas accumulations
were confirmed)

INPEX Petróleo Santos Ltda.

INPEX Petróleo Santos 15% Petrobras* 65%
PTTEP 20%INPEX E&P Mexico PB-03, S.A. de
C.V.

INPEX E&P Mexico PB-03, S.A. de C.V. 33.3333%
Chevron* 33.3334% Pemex 33.3333%

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

INPEX E&P Mexico, S.A. de C.V. 35%
Chevron* 37.5% Pemex 27.5%

INPEX South Iraq, Ltd.

INPEX South Iraq 40% Lukoil* 60%

R1.4 Block 3 (Perdido)
Under exploration
R2.4 Block 22 (Salina)
Block 10

Under exploration (blocks
where oil/gas accumulations
were confirmed)

Sakhalin 1
Zapadno-Yaraktinsky Block/Bolshetirsky Block72

Venture company

In production

INPEX CORPORATION Annual Report 2021

Sakhalin Oil and Gas
SODECO 30% ExxonMobil* 30% ONGC 20%
Development Co., Ltd. (SODECO) Rosneft 20% Share in SODECO 6.08%
Japan South Sakha Oil Co., Ltd.
(JASSOC)JASSOC 49% INK* 51%
Share in JASSOC 24.998%

Financial andCorporate Information
74 Background Information: Oil and Gas Accounting
Policies and Practices

76 Management’s Discussion and Analysis of Financial
Condition and Results of Operations

82 Consolidated Financial Statements / Notes
104 Independent Auditor’s Report108 Subsidiaries and Affiliates
110 Business Risks
117 Oil and Gas Reserves and Production Volume
120 Corporate Information

INPEX CORPORATION Annual Report 2021

73

Background Information Oil and Gas Accounting Policies and Practices
ACCOUNTING METHODS FOR TYPES OF AGREEMENTS
The oil and gas business generates the bulk of consolidated net
sales revenues for the Company 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 other is 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 and gas development companies serve as contractors that
undertake at their own expense exploration and development
work on behalf of the governments of oil-producing countries or
national oil companies and receive production from the projects
as cost recovery and compensation.

Cost recovery and production sharing

The PSCs determine the allocation of oil and gas production
among the host country’s government (or related entity) and thecontractors such as the Group. The allocation formula generally
differs according to the terms of the individual PSC. In the case of
PSC for major projects currently in production, total production
volume is allocated quarterly between two portions.
(1) “Cost recovery portion”: This is the oil and gas equivalentof costs incurred at the quarterly period under the PSCs withthe governments of oil-producing countries. The equivalents
are determined based on the current unit prices of crude oiland natural gas and allocated between the contractors alone.
The quantity of oil and gas in the “cost recovery portion” decreases as unit prices increase, whereas that of the “equity
portion” (explained below) rises.
If the actual production for the quarterly period is insufficient to cover the quantity of oil and gas equivalent calculated for the cost recovery portion, the latter is capped at actual
production and any surplus amount is carried forward to thefollowing quarterly period, as stipulated in the PSC.
(2) “Equity portion”: This is any residual production after thecost recovery portion has been allocated. It is allocated between the host country’s government and the contractors
based on agreed percentages.
The calculation of items in the income statement based on theabove PSC-related considerations is as follows:• The Group records as net sales its share of total sales relating
to the oil and 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 throughthe allocation of its share of the “cost recovery portion.”

Production sharing contracts
Costs

Exploration
costs

Development
costs

Production costs(Operating costs)

Assets on Balance Sheet
Project under
exploration phase

Recoverable accounts
under production sharing
Project under development
and production phase

Recoverable accounts
under production sharing
Project under development
and production phase

Acquisition
costs

74

Exploration anddevelopment rights

INPEX CORPORATION Annual Report 2021

Recoverable costs under the PSCs

Exploration costs
The share of recoverable exploration costs incurred by the Group
under the terms of the relevant PSC is capitalized within “Recoverable accounts under production sharing.”
Development costs
The share of all development costs incurred by the Group that isrecoverable under the terms of the relevant PSC is recorded within “Recoverable accounts under production sharing.”
Production costs
Any operating costs incurred during the production phase thatare recoverable under the relevant PSC are initially recorded within “Recoverable accounts under production sharing.”
Administrative expenses
Any administrative expenses that are recoverable under the relevant PSC are recorded within “Recoverable accounts under production sharing.”
As noted, in “Cost recovery and production sharing,” these costs
are recovered either as capital or operating expenditures.

Non-recoverable costs under the PSCs

Acquisition costs
Costs relating to the acquisition of rights (recorded as intangible
assets under “Exploration and development rights”) for any projects governed by the PSCs that are entirely in the exploration
phase are expensed as incurred and amortized. Expenditures orcosts relating to the acquisition of rights to projects already in thedevelopment 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 lease agreements) by which a government entity ora national oil company of the country directly awards mining
rights to an oil company. The oil company makes its own investment in exploration and development and has the right of disposition of the oil and gas it extracts. Revenues are returned to thehost country 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 treated in 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 is capitalized within tangible fixed assets. The depreciation
Concession agreements

Statement of Income

Costs

Assets on Balance Sheet

Statement of Income

Provision for allowance forrecoverable accounts under
production sharing

Explorationcosts

All exploration costs are
expensed as incurred

Exploration expenses

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

Development
costs

Tangible fixed assets

Cost of sales(Depreciation andamortization)

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

Production costs(Operating costs)

All production costs are
expensed as incurred

Cost of sales(Operating expenses)

Selling, general andadministrative expenses(Depreciation andamortization)

Acquisition
costs

Mining rights

Cost of sales(Depreciation andamortization)

INPEX’s Vision and Value Creationof tangible fixed assets that are governed by concession agreements is computed primarily using the unit-of-production method
for mining assets located outside Japan and the straight-line
method for domestic facilities. These depreciation expenses arerecorded within the cost of sales.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Impairment loss on fixed assets

Allowance for recoverable accounts under
production sharing

Unit-of-production method

Overseas mining facilities, mining rights and exploration and development rights that are acquired during the development andproduction phase are mainly 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 the present value of retirement costs incurred upon termination of the operation and production with respect to oil andgas production facilities, based on the oil and gas contracts orlaws and regulations within the countries in which the Group operates or has working interests. Although the Group believes thatsuch estimates of the present value of retirement costs are

Allowance for investments in exploration companies

An allowance is recorded to provide for probable losses on investments made by the Group in entities engaged in oil and gas
activities, as estimated based on the net assets of such entities.
Although the Group believes that the 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 as of the fiscal year-end of consolidated subsidiaries at the
exploration stage based on a schedule of investments 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 andsales business individually estimated for each project. Althoughassessments and accounting estimates are made on a reasonablebasis, actual operating results can change depending on thebusiness status.

Deferred tax assets

Deferred tax assets reflect temporary differences (including net
operating loss carry-forwards) arising mainly from the write-downof exploration expenditures, foreign taxes payable and excess oftax allowable depreciation. Valuation allowances are provided
once it is judged that the non-realization of deferred tax assets
has become the more probable outcome. The effect of 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 future taxable income was lower than
expected due to market conditions, foreign exchange rate fluctuations or poor operating performance.

Business and Financial Overview

Any expenditures made during the exploration, development andproduction phases of projects governed by the PSCs are capitalized within “Recoverable accounts under production sharing” ifthey are recoverable under the relevant PSC. An allowance equal
to exploration costs is recorded within “Allowance for recoverable
accounts under production sharing” to provide for potential losses from unsuccessful exploration. This allowance typically remains
unchanged on the balance sheet until it exceeds the residual balance of exploration costs that previously had been capitalized
within “Recoverable accounts under production sharing” during
the exploration phase. Reflecting the uncertainty associated withoil and gas projects, an allowance is recorded within “Allowance
for recoverable accounts under production sharing” to provide
for probable losses on development activities, as individually estimated for each project. Although assessments and accounting
estimates are made on a reasonable basis, actual operating
results can change depending on the project status.

reasonable, changes to estimates of the present value of retirement costs which are caused by the factors such as changes to retirement plans, escalating prices of drilling equipment andmaterials and others could significantly affect future operating
results.

Management Foundation to
Advance Growth Strategies

The Group groups mining area and other assets as a basic unitthat generates cash inflows independently of other groups of assets. If any indication that an asset may be impaired exists, theGroup shall estimate the future cash flows, and if the recoverable
amount is lower than the carrying amount, the impairment loss isrecognized. Although the Group estimates prices, foreign exchange rates, reserves and others based on reasonable assumptions, any changes in these assumptions could significantly affectfuture operating results.

Growth Strategies for Value Creation

The Group’s consolidated financial statements are prepared inconformity with Japanese GAAP. The preparation of these financial statements requires the application of estimates, judgments
and assumptions that affect the reported 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 orassumed values.
Accounting estimates pursuant to the preparation of the consolidated financial statements are deemed critical if the degree of
uncertainty associated with such estimates is high, or if rationalchanges to such estimates could exert a material impact on the financial condition or operating results. Critical accounting policies
and estimates relating to the financial presentation are outlined
below.

Retirement benefits to employees

Retirement benefit obligation to employees are recognized at thenet present value of future obligations as of the fiscal year-end,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 be significantly affected by deviation between thebase assumptions and actual results or the revision of suchassumptions which were to generate actuarial gains or losses.

Goodwill

The excess cost over underlying net assets excluding non-controlling interests as fair value as of their dates of acquisition is accounted for as goodwill and amortized by the straight-line
method over 20 years.

INPEX CORPORATION Annual Report 2021

75

Management’s Discussion and Analysis of Financial Condition
and Results of Operations
BUSINESS ENVIRONMENT
During the year ended December 31, 2021, although the global
economy continued to face an uncertain outlook due to the impact of the novel coronavirus (COVID-19), there were signs of arecovery due to economic measures taken by various countries
and progress in vaccinations. Although the Japanese economy isalso expected to recover and normalize with the gradual increasein socioeconomic activities after the lifting of the declaration of astate of emergency at the end of September, there are still concerns about the stagnation of economic activities due to the reemergence of infectious diseases such as mutated strains.
Of the international crude oil price indices, which significantly
influence the financial performance of the Group, Brent crude (ona near-term closing price basis), considered a benchmark index
for crude oil, started the year ended December 31, 2021, at
US$51.09 per barrel. Although the relaxation of the supply anddemand for crude oil due to the gradual reduction in the scale of
OPEC+ production cuts and the spread of the new coronavirus
variant weighed on the situation, the demand for oil as an alternative fuel for power generation increased due to the sharp risein global natural gas prices, and the acceleration of the normalization of economic activities, among other factors, caused the
upward trend to continue, reaching US$77.78 as of December 31,

2021. The Group’s average crude oil sales price for the year ended December 31, 2021, reflected this shift and rose to US$68.43
per barrel, up US$28.12 from the year ended December 31, 2020.
The foreign exchange market, another important factor that
affects the business of the Group, began to trade at ¥103 level
against the U.S. dollar. On first half of the year, Japanese Yen
climbed to ¥110 level against the U.S. dollar due to the expectation of the world economy normalization after vaccination of
COVID-19, and U.S. interest rate rise as FOMC suggested earlier
rate hike.
The latter half of the year, the yen continued to climb to ¥115
level against the U.S. dollar due to the expectation of US rate hikeacceleration, however, the yen turned back to ¥112 level due tothe rising concern of COVID-19 Omicron variant. Finally, as of December 31, 2021, TTM closed at ¥115.02 against the U.S. dollar
which turned out to be ¥11.50 lower than that as of December 31,
2020.
Reflecting these situations, the average sales exchange rate
for the Group for the year ended December 31, 2021, was ¥110.11
against the U.S. dollar, which is ¥3.26 lower than that of the year
ended December 31, 2020.

PERFORMANCE OVERVIEW
Net sales
Consolidated net sales for the year ended December 31, 2021, increased by ¥473.3 billion, or 61.4%, to ¥1,244.3 billion from ¥771.0
billion for the year ended December 31, 2020 due to an increasein sales price of crude oil.
Compared with the year ended December 31, 2020, net salesof crude oil increased by ¥399.6 billion, or 79.1%, to ¥905.1 billion
from ¥505.5 billion, and net sales of natural gas increased by¥69.9 billion, or 27.9%, to ¥320.5 billion from ¥250.5 billion.
Compared with the year ended December 31, 2020, sales volume of crude oil increased by 2,837 thousand barrels, or 2.4%, to120,118 thousand barrels. Sales volume of natural gas decreased
by 2,661 million cf, or 0.6%, to 464,805 million cf. Of this, sales
volume of overseas natural gas decreased by 12,985 million cf, or
3.3%, to 377,068 million cf, and sales volume of domestic natural
gas increased by 277 million m3, or 13.3%, to 2,351 million m3(87,737 million cf).
Compared with the year ended December 31, 2020, the average sales price of overseas crude oil increased by US$28.12, or
69.8%, to US$68.43 per barrel. The average sales price of overseas natural gas increased by US$1.35, or 37.4%, to US$4.96 per
thousand cf, and the average sales price of domestic natural gas
decreased by ¥1.20, or 2.6%, to ¥45.73 per m3.
The increase of ¥473.3 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 ¥25.0 billion
to the increase, an increase in unit sales price contributing ¥411.6
billion to the increase, the depreciation of the Japanese yen
against the U.S. dollar contributing ¥33.0 billion to the increase,and an increase in net sales excluding crude oil and natural gas of¥3.6 billion.
Cost of sales
Cost of sales for the year ended December 31, 2021, increased by¥129.0 billion, or 29.3%, to ¥568.9 billion from ¥439.8 billion forthe year ended December 31, 2020.

76

INPEX CORPORATION Annual Report 2021

Exploration expenses
Exploration expenses for the year ended December 31, 2021, decreased by ¥2.6 billion, or 29.0% to ¥6.4 billion from ¥9.0 billion
for the year ended December 31, 2020. This was mainly due to adecrease in exploration activities in the Asia & Oceania region.
Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended
December 31, 2021, increased by ¥6.1 billion, or 10.4%, to ¥64.9
billion from ¥58.8 billion for the year ended December 31, 2020.
Depreciation and amortization
Depreciation and amortization for the year ended December 31,
2021, decreased by ¥1.4 billion, or 9.5%, to ¥13.4 billion from
¥14.8 billion for the year ended December 31, 2020. The Group
records depreciation expenses for production facilities that arecovered by concession agreements as cost of sales. In addition,
under its accounting treatment of the PSCs, the Group records
capital expenditures as “Recoverable accounts under production
sharing” instead of capitalizing these costs within tangible fixed
assets and depreciating them. Costs that are recovered in any
given year based on the terms of the PSCs are included in thecost of sales.
Operating income
As a result of the above, operating income for the year ended
December 31, 2021, increased by ¥342.1 billion, or 137.7%, to¥590.6 billion from ¥248.4 billion for the year ended December
31, 2020.
Other income
Other income for the year ended December 31, 2021, increasedby ¥48.4 billion, or 75.9%, to ¥112.2 billion from ¥63.8 billion forthe year ended December 31, 2020. This was mainly due to posting equity in earnings of affiliates.

INPEX’s Vision and Value Creation(Millions of yen, %)Change¥ 473,322
399,682
69,9833,657
129,068
344,254(2,629)6,104(1,406)342,186
48,442(2,365)722
38,834

—

7,572

7,572

—

23,588244,880
19,092
12,99927,26859,446
13,747—

3,679(185,433)(5,344)(12,999)15.6(75.7)(28.0)(100.0)2,566—(2,566)(100.0)2
8,209
99
189,940
11,97067,394
171,200(103,806)
7,893¥(111,699)

—
6,709
5,966
14,17018,852643,457
429,532
213,924(9,123)¥ 223,048(2)(1,499)5,866(175,770)
6,882
576,062
258,331317,731(17,016)¥ 334,748(100.0)(18.3)—(92.5)
57.5
854.8
150.9
—
—
—%

Net income (loss) attributable to owners of parent
As a result of the above, net income attributable to owners ofparent for the year ended December 31, 2021, was ¥223.0 billion
compared with ¥111.6 billion of net loss attributable to owners ofparent for the year ended December 31, 2020.

Business and Financial Overview

Other expenses
Other expenses for the year ended December 31, 2021, decreased by ¥185.4 billion, or 75.7%, to ¥59.4 billion from ¥244.8
billion for the year ended December 31, 2020. This was mainly
due to a decrease in impairment loss.

Ratio
61.4 %
79.1
27.9
24.5
29.3
103.9
(29.0)
10.4
(9.5)
137.7
75.9
(7.1)
10.7
—

Management Foundation to
Advance Growth Strategies

2021/12¥1,244,369
905,199
320,575
18,594568,921675,448
6,445
64,92013,425590,657
112,246
31,115
7,456
38,834Growth Strategies for Value Creation

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

2020/12¥ 771,046
505,517
250,592
14,937439,852
331,194
9,074
58,815
14,832
248,471
63,80333,480
6,733—

Income taxes
Total amount of current income taxes and deferred income taxes
for the year ended December 31, 2021, increased by ¥258.3 billion, or 150.9%, to ¥429.5 billion from ¥171.2 billion for the year
ended December 31, 2020. The Group pays the majority of its
taxes outside Japan. In addition to the high corporate tax rates
imposed in a number of regions, the Group is generally unable todeduct expenses incurred in Japan for such taxes. Despite thepositive effects attributable to the application of the foreign tax
credit system, this situation resulted in a high effective income tax
rate.
Net income (loss) attributable to non-controlling interests
Net loss attributable to non-controlling interests for the year ended December 31, 2021, was ¥9.1 billion compared with ¥7.8 billionof net income attributable to non-controlling interests for the year
ended December 31, 2020.

INPEX CORPORATION Annual Report 2021

77

FINANCIAL POSITION
Consolidated total assets as of December 31, 2021, increased by¥523.6 billion, or 11.3%, to ¥5,158.1 billion from ¥4,634.5 billion asof December 31, 2020. Current assets increased by ¥131.7 billion,
or 34.0%, to ¥518.8 billion from ¥387.0 billion as of December 31,
2020, due to increases in accounts receivable-trade and others.
Fixed assets increased by ¥391.9 billion, or 9.2%, to ¥4,639.3 billion from ¥4,247.4 billion as of December 31, 2020, due to increases in tangible fixed assets, investments and other assets, andothers.
Meanwhile, total liabilities increased by ¥178.6 billion, or
10.9%, to ¥1,811.7 billion from ¥1,633.1 billion as of December 31,
2020. Current liabilities increased by ¥9.5 billion, or 2.8%, to¥348.8 billion from ¥339.2 billion as of December 31, 2020. Longterm liabilities increased by ¥169.0 billion, or 13.1%, to ¥1,462.8
billion from ¥1,293.8 billion as of December 31, 2020.
Net assets increased by ¥345.0 billion, or 11.5%, to ¥3,346.4
billion from ¥3,001.3 billion as of December 31, 2020. Total shareholders’ equity increased by ¥113.3 billion, or 4.4%, to ¥2,680.6
billion from ¥2,567.2 billion as of December 31, 2020. Total accumulated other comprehensive income increased by ¥274.1 billion,
or 162.0%, to ¥443.4 billion from ¥169.2 billion as of December
31, 2020. Non-controlling interests in net assets decreased by¥42.4 billion, or 16.0%, to ¥222.3 billion from ¥264.7 billion as ofDecember 31, 2020.

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 expenditures, development expenditures and operating expenses.
The Group’s expenditure categories are defined as follows:•	Exploration expenditures include the costs of exploratory drilling and any geological or geophysical studies. The costs of local personnel and office operations and related administrative
expenses are also included in this category if a project (or contract area) is in the exploration phase.
• Development expenditures include the costs of development
drilling, any production facilities and acquisition of participating interests.
• Operating expenses include the costs of well operations, maintenance and the supervision of production activities. This category also includes the administrative expenses for the 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 both the Group’s
definitions of exploration and development expenditures andthe standards used in preparing the following tables. The following is a partial list of the discrepancies between the Group’s
accounting policies and Topic 932.
– Group expenditures relating to the PSC-governed joint ventures where the Group is not the operator are disclosed ona cash basis rather than an accrual basis as required by Topic 932.
– The tables below have been prepared based on the cost definitions 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 activities 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 December 31, 2020 and 2021.
(Millions of yen)

Year ended December 31, 2020

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 3,961
62,262¥  (589)
24,617¥ 5,682
52,386¥   793
13,532¥ 10,777
154,860

2,992

66,22324,02758,06914,325

165,638

—
—

—
1,470

26
1,653

—
917

—
—

26
4,042

—
2,706
¥5,6981,470
12,546¥80,240

1,680—¥25,707917—¥58,987——¥14,325

4,069
15,252¥184,959

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥ 930
Development
2,061
Subtotal
Equity-method Affiliates
Exploration
Development
Subtotal
Other capital expenditures*
Total* 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.

78

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation(Millions of yen)

Year ended December 31, 2021

Middle East &AfricaAmericasTotal¥ 1,183
83,220¥  (587)
25,335¥ 5,024
46,840¥ 1,356
12,002¥  7,464
171,844

4,934

84,40324,74751,864

13,359179,309

—
—

—
1,255

47
1,394

—
2,900

—
—

47
5,549

—
5,978
¥10,912

1,255
12,273¥97,932

1,441—¥26,1882,900—¥54,764——¥13,3595,596
18,251¥203,158Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥   488
Development
4,446
Subtotal
Equity-method Affiliates
Exploration
Development
Subtotal
Other capital expenditures*
Total

Growth Strategies for Value Creation

Asia & Oceania

Eurasia(Europe & NIS)

* 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.

Total investments for the year ended December 31, 2021, increased by ¥18.1 billion, or 9.8%, to ¥203.1 billion (including ¥5.5 billion for exploration and development by equity-method affiliates) from ¥184.9 billion for the year ended December 31, 2020. This was mainly due toan increase in expenditures in the Asia & Oceania region.
The table below shows the Group’s operating expenses by segment for the years ended December 31, 2020 and 2021.
(Millions of yen, %)2020/12Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Equity-method Affiliates
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa

44,393
14,28541,744
2,709

9.6%
38.9
12.5
36.6
2.4

¥ 10,686
51,491
13,73346,647
3,039

8.5%
41.0
10.9
37.2
2.4

114,065

100.0

125,598

100.0

2,972
460
2,548

49.7
7.7
42.6

3,123
633
2,381

50.9
10.3
38.8

5,981
¥120,046

100.0
—%

6,138
¥131,737

100.0—%

INPEX CORPORATION Annual Report 2021

Business and Financial Overview

Subtotal
Total¥ 10,931

2021/12
Management Foundation to
Advance Growth Strategies

INPEX CORPORATION and Consolidated Subsidiaries
Japan

79

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 December 31, 2020 and 2021.
(Millions of yen)

2020/122021/12

Balance at beginning of the year
Add: Exploration costs
Development costs
Operating expenses
Other
Less: Cost recovery-capital expenditures
Cost recovery-operating expenditures¥568,377
3,584
28,865
17,1886,184(34,691)(13,965)¥575,544
1,014
27,94917,553
3,566(62,236)(15,222)

Balance at end of the year
Allowance for recoverable accounts under production sharing at end of the year

575,544¥ (69,441)

548,170¥ (61,871)

The amount posted as “Cost recovery-operating expenditures” inrecoverable accounts under production sharing is greater thanthat posted as operating expenses. Along with operating expenses, this is because a portion of the exploration and development
costs, which are incurred and recoverable within the year, is included in the “Cost recovery-operating expenditures” account.
Exploration costs for the year ended December 31, 2021, decreased by ¥2.5 billion to ¥1.0 billion from ¥3.5 billion for the year
ended December 31, 2020. This was mainly due to a decrease in
exploration expenditures in the Middle East & Africa region.
Development costs for the year ended December 31, 2021,
decreased by ¥0.9 billion to ¥27.9 billion from ¥28.8 billion for theyear ended December 31, 2020. This was mainly due to a decrease in development expenditures in the Asia & Oceania
region.

Funding sources and liquidity
Oil and natural gas exploration and development projects, as wellas the construction of natural gas infrastructure, require significant
funding. The Group relies on cash flow on hand derived from internal reserves, together with external sources, to procure funds.
The Group’s basic policy is to utilize cash flow on hand and external equity financing to fund exploration projects and to utilize
cash flow on hand, bank loans and issuance of bonds to fund development projects and the construction of natural gas infrastructure. Oil and natural gas development projects are primarily
funded from long-term loans that the Company has secured fromthe Japan Bank for International Cooperation, Japanese commercial banks and others. Japan Oil, Gas and Metals National Corporation has provided guarantees for the principal on certain
outstanding amounts of the Company’s long-term loans. The Development Bank of Japan and Japanese commercial banks andothers have provided long-term loans for the construction of domestic gas infrastructure. The Ichthys downstream entity (Ichthys
LNG Pty Ltd, an equity-method affiliate), as the borrower, has utilized external loans from export credit agencies and commercial
banks for project financing and others.

80

INPEX CORPORATION Annual Report 2021

Operating expenses for the year ended December 31, 2021,
increased by ¥0.3 billion to ¥17.5 billion from ¥17.1 billion for theyear ended December 31, 2020. This was mainly due to an increase in operating expenses in the Asia & Oceania region andthe Eurasia region.
Cost recovery for the year ended December 31, 2021, increased by ¥28.8 billion to ¥77.4 billion from ¥48.6 billion for theyear ended December 31, 2020. This was mainly due to an increase in cost recovery in the Asia & Oceania region and the Eurasia region.
Allowance for recoverable accounts under production sharing
as of December 31, 2021, decreased by ¥7.5 billion to ¥61.8 billion from ¥69.4 billion as of December 31, 2020. This was mainly
due to production start-up in certain blocks.

During the year ended December 31, 2021, the Company took
out bank loans for development expenditures, etc., in addition toissuing the Group’s first bonds (straight bonds and environmentalloans), and diversifying funding. Additionally, the Company received financing from Japan Oil, Gas and Metals National Corporation for development expenditures and exploration expenditures,
etc.
The Group’s basic liquidity policy is to maintain sufficient cash
flow on hand to provide for steep falls in oil and gas prices. In addition, the Group has concluded commitment line contracts withmultiple financial institutions to secure the line of credit.
As of December 31, 2021, total amount of short-term borrowings and long-term debt was ¥1,150.2 billion, and total amount ofcash and cash equivalents was ¥191.2 billion.

INPEX’s Vision and Value Creation

Cash flows
Cash flows for the years ended December 31, 2020 and 2021, are summarized as follows:(Millions of yen)

Net cash provided by (used in) operating activities
Net cash provided by operating activities for the year ended December 31, 2021, increased by ¥152.5 billion to ¥445.4 billion from¥292.9 billion for the year ended December 31, 2020. This was
mainly due to a combination effect of an increase in income before income taxes caused by increases in sales price of crude oiland others and a decrease in impairment loss (non-cash).

2021/12¥ 292,915(417,189)
126,747¥ 172,405¥ 445,457(130,727)(315,215)¥ 191,213

Growth Strategies for Value Creation

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

2020/12Net cash provided by (used in) financing activities
Net cash used in financing activities for the year ended December
31, 2021, was ¥315.2 billion compared with ¥126.7 billion of net
cash provided by financing activities for the year ended December 31, 2020. This was mainly due to decreases in short-term loans
and proceeds from long-term debt.

Net cash provided by (used in) investing activities
Net cash used in investing activities for the year ended December
31, 2021, decreased by ¥286.4 billion to ¥130.7 billion from ¥417.1
billion for the year ended December 31, 2020. This was mainly
due to the absence of payments for purchases of long-term loans
receivable.

Management Foundation to
Advance Growth Strategies
Business and Financial Overview

INPEX CORPORATION Annual Report 2021

81

Consolidated Balance Sheet
INPEX CORPORATION and Consolidated Subsidiaries
December 31, 2021

Thousands of
U.S. dollars (Note 3)

Millions of yen

ASSETS

2020/122021/122021/12Current assets
Cash and cash equivalents (Note 7)¥

172,405¥

191,213$ 1,662,432

Time deposits

10,573

10,55191,731

Accounts receivable-trade (Notes 5 and 7)

83,810168,224

1,462,563

Inventories (Note 7)

34,29947,817415,727

Accounts receivable-other (Note 5)

40,74842,309367,840

Other (Note 7)

57,48170,852615,997

Less allowance for doubtful accounts(12,225)(12,104)(105,233)

387,093

518,864

4,511,076

402,332

407,253

3,540,714

Total current assets
Tangible fixed assets
Buildings and structures

651,938

764,382

6,645,644

1,679,940

1,994,327

17,338,958

Land (Note 7)

18,591

18,666

162,284

Construction in progress (Note 7)

385,405

292,8362,545,957

Wells (Note 7)
Machinery, equipment and vehicles (Note 7)

Other50,68857,337498,495

3,188,897

3,534,804

30,732,081(1,119,114)(1,274,954)(11,084,628)

2,069,783

2,259,849

19,647,443

Goodwill

35,44529,550256,911

Exploration and development rights

156,787

150,902

1,311,963

Mining rights

245,016

260,182

2,262,058

4,587

6,025

52,382441,837446,660

3,883,324

575,544548,170

4,765,866

Less accumulated depreciation and amortization
Total tangible fixed assets
Intangible assets

Other
Total intangible assets
Investments and other assets
Recoverable accounts under production sharing
Less allowance for recoverable accounts under production sharing(69,441)(61,871)(537,915)

506,102486,298

4,227,942

Investment securities (Notes 5, 6 and 7)

297,867

403,356

3,506,833

Long-term loans receivable (Note 7)

911,424

1,011,801

8,796,739

Deferred tax assets (Note 8)

10,237

21,713

188,775

Other (Note 7)

13,231

11,704

101,756

(600)

(652)

(5,668)Less allowance for doubtful accounts(2,460)(1,400)(12,171)

Total investments and other assets

Less allowance for investments in exploration

1,735,804

1,932,821

16,804,216

Total fixed assets

4,247,424

4,639,332

40,335,002¥ 4,634,518¥ 5,158,196$ 44,846,078

Total assets
See accompanying notes to consolidated financial statements.

82

INPEX CORPORATION Annual Report 2021

LIABILITIES AND NET ASSETSINPEX’s Vision and Value Creation

Thousands of
U.S. dollars (Note 3)

Millions of yen

2020/122021/122021/12¥   15,090¥   14,888$   129,438

175,133

80,493699,817

Current liabilities
Accounts payable-trade
Short-term borrowings and current portion of long-term debt
(Notes 5, 7 and 13)

12,67651,350446,444

70,47898,518856,529

Provision for bonuses

12,050

1,415

1,386

Provision for bonuses to officers

54

200

1,738

Provision for loss on business

9,351

9,400

81,724
82,107

Provision for exploration projects

9,496

9,444

Asset retirement obligations (Note 17)

1,475

672

5,842

Other

44,116

82,533

717,553

339,288348,888

3,033,281—

30,000260,824

Total current liabilities

Growth Strategies for Value Creation

Income taxes payable (Note 8)
Accounts payable-other

Long-term liabilities
Bonds payable (Note 13)

1,059,713

1,069,721

9,300,304

Deferred tax liabilities (Note 8)

32,594

81,192705,894

Provision for stocks payment

71

100

869

Long-term debt (Notes 5, 7, 12 and 13)

Provision for special repair and maintenance

650

5,651

8,158

7,048

61,276

Asset retirement obligations (Note 17)

172,147

258,3392,246,035

20,627

15,845

137,758

Total long-term liabilities

Other

1,293,890

1,462,897

12,718,631

Total liabilities

1,633,178

1,811,786

15,751,921

290,809290,8092,528,334

Management Foundation to
Advance Growth Strategies

577

Liability for retirement benefits (Note 16)

Net assets (Note 10)
Common stock
Authorized: 2020/12 — 3,600,000,001 shares
2021/12 — 3,600,000,001 shares
Issued:2020/12 — 1,462,323,601 shares

Retained earnings
Less: Treasury stock

2020/12 — 2,119,069 shares
2021/12 — 75,805,993 shares

Total shareholders’ equity
Unrealized holding gain (loss) on securities

674,374

681,398

5,924,169

1,607,524

1,783,841

15,508,963(5,428)(75,425)(655,755)

2,567,279

2,680,624

23,305,720

2,091

2,640

22,952

Deferred gain (loss) on hedges(54,054)(16,171)(140,592)

Translation adjustments

221,224

456,972

3,972,978Total accumulated other comprehensive income

169,261

443,4413,855,338

Non-controlling interests
Total net assets

264,798

222,344

1,933,089

3,001,339

3,346,409

29,094,148¥4,634,518¥5,158,196$44,846,078

Business and Financial Overview

2021/12 — 1,462,323,601 shares
Capital surplus

Contingent liabilities (Note 19)
Total liabilities and net assets

INPEX CORPORATION Annual Report 2021

83

Consolidated Statement of Income andConsolidated Statement of Comprehensive Income
Consolidated Statement of Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended 2021
Thousands of
U.S. dollars (Note 3)

Millions of yen

Net sales
Cost of sales (Note 14)
Gross profit
Exploration expenses
Selling, general and administrative expenses (Notes 14 and 16)
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Equity in earnings of affiliates
Gain on reversal of allowance for recoverable accounts under
production sharing
Other
Total other income
Other expenses
Interest expense
Equity in losses of affiliates
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Loss on disposal of fixed assets
Impairment loss (Note 15)
Other
Total other expenses
Income before income taxes
Income taxes (Note 8)
Current
Deferred
Total income taxes
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to owners of parent

2020/122021/122021/12¥ 771,046
439,852
331,194
9,074
58,815
14,832
248,471¥1,244,369
568,921675,448
6,445
64,92013,425590,657$10,818,718
4,946,278
5,872,439
56,033
564,423
116,718
5,135,254

33,480
6,733—

31,115
7,456
38,834

270,518
64,823
337,628—

7,572

65,832

23,58863,80327,268112,246

237,071975,882

19,092
12,999
2,566
2
8,209
99
189,940
11,970244,880
67,394

13,747
—
—
—
6,709
5,966
14,17018,85259,446643,457

119,518———
58,32851,869123,195
163,901
516,8315,594,305

184,127(12,926)
171,200(103,806)
7,893¥(111,699)

395,437
34,094
429,532
213,924(9,123)¥ 223,048

3,437,984
296,418
3,734,411
1,859,885(79,316)$ 1,939,210

Consolidated Statement of Comprehensive Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended 2021
Thousands of
U.S. dollars (Note 3)

Millions of yen

Net income (loss)
Other comprehensive income
Unrealized holding gain (loss) on securities
Deferred gain (loss) on hedges
Translation adjustments
Share of other comprehensive income of affiliates accounted
for by the equity-method
Total other comprehensive income (Note 9)Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See accompanying notes to consolidated financial statements.

84

INPEX CORPORATION Annual Report 2021

2020/122021/122021/12¥(103,806)¥213,924$1,859,885(3,483)281(109,917)

564
(807)
235,828

4,903(7,016)2,050,321(39,904)

45,939399,400(153,024)(256,830)

281,524
495,449

2,447,609
4,307,503(260,426)¥3,596497,228¥(1,778)

4,322,969$(15,458)

Consolidated Statement of Changes in Net Assets
INPEX’s Vision and Value Creation

INPEX CORPORATION and Consolidated Subsidiaries

Millions of yen
Shareholders’ equity
For the year ended December 31, 2020
Balance as of January 1, 2020
Change in ownership interest of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in items other than those inshareholders’ equity
Total changes during the period
Balance as of December 31, 2020

Capital surplus

Retained earnings¥290,809¥674,374¥1,763,034¥(5,432)

Total shareholders’equity¥2,722,786

3(43,810)(111,699)—
3

3¥(5,428)(155,507)¥2,567,279

Treasury stock—(43,810)(111,699)—¥290,809—¥674,374(155,510)¥1,607,524

Millions of yen
Accumulated other comprehensive income
Total accumulated
Unrealized holding
Translation
Deferred gainother comprehensive
gain (loss) on(loss) on hedges
adjustments
incomesecurities¥5,570¥(18,128)¥330,546¥317,988

Non-controllinginterests

Total net assets¥256,400¥3,297,176

Growth Strategies for Value Creation

For the year ended December 31, 2020
Balance as of January 1, 2020
Change in ownership interest of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in items other than those inshareholders’ equity
Total changes during the period
Balance as of December 31, 2020

Common stock—(43,810)(111,699)—
3(3,479)(35,926)(109,322)(148,727)

8,397(140,329)(3,479)¥2,091(35,926)¥(54,054)(109,322)¥221,224(148,727)¥169,261

8,397¥264,798(295,836)¥3,001,339

Millions of yen
Shareholders’ equity

For the year ended December 31, 2021
Balance as of January 1, 2021
Change in ownership interest of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in items other than those inshareholders’ equity
Total changes during the period
Balance as of December 31, 2021

Common stock

Capital surplus

Retained earnings¥290,809¥674,374¥1,607,524¥ (5,428)

Total shareholders’equity¥2,567,279(69,999)3(46,731)223,048(69,999)3(69,996)¥(75,425)

113,344¥2,680,624

Treasury stock

7,024

7,024
(46,731)223,048—¥290,809

Unrealized holding
gain (loss) on
securities¥2,091

7,024¥681,398

176,316¥1,783,841

Millions of yen
Accumulated other comprehensive income
Total accumulated
Translation
Deferred gainother comprehensive(loss) on hedges
adjustments
income¥(54,054)¥221,224¥169,261

Non-controllinginterests

Total net assets¥264,798¥3,001,339
7,024(46,731)223,048(69,999)3

548

37,882

235,748

274,179(42,454)

231,725548¥2,64037,882¥(16,171)

235,748¥456,972

274,179¥443,441(42,454)¥222,344

345,070¥3,346,409

For the year ended December 31, 2021
Balance as of January 1, 2021
Change in ownership interest of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in items other than those inshareholders’ equity
Total changes during the period
Balance as of December 31, 2021

Common stock

Capital surplus

Retained earnings$2,528,334$5,863,102$13,976,038$(47,191)

Total shareholders’equity$22,320,283(608,581)
26(406,285)
1,939,210(608,581)
26(608,555)$(655,755)

985,428$23,305,720

Treasury stock

61,06761,067(406,285)
1,939,210—$2,528,334

Business and Financial Overview

Thousands of U.S. dollars (Note 3)
Shareholders’ equity
For the year ended December 31, 2021
Balance as of January 1, 2021
Change in ownership interest of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in items other than those inshareholders’ equity
Total changes during the period
Balance as of December 31, 2021

Management Foundation to
Advance Growth Strategies

For the year ended December 31, 2021
Balance as of January 1, 2021
Change in ownership interest of parent arising fromtransactions with non-controlling shareholders
Cash dividends paid
Net income (loss) attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Net changes in items other than those inshareholders’ equity
Total changes during the period
Balance as of December 31, 2021

61,067$5,924,169

1,532,916$15,508,963

Thousands of U.S. dollars (Note 3)
Accumulated other comprehensive income
Total accumulated
Unrealized holding
Deferred gain
Translation
other comprehensive
gain (loss) on(loss) on hedges
adjustments
incomesecurities$18,179$(469,953)$1,923,352$1,471,578

Non-controllinginterests

Total net assets$2,302,190$26,094,061
61,067(406,285)
1,939,210(608,581)
26

4,764

329,351

2,049,626

2,383,750(369,101)

2,014,649

4,764$22,952

329,351$(140,592)

2,049,626$3,972,978

2,383,750$3,855,338(369,101)$1,933,089

3,000,086$29,094,148

See accompanying notes to consolidated financial statements.
INPEX CORPORATION Annual Report 2021

85

Consolidated Statement of Cash Flows
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended 2021

Thousands of
U.S. dollars (Note 3)

Millions of yen

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) in provision for allowance for recoverable
accounts under production sharing
Increase (decrease) in provision for exploration projects
Increase (decrease) in other provisions
Increase (decrease) in liability for retirement benefits
Interest and dividend income
Interest expense
Foreign exchange loss (gain)
Equity in losses (earnings) of affiliates
Recovery of recoverable accounts under production sharing(capital expenditures)
Decrease (increase) in recoverable accounts under production sharing(operating expenditures)
Decrease (increase) in accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in accounts payable-trade
Decrease (increase) in accounts receivable-other
Increase (decrease) in accounts payable-other
Increase (decrease) in advances received
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payments for time deposits
Proceeds from time deposits
Payments for purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for purchases of intangible assets
Payments for purchases of investment securities
Proceeds from sales and redemptions of investment securities
Investment in recoverable accounts under production sharing(capital expenditures)
Decrease (increase) in short-term loans receivable
Long-term loans madeCollection of long-term loans receivable
Payments for purchases of long-term loans receivable
Payments for acquisitions of participating interests
Other
Net cash used in investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans
Proceeds from issuance of bonds
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from non-controlling interests for additional shares
Purchase of treasury stock
Purchase of treasury stock of subsidiaries
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.

86

INPEX CORPORATION Annual Report 2021

2020/122021/122021/12¥ 67,394
174,098
189,940
6,760¥ 643,457
203,184
14,1706,856$ 5,594,305
1,766,510
123,195
59,6072,544(7,570)(65,814)(1,907)(777)
186(40,214)
19,092
4,809
12,999(814)
1,614(1,050)(38,571)
13,777
13,618(38,834)(7,077)
14,032(9,128)(335,341)
119,779
118,396(337,628)

34,691

62,236541,088(7,101)(4,106)(35,698)

61,756
6,507(6,612)
9,972(21,458)
(148)
8,408
520,941
9,568(19,494)(218,099)
292,915(83,689)(14,534)(3,721)(7,927)
25,6146,237
4,309
794,255
15,404(11,466)(352,735)
445,457(727,603)(126,360)(32,350)(68,918)
222,691
54,22537,463
6,905,364
133,924(99,687)(3,066,727)
3,872,865(64,283)
53,408(129,745)
404(3,380)
(429)
1,318

(17,784)
18,906(140,470)
195(2,762)(6,026)
18,444(154,616)
164,371(1,221,265)
1,695(24,013)(52,390)
160,354(35,039)(30,812)(267,883)

543(84,829)
40,108(201,769)(5,760)12,266(417,189)333(34,868)
69,372—(7,736)2,481(130,727)

2,895(303,147)
603,129—(67,257)
21,570(1,136,558)

92,107—
238,564(158,903)
8,900——(43,796)(4,098)(6,026)
126,747(3,842)(1,368)
173,774¥ 172,405(94,630)
30,00066,313(157,405)
6,455(69,999)(35,479)(46,718)(3,548)(10,202)(315,215)
19,29318,807
172,405¥ 191,213(822,726)
260,824
576,534(1,368,501)
56,120(608,581)(308,459)(406,172)(30,846)(88,697)(2,740,523)
167,736
163,510
1,498,913$ 1,662,432

NotesINPEX’s Vision and Value Creation

INPEX CORPORATION and Consolidated Subsidiaries

1. BASIS OF PRESENTATION
The accompanying consolidated financial statements havebeen prepared in accordance with accounting principles generally accepted in Japan, which may differ in certain material respects
from IFRS 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 December 31, 2021.

Growth Strategies for Value Creation

The Company is primarily engaged in the research, exploration,
development and production of crude oil and natural gas.
The Company and its domestic subsidiaries maintain their accounting records and prepare their financial statements in accordance with accounting principles generally accepted in Japan.
When the financial statements of its foreign subsidiaries areprepared in accordance with International Financial ReportingStandards (IFRS) or the accounting principles generally acceptedin the United States (U.S. GAAP), the Company uses them in the
consolidated accounting procedures. However, there are certain
accounts that must be adjusted in terms of materiality in order torecord net income properly.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of consolidation and accounting forinvestments in affiliates(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 securities with a determinable market value are mainly stated
at fair value with any changes in unrealized holding gain or loss,
net of the applicable income taxes, included directly in net assets.
Other securities without a determinable market value are statedat cost determined by the moving-average method. Cost of securities sold is determined by the moving- average method.

(e) Derivatives

Derivatives are stated at fair value.

(f) Inventories

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

(h) Allowance for recoverable accounts under production
sharing

Allowance for recoverable accounts under production sharing isprovided for probable losses on specific investments made under
production sharing contracts.

(i) Allowance for investments in exploration

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

(j) Tangible fixed assets (except leased assets)

Depreciation of overseas mining facilities is mainly computed by
the unit-of-production method.
For other tangible fixed assets, the straight-line method of depreciation is applied. Useful lives of fixed assets are based on theestimated useful lives of the respective assets.

(k) Intangible assets (except leased assets)

Exploration and development rights at the exploration stage are
fully amortized in the consolidated fiscal year. Such rights 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 mainly amortized by the straightline method.
Software for internal use is amortized by the straight-line
method over 5 years.

Business and Financial Overview

Monetary assets and liabilities denominated in foreign currencies
are translated 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 prevailingwhen such transactions were made. The resulting exchange gainor loss is credited or charged to income.
The assets and liability accounts of foreign subsidiaries aretranslated into yen at the exchange rates prevailing at the balance sheet date. The revenue and expense accounts of foreignsubsidiaries are translated into yen at the average rates of exchange during the period. The components of net assets excluding non-controlling interests are translated at their historicalexchange rates. The differences arising from the translation arepresented as translation adjustments and non-controlling interests in the accompanying consolidated financial statements.

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

Management Foundation to
Advance Growth Strategies

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 the equity method. 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.
The fiscal year-ends of consolidated subsidiaries are now thesame as the consolidated fiscal year-end.
Goodwill is amortized by the straight-line method over 20 years.

(g) Allowance for doubtful accounts(l) Leased assets

Depreciation of leased assets for financing lease transactions
whose ownership are not to be transferred
Depreciation of these assets is calculated based on the straightline method over the lease period assuming no residual value.

(m) Provision for bonuses

Provision for bonuses to employees is provided at the expected
payment amounts.

(n) Provision for bonuses to officers

Provision for bonuses to officers is provided at the expected payment amounts.

(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 andsales business individually estimated for each project.

(p) Provision for exploration projects

Provision for exploration projects is provided for future expenditures
as of December 31, 2021, of consolidated subsidiaries at the exploration stage based on a schedule of investments in exploration.

INPEX CORPORATION Annual Report 202187

(q) Provision for stocks payment

Provision for stocks payment is provided to prepare for paymentsof stock benefits to directors and others under the share delivery
rule. The amount is based on the expected stock benefit payable.

(r) Provision for special repair and maintenance

Provision for special repair and maintenance is provided forplanned major repair and maintenance activities on tanks in certain
subsidiaries at the amounts accumulated through the next activity.

(s) 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 to periods through December 31, 2021. Because certain subsidiaries are classified as small enterprises, a simplified
method (the amount which would be required to be paid if allactive employees voluntarily terminated their employment asof the balance sheet date) is applied for the calculation of theretirement benefit obligation for those subsidiaries.

(Method of recognizing for actuarial differences)

Actuarial gains and losses are charged or credited to income
as incurred.

(t) Asset retirement obligations

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

(u) Hedge accounting(Hedge accounting)

The Company applies the deferred hedge accounting.

(Hedging instruments and hedged items)[Currency related]
Hedging instruments: Interest rate and currency swap
transactions, and foreign exchange
forwards
Hedged items:
L iabilities denominated in Japanese yen and interests in foreignsubsidiaries[Commodity related]
Hedging instruments: Commodity swap transactions andcommodity option transactions
Hedged items:
Sales proceeds from commodities(Hedging policy)

The Company mainly applies the accounting that recognizes
an amount equivalent to the assets, liabilities, income andexpenses of the Group’s share.

(Additional Information)

The Company has applied “Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” (ASBJ Statement No.24, March 31, 2020) to theconsolidated financial statements for the year ended December 31, 2021, and accordingly disclosed information about applied principles and procedures of accounting when there areno specific provisions involved such as accounting standards.

(y) Standards issued but not effective• “Accounting Standard for Revenue Recognition” (ASBJ Statement No.29, March 31, 2020)• “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No.30, March 26, 2021)• “Implementation Guidance on Disclosures about Fair Value of

Financial Instruments” (ASBJ Guidance No.19 March 31, 2020)(Overview)
These are comprehensive accounting standard and guidance
about revenue recognition. Revenue is recognized using thefollowing five steps.
1. Identify the contracts with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when (or as) the entity satisfies a performance obligation(Scheduled effective date)
The accounting standard and guidance are scheduled to takeeffect from the beginning of the year ending December 31,
2022.
(The impact of applying standards)
The impact of applying the “Accounting Standard for Revenue Recognition”, etc. on the consolidated financial statements relates to changing gross or net presentation of
a portion of sales transactions. The application of these standards is expected to have a minor impact on net sales, while
there is expected to be no impact on the amounts of profit orloss for the period and retained earnings at the beginning of
the period.

• “Accounting Standard for Fair Value Measurement” (ASBJ
Statement No.30, July 4, 2019)• “Implementation Guidance on Accounting Standard for Fair
Value Measurement” (ASBJ Guidance No.31, June 17, 2021)

Derivative transactions are limited to the scope of actual demand, and the Company does not engage in speculative
derivative transactions.

• “Accounting Standard for Measurement of Inventories” (ASBJ

The Company performs hedge effectiveness assessment byverifying the relationship between the hedging instruments andthe hedged items.

• “Implementation Guidance on Disclosures about Fair Value of(Assessment of the effectiveness of hedge accounting)(v) Research and development expenses

Research and development expenses are charged to income as
incurred.

(w) Income taxes

Deferred tax assets and liabilities are determined based on the
differences between financial reporting and the tax bases of theassets and liabilities and are measured using the enacted tax
rates and laws which will be in effect when the differences are expected to reverse.

(x) A pplied principles and procedures of accounting
when there are no specific provisions involved such asaccounting standards(Recoverable accounts under production sharing)

Cash investments made by the Company during exploration,
development and production phases under a production
sharing contract are recorded as “Recoverable accounts under production sharing” so long as they are recoverable under the terms of the relevant contract. When the Company
receives crude oil and natural gas in accordance with thecontract, an amount corresponding to the purchase costs ofthe products (i.e., a cost recovery portion of the investments)
is released from this account.

88(Accounting for concession agreements)

INPEX CORPORATION Annual Report 2021

Statement No.9, July 4, 2019)• “Accounting Standard for Financial Instruments” (ASBJ Statement No.10, July 4, 2019)

Financial Instruments” (ASBJ Guidance No.19, March 31, 2020)(Overview)
To enhance comparability with international accounting standards, ASBJ developed “Accounting Standard for Fair Value
Measurement” and “Implementation Guidance on Accounting Standard for Fair Value Measurement”, and establishedsome guidelines about fair value measurement. These apply
to the following items.
· Financial instruments based on “Accounting Standard for Financial Instruments”· Inventories held for trading based on “Accounting Standard
for Measurement of Inventories”
In addition, ASBJ revised “Implementation Guidance on Disclosures about Fair Value of Financial Instruments”, which requires the notes about breakdown of fair value of financial
instruments.
(Scheduled effective date)
The accounting standard and guidance are scheduled to takeeffect from the beginning of the year ending December 31,
2022.
(The impact of applying standards)
No impact of applying the accounting standard and guidanceon consolidated financial statements is expected.

3. U.S. DOLLAR AMOUNTSINPEX’s Vision and Value Creation

The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at¥115.02=US$1.00, the approximate exchange rate in effect as of December 31, 2021. This translation should not be construed as a representation that yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

4. SIGNIFICANT ACCOUNTING ESTIMATES
For the year ended December 31, 2020
Information regarding significant accounting estimates for the year ended December 31, 2020, is not described in accordance with the transitional treatment prescribed in Paragraph 11 of “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No.31,
March 31, 2020).
For the year ended December 31, 2021

(Evaluation of fixed assets (Ichthys LNG Project and Prelude FLNG Project))(a) Amounts recorded in the consolidated financial statements as of December 31, 2021
(1) Ichthys LNG Project

Thousands of U.S. dollars¥1,476,791¥ 227,203

Growth Strategies for Value Creation

Millions of yen

Tangible fixed assets
Investment securities*$12,839,427$ 1,975,334* A balance of ¥227,203 million (US$1,975,334 thousand) in share of interest of associates for Ichthys LNG Pty Ltd, for which the Group holds 66.245% ofinterests is included in the ¥403,356 million (US$3,506,833 thousand) in investment securities in the consolidated balance sheet as of December 31, 2021.
The major assets held by Ichthys LNG Pty Ltd are the fixed assets regarding to the Ichthys LNG Project, and the balance of fixed assets for Ichthys LNG
Pty Ltd as of December 31, 2021 (amount obtained by multiplying by the Group’s share) is ¥2,452,645 million (US$21,323,639 thousand).

(2) Prelude FLNG Project
Millions of yen

Tangible fixed assets
Intangible assets

Thousands of U.S. dollars¥191,385¥ 54,359$1,663,928$ 472,604(b) Information on the content of significant accounting estimates for identified items

Management Foundation to
Advance Growth Strategies(1) Calculation method of the amountThe Company groups mining area and other assets as a basic unit that generates cash inflows independently of other groups of assets. If
any indication that an asset may be impaired exists, the Group shall estimate the future cash flows, and if the recoverable amount is lower
than the carrying amount, the impairment loss is recognized.
The Company has deemed that, in the year ended December 31, 2021, there is no indication of impairment for fixed assets related to the
Ichthys LNG Project and the Prelude FLNG Project as a result of the determination of indications of impairment that took into consideration thestatus of project operation, which includes future crude oil prices and reserves, and operating expenses and development expenses.
(2) Major assumptions used for significant accounting estimates
Reserves, future crude oil/natural gas prices, exchange rates, operating expenses, development expenses and discount rate were used as
major assumptions for the determination of indications of impairment of fixed assets.
These estimates and assumptions are based on the best judgements made by the management taking into account various factors suchas the impact of the spread of COVID-19 that were considered reasonable as of December 31, 2021.
(3) Effect to consolidated financial statements for the year ending December 31, 2022
If it is necessary to review major assumptions due to changes in future economic conditions, impairment loss on fixed assets may arise in the
consolidated financial statements from the following fiscal year onward.

5. STATUS OF FINANCIAL INSTRUMENTS
The Company raises funds for oil and natural gas development
and construction of natural gas infrastructure primarily from cash
flow on hand, bank loans and issuance of bonds. Oil and natural
gas development projects are primarily funded from long-termloans that the Company has secured from the Japan Bank for International Cooperation, Japanese commercial banks and others.
Japan Oil, Gas and Metals National Corporation has provided
guarantees for the principal on certain outstanding amounts of
the Company’s long-term loans. The Development Bank of Japanand Japanese commercial banks and others have provided longterm loans for the construction of domestic gas infrastructure.
The Company generally borrows loans with variable interest rates
and issues bonds with fixed rates, while some loans are witha fixed interest rate depending on the nature of each project.
Regarding the financing policy, the Company manages funds
in consideration of being low-risk and high-liquidity. The Company uses derivative transactions only to manage risks of forecasted
transactions and portfolio assets, and does not engage in speculative derivative transactions.

(b) Details of financial instruments, associated risks andrisk 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 andBusiness and Financial Overview(a) Policy regarding financial instruments

natural gas. Main trading partners are national oil companies, major oil companies and others. In line with the criteria for trading
and credit exposure management, the Company properly analyzes the status of trading partners for early detection and reduction of default risks.

(Fluctuation risks of market price related to securities)

For marketable securities and investment securities exposed tofluctuation risks of market price, analysis of market values is regularly reported to the Executive Committee. For shares of stock,
the Company 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 is held for the purpose of investment.

(Fluctuation risks of interest rate related to short-termloans and long-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 the financial prospects of the project and useful lives of the
facilities. Loans with variable interest rates are exposed to fluctuation risks of interest rate, however, the Company analyzes the impact of fluctuations in interest rate at the time of borrowing andon an annual basis, and leverages fixed-rate-loans as necessary
considering the project statuses.

INPEX CORPORATION Annual Report 2021

89

(Fluctuation risks of exchange rates related to assets
and liabilities in foreign currencies)

As most of the Company’s business is conducted overseas, theCompany is exposed to fluctuation risks of exchange rates due toa large portion of monetary assets and liabilities held in foreign currencies such as cash and deposits, accounts receivables and loans
required in overseas projects. For this reason, the Company endeavors to reduce fluctuation risks of exchange rates by maintaining
the position between assets and liabilities in foreign currencies. In
addition to planned expenditures in foreign currencies, the Company manages fluctuation risks of exchange rates through derivativetransactions such as foreign exchange forwards and others asnecessary.

(Fluctuation risks of commodity price related to salesof oil and natural gas)

Sales price of oil and natural gas is exposed to fluctuation risks ofcommodity price. The Company manages fluctuation risks ofcommodity price by conducting commodity swap transactions
and commodity option transactions within the scope of actual demand, as necessary.

(Management of derivative transactions)

For the above derivative transactions, the Company follows its internal rules. Market values of these derivatives are regularly reported to the Executive Committee, and the Company onlytransacts with financial institutions with high credit ratings to reduce counterparty risks for the use of derivatives. Regarding theGroup’s hedge accounting, hedging instruments, hedged items,
hedging policy and assessment of the effectiveness of hedge accounting are described in “(u) Hedge accounting” of “2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES”(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 division and secures sufficient liquidity on hand to prepare for liquidity
risk.

6. SECURITIES(a) Information regarding other securities as of December 31, 2020 and 2021 is as follows:
Millions of yen
Acquisition cost

December 31, 2020

Carrying value

Securities with carrying values exceeding their acquisition costs¥ 4,399
Stock¥ 2,863
Other
2,178
7,198
Subtotal
5,041
11,598
Securities with acquisition costs exceeding their carrying values
Stock30,385
26,810Subtotal
30,385
26,810Total¥35,427¥38,408

Unrealized gain
(loss)¥ 1,536
5,019
6,556(3,575)(3,575)¥ 2,981Millions of yen
Acquisition cost

December 31, 2021

Carrying value

Securities with carrying values exceeding their acquisition costs
Stock¥15,193¥18,307
Subtotal
15,19318,307
Securities with acquisition costs exceeding their carrying values
Stock
8,526
8,476
Subtotal
8,526
8,476
Total
¥23,719¥26,783

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

Acquisition cost

Carrying value

Unrealized gain
(loss)¥3,113
3,113$132,090
132,090$159,163
159,163$27,064
27,064(49)(49)¥3,064

74,126
74,126$206,216

73,69173,691$232,855

(426)
(426)
$26,638(b) Information regarding sales of securities classified as other securities for the years ended December 31, 2020 and 2021.
Year ended December 31, 2020
None

Millions of yen

Year ended December 31, 2021

Proceeds from sales

Stock
Other
Total

¥10,728
7,713¥18,442

Thousands of U.S. dollars

Gain on sales

Loss on sales

¥ 862
5,535
¥6,397¥2,981—¥2,981

Proceeds from sales$ 93,270
67,057$160,337

Gain on sales

Loss on sales$ 7,494
48,122$55,616$25,917—$25,917(c) Components of securities for which it is extremely difficult to determine fair value as of December 31, 2020 and 2021
are summarized as follows:
Millions of yen

Unlisted securities
Stocks of subsidiaries and affiliates
Total

2020/12¥ 21,691
237,767¥259,458

Thousands of U.S. dollars

2021/12¥ 18,369
358,203¥376,572

2021/12$ 159,702
3,114,267$3,273,969

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
shares of exploration companies, an allowance for investments in exploration is provided at an estimated amount based on the financial position of the investees.

90

INPEX CORPORATION Annual Report 2021

7. SHORT-TERM BORROWINGS AND LONG-TERM DEBT, ASEETS PLEDGED
INPEX’s Vision and Value Creation(a) Short-term borrowings as of December 31, 2020 and 2021 are as follows:
Millions of yen

2020/12
Short-term borrowings from banks and others(Interest rate ranging from 0.503% to 4.498% and 3.103%
at December 31, 2020 and 2021)

Thousands of U.S. dollars

2021/12¥93,614¥5,1102021/12$44,427(b) Long-term debt as of December 31, 2020 and 2021 are as follows:
Millions of yen

2021/122021/12¥1,141,233¥1,145,103$9,955,685

81,519¥1,059,713

75,382¥1,069,721

655,381$9,300,304

Growth Strategies for Value Creation

Loans from banks and others, due through 2035
(Interest rates ranging from 0.035% to 2.589% and from
0.012% to 2.589% at December 31, 2020 and 2021)
Less: Current portion
Amounts on the consolidated balance sheet

Thousands of U.S. dollars

2020/12(c) Assets pledged as of December 31, 2020 and 2021 are as follows:
Millions of yen

Thousands of U.S. dollars

2021/12¥   42,527
21,123
17,625
235,846
1,116,249
153
109,499
239,475
835,109
16,964¥2,634,575

2021/12$   369,735
183,646
153,234
2,050,478
9,704,825
1,330
951,999
2,082,029
7,260,554
147,487$22,905,364

Management Foundation to
Advance Growth Strategies

Cash and cash equivalents
Accounts receivable-trade
Inventories
Wells
Machinery, equipment and vehicles
Land
Construction in progress
Investment securities
Long-term loans receivable
Other
Total

2020/12¥   35,714
10,37815,338231,086
1,067,388
138
55,495144,009722,546
22,253¥2,304,349

The above is mainly related to Ichthys LNG Project Finance, and includes others that are pledged as collateral for liabilities of affiliates.

(d) The aggregate maturities of long-term debt subsequent to December 31, 2021 are summarized as follows:
1 year or lessMore than 1 year and up to 5 years
More than 5 years and up to 10 years
More than 10 years
Total

Millions of yen

Thousands of U.S. dollars¥   75,382
668,399
293,933
107,388¥1,145,103$ 655,381
5,811,154
2,555,494
933,646$9,955,685

Business and Financial Overview

INPEX CORPORATION Annual Report 2021

91

8. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to income taxes which, in the aggregate, resulted in a statutory tax
rate of approximately 28.0% for the years ended December 31, 2020 and 2021.

(a) The effective tax rates reflected in the consolidated statement of income for the years ended December 31, 2020 and
2021 differ from the statutory tax rate for the following reasons: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(domestic subsidiaries)
Differences of effective tax rates applied to tax effect accounting(foreign subsidiaries)
Retained earnings of certain subsidiaries
Reversal of translation adjustments
Other
Effective tax rates

2020/1228.0%

2021/12
28.0%

2.7
(2.1)
47.2
142.7
(3.2)
(38.5)
2.9

0.1
(0.4)
2.0
31.1
(4.4)
(4.4)
0.3

(24.2)

(0.8)

81.7

17.0

9.3
7.7
(0.2)
254.0%

0.2
—
(1.9)
66.8%

(b) The significant components of deferred tax assets and liabilities as of December 31, 2020 and 2021 are described below.
Millions of yen

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-forwards*1
Accumulated depreciation
Liability for retirement benefits
Provision for loss on businessTranslation differences of assets and liabilities denominated inforeign currencies
Asset retirement obligations
Allowance for doubtful accounts
Impairment loss
Other
Total gross deferred tax assets
Valuation allowance for net operating loss carry-forwards*1
Valuation allowance for total amount of deductible temporary
difference and others
Total valuation allowance
Total deferred tax assets
Deferred tax liabilities
Foreign taxes
Translation differences of assets and liabilities denominated inforeign currencies
Translation differences due to an application of purchaseaccounting method
Reserve for exploration
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

92

INPEX CORPORATION Annual Report 2021

Thousands of U.S. dollars

2020/122021/12¥ 53,622
4,059¥ 51,190
1,086

2,821

4,078

35,454688
14,782399,633
27,489
2,632
2,618

392
9,801
377,270
51,987
2,364
2,632

3,408
85,211
3,280,038
451,982
20,552
22,882

2,883

13,308

115,701

15,5503,613
41,14756,319627,864(270,477)

88,991
3,641
46,191
56,493
709,429(245,427)

773,700
31,655
401,591
491,158
6,167,875(2,133,776)(181,883)(196,735)(1,710,441)(452,360)
175,504(442,162)
267,267(3,844,218)
2,323,656(173,016)(302,357)(2,628,734)

(517)

(68)

(591)

(5,347)(5,346)(46,478)(3,650)(979)(14,350)(197,861)¥ (22,356)(3,199)(497)(15,277)(326,746)¥ (59,479)(27,812)(4,320)(132,820)(2,840,775)$ (517,118)2021/12$445,053
9,441

INPEX’s Vision and Value Creation*1 Net operating loss carry-forwards and relevant deferred tax assets by expiration dates are as follows:
Millions of yen
1 year or less

December 31, 2020

Net operating loss carry-forwards*
Valuation allowance
Deferred tax assets

More than 1 year
and up to 5 years

More than 5 years
and up to 10 years¥ 66,041(27,264)¥ 38,776¥ 34,977(20,102)¥ 14,874

More than 1 year
and up to 5 years

More than 5 years
and up to 10 years¥ 65,258(16,274)¥ 48,984¥ 27,241(18,462)¥ 8,779

¥ 495
(479)
¥ 16

a

More than
10 years *b

Total¥ 298,118(222,630)¥ 75,488¥ 399,633(270,477)¥ 129,156

Millions of yen
1 year or less

December 31, 2021

Net operating loss carry-forwards*
Valuation allowance
Deferred tax assetsa¥1,512(973)¥ 538

More than
10 years *b

Total¥ 283,257(209,716)¥ 73,540¥ 377,270(245,427)¥ 131,842
Growth Strategies for Value Creation

Thousands of U.S. dollars
1 year or less

December 31, 2021

Net operating loss carry-forwards*
Valuation allowance
Deferred tax assetsa$13,145(8,459)$ 4,677

More than 1 year
and up to 5 years

More than 5 years
and up to 10 years$ 567,362(141,488)$ 425,873$ 236,837(160,511)$ 76,325

More than
10 years *b

Total$ 2,462,676(1,823,300)$ 639,367$ 3,280,038(2,133,776)$ 1,146,252*a Net operating loss carry-forwards is multiplied by statutory tax rate.
*b Including amounts with no expiration date under applicable laws and regulations.

9. COMPREHENSIVE INCOME
Amount of reclassification adjustments and income tax effects allocated to each component of other comprehensive income for the years
ended December 31, 2020 and 2021 are as follows:
Millions of yen

Deferred gain (loss) on hedges
Amount recognized during the period
Amount of reclassification adjustments
Before income tax effectAmount of income tax effect

Share of other comprehensive income of affiliates
accounted for by the equity-method
Amount recognized during the period
Amount of reclassification adjustments
Total other comprehensive income

2021/12¥ (10,304)
6,378(3,926)442(3,483)¥  5,317(5,234)82481
564$   46,226(45,505)
712
4,181
4,903

281
—
281
—
281

(5,662)
4,792
(870)
62
(807)

(49,226)
41,662(7,563)539(7,016)(128,446)
18,528(109,917)

235,828—
235,828

2,050,321—
2,050,321(49,668)
9,763(39,904)¥(153,024)

28,741
17,19845,939¥281,524

249,878
149,521399,400$2,447,609

INPEX CORPORATION Annual Report 2021

Business and Financial Overview

Translation adjustments
Amount recognized during the period
Amount of reclassification adjustment

2021/12

Management Foundation to
Advance Growth Strategies

Unrealized holding gain (loss) on securities
Amount recognized during the period
Amount of reclassification adjustments
Before income tax effectAmount of income tax effectThousands of U.S. dollars

2020/1293

10. NET ASSETS
A stock by a resolution of the meeting of the Board of Directors incase 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 forClass A stock, no stock split was conducted. The Articles of Incorporation 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 December 31, 2021
amounted to ¥19,200.
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) shouldbe transferred 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.

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 ofDecember 31, 2021.
Class A stock has no voting rights at the common shareholders’ meeting, but the ownership of Class A stock gives its holder
a right of veto over certain important matters described below.
However, requirements stipulated in the Articles of Incorporationneed to be met in cases involving the exercise of the veto over
the appointment or removal of directors, the disposition of all ora portion of material assets, and business integration;• Appointment or removal of Directors• Disposition of all or a portion of material assets• Amendments to the Articles of Incorporation relating to theCompany’s business objectives and granting voting rights toany shares other than the common shares of the Company• Business integration• Capital reduction• Company dissolution
Class A stock shareholder may request the Company to acquire Class A stock. Besides, the Company may also acquire Class

11. AMOUNTS PER SHARE
Amounts per share as of December 31, 2020 and 2021 are as follows:
Yen

2020/12¥1,874.08
24.00¥  (76.50)

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

U.S. dollars

2021/12¥2,253.17
48.00¥ 153.87

2021/12$19.590.42$ 1.34

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 andthe number of shares 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 (loss) per share is computed based on the net income available for distribution to shareholders of common stock and theaverage number of shares of common stock outstanding during the year.
For the purpose of computing net assets excluding non-controlling interests per share, the Company’s shares held by “the Board Incentive
Plan Trust*” recorded as treasury stock under shareholders’ equity are included in the treasury stock to be deducted from the total numberof shares issued at the end of the period. Additionally, in computing net income (loss) per share, above shares of the Company are includedin the treasury stock to be deducted from the average number of shares during the period. The numbers of shares of treasury stock deducted from the total number of shares issued at the end of the period in computing net assets excluding non-controlling interests per share
were 152,569 shares and 149,593 shares as of December 31, 2020 and 2021 respectively. The numbers of shares of treasury stock deductedfrom the average number of shares during the period in computing net income (loss) per share were 153,372 shares and 150,738 shares forthe years ended December 31, 2020 and 2021 respectively.
* “The Board Incentive Plan Trust” is a share-based remuneration system under which a predetermined number of shares of the Company or the amountof money equivalent to the proceeds from the disposal of those shares are delivered or provided to the eligible Directors and Executive Officers of theCompany according to their positions and other factors. The system was scheduled to cover the five calendar years from 2018 to 2023, but following thealterlation of the contract in May 2022, the system will be extended to 2025.

12. DERIVATIVE TRANSACTIONS(a) Derivatives not subject to hedge accounting

Contract amounts, fair value and valuation gain (loss) regarding derivatives not subject to hedge accounting as of December 31, 2020 and
2021 are as follows:(1) Currency related
Millions of yen

December 31, 2020

Foreign exchange forwards*
Sell / CAD and Buy / USD
Interest rate currency swaps*
Receive / floating / USD and pay / fixed / JPY

Contract amounts

More than 1 year

Fair value

Valuation gain (loss)¥ 43,920¥—¥ (314)¥ (314)¥124,293¥72,464¥2,770¥2,770Contract amounts

More than 1 year

¥48,931¥—¥ (551)¥ (551)¥80,514¥34,506¥(6,454)¥(6,454)

Millions of yen

December 31, 2021

Foreign exchange forwards*
Sell / CAD and Buy / USD
Interest rate currency swaps*
Receive / floating / USD and pay / fixed / JPY

94

INPEX CORPORATION Annual Report 2021

Fair value

Valuation gain (loss)

INPEX’s Vision and Value Creation

Thousands of U.S. dollars

December 31, 2021

Foreign exchange forwards*
Sell / CAD and Buy / USD
Interest rate currency swaps*
Receive / floating / USD and pay / fixed / JPY

Contract amounts

More than 1 year

Fair value

Valuation gain (loss)$425,412$—$ (4,790)$ (4,790)$700,000$300,000$(56,111)$(56,111)* Fair value is the price obtained from the counterparty financial institutions.

(2) Commodity related
There is no derivatives not subject to hedge accounting as of December 31, 2020.
Millions of yen

December 31, 2021

More than 1 year

¥2,615¥—¥(130)¥(130)¥2,618

¥—

¥ 127

¥ 127

Contract amounts

More than 1 year

$22,735$—$(1,130)$(1,130)$22,761$—$ 1,104$ 1,104

Commodity swap transactions*
Receive / fixed and pay / floating
Commodity swap transactions*
Receive / floating and pay / fixed

Fair value

Valuation gain (loss)

Growth Strategies for Value Creation

Contract amounts

Thousands of U.S. dollars

December 31, 2021

Commodity swap transactions*
Receive / fixed and pay / floating
Commodity swap transactions*
Receive / floating and pay / fixed

Fair value

Valuation gain (loss)* Fair value is the price obtained from forward quotations.

(b) Derivatives subject to hedge accounting

Contract amounts and fair value regarding derivatives not subject to hedge accounting as of December 31, 2020 and 2021 are as follows:(1) Currency related
Millions of yen

Interest rate currency swaps*
Receive / floating / USD and pay / fixed / JPY

Principal items hedged

Liabilities (JPY)

Contract amounts

More than 1 year

¥124,293¥72,464

Contract amounts

More than 1 year

¥80,514¥34,506

Fair value

Management Foundation to
Advance Growth Strategies

December 31, 2020

¥107

Millions of yen

December 31, 2021

Interest rate currency swaps*
Receive / floating / USD and pay / fixed / JPY

Principal items hedged

Liabilities (JPY)

Fair value¥(369)

Thousands of U.S. dollars

December 31, 2021

Interest rate currency swaps*
Receive / floating / USD and pay / fixed / JPY

Principal items hedged

Liabilities (JPY)

Contract amounts

More than 1 year

$700,000$300,000Fair value$(3,208)* Fair value is the price obtained from the counterparty financial institutions.
Business and Financial Overview(2) Commodity related
There are no derivatives subject to hedge accounting as of December 31, 2020.
Millions of yen

December 31, 2021

Principal items hedged

Contract amounts

More than 1 year

Commodity swap transactions*
Receive / fixed and pay / floating
Commodity option transactions*
Buy / Put
Sell / Call

Sales proceedsfrom commodities¥17,670¥—¥

24,355¥39,854

—
¥—

1,020
¥(1,384)

December 31, 2021

Principal items hedged

Contract amounts

More than 1 year

Commodity swap transactions*
Receive / fixed and pay / floating
Commodity option transactions*
Buy / Put
Sell / Call

Sales proceedsfrom commodities$153,625$—$ 2,721

211,745$346,496

—
$—

8,868
$(12,032)

Sales proceedsfrom commodities

Fair value

313

Thousands of U.S. dollars

Sales proceedsfrom commodities

Fair value* Fair value is calculated based on the price obtained from forward quotations and the counterparty financial institutions.

INPEX CORPORATION Annual Report 2021

95

13. OTHER FINANCIAL INSTRUMENTS(a) The carrying value and estimated fair value of financial instruments excluding marketable securities and investment
securities which are disclosed in Note 6.(a) and derivatives which are disclosed in Note 12 as of December 31, 2020
and 2021 are as shown below. The following summary also excludes cash and cash equivalents, time deposits, and accounts receivable—trade for which fair values approximate their carrying amounts.
Millions of yen

December 31, 2020

Carrying value

Estimated fair value

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

¥ 911,424
175,133¥1,059,713¥ 917,926
174,600¥1,053,580

Millions of yen

Thousands of U.S. dollars

December 31, 2021

Carrying value

Estimated fair value

Carrying value

Estimated fair value

Long-term loans receivable
Short-term borrowings and current portion of
long-term debt
Bonds payable
Long-term debt

¥1,011,801¥1,010,598$8,796,739$8,786,280

80,49380,032

699,817695,809

30,000¥1,069,721

30,064¥1,062,062

260,824$9,300,304

261,380$9,233,715(b) For other financial instruments, computation methods of estimated fair value are as shown below.
(Long-term loans receivable)

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

(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-term borrowings,
the relevant carrying value is used since the item is settled in a short periods of time and its fair value is almost the same as the carrying value.

(Bonds payable)

The estimated fair value of bonds payable is based on the Reference Statistical Prices (Yields) for OTC Bond Transactions issued by theJapan Securities Dealers Association.

(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 discountrate is based 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 ¥483 million and ¥409
million (US$3,555 thousand) for the years ended December 31, 2020 and 2021, respectively.

15. IMPAIRMENT LOSS
For the year ended December 31, 2020
The Company groups mining area and other assets as a basic unit that generates cash inflows independently of other groups of assets. In
light of the substantial decline in crude oil prices resulting from the COVID-19-induced reduction in global energy demand and other factors, the recoverable amount of these groups of assets was expected to decrease; therefore, the Company reduced the respective carrying
amounts of the assets listed below to the recoverable amounts, posting the reductions as impairment loss.
Impairment loss
Use

Location

Assets related to Prelude FLNG
Commonwealth of Australia
Project

Assets related to Tight Oil
Project (Eagle Ford)

Texas, United States

Assets related to Lucius Oil
Field

Gulf of Mexico, United States

Other
Total

Classification

Construction in progress
Mining rights
Subtotal
Wells
Machinery, equipment
and vehicles
Mining rights
Subtotal
Wells
Machinery, equipment
and vehicles
Mining rights
Subtotal

Millions of yen¥ 97,097
31,965129,062
11,178
1,595
20,462
33,235
3,553
2,421
12,71918,693
8,948¥189,940

The recoverable amount of the assets related to Prelude FLNG Project, Tight Oil Project (Eagle Ford) and Lucius Oil Field is reasonably estimated by discounting the future cash flows at a rate of 7.9-10.7%.

96

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation

For the year ended December 31, 2021
The Company groups mining area and other assets as a basic unit that generates cash inflows independently of other groups of assets. In lightof the decline in forecasted production volume, the recoverble amount of this group of assets was expected to decrease; therefore, the Company reduced the respective carrying amounts of the assets listed below to recoverable amounts, posting the reductions as impairment loss.
Impairment loss
Use

Assets related to Van Gogh Oil
Field / Coniston Oil Field

Location

Commonwealth of Australia

Classification

Wells
Machinery, equipment
and vehicles
Construction in progress
Other
Total

Thousands of
U.S. dollars

Millions of yen¥ 1,493$ 12,980

6,632

57,6596,038
8¥14,170

52,49569$123,195

Growth Strategies for Value Creation

The recoverable amount of the assets related to Van Gogh Oil Field and Coniston Oil Field is reasonably estimated by discounting the future cash flows at a rate of 11.5%.

16. RETIREMENT BENEFITS
Retirement benefits for the years ended December 31, 2020 and 2021 are as follows:(a) Defined benefit plans(1) Reconciliation of beginning and ending balances of the retirement benefit obligations (excluding plans included in (3))
Millions of yen

Thousands of U.S. dollars

2021/12¥23,267
1,174
117
(810)
(895)
¥22,8532021/12$202,286
10,206
1,017(7,042)(7,781)$198,687

Management Foundation to
Advance Growth Strategies

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

2020/12¥23,413
1,176
91
(307)
(1,107)¥23,267(2) Reconciliation of beginning and ending balances of plan assets at fair value (excluding plans included in (3))
Millions of yen

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

2020/12¥16,147
270
(397)
565
(694)
¥15,891

Thousands of U.S. dollars

2021/12¥15,891
273
479
564
(622)
¥16,5852021/12$138,158
2,373
4,164
4,903
(5,407)$144,192(3) Reconciliation of beginning and ending balances of liability for retirement benefits applying simplified methods
Millions of yen

Thousands of U.S. dollars

2021/12
¥782
75
(33)
(17)
(26)
¥780

2021/12$6,798
652
(286)
(147)
(226)
$6,781Business and Financial Overview

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

2020/12
¥744
185
(65)
(17)
(64)
¥782

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

Thousands of U.S. dollars

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

2020/12¥ 23,512(16,090)
7,421
737
8,158

2021/12¥ 23,042(16,754)
6,287
760
7,048

2021/12$ 200,330(145,661)
54,6606,607
61,276

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

8,158¥ 8,158

7,048¥ 7,048

61,276$ 61,276

Retirement benefit obligations (funded plans)
Plan assets at fair value* Including plans applying simplified methods.
INPEX CORPORATION Annual Report 2021

97

(5) 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 under simplified methods
Retirement benefit expenses for defined benefit plans

Thousands of U.S. dollars

2020/12¥1,176
91
(270)
90
185
¥1,2742021/12¥ 1,174
117(273)(1,289)75¥ (195)2020/12
26%
45
23
6
100%

2021/12
29%
44
22
5
100%

2021/12$ 10,206
1,017(2,373)(11,206)652$ (1,695)(6) Plan assets (excluding plans applying simplified methods)

Components of plan assets
Stock
General accounts
Bonds
Other
Total

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

Discount rateLong-term expected return rate on plan assets

2020/120.5%
1.8%

2021/120.6%
1.8%(b) Defined contribution plans

The Group’s contributions for defined contribution plans amounted to ¥2,147 million and ¥2,360 million (US$20,518 thousand) for the years
ended December 31, 2020 and 2021, respectively.

17. ASSET RETIREMENT OBLIGATIONS(a) Asset retirement obligations recognized in the consolidated balance sheet

The changes in asset retirement obligations for the years ended December 31, 2020 and 2021 are as follows:
Millions of yen

Balance at beginning of the period
New obligations
Accretion expenses
Obligations settled
Change in estimates *1
Other *2
Balance at end of the period

2020/12¥136,882
1,017
2,835
(211)
40,689(7,591)¥173,622

Thousands of U.S. dollars

2021/12¥173,622
8,590
2,695
(1,532)
63,857
11,780¥259,012

2021/12$1,509,494
74,682
23,430(13,319)555,181
102,416$2,251,886*1 “Change in estimates” for the years ended December 31, 2020 mainly reflects the revised discount rate of certain subsidiaries.
“Change in estimates” for the years ended December 31, 2021 mainly reflects the amounts rocognized for the newly available information of certain
subsidiaries.
*2 “Other” mainly includes the change due to fluctuations in foreign exchange rates.

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

Regarding domestic oil and natural gas production facilities and natural gas supply and marketing facilities, the Group has obligations toprevent 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.
The Group also has obligations to decommission mines with respect to certain overseas oil production facilities. However, the Group
had not recognized retirement costs as of December 31, 2020, since the information about decommissioning work including the assets subject to the work based on the approval by the government of the oil-producing country had not been specified at that time.
For the year ended December 31, 2021, although the approval of the local government has not yet been obtained, the Group acquired
certain information regarding the retirement costs, including the assets subject to work from the state-owned oil company.
As it is no longer considered difficult to estimate the retirement costs to be borne by the Group, the asset retirement obligation of¥74,667 million (US$649,165 thousand) has been recorded as of December 31, 2021, by referring to the information. As a result, ¥14,857 million (US$129,168 thousand) of depreciation expenses was recorded in connection with the recognition of asset retirement obligations.

98

INPEX CORPORATION Annual Report 2021

18. LEASESINPEX’s Vision and Value Creation

Future minimum lease payments subsequent to December 31, 2021 for operating lease transactions are summarized as follows:
As Lessee
Millions of yen

2022
2023 and thereafter
Total

Thousands of U.S. dollars¥2,371
6,571¥8,943$20,613
57,129$77,751

19. CONTINGENT LIABILITIESAs of December 31, 2021, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of affiliates
in the aggregate amount of ¥390,873 million (US$3,398,304 thousand).

Growth Strategies for Value Creation

20. SEGMENT INFORMATION
Segment information for the years ended December 31, 2020 and 2021(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 and Kazakhstan), “Middle East & Africa” (mainly United Arab Emirates) and “Americas.”
The Company produces oil and natural gas in each segment. In addition, the Company conducts purchasing and marketing activities fornatural gas and petroleum products and others in “Japan” segment.

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

Accounting policies for the reportable segments are substantially the same as those described in “Note 2. SUMMARY OF SIGNIFICANTACCOUNTING POLICIES”. Internal sales between segments are based on prices for third-party transactions.
Management Foundation to
Advance Growth Strategies(c) Information on sales, income (loss), assets and other items by reportable segment
Millions of yen
Year ended
December 31, 2020

Japan

Sales to third parties
Intercompany sales andtransfers between
segments
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization

Middle East &Africa¥115,838¥ 220,969¥ 68,369¥352,388¥13,481

—

5,320

—

—

115,838
14,341
255,069

226,290
56,522
3,024,426

68,3694,481
572,642

15,075

100,812—Adjustments*1

Consolidated*2¥ 771,046¥—¥ 771,046

—

5,320

(5,320)—352,388
186,408
493,092

13,481(2,128)24,455776,367
259,625
4,369,687(5,320)(11,154)
264,831771,046
248,4714,634,518

6,923

42,476

7,938

173,227871

174,098

—

—

—

(192)

(192)

6,952

6,760

2,014

198,065

14,417

12,471—

226,969

1,205

228,175¥  4,990¥ 118,840¥  5,909¥ 46,589¥ 7,783¥ 184,113¥938¥ 185,052

Americas

Total

INPEX CORPORATION Annual Report 2021

Business and Financial Overview

Amortization of
goodwill
Investment to affiliates
accounted for by
the equity-method
Increase of tangible
fixed assets andintangible assets

Asia & Oceania

Eurasia(Europe & NIS)

99

Millions of yen
Year ended
December 31, 2021

Sales to third parties
Intercompany sales andtransfers between
segments
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of
goodwill
Investment to affiliates
accounted for by
the equity-method
Increase of tangible
fixed assets andintangible assets

Japan

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &Africa¥130,089¥ 354,919¥116,959¥618,161

—

9,070

—

130,089
11,464
262,201

363,989
175,5423,394,010

14,923

Total

Adjustments*1

Consolidated*2¥24,240¥1,244,369¥—¥1,244,369

—

—

9,070

(9,070)—116,959
30,909570,860

618,161
376,065
623,136

24,24010,27638,546

1,253,440
604,259
4,888,755(9,070)(13,602)269,440

1,244,369
590,657
5,158,196

116,426

6,862

59,872

4,226

202,311872

203,184

—

—

—

—

(96)

(96)

6,952

6,856

2,277

307,749

18,35918,375—

346,761

1,502

348,264¥  8,149¥   66,140¥  5,875¥122,340¥13,402¥ 215,907¥6,272¥ 222,179

Japan

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaTotal

Adjustments*1

Consolidated*2$1,131,011$ 3,085,715$1,016,857$5,374,378$210,745$10,818,718$—$10,818,718—

78,855———78,855(78,855)—

1,131,011
99,6692,279,612

3,164,571
1,526,186
29,507,998

1,016,857
268,727
4,963,136

5,374,378
3,269,561
5,417,631

210,745
89,340335,124

10,897,583
5,253,512
42,503,521(78,855)(118,257)
2,342,549

10,818,718
5,135,254
44,846,078

129,742

1,012,223

59,659520,535

36,741

1,758,920

7,581

1,766,510

—

—

—

—

(834)

(834)

60,441

59,607

19,796

2,675,612

159,615

159,754—

3,014,788

13,0583,027,856$   70,848$   575,030$   51,078$1,063,641$116,518$ 1,877,125$54,529$ 1,931,655

Americas

Thousands of U.S. dollars
Year ended
December 31 , 2021

Sales to third parties
Intercompany sales andtransfers between
segments
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of
goodwill
Investment to affiliates
accounted for by
the equity-method
Increase of tangible
fixed assets andintangible assets

Americas*1 Adjustments include elimination of inter-segment transactions and corporate incomes, expenses and assets that are not allocated to a reportablesegment.
*2 Segment income is reconciled with operating income on the consolidated statement of income.

(d) Products and service information(Sales to third parties)
Millions of yen

Crude oil
Natural gas (excluding LPG)
LPG
Other
Total

2020/12¥505,517
247,854
2,737
14,937¥771,046

2021/12¥ 905,199
313,684
6,891
18,594¥1,244,369

Thousands of U.S. dollars

2021/12$ 7,869,926
2,727,212
59,911
161,658$10,818,718(e) Geographical information(Sales)Millions of yen

Japan
Asia & Oceania (excluding China)
China
Other
Total

2020/12¥350,811
224,183
90,335
105,716¥771,046*Sales are classified by country or region based on the geographical location of customers.

100

INPEX CORPORATION Annual Report 2021

2021/12¥ 504,079
390,063
174,276
175,950¥1,244,369

Thousands of U.S. dollars

2021/12$ 4,382,533
3,391,262
1,515,179
1,529,733$10,818,718

INPEX’s Vision and Value Creation(Tangible fixed assets)
Millions of yen

2020/12¥ 224,534
1,573,641
251,290
20,317¥2,069,783

Japan
Australia
United Arab Emirates
Other
Total

Thousands of U.S. dollars

2021/12¥ 216,442
1,683,503
326,453
33,450¥2,259,849

2021/12$ 1,881,777
14,636,611
2,838,228
290,818$19,647,443(f) Information by major customer(Sales to major customer)
Year ended December 31, 2020

Millions of yen

Ichthys LNG Pty Ltd

Segment¥121,521
Millions of yen

Ichthys LNG Pty Ltd

Thousands of U.S. dollars

Segment$1,269,527

Asia & Oceania¥146,021

Growth Strategies for Value Creation

Year ended December 31, 2021

Asia & Oceania(g) Information on impairment loss from fixed assets
Millions of yen

2020/12¥138,011
51,929¥189,940

Asia & Oceania
Americas
Total

Thousands of U.S. dollars

2021/12¥14,170—¥14,1702021/12$123,195—$123,195(h) Information on unamortized balance of goodwill
Millions of yen

Americas*1
Eliminations and other*2
Total

Thousands of U.S. dollars

2021/12¥—
29,550¥29,5502021/12$—
256,911$256,911

Management Foundation to
Advance Growth Strategies

2020/12¥ (1,057)
36,502¥35,445*1 This is the unamortized balance of negative goodwill acquired before April 1, 2010 and net amount of goodwill is stated on the balance sheet.
*2 This is the unamortized balance of goodwill not attributable to a reportable segment.

21. RELATED PARTY TRANSACTIONSThere are the following related party transactions for the years ended December 31, 2020 and 2021.

(a) Related Party Transactions(1) Transactions with non-consolidated subsidiaries and affiliated companies
Year ended December 31, 2020
Location

Capitalinvestment

Nature of operations Voting interest

Description of
the business
relationshipTransaction
detailLoans offunds*1

Ichthys
LNG
Pty Ltd

Western
Australia,
Australia

US$4,506,860
thousandTransportation,liquefaction andsales of oil andnatural gas throughpipeline in WA-50-L
block in offshore
Western Australia

Indirectly
66.245%

Capitalsubscription

Amounts
Millions of yen¥ 84,713

Title of accountAmounts
Millions of yen

Current assets
other (shortterm loans
receivable)¥ 36,398

Long-term
loans
receivable*2

906,852

Interest
Income*1

31,690Current assets
other (interest
receivable)

1,043

Sales of finishedgoods*3

121,521

Accounts
receivable—
trade

10,431

Guarantee of
liabilities*4

311,386—

Guarantee
commission
received*4¥  6,103

Current assets
other (accrued
revenue)

Business and Financial Overview

Name ofrelatedparty—¥    136*1 The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.
The interest rate on certain loans of funds is zero.
*2 Long-term loans receivable includes increases by purchases of long-term loans receivable in the amount of ¥201,769 million.
*3 All transactions were conducted under general transactional conditions, which are the same as those used in transactions with independent third parties.
*4 Guarantee of liabilities are for securing loans from financial institutions, and the Company receives guarantee commissions based on the amount of the guarantees. In
addition, “Amounts”of “Guarantee of liabilities” are guaranteed balances by the Company as of December 31, 2020.

INPEX CORPORATION Annual Report 2021

101

Year ended December 31, 2021
Name ofrelatedparty

Capitalinvestment

Location

Votinginterest

Nature of operations

Amounts
Description ofTransaction
Thousands
the businessMillions ofdetailof U.S.
relationshipyendollars

Collectionof loans*1

Ichthys
LNG
Pty Ltd

Western
Australia,
Australia

US$4,506,860
thousandTransportation,liquefaction andsales of oil andnatural gas throughpipeline in WA-50-L
block in offshore
Western Australia

Indirectly
66.245%

Capitalsubscription¥ 69,294

Title ofaccount

Amounts
Thousandsof U.S.
dollars

Millions ofyen

Current
assets other(short-term ¥   34,815
loans$ 602,451 receivable)$ 302,686

Long-term
loans
receivable

1,007,106

8,755,920

Interest
Income*1

26,054

226,517

Current
assets other(interest
receivable)

1,212

10,537

Sales offinished
goods*2

146,021

1,269,527

Accounts
receivabletrade21,114

183,568

Guarantee
ofliabilities*3

356,450

3,099,026———

Guarantee
commission
received*3¥  3,180$   27,647

Current
assets other¥     151
(accruedrevenue)$    1,312*1 The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.
The interest rate on certain loans of funds is zero.
*2 All transactions were conducted under general transactional conditions, which are the same as those used in transactions with independent third parties.
*3 Guarantee of liabilities are for securing loans from financial institutions, and the Company receives guarantee commissions based on the amount of the guarantees. In
addition, “Amounts”of “Guarantee of liabilities” are guaranteed balances by the Company as of December 31, 2021.

(2) Transactions with fellow subsidiaries and other affiliated companies
Year ended December 31, 2020
Name ofrelatedparty

Location

CapitalNature of operations Voting interest
investment

Japan Oil,
Support for
Gas and¥1,069,100 exploration and
MetalsMinato-ku, Tokyo
million*1 development of oil
National
and others
Corporation

None

Description of
the business
relationshipAcceptance of
debt
guarantees

Transaction
detailAmounts
Millions of yen

Title of accountAmounts
Millions of yen

Acceptance of
debt
guarantees*2¥132,764—¥—Payment ofguarantee
fees*2¥  1,415

Current
liabilities other(accrued
expenses)¥333*1 The amount of “Capital investment” is as of September 30, 2020.
*2 Japan Oil, Gas and Metals National Corporation guarantees securing loans from financial institutions, and receives guarantee fees based on the amount of the guarantees.
In addition, “Amounts” of “Acceptance of debt guarantees” are guaranteed balances by Japan Oil, Gas and Metals National Corporation as of December 31, 2020.

Year ended December 31, 2021
Name ofrelatedparty

Location

CapitalNature of operations
investment

Japan Oil,
Support for
Gas and¥1,122,000 exploration and
MetalsMinato-ku, Tokyo
1
million*development of oil
National
and others
Corporation

Votinginterest

None

Amounts
Descriptionof theTransaction
Thousands
Millions ofbusinessdetailof U.S.
yen
relationshipdollars

Acceptanceof debt
guarantees

Acceptanceof debt
guarantees*2

Payment ofguarantee
fees*2¥125,659¥  1,260

Title ofaccount

Amounts
Thousandsof U.S.
dollars

Millions ofyen$1,092,496

—

¥—

$—

$   10,954

Current
liabilities
other(accrued
expenses)¥310$2,695*1 The amount of “Capital investment” is as of December 27, 2021.
*2 Japan Oil, Gas and Metals National Corporation guarantees securing loans from financial institutions, and receives guarantee fees based on the amount of the guarantees.
In addition, “Amounts” of “Acceptance of debt guarantees” are guaranteed balances by Japan Oil, Gas and Metals National Corporation as of December 31, 2021.

102

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation(b) Note related to the parent company or significant affiliated companies

The significant affiliated company for the years ended December 31, 2020 and 2021 is Ichthys LNG Pty Ltd. The summary of its financial information is as follows:
Millions of yen

Thousands of U.S. dollars

2021/12¥ 134,475
3,703,147
250,669
3,112,537
474,4162021/12$ 1,169,144
32,195,679
2,179,351
27,060,832
4,124,639

Net sales
Net income (loss) before income taxes
Net income (loss)

417,581(31,983)¥  (39,566)

597,490
94,817¥   56,545

5,194,661
824,352$   491,610

Growth Strategies for Value Creation

Total current assets
Total fixed assets
Total current liabilities
Total long-term liabilities
Total net assets

2020/12¥ 143,769
3,457,635
331,477
2,941,567
328,359

22. SIGNIFICANT SUBSEQUENT EVENTS(a) Business Combination through Acquisition

On October 27, 2021, the Company concluded the agreement ontransfer of 50.5% of shares in Idemitsu Snorre Oil Development
Co., Ltd. with Idemitsu Kosan Co., Ltd. and Osaka Gas Summit
Resources Co., Ltd. On January 31, 2022, the Company acquired
shares in Idemitsu Snorre Oil Development Co., Ltd. after the approval of the government of Norway and other conditions were
fulfilled.
Following the acquisition, Idemitsu Snorre Oil Development
Co., Ltd. and Idemitsu Petroleum Norge AS which is a wholly
owned subsidiary of Idemitsu Snorre Oil Development Co., Ltd.
became subsidiaries of the Company because shares in Idemitsu
Petroleum Norge AS are held indirectly by the Company.

(2) Amount and breakdown of the acquisition costs
Consideration for acquisition
Cash and cash equivalents ¥39,739 million (US$345,496 thousand)Acquisition cost
¥39,739 million (US$345,496 thousand)(3) Amount and breakdown of the main acquisition-related costs
Not yet determined.
(4) Amount of goodwill, reason for recognition, and method andperiod for amortization
Not yet determined.
(5) Amount and breakdown of assets received and liabilities assumed on the date of the business combination
Not yet determined.

(b) Cancellation of the Company’s Own Shares

The Board of Directors of the Company, at its meeting held on
January 24, 2022, resolved to cancel its own shares pursuant to
the provisions of Article 178 of the Companies Act, and carriedout the cancellation as follows.

Management Foundation to
Advance Growth Strategies(1) Type of shares cancelled
Common shares(2) Total number of shares cancelled
75,656,433 shares (5.17% of total number of issued shares prior tothe cancellation)

Business and Financial Overview(1) Outline of the business combinationi) Name and business details of the acquired company)
I. NameIdemitsu Snorre Oil Development Co., Ltd.
Business details
Exploration, development, production and marketing of
crude oil and natural gas in Norway through a subsidiary
II. Name
Idemitsu Petroleum Norge AS
Business details
Exploration, development, production and marketing of
crude oil and natural gas in Norwayii) Main reason for the business combination
The Company expects its core upstream business to become
more resilient and its corporate value to further improve bystrengthening its operational base in Norway.
Additionally, the Company determined that the businesscombination enables the Company to fulfill its two social responsibilities of providing a stable supply of energy while
mounting a response to climate change, in addition to making
its upstream business cleaner, by pursuing decarbonization efforts in Norway and around Europe.
iii) Date of the business combination
January 1, 2022 (deemed acquisition date)
January 31, 2022 (share acquisition date)iv) Legal form of the business combination
Acquisition of shares in Idemitsu Snorre Oil Development Co.,
Ltd. for cash considerationv) Company name after the business combination
I. INPEX Norway Co., Ltd. (corporate name changed from
Idemitsu Snorre Oil Development Co., Ltd.)
II. INPEX Idemitsu Norge AS (corporate name changed from
Idemitsu Petroleum Norge AS)vi) Ratio of voting rights acquired
I. Idemitsu Snorre Oil Development Co., Ltd.
Ratio of voting rights after the acquisition
50.5%
II. Idemitsu Petroleum Norge AS
Ratio of voting rights after the acquisition
100% (of which indirectly owns 100%)vii) Basis for determination of the acquiring company
The Company acquired shares in Idemitsu Snorre Oil Development Co., Ltd. for cash consideration.

(3) Date of cancellation
February 8, 2022
(Reference)· Total number of issued shares: 1,386,667,167 shares· Total number of own shares: 0 shares* The shares held by the BIP Trust (149,593 shares) are not included in
the number of own shares.

INPEX CORPORATION Annual Report 2021

103

Independent Auditor’s Report

Independent Auditor’s Report
The Board of Directors
INPEX CORPORATION
OpinionWe have audited the accompanying consolidated financial statements of INPEX CORPORATION and its consolidated
subsidiaries (the Group), which comprise the consolidated balance sheet as at December 31, 2021, and the consolidated
statements of income, comprehensive income, changes in net assets, and cash flows for the year then ended, and notes to theconsolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Group as at December31, 2021, and its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordancewith these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements of the current period. These matters were addressed in the context of the audit of theconsolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate
opinion on these matters.
Assessment for impairment indicators of fixed assets related to the Ichthys LNG project and the Prelude FLNG project104

Description of Key Audit Matter

Auditor’s Response

INPEX CORPORATION recorded tangible fixed assetsof 2,259,849 million yen and intangible assets of 446,660
million yen in the consolidated balance sheet as of 31
December 2021.
As described in the notes to the consolidated financial
statements (Significant Accounting Estimates), tangible
fixed assets related to the Ichthys LNG project held
through INPEX Holdings Australia Pty Ltd. ("IHA"),a consolidated subsidiary, amounted to 1,476,791 million
yen.
Also, in relation to the Ichthys LNG project, an equity
method investment balance of 227,203 million yen in
Ichthys LNG Pty Ltd ("ILNG"), which is an equity method affiliate, is recorded. The balance of tangible fixed assets held by ILNG included in this investment is2,452,645 million yen (which is obtained by multiplying
by 66.245%, which represents INPEX CORPORATION’s
equity interest).
Further, INPEX CORPORATION recognized tangible
fixed assets of 191,385 million yen and intangible assetsof 54,359 million yen, respectively, related to the Prelude
FLNG project through INPEX Oil & Gas Australia Pty
Ltd. ("IOGA"), which is a subsidiary of INPEXCORPORATION.
As a result of the assessment for the impairment indicators,
given the operational status of the projects with consideration of future crude oil prices, reserves, operating expenses and development costs, INPEX CORPORATION
assessed that no impairment indicators were identified forthe Ichthys LNG project and the Prelude FLNG project.
For the purposes of determining whether there are any
impairment indicators, INPEX CORPORATION confirmed that there has been no significant deterioration in
net cash flows.

We performed the following audit procedures to assess
whether INPEX CORPORATION properly assessed the
impairment indicators with respect to the significant projects in the production phase.
- We evaluated management’s assumptions for future
crude oil prices by making comparisons with estimatespublished by external experts and estimates establishedby management for the previous fiscal year.
- We discussed with management whether there are no
significant changes to the operational status of the project, including reserves, operating expenses and development costs from the previous fiscal year, and inspectedboard minutes and other relevant documents.
- We evaluated management’s assumptions by comparing
the estimates of reserves, operating expenses and development costs used in calculating net cash flows for thecurrent fiscal year with those in the previous fiscal year.
We performed the following additional procedures for the
Ichthys LNG project and the Prelude FLNG project.
- To assess management’s assumptions regarding the reserves, operating expenses and development costs, we
held related discussions with the management and inspected relevant documents.
- We performed a sensitivity analysis for future crude oil
prices and discount rates by applying our own assumptions calculated by our network firm’s valuation
specialists.

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation
Growth Strategies for Value Creation

The key assumptions used in measuring net cash flows
are future crude oil prices, reserves, operating expenses,
development costs and discount rates.
Among these assumptions, there is a high level of uncertainty in the estimates of future crude oil prices, reserves,
operating expenses, and development costs, given that
there is a long period of time from the exploration anddevelopment phase to the recovery of the investment via
production and sales.
Also, with respect to the estimation for the discount rate,a high level of expertise is required for selecting the calculation method and input data.
Therefore, the assessment for impairment indicatorsof fixed assets of the projects held by INPEX CORPORATION requires significant judgment and estimations
by management.
Among these projects, the amount of fixed assets held by
IHA, a consolidated subsidiary, accounts for 54% of total
tangible and intangible assets. Furthermore, by also aggregating the amount of fixed assets held through ILNG,
an equity method affiliate, the total amount is materiallysignificant. Moreover, as the life of the project is over along period of time, any changes in key assumptions suchas in future crude oil prices have a significant impact on
net cashflows. Therefore, the assessment for the impairment indicators of fixed assets related to the projects, including prerequisites for key assumptions, needs carefulconsideration.
Additionally, for the Prelude FLNG project, althoughproduction has commenced, operational risks still remain,and significant amounts of fixed assets are booked.
Also, given an impairment loss was recorded in the previous fiscal year, there is the possibility that additional
impairment losses or impairment reversals may be recognized in the future due to changes in key assumptions.
Based on the above, due to the significance froma materiality perspective and the specific risks derived
from these projects, the assessment for impairment indicators of the Ichthys LNG project and the Prelude FLNG
project are significant, and thus a key audit matter.

Management Foundation to
Advance Growth Strategies

Recognition of asset retirement obligations for certain overseas oil production facilities
Auditor’s Response

As described in the notes to the consolidated financial
statements (Asset Retirement Obligations), INPEX CORPORATION recognized new asset retirement obligationsof 74,667 million yen during the current fiscal year after
acquiring information about disposal costs, including
specific assets subject to the decommissioning work,from a state-owned oil company for a part of overseas oil
production facilities for which estimating disposal costs
was previously considered difficult.
In addition, depreciation expenses that were recognized related to fixed assets as a result of recording the new asset
retirement obligations amounted to 14,857 million yen.
In the case of oil development projects, asset retirement
obligations are calculated by reasonably estimating thecosts of removing oil and natural gas production facilities
and pipelines intended to be abandoned at the end of operations based on oil concession agreements and local
laws and regulations with the costs discounted over thelife of the contract agreement.
However, asset retirement obligations are not recorded
when the amount cannot be reasonably estimated.

To consider the accounting treatment of asset retirement
obligations recorded during the current fiscal year, we
mainly performed the following procedures.
- To assess management’s judgement that the asset retirement obligations can be reasonably estimated during thisfiscal year, we discussed the background of acquiring thenecessary information related to the disposal costs, including the specific assets. Also, we inspected the oilconcession agreement, board minutes and related
documents.
- To assess management’s assumptions regarding the timing of the asset disposal, which serves as the basis of the
discount calculation, we considered the consistency withthe contract term in the oil concession agreement.
- We engaged internal experts in the evaluation of disposal
costs to assess management’s assumptions about the disposal costs per well unit, the number of wells and thescope of the disposal of the oil production facilities.

INPEX CORPORATION Annual Report 2021

Business and Financial Overview

Description of Key Audit Matter

105

Regarding certain overseas oil production facilities forwhich asset retirement obligations were newly recorded
during the current fiscal year, the corresponding asset retirement obligations had not previously been recorded in
the consolidated balance sheet because they could not be
estimated as the details of the disposal work, including
specific assets , based on the approval of the local government had not been clearly established as there isa considerable period of time until the termination of theoil concession agreement.
The determination that the asset retirement obligations,which had previously been considered difficult to reasonably estimate, could be now be reasonably estimated after
obtaining certain information from the state-owned oilcompany in the current fiscal year needs carefulconsideration.
In addition, in the case where there are certain information constraints, key assumptions used to calculate theasset retirement obligations, such as expenditures perwell unit, the number of wells, the scope of oil production facilities to be abandoned, as well as the timing of
the asset disposal are affected by the subjective judgmentof management. As a result, management must exercise
greater consideration of such uncertainties and technicalexpertise required regarding these key assumptions.
Moreover, as it is a large-scale project, the amount of theasset retirement obligations recorded in the current fiscal
year is materially significant.
Based on the above, we considered the accounting treatment related to the recognition of asset retirement obligations for certain overseas oil production facilities for which
related disposal costs had not been recorded previously to
be a key audit matter given their materiality to the consolidated financial statements for the current fiscal year.
Responsibilities of Management, Audit & Supervisory Board Members and the Audit & Supervisory Board for theConsolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith accounting principles generally accepted in Japan, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue
as a going concern and disclosing, as required by accounting principles generally accepted in Japan, matters related to going
concern.
Audit & Supervisory Board Members and the Audit & Supervisory Board are responsible for overseeing the Group’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are freefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion.
• Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances
for our risk assessments, while the purpose of the audit of the consolidated financial statements is not expressing an
opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on

106

INPEX CORPORATION Annual Report 2021

INPEX’s Vision and Value Creation
Growth Strategies for Value Creation

the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if suchdisclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the dateof our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,and whether the consolidated financial statements represent the underlying transactions and events in a manner that
achieves fair presentation in accordance with accounting principles generally accepted in Japan.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervisionand performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with Audit & Supervisory Board Members and the Audit & Supervisory Board regarding, among othermatters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide Audit & Supervisory Board Members and the Audit & Supervisory Board with a statement that we havecomplied with the ethical requirements regarding independence that are relevant to our audit of the financial statements inJapan, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with Audit & Supervisory Board Members and the Audit & Supervisory Board, we
determine those matters that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulationprecludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweighthe public interest benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed
pursuant to the provisions of the Certified Public Accountants Act of Japan.

Ernst & Young ShinNihon LLC
Tokyo, Japan
March 25, 2022

Management Foundation to
Advance Growth Strategies

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended December
31, 2021 are presented solely for convenience. Our audit also included the translation of Japanese yen amounts into U.S.
dollar amounts and, in our opinion, such translation has been made on the basis described in Note 3 to the consolidated
financial statements.

/s/ Hiroaki Kosugi
Designated Engagement Partner
Certified Public Accountant
Business and Financial Overview/s/ Satoshi Takahashi
Designated Engagement Partner
Certified Public Accountant/s/ Takeshi Yoshida
Designated Engagement Partner
Certified Public Accountant/s/ Kentaro Moronuki
Designated Engagement Partner
Certified Public Accountant

INPEX CORPORATION Annual Report 2021

107

Subsidiaries and Affiliates
As of December 31, 2021

Consolidated Subsidiaries
Main business10

51.01%

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

INPEX Masela, Ltd.

65,53851.93%

Exploration and development of oil and natural gas in
the Masela Block in the Arafura Sea, Indonesia

INPEX South Makassar, Ltd.

1,097

100.00%Exploration, development, production and sales of oil
and natural gas in the Sebuku Block in the Makassar
Strait, Indonesia

INPEX Con Son Co., Ltd.

10100.00%Exploration and development, production and sales ofoil and natural gas in Blocks 05-1b/ 05-1c in offshore
southern Vietnam

431,150(Thousands of
U.S. dollars)

100.00%(100.00%)

Exploration of oil and natural gas in the WA-285-P
Block and others, Australia

427,290

100.00%Financing for oil and natural gas exploration, development, production and sales in the WA-285-P Block andothers, Australia

INPEX Holdings Australia Pty Ltd

9,681,023(Thousands of
U.S. dollars)

100.00%(100.00%)

Financing for oil and natural gas exploration, development, production and sales and construction and operation of the LNG plant for the Ichthys LNG project,
Australia

INPEX Ichthys Pty Ltd

804,456(Thousands of
U.S. dollars)

100.00%(100.00%)

Exploration, development, production and sales of oil
and natural gas in the Ichthys Gas-Condensate Field(WA-50-L/ WA-51-L), Australia

INPEX Oil & Gas Australia Pty Ltd

1,011,000(Thousands of
U.S. dollars)

100.00%Exploration and development, production and sales ofoil and natural gas in the Prelude Gas Field (WA-44-L)
and others, Australia

INPEX Sahul, Ltd.

4,600

100.00%Exploration, development, production and sales of oil
and natural gas in the PSC TL-SO-T 19-12 Block in EastTimor

INPEX Alpha, Ltd.

8,014

100.00%Exploration, development, production and sales of oil
and natural gas in the WA-35-L Block and others,
Australia

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.

105,532

51.00%

Exploration, development, production and sales of oilin the Offshore North Caspian Sea Block, Kazakhstan

Japan Oil Development Co., Ltd.

5,532

100.00%Exploration, development, production and sales of oilin the Upper Zakum, Satah and Umm Al Dalkh oil
fields, Offshore Abu Dhabi, United Arab Emirates

JODCO Exploration Limited

50(Thousands of
U.S. dollars)

100.00%Exploration of oil in onshore Block 4 in Abu Dhabi,
United Arab Emirates

JODCO Onshore Limited

111(Thousands of
U.S. dollars)

65.76%

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

JODCO Lower Zakum Limited

600,000(Thousands of
U.S. dollars)

100.00%Exploration, development, production and sales of oilin the Lower Zakum Oil Field Offshore Abu Dhabi,
United Arab Emirates

INPEX Americas, Inc.

19,793(Thousands of
U.S. dollars)

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—

100.00%Exploration, development, production and sales of oilin the Eagle Ford shale play in Texas, US

1,043,488(Thousands ofCanadian dollars)

45.09%

Exploration, development, production and sales ofnatural gas in the shale gas blocks of the Horn River,
Cordova and Liard basins in British Columbia, Canada

INPEX Babar Selaru, Ltd.

INPEX Browse E&P Pty Ltd

INPEX Browse, Ltd.

INPEX Eagle Ford, LLC
INPEX Gas British Columbia Ltd.

108

Issued capital(Millions of yen)*1

Voting rights
held by us (%)*2

Company name

INPEX CORPORATION Annual Report 2021

Issued capital(Millions of yen)*1

Voting rights
held by us (%)*2

Main business100.00%Natural gas transportation, pipeline operation, maintenance and management

Saitama Gas Co., Ltd.

60

62.67%(13.17%)

City gas sales

INPEX DLNGPL PTY Ltd

42,001(Thousands of
U.S. dollars)

100.00%Investment in Darwin LNG Pty Ltd, which constructs
and operates the undersea pipeline and LNG plantconnecting the Bayu Undan Gas-Condensate Field andDarwin (Australia)

INPEX BTC Pipeline, Ltd.

63,800(Thousands of
U.S. dollars)

100.00%Investment in the pipeline construction and management business that connects Baku (Azerbaijan), Tbilisi(Georgia) and Ceyhan (Turkey)

50

100.00%

Sales, agency and brokerage of crude oil and market
research and sales planning in connection with oil andnatural gas sales

1(British Pound)

100.00%Development and management of offshore wind power projects in Europe

INPEX GEOTHERMAL, LTD.

600

100.00%Development and management of geothermal projects in Japan and overseas

INPEX Geothermal Sarulla, Ltd.

10100.00%

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

3,706,000(Thousands of
U.S. dollars)

100.00%

The Group’s intercompany finance operations andsupport for financial administration of projects

Issued capital(Millions of yen)*1

Voting rights
held by us (%)*2

Main business

INPEX Trading, Ltd.
INPEX Renewable Energy Europe
LimitedINPEX FINANCIAL SERVICESSINGAPORE PTE. LTD.
29 other subsidiaries

Equity-method affiliates
Company name338,601(Thousands of
U.S. dollars)

44.00%

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

Ichthys LNG Pty Ltd

4,506,860(Thousands of
U.S. dollars)

66.25%(66.25%)Laying and maintenance of undersea pipeline fromthe Ichthys Gas-Condensate Field to the Darwin
Onshore LNG Plant in Australia, construction andoperation of the LNG plant and sales of LNG, LPG
and condensate.

7

25.00%

Supply of business capital for exploration, development, production and sales of oil in Zapadno-Yaraktinsky and Bolshetirsky blocks, Russia

PT Medco Geopower Sarulla

143,003(Thousands of
U.S. dollars)

49.00%(49.00%)

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

PT. Supreme Energy Sumatera

100(Hundred millions of
Rupiahs)

33.33%(33.33%)

Supply of business capital, etc. to geothermal power
project in Muara Laboh Geothermal Block, Indonesia

Japan South Sakha Oil Co., Ltd.

Business and Financial Overview

MI Berau B.V.

Management Foundation to
Advance Growth Strategies

100

Growth Strategies for Value Creation

INPEX Pipeline Co., Ltd.

INPEX’s Vision and Value Creation

Company name15 other equity-method affiliates*1 Values in the column labeled “Issued capital (Millions of yen)” are rounded to the nearest unit.
*2 Values in parentheses in the column labeled “Voting rights held by us (%)” indicate the ratio of indirectly held voting rights. These values
are included in the total.

INPEX CORPORATION Annual Report 2021

109Business Risks

The following is a list of key items that can be considered potential risk factors relating to the business of INPEX CORPORATION, its subsidiaries and affiliates (the “Group”). From the standpoint of information disclosure to investors and shareholders, we proactively disclose mattersthat 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 the Group’s businesses.
Unless stated otherwise, forward-looking statements in the discussion are the judgment of the Group as of March 28, 2022 and are subject to change after such date due to various factors, including changes in social and economic circumstances.

I. MAJOR BUSINESS RISKS
1. CHARACTERISTICS OF AND RISKS ASSOCIATED WITH THE OIL AND NATURAL GASDEVELOPMENT BUSINESS(1) Risk of disasters, accidents, system failures, etc.

Oil and natural gas development entails the risk that operational
accidents and disasters may occur in the process of exploration,
development, production and transportation. Various information
systems are used in operations. While safety measures are inplace for these systems, there is the risk that operations may besuspended due to unforeseen failures of these systems caused byevents such as natural disasters and cyberattacks. Should such an
unforeseen failure of information systems, or an accident, disasteror other such incident occur, there is the risk that costs may be incurred, excluding compensation covered by insurance, due to infrastructural damage, as well as the risk of a major accident ordisaster involving loss of life. In addition, a cost for recovery or
opportunity loss from the interruption of operations could occur.
Furthermore, the spread of infectious diseases such as
COVID-19 may lead to a shortage of employees required for operations and other necessities, difficulty in procuring materials,
equipment and services as well as transportation of produced
goods, instructions or orders from the governments of oil-producing countries to suspend operations, changes in the policies ofpartners in a joint business and other developments. Such events
may fully or partly suspend or delay operations.
For its domestic natural gas business, the Company has continued to procure natural gas regasified from imported LNG as sourcegas since January 2010. Furthermore, the Company has manufactured regasified LNG from imported LNG at Naoetsu LNG Terminalfrom August 2013. An inability to procure natural gas regasified fromimported LNG and other imported gas as source gas due to issues
concerning suppliers or the Company’s Naoetsu LNG Terminal, an
inability to produce domestic gas due to issues in the domestic gas
field, or compromised pipeline operations due to accidents or disasters along the pipeline network may interfere with the Company’s
ability to supply its customers. This could in turn have an adverse effect on the Company’s domestic natural gas business.
With regard to environmental problems, there is a possibilityof soil contamination, air pollution, and freshwater and seawaterpollution. The Group has established a “Health, Safety and Environment Policy,” and as a matter of course abides by the environmental laws, regulations, and standards of the countries in which
we operate and give due consideration to the environment in the
conduct of business, based on our independent guidelines. In theevent of an operating accident or disaster which impacts the environment, there is the possibility of incurring a response or costburden for recovery from that incident, 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 the interruption of operations. Furthermore, inthe event of changes to or the strengthening of the environmental laws, regulations, and standards (including support measures
for the promotion of new, renewable energies) of the countries inwhich we operate, it may be necessary for the Group to devise
additional measures with an associated cost burden and it could
affect on the financial results of the Group.
The Company strives to prevent accidents and incidents fromhappening to avoid these risks of disasters, accidents, system failures and other developments from materializing. However, risks
are always present, and if they materialize, they may have a significantly adverse effect on the Group’s results.
Although the Group maintains insurance against loss or damage in the natural course of its operations to a reasonable extent,
insurance may not cover all damages. Also, such accidents or issues could result in administrative sanctions or damage the110

INPEX CORPORATION Annual Report 2021

Group’s credibility and reputation as an oil and natural gas development company, and could therefore have an adverse effect on
future business activities.

(2) Risk of failure in exploration, development or
production

Payment of compensation is ordinarily necessary to acquire participating interests. Also, surveying and exploratory drilling expenses(exploration expenses) become necessary at the time of exploration activities for the purpose of discovering resources. When resources are discovered, it is necessary to further invest in
substantial development expenses according to various conditions,
including the size of the recoverable reserves, development costs
and details of agreements with oil-producing countries (including
gas-producing countries; hereinafter the same shall apply).
There is, however, no guarantee of discovering resources ona scale that makes development and production feasible. The
probability of such discoveries is considerably low despite various
technological advances in recent years, and even when resources
are discovered the scale of the reserves does not necessarily
make commercial production feasible. For this reason, 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 thecase of concession agreements (including mining rights awardedin 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 the corresponding amount of investment in the development project as allowances while considering
the recovery possibility of each project.
To increase recoverable reserve and production volumes, theGroup plans to always take an interest in promising properties
and plans to continue exploration investment. At the same time,
we plan to invest in development projects, including the acquisition of interests in discovered undeveloped fields and producing
fields, so as to maintain an overall balance between assets at the
exploration, development, and production stages.
Although exploration and development (including the acquisition of interests) are necessary to secure the reserves essential to
the Group’s future sustainable business development, each typeof investment involves technological and economic risks, andfailed exploration or development could have an adverse effecton the results of the Group’s operations.

(3) Dependence on specific geographical areas
or assets for production volume

The Group engages in stable production of crude oil and natural
gas in the Ichthys gas-condensate field (Australia), the onshore
and offshore Abu Dhabi oil fields (United Arab Emirates), the Minami Nagaoka Gas Field (Japan) and so on. The areas in which theGroup operates are spread broadly throughout Asia-Oceania(particularly Japan, Indonesia and Australia), the Middle East andAfrica, Eurasia including the Caspian Sea area and the Americas.
For fiscal 2021, however, the Asia and Oceania region accounted
for about 45% of the Group’s production volume and the Middle
East and Africa region accounted for about 40%, with these tworegions making up the vast majority of the Group’s operations.
The Group currently relies heavily on specific geographical areas and assets for its production volume, and the occurrence of

(4) Contract expiration dates

INPEX CORPORATION (the “Company”) commissioned 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 materially affect future performance. An assessment of other projects was undertaken by theCompany. The definition of proved reserves is based on the U.S.
Securities and Exchange Commission’s (SEC) Regulation S-X, Rule4-10(a), which is widely known among U.S. investors. Regardlessof whether the deterministic approach or probabilistic approachis used in evaluation, proved oil and gas reserves are estimatedquantities that geological and engineering data demonstrate withreasonable certainty to be recoverable from known reservoirs under existing economic and operating conditions, from the date ofevaluation through to the expiration date of the agreement

A reserve evaluation depends on the available geological and engineering data from oil and gas reservoirs, the maturity of development plans and a considerable number of assumptions, factors
and variables including economic conditions as of the date suchan estimate is made. Reserves may be revised in the future on thebasis of geological and engineering data as well as development
plans and information relating to changes in economic and otherconditions made newly available through progress in production
and operations. As a result, there is a possibility that reserves will
be restated upwards or downwards. As to the reserves undera PSC, not only production, but also oil and gas prices, investments, recovery of investments due to contractual conditions andremuneration fees may affect the economic entitlement. This may
cause reserves to increase or decrease. In this way, the assessedvalue of reserves could fluctuate because of various data, assumptions and changes of definition.

(6) Operatorship

In the oil and natural gas development business, companies frequently form business partnerships for the purpose of the dispersion of risk and financial burden. In such partnerships, one of thecompanies becomes the operator, which performs the actual
work and bears the responsibility for operations on behalf of thepartners. The companies other than the operator, as non-operators, participate in the business by providing a predeterminedamount of funds and either carefully examining the explorationand development plan devised and implemented by the operator, or participating in some operations.
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 business resources aswell as the balance between operator and non-operator projects,
based on the Group’s knowhow and technical capability, which
has been acquired through considerable operational experienceat each of the exploration, development and production stages.
The Company has significant expertise as an operator in the development and production of crude oil and natural gas both inJapan and overseas as well as a wealth of know-how and knowledge accumulated over many years as a participant in LNG andother projects in such countries as Indonesia and Australia. In addition, we believe that by 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 execute business appropriately as an operator including LNG projects.
Engaging in project coordination as an operator contributes
to the expansion of opportunities in acreage acquisition throughenhancement of technical capabilities and greater presence inoil-producing countries and the industry. At the same time, there
are risks such as constraints on the recruitment of personnel withspecialized operational skills and an increase in financial commitments. Inability to adequately cope with such risks could have an
adverse effect on the Group’s operational results.

Business and Financial Overview

1) Proved reserves

2) Possibility of changes in reserves

Management Foundation to
Advance Growth Strategies(5) Crude oil, condensate, LPG and natural gas
reserves

granting operating rights (or in the event of evidence with a reasonable certainty of agreement, 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 of hydrocarbons has commenced or that the
project will commence within an acceptable period of time. Thisdefinition is widely regarded as being conservative. Nevertheless,the strictness of the definition does not imply any guarantee ofthe production of total reserves during a future production period. In this context, when probabilistic methods are employed,
there should be at least a 90% probability that the quantities actually recovered will equal or exceed the sum of estimated proved
reserves.
For further details on proved reserves of crude oil, condensate, LPG and natural gas held by the Group, including equity-method, affiliates accounted please see the section “Oil and
Gas Reserves and Production Volume” on P.115.

Growth Strategies for Value Creation

Expiration dates are often stipulated in the agreements related toparticipating interests, which form the basis of the Group’s overseas business activities. Should an agreement in which an expiration date is stipulated not be extended, re-extended or renewed,
or should the terms and conditions be less favorable (including
a reduction in the proportion of the Group’s interest) than thoseexisting at the time of extension, re-extension or renewal, there
could be an adverse effect on the Group’s results. INPEX Group
policy to work with our business partners toward the extension,
re-extension or renewal of these agreements, should an existing
agreement not be extended, re-extended or renewed as a resultof agreement negotiations with the national petroleum companyof an oil-producing country, or in the event of agreement terms
and conditions (including a reduction in the Group’s participatinginterest) that are more disadvantageous than the situation at thetime of the extension, re-extension or renewal, this could have an
adverse effect on the Group’s business or results. Even should theagreements stipulating expiration dates be extended, re-extended or renewed, we anticipate that the remaining recoverable reserves at that time will have decreased due to production
developments. Although the Group is striving to acquire intereststhat 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 found that are deemed tobe commercialized, and the Company is unable to decide on thetransition to the development stage by the expiration of the current contract, efforts will be made through negotiations with thegovernment of the oil- or gas-producing country in question tohave the periods extended. However, there remains the possibility that such negotiations may not be successfully concluded, inwhich 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 for the other party to have the right to cancel
the agreement before the expiration date. The agreements forproperties in these principal geographical business areas containsimilar provisions. The Group has never experienced early cancellation of an agreement due to breach of contract, and we do not
anticipate such an occurrence in the future. Nevertheless, a major
breach of contract on the part of a party to an agreement could
result in cancellation of an agreement before the expiration date.
And in the overseas natural gas development and production
activities, in many cases we are selling and supplying gas basedon long-term sales and supply contracts in which expiration dates
are stipulated. We plan to make efforts with partners to extend or
re-extend the expiration date before the deadline stipulated inthese contracts. Nevertheless, inability to extend the contracts, orthe occurrence of cases in which extension is made but sales andsupply volumes are reduced, could have an adverse effect on theGroup’s business or results.

INPEX’s Vision and Value Creation

operational issues at these assets could have an adverse effect on
the Group’s operational results.

(7) Project partners

In the oil and natural gas development business, as previously
mentioned, several companies often engage in joint business for

INPEX CORPORATION Annual Report 2021

111

the purpose of dispersion of risk and financial burden. In suchcases, 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 thatis a partner in one property in which the Group is engaged injoint business may become a competitor in the acquisition of other participating interests, even though the relationship with thepartner may be good.
In undertaking the joint business, participants in principle beara financial responsibility in proportion to their interest share. Any
inability of a joint business partner to fulfill this financial responsibility may adversely affect the project.

(8) In the oil and natural gas development
business the period from exploration to sales
is highly capital intensive and funds cannot
be recovered for a long time

Considerable time and expense is required for exploration activities. Even when promising resources are discovered through exploration, substantial expenses including production facility
construction costs, and an extended period of time, are necessary
at the development stage leading up to production. For this reason,
a long period of 10 years or more is required from the time of exploration and development investment until the recovery of funds
through production and sales. In particular, the large-scale LNG
projects require a very large amount of investment, and the financing of these projects could be impacted by changes in theeconomic and financial environment. Following the discovery of resources, a delay in the development schedule or the loss of theeconomic viability of the properties during the development process leading up to production and the commencement of sales
could have an adverse effect on the Group’s operational results.
Such delays or losses may occur due to changes in the business environment including a delay in the acquisition or modification of
government approvals, the occurrence of unanticipated problems
related to geological conditions, fluctuations in the price of oil orgas, fluctuations in foreign exchange rates, or escalating prices ofequipment 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 with prospective purchasers with respect to production.

(9) Risk in relation to mine abandonment

The Group books in its accounts, as an asset retirement obligation,
the estimated present value of costs related to mine abandonmentthat will become necessary after finishing operation and production in oil and gas production facilities and the like in accordancewith agreements with the authorities of oil-producing countries,
applicable laws and regulations and the like. If it is later found thatthe estimated present value of those costs falls short due to achange in the procedures used for mine abandonment, a rise in
expenses for procuring drilling materials and equipment or any
other reason, the Group will be required to increase the amount ofthat 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, NATURAL GAS PRICES, FOREIGNEXCHANGE AND INTEREST RATES ON FINANCIAL RESULTS(1) Effects of fluctuations in crude oil prices andnatural gas prices on financial results

Crude oil prices and natural gas prices at our overseas businesses
are largely determined by international market conditions. In addition, these prices fluctuate significantly due to the influence ofa variety of factors including global and regional supply and demand (including a growing downward pressure on demand due tothe shift towards a net zero carbon society), trends and conditionsin the global economy (including the impact of the contraction of
economic activity due to the global pandemic) and financial markets as well as trends in the policies of oil-producing countries andagreements between oil-producing countries on production volume and other matters. The vast majority of these factors are beyond the control of the Company. In this regard, INPEX is not in aposition to accurately predict movements in future crude oil andnatural gas prices. The Group’s sales and profits are subject to theeffects of such price fluctuations. A fluctuation of US$1 in the priceof crude oil is expected to have a ¥6 billion impact on the Groupfor the year ending December 31, 2022, as estimated at the beginning of the fiscal period. Such effects are highly complex and arecaused 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 are booked,
actual crude oil transaction prices and the average oil priceduring the accounting period do not necessarily correspond.
Moreover, although the Company is taking measures to reducea portion of the risks associated with crude oil price fluctuations,these measures by no means cover all possible risks. As a result,the impact of fluctuations in crude oil prices cannot be completely eliminated.
Since the natural gas business in Japan uses domestically produced natural gas and imported LNG as feedstock, changes in themarket price for LNG have an effect on feedstock prices and sales
prices. There is also the possibility that changes in the competitiveenvironment associated with electric power and gas system reforms
will have an effect on natural gas sales prices and sales volumes.
Also, should the recovery of an amount invested in a business asset held by the Group be no longer expected—due to a decrease inprofitability associated with changes in the business environment on
the basis of changes in future market conditions— since the Group112

INPEX CORPORATION Annual Report 2021

would reduce that business asset’s book value to reflect the level ofrecoverability and the amount of that reduction would be deemed
impairment loss, there is the possibility 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) are denominated 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 theevent of depreciation in the value of the yen, yen-denominatedsales and profits increase.
On the other hand, when borrowing necessary funds, theCompany borrows in foreign currencies. In the event of appreciation in the value of the yen, a foreign exchange gain on foreign-currency denominated borrowings is recorded as a result offiscal year-end conversion; in the event of depreciation in the value of the yen, a foreign exchange loss is incurred. For this reason,
the exchange risk associated with the above business is diminished and the impact of fluctuations in exchange rates on profit
and loss tends to be mitigated. A ¥1 appreciation/depreciation
against the U.S. dollar is expected to have a ¥2.8 billion impact
on the Group for the year ending December 31, 2022. 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 exploration anddevelopment operations through borrowing. Much of these borrowings are with variable-rates, long term borrowings based on the
U.S. dollar six-month LIBOR rate. Accordingly, the Company’s profits are subject to the influence of fluctuations in U.S. dollar interest
rates. Furthermore, although the Group has devised methods toreduce 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 of fluctuations in interest rates.

INPEX’s Vision and Value Creation

3. CLIMATE CHANGE RISK

(1) Policy/regulatory risk

In the event that the countries and regions where the Group operates strengthen climate change actions based on the Paris
Agreement or other accords, making changes or enhancements
to environmental laws, regulations or standards, including carbon
pricing systems such as emissions trading and carbon taxes, theGroup would be required to implement additional measures and,in turn, incur financial commitments that could have an adverse
effect on the Group’s performance.

(2) Technical and market risk

If demand for the Group’s oil and natural gas products declines asa result of accelerated progress in low-carbon related technologies and increased price competitiveness of low-carbon products,
or due to a preference for low-carbon energy, this may have an
adverse effect on the Group’s business and performance.

(3) Physical risk

Acute risks due to extreme meteorological phenomena such as
tropical cyclones and floods, and chronic risks such as rises in average temperature and sea levels over the long term may adversely affect the operations of the Group’s facilities.

Growth Strategies for Value Creation

In order to achieve the goals of the Paris Agreement and amid
growing interest in addressing climate change on a global scale,efforts are being made worldwide to reduce greenhouse gas(GHG) emissions, which are recognized as the cause of climatechange and global warming. The Group identifies, assesses andmanages climate change risks in line with the recommendationsof the Task Force on Climate-related Financial Disclosures (TCFD),
and specifically recognizes the following risks. The potential forthese climate change risks materializing is expected to grow overthe medium to long term, and if they do, they could have an adverse effect on the Group’s performance.

(4) Financing risk

If investors and financial institutions place more importance thanin the past on direct and indirect GHG emissions from the Group’sbusiness as an evaluation item for climate change risk in investment and financing, the Group’s financing and its related terms
and conditions may be adversely affected.

4. OVERSEAS BUSINESS ACTIVITIES AND COUNTRY RISKIn order to respond to the risks listed in items 1 through 4
above, we have introduced guidelines for economic and risk evaluation we conduct on a per-project basis and are recognizing major risks.
When acquiring new projects in the upstream oil and natural
gas business, the New Ventures & Global Exploration Divisioncentrally analyzes and examines whether to take on new projects,
and takes action against these risks in cooperation with related
departments. For existing projects, the INPEX Value Assurance
System (IVAS) Committee works as a cross-organizational mechanism mainly for technical evaluation at each project phase, suchas exploration, evaluation and development. At the same time,
we conduct economic and risk evaluation in principle at least
once a year. For major projects, we report a summary of risk evaluation results to the Board of Directors each year. Regarding therenewable energy business and the hydrogen/CCUS business,
the Renewable Energy & New Business Division and the Hydrogen & CCUS Development Division coordinate their respective
businesses overall, conduct economic evaluation, and evaluate
risks and take action against them. When acquiring new projects,
the INPEX Value Assurance System (IVAS) Committee and external experts conduct verifications, and a summary of risk evaluation results is reported at Board of Directors Meetings forimportant projects.
We strive to actively manage risks related to our business ingeneral through measures including formulating and maintaining
an emergency/crisis response plan and conducting regular emergency response drills at ordinary times, to enhance our ability torespond to emergency situations caused by events such as major
accidents and disasters. In addition, we have formulated a Business Continuity Plan (BCP) and review it as appropriate to prevent
important operations from being interrupted. We have been implementing our BCP and taking necessary measures including
working from home since 2020 due to the spread of COVID-19. At
the same time, we have set up the Corporate Crisis Management

Team to assess the state of the entire company including overseas offices.
Furthermore, the Information Security Committee meets bothon a regular basis and as needed, taking action on information
security on an organizational and systematic basis, as well as conducting education and training including prevention of information leakage.
To manage health, safety and environment (HSE) risk, we haveintroduced the HSE Management System (HSEMS) Manual to facilitate effective and consistent HSE management and improve
HSE performance across the entire business.
To continuously improve the environment, security and occupational health and safety in energy development and production, we identify, analyze and evaluate HSE risks for each businesssite based on the HSE Risk Management Procedure establishedunder the HSE Management System. We have a system in place
for headquarters to continuously check the HSE risk management
status, through such means as having the risk management status
regularly reported to headquarters and holding workshops on aregular basis. We are also working on the company-wide management of security-related risks based on various guidelines andstandards.
We conduct financial risk management regarding crude oiland natural gas prices, currency exchange rates, interest rates
and securities prices by identifying their respective risks associated with fluctuations and establishing corresponding management
and hedging methods.
To tackle climate change, we have set our goal of achieving
net zero carbon emissions by 2050 in line with the Paris Agreement objectives. Towards this goal, the Group will actively promote five business pillars to offer solutions responding to theneeds of society in an age of transformation towards a net zerocarbon society. Specifically, we will (1) develop a hydrogen business, (2) reduce CO2 emissions from the oil and gas business (promotion of CCUS, etc.), (3) enhance and emphasize renewable
INPEX CORPORATION Annual Report 2021

Business and Financial Overview

application of production ceilings in OPEC + member countries
and changes 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 wellas lawsuits could have a significant impact on the Group’s businessor results unless the impact is compensated by insurance.
Additionally, against the background of rising development
costs and other changes in the business environment, the progress of oil and gas projects and the need to address environmental issues, the governments of oil-producing countries may seek
to renegotiate the fiscal conditions including conditions of existing oil contracts related to participating interests. In the eventthat fiscal conditions of contracts are altered, this could have an
adverse effect on the Group’s business performance.

Management Foundation to
Advance Growth Strategies

The Group engages in a large number of oil and natural gas development projects overseas. Because the Group’s business activities,
including the acquisition of participating interests, are conductedon the basis of contracts with the governments of oil-producing
countries and other entities, steps taken by oil-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, restriction of economic activities by global community, government control of foreign exchange or foreign
remittances, and the balance of international payments), the113energy initiatives, (4) promote carbon recycling and cultivate new
business opportunities and (5) promote forest conservation. By
actively promoting these 5 net zero businesses, we will proactively
respond to the shift towards a net zero carbon society and aim to
be a pioneer of energy transformation.
We manage country risk by, among others, establishing guidelines for handling country risks in the countries where we operate,
including setting a maximum target amount of accumulated investments in high-risk countries.

Furthermore, we have developed a mechanism to counter legal risk, where business divisions and management can receive
appropriate legal guidance regarding matters such as important
agreements and lawsuits.
Although we strive to manage risks and mitigate their impact
by taking these countermeasures, they by no means cover all possible risks. As a result, the impact from individual events cannot
be completely eliminated.

II. OTHER BUSINESS RISKS
1. PRODUCTION SHARING CONTRACTS(1) Details of production sharing contracts

The Group has entered into production sharing contracts withcountries including Indonesia and Caspian Sea area, and therefore holds numerous participating interests in those regions.
Production sharing contracts are agreements by which one orseveral oil companies serve as contractors that undertake at theirown expense exploration and development work on behalf of thegovernments of oil-producing countries or national oil companies
and receive production from the projects as cost recovery andcompensation. That is to say, when exploration and development
work results in the production of oil or natural gas, the contractors
recover the exploration and development costs they incurred bymeans of a share in the production. The remaining production(crude oil and gas) is shared among the oil-producing country or
national oil company and the contractors according to fixed allocation ratios. (The contactors’ share of production after cost recovery is called “profit oil and gas.”) On the other hand, in cases
when exploration fails and expected production is not realized,
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 production sharing.” After the start of production, recovered
costs on the basis of those agreements are deducted from thisbalance sheet item.
As production received under production sharing contracts isdivided into the cost recovery portion and the compensation portion, the method of calculating cost of sales is also 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 costof 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.

2. 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 19.97 of the Company’s common sharesissued (excluding treasury shares) and a Class A Stock as of March
28, 2022, the Company 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 believe that no such relationship will develop in the future. Furthermore, there is no concurrent posting or secondment to theCompany of officers or employees from the Japanese
government.

(2) Ownership and sale of the Company’s sharesby the Japanese government (the Minister of
Economy, Trade and Industry)

The Ministry of Economy, Trade and Industry (METI) holds 19.97%
of the Company’s common shares issued (excluding treasury
shares). METI succeeded to the 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 and gas upstream assets owned by JNOC, the114

INPEX CORPORATION Annual Report 2021

Policy Regarding the Disposal of Oil and Gas Development-Related Assets Held by Japan National Oil Corporation (hereinafter,
the “Report”) was announced on March 18, 2003 by the Japan
National Oil Corporation Asset Evaluation and Liquidation Deliberation Subcommittee of the Advisory Committee on Energy andNatural Resources, an advisory body of the Ministry of Economy,
Trade and Industry. The Report describes the importance of appropriate 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 shall apply
hereinafter)) enacted December 2, 2011, sell off the Company’s
shares in Japan or overseas after examining the possibility of disposal of the said shares based on a review of the holdings fromthe perspective of energy policy. This could have an 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 overcertain resolutions of the Company’s general shareholders’ meetings and meetings of the Board of Directors. For details on theClass A Stock, please refer to “4. CLASS A STOCK” on P.113.

INPEX’s Vision and Value Creation

3. TREATMENT OF SHARES OF THE GROUP’S PROJECT COMPANY OWNED BY
JAPANESE GOVERNMENT AND JOGMEC(1) Treatment of shares of the Group’s projectcompany previously owned by Japan National
Oil Corporation (JNOC)

Business and Financial Overview

The Japanese government (the Minister of Economy, Trade andIndustry) owns 50% of the shares of SODECO. SODECO was established in 1995 to engage in an oil and natural gas explorationand development project located on the northeast continental
shelf off Sakhalin Island. SODECO owns a 30.0% interest in the
Sakhalin-1 Project. In October 2005, Phase 1 of this project started with the goal of advanced production of oil and natural gas.
Furthermore, there is a plan for additional development operations (Phase 2) for the purpose of the full-scale production of natural gas. The Company holds 6.08% of SODECO shares issued
and outstanding.
In the previously mentioned Report, SODECO, along with INPEXCORPORATION and JODCO, has been identified as a company
that should comprise part of a core company in Japan’s oil and natural gas upstream industry in the future.
Regarding the future of this project, we will take appropriate
measures while considering the current international situation andtrends in factors including the activities of the government.

Management Foundation to
Advance Growth Strategies(2) Treatment of the shares of Sakhalin Oil and
Gas Development (SODECO) owned by
the Japanese government

Growth Strategies for Value Creation

In the aforementioned Report, INPEX CORPORATION (prior to theintegration with Teikoku Oil; reorganized on October 1, 2008) was
identified as a company that should comprise part of a core company, and is expected to play a role in efficient realization of a stablesupply of energy for Japan through the involvement by a nationalflagship company. In response to the Report, the Company (also,
the Group since our acquirement of Teikoku Oil on October 1, 2008)
has sought to promote efficient realization of a stable supply of energy for Japan while taking advantage of synergy with the efforts ofactive resource diplomacy on the part of the Japanese government,
and has aimed to maximize shareholder value by engaging in highly
transparent and efficient business operations.
As a result, with regard to the integration by means of transferof shares held by JNOC proposed in the Report, INPEX CORPORATION and JNOC concluded the Basic Agreement Concerning
the Integration of Assets Held by JNOC into INPEX CORPORATION 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 of Assets Held by
JNOC into INPEX CORPORATION (hereinafter the “Basic Contract”), achieving the agreement on the details including thetreatment of the project companies subject to the integration andshareholding ratios.
In 2004 INPEX CORPORATION accomplished the integration ofJapan Oil Development Co., Ltd. (JODCO), INPEX Java 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. (now INPEXSouthwest Caspian Sea, Ltd.) would become a wholly owned subsidiary of INPEX CORPORATION by means of a share exchange
and the procedures were undertaken, the share exchange contract
was invalidated owing to failure to accomplish the terms and conditions of the share exchange contract and the planned share exchange was cancelled. Following the dissolution of JNOC on April
1, 2005, the Minister of Economy, Trade and Industry 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 treatment of these shares is undecided and, depending on the result of review in accordance with the Reconstruction Finance Keeping Act, acquisition of INPEX Southwest Caspianshares could be unavailable.
The treatment of Sakhalin Oil and Gas Development Co., Ltd.
(hereinafter “SODECO”), INPEX Masela, Ltd., INPEX North Caspian Sea, Ltd., INPEX North Makassar, Ltd. (liquidation proceedings completed on December 19, 2008), and INPEX Offshore

North Campos, Ltd. (following the acquisition of all shares in thiscompany by private-sector shareholders, including INPEX CORPORATION, this company was sold to a third-party in October2019), was agreed between INPEX CORPORATION and JNOC in
the MOU of February 5, 2004. Regarding the treatment of sharesof SODECO, refer to the following section “(2) Treatment of theshares of Sakhalin Oil and Gas Development (SODECO) ownedby the Japanese government”. 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 betransferred for cash compensation as soon as prerequisites suchas the consent of the oil-producing country and joint venture
partners and the possibility of appropriate asset evaluations arein place. However, the transfer of shares held by JNOC in theabove companies has not been decided and the shares in theabove 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 Industry succeeded. JOGMEC states in its“medium-term objective” and “medium-term plan” that theshares succeeded to from JNOC will be disposed of at an appropriate time and in an appropriate manner. However, the timing
and manner of disposal for those shares in the above companies
held by JOGMEC that have not been acquired by INPEX CORPORATION have not been decided, and it is possible that theCompany will be unable to acquire these shares.

4. 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 OilCo., Ltd. on April 3, 2006. Along with this, a classified share originally issued by INPEX CORPORATION (prior to the merger) wastransferred and at the same time the Company issued a classified
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 ofmanagement control by foreign capital while not unreasonably impeding the efficiency and flexibility of management based on theconcept in the Report discussed in the above section 3. “TREATMENT OF SHARES OF THE GROUP’S PROJECT COMPANYOWNED BY JAPANESE GOVERNMENT AND JOGMEC.” INPEXCORPORATION is identified as a company that should comprisepart of a core company for Japan’s oil and gas upstream industry

and is expected to play a role in efficient realization of a stable supply of energy for Japan as a national flagship company. On the basis of the concept of the Report, following a speculative acquisitionor an attempt at management controlled by foreign capital, Class
A Stock is designed and issued to be highly transparent while notunreasonably impeding the efficiency and flexibility of management and to keep the effects of any such speculative acquisition to
the necessary minimum. At the same time, Class A Stock maintains
the Company’s role in the efficient implementation of a stable supply of 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.

2) Shareholders’ meeting resolutions, dividends,
distribution of 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

INPEX CORPORATION Annual Report 2021

115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) no stock
split was conducted. The Articles of Incorporation specify that
dividends of Class A Stock are equivalent to dividends of a common stock prior to the stock split. The Class A Stock will be redeemed by resolution of the Board of Directors of the Company
if the holder of the Class A Stock requests redemption or if theClass A Stock is transferred to a party other than the governmentof Japan or an independent administrative body that 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 matters such as the appointment or removal of Directors, dispositionof material assets, changes to the Articles of Incorporation, business integration, capital reduction or company dissolution in connection with the business of the Company. Accordingly, theMinister of Economy, Trade and Industry, as the holder of theClass A Stock, has veto rights over these important matters. With
regard to the cases in which the Class A Stock veto rights are exercisable, please refer to “4) Criteria for the exercise of veto rights
provided in the criteria for the exercise of the Class A Stock holder’s voting rights”, below.

4) Criteria for the exercise of veto rights provided in thecriteria for the exercise of the Class A Stock holder’svoting rights

Criteria concerning the exercise of the veto rights have been established in a Ministry of Economy, Trade and Industry Notice(No. 54, 2022) (hereinafter the “Notice”). The criteria stipulate theexercise 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 of energy to Japan.
•	With regard to decisions related to the disposal of all or part ofsignificant assets, when resolutions pertaining to disposition ofmaterial assets are not voted down and the objects of disposition are oil and natural gas exploration or production rights orrights similar thereto or shares or ownership interest in the
Company’s subsidiary whose principal assets are said rights
and it is judged that the probability is high that the Company
will engage in management inconsistent with the role thata 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 the probability 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 thanthe common shares of the Company are not voted down andcould have an effect on the exercise of the voting rights of theClass A Stock.
It is provided that the above 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 and issued to be highly transparent while not unreasonably impeding
the efficiency and flexibility of management and to keep the effects of any such speculative acquisition to the necessary minimum. At the same time, Class A Stock maintains the Company’srole in the efficient implementation of a stable supply of energy
for Japan as a core business, so that management is not conducted in a way contradictory to that role and no negative impact isfelt. Nevertheless, the anticipated risks in connection with theClass A Stock include the following.

1) Possibility of conflict of interest between national
policy and the Company and its common shareholders

It is conceivable that the Minister of Economy, Trade and Industry
could exercise the veto rights in accordance with the above criteria provided in the Notice. As the said criteria have been provided
from the standpoint of efficient realization of a stable supply ofenergy to Japan, it is possible that the exercise of the veto rights
by the Minister of Economy, Trade and Industry could conflict with
the interest of other shareholders who hold the Company’s common shares. Also, it is possible that the said criteria could bechanged 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 inbusiness and 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, the Company’s degree of freedom in management in those matters could
be restricted by the judgment of the Minister of Economy, Tradeand Industry. Also, attendant on the need for a resolution of themeeting of the holder of the Class A Stock concerning the above
matters, a certain period of time is required for procedures suchas the convening and holding of meetings and resolutions and forthe processing of formal objections, if necessary.

5. CONCURRENTLY SERVING OUTSIDE DIRECTORSThe Board of Directors of the Company is currently composed of
12 members, five of whom are outside directors.
Two of the five outside directors have many years’ experienceand knowledge of the Company’s business and are able to offer
objective, professional advice regarding operations. For this reason, they were asked to join the Board of Directors to contributeto the development of the Company’s business. One of the directors concurrently serves as an advisor of Mitsubishi Corporation(hereinafter “shareholder corporations”).
At the same time, however, the shareholder corporations are
involved in businesses that overlap with those of the Company.
The Company therefore recognizes that it must pay particular116

INPEX CORPORATION Annual Report 2021

attention to corporate governance to avoid conflicts of interest inconnection with competition and other matters.
To this end, all Company directors, including the one outside
director 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 of suchmatters as their obligations in connection with noncompetitive
practices under the Japanese Companies Act, the proper mannerfor dealing with conflict of interest, and confidentiality.

Oil and Gas Reserves and Production Volume
INPEX’s Vision and Value Creation

1. Oil and Gas Reserves
Proved reservespresented in accordance with the Accounting Standards Codification Topic 932 “Extractive Activities —Oil and Gas” (“Topic 932”).
The Group’s proved reserves as of December 31, 2021, were 2,704
million barrels for crude oil, condensate and LPG, and 5,118 billion cubic feet for natural gas, for a total of 3,645 million boe.

The following tables list the proved reserves 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 reserves are determined in accordance with the rules and regulations of the U.S. Financial Accounting Standards Board (the “FASB”), and are
Japan
Gas
(Bcf)

Crude oil(MMbbl)

Total

Gas
(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)

Gas
(Bcf)

4,736

301

198

2,413

—

46

27

2,952

5,688

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(6)

30

26

(170)

—

(4)

2

(151)

(19)

(371)
4,359

(17)
314

(9)
215

(81)
2,162

—
—

(3)
39

(19)
10

(118)
2,684

(440)
5,229

324

15

—

5

—

—

—

22

324

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

56

(2)

—

0

—

—

—

(2)

56

(23)
357

(2)
11

—
—

(2)
4

—
—

—
—

—
—

(4)
16

(23)
357

4,715

324

215

2,166

—

39

10

2,700

5,586

4,359

314

215

2,162

—

39

10

2,684

5,229

—

—

—

—

—

—

—

—

—

—

—

—

(6)

—

1

1

(5)

1

1

(17)

(20)

149

—

(3)

21

129

6

(377)
3,983

(16)
281

(10)
186

(83)
2,223

—
—

(3)
34

(9)
22

(121)
2,686

(436)
4,801

357

11

—

4

—

—

—

16

357

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(18)

2

—

4

—

—

—

5

(18)

(21)
318

(3)
10

—
—

(1)
7

—
—

—
—

—
—

(4)
18

(21)
318

4,300

291

186

2,230

—

34

22

2,704

5,118

2,663

224

186

1,603

—

13

14

1,964

3,426

168

9

—

4

—

—

—

15

168

1,320

57

—

620

—

21

8

723

1,375

150

0

—

3

—

—

—

3

150

Business and Financial Overview

Proved developed reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of December 31, 2021
14
564
109
Equity-method affiliates
As of December 31, 2021——
1
Proved undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of December 31, 2021147
24Equity-method affiliates
As of December 31, 2021——
0Americas

Management Foundation to
Advance Growth Strategies

Proved developed and undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of December 31, 2019
18
728
174
Extensions and———discoveries
Acquisitions and sales———
Revisions of previous
(1)
(41)
(6)
estimates
Interim production
(1)
(40)
(16)
As of December 31, 2020
16
646
152
Equity-method affiliates
As of December 31, 2019——2
Extensions and———discoveries
Acquisitions and sales———
Revisions of previous——(0)
estimates
Interim production——(0)
As of December 31, 2020——
2
Proved developed and undeveloped reserves
As of December 31, 2020
16
646
154
INPEX CORPORATION and Consolidated Subsidiaries
As of December 31, 2020
16
646
152
Extensions and———discoveries
Acquisitions and sales———
Revisions of previous04(0)estimates
Interim production
(1)
(40)
(19)
As of December 31, 2021
15
610
133
Equity-method affiliates
As of December 31, 2020——
2
Extensions and———discoveries
Acquisitions and sales———
Revisions of previous——(0)
estimates
Interim production——(0)
As of December 31, 2021——
1
Proved developed and undeveloped reserves
As of December 31, 2021
15
610
134

Middle East &AfricaGrowth Strategies for Value Creation

Crude oil(MMbbl)Eurasia(Europe & NIS)

Asia & Oceania

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 December 31,
2021, the Group held proved reserves in Australia of approximately 127 million barrels for crude oil and approximately 3,822 billion cubic feet for natural gas, fora total of approximately 833 million boe.
2. Proved reserves (as of December 31, 2021) of the following blocks and fields include the portion attributable to non-controlling interests.
		 Eurasia (Europe & NIS): ACG (49%), Kashagan (49%)
		 Middle East & Africa: Abu Dhabi Onshore Concession (34%)
3. MMbbl: Million barrels
4. Bcf: Billion cubic feet
5. Crude oil includes condensate and LPG
6. Oil and gas reserves are rounded to the nearest whole number.

Standardized measure of discounted future net cash flows and their changes relating to proved oil and gas
reserves for the year ended December 31, 2021
Disclosure contents for the standardized measure of discounted
future net cash flows and their changes relating to proved reserves for the year ended December 31, 2021 are determined inaccordance with the rules and regulations of the FASB, and arepresented in accordance with Topic 932.

INPEX CORPORATION Annual Report 2021

117

In calculating the standardized measure of discounted future
cash inflows, the arithmetic average of oil and gas prices at thefirst day of each month during the current fiscal year is applied tothe estimated annual future production from proved 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 and regulatory conditions. Future income tax expenses are calculated by applying theyear-end statutory tax rates to estimated future pretax cash flows
less the tax basis of the properties involved based upon laws andregulations already legislated at year-end. The discount is computed by applying a prescribed discount rate of 10% to the estimated future net cash flows.

December 31, 2020

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 measureof discounted future net cash flows
Total consolidated and equity-method affiliates instandardized measure of discounted future net cash flows

Total

The translation of U.S. dollar amounts into yen amounts iscomputed by applying the year-end exchange rates (TTM) of¥103.52 and ¥115.02 to the U.S. dollar as of December 31, 2020and December 31, 2021, respectively.
Since these figures are calculated in accordance with the rules
set forth by the FASB, which have the following aspects, they do
not represent the fair market value nor the Group’s estimation forthe present value of the cash flows of reserves of crude oil, condensate, LPG and natural gas.
• No economic value is attributed to potential reserves.
• A prescribed discount rate of 10% is applied.
• Oil and gas prices are subject to constant fluctuations despite
the assumptions of constant oil and gas prices of Topic 932.
Millions of yen
Asia &
Eurasia
Oceania(Europe & NIS)

Japan

Middle East &AfricaAmericas¥13,620,229(6,358,718)(4,941,757)
2,319,754(1,128,715)
1,191,039¥ 789,800(254,531)(174,850)
360,420(190,828)
169,591¥ 2,157,411(1,129,013)(74,682)
953,717(359,024)
594,693¥1,190,377(622,464)(108,183)459,730(236,386)
223,344¥ 9,328,481(4,207,125)(4,583,545)
537,812(332,935)
204,877¥ 154,159(145,587)
(498)
8,075
(9,542)(1,466)300,851(127,026)(65,795)
108,030(44,506)

—
—
—
—
—

234,251(92,956)(46,641)
94,654(41,547)

48,972(16,355)(18,375)
14,242(3,165)

17,627(17,715)
(778)
(867)
206

—
—
—
—
—

63,523—

53,107

11,077(661)—¥ 1,254,562¥ 169,591

647,800¥ 234,421

204,216¥ (1,466)¥¥

Notes: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
		 Eurasia (Europe & NIS): ACG (49%), Kashagan (49%)
		 Middle East & Africa: Abu Dhabi Onshore Concession (34%)
Amounts are basically rounded to the nearest million.

December 31, 2021

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 instandardized measure of discounted future net cash flows

Total

Millions of yen
Asia &
Eurasia
Oceania(Europe & NIS)Japan

INPEX CORPORATION Annual Report 2021

¥2,046,648 ¥ 17,309,448(678,653)(6,017,025)(313,955) (10,268,763)
1,054,040
1,023,660(536,240)(655,271)
517,801
368,389

Americas¥23,355,208(8,358,835)(10,924,329)
4,072,045(1,972,952)
2,099,093¥ 833,868(291,923)(174,799)
367,146(201,968)
165,178¥ 2,912,521(1,215,605)(157,632)
1,539,284(546,145)
993,138

421,317(144,212)(115,078)
162,027(59,307)

—
—
—
—
—

291,411(101,817)(66,910)
122,684(51,722)75,146(17,926)(46,388)
10,833(1,616)54,760(24,470)(1,780)28,510(5,969)—————102,721—70,9639,217

22,541—¥ 2,201,813¥ 165,178¥ 1,064,101¥ 527,018¥   390,930¥ 54,586

Notes: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
		 Eurasia (Europe & NIS): ACG (49%), Kashagan (49%)
		 Middle East & Africa: Abu Dhabi Onshore Concession (34%)
Amounts are basically rounded to the nearest million.

118

Middle East &Africa¥ 252,724(155,629)(9,180)87,914(33,328)
54,586

Asia &
Oceania

Millions of yen
Eurasia(Europe & NIS)

¥ 1,254,562¥ 169,591¥ 594,693¥ 223,344(524,513)(43,766)(188,563)

2,477,942(5,781)

167,694

2,192(29,253)(7,179)24,704

337,087
125,902(1,748,011)(4,080)15,98819,373(20,024)
59,487(51,244)

Middle East &Africa¥Americas

Equity-method
affiliates

204,877¥(1,466)¥ 63,523(47,766)(219,037)(8,470)(16,911)424,931

387,194

1,590,155

48,69832,74583,091

24,01041,911

10,446

6,044(2,112)(58,365)

7,033

6,665

(35,015)
22,666(79,332)

372,462
21,081(1,605,855)

(324)
35
(3,834)24,0696,647(27,119)

1,035

—

—

—

(1,599)2,634—

139,369

18,84066,064

24,811

22,760

(163)

7,057

¥ 2,201,813¥ 165,178¥ 993,138¥ 517,801

368,389¥54,586¥102,721¥

Growth Strategies for Value CreationJapan

INPEX’s Vision and Value Creation

INPEX CORPORATION andConsolidated Subsidiaries
Standardized measure at beginning of
the period, as of January 1, 2021
Changes resulting from:
Sales and transfers of oil and gas
produced, net of production costs
Net changes in oil and gas prices andproduction 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 December 31, 2021

Total

Notes: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
		 Eurasia (Europe & NIS): ACG (49%), Kashagan (49%)
		 Middle East & Africa: Abu Dhabi Onshore Concession (34%)
Amounts are basically rounded to the nearest million.

2. Oil and Gas Production

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)

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)

2017/3

2018/3

2019/3

2019/122020/122021/12

3.5
35.8
29.6
176.3
5.6
250.7

3.7
21.2
37.5
176.2
3.9
242.6

3.5
18.7
40.7
225.6
1.8
290.3

3.1
47.5
41.0
240.9
8.2
340.7

3.0
42.5
46.4
221.5
7.6
321.1

2.9
51.3
43.2
227.3
8.0
332.8

97.6

86.5

13.0

11.7

10.0

10.7

348.3
127.1

329.1
120.1

303.3
110.7

352.4
96.9

331.1
121.2

343.5
125.4

132.0
614.8
5.3
—
116.5
868.6

145.6
326.9
21.4
—
107.7
601.6

131.6
346.5
27.4
—
89.8
595.3

118.6
958.6
24.5
—
63.5
1,165.2

110.5
1,012.8
24.8
0.0
52.7
1,200.9

110.2
1,031.7
26.4—
25.8
1,194.1

54.1

48.1

53.8

61.2

63.7

57.2

922.7
336.8

649.7
237.1

649.0
236.9

1,226.4
337.3

1,264.6462.8

1,251.3
456.7

28.3
152.5
30.6
176.3
26.5
414.1

31.1
82.7
41.4
176.2
23.5
354.9

28.2
84.4
45.6
225.6
18.1
401.8

25.4
231.9
45.3
240.9
20.0
563.5

23.7
238.4
50.9
221.5
17.4
552.0

23.6
251.5
47.9
227.3
13.0
563.3

107.2

95.0

22.5

22.6

21.4

20.9

521.3
190.3

449.9
164.2

424.3
154.9

586.2
161.2

573.4
209.9

584.3
213.3

INPEX CORPORATION Annual Report 2021

Business and Financial Overview

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)

The Group’s production for the year ended December 31,
2021, was 343.5 thousand barrels per day for crude oil, condensate and LPG, and 1,251.3 million cubic feet per day for naturalgas, for a total of 584.3 thousand boed.

Management Foundation to
Advance Growth Strategies

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.

119Corporate Information (As of December 31, 2021)
Information Disclosure and Activities for Shareholders and Investors
INPEX undertakes the early delivery of convocation notices for its general meeting of shareholders to ensurethat shareholders have sufficient time to consider agenda items at each Ordinary General Meeting of Shareholders. The Convocation Notice for INPEX’s 16th
Ordinary General Meeting of Shareholders held on
March 25, 2022 was posted on the Company’s Web site
more than three weeks prior to the meeting on February 24, 2022. The Convocation Notice itself was dispatched on March 3, 2022. To facilitate the exercise of
voting rights, INPEX implemented the exercise of voting rights via the Internet. The Company also adopted
a platform for the electronic use of voting rights while
posting copies of the convocation notice and other related documents, both in Japanese and English, on its
Web site and TDnet (Timely Disclosure network).
Turning to the Company’s IR activities, INPEX participates in events such as IR fairs for individual investors
and meetings in a variety of venues virtually or in-person.

INPEX holds biannual meetings for analysts and institutional investors, either virtually or in-person, covering
topics ranging from financial results to financial forecasts.
Video archives are available on the IR section of theCompany’s Web site both in Japanese and in English.
INPEX undertakes overseas IR road shows in the regions including Europe, North America and Asia, while
participating in conferences and engaging in one-on-one
meetings in-person, by phone or online as necessary.
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. Furthermore, efforts are made to disclose pertinent information such as the latest news releases, theCompany’s performance and financial position, as wellas trends in crude oil prices, foreign currency exchange
rates, the Company’s share price and stock information.

Credit Rating (As of June 30, 2022)
Credit Rating Agency

Long-Term Credit Ratings

Short-Term Credit Ratings

Moody’s

A2 (stable)—

Standard & Poor’s

A− (stable)

A-2

Rating & Investment Information (R&I)

AA (stable)a-1+

Rating & Japan Credit Rating Agency

AA+ (stable)—

Status of Inclusion in Major Indexes (As of May 2022)
Nikkei Stock Average (Nikkei 225)TOPIX
JPX-Nikkei Index 400
MSCI Japan Index
MSCI World Energy Index
FTSE4Good Developed Index/
FTSE4Good Japan Index
FTSE Blossom Japan Index

MSCI ESG Leaders Indexes/
MSCI Japan ESG Select Leaders Indexes/
MSCI Japan Empowering Women Index
S&P/JPX Carbon Efficient Index
STOXX Global ESG Leaders Index
ECPI World ESG Equity/
ECPI Global Carbon Liquid/
ECPI Global Developed ESG Best in ClassSOMPO Sustainability Index

Website Information

About INPEXOur Business

https://www.inpex.co.jp/english/

https://www.inpex.co.jp/english/company/

https://www.inpex.co.jp/english/
business/

INPEX Vision @2022
https://www.inpex.
co.jp/english/company/
midterm.html

120

INPEX CORPORATION Annual Report 2021

Basic management policy towards a net zero carbon society by 2050

As a pioneer in energy transformation (EX), INPEX will
provide a stable supply of diverse and clean energy
sources including oil and natural gas, hydrogen andrenewable power.

Vision for around 2030

Established

April 3, 2006

Capital¥290,809,835,000

Company
Headquarters

Akasaka Biz Tower,
5-3-1 Akasaka, Minatoku, Tokyo 107-6332,
Japan

Number of
Employees(Consolidated)

Audit & Supervisory Board(members)
Audit & Supervisory
Board Members’ Office

Audit Unit

HSE Unit

Legal Unit

Strategic Projects Office

General Administration DivisionCorporate Strategy & Planning Division

Finance & Accounting Division

Logistics & IMT Division

Technical Division

Global Energy Marketing Division

Domestic Energy Supply & Marketing Division

New Ventures & Global Exploration Division

Hydrogen & CCUS Development Division

26 INPEX Vision @2022 Long-term Strategy
34 INPEX Vision @2022 Medium-term Business Plan
2022–2024
38 Message from the Senior Vice President,
Finance & Accounting
40 11-Year Financial Information

18 Sustainability Highlights
20 Segment Overview
22 INPEX’s Business
24 INPEX at a Glance

Asia Projects Division

Oceania Projects Division

Research, 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.

Europe & Middle East Projects Division

02 A History of Value Creation
04 Value Creation Process
06 Message from theRepresentative Directors
08 Message from the
President & CEO
16 Financial and Operating
Highlights

Compliance Committee

Information Security Committee

Abu Dhabi Projects Division

26 Growth Strategies for Value Creation

INPEX Advisory Committee

President & CEO

INPEX Value Assurance
System Committee

Main Business

Stock Data
Authorized Shares

Total Number of Shareholders and Issued Shares

3,600,000,000 common stocks
1 Class A Stock

Common Stock 136,935/1,462,323,600 shares1
Class A Stock2 1 shareholder (Minister of Economy, Trade and Industry) / 1 share
1. The total number of issued common shares as of February 8, 2022 is 1,386,667,167 shares, as 75,656,433 own shares have beencancelled on the same day.
2. The Company’s Articles of Incorporation stipulate that certain major corporate decisions require a resolution by theholder of the Class A Stock in addition to the approval of the shareholders’ meetings or the Board of Directors.

Major Shareholders (Common Stock)

Shareholding by Shareholder Type
Percentage of
Number of
total common
common sharesshares* (%)

Name

IR

02 INPEX’s Vision and Value Creation

Executive Committee

Sustainability Committee

276,922,800
179,995,000
60,301,600
53,446,600
43,810,800
29,420,000
21,982,400
21,348,326

19.97
12.98
4.35
3.85
3.16
2.12
1.59
1.54

19,837,543

1.43

18,871,100

1.36*The shareholder ratio is calculated after subtracting treasury shares (75,656,400 shares).
The shareholder ratio is rounded off to the nearest whole number.

CONTENTS

Nomination and Compensation
Advisory Committee

Corporate HSE Committee

Americas Projects Unit

We are committed to contributing to thecreation of a brighter future for society
through our efforts to develop, produce
and deliver energy in a sustainable way.

Board of Directors

3,189

Minister of Economy, Trade and Industry, JapanThe Master Trust Bank of Japan, Ltd. (Trust Account)
Custody Bank of Japan (Trust Account)
Japan Petroleum Exploration Co., Ltd.
ENEOS Holdings, Inc.
JAPAN SECURITIES FINANCE CO., LTD.
SMBC Nikko Securities Inc.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
STATE STREET BANK WEST
CLIENT - TREATY 505234
THE BANK OF NEW YORK MELLON 140051

Our Mission

General Meeting of Shareholders

Company Name INPEX CORPORATION

Domestic Exploration & Production Division

As a pioneer in energy transformation (EX), INPEX will seek
to provide a stable supply of diverse and clean energy
sources including oil and natural gas, hydrogen and renewableenergy. Through these business activities, the company will
promote initiatives towards the realization of a net zerocarbon society and aim to increase the corporate value of the
INPEX Group as a whole.

Organization Chart (As of April 1, 2022)

Renewable Energy & Power Business Division

INPEX will transform net zero carbon from an ideal to reality.
Invest up to about 1 trillion JPY in the 5 net zero businesses andaim for these businesses to generate about 10% of operating
cash flow by 2030

Corporate Data

https://www.inpex.co.jp/english/ir/

CSR
https://www.inpex.co.jp/english/csr/
Sustainability Reporthttps://www.
inpex.co.jp/
english/csr/csr/

Shareholder type

Financial Institutions(Including Trust Accounts)
Securities Companies
Other Domestic
Corporations
Minister of Economy,
Trade and Industry1
Foreign Corporations
and Other
Individuals and Other
Treasury Shares

Number ofshareholders

Number of Percentage ofcommon total commonsharesshares2 (%)

73

340,173,947

23.26

60

95,172,669

6.51

887

145,059,176

9.92

1

276,922,800

18.94

1,125

425,402,780

29.09

134,7881

103,935,828
75,656,400

7.11
5.17

1. Excludes one Class A Stock
2. The shareholder ratio is rounded off to the nearest whole number.

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 GroupWeb site:www.inpex.co.jp/english/ir/inquiries.html

Akasaka Biz Tower
5-3-1 Akasaka, Minato-ku, Tokyo
107-6332, Japan

https://www.inpex.co.jp/english

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

INPEX CORPORATION Annual Report 2021 For the period ended December 31, 2021

Annual Report

2021

For the period
ended
December 31,
2021