Gas Supply Chain

Recovery and protection of mangrove forests in Indonesia

We will establish a gas supply chain byorganically connecting the overseas
LNG with the domestic natural gas
infrastructure, so as to meet natural gas
demand in Japan, which is expected tocontinue to be ﬁrm. What this means isthat we will receive supplies of LNG fromoverseas sources, such as Ichthys andAbadi, at our Naoetsu LNG Receiving
Terminal, and employ the pipeline
network to supply natural gas to all of

our customers. This will enable us to
ﬂexibly combine three supply sources– 1)
domestic natural gas, 2) regasiﬁed LNG
from Shizuoka Gas Co., Ltd. (which webegan receiving in January 2010), and 3)
regasiﬁed LNG received at Naoetsu. We
believe that this will result in improved
supply capacity and enhanced supply
stability, allowing us to meet future
demand increases.

Until now, there had been nocompany in Japan equipped with acomplete natural gas infrastructure,from development and production
through liquefaction, transport andregasiﬁcation, and supply. Building a
total gas supply chain covering upstream
and downstream processes is one of the
beneﬁts of business integration, and it
will be our base of support in developing
an energy business suitable to thecoming era of natural gas use.

Corporate Responsibility
and Management
4.1

Corporate Social Responsibility

Corporate Governance

069

Management System / Independence of Outside Directors andDirector Compensation / Internal Control and Compliance System /A Special-Class Share / Disclosure

Three natural gas supply sources
1 Domestic natural gas

4.3

Performance / Message064

HSE (Health, Safety and Environment) Basic Policies /Environmental Impact of Our Business /Environmental Technologies / Operational Safety /Community Support / Development of Human Resources

4.2

Business Overview

4

Inspecting for leaks at a valve station

Project Overview

Construction at the Naoetsu LNG Receiving Terminal

Board of Directors, Auditors and Executive Ofﬁcers 074

2 Regasified LNG from Shizuoka Gas Co., Ltd.
3 Naoetsu LNG Receiving Terminal
Operational start target in 2014

Market Status
Domestic natural gas sales (FY2010)

1.72 billion m

Approx.

3

1 Minami-Nagaoka Gas Field(1.2 million tons/year for LNG equivalents)

Medium-to long-term expected demand:
Approx.

2.5–3.0 billion m

3(1.8-2.2 million tons/year for LNG equivalents)

Natural Gas Pipeline Network(approx. 1,400 km)
Sales to consumers along lines

Overseas
LNG Sources
Ichthys LNG Project
Abadi LNG Project
2 Sodeshi LNG Terminal (Shizuoka Gas)

062

INPEX CORPORATION Annual Report 2011

Corporate Responsibility
and Management

the Naoetsu LNG Receiving Terminal

Financial /Corporate Information

3 Regasified LNG from

Corporate Social Responsibility
INPEX actively implements corporate social responsibility (CSR)
activities based on the recognition that CSR is inextricably linked toour business operations. We fulﬁll the social responsibility that grows
together with the expansion of our business and contribute to building
a sustainable society through the stable supply of energy.

2. Environmental Impact of Our Business
INPEX monitors how business activities in each process affect the naturalenvironment and tackles the reduction of any adverse impact by reducing emissionsof VOCs (Volatile Organic Compounds), PRTR (Pollution Release and Transfer
Register) substances, etc.

1. HSE (Health, Safety and Environment) Basic Policies

Business processes and emission amounts for main substances
For further details on our activities, pleaserefer to the CSR Report 2011.
http://www.inpex.co.jp/english/csr

CSR Report 2011 pp. 20 –23

Overview of the HSE Management System
INPEX has a unique HSE Management
System that is based on the guidelinesof ISO9000, ISO14001, the occupational
Health and Safety Management System(OHSAS18001, OSHMS) and theInternational Association of Oil & Gas
Producers (OGP).
The HSE Management System
encompasses a document architecturethat includes the HSE Policy, which
declares our company’s basic policies forenvironmental preservation and ensuring
operating safety; the HSE Management
System Manual; and sets of Corporate

We place particular focus on HSE
activities, which are a part of our CSR
initiatives. The mission of the INPEXGroup is to provide a stable and efﬁcient
supply of energy to customers so as
to contribute to the community andmake it more livable and prosperous.
To fulﬁll our mission, it is essential that
we conduct thorough safe management
and environmental preservation andthat we build a trusting relationship withboth domestic and overseas customers.
Requests from society and measures
toward the environment change every
day according to conditions in global
society. However, we view operationalsafe management, environmental
preservation and coexistence/mutual
prosperity with the community as
essential and continuing activities.

Initiatives for Promoting and
Implementing the HSE Management Systemin each Operational Organization, thecommittee deliberates and follows up on
the HSE Activity Plans and the Corporate
HSE Procedures, and conducts a review for
fostering the HSE culture.
We held eight Corporate HSE
Committee meetings during the year
ended March 31, 2011. Discussion washeld regarding the content and record

Production andPower Generation

Reﬁning,
Transportation and Sales

Domestic/overseas explorationand development operations,construction of domestic LNG
receiving terminal, etc.

Production of crude oil andnatural gas, power generation
using natural gas andcondensate, etc.

Reﬁning of crude oil,transportation via natural gas
pipelines, reﬁning/sales ofiodine, etc.

Philosophy of CSR and
HSE Activities

HSE Procedures and Guidelines. The
organizational structure comprises HSE
Committees established at headquarters
and in the Operational Organizations. The
HSE Objectives and action plans for the
HSE Programs are devised each year. The
effectiveness of the HSE Management
System is heightened through HSE
reviews during the design stage and by
HSE audits for the A-PDCA (Access-PlanDo-Check-Act) management cycle, which
begins by risk assessment.

The HSE Management System isimplemented by the HSE Unit at
headquarters. When necessary,
implementation is performed by the HSEGroups organized for our Operational
Organizations.* To promote systematicand Group-wide HSE initiatives, weestablished the Corporate HSE Committee.
Together with the HSE Committees

Exploration,
Development and Constructionof the HSE objectives and programs,
as well as the results of the HSE audit.
Furthermore, the HSE Units and the HSEGroups have been working on further
improvement of HSE activities by hiring
HSE specialists and conducting employee
training through OJT (on-the-job training).
* Operational Organization: Department in chargeof operator projects

Framework for implementing the HSE Management System

Pipeline construction site

Koshijihara Power Plant

Year ended
March 31, 2011

Year ended
March 31, 2010

Year ended
March 31, 2011

Year ended
March 31, 2010

Year ended
March 31, 2011

24,60522,280388,495

348,695

26,342

21,530PRTR substances (t)

0

0

12

11

8

23

VOCs (t)

1

3

448

343

433

386

GHGs (greenhouse gases) (t)Note: Data on the output of PRTR substances was collected only from our operations in Japan.

3. Environmental Technologies
INPEX contributes to reduced environmental impact through technology forunderground/ocean storage of CO2 and through R&D for technologythat uses CO2 and water as materials for generating methane.

Methane Generated by
Photocatalytic Reactions
As a technological development for the
efﬁcient usage of CO2, we are currently
performing research and development forphotocatalytic reactions, which generatemethane from CO2 and water. We havealready achieved research results ofgenerating methane and a by-productof a high-value-added organic material.
We are working to realize future practicalapplication of this research as an effective
technology for reducing CO2 emissions.

Research for Carbon
Dioxide Capture andStorage (CCS)

Masatoshi Sugioka(Vice Chairman in charge of HSE)

separates, captures and stores CO2
underground. We conduct various surveys
and research jointly with Japan CCS
Co., Ltd., in cooperation with industry,
government and academia to spread the
CCS technology and respond to global
warming.

INPEX is active in CCS technology, which

Transport CO2

Inject CO2

Separate and capture CO2

Ground injection well(President & CEO)For details, refer to the
CSR Report 2011 pp. 32 – 33

Conceptual diagram of CCS

Corporate HSE Committee
Toshiaki Kitamura

Pipeline truss bridge

Year ended
March 31, 2010

Corporate Responsibility
and Management

INPEX continually improves and enhances our labor health and safety
and environmental preservation under our in-house HSE Management
System, which coordinates our health, safety and environmental
practices.
For details, refer to the

For details, refer to the
CSR Report 2011 pp. 26 –27

Transport CO2

Inject CO2
Offshore injection well

Major source of CO2

Transportation via pipeline
Operational Organization

Operational Organization

Operational Organization

Operational Organization

Operational Organization
Representative

Operational Organization
Representative

Operational Organization
Representative

Operational Organization
Representative

HSE Committee

064

INPEX CORPORATION Annual Report 2011

HSE Committee

HSE Committee

HSE Committee

CO2Impermeable layer
Undergroundaquifer

CO2

Aquifer beneathocean floor

INPEX CORPORATION Annual Report 2011065

4. Operational Safety

5. Community Support

INPEX promotes thorough operational safety in order to ensure the stable production andsupply of oil and natural gas. In addition to implementing safety activities in accordance withthe country of operation and operating conditions, each Operational Organization works toperform accident prevention together with contractors and to reduce environmental impact.

In addition to actively communicating in the communities where our projects areoperated, INPEX conducts numerous activities for contributing to the sustainable
development of communities while also seeking harmony with local society.

For details, refer to the
CSR Report 2011 pp. 38 – 41

Ensuring Operational Safety■ Repaired Elementary School
Management Team will respond. When the
Great East Japan Earthquake occurred in
March 2011, the Team took action to checkthe damage within the ﬁrst two days. We
also revised our Business Continuity Plan
(BCP) assuming the Tokyo metropolitan
area as the epicenter of an earthquake
based on the experience of this disaster.

Discussion among members of the Corporate Crisis
Management Team after the Great East Japan Earthquake

Number of work-related accidents per year
Company
Year ended
Contractor
March 31, 2009
OverallCompany
Year ended
Contractor
March 31, 2010
OverallCompany
Year ended
Contractor
March 31, 2011
Overall

Fatal incident

Lost time injury*1

0
2
2
0
0
0
0
0
0

3
4
7
0
9
9
2
3
5

Restricted
Medicalworkday injury*2 treatment injury*3

1
5
6
1
3
4
0
0
0

066

INPEX CORPORATION Annual Report 2011

■ Supporting Project forInternational Hunting andEquestrian Exhibition

Greenhouse Agriculture
in Regions with Pipelines

Since 2004, we have been exhibiting
every year in the UAE Abu Dhabi
International Hunting and Equestrian
Exhibition. In 2010, our booth introduced
traditional Japanese culture by featuring
Japanese falconry and sword-making.
Visitors to our booth were served
green tea.

We support greenhouse agriculture invillages in Azerbaijan, a region throughwhich the BTC pipeline passes. In
addition to installing greenhouses andproviding crop seeds, we conduct
education and training for the villagers.

7
23
30
3
13
16
2
2
4

Accident Frequency by Yearand the speciﬁc needs of particular
projects.
Furthermore, we are working toconduct even safer onsite construction
by strengthening HSE-related
communications through process
meetings with contractors and throughpre-work meetings. Safe management bycontractors is a priority objective of ourcompany and one that shall be improved
further in the future.

reviewing and implementing reforms
for the methodology of selecting
drilling contractors, the form of HSE
Management, the design standards fordrilling wells, the policy documentation
for drilling wells and the content of our
prevention/response plan for oil leaks.
An assessment of response conditions atmajor oil companies issued by the OGP is
also used to formulate reforms. Throughthese actions, we are working to prevent
marine blowouts.

Students and teachers from San Antonio Elementary School

Participating in the Abu Dhabi International Hunting andEquestrian Exhibition

A representative from the BTC pipeline instructs
a local worker

Domestic Community Support Activities■ Reforestation Support Project

Marine Blowouts and Related Responses
In April 2010, an oil drilling rig explodedand caught ﬁre at another company’s welldrilling site in the U.S. Gulf of Mexico.
Eleven people were killed and large
quantities of leaked crude oil gushed into
the Gulf of Mexico. The ﬂow of crude oil
was stopped approximately three months
after the accident. Related government
agencies in the United States are still
investigating the causes of the accident.
While monitoring the progressof that investigation, we are

In 2010, Gas Guarico, S.A., which is
capitalized and operated by INPEX,
received a request from local citizens
regarding renovating an elementary
school. Based on their requests, wehave refurbished the classrooms, kitchen
facilities and playgrounds, as well as
installed new water supply facilities andﬂush toilets, at three schools including
San Antonio Elementary School, which islocated close to the gas ﬁelds.

■ Exhibited in the Abu Dhabi*1. Incident involving a nonfatal injury that results in at least one day off work *2. Incident involving a nonfatal injury that results
in restricted duties *3. Incident involving a nonfatal injury that requires treatment by a medical professional

Safety Management by Contractors
INPEX promotes all contractors having
an understanding of our HSE Policy, andwe work closely with them in an effort
to prevent work-related incidents andreduce environmental impact.
Operational Organizations both
domestic and overseas have translated
the Corporate HSE Procedure forContractors’ HSE Management into theirown Contractors’ HSE Management
Manual that meets regional requirements

Facilities in Venezuela

Corporate Responsibility
and Management

Every year, we set numerical targets forsafety management by referring to safety
data owned (assessed) by the OGP.
In response to the oil spill incident at
another company's project that occurredin the Gulf of Mexico, we have revised
our safety management policy, including
HSE review for our operator projects. The
Operational Organizations in Japan work
to strengthen construction inspections
and ensure thorough safety management
in conformance with the HSE plans.
Through such activities, the Operational
Organizations achieved signiﬁcantreductions in work-related accidents anddisasters. The Overseas Operational
Organizations conduct safety actions inaccordance with each operation.
In case of an operation-related
emergency, the Corporate Crisis

Overseas Community Support Activities

For details, refer to the
CSR Report 2011 pp. 48 – 51

*1. Lost time injury frequency (LTIF): Rate of injuries resulting
in fatalities or lost time per million hours worked*2. Total recordable injury rate (TRIR): Rate of recordable
injuries (fatalities, lost time, restricted workdays andmedical treatment) per million hours worked
Note: Targets for LTIF and TRIR are calculated annually byconsidering a reduction rate that is applied to the target forthe previous year.

INPEX participates in the Reforestation
Support Project conducted by Niigata
Prefecture. In the project, not well-kept
lands are provided free-of-charge bylandowners. We then raise trees thatare ideal for that region. Activities heldin the autumn of 2010 and the springof 2011 featured participation fromapproximately 160 volunteers, including
INPEX employees and their families, aswell as local citizens. We planted 300
trees including beech and oak, held ecoworkshops and provided assistance toseedlings that had been knocked over bysnow. In the autumn of 2011, we planted
walnut trees in addition to other treesthat had been planted in the past.

■ Support Activities

for Local Communities
We actively participate in and cooperatewith a variety of events held in the local
communities where we operate ourbusiness.
Every year, we support the Nagaoka
Festival Fireworks Show held in Nagaoka
City, Niigata Prefecture, which is where
our main domestic production baseis located. Also in Niigata Prefecture,
our employees volunteer to support
a local marathon in Kashiwazaki Cityand participate in the Gion KashiwazakiFestival. More than 100 representatives ofour company participated as dancers in
the Gion Kashiwazaki Folk Parade and the
Niigata Festival Giant Folk Parade held inthe summer of 2010. We also participatedin the 65th National Sports Festival in
Chiba Prefecture.

Reforestation support project

Gion Kashiwazaki Festival

INPEX CORPORATION Annual Report 2011067

Corporate Governance
To raise the corporate value and to continue to exist as a company that is trusted bystakeholders such as shareholders and all of society, we recognize the importance ofthoroughly implementing compliance and improving the efﬁciency and transparency ofmanagement, and we are working to enhance corporate governance.

6. Development of Human Resources
Training of global professionals(The information below is current as of the end of June 2011, unless otherwise stated.)

1. Management System
For details, refer to the
CSR Report 2011 pp. 42 – 45

Leveraging Global Human Resources■ Actions in Ichthys, Australia■ Actions in Abadi, Indonesia

At our domestic and overseas Australianofﬁces, we employ more than 400 workers
including Australians, British, French
and Japanese. Workers are involved inprojects such as the Ichthys LNG Project.
In Australia, we recruit staff in accordancewith Australian employment guidelines toprovide equal opportunity employment.
Beginning from 2010, we launched the
INPEX@heart program in order to create
a comfortable working environment. In
March 2011, in conjunction with Harmony
Week in Australia, we held workshops andsocial gatherings in our ofﬁces as part of
the INPEX@heart program. Through suchactivities, we seek to create a workplaceenvironment and team atmospherethat fosters equality among workers ofdifferent races and nationalities.

As part of the Abadi Project in Indonesia,
176 employees from seven countries
work at our Jakarta Ofﬁce. The majorityof employees are Indonesian (103) orJapanese (52). As work proceeds in the
future, we forecast that even more global
professionals will work at the Jakarta
Ofﬁce. In March 2011, we establisheda Code of Conduct that applies to all
personnel working at the ofﬁce. This
code is intended to ensure respect andthe continuity of a safe and harmonious
workplace environment that is basedon the principles of integrity, trust andfairness. Senior management from theofﬁce explained the Code of Conduct tolocal employees, and actions are being
taken to ensure that the code is ﬁrmly
instilled among the staff.

INPEX@heart Program (Australia)

Brieﬁng session on the Code of Conduct (Indonesia)

Employee Statistics
As of March 31, 2011, the INPEX Group
employed a total of 1,854 persons(consolidated) consisting of 1,613 males
and 241 females. We also hire an averageof 774 temporary employees, including
local contract employees, domestic part-

Employee Breakdown (Consolidated)time staff, non-full-time contract staff
and temporary stuff. The number of
employees from outside Japan accounts
for slightly less than 20%.

■Japan ■Asia & Oceania ■South America■Middle East & Africa ■Eurasia (Europe & NIS countries)■North & Central America
8.2 5.2 3.7 0.9 0.6

81.4

By
RegionMale/
FemaleFemale (241)Male (1,613)
（%） 0

20

40

60

80

Recovery Support for Disaster-Affected Areas of the Great East Japan Earthquake100[ 1] Directors andBoard of Directors

Overview of the corporate
governance systeman Executive Committee with attendance
by full-time directors and managing
executive ofﬁcers. The meetings are held
weekly and as necessary. At the Executive
Committee, ﬂexible decision making is
conducted for resolutions not afﬁliated with
the Board of Directors, and deliberation isheld to contribute to decision making by
the Board of Directors.
Moreover, we implemented an
Executive Ofﬁcer System from October
2008 in order to respond accurately andquickly to a rapidly changing management
environment and the expansion of ourbusiness activities. The Executive Ofﬁcer
System seeks to clarify a system for the
execution of business and strengthen a
ﬂexible and efﬁcient management system.

Regarding deliberation and decision
making related to conducting importantbusiness in the development of oil andnatural gas, INPEX appoints outside
directors in addition to the knowledgeable
directors from within our company. This
ensures the validity of decision making
through a rational, efﬁcient and objective
perspective.
Our Board of Directors consists of
15 directors, four of which are outside
directors. In addition to a monthly
meeting, the Board of Directors meetsas necessary in order to discuss anddetermine the execution of importantmatters. The board also supervises theexecution of duties by directors.
Furthermore, our Board of Directors
collects written pledges from all directors
including outside directors. This is done toensure conformance with the Companies
Act when taking a proper response
toward the duty of noncompetition, theprevention of information leakage and theimplementation of appropriate measures
toward transactions with a potential
conﬂict of interest.

[ 3] Board of Statutory Auditors
and Statutory Auditors
INPEX has adopted a statutory auditor
system. The Board of Statutory Auditors is
composed of ﬁve members, including four
outside auditors.
In addition to attending meetings ofthe Board of Directors and the Executive
Committee, the statutory auditors
review the execution of business duties
by directors through reports given by
and hearings for related departments.
Furthermore, the statutory auditors receive
reports from the independent auditors
regarding audits held six times per year
and as necessary. They also conduct[ 2] Executive Committee andExecutive Ofﬁcer System
From the perspective of increasing the
speed of decision making related to the
execution of business, we have established■Organizational structure ........ Company with.................................................statutory auditors■Percentage of shares held by foreigners(as of March 31, 2011) ...............................40.2%■Directors
Number of directors as stipulatedby the Articles of Incorporation .......................16
Number of directors(number of outside directors) .....................15 (4)Term......................................................... 2 years■Statutory auditors
Number of statutory auditors as stipulatedby the Articles of Incorporation .........................5
Number of statutory auditors(number of outside auditors) .......................5 (4)Term......................................................... 4 years■Rights plan and other measures toprotect against acquisition....................None■Other ............Issuance of a special-class share................................ to the Minister of Economy,...............................................Trade and Industry

regular meetings (ﬁve or six times per year
or as necessary) with the internal audit
department (Internal Audit Unit) to receive
reports regarding internal audits and theevaluation of internal controls.
To strengthen the function of thestatutory auditors and to ensure viablecorporate governance, we are working toenhance ancillary staff for the statutory
auditors and form partnerships throughperiodic meetings between the statutory
auditors, the Internal Audit Unit and the
independent auditors. Moreover, wehave constructed a system to strengthen
the monitoring function through periodic
meetings with the representative directors
and directors.

Corporate Responsibility
and Management

INPEX hires and trains the necessary personnel regardless of nationality. Employeesof various nationalities work at our Tokyo headquarters and our overseas ofﬁces.
Furthermore, for overseas operator projects, local employees are directly hired andtrained.

Corporate governance framework
Shareholders' Meeting

068

Support for Affected Areas

Volunteer Activity in Affected Areas

To contribute to the recovery ofdisaster-affected areas, we havemade ﬁnancial donations throughthe Japanese Red Cross Society,provided relief aid including oil
products such as gasoline, andadditionally supplied crude oil/LNG
in order to deal with the shortageof electricity.

INPEX supports employees who volunteer to assist
with efforts to recover from the recent earthquake. We
provide them with accommodation, transportation fareand expenses, as well as the tools to perform recovery
work, as well as providing volunteer leave. In July 2011,
31 employees from the Tokyo head ofﬁce participatedin such activity as removing rubble and debris, cleaning
up farms and mowing grass in the city of Rikuzentakata,
Iwate Prefecture.

INPEX CORPORATION Annual Report 2011

Appoint/dismiss

Independent
Auditors

Appoint/dismiss

Coordinate

Board of Statutory Auditors
5 Statutory Auditors including 4 Outside Statutory Auditors

Accounting audit

Coordinate

Audit

Appoint/dismiss
Audit
Coordinate

Board of Directors
15 Directors including 4 Outside Directors
Appoint/supervise/dismiss

Accounting audit

Appoint

Executive Committee
President
Volunteer Activity in Rikuzentakata City

ReportAudit Unit
14 dedicated members

Internal audit

Executive Officers

9 Concurrent Directors and Executive Officers
24 Executive Officers (Total 33)

Divisions and Subsidiaries

Compliance
Committee

INPEX CORPORATION Annual Report 2011069

Compensation paid to the CPAs and related parties (Year ended March 31, 2011)

3. Internal Control and Compliance System

Name of the CPA ﬁrm:

Ernst & Young ShinNihon LLC[ 1] Internal Control Systems

Names of the CPAs:

Kenji Endo, Yusuke Kosugi, Satoshi Takahashi

Accounting audit members:

12 CPAs, 12 assistant CPAs and 16 others

Compensation for auditing services:

INPEX: ¥137 million; Consolidated subsidiaries: ¥80 million

Compensation for non-auditing services:

INPEX: ¥39 million; Consolidated subsidiaries: ¥6 million

For proper and efﬁcient company
operations and to prevent the occurrence
and expansion of losses, INPEX conducts
appropriate business management by
our Board of Directors and Executive
Committee, and develops internal rules
such as our Articles of Incorporation, job
demarcation, administrative authority
and group companies management.
We also created our Corporate Social
Responsibility Policy, developed asystem for its adherence and thoroughimplementation, and developed acompliance system, internal notiﬁcation
system, risk management system andinternal audits.
In accordance with the Internal
Controls Reporting System (enacted
April 2008) stipulated by the Financial
Instruments and Exchange Act, weformed a special evaluation team within
the Internal Audit Unit and evaluate
the maintenance and operation ofinternal controls related to ﬁnancial
reporting for our company and the groupcompanies. As the result of evaluations
performed at the end of March 2011,
we have judged that internal controls
associated with ﬁnancial reporting arefunctioning effectively. In June 2011,details of the evaluation were submitted
to regulatory agencies in the form of areport on internal controls. Furthermore,
our internal controls report received an
unqualiﬁed opinion of appropriatenessfrom its independent auditors.

In accordance with the Companies
Act and the Financial Instruments andExchange Act, we accept accounting
audits from Ernst & Young ShinNihon
LLC. The amount of compensation paid
to the CPAs is determined in total basedon the audit plan and the number ofauditing dates, after obtaining approval
from the Board of Auditors.

2. Independence of Outside Directors and Director Compensation[1 ] Independence of Outside
Directors/Outside Auditors
Regarding the appointment of outside
directors, we place importance on
evaluation for the validity of businessdecisions and consideration of their
efﬁcacy, professionalism and objectivenessin the oversight function in addition to theperspective of independence.
Each of our company’s four
outside directors possesses a broad
range of knowledge and many years ofexperience in the energy industry. Also,these directors are shareholders of ourcompany and serve as directors andan advisor of companies that conductbusiness in the same ﬁeld as we do.
Therefore, we recognize the importance of
paying special attention to the possibilityof competition and other conﬂicts ofinterest. In response, we collect written
pledges from outside directors in order toensure conformance with the Companies
Act when taking a proper response
toward the duty of noncompetition, theprevention of information leakage and theimplementation of appropriate measures
towards transactions with a conﬂict ofinterest. These written pledges are the[ 2] Director Compensation
In the business of developing oil andnatural gas, a long period of time isrequired from starting business until therecovery of investment. Therefore, we
believe that it is inappropriate to reﬂect
short-term performance in director
compensation.
Compensation for directors
consists of monthly compensation (basic
compensation), which is issued basedon the business duties for each director
position, and a bonus based on company
performance. Compensation is decided
by the Board of Directors. Similarly,
compensation for the statutory auditors
consists of monthly compensation (basic
compensation) and a bonus, decided
through consultation with the statutory
auditors.
The table below shows the amount ofcompensation for directors and statutory
auditors for the year ended March 2011.
Note that the retirement beneﬁts plan was
abolished in 2008 as a result of a revisionin the form of the director compensation
system.

Attendance at board meetings

Compensation paid to directors and auditors(Year ended March 31, 2011)(Year ended March 31, 2011)

Name

Attendance times

Kazuo Wakasugi

Board of Directors meetings 17/17

Outside Yoshiyuki Kagawa
directors Seiji Kato

Outsideauditors

070

same as those submitted by internal
appointees.
When appointing outside auditors,
we believe that it is important tocomprehensively consider factors such as
independence, efﬁcacy in the oversightfunction and professionalism.
The four outside auditors forma majority on the Board of Statutory
Auditors with a total of ﬁve members. The
outside auditors possess rich knowledge
and experience in our company’s business,
as well as in ﬁelds such as ﬁnance andaccounting. The statutory auditors utilize
these qualities when performing auditing
activities for our company. One of theoutside auditors also serves as a director
at Japan Petroleum Exploration Co., Ltd.
(JAPEX), a corporation that owns stock in
our company. JAPEX conducts businessin the same ﬁelds as the business of ourgroup. Listed companies are required
to appoint an independent executive inorder to protect general shareholders.
Our company has appointed theoutside auditor Haruhito Totsune as anindependent director required by the
Tokyo Stock Exchange, Inc. from theperspective of the protection of investors.

Directorclassiﬁcation

Board of Directors meetings 11/14
Board of Directors meetings 14/17

Haruhito Totsune

Board of Directors meetings 15/17
Board of Auditors meetings 15/15

Koji Sumiya

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

Hiroshi Sato

Board of Directors meetings 16/17
Board of Auditors meetings 14/15

Masaru Funai

Board of Directors meetings 12/14
Board of Auditors meetings 11/11

INPEX CORPORATION Annual Report 2011

Total amount of compensation
paid by type of compensation(¥ million)

Number of directors
eligible forbasic compensation

Basic
compensation

Bonus

546

448

98

14

(excluding outside
auditors

33

31

2

2

Outside Directors

68

58

9

9

Directors(excluding outside
directors)

Statutory Auditors

To conduct integrated actions throughout
our entire company, we established aCompliance Committee in April 2006.
Our company’s Vice Chairman serves
as the chairperson (director in chargeof compliance) of the committee. The
committee works together with thestatutory auditors, the Board of Statutory
Auditors, the independent auditors
and the Internal Audit Unit, which is theinternal audit department. Through thiscooperation, the committee proposes/
implements compliance measures,monitors the status of implementationand holds activities to increase
compliance awareness. Moreover,the committee receives reports on
violations and implements stoppage
recommendations and other responses
to investigated violations. The committee
also formulates measures to prevent thereoccurrence of violations.
In addition, an internal notiﬁcation
system was established in April 2006
in accordance with the Whistleblower
Protection Act. The system is available
for use by the directors and employees
of our company. Anonymous reportingis possible and whistleblowers arethoroughly protected to ensure that they
are not subject to unfair treatment.
As a form of compliance education,
we distribute a compliance manual andcompliance Q&A. The goal of thesematerials is to have each employee
implement compliance activities.
Furthermore, we conducted domestic
compliance training seminars andprograms a total of 66 times from March

to July of 2010. The training was basedon results of a compliance questionnaire
distributed in December 2009 to all
directors and employees of our company.
At the training, an explanation wasgiven for the themes and suggested
reforms ascertained through thequestionnaire. The training also sought
to reconﬁrm fundamental complianceconcepts, increase awareness mainly
toward information security and provide
education on human rights related tovarious forms of harassment. In addition,
we established a compliance committee
Web site on our company intranet
in December 2010, and we began
publishing a monthly internal newsletter
titled Compliance Journal. Throughall these measures, we are working toincrease the level of awareness toward
compliance.

Compliance framework(Internal notiﬁcation system)

Board of Directors
Appoint

ReportCompliance Committee
Director in Charge of Compliance
Committee Chairperson: Masatoshi Sugioka

Compliance Committee Members(Heads of Business Divisions)

Anonymize

ReportGeneral Administration Unit

External
Consultation

In-house
Department inConsultation Charge of Compliance(Lawyer)

Report / consult

Report / consult

Officers and Employees

EnglishJapaneseJ

4. A Special-Class Share(¥ million)

Board of Directors meetings 13/17

Shigeo Hirai

Totalamount ofcompensationpaid[ 2] Actions for Improving the
Efﬁcacy of ComplianceCorporate Responsibility
and Management[4] Accounting Audit andAuditor Compensation

Notes:
1. The Company does not maintain a stock option plan. 2. The Company does not maintain an accrued retirement
beneﬁts plan. 3. The total amount of compensation paid includes a provision to accrued bonuses to directors for theyear ended March 31, 2011. 4. The number of directors eligible for compensation includes three directors including one
outside director who retired by termination during this term and two statutory auditors including one outside auditor who
retired by resignation from the Company effective June 23, 2010 at our 4th ordinary General Meeting of Shareholders.
5. Compensation was not paid to one of the 16 directors as of March 31, 2011.

According to the stipulations of the
Articles of Incorporation, INPEX issues
a special-class share to the Minister of
Economy, Trade and Industry. This sharepossesses inﬂuence on certain major
corporate decisions. The special-classshare does not possess voting rights atshareholders’ meetings. However, it ispossible for the holder of the specialclass share to exercise veto rights forcertain major corporate decisions. For

our company, the issuance of the specialclass share to the Minister of Economy,
Trade and Industry is an effective
countermeasure to prevent control overthe business of our company or against
hostile takeovers for speculative purposes.
Furthermore, we expect positive results interms of external negotiation and credits.

Compliance manuals(For details, please refer to the section titled “SpecialClass Share” on pages 95-96.)
Compliance Q&A

Compliance Journal

INPEX CORPORATION Annual Report 2011071

5. Disclosure
Disclosure Policies

To improve the transparency of management and the accountability of managers, we
conduct timely, appropriate and fair disclosure of information through our Web site,
public relations activities and IR activities toward shareholders and investors.

To achieve the appropriate disclosure of information, we have established internal regulations
for corporate information disclosure and deﬁned the process for collecting, managing,transmitting and disclosing information throughout our company. A summary of disclosure
and other policies based on the aforementioned regulations is listed below. Please refer toour company’s Web site (http://www.inpex.co.jp/english/ir/policy.html) for further details.

1. For invigorating the general meeting of shareholders
and promoting effective voting
Supplementary explanation

At the 5th Ordinary General Meeting of Shareholders held on
June 28, 2011, we sent convocation notices on June 10, which
was earlier than the period stipulated by law.

Use of voting rights
through the Internet

We implemented the use of voting rights via the Internet. We
also adopted a platform for the electronic use of voting rights.

Other

The convocation notice and other related documentation
are available in both Japanese and English (summary) on ourcompany’s Web site. On the day of the shareholders’ meeting
we used videos and a slide show to explain our business prior
to opening the meeting.

1. Basic Policy

The 5th Ordinary General Meeting of Shareholders(held June 28, 2011)

Our basic approach is to disclose theinformation that our shareholders andinvestors need in a timely, appropriate
and fair manner in order for them tomake decisions concerning investment
in our securities. We also actively
engage in public relations activities
to foster a deeper understanding
among all stakeholders concerning ourbusiness activities.

2. Internal System
for Timely Disclosure

2. Enhancing IR activities
IR fair for individual investors (held March 2011)
Supplementary explanation

Regular IR presentations
for individual investors

We participate in events such as IR fairs forindividual investors and meetings in venues
such as branches of brokerage ﬁrms. For
the year ended March 31, 2011, we held 13
meetings in six cities throughout Japan. The
meetings were attended by more than 1,500
individual investors.

Regular IR presentations
for analysts
and institutional
investors

We hold biannual meetings on ﬁnancial
results for analysts and institutional
investors. Our president and director in
charge of ﬁnance & accounting explain ourﬁnancial details and business forecast to
approximately 200 analysts and institutional
investors. Video archives of the meetingare made available on the same day on ourcompany’s Web site. An English translation is
included in the transmission.
Furthermore, we held two onsite tours(domestic and overseas) for analysts andinstitutional investors in the year underreview.

IR meetings

We held more than 500 IR meetings withanalysts and institutional investors in the year
under review. Meetings included overseas
IR road shows, conferences and one-on-one
meetings.

IR materials available
on Web site

Our Web site (IR section) features ﬁnancial
reports, stock information, presentationmaterials, videos and brochures for individual
investors.
http://www.inpex.co.jp/english/ir/

Explanation byrepresentative:
Yes/NoYes

IR meeting for individual investors in Nagoya(held October 2010)

We have appointed the Senior
General Manager, Corporate Strategy& Planning Division, as Corporate
Information Handling Ofﬁcer
responsible for the timely disclosure of
our corporate information. In addition,
we have established Corporate
Communications Unit, as the Unit incharge of practical matters for thetimely disclosure of our corporate
information.
Senior General Manager,
Corporate Strategy & Planning
Division, and the Corporate
Communications Unit conduct
exhaustive compilation of information
for disclosures (information on
decisions made by the Company,
occurrence of material facts, andbusiness results, etc.), and inaccordance with the internal rules, theCorporate Communications Unit inprinciple conducts its disclosure upon
authorization made by the board of
directors and by the management
committee concerning otherinformation. In addition, we maintaincomprehensive control of all importantinternal information and prevent any
insider trading in line with the internal
rules against insider trading.
The following chart shows ourinternal system for timely disclosure of
our company information.

3. Quiet Period
The two weeks prior to theannouncement of business results(including quarterly reports) are
deemed as the “quiet period,” inorder to prevent information leaks
and to maintain disclosure fairness.
During this quiet period, we will refrainfrom commenting on and answeringinquiries related to business results.
However, should it prove necessary
to substantially revise forecasts during
the quiet period, this information will
be appropriately released.

4. IR Activities
Representative directors andresponsible directors as well
as dedicated staff members conductproactive IR activities for investors.
For any questions regarding ﬁnancial
reporting or other IR information,please contact Investor Relations
Group indicated below.

Corporate Responsibility
and Management

Early delivery of
convocation notices forthe general meeting ofshareholders

Internal system for timely disclosure
Board of Directors/Management Committee
Deliberation/report on disclosure details

Yes

Authorization
for disclosure

President
ReportDeliberation/authorizationof urgent information
for disclosure

Corporate Information Handling Officer(Senior General Manager, Corporate Strategy & Planning Division)

Disclosure based on organizational
decision-making(Internal
Audit Unit)

Internal audit(Corporate Communications Unit)

Consultation/Confirmation

Yes

ReportIn charge of timely disclosure
ReportDisclosure

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

Divisions/Subsidiaries

Corporate Strategy and Planning Division, Corporate Communications Unit, Investor Relations Group
Tel.: +81-3-5572-0234 IR Web site: http://www.inpex.co.jp/english/ir/
Inquiries via the Internet: http://www.inpex.co.jp/english/ir/inquiries.html
IR Web site

072

INPEX CORPORATION Annual Report 2011

INPEX CORPORATION Annual Report 2011073

Board of Directors, Auditors and Executive Ofﬁcers(As of June 30, 2011)

ChairmanNaoki Kuroda

Director (Adjunct)

Kazuo Wakasugi

Vice Chairman

Masatoshi Sugioka

Director (Adjunct)Yoshiyuki Kagawa

President & CEO

Toshiaki Kitamura

Director (Adjunct)

Seiji Kato

Director

Seiji Yui

Director (Adjunct)

Shigeo Hirai

Director

Masaharu Sano

Statutory Auditor

Yoshitsugu Takai

Director

Noboru Tezuka

Statutory Auditor

Haruhito Totsune

Director

Shunichiro Sugaya

Statutory Auditor

Koji Sumiya

Masahiro Murayama

Statutory Auditor (Adjunct)

Director

Seiya Ito

Statutory Auditor (Adjunct)

Director

Wataru Tanaka

Director

Takahiko Ikeda

Notes:
1. Directors Kazuo Wakasugi, Yoshiyuki Kagawa, Seiji Kato and Shigeo Hirai are Outside
Directors as stipulated in Article 2, Paragraph 15 of the Companies Act.
2. Statutory Auditors Haruhito Totsune, Koji Sumiya, Hiroshi Sato and Masaru Funai are
Outside Statutory Auditors as stipulated in Article 2, Paragraph 16 of the Companies Act.

Director

Hiroshi Sato

Seiji Yui

Masaharu Sano

Noboru Tezuka

Director,

Director,

Director,

Senior Vice President, Asia & Australasia

Senior Vice President, The Americas & Africa

Senior Vice President, Eurasia & the Middle East,
Abu Dhabi Project

Shunichiro Sugaya

Masahiro Murayama

Seiya Ito

Director,

Director,

Director,

Senior Vice President, Masela Project

Senior Vice President, Finance & Accounting

Senior Vice President, Ichthys Project

Masaru Funai

Naoki Kuroda

Masatoshi Sugioka

Toshiaki Kitamura

ChairmanVice Chairman

President & CEO

Corporate Responsibility
and Management

Directors and Auditors

Chief Technical Executive, HSE and Compliance074

INPEX CORPORATION Annual Report 2011

Wataru Tanaka

Takahiko Ikeda

Director,

Director,

Senior Vice President, General Administration,
Corporate Strategy & Planning

Senior Vice President, Domestic Projects

INPEX CORPORATION Annual Report 2011075

Statutory Auditor

Statutory Auditor

Statutory Auditor

Executive Ofﬁcers

076

Noboru Himata

Seiji Yui*

Takashi Kubo

Masaharu Sano*

Kenji Kawano

Noboru Tezuka*

Yasuhisa Kanehara

Kunio Kanamori

Toshihiko Fukasawa

Shunichiro Sugaya*

Hirohisa Ota

Masahiro Murayama*

Yoshinori Yamamoto

Seiya Ito*

Hajime Kawai

Wataru Tanaka*

Atsushi Sakamoto

Takahiko Ikeda*

Arihiro Kezuka

Sadafumi Tanigawa

Kimiya Hirayama

Kasaburo Tamura

Nobuharu Sase

Akinori Sakamoto

Shigeharu Yajima

Kazuo Yamamoto

Tetsuro Tochikawa

Kazuhiko Itano

Yoshiro Ishii

Shuhei Miyamoto

Toshiya Oshita

INPEX CORPORATION Annual Report 2011

5.1

Five-Year Financial Information

078

5.2

Background Information

079(Oil and Gas Accounting Policies and Treatment)

Toshiaki Kitamura*

Yoshikazu Kurasawa

Financial /Corporate Information*Member of the Board

5.3

Management's Discussion and Analysis of Financial 082
Condition and Results of Operations

5.4

Business Risks

089

5.5

Oil and Gas Reserves and Production Volume

097

5.6

Consolidated Financial Statements /Notes to Consolidated Financial Statements

100

5.7

Report of Independent Auditors

117

5.8

Subsidiaries and Afﬁliates

118

5.9

Oil and Gas Glossary120

5.10 Corporate Information

121

Performance / Message
Business Overview

Koji Sumiya

Project Overview

Haruhito Totsune

Corporate Responsibility
and Management

Yoshitsugu Takai

Financial /Corporate Information

5

Samples of crude oil and condensate