B u s in e s s M o d e l a n d S t r e n g t h s
In its oil and gas development business, INPEX employs a business model that
focuses on stable production and supply, as well as the reinvestment of cash ows
obtained from production activities toward the acquisition of new reserves and thediscovery and development of oil and gas that contribute to further production revenues. This cycle is the source of sustainable growth as a company.

INPEX’s Strength 1

D y n a m ic G r o w t h S c e n a r ioIchthys LNG ProjectINPEX is the ﬁrst Japanese company to develop a global
large-scale LNG project such as Ichthys in Australia as
an operator. Steps are also being taken to quickly bringto fruition the Abadi LNG Project in Indonesia, another
undertaking after the Ichthys project in which INPEX willserve as the operator. The Company’s net production
volume is currently at a level of around more than 500
thousand BOED, and there are prospects of an increase
to 600-700 thousand BOED following the start of production at Ichthys and other projects. We are focusing
on Ichthys development work, which will increase thecorporate value of our company.

INPEX’s Strength 2

A B a la n c e d P o r t f o lio a n dS t r o n g R e s e r v e V o lu m e /R e s o u rc e s

4.69 billion BOE(Proved and probable reserves)

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

08

INPEX CORPORATION Annual Report 2017

G ro w th o f
P r o d u c t io n
V o lu m e

In c r e a s in g
R e s e rv e s

INPEX’s Strength 3

N a t u r a l G a s S u p p ly C h a inDomestic natural gas pipeline network

1,500 kmP r o a c t iv e
E x p lo r a t io n a n dD e v e lo p m e n tIn v e s tm e n t

Market Trend &Management Policy

A c c o u n t in go f R e v e n u e
A t t r ib u t a b let o S a le s

3

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

INPEX’s Strength 4

S t r o n g F in a n c ia l B a s e
Equity ratio:

68.3%

Net debt/Net total
capital employed:

0.9%

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

INPEX CORPORATION Annual Report 201709

T h e S t r u c t u r e a n d M e c h a n is m o fO il a n d N a t u r a l G a s E x p lo r a t io n a n d D e v e lo p m e n t
The business activities of the oil and gas industry can be envisioned as the ow of ariver. The upstream consists of development and production of oil and natural gas.
The midstream is where products are transported. The downstream refers to reﬁningand sales. Our mainstay business is to handle operations in the upstream including theexploration, production, and sales of crude oil and natural gas. As shown in the business ow below, upstream business activities can be further classiﬁed into the acquisition of blocks, exploration, appraisal, development, production and sales.

A c q u is it io n o f B lo c k s
We collect extensive informationon legal system and country risks
related to areas in which oil andnatural gas are expected to exist.
We then apply and bid for mining rights and/or exploration anddevelopment rights and enter
into a contract for explorationand development.

Signing ceremony
ony of a contract

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

Major oil and natural gas
producing regions (image)P r o d u c t io n
The extracted oil and natural
gas are refined and processed.
After separating oil and removing impurities (e.g., carbon gas,hydrogen), we ship natural gasthat can be used as a product.
LNG tanker

10

INPEX CORPORATION Annual Report 2017

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

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

3
Market Trend &Management Policy

Geophysical surveys

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

Drilling of appraisal wells

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

INPEX CORPORATION Annual Report 201711T h e M e d iu m - t o L o n g - T e r m V is io n o f
IN P E X a n d In v e s t m e n t P la n s
In May 2012, the Company formulated the INPEX Medium- to Long-Term Vision that clariﬁed
key initiatives up to the Ichthys start-up as well as medium- to long-term growth targets and theachievement of those targets. The Medium- to Long-Term Vision deﬁnes three growth targets
and three management policies and clearly speciﬁes our key initiatives.

1T h r e eG r o w th T a r g e ts
We have set three growth targets
necessary for sustainable growth
and will conduct key initiatives toachieve them.

Continuous Enhancement of E&P Activities
A c h ie v e n e t p r o d u c t io n v o lu m e o f

1 m illio n B O E D

2b y t h e e a r ly 2 0 2 0 s

Strengthening Gas Supply Chain
A c h ie v e d o m e s t ic g a s s u p p ly v o lu m e o f

2 .5 b illio n m
3/y e a rb y t h e e a r ly 2 0 2 0 s ( 3 .0 b illio n m ³ / y e a r in t h e lo n g t e r m )3

Reinforcement of Renewable Energy Initiatives

P r o m o t e e ﬀ o r t s t o c o m m e r c ia liz er e n e w a b le e n e r g ie s a n d r e in f o r c e
R &D a c t i v i t i e s f o r t h e n e x t g e n e r a t i o n

T h r e e M a n a g e m e n t P o lic ie s
We are positioning ourselves to become a top-classinternational oil and gas E&P company and are improving and building our management base to evolve into
an integrated energy company.

2

Investment for Growth andReturn for Shareholders

Investment

1

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

12INPEX CORPORATION Annual Report 2017Over
ﬁve years

Payout Ratio（%）
200¥3.5trillion

150

Including
exploration
expendituresof around50¥300billion

From the year ended
March 31, 2013, toMarch 31, 2017156.7%

100

14.0% 14.3%
02013/3

2014/333.8%
2015/3

2016/356.9%
2017/3

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

1,000521 thousand BOED

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

Net production volume (Thousand BOED)

Proved Reserves,
Net Production Volumeand the Market Value ofthe Major International Oiland Gas E&P Players

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

400

Occidental (US)anynmptioosi &P coprmsEa ﬁ d ganishabl l oil ats
INPEX
naoeg t atio s
kin ern 020
See n int rly 2
Probable reserves toaa
as the e
upgrade to proved
bythrough the shift ofdevelopment

Apache (US)Santos (AU)

200
0

0.5

1.0

Woodside (AU)
1.5

2.0

Proved reserves: 3.30 billion BOE

2.5

3.0

3.5

4.0

4.5

5.0

Probable reserves: 1.39 billion BOE

5.5

Proved and probable reserves (Billion BOE)

Becomea Top-ClassInternational Oil and Gas
E&P Company3Market Trend &Management PolicyBecome an Integrated
Energy Company
with natural gas as the core

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

Maintain Financial Strength

Funding Source
Own funds

50Target: 50% or higher
Equity ratio

68.3%(As of March 31, 2017)

200Target: 20% or less
Net debt/Net total
capital employed0.9%(As of March 31, 2017)¥663.0 billionof cash available on hand
(As of March 31, 2017)

Cash flows
Future operating cash ows
obtained each year

Bank loans
Lending from JBIC
Guarantee from JOGMEC
Project ﬁnance

3Responsible
Management as a
Global Company
Promote continuous improvements
in corporate compliance and HSE
initiatives.
Build trust-based working relationships with stakeholders throughinteractive communications.

INPEX CORPORATION Annual Report 201713