INPEX CORPORATION

Annual Report 2013
Year ended March 31, 2013

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

FORWARD-LOOKING STATEMENTS

This Annual Report includes forward-looking information that reflects the Companyʼs plans and expectations. Such forwardlooking information is based on the current assumptions and beliefs of the Company in light of the information currently
available to it, and involves known and unknown risks, uncertainties and other factors. Such risks, uncertainties and otherfactors may cause the Companyʼs 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 and natural gas;
• exchange rates; and• the costs associated with exploration, development, production and other related expenses.
The Company undertakes no obligation to publicly update or revise any information in this Annual Report (including forwardlooking information).

NOTES REGARDING FIGURES
Financial figures in this Annual Report have been basically rounded to the nearest unit (millions, billions, etc.) for convenience.
The “Project Overview by Region” section (starting on p. 60) basically describes the operating situation as of June 30, 2013.
Figures in parentheses denote negative amounts.

About the cover
The Kashagan Oil Field, Kazakhstan, where production is scheduled to commence during the fiscal year ending March 31,
2014 (please refer to p. 65).

Annual Report 2 013 in} Contents: p. 12

INPEX CORPORATION

Major Results
for the Year Ended March 31,

About Us

2013

Major Player in Japan

Reserves and Production Volumes

Developer ofoil and natural gas

Reserve volume

Major E&P Company in Japan

Abundant reserves andproduction volumes
Our Mission

To ensure a stableand efficient supply ofenergy4.09 billion boe (proved + probable)
Production volume

408 thousand boed
Performance and Cash Dividends
Net sales¥1,216.5 billion
Net income¥183.0 billion
Cash dividends per share

In Australia and Indonesia¥7,000 per share (annual)

Promoting large-scale
LNG projects

Sustainable Expansion of
Upstream Businesses} Ichthys LNG Project: pp. 48–55

Net Production Volume by
the First Half of the 2020s

Acquisition ofdevelopment andproduction projects

Targeting 1 million boed

(Lucius Project in the United States; Angola)} Medium- to Long-Term Vision: pp. 40 – 41

The Ichthys LNG Projectcontinued progress indevelopment operations
The Abadi LNG Projectcommenced FEED works

INPEX CORPORATION Annual Report 2013

001

INPEX Snapshot

INPEX conducts oil and natural gas
projects worldwide focusing mainly on
the Asia and Oceania regions.
(The number of countries and projects is current as of June 30, 2013)002

INPEX CORPORATION Annual Report 2013

INPEX CORPORATION Annual Report 2013003

INPEX Snapshot

4.0dKashagan Oil Field, Kazakhstan

004

INPEX CORPORATION Annual Report 2013

400

INPEX is the largest company in its field inJapan boasting reserve volumes (proved + probable) of
4.09 billion boe and a production volume of408 thousand boed for the year ended March 31, 2013.
The Company is looking to achieve a production scale of
1 million boed by the early 2020s.

ACG Oil Field, Azerbaijan

INPEX CORPORATION Annual Report 2013005

INPEX Snapshot

Development operations areprogressing smoothly at the Ichthys
LNG Project in Australia.

006

INPEX CORPORATION Annual Report 2013

The dredging vessel Athena
Dredging work at Darwin

INPEX CORPORATION Annual Report 2013

007

INPEX Snapshot

Leveraging its proven operating track record of
more than 70 years in Japan, INPEX is promoting
various projects worldwide.

008

INPEX CORPORATION Annual Report 2013

2013 in the world
1940S in Japan

Shale Gas Project, Canada(Horn River)

Yabase Oil Field, Akita Prefecture(photograph from the 1940s)

INPEX CORPORATION Annual Report 2013009

INPEX Snapshot

More than half of the crude oil / natural gas produced by
the Company overseas is transported to Japan.
The natural gas produced in Japan is supplied to the Kanto andKoshinetsu regions surrounding the Tokyo metropolitan area using
the Companyʼs 1,400-km pipeline network.

010

INPEX CORPORATION Annual Report 2013

Natural gas pipeline in JapanThe Naoetsu LNG Terminal
currently under construction

INPEX CORPORATION Annual Report 2013011

Annual Report 2013 Contents

INPEX Snapshot ................................. 002

6 Environment, Society andGovernance ............................................ 073
Corporate Social Responsibility ................. 074

1 Highlights .................................................. 013

HSE Management .............................................. 076

Financial and Operating Highlights......... 014

Environmental Action ....................................... 078

Financial and Operating Highlights(Graphs) ........................................................ 016

Human Rights, Human Resources
and Diversity ................................................ 079

Business Topics .................................................... 018

Activities of Community Contribution.... 080

2 Management Message .......... 021

The Companyʼs
Management Structure.......................... 083

Greetings fromthe Representative Directors.............. 022

Internal Control Systems /Risk Management ..................................... 086

Message from the President ........................ 024

Compliance / Disclosure ................................ 088

Corporate Governance .................................. 082

Board of Directors .............................................. 090

3 Market Trend andManagement Policy .................... 033
Business Model and Strengths ................... 034
The Structure and Mechanism of Oil
and Natural Gas Exploration
and Development ..................................... 036
The Medium- to Long-Term Vision of INPEX
and Investment Plans .....................040
Column #1 .............................................. 042

4 Special Report .................................... 043
Special Report 1:
Unconventional Resources andRenewable Energy ................................... 045
Special Report 2:
Ichthys LNG Project Status .................. 048
Column #2 .............................................. 056

5 Project Overview ............................ 057
Project (Segment) Overview ........................ 058
Project (Segment) Overview by Region
Asia & Oceania ........................................... 060
Eurasia ............................................................. 064
Middle East & Africa ............................... 066
Americas......................................................... 068
Japan ................................................................ 070
Column #3 .............................................. 072

012

INPEX CORPORATION Annual Report 2013

7 Financial / Corporate
Information.............................................. 095
Message from the Senior Vice President,
Finance & Accounting Division......... 096
12-Year Financial Information .................... 097
Background Information
Oil and Gas Accounting Policies
and Treatment............................................. 100
Managementʼs Discussion and Analysisof Financial Condition and Resultsof Operations .............................................. 103
Consolidated Financial Statements /Notes to Consolidated Financial
Statements .................................................... 110
Independent Auditorʼs Report.................... 129
Subsidiaries and Affiliates ............................ 130
Business Risks ....................................................... 132
Oil and Gas Reserves andProduction Volume................................... 140
Oil and Gas Glossary ........................................ 144
Index / Unit Conversion .................................. 146
Corporate Information..................................... 147

highlightS1

Financial and Operating Highlights
As of or years ended March 31
Please refer to p. 97 for notes of major indices.

2007

2008

2009

2 010

Results of Operations (Millions of yen / Thousands of U.S. dollars)¥

Net sales
Gross profit

969,713¥ 1,202,965

625,918

812,411¥

1,076,165
757,127¥

840,427542,259

Operating income

559,077

714,211663,267

461,668

Net income

165,092

173,246

145,063

107,210EBIDAX

321,790382,654

275,871242,543¥ 1,608,107¥ 1,807,901¥ 1,768,045(Earnings before interest, depreciation and amortization, and exploration)

Financial Position (Millions of yen / Thousands of U.S. dollars)
Total assets¥

2,013,778

Net assets excluding minority interests

1,028,895

1,157,371

1,271,123

1,387,500

Net debt(169,667)(328,353)(324,109)(349,211)

Cash Flows (Millions of yen / Thousands of U.S. dollars)¥

Cash flows from operating activities

231,982¥363,995¥

230,352¥

241,373

Cash flows from investing activities(209,243)(261,767)(240,168)

Cash flows from financing activities

13,794(45,228)(46,090)(251,812)
68,937

Cash and cash equivalents at end of the year

189,417

222,270

162,845

216,395

Earnings per share (EPS)¥ 70,423.45¥ 73,510.14¥ 61,601.60¥ 45,553.56

Net assets per share

436,467.92

491,168.09

540,100.10

589,548.88

7,000.00

7,500.00

8,000.00

5,500.00

9.9%

10.2%

13.0%

12.1%

(18.6)%
64.0%
17.7%
20.4%

(36.1)%
64.0 %
15.8 %
21.4 %(31.2)%
71.9%
11.9%
14.6%

(30.6)%
68.9%
8.1%
10.5%

¥ 1,020,000¥ 1,110,000

2,405.6

2,617.8

1,610.8

1,617.9

Price earnings ratio (PER) (Times)

14.5

15.1

11.1

15.1

Price book-value ratio (PBR) (Times)

2.3

2.3

1.3

1.2

Net proved reserves (Million boe)

1,770

1,645

1,598

1,475

Net production (Thousand boed)

418

423

405

405

217,646

315,684

294,364

235,721

Per Share Data (Yen / U.S. dollars)

Cash dividends per share
Payout ratio (%)

Financial Indices (%)
Net debt / Net total capital employed
Equity ratio
Return on equity (ROE)Net return on average capital employed (Net ROACE)

Stock Indices
Stock price (Yen / U.S. dollars)Market capitalization (Billions of yen / Millions of U.S. dollars)¥

683,000¥

686,000

Operating Data

Exploration and development expenditures(Millions of yen / Thousands of U.S. dollars)

Oil price / Exchange rate / INPEX share price
Oil price (U.S.$/bbl)
150¥118.09¥117.47¥1,110,000

120$100.30¥98.26¥1,020,000

90¥100.2060$68.10$65.91¥93.04 $8¥683,000¥686,000$49.2330
Jan. 2006

014

Apr. 2006

Jan. 2007

INPEX CORPORATION Annual Report 2013

Apr. 2007

Jan. 2008

Apr. 2008

Jan. 2009

Apr. 2009

Jan. 2010 Apr. 2010

1
Highlights

2 0 112 0 122 0 13¥¥

1,186,732¥ 1,216,533$ 12,943,217

791,289

790,2078,407,352

529,743

709,358

693,448

7,377,891

128,699

194,001

182,962

1,946,611

943,080
608,247

2 013 (U.S. dollars)*

274,931362,597

350,905

3,733,429¥ 2,680,380¥ 3,066,398¥ 3,616,159$ 38,473,870

1,996,890

2,179,252

2,481,293

26,399,543(688,807)(874,116)(815,308)(8,674,412)

Net Income
for the year ended March 31, 2013

183.0

¥

Net Income Analysis(¥ billion)(For the year ended
March 31, 2012)¥194.0¥274,094¥

320,692¥

252,347$

2,684,828(844,511)(280,864)(489,870)(5,211,937)

548,057

29,294137,069

1,458,336

182,025

249,233

199,859

2,126,386

53,137.93¥ 50,114.22

546,958.90

596,908.99

7,230.98

6,000.00

7,000.00

679,639.63
7,000.00

14.7%

13.2%

14.0%

14.0%

¥ 40,832.40¥$

Increase in net sales

29.8
Increase in cost of sales

30.9
Increase in exploration expenses andallowance for exploration

533.19

20.6
Others

74.48

10.7(For the year ended
March 31, 2013)¥183.0(48.9)%
74.5%
7.6%
10.8%
¥

631,000(43.9)%
68.6%
7.9%
11.2%

(60.7)%
71.1%
9.3%
16.0%
¥

559,000¥

500,000(43.9)%
68.6%
7.9%
11.2%
$

0

2,043.6

1,827.9

19,448

15.5

10.5

10.0

10.0

1.2

0.9

0.7

0.7

1,308

2,432

2,188

2,188

423

426

408

408

248,005

243,531807,9888,596,532

50

INPEX share price (Yen)

808.0

800

177.3

130

600

$122.88¥93.99¥631,000¥559,000¥83.15Jan. 2011

Apr. 2011

400¥500,000

Apr. 2012

243.5

100

200
85

0.6
32.8

576.7

210.1
0

¥82.14Jan. 2012

54.0

115

$110.0282.70

billion■Development ■Exploration■Acquisition costs

Exchange rate (Yen/U.S.$)$117.36200

Exploration and development expenditures
increased substantially compared with theprevious fiscal year due mainly to the increase in development expenditures in connection with the transition to the Ichthys development phase for the year under review,and the acquisition of interests in such largescale projects as shale gas projects in Canada and Prelude FLNG Project in Australia.

(¥ billion)

Exchange rate (Yen/U.S.$)

150

808.0

¥

* The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic
computation only, at ¥93.99 = U.S.$1.00, the approximate rate of exchange in effect as of March 31, 2013.

Oil price (ICE Brent)

100

Exploration and Development
Expenditures for the year ended
March 31, 2013

5,320

2,306.8billionNet sales increased by ¥29.8 billion compared with the previous fiscal year. In addition, the gain on transfer of the Ichthys LNG
Project equity interest was recognized.

Jan. 201370
Apr. 2013

2012

2013

INPEX CORPORATION Annual Report 2013015

Financial and Operating Highlights (Graphs)
As of or years ended March 31
Please refer to p. 97 for notes of major indices.

Profitability Indices} See p. 8 of Fact Book 2013 for more about profitability indices.

Net Income, EBIDAXNet Sales (by product)(Earnings before interest, depreciation and amortization, and exploration)■Crude oil ■Natural gas ■Other(¥ billion)

1,500
1,200

400

1,203.0
28.4

900
600

1,186.7

1,076.2
27.5

391.1

650.4

326.4

200

788.1

558.0

486.9

300

275.9
173.2

107.2

350.9

274.9
194.0

145.1

100

183.0

128.7

0

0
2008

2009

2010

2011

2013

2012

2008

2009

2010

2011

2013

2012

Despite the impact of yen appreciation, net sales experienced a sound increase owing mainly to firm trends in crude oil prices between the period fromthe year ended March 31, 2010, to the year ended March 31, 2012.

EBIDAX is an index that is commonly used by resource development companies. It is a measure of profit before interest payments, depreciation andamortization as well as exploration expenses. EBIDAX provides an indicationof the level of profit generated without the impact of accounting treatment
applied by individual companies.

Efficiency Indicesp. 11 of Fact Book 2013 for more
Stability Indices } See
about stability indices.

} See p. 9 of Fact Book 2013 for more
about efficiency indices.

Return on Equity (ROE), Net ROACE

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

（%）

ROE

Net ROACE

25

21.4

15

1,500

16.0

14.6
15.8

10.5

11.9

7.6

1,000

11.2

10.8

8.1

5

71.9%

9.3

0

7.9

2009

2010

2011

2012

2013

Net ROACE is an indicator that is commonly used by resource development
companies. Net ROACE is a profit ratio which includes net debt with the sumof net assets. With the Companyʼs negative net debt position, net ROACE ishigher than ROE.

Performance Indices

8,000
4,000

6,000

5,500

13.0
%

3,000

4,000
10.2
% 3,500

4,000

12.1
%

6,000

7,000

7,000

4,000

3,500

-324.13,000

20-36.1%-31.2%-30.6%

2008

2009

2010

2010

-688.8-874.1-815.30-40-48.9%
2011-60.7%

2012-43.9%-80

2013

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

(Times)

20

20

15

15

10

10

5

5

0

0

PER

15.1

2.3
0
2009

-349.2

2011

2012

2013

The Company, which is currently in a growth investment phase, is placing theemphasis on balancing the needs to expand medium- to long-term earnings
with ensuring appropriate returns to shareholders.

INPEX CORPORATION Annual Report 2013

15.1

PBR

15.5
10.5

10.0

3,500
3,000

2,500

2008

80

68.6% 60
40

11.1

14.0
%

13.2
%

14.7
%
3,000

2,000

-328.4

1,387.5

71.1%

74.5%

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

4,000

1,271.1

2,481.3

2,179.3

1,996.9} See p. 12 of Fact Book 2013 for more about performance indices.

Cash Dividends per Share, Payout Ratio

7,500

1,157.4-500-1,000

2008

64.0%

68.9%

500

0

(Yen)

■Net assets excluding minority interests Equity ratio ■Net debt （%）
Net debt / Net total capital employed 100

2,000

10

8,000

(¥ billion)

2,500

20

016

362.6

242.5

397.8

726.2

356.2

300

30.6

429.1

27.1

398.3

783.5

28.9

382.7

1,216.5

31.4

943.1

840.4

■Net income ■EBIDAX(¥ billion)

2008

1.3

1.2

1.2

0.9

0.7

2009

2010

2011

2012

2013

Despite the Company ʼ s steady performance and stable cash dividend
payment record, PER and PBR remained entrenched at a low level. This
trend can be seen in other mining- and oil-related stocks listed in Japan.

1Highlights

Reserve/Production Indices} See p. 13 of Fact Book 2013 for more about reserve/production indices.

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

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

2,500

■Crude oil ■Natural gas

2,000

1,645

1,500
1,000

1,598

1,475

558
550

122
%

61
% 1,048500
0Reserve replacement ratio (3-year average)（％）
300
2,432
282
2,188
%
255 240
%

495

35
%

180

1,308
409

980

899

1,451

1,259

981

929

120
60

25
%
2010

2011

2012

4,774

4,366
4,000

4,404

3,176

3,000

1,823

2,818

4,095

40

1,907

30

29.8

32.3

4,256

4,126

2,929

2,721

26.7

2,000

27.5

27.4

20
14.7

0
2009

5,000

28.2

1,087

2008

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

1,000

10.8

10.7

0

2013

10.0

1,645

1,598

1,475

2008

2009

2010

10

15.6

8.5

1,308

2,432

2,188

2011

2012

2013

0

Reserve replacement ratio (3-year average) =Proved reserves increase including acquisition / Production

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

The Final Investment Decision (FID) for the Ichthys LNG Project was made inJanuary 2012 and the reserve evaluation at 1.18 billion boe was upgraded to
net proved reserves.

The reserves-to-production ratio measures the current number of production
volume years of reserve volumes held. As of March 31, 2013, the Companyʼsreserves-to-production ratio was 14.7 years for net proved reserves and 27.5
years on the basis of proved and possible reserves.

Net Production (by product)

Average Expenses per BOE Produced,
Finding and Development Cost per BOE (3-year average)■Crude oil ■Natural gas(Thousand boed)

450
360

423
181

405

405

182

187

423

426

184

175

Average expenses per boe produced
Finding and development cost per boe (3-year average)(U.S.$/boe)

80

408

78.6

162

60

55.4

270
180

242

223

218

239

251

40

246

28.3
20

90

17.5
11.4

0

0

2008

2009

2010

2011

2012

2013

10.2

12.4

11.2

2008

2009

2010

16.4
6.3

2011

17.9
11.2

2012

2013

For the year ended March 31, 2013, crude oil production volume in the Middle
East and Africa regions increased, mainly in the ADMA Block. On the other
hand, there were signs of a decrease in natural gas production volume for thesame period owing mainly to natural decline at the Offshore Mahakam Block.

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

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

LTIF, TRIR（％）

(Incidents)■Number of exploratory wells（Number）
40

80

Finding and development cost per boe is improving significantly following
the upgrade of the Ichthys net probable reserves to net proved reserves.

64.5%
60

57.9%

50.6%
19

17

30

0
2009

2010

2011

3.86

20

46.8%

7
2008

4.05

4

45.0%

13

20

TRIR

5.26

56.3%
24

40

LTIF

6

2012

9

2013

10

2

0.96
0

Exploration success ratio (3-year average) = The number of net productive exploratory wells drilled /The number of net exploratory wells drilled. (An exploratory well is a well drilled to find a new field,
to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir or
to extend the limits of a known reservoir.) The number of wells represents the completion of drilling
operations for the subject year. However, data for the year ended March 31, 2013 included operations
currently in progress.

1.20

0.64

0
2009

1.16

2010

2011

1.86
0.72

0.77

2012

2013

LTIF: Rate of injuries resulting in fatalities or lost time per million hours worked
TRIR: Rate of recordable injuries (fatalities, lost time, restricted workdays, and medical treatment)
per million hours worked

The number of exploratory wells is expected to increase from the year ending
March 31, 2014 on the back of vigorous exploration investment.

INPEX CORPORATION Annual Report 2013017

Business Topics

1

Acquisition of Production and Development Assets
August 2012 Participation in Offshore Angola Block 14

INPEX reached an agreement with TOTAL S.A. to acquire a 9.99%
interest in Block 14 offshore the Republic of Angola. Locatedapproximately 100 kilometers offshore, Block 14 is currently producing crude oil in three development areas, and there are otherdiscovered undeveloped areas. Further exploration and development of the discovered undeveloped areas of the block will be
conducted.
August 2012 Acquisition of interest in

the Lucius Oil Field in the U.S. Gulf of Mexico
INPEX agreed to acquire a 7.2% participating interest in the
Lucius project, which includes portions of Keathley Canyon
Blocks 874, 875, 918 and 919 in the U.S. Gulf of Mexico.
The Lucius project has been in the development phase since
December 2011, and the first production of crude oil and natural gas is expected to start in the latter half of 2014.
Texas

Marine production facilities at
Angola Block 14

Louisiana
New Orleans

Houston

KC874

KC875

KC918

KC919

Keathley Canyon Blocks
874/875/918/919
Lucius Oil Field

Construction work on production facilities for the Lucius project

Geographic areas subject to participation2

Acquisition of New Exploration Projects
From April 1, 2012, through June 30, 2013,
INPEX acquired a total of nine new exploration projects.

October 2012: United Kingdom

INPEX was awarded new exploration blocks
in the 27th Seaward Licensing RoundMay 2013: Uruguay, South America

INPEX was successful in the 27th Seaward
Licensing Round in the United Kingdom, andwas awarded offshore exploration blocks jointlywith Centrica (U.K.) and Statoil (Norway). Exploration work will be conducted.

Acquisition of interest in offshore
exploration block
INPEX agreed to acquire a partial interest in
exploration Area 15 offshore Uruguay from
Tullow Oil (U.K.), an independent E&P company. Exploration activities including 3D seismic data acquisition work have been ongoing in the block since December 2012.

018

INPEX CORPORATION Annual Report 2013

April 2013: Mozambique, Africa

Participation in offshore exploration project
INPEX agreed to acquire a partial interest in the
exploration block Area 2 & 5 offshore Mozambiquefrom Statoil (Norway). Two exploratory wells areplanned during 2013.

3

Financial /Corporate Information

Highlights

7

1

Progress on Development Work for the Ichthys LNG Project in Australia
December 2012 Project finance arrangements signed

June 2013 Construction begins on FPSO facility

INPEX finalized arrangements for US$20 billion in project
finance loans for the Ichthys LNG Project, including those witheight export credit agencies and 24 commercial banks fromJapan and abroad.

A ceremony was held for the first steel cutting for the hull ofa Floating Production, Storage and Offloading (FPSO) facility
in Okpo, South Korea. With fabrication of the hull under way,
construction work on all of the Ichthys LNG Projectʼs major offshore facilities has been commenced.

January 2013 First steel cutting ceremony foroffshore CPF
The first steel cutting ceremony was held at Geoje in South
Korea for the construction of the offshore central processing
facility (CPF) for the Ichthys LNG Project.
February 2013 Completion of insurance arrangements forconstruction of facilities
INPEX completed insurance arrangements providing coveragefor project facilities related to the Ichthys LNG Project during
the construction period (through the end of 2016).

Ribbon-cutting and first steel-cutting ceremony for the FPSO facility

See the Special Feature on pp. 48–55 for more details aboutprogress being made on the Ichthys LNG Project.

4

Progress on the Abadi LNG Project in Indonesia
November 2012 Start of FEED work for

January 2013 Start of FEED work for FLNG facilities

subsea production facilities
Front-End Engineering and Design (FEED) work for subsea
production facilities was commenced that will transport natural
gas and condensate from the Abadi gas field to the Floating
LNG (FLNG) plant.

FEED work for Floating LNG (FLNG) facilities was commenced
that refine, liquefy, store and offload natural gas and condensate produced from the Abadi gas field.

May 2012: Iraq

March 2013: Indonesia

INPEX was awarded onshore exploration Block 10

INPEX was awarded West Sebuku Block inSouth Makassar

INPEX was successful in the fourth Petroleum Licensing
Round in Iraq, and was awarded the onshore exploration
Block 10 jointly with LUKOIL (Russia). In November 2012, a
service agreement related to the block was signed. Exploration work will be conducted accordingly.

April 2013:
Timor Sea Joint Petroleum
Development Area

INPEX was successful with Mubadala Petroleum(United Arab Emirates) in the 2012 Petroleum
Licensing Round in Indonesia and was awarded
the West Sebuku Block in South Makassar. Exploration work will be conducted.

November 2012: India

June 2012: Australia

Acquisition of interest in exploration block in the Bay of
BengalAcquisition of interest in exploration
Block AC/P36

INPEX agreed to acquire a partial interest in the offshore exploration block KG-DWN-2004/6 from Oil and Natural Gas Corporation Limited, Indiaʼs national E&P company. Exploration work
has already begun in the block, and exploratory wells are currently being drilled.

INPEX acquired an interest in the exploration Block AC/P36 offshore Western
Australia. As an operator, INPEX willconduct exploration work, including
drilling of exploratory wells.

INPEX signed a contract
for the JPDA 11-106 Block
A new production sharing
contract was signed withthe relevant authorities
upon expiry of the exploratory phase under the contract for the JPDA 11-106
contract area in the exploration area around the Kitan
Oil Field in the Timor Sea
Joint Petroleum Development Area. INPEX will continue with exploration anddevelopment of the area.

June 2013: Australia

INPEX was awarded exploration Block WA-494-P offshore Western Australia
As an operator, INPEX was awarded a 100% interest in exploration Block WA-494-P offshore Western Australia. Large-scale gas-condensate fields have been discovered and areunder development, such as the Ichthys and Prelude gas fields adjacent to the block.

INPEX CORPORATION Annual Report 2013

019

5

Major Corporate Topics
October 2012 Establishment of

the INPEX Advisory Committee
The INPEX Advisory Committee was established as a part ofmeasures to enhance corporate governance. INPEX plans
to hold INPEX Advisory Committee meetings twice a year,
attended by four Japanese and international experts who willoffer their advice on various issues including domestic andinternational politics and economy, the energy situation, andcorporate social responsibility.

May 2013 Acquisition of A1 credit rating from Moodyʼs
INPEX obtained from the U.S. credit rating agency Moodyʼs a
new long-term issuer rating of A1 with a “stable” outlook.
May 2013 Announcement of stock split andreduction in investment unit
INPEX decided to conduct a 1:400 common stock split effective on October 1, 2013, and to adopt a share unit system with
100 shares defined as a single investment unit. As a result of
these initiatives, the investment unit amount of the Companyʼs shares will be one quarter of what it was before the stock
split and adoption of the share unit system, making it easier forindividual investors to acquire shares of the Companyʼs stock.

Effective on October 1, 2013
1 1:400 common stock split
1

The INPEX Advisory Committee

2 Adoption of share unit system(trading unit becomes 100 shares)

400

April 2013 Construction completed on

INPEX Mega Solar Joetsu
INPEX completed construction on the INPEX Mega Solar Joetsu
solar power generation plant in Joetsu, Niigata. Installed on thesite of our subsidiary, the solar panels began generating powerin March 2013 with a maximum output of two megawatts.

400

100

100

100

100

* Trading is allowed in 100-share units (for example, if the price of one share today(400 shares after October 1) is ¥500,000, the price will become ¥125,000 for
a 100-share unit after October 1, 2013).

Electric power conservation and volunteer work

INPEX is working to reduce electricity consumption at its
business sites in Japan. During the summer of 2012, wewere able to cut electricity consumption by as much as
40% compared with the 2010 level. INPEX employees
have volunteered in areas affected by the Great East Japan
Earthquake, with a combined total of 524 employees
volunteering since the natural disaster. For the year ended
March 31, 2013, 214 employees volunteered.
Ceremony to commemorate the completion of
INPEX Mega Solar Joetsu

Reorganizations
In May 2012, INPEX established the New Ventures Division for
the enhancement of planning functions for basic policies andinvestment strategies related to the development of new overseas projects. In June 2013, INPEX established the Gas Supply & Infrastructure Division for the integrated managementof gas supply chain facilities in Japan, including the Naoetsu
LNG Terminal to be completed shortly. INPEX also reorganizedoverseas business divisions and units to promptly deal with theincreasing number of overseas upstream projects.

020

INPEX CORPORATION Annual Report 2013

Volunteer work

MANAGEMENTMESSAGE

2

Greetings from the Representative Directors

Naoki Kuroda
Masatoshi Sugioka
Vice Chairman

022

INPEX CORPORATION Annual Report 2013

ChairmanToshiaki Kitamura
President & CEOINPEX CORPORATION is currently moving forward with 80 oil and gas projects in 29 countries around the world. We are the largest Japanese E&P company in terms of reserves and production volume, and we have grown to rank
globally among the mid-tier oil and gas E&P companies. Our mission is to contribute to the creation of affluent societies by realizing a stable and efficient
supply of oil and gas. By continuing to achieve success in such large-scale oiland gas projects as the Ichthys LNG Project in Australia, INPEX will make evengreater strides toward our goal of growing and evolving into an integrated
energy company.

2
Management
Message

We would like to begin by thanking everyone for their understanding andsupport of our business.

Stable Supply of Energy
Sustainable Growth in
Corporate Value
The business environment in energy markets is in a constant state of evolutionary change. As demand for energy continues to strengthen around the globe,
companies are competing ever more aggressively to acquire limited conventional oil and gas resources. Meanwhile, it is necessary to take measured
responses to unstable oil and gas prices as well as fluctuations in foreign
currency markets, while diligently engaging in safety management and available conservation.
We have chosen “Growth Explorer, Reliable Energy Contributor” as thetheme of this Annual Report for 2013, which covers the business activities
and major projects we have undertaken over the past year.
INPEX is committed to achieving sustained growth in our corporate value so
as to meet the expectations of our shareholders and all other stakeholders. We
hope to receive your continued support and understanding as we undertakethese endeavors.
July 2013
Naoki Kuroda

Masatoshi Sugioka

Toshiaki Kitamura

ChairmanVice Chairman

President & CEO

INPEX CORPORATION Annual Report 2013023

Message from the President

Toshiaki
Kitamura
President & CEO

024

INPEX CORPORATION Annual Report 2013

To Our Stakeholders
For the year ended March 31, 2013, we took steady strides toward developing
the Ichthys LNG Project, a central growth driver, and saw progress at every stage ofbusiness development, including the successive acquisition of upstream interests.
Consolidated net income totaled ¥183.0 billion, exceeding our initial forecast.
In the Message from the President section of the Annual Report 2013,
I cover in detail the topics that matter the most to our shareholders and investors.

2

Please describe the Companyʼs perfor-

last year, financial forecasts for thisQ. mance
year, and cash dividend plans.
INPEX recorded consolidated net income of¥183.0 billion for the year ended March 31, 2013,
partially reflecting gain on transfer of interestsof the Ichthys. Assuming zero gains on the transfer
of interests going forward, financial forecasts arefor net income of ¥142.0 billion for the year ending March 31, 2014. Nevertheless, the Company
plans to slightly increase cash dividends per share.
Consolidated net income of ¥183.0 billion for the year
ended March 31, 2013, exceeded our initial forecast at the
beginning of the year. The value of our interests in the Ichthys LNG Project contributed to earnings for the year ended
March 31, 2013, as net income included approximately ¥50.0
billion in gains on the transfer of interests to LNG buyers/
partner in the Ichthys LNG Project. Moreover, INPEX decided
to distribute an annual cash dividend of ¥7,000 per share.
As announced on August 2, 2013, we forecast negligible growth in net sales for the year ending March 31, 2014,
and we expect net income of ¥142.0 billion on account of
the disappearance of the aforementioned one off gains on
the transfer of interests in the Ichthys LNG Project. INPEX
plans to pay a slightly higher annual cash dividend of ¥7,200
per share for the year ending March 31, 2014 (calculated
prior to the planned stock split). INPEX emphasizes a balanced approach to shareholder returns and profit growthover the longer term, because the Company is at the stage
where it is investing in growth mainly by developing two
world-scale LNG projects, Ichthys and Abadi.

A.

With business development advancing

Factors relaxing the balance of supply and demand havegiven rise to expectations for a fall in energy prices. These
factors include projections for an increase in the supplyof energy based on expectations for higher production of
shale gas in North America, as well as opinions that energy
demand may be weaker than the outlook for emerging countries. I believe factors such as these have applied downward
pressure to the share prices of all resource-related companies around the world, including our own. Taking a closer
look at each individual stock, however, we can see thatthe market has reacted positively to companies that havepromising development and production projects compelling stories, and companies with compelling stories such as
production starting on major LNG projects. The share pricesof companies that fit this description have remained strong.
Our compelling story begins with the start of production at the large-scale Kashagan oil field (Kazakhstan) during
the year ending March 31, 2014, and full-term contributions
from production at the Angola Block 14 area, in which we
acquired an interest last year. In addition, INPEX plans tocommence production at the Lucius oil field in the Gulf of
Mexico in the latter half of 2014. The most compelling partof our story is the smooth and steady progress being madeto move development forward on the Ichthys LNG Projectin Australia toward the launch of production. We expect themarket to recognize this steady progress in a timely fashion going forward. As we progress through each chapter ofour compelling story, we expect our share price to be reassessed at an appropriate level.

Management
Message

The Year in Review

are your thoughts on stock splits andlowering the minimum investment unit?
Q. Whatand earnings and dividends doing
Q. steadilyA.
well, what is your take on the Company sshare price?

A.

ʼ

Our share price is also affected by macroeconomic
factors to a certain degree, and we are focusing
on steadily achieving milestones in the Ichthys
LNG Project and other promising projects in order
to be given fair assessment by the market.

Conditions are now conducive to setting a shareprice threshold that would facilitate investing.
On October 1, 2013, INPEX plans a 1:400 stock split
for shares of common stock. At the same time, the Company
will adopt the share unit system and set its basic investment
unit at 100 shares of common stock. As a result, investors
will be able to buy and sell one investment unit at onequarter of the current share price. INPEX has received comments in the past, especially by individual investors, that its
minimum investment unit in common stock was too high.
By making it easier for investors to invest in the Companyʼsstock, INPEX believes liquidity in its shares will increase andlead to a fairer evaluation of its share price.

INPEX CORPORATION Annual Report 2013025

Management in Review: Progress on Major Projects
is the level of production at the
Mahakam Project in Indonesia?
Q. WhatA.

Under the project, measures were implemented
to slow diminishing production, and they worked.
The Mahakam Project is a main source of earnings
for INPEX until production commences at the Ichthys Project.
The Mahakam Project has been producing oil and gas formore than four decades, and production volume began todiminish in 2011. In addition to this natural decline, technical problems for the year ended March 31, 2012, resulted ina drop of about 20% in production volume compared withthe previous year. Under the project, measures were implemented, including additional development, to counter thisdecline. These measures were successful in effectively slowing the decrease in production from autumn 2012. We expect
the rate of decline in production to stay at a moderate levelgoing forward.

Can you give us a progress report on

Q. the Ichthys LNG Project in Australia?
A.

INPEX has finalized a project financing agreement
to secure funding. Development is on schedule,
and costs are in line with initial projections.
The Ichthys LNG Project is a crucial medium- to long-term
growth driver for INPEX. More than 10 years have passed
since the discovery of gas and condensate in 2000, during
which we have carefully moved ahead with preparations
for development. In January 2012, INPEX made the Final
Investment Decision (FID) for the project. In December
2012, INPEX took a major leap forward on fund procurement, reaching a project financing agreement for US$20
billion, one of the largest such agreements in the world, forthe deve lopment of the Ichthys Project. INPEX has worked
long and hard collaborating with the banking group thatsigned the agreement, composed of eight export credit
agencies and 24 commercial banks, and the fact that wereached an agreement without incident underlines the confidence placed in the project by the financial professionals.

026

INPEX CORPORATION Annual Report 2013

Development work is on schedule and on budget
according to initial projections, and I believe the next threeor so years before production starts will be a time that tests
the mettle of INPEX as an operator. With a great sense ofurgency and responsibility, our employees are unifying as
one to take on the challenges that each day brings.

Q. How is progress on the Abadi LNG Project?
A.

For the previous year, INPEX started front-end
engineering and design (FEED) work on the project, placing orders with two groups in a bid to foster competition and maintain quality.
The Abadi LNG Project is a large project on par with the
Ichthys LNG Project. We have been making steady progress on the Abadi LNG Project, starting up FEED work on
facilities from November 2012 through January 2013. For
FEED work on FLNG facilities, INPEX placed orders with
two groups, one led by JGC Corporation and the other bySaipem S.p.A. (Italy), to foster a competitive environment
and improve work quality to the greatest extent possible.
In 2011, INPEX welcomed oil major Shell as a strategic
partner in the Abadi LNG Project, and this successful partnership has been a major force propelling progress on various fronts, including FEED work.

Development work is on scheduleand on budget according toinitial projections, and I think
the next three or so years before
production starts will be a time thattests the mettle of INPEX
as an operator.

The Medium- to Long-Term Vision of INPEX
2

I would characterize the first year as a “jumpstart” as the Company spared no effort working
toward the growth targets of the vision. In particular, we took bold steps forward in upstream
businesses.
The year ended March 31, 2013, was the first year of theMedium- to Long-Term Vision of INPEX, which takes alook at where we want to be in five and 15 years. We got
off to a “jump-start” during the year, making progressin all areas covered by the vision. We made concerted
efforts toward attaining our first growth target, the continuous enhancement of our E&P activities, by acquiring
more than 10 upstream interests in the 14 months since
the vision was unveiled (in May 2012). The second gro wth
target is strengthening our gas supply chain. On this front,A.

construction on the Naoetsu LNG Terminal in Niigata
Prefecture is on schedule, and we have entered the final
adjustment stage prior to initiating operations. We also
concluded contracts for two new vessels in June 2013.
One vessel will service the offtake and delivery of LNG for
Naoetsu LNG Terminal. Another vessel will be operated asa time charter. The third growth target under the vision isreinforcement of our renewable energy initiatives. We built
a mega solar power plant on our idle land at the site of anold oil refinery in Niigata Prefecture and began generating
electricity there in March 2013. At our geothermal energy
projects under way in Hokkaido and Akita prefectures, we
completed first-stage geological surveys and a re drilling
three exploration wells as part of second-stage activities inthe year ending March 31, 2014.

INPEX CORPORATION Annual Report 2013

Management
Message

describe in detail the progress
made for the first year of the MediumQ. Please
to Long-Term Vision of INPEX.

027

Strategy for acquiring interests• Investment budget framework is ¥3.5 trillion• Hurdle rate (IRR: 10-15%)• Target regions (core areas, hot areas, frontier areas)

was INPEX able to acquire interests in
so many upstream assets in the short space
Q. Whyof a year?
One major reason is the greater trust placed in
INPEX internationally as it began development
work on the Ichthys LNG Project.
Of the more than 1,000 E&P companies around the world,
there are only 10 or so companies with sufficient finances andtechnologies to warrant the trust placed in an LNG operator.
Since INPEX is the LNG operator responsible for the Ichthys
Project, on which development work has only just begun, agreater degree of trust has been earned on the international
stage. And we are receiving increased number of partnership proposals from oil companies around the world. This is
the main reason why we have been able to acquire interests
in so many excellent projects.

A.

Please talk about the strategies manage-

when deciding whether to acquire
Q. ment
an interest.

premium, we would accept a minimum IRR of 10%. INPEX
also considers regional characteristics. INPEX categorizes
the strategic areas that it targets as core areas, hot (promising) areas, and frontier areas. Core areas center on Indonesia and Australia, mainstay regions where the Company has
accumulated know-how and extensive experience over theyears. When obtaining an interest in core areas, INPEX can
expect synergies by using facilities that are already in place
there. Hot areas are regions with strong potential reservesof oil and gas, such as Africa, Brazil and the Gulf of Mexico,
but entry costs are so high that a careful examination of economic viability and finances are essential. Frontier areas are
unexplored regions such as the Russian Far East, the Arctic
Ocean and South America. From a long-term perspective
these areas hold future potential, and projects mainly consist of exploratory activities.

Assuming the interests align with our growthstrategy, we base our evaluation on financial
analysis, economic viability, regional characteristics, and other criteria.
INPEX has a medium- to long-term target for net production volume of 1 million boed by the early 2020s. Based on
existing projects alone, we estimate production volume will
increase to 700 thousand boed from 2017 onward, indicating that we need to make up the remaining 300 thousand
boed through the acquisition of new interests. Assuming
the interests align with this medium- to long-term growthstrategy, we have set a hurdle rate that targets an internalrate of return (IRR) of 15% within an investment budget
framework of ¥3.5 trillion, and if an interest has a strategicA.

Of the more than 1,000
E&P companies around the world, there are
only 10 or so companies that are LNG operators.
While it is still in the development stage,
INPEX is the LNG operator responsible for
the Ichthys Project, raising the Company’s
visibility on the international stage.
028

INPEX CORPORATION Annual Report 2013

Medium- to long-term
production volume targets

1 million boed
700
thousandboed

New
projects

Existing
projects

Existing
projects

2017
onward

Early
2020s

300
thousandboed

408
thousandboed

Year ended
March 31, 2013(actual)The Business Environment for Energy Development
2“”

LNG projects?

Management
Message

Regarding these hurdles that must be

what impact will the so-called
Q. cleared,
shale gas revolution have on existing
There are hurdles to making LNG from shale gas.
We take a conservative view due to the challenges
involved in expanding the production of shale gas
and turning it into LNG for mass export from theUnited States. We also do not expect prices to bemuch different compared with a regular LNG project.
We often hear talk about the so-called “revolution” in shale
gas in North America, but we think a bit of caution is warranted with regard to the feasibility of ramping up production and turning the shale gas into LNG for mass export.
There are critics warning about the impact LNG exports will
have on the industry in the United States, and the amountof shale gas that can be exported as LNG to Japan andAsia is unknown. Natural gas prices in the United States rose
temporarily above US$4 per million Btu entering 2013, andfutures prices for five years out, when exports to Asia would
presumably begin, are above US$5 per million Btu. Adding to this the cost of liquefaction and transportation, which
we estimate totals about US$7 per million Btu, there is little
difference in the price of shale gas LNG and that from a
regular LNG project linked to the price of crude oil. In thislight, shale gas would not replace existing LNG projects. We
think that only the best individual projects will be competitive and prosper.

A.

What is your view of macroeconomic con-Q. ditions in relation to natural gas in Asia?
A.

We project robust demand for natural gas over the
medium to long term. We think there are potential
to supply for this growing market, but see highhurdles that must be overcome before full-fledged
supply operations can begin.
With regard to macroeconomic conditions, over the shortterm we anticipate higher natural gas production volumes
in the United States, which means the LNG that had been
destined for the United States is now available for othermarkets. Over the medium to long term, we expect threepotential supply sources to fulfill growing demand for LNG
in Asia, especially India, China and the ASEAN countries.
One potential supply source is new LNG supplies fromexisting producer countries such as Australia, and anotherpotential source is LNG supplies from new regions such as
Mozambique. The third potential source is LNG made fromshale gas in North America. However, the majority of these
supply sources have not reached FID status yet. As such,
I believe there are considerable hurdles that need to be
overcome to start as development projects. before full-scale
supply from them can begin.

Outlook for the price of shale gas produced in the United States andturned into LNG for export to Asia
（U.S.$/MMBtu）

14
12
10

Transportation cost

LNG

8Henry Hub price6(dotted line is futures price)

Liquefaction cost

4
2

U.S. natural gas prices

0
2013

2014

2015

2016

2017

2018

2019

INPEX CORPORATION Annual Report 2013029

are considered to be the attributes
The terrorist incident in Algeria in January
of a quality LNG project with supply
2013 is still a fresh memory. What is the
Q. WhatQ.
capacity?
Company s approach to country risk?
ʼ

The most important attribute is a project thatcan realistically create a stable supply of LNG
from a geographical characteristic view.
Launching an LNG project requires a massive investment.
To procure funds for these investments, we must gain thetrust of financial institutions and win the confidence of LNG
buyers to reach long-term LNG sales contracts with them.
Until there is a clear path to collecting a return on the investment, the project stays on the drawing board. East Asian
countries, including Japan, depend almost entirely on LNG
for their natural gas imports, an important geographicalcharacteristic to consider. For countries like these that haveno viable alternative to LNG, the focus is on price fairness
and the probability that a project can stably supply LNG.
We think an important attribute of a quality project is it
being able to earn the trust of LNG buyers in terms of supply stability.

A.

In the energy development business, it is difficult to completely eliminate country risk. We
frequently reevaluate security risk while incorporating the opinions of local staff and the resident
officer.
The heart-wrenching terrorist incident symbolizes the various risks involved in the energy development business indifferent regions around the world. While carrying out our
mission of developing natural resources, we must continually deal with country risk. In its biannual review of security
risk, INPEX incorporates the opinions of local staff and resident officers that know the region best, and spares no effort
to ensure the safety of all staff working on a project.

A.

Attention has focused on domestic

resources from the viewpoint
Q. energyof supply stability. Are there potential

oil and natural gas resources in Japan?

For the past two years, INPEX has scoured promising areas in Japan. From 2013, INPEX is starting
exploration work in specific areas.
Although limited in volume, there are still some promisingareas in Japan. The development of energy resources inJapan has the advantage of not having any of the foreign
currency and country risk that comes with overseas projects.
INPEX has spent the last two years looking to all over Japanfor promising areas. Based on these results, we are finally
starting exploration work in specific areas in 2013.
Backed by more than 70 years of operational experience in the development of oil and natural gas in Japan,
INPEXʼs domestic business division is the largest in Japan.
INPEX will continue to develop oil and natural gas resources
in Japan, leveraging its technical capabilities, financial position and experience.

A.

Our focus ison price fairness andthe probability that a project
can stably supply LNG.

030

INPEX CORPORATION Annual Report 2013

Our Relationship with
Stakeholders
2
Management
Message

Please describe the Companyʼs relation-

ship with stakeholders shareholders and
Q. investors
in particular.
­

INPEX aims to further enhance its ongoing communication with shareholders and investors.
The oil and natural gas business is exposed to considerable risks and operates on extremely long timelines.
For this reason, it is imperative that projects are promotedwith business partners that share the same values and havemutual trust and respect for one another. With this kind of
relationship, it becomes possible to deal head on with problems in lockstep with business partners. Like these business
partners, we hope to build long-term relationships of trustwith our shareholders and investors.
As the Company has expanded operations in recent
years, so too has the amount of information that should beshared between management, shareholders and investors.
In these circumstances, we think it is important to follow a
process where management respectfully discloses the Companyʼs conditions to its shareholders and investors, engages
in a candid discussion with its shareholders and investors
and listens sincerely to their opinions, and reflects these
opinions in management. I attend results briefings twice ayear and an IR presentation for individual investors at least
once a year. Moreover, I travel overseas to meet with institutional investors twice a year. This is just an example of how
important I think direct communication is. For the year ending March 31, 2014, we will proactively disclose information and engage in discussions with our shareholders andinvestors.

A.

We hope to build
long-term relationships of trust with
our shareholders and investors.
We will continue to emphasize
ongoing communication.

INPEX CORPORATION Annual Report 2013031

Outlook
How are you going to lead the Company
the year ending March 31, 2014?
Q. forA.

We aim to take bold strides forward as a company this year, building up our portfolio of quality
projects.
Building on the “jump-start” we had for the year ended
March 31, 2013, we want this year to be one of bold strides
forward for the entire company as a number of projects comeon stream, including the Kashagan oil field that is slated tostart production, and the Angola Block 14 area that will
have a full-year contribution to production. We went over
our earnings forecasts and dividend plans at the start of thisinterview. Development work on the Ichthys LNG Projectis in its second year, putting it at the central stage of its
development, and we will continue to make safe and steadyprogress according to schedule. While firmly pushing these
existing projects forward, there is also the possibility that we
could see major results from exploratory projects in which
we acquired an interest.

In last yearʼs annual report, I said that INPEX would gain
trustworthiness from an international perspective as it accumulates experience in the Ichthys LNG Project and otherprojects, and that this would lead to more opportunities toform partnerships in a wider selection of projects. With theshift to development operations at the Ichthys LNG Project,
opportunities for INPEX to participate in projects have infact increased dramatically. Since energy development projects are “living things,” a promising area that will suddenly
come to the scene must be pursued. On the other hand, it
is also necessary to make steady progress on basic work.
We are committed to steadily advancing the developmentof the Ichthys LNG Project and other projects while building
up our portfolio of quality projects. We strive for sustainablegrowth as a company by applying a stronger spin to thevirtuous cycle of growth.

July 2013
President & CEO

Toshiaki Kitamura

We strive for sustainable growth
as a company by applying
a stronger spin to
the virtuous cycle of growth.

032

INPEX CORPORATION Annual Report 2013

Market Trend andManagement Policy

3

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

14

Large-scale
LNG project operator
Production
GrowthIchthys

Abadi

INPEX is in the process of developing two of the worldʼsleading-scale LNG projects at Ichthys in Australia andAbadi in Indonesia. We are the first Japanese company
to develop such large-scale projects as an operator. The
expected production volume from both projects is vast,equaling more than 10% of Japanʼs current LNG annual
import volume. We are focusing on these priority projects,
which will increase the corporate value of our company.

Strong reserve /Resource base
Proved and probable reserves of

4.09 billion boe

積極的なIncreasing
探鉱・開発
Reserves
投資034

INPEX CORPORATION Annual Report 2013

Reserves and resources, which are the source of corporate
value, are the critical factor in the oil and gas E&P business.
INPEX has the largest proved reserves in Japanese companies in the sector. Our net proved and probable reserves
total 4.09 billion boe. Our reserves-to-production ratio is14.7 years for proved reserves and 27.5 years if probablereserves are added. Beyond our probable reserves, wehave an abundance of possible reserves and contingent
resources. We expect to continue increasing proved andprobable reserves over the medium to long term.

2
3

Gas supply chain
Domestic natural gas pipeline network

1,400km

Complementing the completion of the Naoetsu LNG
Termnal, INPEX owns a domestic natural gas pipeline
network stretching approximately 1,400 km that connects
domestic and overseas gas assets to the Japanese gas
market. We plan to add value by establishing a gas supply
chain through linkage between this network and our major
LNG projects. We are currently proceeding with work on
the Naoetsu LNG Terminal, with the terminal scheduled
to enter operation in early 2014. Construction of Toyama
Line (Toyama Prefecture) is also under way, with supplies
slated to commence around the end of 2014.

Accountingof Revenue
Attributable
to SalesStrong financial position
Equity ratio:

68.6%

Net debt/Net total
capital employed:

43.9%

−

A strong, healthy balance sheet and plentiful cash reserves
are essential for oil and gas E&P companies. This reflects
both the high degree of risk associated with E&P activities and the need to have sufficient funds on hand to takeadvantage of major investment opportunities quickly as
they arise. As a result of a public offering held in August
2010, our company secured a strong financial position. Asof March 31, 2013, our company had an equity ratio of
68.6% and a ratio of net debt to net total capital employedof –43.9%. (Cash and cash equivalents and public bonds
were greater than interest-bearing debts.) Compared withthe oil majors and other global peers, this represents asound level of financial strength.

Aggressive
Exploration andDevelopment
Investment

INPEX CORPORATION Annual Report 2013 035

The Structure and Mechanism of
Oil and Natural Gas Exploration and Development
Acquisition of Blocks
The business activities of the oil and gas industry can be envisioned as the flow of a river. The
upstream consists of exploration, development andproduction of oil and natural gas. The midstream iswhere products are transported. The downstream
refers to refining and sales. Our mainstay business isto handle operations in the upstream including the
exploration, drilling, production and sales of crude
oil and natural gas. As shown in the business flow
at right, upstream business activities can be further
classified into the acquisition of blocks, exploration,
appraisal, development, and production and sales.

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

INPEX participates in

80 projects across 29 countries
worldwide as of June 30, 2013.

Eurasia

6
Japan

Americas

Asia & Oceania

42

Middle East
& Africa

12

Global Reserves andReserves-to-Production Ratio

Proved reserves by region and reserves-to-production ratio (PR ratio)
Africa(As of December 31, 2012)

Global proved reserves of oil and natural gas total around 1.7 trillion bbl and
6,600 trillion cf, respectively. By region,
the Middle East accounts for the largest portion. In specific terms, Central
and South America as well as North
America have vast proved reservesof oil while Europe and Eurasia boast
large proved reserves of natural gas.
036 I 037

INPEX CORPORATION Annual Report 2013

7.8%

Middle East

48.4%

PR ratio(years)52.9

Asia Paciﬁc

Asia Paciﬁc 2.5%

8.2%

North America

13.2%

Crude oil

1,688.9billion bbl

Central,South
America

19.7%
Europe,Eurasia

8.4%

Africa7.7%
Middle East

43.0%

PR ratioNorth
America 5.8%

Natural gas

6,614.0
trillion cf

Central,South
America

4.1%
Europe,Eurasia31.2%(years)

55.7
Source: BP Statistical Review of World Energy 201319

Exploration

Appraisal

In addition to geological surveys, we utilize geophysicalsurveys conducted through satellite images and seismic
waves in order to assess
the potential subsurface
accumulations of oil andnatural gas. Furthermore,
we drill exploratory wellsin order to confirm thepresence of oil and gas.

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 amountof reserves. In addition,
we make comprehensive
judgments regarding thecommercial viability of the
fields.

Geophysical surveys

Drilling of appraisal wells

Satellite

Offshore drilling rig(platform)

Offshore geophysical survey

Natural gas
Oil

Global Energy Demand
Looking at global primary energy consumption, oil and natural gas accountfor more than half of the worldʼs primaryenergy demand.
From a global perspective, demandfor energy is forecast to increase evenfurther in such developing countries as
China and India. Natural gas in particular is expected to witness substantial
growth in demand especially in major
regions.

Natural gas demand by country or region
Americas(Billion m³)

Middle East
Europe
China
India
Japan

World primary energy consumption 2012
Hydroelectricity

Renewables

1.9%

6.7%

1,200
1,000

Nuclear
power

800

12.48

4.5%

600

Coal

400

29.9%

200
0

2010

Total

2015

2020

2025

2030

2035

Source: IEA World Energy Outlook 2012
in the New Policies Scenario

Oil

33.1%

billion toe
Natural gas

23.9%

Source: BP Statistical Review of World Energy 2013

Development

Production and Sales

We drill production wells for the production of oil andnatural gas. We also construct separators, gas processing facilities and a transport pipeline, which arenecessary for production
and shipping.

We perform production and operation management
such as refining/treatment to create products from theoil and natural gas recovered from the production
wells. We also engage inmarketing and sales forthe produced crude oil,condensate, LPG, natural
gas and LNG.

Drilling of production wells

LNG tanker

Onshore rig
LNG tanker

World primary energy demand by fuel(Million toe)
5,000

Coal
Oil
Natural gas

4,000

Nuclear power
Hydroelectricity

3,000

Natural gas

Biomass

To grow 1.6%
annually

Other
Renewableenergy

2,000
1,000
0
2010

2020

2035

Source: IEA World Energy Outlook 2012 in the New Policies Scenario

Natural gas is forecast to experience high demand growth. Amid
an upswing in overall energy demand, the annual natural gas
growth rate is projected at 1.6% from 2010 to 2035. Expectations
are that demand for natural gas will approach demand for coal in
2035. In contrast to fossil fuels, which are limited resources, solar,hydro, biomass, geothermal, and similar energy sources are gaining attention because they are renewable energy sources that canbe reused in the short term and, moreover, produce less CO2
emissions. Although demand for hydro and biomass energy as aratio of overall energy demand is expected to remain more or lessflat through to 2035, demand for other renewable energy sources
is expected to increase (2010: 1% → 2035: 4%).

Investment Aimed at Further Exploration and the Acquisition of Assets

Consumer demand

3Market Trend andManagement Policy

LNG receiving terminal

Pipeline, tanker

Naoetsu
LNG
Terminal(Under construction)

Toyama Line (Under construction)

Minami-Nagaoka
Gas Field

Shin Oumi Line
Tokyo Line

Naoetsu LNG Terminal andNatural Gas Pipeline Network

Shin Tokyo Line
Matsumoto Line
Ryomo Line
Kofu Line
Iruma LineINPEX is constructing an LNG receiving terminal in
Naoetsu, Niigata Prefecture. The Company will supply
natural gas throughout Japan using this LNG receiving
terminal and its natural gas pipeline network that extends
across the Kanto and Koshinetsu regions.

Shizuoka LineOil and Natural Gas Demand in Japan

Japanʼs primary energy supply (2011)

The demand for oil has been decreasing inJapan recently, but oil is broadly used as asource of heat and power, as well as in the production of materials, and even now accounts
for more than 40% of Japanʼs primary energy
demand. The share of LNG used for thermal
power generation in Japan has risen in the wakeof the shutdowns of nuclear power plants after
the Great East Japan Earthquake, with demandfor LNG growing. LNG import volume increased
more than 10% from the previous year reachingan all-time peak of 87.31 million tons in 2012.

Newenergy,etc.

Hydroelectricity

3.6%

1.5%

Nuclear
power

4.2%

(Million tons/year)

2012: 87.31 million tons

80
60

Coal

21.9%

LNG import trend in Japan

Oil

47.2%

Natural gas

40

20

21.7%

0

1995

Source: Energy & Economic Statistics in Japan 2013

2000

2005

2010

Source: Ministry of Finance trade statistics

INPEX CORPORATION Annual Report 2013

038 I 039

The Medium- to Long-Term Vision of INPEX
and Investment Plans
In May 2012, INPEX drew up its Medium- to Long-Term Vision of INPEX to clarify the Companyʼs growth targets over the medium to long term and the key initiatives the Company
will take through the year ending March 31, 2017, to achieve these targets. Over the fiveyear period from the year ended March 31, 2013 to the year ending March 31, 2017, INPEX
plans to invest a total amount of ¥3.5 trillion. In addition to funds on hand, investment
funding will be covered by future operating cash flows as well as bank loans while taking
into consideration the Companyʼs financial soundness.
MEDIUM- TO LONGTERM VISION OF INPEX:
Ichthys and our growth beyond
For details, please refer to thebooklet entitled “MEDIUMTO LONG-TERM VISION OF
INPEX: Ichthys and our growth
beyond,” or refer to the following Web site:

I

at

lO

Gas E&P Company1Continuous Enhancement of
E&P Activities

To
p

-C

la

ss

} inpex.co.jp/en/vision

rn
e
nt

a
io n

d
il a nomeaAchieve net production
volume of

Be c

1 million boedby the early 2020sThree Growth Targets
We have set three growth targets necessary forsustainable growth, and will conduct key initiatives over the next five years to achieve them.

Three Management Policies
We are positioning ourselves to become a top-classinternational oil and gas E&P company and are
improving and building our management base to
evolve into an integrated energy company.

1

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

040

INPEX CORPORATION Annual Report 2013

Maintain Financial Strengths
Financial performanceand target
As of
March 31,2013

Net debt /Net total capital
employed69%

20%

Equity ratio

As ofMarch 31,
2013

50%

or higher

or less-44%

Funding Source
Own Funds
Approximately ¥1.5 trillionof cash available on hand
(As of March 31, 2013)

Cash Flows
Future operating cash flows
obtained per year

Bank Loans■ Lending from JBIC
■ Guarantee from JOGMEC■ Project finance

Be

c

e
om

g
I n teanrated Energy Com

2

pa n
yw

it h

na

ra

l

ga

Strengthening
Gas Supply Chain

tu

sa
st

he
co
re

Achieve domestic gas
supply volume of3
Market Trend andManagement Policy

2.5 billion m / year
3

by the early 2020s

3(3.0 billion m³/year in the long term)

Reinforcement ofRenewable Energy Initiatives

2

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

Investment for Growth andReturn for Shareholders
Future Investment
Investment results andinvestment plan for
the next three years(¥ billion)¥3.5 trillion
to be invested over

5 years

from the year ended
March 31, 2013
to March 31, 2017
in major projects
including Ichthys■Development expenditures*■Exploration expenditures■Other capital expenditures**1,131.0

Including
exploration
expendituresof around

1,003.0

919.0
814.0

653.3

733.0
657.0

576.7

¥300 billion
54.0
22.6
2013/3(Actual)

91.0
37.0
2014/387.0
18.0
2015/370.0
6.0
2016/3* Development expenditures include
investment in Ichthys downstream** Mainly investment in the Naoetsu LNG Terminal and the domestic pipeline network, etc.

3

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

INPEX CORPORATION Annual Report 2013041

Where does crude oil and natural gas come from?
Crude oil and natural gas are thought
to originate from organic matter, suchas the remains of once-living organismsthat accumulated at the bottom of seas
and lakes, and then subjected to extreme
heat and pressure underground. Crude
oil and natural gas that have formed
deep underground are lighter than thedirt and water in the earth, allowing themto gradually rise to the surface over a
very long period of time. If the crude oiland natural gas encounters highly dense
geological formations on the way to thesurface, however, it is blocked and forms
deposits that become oil and gas fields.
Shale gas differs from conventional
natural gas in that it is trapped within layers of hard shale formations. Shale gas isrecovered by drilling horizontal wells into
these formations and applying hydraulicfracturing to crack the layers of shale torelease the trapped gas.

Limestone
Sandstone

Volcanic rock

Approximately
1 mm
in diameter

Orangepart is pore

Shale gas field

Conventional
oil and gas field

Crude oil and natural gas is found in small
pores in sand and rocks.

Surface of the earth

Shale

Coalbed methane

Natural gas
Crude oil

Sandstone (reservoir rock)

The color, specificgravity and viscosityof crude oil and natural gas differ greatly
depending on thelocation of the well.

Layers of shale rich in gas

Tight sands gas

Shale gas

INPEXʼs position among global E&P companies
INPEX is currently positioned as a mid-tier player among the
global E&P companies. However, INPEX aims to join the leading group of global E&P companies in the early 2020s after
the commencement of production at the Ichthys LNG Projectin Australia. The chart below compares the proved reserves,
net production volume and market capitalization of major E&P
companies.

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

1,000

800

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

Apache (US)

Talisman (CA)Occidental (US)Anadarko (US)600

( Present )

400

408
thousand boed

Net production volume (Thousand boed)

Proved reserves and production volume indicated in this chart are from documents disclosed by the major E&P companies in fiscal 2012.
The size of the circle shows the market value of each company as of June 30, 2013.

Santos (AU)
200

h
blis
sta s aeg to n a ny
kin sitio pa
BG (UK)
See rm po P com 20s
a fi bal E& rly 20
glo the ea
Probable reserves tobyupgrade toproved through explorationand development

01

Woodside (AU)

2

3

4

Our net production
volumeOur proved
and probable reserves

Proved reserves: 2.19 billion boe

Probable reserves: 1.91 billion boe

Proved reserves (Billion boe)

042

INPEX CORPORATION Annual Report 2013

Special Report4Special Report

Contributing to Future
Supplies of Energy to Japan
Japanʼs low energy self-sufficiency rate demands stableand efficient supplies of energy, and in recent years environment-friendly,
clean energy with low CO2 emissions has been needed more than ever.
Through these Special Report pages of Annual Report 2013,
we would like to provide more details: in Special Report 1 on
the potential of unconventional resources and renewable energy and
INPEXʼs activities, all of which are attracting attention
and in Special Report 2 on the progress of the Ichthys LNG Project,
by which the Company will contribute greatly to the supply of energy to Japan.

Special Report 1} Shale Gas p. 45} Geothermal p. 46} Mega Solar p. 47} Methane Hydrate p. 47

Special Report 2} Ichthys LNG Projectpp. 48–55

044

INPEX CORPORATION Annual Report 2013

Special Report 1: Unconventional Resources and Renewable Energy#

1 Shale Gas

One kind of unconventional natural gas, shale gas is
the name given to the gas found in underground shale
beds. Involving the drilling of a well horizontally into
the shale beds, the production volume of shale gas ismaking great strides due to established gas recovering
technologies that artificially create a crack so that thegas can be extracted. The development potential of
shale gas is attracting attention throughout the world,
particularly in North America.
There are, however, points to bear in mind in thedevelopment of shale gas. These include the impact
on the environment at the time of development andthe mounting costs of development in comparison
with conventional gas fields. Furthermore, shale gas
must be liquefied prior to being brought to Japan fromoverseas, which requires transportation costs in addition to liquefaction and transportation infrastructureand export licenses from the gas-producing country.
As part of its global gas portfolio, INPEX has participated in a shale gas project in Canada since 2011.
Although there are issues with Canada such as infra-

structure, the country offers advantages that include
substantial reserves, a government that takes a moreaggressive approach toward LNG exports, and its relatively proximity to Japan after LNG conversion. INPEX
expects this shale gas project to become a new supply
source of LNG for Japan and is looking into the possibilities of LNG conversion while making progress withstudies.

Shale gas project in Canada (Horn River area)

4
Special Report

Conventional natural gas
Conventional oil

Shale beds

Shale gas

INPEX CORPORATION Annual Report 2013

045

#

2 Geothermal Power Generation

Geothermal power generation involves
using the heat energy of volcanic
magma to create steam, which turns
turbines, and to thus generate power.
Geothermal is also gaining attention asa precious clean energy source becauseof its low CO2 emissions during power
generation and its ability to generate
power stably without climate or seasonal effects compared to the othertypes of renewable energy.
A land of volcanoes, Japan is said
to have appreciable geothermal energy
supplies of approximately 20 million
kilowatts (kW), the worldʼs third-largest
source after Indonesia and the UnitedStates. However, the total amount of
power generated by the geothermal
power plants in operation in Japan is
only around the 0.5 million kW unit
level. Furthermore, as many of the areas
with geothermal potential are locatedin national parks and hot spring areas,
geothermal development requires

paying heed to such aspects as environmental regulations and gaining theunderstanding of local communities.
Since 2011, INPEX has been participating in joint studies into geothermal development in both Akita andHokkaido prefectures. The Company
is conducting a large number of drilling operations, including the drilling ofboth exploratory and production wells
for geothermal power generation. The
Company subsidiary Teiseki DrillingCo., Ltd., conducted the drilling of thefirst geothermal power production wellin Japan. The technologies needed forgeothermal development activities,
which include looking for undergroundsources and the drilling of wells, are thesame as those utilized for oil and natural gas development; INPEX is also able
to leverage its technological strengths
and experience. In the years to come,INPEX will be exploring the possibilities
of geothermal power development not

only in Japan but also in the Companyʼscore areas overseas, including Indonesia, which possesses the worldʼs largest
source of geothermal energy.

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

TurbineGenerator

Cooling
tower
Condenser

Steamseparator

Brine tank
Production well

Injection well

Geothermal reservoir

Magma

046

INPEX CORPORATION Annual Report 2013

External
air

Substation

#

3 Mega Solar

In photovoltaic power generation, large-scale systems
with an electric generating capacity of 1 megawatt (MW)or more are called Mega Solar facilities. Since the Great
East Japan Earthquake, expectations have been growing that photovoltaic power generation will help toward
dispelling anxieties about power supply shortages. The
construction of Mega Solar facilities comprising ranks ofmany photovoltaic panels over a wide area is being promoted in several areas throughout Japan.
INPEX Mega Solar Joetsu̶in the city of Joetsu,
Niigata Prefecture̶that has a maximum electric generating capacity of 2 MW. The Companyʼs first photovoltaic
power generating system, INPEX Mega Solar Joetsuʼsphotovoltaic panels were installed on the site of theCompanyʼs old refinery. Power generation operations
started in March 2013.

#

4 Methane Hydrate

Another kind of unconventional natural gas, methane
hydrate has a solid crystalline structure of water in whichmethane molecules are trapped, giving rise to the name“combustible ice.” As methane hydrate is stable in lowtemperature and high-pressure environments, sources
are found under the permafrost layer onshore, and at
depths of more than 500 meters offshore. The presenceof methane hydrate in Japan and in the seas surrounding Japan is being confirmed, and the substance is
expected to be one of the countryʼs future gas sources.
However, due to the technical challenges involved in
extraction from low-temperature and high-pressure
strata, it will reportedly be some time before economically justifiable development technology is established.

4

INPEX Mega Solar Joetsu

Special Report

Combustible ice

Methane hydrate beds

INPEX CORPORATION Annual Report 2013047

Special Report 2: Ichthys LNG Project Status

Progress Status
DarwinIchthys gas-condensate field

Under development by the Company,
the Ichthys LNG Project is a large-scale project to produce
approximately 10% of Japanʼs annual LNG import volume.
Work has been proceeding smoothly
since the Final Investment Decision (FID) in January 2012.
The work carried out in 2012 centered on
the detailed engineering of facilities and procurement.
From early 2013, we started construction of the offshore production
facilities and the main modules of the onshore gas liquefaction plant, andprocurement as well as construction work will be finally in full progress.
Contributing to future supplies of the worldʼs energy to Japan–
through these Special Report pages of Annual Report 2013,
we would like to provide more details about the progress ofwork realizing the Ichthys LNG Project and the work in each area.

048

INPEX CORPORATION Annual Report 2013

Project Timeline
1998

Participated in open bid, permit acquired} Submitted bid in open bid process conducted by the Australian Federal Government in March;permit for Block WA-285-P acquired in August of the same year

–

2000
2004

} Undertook first drilling campaign, confirmed presence of gas andcondensate in all three exploratory wells} Conducted 3-D seismic survey} Undertook second drilling campaign, confirmed areal extensionof reservoir and presence of gas and condensate by drilling three
exploratory wells

–

2007

} Confirmed extension of the Ichthys gas-condensate pool throughfurther drilling of two wells} Selected Darwin for LNG plant site

2009

Preparation for development

–

2008

2011

} 2009: Started front-end engineering and design (FEED) activities} July–September 2010: Public review of Environmental Impact

Statement (EIS) conducted} May 2011: Pipeline license acquired} 2011: Environmental approval received from Northern Territory

government (May) and from Australian Federal Government (June)} December 2011 to January 2012: LNG sales and purchaseagreements (SPAs) were signed with eight LNG buyers covering
entire production volume of 8.4 million tons completed

2012} January: Final Investment Decision (FID) made,start of detailed engineering and procurement} March: Production licenses granted} May: Groundbreaking ceremony at gas liquefaction plant (Darwin)} December: Project finance agreement signed

2013} January: Steel cutting ceremony for Central Processing Facility (CPF)} February: Insurance arrangements for major facilities during

construction period concluded} June: Contracts for the building and ownership of new LNG

vessels related to LNG transportation and of fixed-term shipcharters concluded} June: Steel cutting ceremony for floating production storage andoffloading (FPSO) facility} Construction of offshore facilities and onshore gas liquefaction

modules2014} Drilling of production wells–} Construction of piers, tanks, etc. at onshore facility} Transportation and onsite installation of facilities

2016} Commissioning} Production startup by the end of 2016

Offshore Production Facilities
Offshore production facilities comprise: a Subsea Production System(SPS), which includes the well heads that will carry out production
from the production wells on the sea floor: umbilicals, risers and flowlines (URF) that transport the product; the Central Processing Facility(CPF) that processes the product received via the flexible risers fromthe production wells, separating it into gas and condensate; and thefloating production storage and offloading (FPSO) system that storesand ships condensate. The Company started construction work onthese facilities in 2013.

} Started construction work of main facilities(CPF, FPSO) in 2013
} Production well drilling scheduled tocommence in 2014

Steel cutting ceremony for CPF (Geoje, South Korea)
January 2013, at the Samsung Heavy Industries shipyard. Measuring around
150 meters by 110 meters and with a displacement of 140,000 tons, thissemi-submersible production facility is the largest of its kind in the world.

Floating Production,
Storage and Offloading(FPSO)

CentralProcessing
Facility(CPF)

Gas Export Pipeline
The approximately 900-km-long gas export pipeline will run from theoffshore CPF to the onshore gas liquefaction plant at Darwin. The
42-inch diameter pipe will pass along the sea floor at a depth of around
250 meters. The detailed engineering of the gas export pipeline andthe manufacture of its steel pipes are already completed. Following
coating work, the laying of the steel pipes will commence in 2014.

} Manufacture of steel pipes for the approximately

900-km pipeline completed} Following coating of the steel pipes,
pipe-laying to commence in 2014

Onshore Facilities
Comprising a gas liquefaction plant, storage facilities such as tanks
as well as shipping piers, onshore facilities are under construction at
Blaydin Point, which is across the harbor from the city of Darwin in
Australiaʼs Northern Territory. For this purpose, we are firstly advancing work on the preparation of the plant site and dredging work in
the Port of Darwin. Use of the workforce Accommodation Village has
already commenced, and 3,500 rooms will be completed in 2014.

} Construction commenced in various locationsof the world in 2013
} 3,500-room workforce Accommodation
Village scheduled for completion in 2014050

INPEX CORPORATION Annual Report 2013

Site of onshore gas liquefaction plant
Aerial view of the plant site. The engineering, procurement and construction (EPC) contract work for the onshore LNG plant is being carried out
by a Japan-U.S. joint venture, comprising JGC Corporation and Chiyoda
Corporation from Japan and U.S.-based KBR, Inc.

Steel cutting ceremony for FPSO (Okpo, South Korea)
June 2013, at Daewoo Shipbuilding & Marine Engineeringʼs shipyard.
A steel cutting ceremony was held to celebrate the start of construction
work.

Site for flexible riser manufacturing
February 2013, Technip S.A.ʼs Le Trait plant. In the manufacturing process
for the hoses that will transport product from the sea floor to the CPF, a steel
catenary wire is wound into the hose to increase its strength.

Onshore gas liquefaction plant(Far left, left)
Unloading of steel pipes foruse on pipeline
Photos showing the unloading ofsteel pipes that have been transported to Kuantan in Malaysia forcoating work. The pipes manufactured in Germany and Japanare undergoing coating work inIndonesia and Malaysia.

Dredging work in the Port of Darwin
To secure the route to be taken by tankers and other vessels, a dredger isdeepening the sea floor in the area around the construction site in the bay.
The photo shows the dredger Athena.

Workforce Accommodation Village
Aerial view of the workforce Accommodation Village. The white buildings
are the workforce Accommodation Village dormitories that extend to 1,000
rooms.

INPEX CORPORATION Annual Report 2013

051

1

2

Australia (Darwin)

Australia (Perth)

LNG Plant Construction, Building ofWorkforce Accommodation Village,
Detailed Engineering Work in the Port of Darwin
In Darwin, onshore LNG plant construction work is being carried out by
a Japan-U.S. joint venture, comprising JGC Corporation and Chiyoda
Corporation from Japan and U.S.-based KBR, Inc. A Dutch company,
Van Oord Dredging & Marine Contractors BV, is advancing the dredging work in the Port of Darwin.

LNG plant

Project Management,
Detailed Engineering Work of GEP
Perth is responsible for the overall management of the project. Here,the branch office of Saipem S.p.A. is undertaking detailed engineeringof gas export pipeline design work.

Dredging operations

Image of the completed LNG plant (left) and a photo of
the dredging operations in the Port of Darwin.

Engineers discuss the laying of the pipeline, which will be approximately
900-km long, from the Ichthys gas-condensate field to Darwin.

Project Bases Span
the Globe

3

4
5
6

Detailed engineering and construction for the Ichthys Project isbeing undertaken by highly reliable EPC contractors all over the world.
Facilities constructed in several parts of the world are ultimately transported
and installed at the Ichthys LNG Project sites.

3

4

United Kingdom (Aberdeen)

Detailed Engineering Work of
Subsea Production System(SPS)
In the United Kingdom, GE Oil & Gas isundertaking the detailed engineering, procurement and manufacture of the SPS.

5The Netherlands (Leiden)

Detailed Engineering
Work of URF
In the Netherlands, McDermott and its subcontractor, Heerema Marine Contractors B.V.,
are carrying out detailed URF* design work.
* The abbreviation for umbilicals, risers and flowlines, the equipment that connects the wellheads to the offshore CPF.

Germany (Mühlheim)
Kashima, Kimitsu

Manufacture of Steel Pipes
for Pipeline
The steel pipes for the GEP are being manufactured in Germany and Japan. Manufactured pipes are transported to Malaysia andIndonesia for coating.

GE Oil & Gas is also
manufacturing and testing the systemʼs 42-inch
connector parts at its
plant in Norway. These
will be used on theequipment that connects the flexible risersfrom the CPF to the
42-inch pipes leading toDarwin.
Artistʼs impressions of the URF and CPF

052

INPEX CORPORATION Annual Report 2013

Sections of the 42-inch diameter steel pipes thathave been transported to Malaysia for coating

6

7

Monaco8

Malaysia (Kuala Lumpur)

Detailed Engineering of
FPSO Turret

The detailed engineering work of the turret̶
installed in the FPSO to moor the FPSO in a
fixed position and to connect the flexible risers to the FPSO̶is being undertaken at theMonaco office of SBM Offshore N.V.

Image of the FPSO after completion. The overall
length of the FPSO is approximately 330 m.

Singapore

Detailed Engineering Work for
FPSOʼs Topside

The detailed engineering of the FPSOʼs topside̶the oil or gas production facilities installed
on a shipʼs deck̶and of the FPSOʼs turret isbeing carried out in Kuala Lumpur, Malaysia,
by Daewoo Shipbuilding & Marine Engineeringand SBM Offshore N.V., respectively.

Detailed Engineering ofInstrumentation and Controls,
Construction of FPSO Turret
In Singapore, Yokogawa Electric Corporation iscarrying out the detailed engineering of instrumentation and controls, and SBM Offshore N.V.
is constructing the FPSO turret.

Image of the FPSOʼs topside after completion

The FPSO turret steel cutting ceremony held inJanuary 2013 (Singapore)

11

4

United States (Houston)

9
5

10

11

The detailed engineering of the CPFʼs topside̶
installed oil or gas production facilities̶is being
undertaken in Houston by Mustang Engineering
L.P. (a Samsung Heavy Industries subcontractor).

Special Report

Detailed Engineering Work of
CPF Topside

7
8

1
2

10
Image of the CPF after completion

10

Yokohama
9South Korea (Geoje, Okpo)

Detailed Engineering andConstruction Work for CPF andFPSO Hulls

Australia (Perth, Brisbane)

Detailed Engineering Work of
LNG Plant
The detailed engineering work on the main
facilities for the onshore gas liquefaction
plant is being carried out at Yokohama inJapan and at Perth and Brisbane in Australia.

The detailed engineering of and construction work for the hulls of the CPF and FPSO is
being carried out in South Korea by Samsung
Heavy Industries and Daewoo Shipbuilding &Marine Engineering, respectively.
An artistʼs impression of the CPFʼs hull after completion. When installed at the facility, the CPF willmeasure 150 m by 110 m and be the largest semisubmersible production facility in the world.
Final checks of the detailed engineering are
carried out at the Yokohama engineering office.

INPEX CORPORATION Annual Report 2013053

Ichthys LNG Project
Characteristics and Strengths
The characteristics and strengths of the Ichthys LNG Project that
set it apart from other LNG projects include its substantial condensate and LPG,
which raises economic efficiency; good coordination and relationship with
TOTAL of France, which has a wealth of project experience;and reduced risk of cost overruns due to a high ratio of lump-sum contracts.
Furthermore, for the year ended March 31, 2013, INPEX ensured funding bysigning project financing agreements and completed the arrangement ofdamage insurance cover for the related facilities, the construction of which has just started.
By means of its fully prepared systems, INPEX will continue towork toward the start of production by the end of 2016.

Substantial Condensate and LPG
In addition to the 8.4 million tons of LNG per year,
the production volume of the project calls fora maximum of 100,000 barrels of condensate a day
and 1.6 million tons of LPG per year.

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

Cooperation with
Oil Major

Sales of Entire LNG Production
Volume Completed

Development work is being advanced with oil major
TOTAL, which has a vast amount of experiencein LNG projects.

The signing of sales and purchase agreements
covering the entire production volume was completed
before the Final Investment Decision (FID).

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

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

054

Ratio of Lump-Sum Contracts:
Approximately 75%

INPEX CORPORATION Annual Report 2013

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

Insurance Arrangements for
Facilities during Construction
Period Completed
In February 2013, INPEX completed insurance
arrangements related to the construction periods ofthe projectʼs onshore and offshore facilities.

Response to Risk of
Cost Overruns,
Schedule Delays

4
How do you go about managing the operations of each base, which span the world?

A.2

For the Ichthys LNG Project, we have assigned a person in charge at each base. In addition to carrying out
detailed operations management, we ascertain andmanage the overall project operations from Perth on
the basis of regular operational reports from each base.
In addition, a Technical Directorate and a Project
Coordination control overall operations in a crossorganizational manner.

Q.1

How many people are engaged in the framework for advancing the development work?

Q.3

Please tell us about the projectʼs upside
potential.

A.1

Excluding the EPC contractors, there are 1,400 people
on the Ichthys LNG Project overall, of whom 40 are
seconded from the oil major TOTAL (as of June 30,2013). Through the course of development work it isexpected that this will increase up to a maximum ofaround 1,700 for the overall project.

A.3

The area around the giant Ichthys gas-condensate field
has high exploration potential. INPEX retains interests
in a total of 10 blocks surrounding the Ichthys field,
six as an operator and four as a non-operator, andfinds have already been made in three of them. We
will continue our exploration and assessment activities
in the surrounding exploration blocks in the years tocome with a view to the joint development of Ichthys.

Q&A

Seiya Ito

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

Timor Sea

WA-274-P
WA-410-P
WA-411-P

Special Report

Q.2

Ichthys

AC/P36
WA-343-P
WA-341-P
WA-344-P
WA-285-P
WA-494-P

WA-281-P
Ichthys gas-condensate field

Australia

INPEX CORPORATION Annual Report 2013055

What is the ultimate
renewable energy?
The development of various forms of renewable energy has been
attracting increasing interest in recent years. Regarded as theultimate renewable energy, there are high hopes for hydrogen,which only produces water at the time of combustion. At thepresent time, however, hydrogen is manufactured as a raw material using exhaustible resources such as oil. Research is therefore
being conducted into a revolutionary manufacturing method
where solar energy is used instead of oil to break down waterand obtain hydrogen.

H2

lar y
So ergEn

Hydrogen

O2
OxygenH2O
Water

Size of the Ichthys LNG Project
250

243 m

200 m or higher

200

150

100

65.45 m50

0Tokyo Metropolitan
Government Headquarters

Producing 8.4 million tons of LNG peryear, the Ichthys project requires a largescale production facility. Designed to
produce and process gas extracted
from subsurface, the floating production
facility known as the Central Processing
Facility (CPF) is more than 200 meters
high, making it the largest offshore facility in the world.

Ichthys LNG ProjectCentral Processing Facility(CPF)

National Diet Building, Tokyo

Graphic representation of the size of the Ichthys gas-condensate field

SaitamaIchthys gas-condensate field
Tokyo
Chiba

An extremely large gas-condensate
field, Ichthys covers an area of approximately 600 km2 and is around 40 km
along its longest axis and more than
15 km along its shortest. The graphic to
the right shows the area of the gas reservoirs superimposed on a map of Tokyo.

056

INPEX CORPORATION Annual Report 2013

Kanagawa

010km

PROJECT
Overview

5Project (Segment) Overview

Asia &p.60
Oceania

Eurasia
p.64

8

4

}

1,551

}

1,296
1,296

Number of countries

1

Number of projects

1

42

20

In production

2

4

1

5

Under development

2

6

12

Discovered /Preparation for development

Project Summary

Upside Potential

058

INPEX CORPORATION Annual Report 2013

190

188

210

207

211

207
2008

25

2013

25

2012

28

2011

27

2010

25

2009

54

195

2008

179

185

■Net production (thousand boed)

177■Proved reserves (million boe)

214

Production / Reserves

201

367

466

523

530

Other project

Substantial increase in net proved reserves owing to the booking of
Ichthys reserves as a result of development transfer.

Under exploration

2009

2010

2011

2012

2013

In the core Asia and Oceania region, INPEX isengaged in activities in the Offshore Mahakam
Block, which is contributing significantly to earnings, and the large-scale Ichthys and Abadi
LNG projects, where development as well as
preparation for development are ongoing. At
the same time, the Company is actively advancing multiple small and medium-sized production
projects.

The Companyʼs activities in this region revolve
mainly around the ACG Projects in Azerbaijan and
the Kashagan Project in Kazakhstan, a large-scale
oil project. With the commencement of production
at the Kashagan Project, production volumes inthe Eurasia region are expected to increase going
forward.

Exploration prospects number up to a maximumof 20 in this region. Of this total, 10 projects are
in close proximity to the Ichthys gas and condensate fields. In addition, interests are maintained in exploration blocks near the Offshore
Mahakam Block and in the frontier areas of the
Bay of Bengal in India.

Two exploration potentials were added to theportfolio during the year ended March 31, 2013.
INPEX was awarded offshore exploration blocks
located northwest of Shetland Island in the
United Kingdom in October 2012. The Company
also concluded a Cooperation Agreement with
Rosneft regarding the exploration blocks in the
Sea of Okhotsk, Russia in May 2013.

Middle East&
Africap.66

Americas
p.68

Japan
p.70

8

8

1

}

6

}

Minami-Nagaoka
Gas Field

5

12

4

}

19

2

Naoetsu LNG
Terminal

11

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

1

505

518

583

636

682

739

2

130

138

126

137

117

2013

25

28

29

2013

30

17

36

2012

32

2011

18

30

40

2010

21

21

38

2009

32

2008

17

26

68
2012

15
2011

158

2010

155

135

146
2009

132

145
2008

Project Overview

151

5

2008

2009

2010

2011

2012

2013

The Middle East and Africa region accounts formore than 60% of INPEXʼs net oil production volume. From both the Companyʼs reserves and net
production volume perspectives, the mainstay
ADMA Block in Abu Dhabi in the United ArabEmirates contributes substantially. In Africa, theacquisition of a project in Angola Block 14 during
the year ended March 31, 2013 is also expected
to bolster reserves and production volumes.

The Companyʼs track record as a development
operator in Venezuela spans more than 20 years.
In addition to its development and preparation
for development activities in the Joslyn oil sandsand shale gas projects in Canada, INPEX participates in such projects as the Lucius oil field in
the deepwater Gulf of Mexico in August 2012.

INPEX is active in the Minami-Nagaoka Gas
Field in Niigata Prefecture, one of the largest of
its kind in Japan. At the same time, the Company
operates a domestic trunk pipeline of approximately 1,400 km. With the Naoetsu LNG Terminal scheduled to come online from 2014, INPEX
is positioned to put in place a comprehensive gas
supply chain.

Building its portfolio in the Middle East, INPEX
was awarded an onshore exploration block in
Iraq in May 2012. Plans are in place to commence
exploration activities going forward. In April
2013, the Company took steps to participate inan exploration block in offshore Mozambique,
East Africa. Moreover, exploration potential
exists within Angola Block 14.

Additional exploration and development projects
with potential include the shale gas project inCanada and the offshore exploration projectin the frontier area of Uruguay, South America.
Moreover, considerable interest is being directed
toward the succession of pre-salt (deepwater oilfields) discoveries in offshore locations in Brazil.

INPEX has placed considerable weight on surveying new oil and natural gas resources both onand offshore Japan for many years. The Company
has conducted comprehensive evaluation workover the past two years. In addition to identifying
promising areas, INPEX has also established an
exploration policy going forward. Looking ahead,
the Company will engage in specific exploration
work based on its past findings and policy.

INPEX CORPORATION Annual Report 2013059

Project (Segment) Overview by Region

Asia & Oceania

Regarding the performance in Asia and Oceania for the year ended March 31, 2013, net
sales increased by 0.4% to ¥485.3 billion. Despite decreases in sales volume and pricesof natural gas, this result was largely attributable to an increase in crude oil sales volume
and yen depreciation. From a profit perspective, operating income decreased by 6.0%
to ¥281.6 billion owing mainly to an increase in depreciation.
In production

M YA N M A R

Under development
Discovered /Preparation for development

VIETNAM
KG-DWN2004/6

Offshore Martaban

Under exploration
Other project
Blocks 05-1b & 05-1c

2 South Natuna

Kuala Lumpur Oﬃce

OP Operator project

Block S OP
Block R
Block SK-10
Block SK-8

Sea Block B p. 61

M A L AY S I ATangguh LNG Project (Berau Block)

East Kalimantan Block

1 Offshore Mahakam Blockand Attaka Unit p. 61

PA P U A
NEW GUINEA

Tengah BlockSouth East Mahakam BlockWest Sebuku Block

Sebuku Block

Semai II Block

INDONESIA

Jakarta Office

4 Bayu-Undan Project (JPDA03-12 Block)

Kitan Oil Field (JPDA06-105 Block) p. 62
AC/P36 OP
WA-410-P

Ichthys LNG Project5 Abadi LNG Project OP p. 63
Darwin Office

JPDA11-106
WA-343-P OP
WA-341-P OP
WA-344-P OP

WA-411-P
WA-274-P
WA-281-Ppp. 48–55（Special Report）OP

Babar Selaru Block OP

PDL3 & PDL4
Unitization
PRL14

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

6 Prelude FLNG Project (WA-44-L Block)p. 63

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

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

WA-155-P (Part II)
WA-35-L
WA-155-P (Part I）

3 Van Gogh Oil Field,

Ravensworth Oil Field
and othersp. 62

AUSTRALIA
Perth OfficeQ.

Please tell us
about production
trends at
the Offshore
Mahakam Block.

A.

Asia & Oceania Q&A
060

INPEX CORPORATION Annual Report 2013

In addition to the natural decline in production, volumes contracted due to production
impediments caused by such factors as sandat production wells. In response, steps weretaken to drill new production wells and to
implement various initiatives including measures to counteract sand problems. Thanks
to these countermeasures the drop in production bottomed out around autumn 2012
and is currently showing signs of recovery.

Offshore Mahakam Block production facility

1. Offshore Mahakam Block and Attaka Unit
INPEX entered into a production sharing contract (PSC) with the Indonesian
Government in October 1966, at thattime acquiring a 100% participating interest in the Offshore Mahakam Block. The
Attaka Unit was established in April 1970
through the unitization of part of the adjacent blocks owned by INPEX and Unocal(now Chevron), with each company taking a 50% interest. Production of crude
oil and natural gas began in 1972. INPEX
farmed out a 50% participating interest in
the Offshore Mahakam Block to CFP (nowTOTAL) in July 1970. This venture subsequently made a series of discoveries in
the Bekapai (oil), Handil (oil), Tambora (oiland gas), Tunu (gas), Peciko (gas), Sisi andNubi (gas), as well as the South Mahakam(gas) fields, each of which has continued
to produce crude oil and natural gas.
The crude oil and condensate produced
from these fields are shipped mainly to oil
refineries and power companies in Japanby tanker from the Santan and Senipah

Shipping terminal

terminals. Most of the natural gas is supplied to the Bontang LNG Plant, thenshipped as LNG to Japan and elsewhere.
The Offshore Mahakam Block willcontinue to be a key profit center for
INPEX. In addition, together with TOTAL(the operator), we have been engaged
in negotiations with the Indonesianauthorities to secure a contract extension
beyond 2018 with respect to the Offshore
Mahakam Block.

Project status
Contract area
(production on the basis of all fields and(block)average rate of FY2012)
Offshore
MahakamAttaka Unit

Crude oil: 72 Mbbld
In production Natural gas: 1,393 MMcf/d
LPG: 12 Mbbld

Venture company(established)

Interest owned(*Operator)

INPEX
CORPORATION(February 21, 1966)

INPEX 50% TOTAL* 50%

Bontang LNG Plant

Attaka Unit

Santan Terminal

Attaka Field

Badak Field
Nilam Field

Tunu Field

Tambora Field
Sisi Field

Handil Field

Nubi Field

Senipah Terminal

Bekapai Field

Balikpapan

Peciko Field

Offshore
Mahakam BlockSouth Mahakam Field

Gas field

Oil field

Oil and gas field

INPEX 50% Chevron* 50%

5Project Overview

2. South Natuna Sea Block B
In July 1977, INPEX acquired a 17.5%
participating interest in the South NatunaSea Block B. Later, in January 1994,
INPEX increased its total participatinginterest in the block to 35% with thepurchase of an additional 17.5% interest. Crude oil production began in 1979,and supplies of natural gas to Singapore
via Indonesiaʼs first international pipelinecommenced in 2001. Additional deliveries of natural gas from this pipeline to
Malaysia started in 2002. These supply
milestones contributed to the extensionof the PSC covering the block until 2028.

FPSO vessel

Project status
Contract area
(production on the basis of all fields and(block)average rate of FY2012)
South Natuna
Sea B

In production

Crude oil: 40 Mbbld
Natural gas: 374 MMcf/d
LPG: 15 Mbbld

Venture company(established)

Interest owned(*Operator)

INPEX Natuna, Ltd.
(September 1, 1978)

INPEX Natuna 35%
ConocoPhillips* 40%
Chevron 25%

Production operations in the Belanak oil and gas field, which is part ofSouth Natuna, utilize a world-class floating production, storage and offloading(FPSO) system. Production of crude oiland condensate began in December
2004, with LPG production commencing in April 2007. At this same block,production began at the Hiu Gas, Kerisi
Oil and Gas, and North Belut Gas fields
from 2006 as well as the Bawal Gas
Field in July 2012. In addition, a numberof development projects are currently
under way to maintain and expand output. This includes preparation for development at the South Belut Gas Field.
Natuna Sea

North Belut South Natuna Sea

BelidaKerisi

Bawal

Sembilang

Block B

South Belut
Gas Field Natuna Island
Hiu
BelanakGas field

Oil field

Oil and gas field

INPEX CORPORATION Annual Report 2013061

3. Van Gogh Oil Field, Ravensworth Oil Field and others
INPEX acquired participating interests
in WA-155-P (Part I) in July 1999, after
which the Van Gogh and Ravensworth
oil fields were discovered. The Australian Government granted production
licenses (WA-35-L and WA-43-L) for
those two blocks, in which oil productioncommenced in February and August of
2010, respectively.
The decision to develop the Coniston Unit, which saddles WA-35-L andWA-55-L, was made in December 2011,
and work targeting the commencement of
production in 2014 is under way. Average
crude oil production for the first year ofoperation of the Coniston Unit is expected
to be 21.5 thousand barrels per day.
WA-35-L & WA-55-L
Unitization(Coniston Unit)

Barrow Island

Van Gogh Oil Field

WA-35-L

Indian Ocean

WA-155-P（Part II）

Ravensworth Oil Field

WA-43-L
ExmouthContract area
(block)Project status(production on the basis of all
fields and average rate of FY2012)

WA-155-P（Part I）
Onslow

AUSTRALIA

Venture company(established)

Oil field

Van Gogh FPSOInterest owned(*Operator)

WA-35-L (Van Gogh Oil Field)

In production (Crude oil: 16 Mbbld)

INPEX Alpha 47.499% Apache* 52.501%

WA-43-L (Ravensworth Oil Field)

In production (Crude oil: 16 Mbbld)

INPEX Alpha 28.5% BHPBP* 39.999% Apache 31.501%

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

Under development

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

INPEX Alpha, Ltd.
(February 17, 1989)

Under exploration

INPEX Alpha 47.499% Apache* 52.501%
INPEX Alpha 47.499% Apache* 52.501%
INPEX Alpha 18.670% Apache* 40.665% OMV 27.110% Tap 13.555%

WA-155-P (Part Ⅰ)

INPEX Alpha 28.5% BHPBP* 39.999% Apache 31.501%

4. Bayu-Undan Project (JPDA03-12 Block) and Kitan Oil Field (JPDA06-105 Block)
In April 1993, INPEX acquired a participating interest in JPDA03-12, a contract
area located in the Timor Sea JPDA.
Exploration within this contract area
resulted in the discovery of oil and gas
fields. Of these, studies revealed that
the Undan structure and the Bayu structure in the adjacent JPDA03-13 contract
area were a single structure. The interest holders unitized both contract areas
in 1999, allowing joint development of
the Bayu-Undan Gas-Condensate Field
to proceed. The commercial production and shipment of condensate and
LPG started in 2004, and LNG in February 2006.
INDONESIAEAST TIMOR

Abadi Gas Field

JPDA06-105 (Kitan Oil Field)
Timor Sea
Joint Petroleum Development Area

The presence of oil was confirmed
through exploration drilling of the Kitan-1
and Kitan-2 wells in March 2008 in the
JPDA06-105 contract area, which INPEX
acquired in January 1992. Thereafter, we

Darwin LNG

Project status
Contract area
(production on the basis of all(block)fields and average rate of FY2012)

Bayu-Undan
Unit

In production
Crude oil: 48 Mbbld
Natural gas: 501 MMcf/d
LPG: 29 Mbbld

DarwinAUSTRALIA

Gas field

062

Oil field

INPEX CORPORATION Annual Report 2013

Venture company(established)

JPDA06-105
In production (Crude oil: 32 Mbbld)(Kitan Oil Field)

Interest owned(*Operator)
INPEX Sahul 19.2458049%
ConocoPhillips* 61.3114766%
Santos 19.4427185%

JPDA03-12

Darwin Gas Pipeline

Bayu-Undan Gas-Condensate Field

obtained approval for the final development plan from the Timor Sea JPDA
authorities in April 2010. After development works, the production at the Kitan
Oil Field commenced in October 2011.

INPEX Sahul, Ltd.
(March 30, 1993)

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

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

5. Abadi LNG Project
INPEX acquired a 100% participatinginterest in the Masela Block in November
1998 through an open bid conducted by
the Indonesian Government. INPEX proceeded with exploratory activity as theoperator, and an exploratory well drilledin 2000 discovered the Abadi Gas Field.
Subsequently, six appraisal wells were
drilled (two in 2002 and four in 2007–2008), all of which confirmed the presence of gas and condensate column.
The Indonesian Government granted
its approval to the plan of development
for Stage-I (POD-1) for a “floating LNG”
with a capacity of 2.5 million tons per

year of LNG in December 2010. INPEX
is currently conducting FEED works. We
are studying the possibilities for further
development exploiting its reserves andare currently undertaking the continuous
drilling of three appraisal wells and one
exploration well.

Tanimbar Island
Drilling rig

INDONESIA

Abadi Gas Field

Arafura Sea

AUSTRALIA
Timor Sea

DarwinContract area (block)
MaselaGas field

Floating LNG

Project status

Venture company (established)

Interest owned (*Operator)

Preparation for development

INPEX Masela, Ltd.
(December 2, 1998)

INPEX Masela* 65% Shell 35％

5

In June 2012, we acquired from Shell a
17.5% participating interest in the Prelude FLNG Project, which is under development in offshore Western Australia.
The Prelude FLNG Project consists of
the Prelude and Concerto gas fields andwill produce 3.6 million tons per year of
LNG, 400 thousand tons per year of LPG
at peak and approximately 36 Mbbld ofcondensate at peak. Shell made the FID
on the Prelude FLNG Project, which willbe the worldʼs first FLNG project, in May

2011. Development of the Prelude FLNG
Project is currently under way, with thestart of production targeted at around 10
years from when the Prelude Gas Field
was first discovered in early 2007.

Project Overview

6. Prelude FLNG Project (WA-44-L Block)

Timor Sea

Concerto Gas Field
Prelude Gas Field

WA-44-L

Ichthys Gas-Condensate Field

AUSTRALIA

Gas field

FLNG vessel

Contract area(block)WA-44-L

Project status

Venture company (established)

Interest owned (*Operator)

Under development

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

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

INPEX CORPORATION Annual Report 2013063

Eurasia

Regarding the performance in Eurasia for the year ended March 31, 2013, net sales increasedby 1.4% to ¥85.5 billion due to yen depreciation despite a decrease in the sales price of
crude oil. Operating income decreased by 11.3% to ¥41.8 billion mainly due to an increasein administrative expenses.
214/28Southeast Area,
214/29South Area,214/30b
Sakhalin I Project
P799

UNITED
KINGDOMRUSSIA

BELARUSRUSSIA

London Office

JA PA NFRANCEUKRAINE
AUSTRIAK A Z A K H S TA N

HUNGARY

1 Offshore NorthROMANIA

Caspian Sea Contract Area

(Kashagan Oil Field and others)p. 65

I TA LY

In production

BULGARIA

TURKEYGREECEUZBEK IS TANGEORGIAAZERBAIJAN

2 ACG Oil Fieldsp. 65
TURK MENIS TAN

Under development
Under exploration

3 BTC Pipeline Projectp. 65

Other project

Q.

What do you see
as the potential
for new oil and gas
fields in Russia?

Eurasia Q&A

064

INPEX CORPORATION Annual Report 2013

A.

In May 2013, INPEX signed a Cooperation
Agreement with Rosneft in connection withthe exploration and development of blocks ina frontier area to the north of the Okhotsk Sea.
INPEX has accordingly secured the exclusive
right to negotiate final agreements with regard
to exploration and development activities inthe blocks. Recognizing the vast reserves ofoil and gas in and around Russia, this initiative
is expected to help develop the Companyʼsbusiness over the medium to long term.

Agreement signing ceremony

1. Offshore North Caspian Sea Contract Area (Kashagan Oil Field and others)
Phase 1 experimental program currently
under way. Production is scheduled tocommence in the third quarter of 2013(as of June 30, 2013).
Besides the Kashagan fi eld, hydrocarbon reserves were also confirmed infour other structures: Kalamkas, Aktote,

In September 1998, INPEX acquired aparticipating interest in the Offshore
North Caspian Sea Contract Area in
Kazakhstan ʼs territorial waters and now
holds a 7.56% interest.
Phased development of the
Kashagan Oil Field is planned, with the

Kairan, Kashagan Southwest. Appraisalof these structures is continuing in parallel with the development of the main
Kashagan field with a view to expanding the total production of the contractarea.

AtyrauKAZAKHSTAN

Kashagan Oil Field

KairanCaspian Sea

KalamkasKashagan Southwest

AktoteOffshore
North Caspian Sea
Contract Area

Onshore facility

Contract area (block)

Project status

Venture company (established)

Interest owned

Offshore
North Caspian Sea

Under development

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

INPEX North Caspian Sea 7.56% Eni 16.81% ExxonMobil 16.81%
KMG 16.81% Shell 16.81% TOTAL 16.81% ConocoPhillips 8.40%

2. ACG Oil Fields
AZERBAIJANBaku

ACG Oil Fields

Sangachal

Deepwater Gunashli Field
Chirag Field
Caspian Sea

Azeri Field

Oil field

Azeri Field, the West Azeri Field, the East
Azeri Field, and the Deepwater Gunashli
Field. In March 2010, the decision wasmade to transition the Chirag Oil Project
to a development phase. Operations
are currently in progress with the commencement of production planned at
the end of 2013.

Contract area
(block)Project status(production on the basis of all fields
and average rate of FY2012)

Venture company(established)

Interest owned(*Operator)

ACG(Azeri, Chirag, Gunashli)

In production(Crude oil: 652 Mbbld)

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

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

5
Project Overview

Oil Pipeline

INPEX acquired a participating interestof the Azeri-Chirag-Gunashli (ACG) Oil
Fields in a region of the south CaspianSea in Azerbaijan in April 2003. The
Companyʼs current participating interest
has increased to 10.9644%.
At the ACG Oil Fields, oil is being
produced at the Chirag Field, the Central

3. BTC Pipeline Project
The 1,770-km BTC pipeline stretchesfrom Baku in Azerbaijan to Ceyhan on
Turkeyʼs Mediterranean coast throughTbilisi, Georgia. Full-scale operationcommenced in June 2006. Total transportation capacity stands at 1.2 million

barrels per day. While mainly transporting crude oil produced in the ACG
Oil Fields in Azerbaijan, the pipeline
also transports crude oil produced inother areas including Turkmenistan andKazakhstan.

Black Sea

TURKEYGEORGIARUSSIA
CaspianSea
AZERBAIJAN
ARMENIA

TbilisiBaku

BTC Pipeline
Ceyhan
SYRIA

IRAQ

IRAN

Contract area
(block)Venture company(established)

Interest owned(*Operator)

BTC Pipeline

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

INPEX BTC Pipeline 2.5% BP* 30.1% Azerbaijan (BTC) Limited 25%
Chevron 8.9% Statoil 8.71% TPAO 6.53% Eni 5% TOTAL 5% Itochu 3.4%
ConocoPhillips 2.5% ONGC 2.36%

CYPRUSINPEX CORPORATION Annual Report 2013065

Middle East & Africa
Regarding the performance in the Middle East and Africa for the year ended March 31,
2013, it was impacted by a decrease in the sales price of crude oil, an increase in the sales
volume of crude oil, and yen depreciation. As a result, net sales increased by 4.2% to ¥520.8
billion and operating income increased by 0.9% to ¥357.3 billion.
TURKEYGREECE

SPAIN

SYRIA
MOROCCO

IRAN

IRAQ

Block 10JORDANEl Ouar I/II Blocks

South October Area

ALGERIAL I BYA

Soroosh & Nowrooz Fields

Abu Al Bukhoosh Block

EGYPTADMA Block 1
p. 67SAUDI
ARABIA
MALI

NIGER
CHAD
NIGERIACAMEROON

2 Offshore Angola Block 14p. 67

Abu Dhabi
Office

OMAN

YEMEN

SUDAN

CENTRAL SOUTH
AFRICAN SUDAN
REPUBLIC
D EM O CR ATI CREPUBLIC
OF THE CONGO

Onshore Cabinda North Block

U.A.E.

S O M A In
L Iproduction
A
ETHIOPIA

Discovered /Preparation for development
Under exploration
OP Operator project

K EN YATA NZ A NIA

Nganzi Block3/05 Block

3 Offshore D.R. Congo Blockp. 67

Area 2&5

ANGOLAZAMBIANAMIBIAQ.

Which exploration
project is attracting
your attention in
the Middle East andAfrica region?

A.

Middle East & Africa Q&A

066

INPEX CORPORATION Annual Report 2013

MOZAMBIQUE

ZIMBABWE

We are particularly excited by thepotential of exploration projects in Iraq.
In May 2012, INPEX put forward thesuccessful bid for the onshore Exploration Block 10 in Iraq with a partner. In
addition, we participated in an exploration project in an area in Mozambique in
April 2013, where large-scale reserves ofnatural gas have been discovered.
A view of the Block 10 surface in Iraq

1. ADMA Block

The ADMA Block (Upper Zakum Oil Field)

Contract area (block)

Project status

In May 2004, INPEX made Japan Oil
Development Co., Ltd. (JODCO), a wholly
owned subsidiary by acquiring all of the
JODCO shares held by Japan National Oil
Corporation through a share exchange.
JODCO owns an interest in the ADMA
Block located offshore Abu Dhabi in the
United Arab Emirates. Oil production currently spans five fields in the block.
In addition, a number of development projects are currently under way tomaintain and expand oil output, such asredevelopment of the Upper Zakum Field
Venture company (established)

Umm Shaif, Lower Zakum Field

involving the use of artificial islands, as well
as phase 1 development and other workwith the aim of engaging in early production at the Umm Lulu and Nasr fields.
Satah Field Das Island

Nasr Field
Umm Shaif Field
Upper Zakum/
Lower Zakum
Field

Zirku Island

Umm Al-Dalkh Field
Umm Lulu Field

U.A.E.

Abu Dhabi

Oil field
Undeveloped oil field

Subsea pipeline

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

Upper Zakum Field

In production

Umm Al-Dalkh Field
Satah Field
Nasr Field

JODCO 12% ADNOC 60% ExxonMobil 28%
Japan Oil Development Co., Ltd.
(JODCO) (February 22, 1973)

Under
development

Umm Lulu Field

JODCO 12% ADNOC 88%
JODCO 40% ADNOC 60%
JODCO 12% ADNOC 60% BP 14.67% TOTAL 13.33%

2. Offshore Angola Block 14
CONGO

Atlantic Ocean

Offshore Angola
Block 14The State ofCabindaCONGO

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2012)

Offshore Angola Block 14

In production (Crude oil: 148 Mbbld)

5

Production facility

Venture company(established)

Interest owned(*Operator)

Angola Block 14 B.V.
(April 19, 2012)

Project Overview

AngolaParticipating through a joint venture company with TOTAL S.A., INPEX acquired a
9.99% indirect interest in the oil producing Angola Block 14 in February 2013.
Block 14 is located approximately 100
km offshore from Cabinda, Angola. It isan oil-producing block that includes discovered undeveloped fields. Crude oil
is currently being produced from threedevelopment areas. Through exploration
activities as well as the development of
discovered undeveloped fields, this blockis expected to help boost overall value.

Angola Block 14 B.V. 20% (including 9.99% of
INPEXʼs interest) Chevron* 31%
Sonangol 20% Eni 20% Galp 9%

3. Offshore D.R. Congo Block
MibaleMotobaLukamiMoko

MwambeMisatoLibwa
CONGO

MuandaBananaTshialaGCO
Soyo
Atlantic Ocean

INPEX has participated in oil explorationand development projects offshore the
Democratic Republic of the Congo (DRC)
since July 1970. Oil production commenced
in 1975 from the GCO Oil Field, which wasContract
area (block)discovered in 1971. Including GCO, 11 oilfields have been discovered. The contract
covering this block was extended until
2023 in May 1995, and production levels
from existing fields remain stable.

Project status
Venture company(production on the basis of all(established)fields and average rate of FY2012)

Offshore D.R. In production
Congo Block (Crude oil: 14 Mbbld)

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

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

INPEX CORPORATION Annual Report 2013067

Americas
Regarding the performance in the Americas for the year ended March 31, 2013, net sales
increased by 7.6% to ¥5.9 billion due to an increase in the sales volume of natural gas.
On the earnings front, however, INPEX recognized an operating loss of ¥6.1 billion (10.4%
higher than the previous year).
2 Shale Gas Project in Canadap. 69

In production

1 Joslyn Oil Sands Projectp. 69

Under development

Hangingstone Block

Under exploration

Discovered /Preparation for development

CANADA
Calgary Oﬃce

Q.

Please tell us about theCompanyʼs participation in
the development project in
the U.S. Gulf of Mexico inAugust 2012.

OP Operator project

U N I T ED S TAT E S
OF AMERICA

Americas Q&A

Houston Office
Louisiana Block SL20183
West Cameron Blocks
401/402
Block Cuervito
Block FronterizoA.

We acquired a 7.2% participatinginterest in the Lucius project in the
deepwater of the U.S. Gulf of Mexico from Anadarko Petroleum Corporation. Currently, development
operations are being undertakenwith an eye toward commencing
production of crude oil and natural
gas from the latter half of 2014.
The Lucius project is expected tocontribute to the Companyʼs net
production volume prior to thecommencement of production at
the Ichthys Project. At the sametime, we anticipate gaining considerable experience and knowledge in deepwater development
through the participation.

Main Pass Block 118
Ship Shoal Block 72
Walker Ridge 95/96/139/140
Keathley Canyon Blocks 874/875/918/919 (Lucius)

MEXICO
Caracas Office

3 Copa Macoya OP /Carabobo Block,
Project 3

Guarico Oriental Blocksp. 69

Block 31 OP
Paramaribo Office

VENEZUELA
COLOMBIASURINAME

Block 117PERU

BRAZIL

BOLIVIABM-ES-23

Frade Project

PA R AGUAY
Rio de Janeiro Office

URUGUAY
Area15

Lucius Oil Field

068

INPEX CORPORATION Annual Report 2013

1. Joslyn Oil Sands Project
In November 2007, INPEX acquired a 10%
interest in the Joslyn Oil Sands Upstream
Project in Alberta, Canada. The Joslyn
project plans to conduct a multiphase mining development, with a production planof 100 thousand barrels per day by thelate 2010s as part of the Stage I develop-

ment. Currently, we are taking preliminary
steps to consider a development plan.
Despite the decision by TOTAL to suspend the oil sand upgrader (synthetic crude
oil manufacturing) project in which we areparticipating, measures going forward are
currently under consideration.

Contract area (block)

Project status

Venture company (established) Interest owned (*Operator)

OSL 7280060T24

Discovered /Preparation fordevelopment

INPEX Canada, Ltd.
(November 28, 2006)

OSL 7405070799
OSL 7404110452

OSL
7405070799
OSL
7404110452

OSL 7280060T24

Athabasca
River

Joslyn Oil Sands
Lease Block

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

Province of Alberta
Fort McMurray

2. Shale Gas Project in Canada
In August 2012, INPEX acquired a 40%
participating interest in the shale gas
projects in the Horn River, Cordova andLiard basins from Nexen Inc.
The shale gas projects in the Horn
River, Cordova and Liard basins containdiscovered and undeveloped shale gas.
Yukon Territories

We will proceed with full-scale development and are aiming for combined production at the Horn River and Cordova
projects of a maximum of 1,250 millionsof cubic feet per day (approximately 200
thousand boed). The shale gas that is
produced will be converted into LNG

with studies currently under way to consider commercialization through exports
from the Canadian west coast.

Northwest Territories

Acquired area
British Columbia

Highway
Major pipelines

Cordova Area

5
Horn River Area

Onsite drilling

Contract area
(block)Project status

Venture company(established)

Interest owned(*Operator)

Horn River,
Cordova and Liard areas

In production (partly)

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

INPEX Gas British Columbia 40%
NEXEN* 60%

Project Overview

Liard Area

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

Copa Macoya andGuarico Oriental Blocks
Georgetown
CaracasGUYANAVENEZUELA
BogotaCOLOMBIA
BRAZIL

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2012)

Venture company(established)

Interest owned(*Operator)

Copa Macoya

In production
Crude oil: 1 Mbbld
Natural gas: 64 MMcf/dTeikoku Oiland Gas Venezuela,
C.A. (June 7, 2006)

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

Guarico Oriental

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

INPEX CORPORATION Annual Report 2013069

JapanRegarding the performance in Japan for the year ended March 31, 2013, net sales increased
by 4.6% to ¥118.9 billion due to an increase in the sales price of natural gas. Operating
income increased by 16.1% to ¥28.6 billion.

Yabase Oil Field
Akita
District Office

Akita Prefecture

2 Naoetsu LNG Terminal
p. 71(Under construction)

Higashi-Kashiwazaki Gas Field
Sekihara Gas Field (underground storage)
Niigata City

Niigata Marketing
Office(Under construction)［建設中］
Toyama Lineン

Toyama City
ToyamaPrefecture

Minami-Aga Oil Field

Kashiwazaki
City

Itoigawa
City

Niigata District Office
Minami-Kuwayama Oil Field

Nagaoka City

Joetsu City

Shin Oumi Line

Niigata
Prefecture
Domestic Natural Gas

Nagano City

1 Minami-Nagaoka Gas Fieldp. 71

Tokyo Lineン
Tomi BSS※

Matsumoto City

Gunma
Prefecture

Shin Tokyo Line

Matsumoto Line
NaganoPrefecture

Yamanashi
Prefecture

Ome City

Shizuoka Line

[Shizuoka Gas]

Shizuoka Shizuoka
PrefectureCity

Gotemba
City
Fuji City

Minamifuji Line
(INPEX, Shizuoka Gas, Tokyo Gas)

Japan Q&A

INPEX CORPORATION Annual Report 2013

Konosu City

Other project

Natural gas
pipeline network

Adachi-ku, Tokyo

Head Office (Akasaka, Minato-ku)

Regasified
LNG(Kitakarasuyama, Setagaya-ku)* BS・・・Booster station

Chiba City

Technical Research CenterA.

Oil and gas fields

SaitamaPrefecture

Metropolitan
Tokyo

Itazuma Power Control Center

What progress
have you made inyour ongoinggeothermal power
development
endeavors in Japan?

Sano City

Iruma Line

Kofu City

Sodeshi LNG Terminal

070

Ryomo Line

Honjo City

Second Suruga Trunk Line Showa Town

Q.

Tochigi Prefecture

Chino City
Tomioka City

Kofu Line

Fujioka BS*
Isesaki Power Control Center

Karuizawa
Town

Sammu
City

Chiba
Prefecture

Major office or
district officeNaruto Gas Field
Chiba District Office
0

100km

We continue to carry out joint studies forthe development of geothermal power
Hokkaido
in Hokkaido and Akita prefectures, which
Amemasudake
began in 2011. Geological ground surveys
have already been completed in both prefectures confirming the presence of underground temperatures of 200ºC and above,a necessary requirement for geothermal
Akita
Oyasu
power generation. Plans are in place to drill
exploration wells during 2013 and to push
Geothermal power generation research areas
forward studies in earnest.

1. Minami-Nagaoka Gas Field and the domestic natural gas business
Discovered in 1979 and in production
since 1984, Minami-Nagaoka is one of
the largest gas fields in Japan. After processing, the natural gas is transported
through a 1,400-km trunk pipeline network stretching across the Kanto andKoshinetsu regions that surround thegreater Tokyo metropolitan area anddelivered to city gas companies andindustrial customers along this network.
INPEX has experienced substantial
sales growth in recent years due to sharp
rises in the prices of competing fuels, aswell as the highly environmentally friendly
attributes of natural gas. The target is for
medium- to long-term annual sales of 2.5
billion m3 by the early 2020s and in the
3.0 billion m3 range over the long term,reflecting further capacity increases forour core Shin Tokyo Line and develop-

ment of the Toyama Line (extending from
Itoigawa City, Niigata Prefecture, to Toyama City, Toyama Prefecture), construction of which began in April 2012.
In order to support this growth, supply capacity and reliability have beenenhanced through the introduction of
LNG from Shizuoka Gas Co., Ltd., in2010. INPEX decided to build an LNG
terminal at Naoetsu, Joetsu City, in Niigata Prefecture, which is slated to start in
the beginning of 2014.
At the Naruto Gas Field in Chiba
Prefecture, natural gas dissolved in water
is being produced. Natural gas dissolvedin water is contained in underground“brine water.” We pump up the brinewater, extract natural gas and supply
the gas to surrounding areas. The brinewater also contains high levels of iodine.

We export the iodine to Europe, theUnited States and elsewhere.

The natural gas pipeline that crosses Shibumi river in Niigata

Echigo Line

Sekihara Gas Field

Sea ofJapan(underground storage)

Producing: Total oil and gas fields (FY2012 average)

Natural gas: Approx. 134 MMcf
Crude oil and condensate: Approx. 4 Mbbld

Natural gas sales (FY2012)

Approx. 1.75 billion m³

JoetsuShinkansen
Line

KashiwazakiCity

Gas field

Shinetsu
HonsenNagaokaCity

Higashi-Kashiwazaki
Gas Field

Production and Sales of Domestic Natural Gas

MitsukeCity

Minami-Nagaoka
Gas Field

Minami-Nagaoka andnearby gas ﬁelds

Ojiya City

JoetsuLine

2. Construction of the Naoetsu LNG Terminalby combining that supply with existing
domestic supplies from Minami-Nagaoka and other fields we will be able toenhance the capacity and stability of our
supply structure.

5
Project Overview

We expect domestic demand for natural
gas to rise steadily and continue to be
firm due to factors such as the shift to natural gas from oil as consciousness about
the environment and energy conservation increases, as well as rising oil prices.
To ensure stable supply to the domestic
natural gas market over the long term,
INPEX has been engaged in constructing
an LNG terminal in Joetsu City (the portof Naoetsu) in Niigata Prefecture since2009. The operational startup is planned
for the beginning of 2014. Afterward, weplan to receive LNG from our overseas
projects at the Naoetsu terminal, andNaoetsu LNG Receiving Terminal Overview
Location

12 Yachiho, Joetsu City,
Niigata Prefecture

Lot area

Approx. 25 ha

Gas production
capacity

7.5 MM m³/d
(LNG 240 tons/hour)

LNG tank

180 thousand kl 2
(upgrade possible)

LNG receiving capacity

Approx.
1.5 million tons/year

Operational start target

Beginning of 2014

The Naoetsu LNG Terminal currently underconstruction (April 2013)

Gas Supply Chain
We will establish a gas supply chain byorganically connecting overseas LNG
with the domestic natural gas infrastructure to meet the natural gas demand inJapan, which is expected to remain firm.
By flexibly combining the three gas
supply chain sources of
1 domestic natural gas,
2 regasified LNG from Shizuoka Gas
Co., Ltd., and3 regasified LNG from Naoetsu,

we are confident in our ability to improve
supply capacity and enhance supply stability, allowing us to meet future demand
increases.
Building a total gas supply chain
covering upstream and downstream
processes will be our base of support instrengthening emergency backup measures for the supply of gas by enhancing
cooperation with gas and electric powercompanies and expanding the pipeline

network, as well as building the global
LNG portfolio. Through these activities, we will work toward developing anenergy business that uses natural gas.

INPEX CORPORATION Annual Report 2013071

What it means to take on the challenge of a project operator
In the crude oil and natural gas business, it is common for several companies to form a partnership, instead of one company
taking sole responsibility, for the purpose of splitting up themassive amount of operating capital required and distributing
risk in the event no discoveries of crude oil or natural gas are
made. Among the partner companies that form the coalition,
the one company that acts as the lead representative of the
project is called the operator. Being the operator entails leading
the other partners, negotiating with the oil-producing country,■ Operator■ Non-operator■ Affiliate

and closely managing contractors and other affiliates in order tosuccessfully develop the crude oil and natural gas project intoa business. For this reason, the operator is viewed as the truedeveloper of the crude oil and natural gas project. Contrary to a
non-operator, which mainly provides funding, an operator that
leads a project to success is often presented with opportunities to participate in many other high-quality projects; in otherwords, it sees more opportunities to acquire new interests.

Electric powercompanies

ajor

Oil m

Consumers
Oilcompanies

Trad
compinganyGascompanies

Operator

Chemicalsmakers(project propeller)

Insurance companies

E&P c

ompa

Steelmakers

Oil-producing country

ny

Crude oil and natural gas
development project

Government-affiliated financial institutions and banks
Consulting companies, etc.
Plant engineering companies

What is 1 ton of LNG?
In Japan, liquefied natural gas (LNG) is primarily used two ways:
as a fuel to generate electricity and as city gas. The energy produced by one ton of LNG differs based on assumptions used,
but as a fuel burned to generate electricity, one ton of LNG
can produce 6,000 kWh in a conventional power generation
turbine. This is equivalent to the amount of electricity used byabout two households in one year. In terms of city gas, one tonof LNG can produce 1,200 cubic meters of city gas, which isenough to supply two to three households for a year.

1 ton of
LNG

Electricity

Electricity

City gas

City gastwo= Approximately= about
households annually
6,000 kWhtwo to three= Approximately= about
households annually
1,200 m3

What are the chances of finding crude oil and natural gas?
Generally speaking, the odds of discovering sufficient quantities of crude oiland natural gas after drilling a well are
low. In the test wells it drilled between
the fiscal years ended March 2011 andMarch 2013, INPEXʼs success rate was
45.0% (3-year average). However, thisfigure includes additionally drilled wells
in geographical formations where crude
oil and natural gas had already been dis-covered. Accordingly, this figure tends tobe higher than the success rate for wells
drilled in so-called wildcat territory̶
unproven, unexplored geographical formations. Prior to drilling a well, a surveyof geological features is conducted, as isa seismic survey for minerals, based uponwhich drilling sites are screened for themost promising geological structures toimprove the odds of making a discovery.

Drill bit072

INPEX CORPORATION Annual Report 2013

Environment,
Society and Governance

65
Project Overview

INPEX CORPORATION Annual Report 2013073

Environment, Society and GovernanceCorporate Social Responsibility ­ to Remain Essential for Society
INPEX aspires to be essential for society by contributing to economic growth and social
advancement through its business operations, and be given even higher ratings from thesociety. The section on the environment, society and governance in Annual Report 2013 describes mainly the substance of our CSR activities and our approaches to enhance corporate
governance in the year ended March 31, 2013.

Environment, Society and Governance Summary– actual data for FY2012

Environment pp. 76–78}

Highlights in FY 2012 in the Environmental Aspect
Share of total waste occupied by
the subtotal recycled(both inside and outside Japan)

Breakdown of GHG emissions by type
Unit: (CO2 : tons, CH4 & N2O: tons-CO2)

85.2%

Type

2011

2012

2013

Emissions into water areas

1,655,758 ㎥

CO2

346,357

355,601

501,536

CH4

13,428

8,161

10,516

Volume of water sources used

N2O

21

114

894

1,749,451 ㎥

Receipt of Third-Party EnvironmentRelated Verification
Receipt of verification
by Bureau Veritas Japan
Co., Ltd., in connection
with disclosure of data
for environmental performance

Society pp. 79–81}

Highlights in FY2012 in the Social Aspect (figures in parentheses indicate percentages of respective totals)
Expenditures on activities
Awarded Kurumin Markfor social contribution ........ ¥1.81 billion
Number of women in
management positions ...... 20 (2.8%)■ Year-end number of challenged employees
Year-end rate of challenged employees(Persons)

(%)

40
30

Number of foreign nationals inmanagement positions ...... 108 (15.4%)
Number of employees
who quit ................................. 17 (1.3%)

Trend of employment of the challenged29

20(a certification provided by the Ministry of Health,
Labor and Welfare in recognition of company
efforts to support child rearing by employees)

10
0

32

1.90

2.00

2011

2012

35

4.0
3.0

2.13

2.0
1.0

2013

0

Corporate Governance pp. 82–89}

Highlights in FY2012 in the Social Aspect
Holding of meetings ofthe INPEX Advisory Committee
October 1, 2012
Announcement of institution of the INPEX
Advisory Committee
December 18, 2012
The first meeting of the INPEX Advisory Committee
June 6, 2013
The second meeting of the INPEX Advisory
Committee

074

INPEX CORPORATION Annual Report 2013

Profile of the Corporate Governance
System■ Organizational structurecompany with statutory auditors■ Number of directors
16 (including 5 outside directors) / term of 1 year
■ Number of statutory auditors
5 (including 4 outside auditors) / term of 4 years■ Number of independent
directors and auditors
9 (consisting of 5 outside directors and 4 outside auditors)

Abolishment of the Bonus
Compensation Component for
Outside Directors and Auditors
In an effort to further bolster corporate
governance, INPEX has consolidated
outside director and outside statutory
auditor compensation into a single fixedamount while abolishing the bonus component effective from the year ending
March 31, 2014.

Sustainability Report 2013

Five Key CSR Subjects
On our current CSR agenda, we are emphasizing approaches to five key issues which have a significant impact on both INPEX and our stakeholders, and which require reinforcement of activities
for the time being.

ComplianceGreenhouse gas
countermeasures

HSE initiatives

Comply with laws and social
norms (including consideration
for human rights)

Practice safety and environmental protection in operations

Community contribution

Build trust with and contribute to local
communities (including education)

Address climate change

Employee development

Develop and utilize human resources asa global company

For more detailed information on activities inthese areas, please see Sustainability Report 2013
and our CSR Web site.
} inpex.co.jp/english/csr

Ichthys Project Approaches } p. 78•Operation reflecting
concern for climatechangeDredging vessel

In consideration of the impact on dolphinsetc., we are performing dredging work in the
Port of Darwin without underwater blasting.

Activities on Community Contribution } p. 80

Suppliers•Development andsupply of diverse
energy for
response to climatechangeBusiness
partners

Shareholders
Investors

Customers•Full communication
with stakeholders inoperation area
•Respect for culture
and conventions inoperation area

Tuition assistance at an orphanage inthe Democratic Republic of the CongoOf the total expenditure of about ¥1.8 billion
on activities for community contribution in fiscal 2012, about 70% was spent on support for
education.

•Contribution tosocial advancementin operation area

Local
communities

6

NGOs &
NPOs
Oil / gasproducing
countries•Responsible
management as a
global company

IR presentation for
individual investors(September 2012 in Osaka)

In FY2012, we held a total of nine IR presentations for individual investors.

Environment,
Society and Governance

Enhancing IR Activities } p. 89

Employees

Buildinga sustainable
society &continuously
creating
corporate
value•Observance of therequirements ofcompliance•Enhancing IR
activities

INPEX CORPORATION Annual Report 2013075

Environment & Society

HSE Management
Outline of the HSE Management
System and Its Operational Structure
INPEX has prepared an HSE Management
System encompassing approaches tohealth, safety, and environment with consideration of the standards under ISO 9000
and ISO 14001 as well as management systems for labor safety and health, and theguidelines of the International Associationof Oil & Gas Producers (OGP). It is likewise
promoting the improvement and refinement of this system on an ongoing basis.
The system consists of the HSE Policy, theHSE Management System Manual, Corporate HSE procedures and guidelines,
an organizational structure comprising
the HSE Committees, and the HSE objectives and programs devised each fiscal
year. As for methodology, the A-PDCA
cycle* beginning with risk assessment isperformed to assure execution of the HSE
Management System.
* Access-Plan-Do-Check-Act: In this case, “Access”
refers to risk management and determinationof legal and other requirements; “Plan”, tothe preparation of HSE plans and emergency
response plans; “Do” and “Check”, to the collection and analysis of HSE-related data and HSE
audits; and “Act”, to management reviews.

HSE Auditing and Management Review
For ongoing improvement of HSE performance, we implement HSE audits on
the Corporate*2 and Operational Organizations. These audits cover the HSE
Management System, its operation,
and all related HSE activities. They set
priorities that are the subject of work for
improvement at each site.
In fiscal 2012, HSE audits were carried out at locations including the Copa
Macoya block.
*2 Corporate: the framework (organizational andfunctional) encompassing the whole company
in the HSE Management System

Initiatives for Promoting and Implementing the HSE Management System
Chief Executive of HSE
Toshiaki Kitamura (President & CEO)Corporate HSE Committee
HSE Management Director (Director in charge of HSE)
Masatoshi Sugioka (Vice Chairman)
Operational
Organization

Operational
Organization

Operational
Organization

Operational
Organization

Operational Organization
Representative

Operational Organization
Representative

Operational Organization
Representative

Operational Organization
Representative

HSE Committee

HSE Committee

HSE Committee

HSE Committee

Priorities of HSE Audits•Structure of
the HSE Management System•Degree of adequacy of
the A-PDCA cycle•Efficacy of HSE objectives•State of improvement on items
indicated in the last audit•Management of contractors•Assessment of efficacy of responseto emergencies

HSE Communication
We are striving to enhance in-housecommunication to improve HSE awareness. In fiscal 2008, we began holding
HSE Annual Meeting composed of representatives from Operational Organizations in Japan and other countries. We
also hold HSE Managers Meeting, which
is for the personnel assigned to HSE ineach Operational Organization.
To bolster communication with HSE
units and overseas business divisions, weregularly hold HSE Liaison Meetings fora sharing of information on the details of
HSE Management Systems and activities.

An HSE audit at the Copa Macoya project

An HSE Annual Meeting

Message from the Director in Charge of HSE

Masatoshi Sugioka,

Vice Chairman, in charge of HSE

076

INPEX CORPORATION Annual Report 2013

INPEX formulated HSE Policy in 2006 and the HSE Management System Manualin 2007. On this basis, it has prepared manuals and guidelines related to labor
safety and health, and environmental preservation. These approaches to HSE
over the past few years are behind the deepening in-house penetration of theHSE culture and trend of improvement in actual data for HSE activities, but there
remain shortcomings as compared to the HSE activities of other companies in
our industry around the world. To raise our HSE level even higher, we intend to
take vigorous action in areas indicated in the second HSE medium-term plan forthree years from April 2013, such as HSE audits, HSE risk management, process
safety management, and prevention of major accidents.

Breeding of an HSE Culture and
HSE Education
To foster the growth of an HSE culture,
we conducted a survey aimed at determining its degree of maturation in fiscal
2011. Based on the findings, we posted
a higher level of HSE capacity companywide and reinforcement of HSE communication as HSE objectives in fiscal 2012,and launched activities to attain them.
To help the HSE culture reach maturity and to impart HSE-related knowledge
and capabilities, we hold annual programsof HSE education in correspondence withlevels of HSE skills and training rules. In
fiscal 2012, we likewise staged HSE seminars for younger engineers.

HSE Awards
To enhance HSE awareness and better the HSE record throughout the Company, we present HSE awards for outstanding HSE activities. In fiscal 2012,
we handed out HSE awards to four project teams including contractors. Oneof them was given an award for completing a drilling campaign that lasted
more than 240 days in the Suriname Project in South America with zero losttime injuries (LTI).

Onsite in the Suriname Project

An HSE program

Approaches to Prevent Major Accidents
Campaign to Spread Knowledge of
the Seven INPEX Safety Rules

Frequency of accident occurrence

6
Environment,
Society and Governance

For increased attention tosafety, we conducted a campaign to publicize the seven
INPEX safety rules in step withJapanʼs National Mine Safety
Week in July 2013. In thiscampaign, we held meetings
to describe the seven rules toour employees and representatives of contractors, put up
posters with pictorial symbols
to prompt awareness of safety,
and distributed related novelty
goods.

Toward Reduction of Accidents
All of our operational entities are promoting HSE campaigns aimed at “Zero
Accidents” and safety activities to reduce
the number of accident occurrences.
On the corporate level, every year,
we post target indicators for occurrenceof accidents and engage in activities toreduce occurrences. In fiscal 2012, we
set a target value for LTIF (rate of injuries resulting in fatalities or lost time
per million hours worked) of 0.77, anda TRIR (rate of recordable injuries (fatalities, lost time, restricted workdays andmedical treatment) per million hours
worked) of 4.05.

（LTIF、
TRIR）

LTIF(Incidents)

TRIR

6

5.26
4

2

0.96

3.86

1.20

1.16
0.64

2010

2011

0
2009

4.05

1.86
0.72

0.77

2012

2013

INPEX CORPORATION Annual Report 2013077

Environment & Society

Environmental Action
Measures for Prevention of
Global Warming
Methane, the main constituent of naturalgas, is a type of greenhouse gas (GHG);
its greenhouse effect is 21 times as great
as that of CO2. In the oil and natural
gas business, there are some cases inwhich there is no choice but to temporarily release methane into the atmosphere. INPEX makes efforts to curtailthe amount of methane emissions, and issteadily installing grand flare*1 systems
at all sites to hold down emission levels
when releases are unavoidable.

*1 Grand flare: Equipment that incinerates excesshydrocarbon gas produced by crude oil drilling facilities, gas processing facilities and oil
refineries instead of simply dissipating thegas as is. Shaped to combust flames within an
upper chimney-like furnace, thereby resulting
in no night-time illumination, noise pollution oreffects on the surrounding environment.

6.4

6.2

4.1

7.8

2.4

21.0

2.2

21.2

8.4

8.5

9.3

2.2

1.5

16.3

16.3

17.0

10.4

20.1

1.7

10

12.0

11.2

10.8

9.1

9.3

2008

2009

2010

2011

2012

0

2013

GHG emissions per unit ofproduction (Japan)■CO2 removal ■Power generation■Natural gas emissions ■Energy use（kg-CO2/GJ）
6

2 Release of CO2 separated and5removed from natural gas

0.809

natural gas
4 CO2 derived from use of energy inpower generation businesses

1.313

1.453

1.267

0.280
2.555

0.335
2.515

0.227
2.533

0.251
2.561

1.387

1.376

1.410

1.454

1.565

2009

2010

2011

2012

2013

0.761

0.985

2.664

0.302
2.603

1.526

2008

0.525
4

3 CO2 derived from diffusion of3
2

A grand flare system at the facility for collectionof newly extracted oil at the Akita District OfficeVolume of water resources used（m3）

■Sea/river water ■Tap water ■Groundwater

1
0

Emissions into water areas（m3）

2,000,000

2,000,000■Emissions into public water areas■Injection return to groundwater

1,749,451
1,396,478
50,1311,500,000

1,000,000

500,000

1,248,152
169,258

170,795

1,175,552

426,6111,500,000

333,162

1,000,000

989,679

1,078,896

500,000

1,539,263

1,572,414

642,815552,869

896,448

1,655,758
560,1021,019,545 1,095,656

0

0
2011

2012

2013

2011

2012

2013

Protection of Biodiversity in a Project

Monitoring coral reefs in the Port of Darwin

INPEX CORPORATION Annual Report 201340

20

gas businesses

078■CO2 removal■Power generation■Natural gas emissions■Energy use

50

30

Major Sources of GHG Emissions
1 Use of energy in oil and natural

Reduction of Water Use andApproaches to Prevent Water Pollution
All our Operational Organizations observe
the environmental laws and regulations in
the host country in managing wastewater.
The crude oil and natural gas which we
produce sometimes contain groundwater. We separate and collect this waterat the production facilities. We treat thewater to remove any residual oil, etc.
In our production facilities in Japan,
we handle wastewater in conformancewith the related standards. For example,
in disposing well water, we release it
into rivers only after reducing concentrations of boron, nitrogen compounds, orother substances to levels that meet thewastewater standards in relevant regulations, by putting it through shaft wastewater treatment facilities. At offshore rig
platforms and during the construction of
LNG receiving terminals, seawater used
for cooling is released back into the sea.
In these releases, we make advance confirmations of temperature differences
between the used water and the sea
as well as of water quality, to curb any
impact on the ecosystem in the sea to aminimum.

Total GHG emissions (Japan)（10 Thousand t-CO2）

In dredging works in the Port of Darwin,
Australia, we perform most of the work
during the rainy season, when the waterof the Port is turbid, in order to curtailany impact on the surrounding environment to a minimum. We are also taking
measurements of the influence of deposits from the dredging works through anenvironmental monitoring program. In
these ways, we are striving to protect
the ecosystem in the Port of Darwin andperipheral areas.

Human Rights, Human Resources and Diversity
Respect for Human Rights
In the pursuit of its business in oil and natural gas development
around the world, INPEX follows all sorts of international standards regarding human rights and the social standards in theregions of operation. More specifically, we observe international
standards including the Universal Declaration of Human Rights(UDHR) and the International Labor Standards of the International Labor Organization (ILO) as well as the 10 principles of
the United Nations Global Compact based on the UDHR.
In our operator projects, we work to identify the risks byassessing impact in the environmental and social aspects,
including the human rights dimension, that the project activities

could possibly have on the region of operation, and emphasize
dialogue with local governments, residents, and other stakeholders.

Dialogue with local residents (Indonesia)

Concern for Indigenous People in Projects
In the Northern Territory of Australia, where the Ichthys LNG
Project is moving ahead, Indigenous (aboriginal) people makeup about 40% of the Territory population. We are running the
project while taking full consideration for the indigenous people.
INPEX signed a memorandum with representatives of theLarrakia people, who are the historical owners of land and water
areas in the Darwin vicinity, and have built relations with themgrounded in cooperation and mutual respect. In May 2013,
we released the Reconciliation Action Plan (RAP), a new plan
revolving around the three priority themes of relations, respect,and opportunity. We have therefore presented our commitment
to the local community and our activity plans in the form of apublic document.

Reconciliation Action Plan (RAP) – Cooperation Activities with Indigenous People
The circles in the middle of the cover design stand for resource development
and the energy supplied from it.

Development and Use of Human Resources
In fiscal 2012, we formulated the INPEX HR VISION in our desire to promote various personnel initiatives from a global perspective and build organizations that will
be internationally competitive. In accordance with the Vision, we are providing training based on personnel models, roles, and capabilities required in each type of job(clerical, technical, etc.) in the context of programs for human resource development.
Furthermore, to help them function in global projects, we dispatch personnel to othercountries, to take part in foreign language classes, training at overseas offices, andprograms at specialized training institutes.

6

Promotion of Diversity

Environment,
Society and Governance

Scene at an in-house training

Awarded Kurumin MarkIn August 2012, INPEX was awarded the Kurumin Mark, a certification provided by the
Ministry of Health, Labor and Welfare indicating satisfaction of the standards based on
the Law for Measures to Support the Development of the Next Generation. We were
given the award in recognition of our achievements in preparing and implementing
our general employer action plan (which sets forth approaches to assist employees inraising children and still keep their jobs), and attaining the targets contained therein.

INPEX CORPORATION Annual Report 2013079

Environment & Society

Activities of Community Contribution
In all the countries and regions in which it does business, INPEX engages in communication with governments, local residents, NGOs, and other parties, in order to comprehend their wants and needs, and to takerequisite action in response. We endeavor to develop business in ways that assist social advancement in theregions of operation while respecting the culture and conventions there.

CSR expenditures by issue

Azerbaijan, Georgia, and Turkey(for the year ended March 31, 2013)
Culture and the arts

2.3％
Environment

1.3％
Support fordisasteraffected areas

0.3％
Health, medicine
and sports

9.7％

Project for Support of Agriculture in
Local Communities
In the Azeri–Chirag–Guneshli (ACG)
and Baku-Tbilisi-Ceyhan pipeline project, supporting programs are ongoingin order to support agriculture in Azerbaijan. We have spent a total of about
US$1 million for provision of greenhouses, bees, beehives, and related
equipment, and are also offering education and training programs to farmers.

Other 0.2％

Supportfor local
communities

15.8％

Total

¥1.81
billion

Educating andfostering future
generations

70.3％

A beekeeper receiving support

Abu Dhabi, UAE

Congo

Abu Dhabi International Hunting and Equestrian Exhibition
Every year since 2004, INPEX has
set up a booth in the Abu Dhabi
International Hunting and Equestrian Exhibition (ADIHEX). The
booth introduces Japanʼs medieval
falconry culture and other elementsof traditional culture such as samurai swords and the tea ceremony.
People at the INPEX boothContribution in Muanda
In the city of Muanda in the Democratic Republic of the Congo, INPEX is engaged in activities
for contribution tocommunity development in the fieldsof health and medical care, education,and infrastructural
conditioning.
An orphanage in Muanda

080

AngolaMalaysia

Indonesia

Contribution in Cabinda Province
In the Angola province of Cabinda, weare promoting activities for contribution
to the local community. These activities
include the outlay of funds for construction of medical centers and related facilities, and their outfitting with medical
apparatus, pharmaceuticals, furniture,and other items.

Acceptance of Technical Trainees
In the context of an offshore projectin Sabah, Malaysia, INPEX is providing opportunities for technical training
through acceptance of young oil technicians in a program of on-the-job training(OJT) held at our Kuala Lumpur Office.

Support for Improvement of
the Educational Environment
In connection with the Mahakam Block,
INPEX is conducting a program to support education in the province of East
Kalimantan. In 2012, we set about improving the environment of education bybuilding new and remodeling old school
facilities, with a view to raising the level of
education for students.

A local facility

A geological technician receiving OJT

A local school building

INPEX CORPORATION Annual Report 2013

East Timor

Niigata Prefecture

Construction of Greenhouses for
Cultivation of Vegetables andSupport for Agricultural Training
INPEX contributed to construct large
greenhouses for crop farming in the suburbs of Dili, the capital city of East Timor.
We have provided technical support totrain local farmers in hydroponic growing
methods. We hope this initiative will provide local farmers with a stable income
and improve agricultural productivity.

Naoetsu LNG Terminal： Event for
Painting on the Inside of an LNG Tank
In May 2012, shortly before the closureof the mouth of an LNG tank, INPEX
staged an event in which it invited a
total of 66 students and 11 teachers
from two nearby elementary schools topaint pictures on the inside of the tank.

Tokyo (Head Office)Donation of “Secrets of Natural Gas
Development,” a Popular Educational
Materials Series
INPEX assisted the composition, production of illustrations, and overall editing work in preparation of “Secrets of
Natural Gas Development” in the “Better
Understanding through Comic Books,”*
a popular educational series publishedby Gakken Publishing Co., Ltd. This title
was donated to some 23,500 elementary
schools and 3,000 libraries nationwide.
* Both tentative translations of titles available only in Japanese.

Painting on the inside of an LNG tank
Inside a greenhouse for vegetable cultivation

The cover of “Secrets of Natural Gas Development” in the “Better Understanding throughComic Books” series

Australia

Australia

Planting mangrove trees
In the Mahakam Block, a program forplanting one million mangrove trees waslaunched in cooperation with residents in
the Mahakam river delta area. In 2012,
we assisted the planting of about 1.6 million mangrove seedlings.

Support for establishment ofa research center
INPEX provided a sum of A$3 million forestablishment of the North Australian
Centre for Oil and Gas in Charles Darwin
University. The Centre opened its doors in2012 and is offering students programs ofeducation and training related to oil andnatural gas.

Support for a Program of
Scientific Learning
In connection with the Ichthys LNG
Project, we are providing students ofthree schools in the Northern Territory
with opportunities to participate in the
Science and Technology Education
Leveraging Relevance (STELR) project,which is aimed at reinforcing education in science and mathematics.

Planting mangrove trees

Scene at the ceremony of donation

A class in the program for scientific learning

INPEX CORPORATION Annual Report 2013

6
Environment,
Society and GovernanceIndonesia081

GovernanceCorporate Governance
INPEX works diligently to continuously strengthen its corporate governance activities
as a part of efforts to engage in responsible management as a global company.
(The information presented in this section was current as of June 26, 2013, unless otherwise stated.)

Overview of the Corporate Governance Structure andChanges Implemented to Strengthen that Structure
Overview of
the Corporate Governance Structure

Changes Implemented to Strengthen the Corporate Governance Structure
Strengthened
the supervisory andaudit functions■ Organizational structure ...............................................

.................................Company with statutory auditors

Number of directors as stipulated by
the Articles of Incorporation ......................... up to 16
Number of directors(number of outside directors) ............................. 16（5）Term..............................................................................1 year
■ Statutory auditors
Number of statutory auditors as stipulated by
the Articles of Incorporation ..................... up to 5
Number of statutory auditors(number of outside auditors) ........................ 5（4）Term.......................................................... 4 years■ Number of independent
directors and auditors...................................... 9(5 outside directors, 4 outside auditors)■ Rights plan and other measures to protect
against a takeover..................................... None
■ Other .......................Issuance of Class A Stock to
the Minister of Economy, Trade and Industry

2006

Established the Compliance
Committee

2007

Established the Information
Security Committee

2008

Implemented the Executive
Officer System

2009

Strengthened the Support to thestatutory auditors (two members,
one of which is a management
position, are assigned toconcurrently serve as ancillary staff)
Shortened the directorsʼ andexecutive officersʼ terms of office(from two years to one year)

2012

~

■ Directors

Undertook steps toaddress management
issues2013

Addressed
issues relating tocompensation

Established the Corporate
HSE Committee

Established the CSR Committee
Established the Medium- to
Long-Term Vision of INPEX

Established guidelines for thepurchase of shares of INPEX
Consolidated outside director
and statutory auditor
compensation into a single fixedamount while abolishing thebonus component

Appointed an additional outside
director (from four directors to five
directors)
Registered nine outside directors /statutory auditors as independent
as stipulated by the Tokyo Stock
Exchange
Established the Advisory Committee

Establishment of the Advisory Committee
The Advisory Committee comprising eminent persons both from Japanand overseas was established on October 1, 2012 to enhance the Companyʼs value and further bolster corporate governance. The role of theAdvisory Committee is to provide objective recommendations and advice
that incorporate a wide range of opinions and perspectives on importantmatters relating to the Companyʼs business and management including
political and economic conditions in Japan and overseas, circumstances
surrounding energy, and CSR. The Advisory Committee is generally scheduled to meet twice each year. The first meeting was held in December
2012 and the second meeting in June 2013.
Issues discussed during the first meeting of the Advisory Committee
on December 18, 2012
• Operating conditions in the United States (energy policies in the United States andthe impact of the shale gas revolution in the United States on international politics andeconomic conditions)Issues discussed during the second meeting of the Advisory Committee
on June 6, 2013
• The impact of ongoing shale gas and oil development in the United States onsuch issues as the structure of energy supply and demand as well as prices• The impact on international conditions attributable to such factors as changes inenergy supply and demand in the United States• Changes in global country risks owing to such factors as forecasts of conditions in
the Middle East
• The promotion of CSR management as a global company

082

INPEX CORPORATION Annual Report 2013

Advisory Committee members in attendance (front row from the left)
Dr. Masayuki Yamauchi

Dr. Tsutomu Toichi

Ms. Kaori Kuroda

Dr. Kent Eyring CalderProfessor Emeritus,
The University of Tokyo

Advisor,
The Institute ofEnergy Economics,
Japan

Executive Director,
CSO Network
Foundation

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

Participants from INPEX (back row from the left)
Seiji YuiToshiaki Kitamura

Naoki Kuroda

Masatoshi Sugioka

Director,
Senior Managing
Executive Officer

President & CEO

ChairmanVice Chairman

The Companyʼs Management Structure[1] Directors and the Board of Directors
Directors with a wide range of knowledge appointed from within
the Company, deliberate on and determine important mattersrelating to the conduct of business in conjunction with outside
directors. In this manner, INPEX ensures that decisions are madein a rational, effective, and objective manner.
The Companyʼs Board of Directors comprises 16 members,
five of whom are outside directors. In addition to a monthly meeting, the Board of Directors meets as necessary in order to discussand determine the execution of important matters. The Board
also supervises the execution of duties by directors. In addition,
the term of office for directors has been set at one year to enablea faster response to changes in the Companyʼs operating environment and to further clarify management responsibilities.

[2] Executive Committee and Executive Officer System
From the perspective of increasing the speed of decision making related to the execution of business, we have established an
Executive Committee with attendance by full-time directors andmanaging executive officers. The meetings are held weekly andas necessary. At the Executive Committee, flexible decision making is conducted for resolutions not affiliated with the Board of
Directors, and deliberation is held to contribute to decision making by the Board of Directors.
We implemented an Executive Officer System in order to
respond accurately and quickly to a rapidly changing management environment and the expansion of our business activities.
The term of office for executive officers is set to one year, thesame as for directors.

In the business of developing oil and natural gas, a considerable amount of time is required between the launch of a businessventure and any investment recovery. Accordingly, INPEX does
not consider it appropriate to reflect short-term performance indirectorsʼ compensation. Compensation for directors consistsof monthly compensation (basic compensation), which is paid
based on the duties of each director, and a bonus based on the
Companyʼs performance. Compensation is determined by the
Board of Directors. Similarly, compensation paid to statutory
auditors consists of monthly compensation (basic compensation)
and a bonus, which is determined through consultation between
statutory auditors.
The table at the bottom left of the page shows the amountof compensation paid to directors and statutory auditors forthe year ended March 31, 2013. From the current period, thebonus component paid to outside directors and statutory auditors has been abolished. Outside directors and statutory auditors are now paid a consolidated fixed compensation amountonly. This takes into account efforts to further bolster corporate
governance.

[4] 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 compensation
paid to the CPAs is determined in total based on the audit planand the number of auditing dates, after obtaining approval fromthe Board of Auditors.

[3] Director Compensation
Compensation Paid to Directors and Auditors (Year ended March 31, 2013)
Total amount ofcompensation
paid(¥ million)

Director classification

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

Directors(excluding outside directors)
Statutory Auditors(excluding outside auditors)

500

403

27

25

2

1

Outside Directors

79

69

10

10

97

Compensation Paid to the CPAs and Related Parties (Year ended March 31, 2013)

Number of
directors
eligiblefor basiccompensation(person)

12

Name of the CPA firm

Ernst & Young ShinNihon LLC

Names of the CPAs

Kazuhiko Umemura, Satoshi Takahashi

Accounting audit members

19 CPAs and 29 others

Compensation for auditing
services¥199 million (INPEX: ¥134 million;
Consolidated subsidiaries: ¥65 million)

Compensation for non-auditing services¥35 million (INPEX: ¥23 million;
Consolidated subsidiaries: ¥12 million)

Corporate Governance Framework
General Meeting of Shareholders
Appoint/Dismiss

Independent Auditors
Coordinate

Appoint/Dismiss

Board of Auditors

Coordinate

5 Statutory Auditors including
4 Outside Statutory Auditors
Accounting audit

Audit

Appoint/Dismiss

Board of Directors

Audit

16 Directors including 5 Outside Directors
Appoint/Supervise/Dismiss

Accounting audit

Advisory Committee

Executive Committee

CSR Committee

President & CEO

Compliance Committee

ReportAudit Unit

Internal audit

6
Environment,
Society and GovernanceNotes: 1. The Company does not maintain a stock option plan.
2. The Company does not maintain an accrued retirement benefits plan.
3. The total amount of compensation paid includes a provision to accrued bonuses to directors for the year ended March 31, 2013.
4. The number of directors eligible for compensation includes two directors (including one outside director) who retired due to the expiration of their terms effective fromthe Board of Directorsʼ meeting held on June 26, 2012 following the close of the Companyʼs 6th ordinary General Meeting of Shareholders.
5. In addition to the amounts of compensation paid presented in the table, an amount totaling ¥2 million was paid by a subsidiary company as director compensation toan outside director of the Company for the year ended March 31, 2013.

Directors and Executive Officers
Executive Officers 925Concurrent
Executive Officers (Total 34)
Divisions and Subsidiaries

Corporate HSE Committee
Information Security
Committee

INPEX CORPORATION Annual Report 2013083

GovernanceOutside Directors: Independence and Reason for Appointment[1] Outside Directors
Regarding the appointment of outside directors, we place
importance on evaluation for the validity of business decisions
and consideration of their efficacy, professionalism and objectiveness in the oversight function in addition to the perspectiveof independence.
Our companyʼs five outside directors possess broad knowledge and many years of experience as managers and in fields
such as the resource / energy industry, finance and legal matters.
Also, four of the outside directors are shareholders of our company and serve as directors and an advisor of companies that
conduct business in the same field as us. Therefore, we recognize the importance of paying special attention to the possibilityof competition and other conflicts of interest. In response, wecollect written pledges from outside directors in order to ensure
conformance with the Companies Act when taking a proper
response toward noncompetition, the prevention of information
leakage and the implementation of appropriate measures toward
transactions with a conflict of interest. These written pledges are
the same as those submitted by internal appointees.

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

[3] Independence of Outside Directors

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

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

OutsideDirectors

Kazuo Wakasugi

Yoshiyuki Kagawa

Seiji Kato

Rentaro Tonoike

Director (Outside)

Director (Outside)

Director (Outside)

Director (Outside)

Kazuo Wakasugi
April 1953

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
June 1984
Vice-Minister for International Affairs, Ministry ofInternational Trade and Industry
September 1986 Advisor to Long-Term Credit Bank of Japan, Ltd.
(currently Shinsei Bank, Ltd.)
June 1993
Representative Director, Executive Vice President of
Mitsubishi Electric Corporation
May 1995
Advisor to Japan Petroleum Exploration Co., Ltd.
(“JAPEX”)
June 1995
Representative Director, President of JAPEX
June 1996
Director of Indonesia Petroleum, Ltd.
(INPEX Corporation)
June 2001
Representative Director, Chairman of JAPEX
April 2006
Director of INPEX Holdings Inc. (currently the Company)(incumbent)
May 2007Counsellor of JAPEX
June 2013
Corporate Advisor of JAPEX (incumbent)

Yoshiyuki Kagawa
April 1970
Joined Mitsui & Co., Ltd.
September 2001 Director of Mitsui Oil Exploration Co., Ltd.
October 2001 Chief Operating Officer of Energy Business Unit, Energy
Group of Mitsui & Co., Ltd.
April 2002
Managing Officer, Chief Operating Officer of Energy
Business Unit, Energy Group of Mitsui & Co., Ltd.
April 2003
Executive Managing Officer, Chief Operating
Officer of Energy Business Unit of Mitsui & Co., Ltd.
April 2005
Representative Director, Executive Vice President of
Mitsui Oil Exploration Co., Ltd.
June 2005
Representative Director, President, CEO of Mitsui Oil
Exploration Co., Ltd.

084

INPEX CORPORATION Annual Report 2013

June 2006
June 2007
June 2012

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

April 2009

Seiji Kato
April 1971
July 1997
April 2003
April 2006
April 2007
April 2008
June 2010
June 2011

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

Rentaro Tonoike
April 1978
April 2000

April 2008

Joined Nippon Mining Co., Ltd.
General Manager of Planning & Coordination Dept.,
Metal Division of Nippon Mining & Metals Co., Ltd.
October 2003 General Manager (Group Companies Coordination) of
Planning & Coordination Dept. of Nippon Mining &Metals Co., Ltd.
April 2006
Executive Officer, General Manager (Planning & Coordination) of Planning & Coordination Dept. of Nippon

June 2012
June 2012

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

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

Joined Ministry of FinanceDirector-General for the Tokyo Regional Taxation
BureauSecretary-General of Executive Bureau, Securities andExchange Surveillance Commission
Administrative Vice-Minister of Environment
Agency (currently Ministry of the Environment)
President of National Association ofLabour Banks; President of The Rokinren Bank
Attorney at Law admitted to practice in Japan;
Partner of Kitahama Partners (Tokyo Office)(incumbent)
Director of the Company (incumbent)Auditors regarding audits. They also conduct regular meetings
with the internal audit department (Audit Unit) to receive reports
regarding internal audits and the evaluation of internal controls.
To strengthen the function of the statutory auditors andensure viable corporate governance, we are working to enhanceancillary staff for the statutory auditors and form partnerships
between the statutory auditors, the Audit Unit and the independent auditors. Moreover, we have constructed a system tostrengthen the monitoring function through periodic meetings
with directors including representative directors.

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

Name

Outside auditors

Outside directors

Kazuo Wakasugi
Yoshiyuki Kagawa
Seiji Kato
Rentaro Tonoike

Significant concurrently held positions

Reason for appointment

Attendanceat board meetings

Corporate Advisor for Japan Petroleum
Exploration Co., Ltd., a shareholder inour company

To utilize in our companyʼs management his rich experienceand broad knowledge as a business executive

Board of Directors
meetings 15/16

Senior Advisor of Mitsui Oil Exploration
Co., Ltd., a shareholder in our company
Corporate Advisor of Mitsubishi
Corporation, a shareholder inour company
Director, Senior Vice President andExecutive Officer of JX Holdings, Inc.,a shareholder in our company

To utilize in our companyʼs management his rich experienceand broad knowledge as a business executive

Board of Directors
meetings 15/16

To utilize in our companyʼs management his rich experienceand broad knowledge in the resources/energy industry

Board of Directors
meetings 16/16

To utilize in our companyʼs management his rich experienceand broad knowledge in the resources / energy industry

Board of Directors
meetings 12/12
Board of Directors
meetings 12/12

Yasuhiko Okada

Partner of Kitahama Partners

Possesses extensive experience and knowledge in financeas well as professional knowledge and experience as an
attorney, in addition to management experience in financial
institutions

Haruhito Totsune―

Possesses rich knowledge and experience in financial fields

Koji Sumiya―

To utilize in our companyʼs auditing procedures
his knowledge of finance

Hiroshi Sato

Executive Vice President and Executive
Officer of Japan Petroleum Exploration
Co., Ltd., a shareholder in our company

To utilize in our companyʼs auditing procedures his richexperience and broad knowledge in the resources/energy
industry, as well as his accounting-related knowledge

Masaru Funai

Former Senior Consultant ofMarubeni Corporation

To utilize in our companyʼs auditing procedures his richexperience and broad knowledge in the resources/energy
industry, as well as his accounting-related knowledge

Board of Directors
meetings 15/16
Board of Auditors
meetings 14/15
Board of Directors
meetings 16/16
Board of Auditors
meetings 15/15
Board of Directors
meetings 13/16
Board of Auditors
meetings 12/15
Board of Directors
meetings 16/16
Board of Auditors
meetings 15/15

Statutory
Auditors

Yoshitsugu Takai

Haruhito Totsune

Koji Sumiya

Hiroshi Sato

Masaru Funai

Statutory Auditor

Statutory Auditor (Outside)

Statutory Auditor (Outside)

Statutory Auditor (Outside)

Statutory Auditor (Outside)

Joined Teikoku Oil Co., Ltd.
General Manager, Corporate Management Department
and LNG Project Department of Teikoku Oil Co., Ltd.
March 2001
Senior General Manager, Corporate Management
Department and LNG Project Department of
Teikoku Oil Co., Ltd.
March 2002
Director, General Manager, Accounting & Finance
Department of Teikoku Oil Co., Ltd.
March 2005
Managing Director of Teikoku Oil Co., Ltd.
October 2008 Senior Vice President, Logistics & IMT Division of
the Company
June 2011
Statutory Auditor of the Company (incumbent)

October 2005 Resident Executive Director, Osaka Branch of Japan
Bank for International Cooperation
October 2007 Senior Executive Director of Japan Bank forInternational Cooperation
October 2008 Managing Executive Officer of Japan Bank forInternational Cooperation, Japan Finance Corporation
May 2010
Retired from Japan Bank for International
Cooperation, Japan Finance Corporation
June 2010
Statutory Auditor of the Company (incumbent)

Hiroshi Sato
April 1970
June 1999

Haruhito Totsune

June 2002

July 1969
July 1995
July 1997
July 1998

June 2005
April 2006

August 2004
June 2006
June 2007

Koji Sumiya
April 1976
April 2001
April 2002

Joined Ministry of Finance
Deputy Director-General of Financial Bureau
Director General of Japan Mint
Senior Executive Director of Japan FinanceCorporation for Small and Medium Enterprise
Corporate Advisor of KPMG AZSA & Co.
(currently KPMG AZSA LLC)
Statutory Auditor of INPEX Corporation
Statutory Auditor of INPEX Holdings Inc.
(currently the Company) (incumbent)
Joined The Export-Import Bank of Japan
Director General, International Finance Department I
of Japan Bank for International Cooperation
Director General, Policy Planning and Coordination
Department of Japan Bank for International Cooperation

June 2006
June 2007
June 2010

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

April 2002
April 2003
April 2005

June 2005

April 2007

April 2009

Masaru Funai
April 1972
April 1998
April 2000
April 2001

Joined Marubeni Corporation
General Manager, Corporate Planning &Coordination Department of Marubeni Corporation
Executive Vice President and CFO of
Marubeni America Corporation
Executive Vice President, CFO and CAO of Marubeni
America Corporation

April 2010
June 2010
April 2011

General Manager, Risk Management Department ofMarubeni Corporation
Corporate Vice President, General Manager, Corporate
Planning & Coordination Department of Marubeni
Corporation
Corporate Senior Vice President, CIO, Executive
Corporate Officer, Human Resources Department,
Information Strategy Department and Risk
Management Department of Marubeni Corporation
Corporate Senior Vice President, Member of the Board,
CIO, Executive Corporate Officer, Human Resources
Department, Information Strategy Department and Risk
Management Department of Marubeni Corporation
Corporate Executive Vice President, Member ofthe Board, Executive Corporate Officer, General
Affairs Department, Human Resources Department,
Risk Management Department andLegal Department of Marubeni Corporation
Senior Executive Vice President, Member of the Board,
CIO, Chief Operating Officer, Information Strategy
Department, Corporate Accounting Department,
Business Accounting Department-I, BusinessAccounting Department-II, Business Accounting
Department-III and Finance Department, Senior
Operating Officer, Audit Department, Chief Operating
Officer, Investor Relations of Marubeni Corporation
Senior Executive Vice President, Member of the Board,
Senior Operating Officer, Audit Department ofMarubeni Corporation
Statutory Auditor (part-time) of the Company(incumbent)
Senior Consultant of Marubeni Corporation

INPEX CORPORATION Annual Report 2013

Environment,
Society and GovernanceYoshitsugu Takai
April 1974
March 1999

6085

GovernanceInternal Control Systems / Risk Management
Internal Control Systems
Our company has developed an internal control system and has established asystem for the appropriate and efficientperformance of company affairs.
An overview of these systems is asfollows.

Compliance by Directors andEmployees■ A Corporate Social Responsibility Policy

shall be established in order to ensure compliance by directors and employees.

■ A representative director shall be elected

Rules and Other Systems for
Risk Management

Employees toAssist Statutory Auditors■ To manage all types of risks related to our■ Two employees shall be assigned to concurrently assist with the statutory auditorsʼ

3business activities, directors shall identify,
analyze and evaluate risks through close
cooperation with related departments.

■ Based on the internal rules on group man-agement, directors shall manage groupwide risk.

■ The management of risks related to the daily

operations shall be reviewed, assessed andrevised by the Audit Unit, related departments and / or external experts.

to be the director in charge of compliance,
and the Company shall establish a Compliance Committee chaired by that director.

1■ The Company shall establish an internal

notification system with related departments and an external expert (lawyer) as
providers of consultation services.

■ To ensure effective compliance systems andrelevant internal rules, the Company shallverify and evaluate them and make the necessary improvements through audits carried out by the internal audit department(Audit Unit), which reports directly to the
President & CEO.

■ The Company shall develop and manage asystem to ensure the accuracy and reliability of financial reporting while evaluating its
effectiveness.

Storage and Management ofInformation Related to the
Execution of Duties by Directors

2■ In accordance with applicable laws, regu-

lations, the Articles of Incorporation andinternal rules, an information security system shall be established for information
related to the execution of duties under
the jurisdiction of directors. Through thissystem, such information is appropriately
stored and managed.

086

INPEX CORPORATION Annual Report 2013

6under the instruction of the statutory
auditors.

7

Independence of Employees toAssist Statutory Auditors■ Any changes in personnel of the statutory
auditorsʼ assistants shall be discussed with

Efficiency of Duties for
Directors

4■ To establish a system that enables the effi-

cient performance of duties, major corporate decisions shall be addressed promptly
and properly through Executive Committee
meetings, which are held weekly and asnecessary.

■ The person in charge at each level shall per-form his/her daily duties promptly throughdelegation of authority based on internal
rules such as job demarcation and administrative authority.

Proper Operation of
the INPEX Group5■ Subsidiaries shall conduct a group man-agement contract and shall be required toreport to the Company on important matters. The Company shall issue approvals
regarding such reports.

■ Based on the internal rules on groupmanagement, a partnership shall be conducted for the risk management, compliance management and internal auditing ofsubsidiaries.

Class A Stock
According to the stipulations of the Articles ofIncorporation, INPEX issues a Class A Stockto the Minister of Economy, Trade and Industry. This share possesses influence on certain
major corporate decisions. The Class A Stock
does not possess voting rights at shareholdersʼ meetings. However, it is possible for theholder of the Class A Stock to exercise vetorights for certain major corporate decisions.
For our company, the issuance of the Class A
Stock to the Minister of Economy, Trade andIndustry is an effective countermeasure toduties.

■ These assistants shall execute their duties

the statutory auditors.

Reporting to Statutory Auditors■ Directors and employees shall report and8provide information to the statutory auditors for matters provided by laws and regulations and matters that might have a significant impact on the Company.

■ The statutory auditors shall always havethe right to obtain business information byattending the Board of Directorsʼ meetingsand other important internal meetings, as well
as receiving internal approval documents.

Ensuring the Effectiveness of
Audits by Statutory Auditors

9■ When conducting audits, the Company

shall ensure close cooperation with external experts such as lawyers, certified public
accountants and certified tax accountants.

■ To improve the effectiveness of audits, thestatutory auditors shall cooperate with
the Audit Unit and shall receive regularly
reports.

Stock Data (As of March 31, 2013)
prevent outside control over the business of
our company or against hostile takeovers for
speculative purposes. Furthermore, we expect
positive results in terms of external negotiationand credits as a leading oil and gas E&P contributing to the stable and efficient supply ofenergy in Japan.
} See pp. 138–139 for Business Risks(8. Class A Stock).

Authorized Shares
Common Stock: 9,000,000 common shares(After stock split on Oct. 1, 2013: 3,600,000,000 shares)

Class A Stock: 1 Class A Stock
Total Number of Shareholders and Issued Shares
Common Stock:40,610 shareholders / 3,655,809 shares(After stock split on Oct. 1, 2013: 1,462,323,600 shares)

Class A Stock: 1 shareholder (Minister of
Economy, Trade and Industry) / 1 shareOverview of Risk Management
Business Continuity Plan (BCP)
Our Business Continuity Plan (BCP) prepares us for the smooth
continuity of operations during emergency conditions without
interrupting key headquarter functions. It has been compiled
as an earthquake response manual that stipulates 1 the basic
BCP policy, 2 the BCP for continuation of our key headquarter
operations and 3 an earthquake response manual to transit toa BCP system.

We renewed the BCP Manual drawing on our experiences in
the Great East Japan Earthquake. The BCP Manual exhaustively
covers measures to be taken in the event of a major earthquake
centered directly under Tokyo, stipulating every step from thefirst response measures through transition to the BCP structure.
Responses to outbreaks of new strains of influenza are also includedin the BCP, with a response manual that is distributed to all employees to cope with an operational disruption caused by an outbreak.

Emergency Response System and Business Continuation
Response Level of Operation
Major
earthquake

Corporate Crisis Management Team
Business Continuation Response Team

Emergency
response■ Evacuation, safety confirmation■ Disaster situation assessment■ Secondary disaster prevention■ Rescue operations, etc.

Business continuity
response■ Customer handling■ Carrying out of continuingbusiness activities

BCP termination
announcement

BCP initiation
announcement

Level of operation

100％

Normalbusiness
operation

Restoration activities / Community contribution
Several weeks

Time

Addressing Climate Change Risk
Among the risks to the INPEX Group
imposed by climate change are damage
to production facilities or pipelines fromclimatic events, water shortages at operational sites, the impact on operationsof rising water levels and regulations
on greenhouse gas emissions. We takeall of these risks under consideration in
implementing projects. For example, wehave designed offshore facilities for the
Ichthys LNG Project in Australia that canwithstand major cyclones, and we havetaken a rise in sea levels in considerationin placing our facilities there. The offshore facilities at the Abadi LNG Project
also incorporate cyclone-proof design.

Offshore facility model test

6
Environment,
Society and Governance

Information Security Measures
INPEX has established a Basic Policy for
Information Security, and through thework of the Information Security Committee we have instituted a set of information security–related regulations, aswell as an information security control
structure. In addition to putting in placesecurity measures to guard confidential
information, we seek to improve consciousness about information security
through employee training.

The Corporate Crisis Management Team
engages in discussion

Information Security Management System
Executive Committee
Head of Information Security

Information
Security Committee

Information security managers(Head of business divisions and project divisions)

Information security administrators(General Manager of each unit)

Users

INPEX CORPORATION Annual Report 2013087

GovernanceCompliance / Disclosure
Compliance Initiatives[1] Compliance Committee[4] Anti-Corruption Initiatives

To conduct integrated actions throughout our entire company,
we established the Compliance Committee. Our companyʼs
Vice Chairman (director in charge of compliance) serves as thechairperson of the committee. The committee works together
with the statutory auditors, the Board of Auditors, the Independent Auditors and the Audit Unit, which is the internal audit
department. Through this cooperation, the committee proposes / implements compliance measures, formulates measures
to prevent the reoccurrence of violations.

Endorsement of the UN Global Compact
INPEX endorsed the UN Global Compact in December 2011.
Having endorsed the Compact, the Company agrees to commit to 10 universally accepted principles across the four fields
of human rights, labor, the environment, and anti-corruption. In
this manner, INPEX is working to contribute to the sustainable
development of the international community.

Compliance Framework (Internal notification system)
Board of Directors
Appoint

ReportCompliance Committee

Director in Charge of Compliance

Committee Chairperson: Masatoshi Sugioka (Vice Chairman)

Compliance Committee Members(Heads of Business Divisions)

ReportGeneral Administration Unit

External Consultation(Lawyer)

In-House Consultation Department in Charge of Compliance

Anonymize
Report/Consult

Report/Consult

Officers and Employees[2] Internal Notification System
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 ourcompany. Anonymous reporting is possible and whistleblowers
are thoroughly protected to ensure that they are not subject tounfair treatment. There were four reports received during theyear ended March 31, 2013.

Increasing the awareness of directors andemployees toward anti-corruption
The Companyʼs Code of Conduct outlines the need for directors and employees to adhere strictly to the related laws andregulations as they relate to the prevention of bribery and corrupt practices in each country. In addition, INPEX is currently
preparing specific guidelines in connection with the preventionof corruption. Based on these guidelines, the Company will continue to bolster its global anti-corruption structure and systems.
Participating in EITIINPEX has been a participant in the Extractive Industries Transparency Initiative (EITI) from October 2012. EITI is a global initiative that aims to implement good governance and promoteeconomic development throughout resource-rich countries by
eradicating political corruption and poverty through the clarification of the flow of funds from resource exploration industries
to the governments of resource producing countries. As of May
2013, 40 resource producing countries, numerous supporting
countries including Japan, and a substantial number of companies and NGOs were participants.
} EITIʼs Web sitewww.eitransparency.org[3] Compliance Education
The Company distributes a compliance manual and compliance Q&A to each and every employee. At the same time, adesignated compliance home page has been established on
the intranet. Moreover, the Compliance Journal is issued andposted each month. To heighten awareness toward compliance, the Company also conducts level-based (middle management and general employees) compliance training as wellas e-learning programs. Furthermore, lawyers serve as lecturers at group training sessions.

Compliance manuals

088

Compliance Q&A

INPEX CORPORATION Annual Report 2013

Compliance Journal

The exhibition booth at EITIʼs annual meeting

Compliance training

Disclosure Structure and IR Activities[1] Disclosure Structure
INPEX has put in place internal regulations to ensure the proper disclosure of corporate information. These regulations define the processes for collecting, managing,transmitting, and disclosing information.
} Please refer to the Companyʼs Web site for details: URL: inpex.co.jp/en/ir/policy
Representative directors and responsible directors as well as six dedicated staff conduct proactive IR activities for shareholders and investors in Japan and overseas. For any
questions regarding IR information, please contact the Investor Relations Group (TEL.:+81-3-5572-0234). Inquiries may also be directed through the Companyʼs Web site. For
inquiries and to request information via the Internet: URL: inpex.co.jp/en/ir/inquiries

7th Ordinary General Meeting of Shareholders(June 25, 2013)[2] Shareholder and Investor Contact (IR activities)
1. To invigorate the general meeting of shareholders and promote effective voting
Supplementary explanation
Early delivery of
convocation
notices for thegeneral meeting ofshareholders

At the 7th Ordinary General Meeting of Shareholders held on June25, 2013, we sent convocation notices on June 3, which was morethan three weeks before the date of the meeting.

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 on our companyʼs Web site and
TDnet. On the day of the shareholdersʼ meeting, we used videos anda slide show to explain our business before opening the meeting.

IR presentation for individual investors(presented by Toshiaki Kitamura, President & CEO
in January 2013)

2. Enhancing IR Activities
Supplementary explanation

Explanation byrepresentative:
Yes / No

RegularIR presentations forindividual investors

We participate in events such as IR fairs for individual
investors and meetings in venues such as branchesof brokerage firms. For the year ended March 31,
2013, we held 9 meetings in 8 cities throughout
Japan. The meetings were attended by more than
750 individual investors.

Yes

RegularIR presentations foranalysts andinstitutional investors

We hold biannual meetings on financial results for analysts and institutional investors. The President & CEO
and the director in charge of finance and accounting
explain our financial details and business forecast to
approximately 200 analysts and institutional investors.
Video archives of the meetings are made available on
the same day on our companyʼs Web site. An English
translation is included in the transmission.

Yes

IR meetings

We held more than 400 IR meetings with analysts
and institutional investors for the year ended March
31, 2013. Meetings included overseas IR roadshows, conferences and one-on-one meetings.

Yes

IR materials available
on Web site

Our Web site (IR section) features financial reports,stock information, presentation materials, videos
and brochures for individual investors.
} inpex.co.jp/english/ir

Yes

IR presentation for individual investors(presented by Masatoshi Sugioka, Vice Chairman
in February 2013)

6
Environment,
Society and Governance

The Companyʼs booth at the IR fair forindividual investors (February 2013)

Overseas site tour for analysts (December 2012)

INPEX CORPORATION Annual Report 2013089

Board of Directors (As of June 26, 2013)

Masaharu Sano
Seiji Yui
Director,
Senior Managing
Executive Officer

Toshiaki Kitamura
President & CEO

Masatoshi Sugioka
Vice Chairman

Naoki Kuroda
Chairman090

INPEX CORPORATION Annual Report 2013

Director,
Senior Managing
Executive Officer

Shunichiro Sugaya
Director,
Managing
Executive Officer

Masahiro Murayama
Director,
Managing
Executive Officer

Seiya Ito
Director,
Managing
Executive Officer

Wataru Tanaka
Director,
Managing
Executive Officer

Takahiko Ikeda
Director,
Managing
Executive Officer

Yoshikazu Kurasawa
Director,
Managing
Executive Officer

6
Environment,
Society and Governance

INPEX CORPORATION Annual Report 2013091

Naoki Kuroda

Masatoshi Sugioka

Chairman

April 1963

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

Seiji Yui

Joined Teikoku Oil Co., Ltd.
General Manager of Engineering Department of
Teikoku Oil Co., Ltd.
March 1995
Senior General Manager of Teikoku Oil Co., Ltd.
March 1996
Director of Teikoku Oil Co., Ltd.
March 1999
Managing Director of Teikoku Oil Co., Ltd.
March 2002
Senior Managing Director of Teikoku Oil Co., Ltd.
March 2005
Representative Director,
President of Teikoku Oil Co., Ltd.
April 2006
Representative Director of INPEX Holdings Inc.
(currently the Company)
October 2008 Representative Director, Chief Technical Executive,in charge of HSE and Compliance of the Company
June 2010
Representative Director, Vice Chairman,
Chief Technical Executive, in charge of HSE andCompliance of the Company (incumbent)

Director, Senior Managing Executive Officer

April 1975
Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
September 1999 General Manager of Jakarta Office of INPEX Corporation
June 2000
Director,
General Manager of Jakarta Office of INPEX Corporation
March 2003
Director, Coordinator of Exploration Department 1
and Exploration Department 2 of INPEX Corporation
June 2003
Managing Director of INPEX Corporation
April 2004
Managing Director of Japan Oil Development Co., Ltd.
March 2006
Representative Director,
Managing Director of Japan Oil Development Co., Ltd.
April 2006
Director, Deputy Senior General Manager ofCorporate Strategy & Planning Division andTechnology Division of INPEX Holdings Inc.
(currently the Company)
March 2007
Managing Director, Senior General Manager ofTechnology and HSE Division, in charge of
Oceania & America projects of INPEX Holdings Inc.
June 2007
Managing Director, Senior General Manager ofTechnology and HSE Division and Oceania & America
Project Division of INPEX Holdings Inc.
October 2008 Director, Senior Managing Executive Officer,
Senior Vice President of Asia & Australasia of theCompany
June 2012
Director, Senior Managing Executive Officer,
Senior Vice President of Corporate Strategy &Planning Division of the Company (incumbent)

092

INPEX CORPORATION Annual Report 2013

Vice Chairman

April 1968
April 1994

Masaharu Sano
April 1974
April 2000

Toshiaki Kitamura

President & CEO

April 1972

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

Director, Senior Managing Executive Officer

Joined Teikoku Oil Co., Ltd.
General Manager ofTechnical Planning Department of Teikoku Oil Co., Ltd.
March 2001
Senior General Manager of Teikoku Oil Co., Ltd.
March 2001
General Manager of New Ventures Department,International Projects Division of Teikoku Oil Co., Ltd.
March 2002
Director, General Manager of
New Ventures Department,International Projects Division of Teikoku Oil Co., Ltd.
March 2005
Managing Director, President ofInternational Projects Division /Domestic Offshore Division of Teikoku Oil Co., Ltd.
April 2006
Director, Deputy Senior General Manager ofCorporate Strategy & Planning Division / Technology
Division of INPEX Holdings Inc. (currently the Company)
October 2008 Director, Senior Managing Executive Officer,
Senior Vice President of
The Americas & Africa Project Division of the Company
June 2012
Director, Senior Managing Executive Officer,
Senior Vice President of Technical Division of
the Company (incumbent)

Shunichiro Sugaya

Director, Managing Executive Officer

April 1976
April 1997

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

Masahiro Murayama

Director, Managing Executive Officer

April 1976

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

Seiya Ito

Director, Managing Executive Officer

April 1977
April 2002

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

6

April 1977
June 2000

Director, Managing Executive Officer

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
General Manager of Planning & New Ventures
Department of INPEX Corporation
June 2003
Director, General Manager of Planning & New
Ventures Department of INPEX Corporation
June 2004
Director, Coordinator in charge of the Middle East
and Caspian Sea regions of INPEX Corporation
October 2004 Director, Deputy General Manager of Tehran Office of
INPEX Corporation
February 2007 Director, Coordinator in charge of Middle East
projects of INPEX Corporation
April 2007
Director, Assistant Senior General Manager of General
Administration and Corporate Planning Division of
INPEX Corporation
October 2008 Managing Executive Officer, Deputy Senior General
Manager of General Administration Division of
the Company
June 2009
Director, Managing Executive Officer, Senior Vice
President of General Administration of the Company
June 2011
Director, Managing Executive Officer, Senior Vice
President of General Administration Division(incumbent) and Corporate Strategy & Planning
Division of the Company

Takahiko Ikeda
April 1978
March 2002

Director, Managing Executive Officer

Joined Teikoku Oil Co., Ltd.
General Manager of Production Department,
Domestic Operating Division of Teikoku Oil Co., Ltd.
March 2004
Senior General Manager of Teikoku Oil Co., Ltd.
March 2005
Director of Teikoku Oil Co., Ltd.
April 2006
General Manager of Domestic Project Planning and
Administration Unit, Corporate Strategy &Administration Division of INPEX Holdings Inc.
(currently the Company)
June 2007
Managing Director, President of Domestic Operation
Division and General Manager of Niigata District
Department of Teikoku Oil Co., Ltd.
October 2008 Director, Managing Executive Officer, Senior Vice
President of Domestic Projects of the Company(incumbent)

Yoshikazu Kurasawa

Director, Managing Executive Officer

April 1982
Joined Japan National Oil Corporation
February 2004 Deputy General Manager of Planning & New Ventures
Department of INPEX Corporation
April 2005
General Manager of Planning & New Ventures
Department of INPEX Corporation
September 2005 General Manager of Business Development and Legal
Unit, General Administration & Corporate Planning
Division of INPEX Corporation
April 2006
General Manager of Overseas Project Planning and
Administration Unit, Corporate Strategy &Administration Division of INPEX Holdings Inc.
(currently the Company)
June 2007
Executive Officer, General Manager of Business
Development and Legal Unit, General Administration& Corporate Planning Division of INPEX Corporation
October 2008 Executive Officer, Assistant Senior General Manager ofCorporate Strategy & Planning, General Manager ofBusiness Development and Legal Unit of the Company
June 2011
Managing Executive Officer, Vice President ofCorporate Strategy & Planning of the Company
June 2012
Director, Managing Executive Officer, Senior Vice
President of New Ventures Division of the Company(incumbent)

INPEX CORPORATION Annual Report 2013

Environment,
Society and Governance

Wataru Tanaka

093

Directors and Auditors
C A

Director (Outside)

Kazuo Wakasugi

（2）
（4）

C C H A

Director (Outside)

Yoshiyuki Kagawa

（2）
（4）

（1）

C A

Director (Outside)

Seiji Kato

（2）
（4）

Seiji Yui

（1）

C C H I A

Director (Outside)

Rentaro Tonoike

（2）
（4）

Director

Masaharu Sano

（1）

C H I

Director (Outside)

Yasuhiko Okada

（2）
（4）

Director

Shunichiro Sugaya

（1）

C H

Statutory Auditor

Yoshitsugu Takai

Director

Masahiro Murayama

（1）

C I

Director

Seiya Ito

（1）

C H

Director

Wataru Tanaka（1）

C C H I

Director

Takahiko Ikeda

（1）

C H

Director

Yoshikazu Kurasawa

（1）

C H I

ChairmanNaoki Kuroda

Vice Chairman

Masatoshi Sugioka

President & CEO

Toshiaki Kitamura

Director

Executive Officers
President & CEO
Senior Managing
Executive Officer
Senior Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Managing
Executive Officer
Executive Officer

C A

Toshiaki Kitamura
Seiji Yui

Senior Vice President of Corporate
Strategy & Planning Division

Masaharu Sano

Senior Vice President of Technical Division

Shunichiro Sugaya

Senior Vice President of Masela Project Division

C H

Senior Vice President of Finance & Accounting
Masahiro Murayama Division

C I

Seiya Ito

Senior Vice President of Ichthys Project Division

C H

Wataru Tanaka

Senior Vice President of General
Administration Division

Takahiko Ikeda

Senior Vice President of Domestic Project Division

C H

Yoshikazu Kurasawa

Senior Vice President of New Ventures Division

C H I

Sadafumi Tanigawa

Senior Vice President of Oil & Gas Business Division 1

Kasaburo Tamura

Senior Vice President of Oil & Gas Business Division 2

Akinori Sakamoto

Senior Vice President of Gas Suppy &Infrastructure Division

Kazuo Yamamoto

Senior Vice President of Logistics & IMT DivisionC

Shuhei Miyamoto

Senior Vice President of America &Africa Project Division

Kenji Kawano

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

Yasuhisa Kanehara

Senior Vice President of Eurasia & Middle
East Project Division

C H

Kazuhiko Itano

Vice President of Corporate Strategy & Planning
Division

Hiroshi Fujii

Vice President of Eurasia & Middle East Project Division

Noboru Himata

Vice President of Finance & Accounting Division
General Manager of Finance UnitC C H I AC H IStatutory Auditor(Outside)
Statutory Auditor(Outside)
Statutory Auditor(Outside)
Statutory Auditor(Outside)Haruhito Totsune

（3）
（4）

Koji Sumiya

（3）
（4）

Hiroshi Sato

（3）
（4）

Masaru Funai

（3）
（4）

(1) Concurrently hold the position of executive officer(2) Outside directors as defined in Article 2, Item 15, of the Companies Act(3) Outside auditors as defined in Article 2, Item 16, of the Companies Act(4) Independent directors / auditors as defined in Article 436, Item 2, Sub-Item 1,of the Securities Listings Regulations for the Tokyo Stock Exchange

Executive Officer Takashi Kubo

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

Executive Officer Toshihiko Fukasawa

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

Executive Officer Hirohisa Ota

Vice President of Masela Project Division,
General Manager of Technical Unit
Vice President of Oil & Gas Business Division 2

Executive Officer Yoshinori Yamamoto General Manager of Gas Marketing Unit

General Manager of Oil Products Marketing Unit

Executive Officer Hajime Kawai

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

Executive Officer Atsushi Sakamoto

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

Executive Officer Arihiro Kezuka

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

Executive Officer Kimiya Hirayama

Vice President of Domestic Project Division General
Manager of Niigata District Office, General Manager of
Production Unit, General Manager of Drilling UnitC

Executive Officer Nobuharu Sase

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

Executive Officer Shigeharu Yajima

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

C H

Executive Officer Tetsuro Tochikawa

Vice President of Technical Division

Executive Officer Yoshiro Ishii

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

C H

Executive Officer Toshiya Oshita

Vice President of Technical Division, General Manager ofTechnical Resources Unit

C H

Executive Officer Kimihisa Kittaka

Vice President of Corporate Strategy & Planning Division
General Manager of Corporate Strategy & Planning Unit
General Manager of Corporate Communication Unit

Executive Officer Hideki Iwashita

Vice President of Ichthys Project Division
Director of Commercial Coordination, Perth OfficeC C H I

ICInternal Committees
Objectives

Established

Number of Committee
Meetings Held during
the Year Ended March 31, 2013

Advisory
A Committee

The INPEX Advisory Committee is made of up key figures fromJapan and overseas. The Committee provides the Company with advice andrecommendations on a host of business-related issues and has been establishedto further enhance corporate value and corporate governance.

Oct. 2012

1

C CSR
Committee

The CSR Committee is charged with the responsibility of systematicallypromoting and continuously strengthening CSR activities Companywide.

Apr. 2012

5

Compliance

The Compliance Committee is charged with the responsibility offostering greater awareness toward compliance within the Company andstrengthening corporate ethics and behavior.

Apr. 2006

6

Corporate HSE

The Corporate HSE Committee promotes HSE (health, safety and environment)
activities on a Group-wide basis in accordance with the HSE Management System.

Oct. 2007

9

The Companyʼs Information Security Committee evaluates and determines
a variety of measures that are considered essential to the maintenance,
management, and strengthening of information security.

Nov. 2007

3

C Committee

H Committee

I
094

Information
Security Committee

INPEX CORPORATION Annual Report 2013

Financial /Corporate Information

7

Message from the Senior Vice President,
Finance & Accounting Division
I would like to take this opportunity to provide an overview of the Groupʼsbusiness results highlights and ﬁnancial position, for the year ended March
31, 2013 as well as details of its investment plans and funding.
Business Results Highlights for
the Year Ended March 31, 2013
Consolidated net sales for the year ended March
31, 2013 resulted ¥1,216.5 billion increased by
2.5% and consolidated net income resulted ¥183.0
billion decreased by 5.7% from the previous ﬁscal
year. Despite this decrease, the Group recognized
one-off gain on transfer of the Ichthys interest of
approximately ¥50.0 billion, in similar fashion to thegain on transfer of the Masela interest recognized in
the year ended March 31, 2012. As a result, INPEX
maintained a high level of income.
The substantial depreciation of the yen against
the U.S. dollar toward the end of the year ended
March 31, 2013 had a positive effect on the Groupʼs
results, such as pushing net sales up by ¥47.2 billion. On the other hand, foreign exchange loss
occurred on foreign-currency denominated loansof ¥30.1 billion as other expenses. Meanwhile,
the Group recognized foreign exchange gain on
foreign-currency denominated bonds attributableto yen depreciation, which is not reﬂected in thestatement of income, but as unrealized holding gain
on securities in net assets. The risks associated with
the Groupʼs foreign-currency denominated transactions are considered to be in effect offset by efforts
to balance its foreign-currency denominated assets
and liabilities.

Financial Position
Consolidated total assets as of March 31, 2013
increased by ¥549.8 billion to ¥3,616.2 billion fromthe previous ﬁscal year mainly due to the development investment in the Ichthys Project, and theacquisition of interests in the shale gas projects in
Canada and the Prelude FLNG Project in Australia.
The Group relies mainly on operating cash ﬂows
and external loans to procure funds for these investments. At the same time, the available cash on handas of March 31, 2013 was approximately ¥1,500.0
billion and secured for those investments planned in
the “Medium- to Long-Term Vision of INPEX.” Recognizing that its investments are generally in U.S.
dollars, the vast majority of available cash on handis in effect denominated in U.S. dollars.

Consolidated net assets as of March 31, 2013
increased by ¥356.8 billion to ¥2,671.0 billion. In
addition to the increase in retained earnings of¥155.6 billion attributable to net income for theperiod, the increase in net assets largely reﬂected
the impact of yen depreciation on unrealized gainfrom hedging instruments and translation adjustments, which rose ¥118.7 billion. The increases
in unrealized gain from hedging instruments andtranslation adjustments were derived from foreignexchange gain by yen depreciation, resulting fromthe foreign exchange forward contracts and capital
investments in the overseas subsidiaries under yen
appreciation situation.
Yen depreciation contributed to improve theGroupʼs ﬁnancial condition. Its equity ratio which
resulted 68.6% as of March 31, 2013 remained
substantially higher than our long-term ﬁnancial
target of 50%. Moreover, net assets per share also
increased by 13.9% from the previous ﬁscal year.

Investment Plans and Funding“Medium- to Long-Term Vision of INPEX” issued in

May 2012 expresses ¥3.5 trillion investment plansover the 5 years period from the year ended March
31, 2013 to the year ending March 31, 2017. In
accordance with the plans, INPEX is continuing toengage in exploration and development investments toward future growth. In light of the recent
trend of yen depreciation, INPEX has revised its
medium- to long-term assumption of exchange
rate from ¥80 in May 2012 to ¥95 to the U.S. dollar. As a result, the investment amount on yen basis
has ﬂuctuated upward. For the sake of investments
denominated in U.S. dollars, the Group plans to
procure the required funds mainly through U.S. dollar based external loans including project ﬁnanceas well as U.S. dollar based operating cash ﬂows.
As previously mentioned, the vast majority of available cash on hand is denominated in U.S. dollars.
The current amount held is sufﬁcient to meet theGroupʼs needs for U.S. dollar based exploration anddevelopment investments in the next four years.
Taking this into consideration, INPEX is not required
to incur additional debt as a result of yen depreciation and accordingly does not contemplate theneed for further ﬁnancing.
The Group will make efforts to manage its balance sheet while taking care of ﬁnancial condition
to maintain the long-term ﬁnancial targets of “anequity ratio of 50% or more” and “a net debt to net
total capital employed ratio of 20% or less”.
` For details regarding the Groupʼs investment plans and

Masahiro
Murayama
Director,
Senior Vice President,
Finance & Accounting Division096

INPEX CORPORATION Annual Report 2013

funding please refer to the “The Medium- to LongTerm Vision of INPEX and Investment Plans” section of
the report on pp. 40 and 41.

Notes* EBIDAX = Net income + Minority interests + Deferred tax + (1 – Tax rate) ×(Interest expense – Interest income) + Exchange profit 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 for recoverable accounts under
production sharing* Net assets excluding minority interests = Net assets – Minority interests* Equity ratio = Net assets excluding minority interests / Total assets* Net debt = Interest-bearing debt – Cash and cash equivalents – Time deposits –Certiﬁcate of deposits – Public bonds and corporate bonds and other debt securities
with determinable value – Long-term time deposits* Net debt / Net total capital employed = Net debt / (Net assets + Net debt)* D/E ratio = Interest-bearing debt / (Net assets – Minority interests)* ROE = Net income / Average of net assets excluding minority interests at the
beginning and end of the year
* Net ROACE = (Net income + Minority interests + (Interest expense – Interest
income) × (1 – Tax rate)) / Average of sum of net assets and net debt at the
beginning and end of the year
* The reserves cover most of INPEX group projects including the equity-method
afﬁliates. The reserves from March 31, 2007 to March 31 2010 were evaluated by
DeGolyer & MacNaughton, and from March 31, 2011, the reserves of projects which
are expected to be invested a large amount and affect the Group’s future resultmaterially are evaluated by DeGolyer & MacNaughton, and the others are doneinternally.
The proved reserves are evaluated in accordance with SEC regulations.
The probable reserves are sum of proved reserves and probable reserves evaluatedin accordance with SPE/WPC/AAPG/SPEE guideline Petroleum Resources
Management System 2007(PRMS) approved in March 2007 after deduction ofproved reserves evaluated in accordance with SEC regulations.The probablereserves include reserves of bitumen. Probable reserves as of March 31, 2007 areevaluated in accordance with the guideline established by SPE and WPC (1997 SPE/
WPC).
Possible reserves are evaluated in accordance with PRMS. Possible reserves also
include reserves of bitumen.
* Production volumes are calculated in accordance with SEC regulations and include
the equity-method affiliates. The production volume of crude oil and natural gas
under the production sharing contracts entered into by the Group corresponds tothe net economic take of the Group.
Calculation of the conversion factor from gas to oil equivalent was altered from theyear ended March 31, 2012.
* Exploration and development expenditures = Exploration expenditures +Development expenditures + Acquisition costs
Exploration and development expenditures include the Group’s share of investmentin the Ichthys downstream entity (Ichthys LNG Pty Ltd, an equity-method afﬁliate)from the year ended March 31, 2012.

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

097

INPEX CORPORATION Annual Report 2013

12-Year Financial Information
Fig ure s give n for t he year s e n d e d o n or b efore Marc h 31, 20 0 6 re p re s e nt INPE X C or p or atio n an d it s
subsidiaries/Teikoku Oil Co., Ltd. and its subsidiaries; figures given for the years ended on or after March 31,
2007 represent INPEX Corporation (post integration) and its subsidiaries.

Millions of yen
2002/3
2001/12

2003/3
2002/12

2004/3
2003/12

2005/3
2004/12INPEX ¥ 184,203
Teikoku Oil
75,767
INPEX
79,120
Teikoku Oil
45,036
INPEX
105,083
Teikoku Oil
30,730
INPEX
97,049
Teikoku Oil
11,864
INPEX
76,855
Teikoku Oil
7,799
INPEX
27,605
Teikoku Oil ¥5,704¥ 201,533
73,63095,99744,931
105,536
28,69997,2707,296
70,0507,491
27,911¥
5,233¥ 218,831
78,498105,758
47,062
113,072
31,436
93,876
8,739
94,773
11,04434,781¥
6,796¥ 478,586
84,032
197,094
48,455
281,492
35,576
268,662
13,533
258,631
16,67676,493¥9,276

INPEX ¥
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil ¥¥ 119,076
47,58529,869110,416
3,885
796
185,91445,188
338,747
203,986
27,27523,88257,007
41,342
254,463¥ 138,760¥ 106,952
50,16635,141
103,668
137,908754
245,295
71,691
525,298
226,280
28,894
20,661
185,410
46,101
310,991¥ 159,516¥ 238,419
45,65868,260114,220
138,631776
333,915
79,858779,227
240,513
122,91027,439209,738
44,986446,578¥ 168,086

As of or years ended March 31,(Results of operations)
Net sales
Cost of sales
Gross profit
Operating income
Income before income taxes
and minority interests
Net income(Financial position)
Current assets
Tangible fixed assets
Intangible assets
Investments and otherassetsTotal assets
Current liabilities
Long-term liabilities
Net assets*

99,09659,89423,44496,403
4,233
841
160,874
45,229287,649
202,369
17,73024,07438,317
41,232
231,600
137,061* The amount of Net assets as of the years ended on or before March 31, 2006 is retroactively adjusted in accordance with "Accounting Standard for Presentation of Net
Assets in Balance Sheet" (ASBJ Statement No.5).

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

INPEX ¥
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil ¥51,83015,971(39,626)(19,666)
9,443
6,238
49,77534,001¥¥

44,464
19,955(218,121)(8,284)
151,120(5,914)54,582¥ 28,789¥ 131,206
19,225(119,956)(20,018)
9,791(5,824)
128,375¥ 22,234¥15,726.17*
17.11
143,389.73*
444.903,333*¥
6.00¥19,612.92*
22.09
157,275.33*
512.183,333*¥
6.00¥40,255.92
30.22
214,163.98
543.62
4,000
¥
7.50

(75.8)%
(2.3)
74.9
66.6
18.5
18.8%

12.0%
(9.1)
52.9
69.1
60.9
13.9%

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

¥

51,282
15,004(40,533)(27,166)
21,237(407)
78,41423,020(Per share data)
Earnings per share (EPS)(Yen)
Net assets per share (Yen)
Cash dividends per share(Yen)

INPEX ¥15,617.64*
Teikoku Oil
18.63
INPEX 130,586.85*
Teikoku Oil
438.79INPEX
3,333*
Teikoku Oil ¥7.00* Retroactively adjusted for a three-for-one stock split in May 2004

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

098

INPEX CORPORATION Annual Report 2013

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil(82.8)%(15.0)
80.2
66.4
13.5
17.5%

Millions of yen
2006/3
2005/12
2006/3

2007/3

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

943,080¥ 1,186,732¥ 1,216,533

INPEX¥ 704,234
100,716
27,718257,903
55,47312,807446,330
45,243
14,910426,650
21,077
9,470
403,539
26,122
10,216
103,476¥ 15,485¥ 6,484¥

969,713 ¥ 1,202,965¥ 1,076,165¥

840,427¥

343,795

390,554

319,038

298,168

334,833

395,443426,326

625,918

812,411757,127542,259

608,247

791,289

790,207559,077

714,211663,267

461,668

529,743

709,358

693,448586,263

685,800

616,167

442,027

508,587

767,039

718,146¥

165,092¥

173,246¥

145,063¥474,124¥565,111¥411,110¥

107,210¥

128,699¥

194,001¥

182,962

492,855¥

492,932¥

908,702¥ 1,106,504

INPEX¥ 257,573
58,58665,86465,219125,418
126,497
136,757
811
1,028
512,887
108,949
115,268
972,437
293,767
308,659
179,600
28,15628,998250,236
65,23072,927542,600¥199,536¥207,574¥

219,227

254,481

297,636

358,094

379,862

383,698584,541

265,822265,481

253,681239,205

249,111233,318

380,156

648,934

722,828805,618

923,624

1,558,475

1,540,680

1,544,958

1,608,107

1,807,901

1,768,045

2,013,778

2,680,380

3,066,398

3,616,159

266,248

325,286

206,059

227,905

254,729

367,844414,977

261,843

243,802

199,925

295,270

328,268

384,361

530,198¥ 1,080,016¥ 1,238,813¥ 1,362,061¥ 1,490,603¥ 2,097,383¥ 2,314,193¥ 2,670,984

¥

¥

¥

INPEX

¥ 218,239
15,1189,872(252,399)(20,287)(4,705)
14,3507,845
5,480
114,967¥ 25,545¥ 36,175¥¥

231,982¥363,995¥

230,352¥

241,373274,094

320,692

252,347(209,243)(261,767)(240,168)(251,812)(844,511)(280,864)(489,870)

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

68,937548,057

29,294137,069

189,417 ¥

222,270

162,845 ¥

216,395¥¥

182,025¥

249,233¥

199,859

INPEX¥
53,814.47—
50.61
262,966.53—
646.90
5,500
—
¥
9.00
¥

¥ 70,423.45¥ 73,510.14¥ 61,601.60¥ 45,553.56¥ 40,832.40¥ 53,137.93¥ 50,114.22

436,467.92

491,168.09

540,100.10

589,548.88

546,958.90

596,908.99

679,639.63¥

7,000.00¥

7,500.00¥

8,000.00¥

5,500.00¥

6,000.00¥

7,000.00¥

7,000.00

(1.0)

—

51.9
67.1

—

43.6
14.7%

—%

(18.6)%(36.1)%(31.2)%(30.6)%(48.9)%(60.7)%(43.9)%

64.0

64.0

71.9

68.9

74.5

71.1

68.6

24.2%

16.8%

12.9%

17.3%

13.7%

14.6%

19.2%

INPEX CORPORATION Annual Report 2013

Financial /Corporate Information

INPEX(19.6)%

7099

Background Information
Oil and Gas Accounting Policies and Treatment

ACCOUNTING METHODS FOR TYPES OF AGREEMENTS
The oil and gas business generates the bulk of consolidated net

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

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

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

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

1. Production sharing contracts
Production sharing contract is an agreement by which one

Recoverable costs under the PSCs

or sever al oil and gas development companies ser ve as

Exploration costs
The share of recoverable exploration costs incurred by theGroup under the terms of the relevant PSC is capitalized within”Recoverable accounts under production sharing.”

contractors that undertake at their own expense exploration anddevelopment work on behalf of the governments of oil-producing
countries or national oil companies and receive production fromthe projects as cost recovery and compensation.

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

(1) “First tranche petroleum”: This is a prescribed portionof total production allocated between the host country’s
g ove r n m e nt a n d t he co nt r ac to r s in line w i t h ag re e dpercentages.
(2) “Cost recovery portion”: This is the oil and gas equivalentof a) non-capital production-related expenditures incurred inthat period, plus b) the scheduled depreciation expenses inthat period for capital expenditures, as calculated under the
PSC. The equivalents are determined based on the current
unit prices of crude oil and natural gas and allocated between
the contractors alone. The quantity of oil and gas in the “costrecovery portion” decreases as unit prices increase, whereasthat of the “equity portion” (explained below) rises.
If the actual production for the period is insufficient tocover the quantity of oil and gas equivalent calculated forthe cost recover y por tion, the latter is capped at actual
production and any surplus amount is carried forward to thefollowing period, as stipulated in the PSC.
(3) “Equity portion”: This is any residual production that is left
after the ﬁrst two portions have been allocated. It is allocatedbetween the host country’s government and the contractors
based on agreed percentages.
The calculation of items in the income statement based100

portion.”INPEX CORPORATION Annual Report 2013

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

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

2. Concession agreements

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

Conces sion agreement is an agreement or authorization

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

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

depreciation expenses are recorded within the cost of sales.

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

Production sharing contracts
Costs

Exploration
costs

Development
costsStatement of
IncomeProject under
exploration phase

Provision for allowance
for recoverable
accounts under
production sharing

Production costs(Operating costs)

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

Acquisition
costs

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

Concession agreements

Assets on
Balance Sheet

Recoverable
accounts under
production sharing

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

Costs

Assets on
Balance Sheet

Statement of
IncomeExplorationcosts

All exploration costs
are expensed
as incurred

Exploration
expenses

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

Tangible fixed

Production costs(Operating costs)

All production costs
are expensed
as incurred

Cost of sales(Operating expenses)

Acquisition
costs

Mining rights

Cost of sales(Depreciation andamortization)

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

Selling, general andadministrative expenses(Depreciation andamortization)
Other expenses(Amortization of
exploration anddevelopment rights)

Cost of sales(Depreciation andamortization)

Development
costs

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

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

financial statements requires the application of estimates,

policies and estimates relating to the ﬁnancial presentation are

judgments and assumptions that affect the reported values ofoutlined below.

well as the reported amounts of revenues and expenses for thereporting period. Actual results may differ from the previously— Allowance for recoverable accounts under
production sharing

estimated or assumed values.

Any expenditures made during the exploration, development

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

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

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

INPEX CORPORATION Annual Report 2013

Financial /Corporate Information

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

7101

reserve equal to exploration costs is recorded within “Allowance— Provision for exploration projects

for recoverable accounts under production sharing“ to provide

A provision for exploration projec ts is provided for future

for potential losses from unsuccessful exploration. This reserve

expenditures of consolidated subsidiaries at the exploration

typically remains unchanged on the balance sheet until it exceeds

stage based on a schedule of investments in exploration.

the residual balance of exploration costs that previously had

Although the Group believes that assessments relating to thebeen capitalized within “Recoverable accounts under production

schedule of investments are reasonable, changes to the schedulesharing“ during the exploration phase. Reﬂecting the uncertainty

could signiﬁcantly affect future operating results.

associated with oil and gas projects, a reserve is recorded within“Allowance for recoverable accounts under production sharing“— Deferred tax assets

to provide for probable losses on development activities, as

Deferred tax assets reﬂect temporary differences (including net

individually estimated for each project. Although assessments

operating loss carry-forwards) arising mainly from the write-

and accounting estimates are made on a reasonable basis, actual

down of exploration expenditures, foreign taxes payable andoperating results can change depending on the project status.

excess of tax allowable depreciation. Valuation allowances are— Unit-of-production method

tax assets has become the more probable outcome. The effectprovided once it is judged that the non-realization of deferred
Overseas mining facilities, mining rights and exploration andof foreign tax credits is taken into account in the calculation ofdevelopment rights that are acquired during the development

such valuation allowances. The realization of deferred tax assets

and production phase are mainly depreciated or amortizedis principally dependent on the generation of sufﬁcient taxable

based on the unit-of-production method. This approach requires

income, based on the available information. Adjustments tothe estimation of reserves. Although the Group believes thatdeferred tax assets could be required if future taxable income

the assessment of reserves is done in an appropriate manner,

was lower than expected due to market conditions, foreign

any changes in these estimates could signiﬁcantly affect futureexchange rate ﬂuctuations or poor operating performance.

operating results.

— Retirement beneﬁts to employees— Asset retirement obligations

Retirement benefit obligation to employees are recognized at

Asset retirement obligations are recorded by a reasonable

the net present value of future obligations as of the end of theestimate of retirement costs incurred upon termination of theaccounting period, taking into account any periodic beneﬁt costs

operation with respect to oil and gas production facilities in casethat have arisen during the period. The calculation of retirementthat the Group is obliged to retire such facilities by oil and gas

benefit obligations and retirement benefit expenses is based

contracts or laws and regulations within the countries in which

on various actuarial assumptions, including the discount rate,

the Group operates or has working interests. Although the Group

employee turnover and retirement rates, remuneration growth

believes that such estimates of the present value of retirement

rates, and the expected return on pension plan assets. Future

costs are reasonable, changes to estimates of the present value

operating results could be significantly affected by deviationof retirement costs could significantly affect future operating

between the base assumptions and actual results or the revision

results.

of such assumptions which were to generate actuarial gains orlosses.

— Allowance for investments in exploration companies
A reser ve is recorded to provide for probable los ses oninvestments made by the Group in entities engaged in oil andgas activities, as estimated based on the net assets of such
entities. Although the Group believes that the assessments andestimates relating to such investments are reasonable, changes
in actual production volumes, prices or foreign exchange rates
could signiﬁcantly affect future operating results.

102

INPEX CORPORATION Annual Report 2013

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

Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
BUSINESS ENVIRONMENT
During the year ended March 31, 2013, the Japanese economy
showed a gradual recovery owing to the reconstruction demand
from the Great East Japan Earthquake. Although the economy
weakened owing to the slowdown of the global economy
stemming from the European debt crisis in the second half ofthe fiscal year towards its end, there is a growing expectation
for an economic upturn from the effect of the new government’s
economic and monetary policies.
Under such business environment, Brent crude oil price,a t ypical indicator of international crude oil prices whichsigniﬁcantly affect the Group’s business, started the year ended
March 31, 2013, at US$125.43 per barrel but fell to US$89.23
per barrel in late June due to mounting crude oil inventories
worldwide and the European debt crisis. However, after EU
leaders agreed on a solution for the debt crisis, an upward
trend began and the price reached US$116.90 per barrel in midAugust, remaining at around US$110 per barrel until the end of
2012. As economic indicators in the United States and Europe
were strong from the beginning of 2013, the Brent crude oil pricewent up to US$118.90 per barrel in early February but began to
decline from the concerns of a recurrence of the European debt
crisis and closed at US$110.02 per barrel for the year ended
March 31, 2013. Meanwhile, domestic prices of crude oil andpetroleum products tracked movement in the international crude
oil prices. Reﬂecting these circumstances, the Group’s averagesales price of crude oil for the year ended March 31, 2013, was
US$110.11 per barrel, which was US$2.86 lower than that for theyear ended March 31, 2012.

The foreign exchange market, another important factor
that affects the business of the Group, began the year ended
March 31, 2013, with the yen trading at around ¥83 to the U.S.
dollar. Yen appreciation continued steadily against the U.S. dollar
early in the ﬁscal year ended March 31, 2013, to the ¥77 level in
mid-September while the U.S. economy showed a decelerating
recover y and concerns about sovereign and the financial
institutions arose in Europe. However, the yen depreciatedsharply to the U.S. dollar beginning of December 2012, aroundthe time of the Japanese Lower House election, in line withexpectations for the new administration’s economic policy andadditional monetary easing measures by the Bank of Japan, as
well as increased yen selling reﬂecting trends in Japan’s actual
trade deﬁcit. Since the beginning of the year, the yen continued
to depreciate to the U.S. dollar supported by the expectation ofmonetary easing related to the appointment of a new governorof the Bank of Japan and the U.S. dollar appearing to appreciate
against major currencies, reﬂecting discussions that the end ofquantitative easing began partly against the background of asteady recovery of the U.S. economy.
In March 2013, the yen temporarily dropped to the range of¥96 to the U.S. dollar, which was the lowest level in three and halfyears and, as a result, the TTM closed at ¥93.99 to the U.S. dollar
on March 31, 2013, which was ¥11.85 lower than that on March
31, 2012. Reﬂecting these situations, the average sales exchange
rate for the Group for the year ended March 31, 2013, was ¥82.68
to the U.S. dollar, which was ¥3.55 lower than that for the year
ended March 31, 2012.

PERFORMANCE OVERVIEW
Net sales31, 2012. The average sales price of overseas crude oil was
US$110.11 per barrel, a decrease of US$2.86, or 2.5%, comparedwith the year ended March 31, 2012. The average sales price ofoverseas natural gas was US$13.43 per thousand cubic feet (Mcf),a decrease of US$0.69, or 4.9%, compared with the year ended
March 31, 2012. The average sales price of domestic natural
gas was ¥47.02 per m3, an increase of ¥2.46 per m 3, or 5.5%,
compared with the year ended March 31, 2012.
The increase of ¥29.8 billion in net sales was mainly
derived from the following fac tor s: the increase in sales
volume contributing ¥7.6 billion to the increase, a decrease in

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

1,200

1,203.0

1,186.7

1,216.5

2012

2013

7

1,076.2
943.1

900

Financial /Corporate Information

Consolidated net sales for the year ended March 31, 2013,
increased by ¥29.8 billion, or 2.5%, to ¥1,216.5 billion from
¥1,186.7 billion for the year ended March 31, 2012, due to anincrease in sales volume of crude oil and the positive effect ofthe depreciation of the yen against the U.S. dollar, despite adecrease in the sales prices of crude oil and natural gas.
Compared with the year ended March 31, 2012, net salesof crude oil increased by ¥61.9 billion, or 8.5%, to ¥788.1 billion
from ¥726.2 billion, and net sales of natural gas decreased by¥31.3 billion, or 7.3%, to ¥397.8 billion from ¥429.1 billion. Net
sales excluding crude oil and natural gas decreased by ¥0.8
billion, or 2.6%, to ¥30.6 billion from ¥31.4 billion.
Crude oil sales volume increased by 5,452 thousand barrels,
or 6.8%, to 86,189 thousand barrels compared with the year
ended March 31, 2012. This was mainly due to an increase in sales
volume in the Kitan Oil Field and the ADMA Block. The sales
volume of natural gas decreased by 39 billion cubic feet (Bcf),
or 10.9%, to 319 Bcf compared with the year ended March 31,
2012. Of this, the sales volume of overseas natural gas decreasedby 39 Bcf, or 13.2%, to 253 Bcf compared with the year ended
March 31, 2012, mainly due to a decrease in sales volume in
the Offshore Mahakam Block. The sales volume of domestic
natural gas decreased by 5 million m3, or 0.3%, to 1,753 million
m3 (equivalent to 65 Bcf) compared with the year ended March

840.4

600

300

0

2008

2009

2010

2011

INPEX CORPORATION Annual Report 2013

103

(Millions of yen, %)Years ended March 31

Net sales:
Crude oil
Natural gas
Other
Cost of sales
Gross profit
Exploration expenses
Selling, general and administrative expenses
Depreciation and amortization
Operating income
Other income:Interest income
Dividend income
Gain on sales of investment securities
Equity in earnings of affiliates
Gain on transfer of mining rights
Other
Other expenses:
Interest expense
Equity in losses of affiliates
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Other
Income before income taxes and minority interests
Income taxes
Income before minority interests
Minority interests
Net income

2012

2013

¥1,186,732
726,223
429,065
31,444395,443
791,289
11,74748,286
21,898709,358
102,082
4,400
6,993
48
6,638
70,26013,74344,401
1,228—
14,816519
14,641
13,197
767,039
536,934
230,105
36,104¥ 194,001¥1,216,533
788,135
397,766
30,632426,326
790,207
20,12553,73422,900693,448
98,666
8,735
7,832
25,449—50,173
6,477
73,968
1,518
1,042
15,131
12,45230,056
13,769718,146529,275
188,871
5,909¥ 182,962

ChangeRatio¥ 29,801
61,912(31,299)(812)
30,883(1,082)
8,378
5,448
1,002
(15,910)(3,416)
4,335
839
25,401(6,638)(20,087)(7,266)29,567
290
1,042
315
11,933
15,415572(48,893)(7,659)(41,234)(30,195)¥(11,039)

2.5%
8.5
(7.3)
(2.6)
7.8
(0.1)
71.3
11.3
4.6
(2.2)
(3.3)
98.5
12.0
—
(100.0)(28.6)(52.9)
66.6
23.6
—
2.1
—
105.3
4.3
(6.4)
(1.4)
(17.9)(83.6)(5.7)%

average unit sales prices pushing sales down ¥24.2 billion, thedepreciation of the yen against the U.S. dollar contributing ¥47.2
billion to the increase and a decrease in net sales excluding
crude oil and natural gas of ¥0.8 billion.

and others, exploration expenses for the year ended March 31,
2013, increased by ¥8.4 billion, or 71.3%, to ¥20.1 billion from
¥11.7 billion for the year ended March 31, 2012, due to increased
exploration activities in the Middle East & Africa and other areas.

Cost of sales

Selling, general and administrative expenses

Cost of sales for the year ended March 31, 2013, increased by¥30.9 billion, or 7.8%, to ¥426.3 billion from ¥395.4 billion for theyear ended March 31, 2012. This was mainly due to an increasein royalties in the ADMA Block owing to an increase in sales, anincrease in depreciation and amortization in the Kitan Oil Field
and the trend of yen depreciation.

Selling, general and administrative expenses for the year ended
March 31, 2013, increased by ¥5.4 billion, or 11.3%, to ¥53.7
billion from ¥48.3 billion for the year ended March 31, 2012.
This was mainly due to an increase in personnel expenses, anoccurrence of transport costs for shale gas in Canada and anincrease in transport costs for ACG crude oil.

Exploration expenses

Depreciation and amortization

Despite a decrease in exploration expenses in the Americas

Depreciation and amortization for the year ended March 31,

Cost of sales

Operating income(¥billion)(¥billion)

500

800

400

714.2

426.3

390.6

709.4

693.4

2012

2013

663.3

395.4
600

319.0
300

529.7

334.8
298.2

461.7
400

200
200
100

0

0

2008

104

2009

2010

INPEX CORPORATION Annual Report 2013

2011

2012

2013

2008

2009

2010

2011

2013, increased by ¥1.0 billion, or 4.6%, to ¥22.9 billion from
¥21.9 billion for the year ended March 31, 2012, due to anincrease in the depreciation of exploration and development
rights for the ACG Oil Fields and others. The Group records
depreciation costs for production facilities that are covered byconcession agreements as cost of sales. In addition, under its
accounting treatment of the PSCs, the Group records capital
expenditures as “Recoverable accounts under produc tion
sharing” instead of capitalizing these costs within tangible ﬁxed
assets and depreciating them. Costs that are recovered in any
given year based on the terms of the PSCs are included in thecost of sales.

¥29.6 billion, or 66.6%, to ¥74.0 billion from ¥44.4 billion for theyear ended March 31, 2012. This was mainly due to an increasein provision for exploration projects owing to an increase of
exploration activities in Asia and an increase in foreign exchange
loss.

Income taxes

As a result of the above, operating income for the year ended
March 31, 2013, decreased by ¥16.0 billion, or 2.2%, to ¥693.4
billion from ¥709.4 billion for the year ended March 31, 2012.

Total current income taxes and deferred income taxes for theyear ended March 31, 2013, decreased by ¥7.6 billion, or 1.4%,
to ¥529.3 billion from ¥536.9 billion for the year ended March 31,
2012. The Group pays the majority of its taxes outside Japan. In
addition to the high corporate tax rates imposed in a numberof regions, the Group is generally unable to deduct expenses
incurred in Japan for such taxes. Despite the positive effects
attributable to the application of the foreign tax credit system,
this situation resulted in a high effective income tax rate of 73.7%
in the year under review.

Other income

Minority interests

Despite an increase in gain on sales of investment securities,
other income for the year ended March 31, 2013, decreased by¥3.4 billion, or 3.3%, to ¥98.7 billion from ¥102.1 billion for theyear ended March 31, 2012, due to a decrease in gain on transferof mining rights and others.

Minority interests for the year ended March 31, 2013, decreasedby ¥30.2 billion, or 83.6%, to ¥5.9 billion from ¥36.1 billion for theyear ended March 31, 2012.

Operating income

Other expenses
Other expenses for the year ended March 31, 2013, increased by

Net income
As a result of the above, net income for the year ended March 31,
2013, decreased by ¥11.0 billion, or 5.7%, to ¥183.0 billion from
¥194.0 billion for the year ended March 31, 2012.

FINANCIAL POSITION
Total assets as of March 31, 2013, increased by ¥549.8 billion,
or 17.9%, to ¥3,616.2 billion from ¥3,066.4 billion as of March
31, 2012. Current assets increased by ¥197.8 billion, or 21.8%,
to ¥1,106.5 billion from ¥908.7 billion due to an increase in time
deposits and others. Fixed assets increased by ¥352.0 billion,
or 16.3%, to ¥2,509.7 billion from ¥2,157.7 billion as of March
31, 2012, due to an increase in construction in progress, mining
rights, long-term time deposits and others.
Meanwhile, total liabilities increased by ¥193.0 billion,
or 25.7%, to ¥945.2 billion from ¥752.2 billion as of March 31,
2012. Current liabilities increased by ¥47.2 billion, or 12.8%, to¥415.0 billion from ¥367.8 billion as of March 31, 2012, due to anincrease in income taxes payable and provision for exploration
projects. Long-term liabilities increased by ¥145.8 billion, or
37.9%, to ¥530.2 billion from ¥384.4 billion as of March 31, 2012,
due to an increase in long-term debt and others.
Net as set s increased by ¥356.8 billion, or 15.4%, to¥2,671.0 billion from ¥2,314.2 billion as of March 31, 2012. Total
shareholders’ equity increased by ¥155.6 billion, or 7.1%, to¥2,340.0 billion from ¥2,184.4 billion as of March 31, 2012. Total
accumulated other comprehensive income increased by ¥146.4
billion to ¥141.3 billion from a loss of ¥5.1 billion as of March 31,
2012, and minority interests increased by ¥54.8 billion, or 40.6%,
to ¥189.7 billion from ¥134.9 billion as of March 31, 2012.

Net income

Total assets(¥billion)(¥billion)

200

194.0
173.2

3,066.43,000

72,680.4

145.1

150

3,616.2

3,500

183.0
2,500
2,000

107.2
100

Financial /Corporate Information

128.7
2,013.8
1,807.9

1,768.0

2008

2009

1,500
1,000

50

500
0

0

2008

2009

2010

2011

2012

2013

2010

2011

2012

2013

INPEX CORPORATION Annual Report 2013

105

INVESTMENT AND FUNDING— Investments in upstream oil and gas projects
Continuous exploration for new reserves of crude oil and natural
gas is essential for stable earnings of the Group. The informationin this section on upstream oil and gas investments is based on
the data reported by project operators relating to exploration
ex penditures, development ex penditures and oper ating
expenses. The Group’s expenditure categories are defined asfollows:• Exploration expenditures include the costs of exploratory
drilling and any geological or geophysical studies. The
costs of local personnel and ofﬁce operations and related
administrative expenses are also included in this category if
a project (or contract area) is in the exploration phase.
• Development expenditures include the costs of development
drilling and any production facilities.
• Operating expenses include the costs of well operations,maintenance and the supervision of production activities.
This category also includes the administrative expenses forthe project (or contract area) if it contains a ﬁeld in active
production and/or development.

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

The table below shows the Group’s exploration and development costs and other expenditures (excluding capitalized interest costs
and asset retirement costs corresponding to asset retirement obligations capitalized under fixed assets) by segment for the years
ended March 31, 2012 and 2013:(Millions of yen)

Year ended March 31, 2012Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥
31
Development
1,021
1,052
Subtotal* 1
Equity-method affiliates
Exploration—
Development—
Subtotal—
35,895
Other capital expenditures* 2
Total* 3¥36,947

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 15,700
90,878106,578¥ 1,094
59,66260,756¥ 1,074
18,24919,323¥14,915
2,922
17,837¥ 32,814
172,732
205,546—327
327
38,403¥145,308———
3¥60,759

38
225
263
5
¥19,591

—
1,768
1,768
—
¥19,605

38
2,320
2,358
74,306¥282,210*1 Figures include an equity-method afﬁliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic pipelines for sales of natural gas and the Naoetsu LNG Receiving Terminal, and theGroup’s share of investment in the Ichthys downstream entity (Ichthys LNG Pty Ltd, an equity-method afﬁliate).
*3 The amount capitalized for the asset retirement costs corresponding to asset retirement obligations for the year ended March 31, 2012 was ¥471 million.

(Millions of yen)

Year ended March 31, 2013

Japan

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

Asia & Oceania

Eurasia(Europe & NIS)

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

8
298
306
79
¥42,415

—
878
878
13
¥21,432

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

106

INPEX CORPORATION Annual Report 2013

Total investments for the year ended March 31, 2013, increased by ¥372.6 billion, or 132.0%, to ¥654.8 billion (including ¥1.6 billion for
exploration and development by equity-method afﬁliates) from ¥282.2 billion for the year ended March 31, 2012. This was mainly due to anincrease in development expenditures for the Ichthys Project (including the downstream business) and WA-44-L (the Prelude FLNG Project) in
the Asia & Oceania region.
The table below shows the Group’s operating expenses by segment for the years ended March 31, 2012 and 2013.
(Millions of yen, %)Years ended March 31,

2012

INPEX CORPORATION and Consolidated Subsidiaries
Japan¥ 9,071
Asia & Oceania
50,886
Eurasia (Europe & NIS)
6,901
Middle East & Africa
22,396
Americas417
Subtotal
89,671Equity-method affiliates
Asia & Oceania
312
Middle East & Africa
1,533
Americas
5,639
Subtotal
7,484
Total
¥97,155

2013
10.1%
56.7
7.7
25.0
0.5
100.0

¥

9,491
63,851
7,152
23,055868
104,417

9.1%
61.2
6.8
22.1
0.8
100.0

4.2
20.5
75.3
100.0
—%

525
1,724
1,746
3,995
¥108,412

13.1
43.2
43.7
100.0
—%

— Expenditures for acquisitions of upstream oil and gas projects
The table below shows the Group’s expenditures for acquisitions of upstream oil and gas projects by segment for the years ended
March 31, 2012 and 2013. Expenditures in this category include the costs of acquiring mining rights, exploration and development
rights, signing bonuses and any tangible ﬁxed assets or recoverable accounts under production sharing gained through the acquisitionof interest in upstream oil and gas projects.

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

INPEX CORPORATION and Consolidated Subsidiaries
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Equity-method affiliates
Asia & Oceania
Middle East & Africa
Americas
Subtotal
Total

2012

2013

¥ —
601
—
—
601

—%
100.0
—
—
100.0

¥ 82,219
1,024—
94,088177,331

46.4%
0.6
—
53.0
100.0

—
—
—
—
¥601

—
—
—
—
—%

—
42,228—42,228¥219,559

—
100.0
—
100.0
—%

Total expenditures on acquisitions of upstream oil and gas projects for the year ended March 31, 2013, increased by ¥219.0 billion to¥219.6 billion (including ¥42.2 billion for acquisitions of projects by equity-method afﬁliates) from ¥0.6 billion for the year ended March
31, 2012, due to acquisitions of projects in the Asia & Oceania, Middle East & Africa, and Americas regions.

7
Financial /Corporate Information

INPEX CORPORATION Annual Report 2013107

— Analysis of recoverable accounts under production sharing
For upstream projects governed by the PSCs, the Group’s share of costs arising during the exploration, development and production
phases is capitalized under ”Recoverable accounts under production sharing.” The following table shows the changes in the balance of”Recoverable accounts under production sharing” during the years ended March 31, 2012 and 2013.
(Millions of yen)

Years ended March 31,

Balance at beginning of the year
Add: Exploration costs
Development costs
Operating expenses
Other
Less: Cost recovery—capital expenditures
Cost recovery—operating expenditures
Other
Balance at end of the year
Allowance for recoverable accounts under production sharing at end of the year2012
¥ 534,331
25,320123,762
50,055
4,501
53,54398,87017,238568,318¥(100,671)

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

The amount posted as ”Cost recovery—operating expenditures”

increased compared with the year ended March 31, 2012,

in recoverable accounts under production sharing is greater

mainly due to an increase in operating expenses in the Offshore

than that posted as operating expenses. Along with operating

Mahakam Block.

expenses, this is because a por tion of the exploration andCost recovery for the year ended March 31, 2013, increased

development cos t s, which are incur red and recover ablecompared with the year ended March 31, 2012. This was mainly

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

due to increases in cost recovery in the Offshore Mahakam Block

expenditures” account.

and the ACG Oil Fields, despite a decrease in cost recovery inE xploration cost s for the year ended March 31, 2013,

the South Natuna Sea Block B.

decreased compared with the year ended March 31, 2012. ThisIn addition, other deduction was mainly due to the decrease

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

transfer to other accounts.

Development costs for the year ended March 31, 2013,

The allowance for recoverable accounts under production

increased compared with the year ended March 31, 2012. Thissharing as of March 31, 2013, increased compared with March

was mainly due to increases in development expenditures in the31, 2012. This was mainly due to additional allowance provisions

Offshore Mahakam Block, the South Natuna Sea Block B and thein connection with an increase in recoverable accounts under

ACG Oil Fields, despite a decrease in those in the Kashagan Oil

production sharing with respect to exploration expenditures in

Field.

the Asia region.

Operating expenses for the year ended March 31, 2013,— Funding sources and liquidity
Oil and gas exploration and development projects, as well as the

The Ichthys downstream entity (Ichthys LNG Pty Ltd, anand other supply infrastructure, require significant funding.

equity-method afﬁliate), as the borrower, began utilizing external

The Group relies on cash flow derived from internal reserves,loans from 8 export credit agencies and 24 commercial banks for

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

project ﬁnancing during the year ended March 31, 2013.

basic policy is to utilize internal cash flow and external equity

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

cash on hand at all times to fund expenditures for existing andcash flow and external loans to fund development projects,

new oil and gas projects in a timely manner, while also keeping apipeline construction and the LNG receiving terminal. The Groupcushion of liquidity to provide for steep falls in oil and gas prices.

currently receives loans from the Japan Bank for International

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

Cooperation, Japanese commercial banks and others. The Japanrisk, highly liquid ﬁnancial instruments. The Group’s strategy is toOil, Gas and Metals National Corporation (JOGMEC) guarantee

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

expansion while continuing to maintain a sound ﬁnancial position

Japan and various Japanese commercial banks provide loans forwith sufﬁcient liquidity.

the construction and expansion of domestic pipelines and LNG

108

receiving terminal.

construction and expansion of pipelines, LNG receiving terminal

INPEX CORPORATION Annual Report 2013

— Maturities of long-term debt
The aggregate annual maturities of long-term debt subsequent to March 31, 2013, are summarized as follows:(Millions of U.S. dollars and Millions of yen)
Long-term debt denominated inYears ending March 31,

U.S. dollars

2014
2015
2016
2017
2018
2019 and thereafter
Total

$

38.5
116.2
154.6
258.6
258.6
3,211.4$4,037.9

Yen

Total yen equivalent¥ 3,776
5,630
7,788
32,674
7,722
37,187¥94,777¥

7,391
16,54722,321
56,981
32,029339,031¥474,300— Cash ﬂows
Cash ﬂows for the years ended March 31, 2012 and 2013, are summarized as follows:(Millions of yen)

Years ended March 31,

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

Net cash provided by operating activities
Net cash provided by operating activities for the year ended
March 31, 2013, was ¥252.3 billion, a decrease of ¥68.4 billion
from ¥320.7 billion for the year ended March 31, 2012. Thiswas mainly due to a decrease in income before income taxes
and minority interests caused by a decrease in the unit sales
prices for crude oil and natural gas and others, in addition to anincrease in income taxes paid.

Net cash used in investing activities

2012¥320,692(280,864)
29,294¥249,233

2013¥252,347(489,870)
137,069¥199,859

due to payments for long-term time deposits and payments forpurchase of mining rights recorded for the year ended March 31,
2013.

Net cash provided by ﬁnancing activities
Net cash provided by financing activities for the year ended
March 31, 2013, was ¥137.1 billion, an increase of ¥107.8 billion
from ¥29.3 billion for the year ended March 31, 2012. This was
mainly due to increases in proceeds from long-term debt andproceeds from minority interests for additional shares.

Net cash used in investing activities for the year ended March
31, 2013, was ¥489.9 billion, an increase of ¥209.0 billion from¥280.9 billion for the year ended March 31, 2012. This was mainly

CONSOLIDATED FINANCIAL FORECAST FOR THE YEAR ENDING
MARCH 31, 2014 (Announced on August 2, 2013)
stay at the same level due to a positive effect from depreciationof the yen against the U.S. dollar despite the forecasted declineof the crude oil price compared with the year ended March 31,
2013. On the other hand, operating income, income before
income taxes and minority interests, and net income for the year
ending March 31, 2014 are expected to decrease due to theabsence of one-off gain on transfer of interests in the Ichthys
Project, an increase in cost of sales and others.
The aforementioned forecasts are based on an average oil
price of US$100.8 per barrel for Brent crude oil and an averageexchange rate of ¥95.9 to the U.S. dollar for the year ending
March 31, 2014.

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Consolidated net sales for the year ending March 31, 2014, areexpected to increase by ¥5.5 billion, or 0.4%, to ¥1,222.0 billion
compared with the year ended March 31, 2013. Operating
income for the year ending March 31, 2014, is expected todecrease by ¥78.4 billion, or 11.3%, to ¥615.0 billion comparedwith the year ended March 31, 2013. Income before income taxes
and minority interests are expected to decrease by ¥81.1 billion,or 11.3%, to ¥637.0 billion compared with the year ended March
31, 2013. Net income is expected to decrease by ¥41.0 billion, or
22.4%, to ¥142.0 billion compared with the year ended March 31,
2013.
Net sales for the year ending March 31, 2014, are expected to109Consolidated Balance Sheet
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2013

Thousands of
U.S. dollars(Note 3)

Millions of yen

ASSETS
Current assets:
Cash and cash equivalents
Time deposits (Note 12)
Accounts receivable—trade (Note 4)
Marketable securities (Notes 4 and 5)
Inventories
Deferred tax assets (Note 7)
Accounts receivable—other (Note 4)
OtherLess allowance for doubtful accounts

Tangible ﬁxed assets:
Buildings and structures (Note 6)
Wells (Note 6)
Machinery, equipment and vehicles (Note 6)Land
Construction in progress
Other
Less accumulated depreciation and amortization

Intangible assets:
Goodwill (Note 16)
Exploration and development rights
Mining rights
Other

Investments and other assets:
Recoverable accounts under production sharing
Less allowance for recoverable accounts
under production sharing
Investment securities (Notes 4, 5 and 6)
Long-term loans receivable
Deferred tax assets (Note 7)Long-term time deposits (Note 12)
Other investments (Note 6)
Less allowance for doubtful accounts
Less allowance for investments in exploration
Total assets
See accompanying notes to consolidated financial statements.

110

INPEX CORPORATION Annual Report 2013

2012

2013

2013

¥ 249,233¥ 199,859$ 2,126,386

84,665

284,469

3,026,588

119,460

117,4121,249,197

341,387

281,129

2,991,052

11,977

15,409163,943

18,693

10,111

107,575

71,912

94,333

1,003,649
1,262,911

24,388

118,701(13,013)(14,919)(158,729)

908,702

1,106,504

11,772,572

233,523240,218

2,555,782

237,363

247,1732,629,780

277,572

305,836

3,253,921

20,07019,560208,107

167,779

359,430

3,824,130

14,695

19,067

202,862

951,002

1,191,284

12,674,582(567,304)(606,743)(6,455,399)

383,698584,541

6,219,183

94,602

87,841

934,578

118,007

118,869

1,264,699

16,492

167,179

1,778,689

4,217

6,267

66,677233,318

380,156

4,044,643

568,318

590,566

6,283,285(100,671)(112,871)(1,200,883)

467,647

477,695

5,082,402

886,222673,129

7,161,709

48,1107,264

77,28530,55540,076426,386

55,000287,273

3,056,421

60,14265,434

696,180

(716)

(794)

(8,448)(6,280)(5,119)(54,463)

1,540,680

1,544,958

16,437,472¥3,066,398¥3,616,159$38,473,870

Thousands of
U.S. dollars(Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2012

2013

¥

¥

2013

Current liabilities:
Accounts payable—trade
Short-term borrowings and current portion of
long-term debt (Notes 4, 6 and 12)
Income taxes payable (Note 7)

30,22841,402$

440,494

4,802

8,561

91,084

139,145

152,681

1,624,439

Accounts payable—other (Note 6)

133,153

133,233

1,417,523

Provision for exploration projects

5,551

26,857285,743

Accrued bonuses to ofﬁcers
Asset retirement obligations (Note 15)
Other (Note 7)

128

127

1,351

3,338

3,813

40,56851,49948,303513,917367,844414,977

4,415,119

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

313,973

466,909

4,967,645

Deferred tax liabilities (Note 7)

43,17834,988372,252

Accrued retirement beneﬁts to employees (Note 14)

6,341

8,580

91,286

Provision for loss on business

—

3,705

39,419Accrued special repair and maintenance

368

278

2,958

Asset retirement obligations (Note 15)

9,804

13,582

144,505

Other (Note 6)

10,6972,156

22,939384,361

530,198

5,641,004

752,205

945,175

10,056,123

Common stock:
Authorized: 2012 — 9,000,001 shares2013 — 9,000,001 shares
Issued:2012 — 3,655,810 shares2013 — 3,655,810 shares
Capital surplus

290,810

290,810

3,094,053

679,288679,288

7,227,237

Retained earnings
Less: Treasury stock: 2012 — 4,916 shares2013 — 4,916 shares
Total shareholders’ equity

1,219,527

1,375,107

14,630,354(5,248)(5,248)(55,836)

2,184,377

2,339,957

24,895,808

Unrealized holding gain on securities

6,953

34,742369,635

Unrealized gain from hedging instruments (Note 11)

4,118

16,244

172,827

Translation adjustments(16,196)

90,350961,273

Total accumulated other comprehensive income(5,125)

141,336

1,503,735

134,941

189,691

2,018,204

2,314,193

2,670,984

28,417,747¥3,066,398¥3,616,159$38,473,870

Long-term liabilities:

Total liabilities
Net assets (Notes 9 and 10):

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

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Minority interests

111

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2013
Thousands of
U.S. dollars(Note 3)

Millions of yen

Net sales
Cost of sales
Gross proﬁt
Exploration expenses
Selling, general and administrative expenses (Notes 13, 14 and 16)
Depreciation and amortization
Operating income
Other income:Interest income
Dividend income
Gain on sales of investment securities
Equity in earnings of afﬁliates
Gain on transfer of mining rights
Other
Other expenses:
Interest expense
Equity in losses of afﬁliates
Provision for allowance for recoverable
accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Other
Income before income taxes and minority interests
Income taxes (Note 7):
Current
DeferredIncome before minority interests
Minority interests
Net income (Note 10)

2012

2013

2013

¥1,186,732
395,443
791,289
11,74748,286
21,898709,358¥1,216,533
426,326
790,207
20,12553,73422,900693,448$12,943,217
4,535,865
8,407,352
214,119571,699
243,643
7,377,891

4,400
6,993
48
6,638
70,26013,743102,082

8,735
7,832
25,449—50,173
6,477
98,666

92,93583,328
270,763—
533,81268,912
1,049,750

1,228
—

1,518
1,042

16,151
11,086

14,81615,131

160,985519
14,641
13,19744,401
767,039

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

132,482319,779
146,494
786,977
7,640,664

543,157(6,223)536,934
230,105
36,104¥ 194,001

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

5,736,866(105,682)
5,631,184
2,009,480
62,869$ 1,946,611

Consolidated Statement of Comprehensive Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2013
Thousands of
U.S. dollars(Note 3)

Millions of yen

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

112

INPEX CORPORATION Annual Report 2013

2012

2013

2013

¥230,105¥188,871$2,009,480

5,499
4,118
2,082

27,787
16,769105,692

295,638
178,412
1,124,502(1,134)(1,577)(16,778)

10,565
240,670

148,671
337,542

1,581,774
3,591,254

204,268¥ 36,402

329,422¥ 8,120

3,504,862$ 86,392

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

Millions of yen

For the year ended March 31, 2012

Balance
as of April 1,
2011

Cash
dividends paid

Net income

¥

¥

¥

—

Balance
as of March 31,
2012¥¥ 290,810¥ 290,810

Capital surplus

679,288

—

—

—

—

679,288

1,047,431(21,905)

194,001—

172,096

1,219,527

Treasury stock—

Total changes
during theperiodCommon stock
Retained earnings—

Net changes in items
other than those inshareholders’ equity—(5,248)

—

—

—

—

(5,248)2,012,281(21,905)

194,001—

172,096

2,184,377

Unrealized holding gain
on securities

1,456

—

—

5,497

5,497

6,953

Unrealized gain fromhedging instruments

—

—

—

4,118

4,118

4,118

Translation adjustments(16,847)

—

—

651

651

(16,196)

Total accumulated othercomprehensive income(15,391)——

10,266

10,266(5,125)

Total shareholders’ equity

Minority interests

100,493——

34,44834,448

134,941

Total net assets¥2,097,383¥(21,905)¥194,001¥44,714¥216,810¥2,314,193

For the year ended March 31, 2013

Balance
as of April 1,
2012

Cash
dividends paid

Total changes
during theperiodBalance
as of March 31,
2013

Common stock¥ 290,810

Capital surplus

679,288

—

—

—

—

679,288

1,219,527(27,382)

182,962—

155,580

1,375,107

Millions of yen

Retained earnings
Treasury stock¥

Net income

—

¥

—

Net changes in items
other than those inshareholders’ equity

¥

—

¥

—

¥ 290,810(5,248)

—

—

—

—

(5,248)2,184,377(27,382)

182,962—

155,580

2,339,957

Unrealized holding gain
on securities

6,953

—

—

27,78927,78934,742

Unrealized gain fromhedging instruments

4,118

—

—

12,126

12,126

16,244

Translation adjustments(16,196)——

106,546

106,546

90,350Total accumulated othercomprehensive income(5,125)——

146,461

146,461

141,336

Total shareholders’ equity

Minority interests

134,941——

54,75054,750189,691

Total net assets¥2,314,193¥(27,382)¥182,962¥201,211¥356,791¥2,670,984

For the year ended March 31, 2013

Balance
as of April 1,
2012

Cash
dividends paid

Total changes
during theperiodBalance
as of March 31,
2013

Common stock$ 3,094,053$$$ 3,094,053

Capital surplus

7,227,237

—

—

—

—

7,227,237

Retained earnings

12,975,072(291,329)

1,946,611—

1,655,282

14,630,354

Thousands of U.S. dollars (Note 3)

Treasury stock—

Net income$—

Net changes in items
other than those inshareholders’ equity

$

—

—

—

—

—

—

(55,836)(291,329)

1,946,611—

1,655,282

24,895,808

Unrealized holding gain
on securities

73,976——295,659

295,659

369,635

Unrealized gain fromhedging instruments

43,813——129,014129,014

172,827

Translation adjustments(172,316)——

1,133,589

1,133,589

961,273

Total accumulated othercomprehensive income(54,527)——

1,558,262

1,558,262

1,503,735

Minority interests

1,435,695——

582,509582,5092,018,204

Total net assets$24,621,694$(291,329)$1,946,611$2,140,771$3,796,053$28,417,747

See accompanying notes to consolidated financial statements.

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information(55,836)
23,240,526

Total shareholders’ equity

113Consolidated Statement of Cash Flows
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2013

Thousands of
U.S. dollars(Note 3)

Millions of yen

Cash ﬂows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Amortization of goodwill
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Provision for accrued retirement beneﬁts to employees
Other provisions
Interest and dividend income
Interest expense
Foreign exchange loss (gain)
Equity in (earnings) losses of afﬁliates
Gain on transfer of mining rights
Loss (gain) on sales of investment securities
Recovery of recoverable accounts under production sharing(capital expenditures)
Recoverable accounts under production sharing(operating expenditures)
Accounts receivable—trade
Inventories
Accounts payable—trade
Accounts receivable—otherAccounts payable—other
Advances received
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash ﬂows from investing activities
Payments for time deposits
Proceeds from time deposits
Payments for long-term time deposits
Proceeds from long-term 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 marketable securities
Proceeds from sales and redemptions of marketable securities
Payments for purchases of investment securities
Proceeds from sales and redemptions of investment securities
Investment in recoverable accounts under production sharing(capital expenditures)
Decrease (increase) in short-term loans receivable
Long-term loans madeCollection of long-term loans receivable
Payments for purchase of mining rights
Proceeds from transfer of mining rights
Other
Net cash used in investing activities
Cash ﬂows from ﬁnancing activities
Increase (decrease) in short-term loans
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from minority interests for additional shares
Cash dividends paid
Dividends paid to minority shareholders
Other
Net cash provided by 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 year
Increase in cash and cash equivalents from newly consolidated subsidiary
Decrease in cash and cash equivalents resulting from exclusion ofsubsidiaries from consolidation
Cash and cash equivalents at end of the year
See accompanying notes to consolidated financial statements.

114

INPEX CORPORATION Annual Report 2013

2012

2013

2013

¥767,039
48,026
6,760
18,991(3,916)(637)(26)(11,393)
1,228
5,334
(6,638)(70,260)(48)¥718,146
51,916
6,761
16,354
21,132
2,285
5,547(16,567)
1,518
16,3301,041(50,173)(25,449)$7,640,664
552,357
71,933
173,997
224,832
24,31159,017(176,263)
16,151
173,742
11,076(533,812)(270,763)

53,54354,087575,455(21,041)(21,079)(224,269)(23,816)
195
6,562(19,774)
40,94323,891
418
815,381
16,997(943)(510,743)
320,692

2,795(3,232)
11,0304,910(900)(24,636)
3,091
774,907
19,652(1,344)(540,868)
252,347

29,737(34,387)
117,353
52,240(9,575)(262,113)
32,886
8,244,569
209,086(14,300)(5,754,527)
2,684,828(88,771)
6,065——(68,317)315(1,368)(4,090)136,614(238,568)
20,672(299,460)
134,162(252,082)
5,000(189,153)
116(4,256)(17,710)366,633(90,831)70,902(3,186,084)
1,427,407(2,682,009)
53,197(2,012,480)
1,234(45,281)(188,424)
3,900,766(966,390)
754,357(82,916)(82,696)(879,838)

3,759(38,094)
3,600—
71,487(1,252)(280,864)(85)(141,222)
119,238(176,232)
56,80011,006(489,870)(904)(1,502,522)
1,268,624(1,875,008)
604,320
117,098(5,211,937)(40)
50,913(4,317)
9,723(21,922)(4,992)(71)
29,294(2,664)66,458
182,025
750

991
121,572(4,682)55,852(27,385)(4,992)(4,287)137,069
51,498(48,956)
249,233440

10,544
1,293,457(49,814)594,233(291,361)(53,112)(45,611)
1,458,336
547,909(520,864)
2,651,697
4,681

—

(858)

(9,128)¥249,233¥199,859$2,126,386

Notes to Consolidated Financial Statements
INPEX CORPORATION and Consolidated Subsidiaries

1. BASIS OF PRESENTATIONINPEX CORPORATION (the ”Company”) is primarily engaged in the
research, exploration, development and production of crude oil andnatural gas.
The Company and its domestic subsidiaries maintain theiraccounting records and prepare their financial statements inaccordance with accounting principles generally accepted in Japan.
The accompanying consolidated financial statements have been
prepared by using the accounts of foreign consolidated subsidiaries
prepared in accordance with International Financial ReportingStandards, or IFRS or the accounting principles generally accepted in

the United States, or U.S. GAAP as adjusted for certain items.
The accompanying consolidated financial statements havebeen prepared in accordance with accounting principles generally
accepted in Japan, which may differ in certain material respects fromIFRS or U.S. GAAP, and are compiled from the consolidated ﬁnancial
statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
The Company has made certain reclassifications of the previous
years’ consolidated financial statements to conform to thepresentation used for the year ended March 31, 2013.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of consolidation and accounting forinvestments in afﬁliates
The accompanying consolidated financial statements include theaccounts of the Company and companies controlled directly or
indirectly by the Company. Companies over which the Company
exercises signiﬁcant inﬂuence in terms of their operating and ﬁnancial
policies are included in the consolidated ﬁnancial statements on an
equity basis. All signiﬁcant intercompany balances and transactions
are eliminated in consolidation. Further, certain companies that do
not have signiﬁcant impact on the consolidated ﬁnancial statements,
are not consolidated or accounted for by the equity-method.
For the 43 companies for which the closing date differed from theconsolidated closing date, including but not limited to, INPEX Sahul,Ltd. and INPEX Masela, Ltd., the financial statements for the year
ended December 31 were used. However, the necessary adjustments
have been made to the ﬁnancial statements of those companies toreflect any significant transactions made between the Company’s
closing date and that of the consolidated subsidiaries. For the 11
companies, including but not limited to, Japan Oil Development,
Co., Ltd., INPEX Southwest Caspian Sea, Ltd., INPEX North CaspianSea, Ltd., INPEX Holdings Australia Pty Ltd, and INPEX Ichthys Pty
Ltd, the ﬁnancial statements for the year ended on the consolidated
closing date were used, even though their closing date is December
31.
The excess of cost over underlying net assets excluding minority
interests at fair value as of the date of acquisition is accounted for as
goodwill and amortized over 20 years on a straight-line method.

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

(c) Foreign currency translation(d) Securities
In general, securities are classified into three categories: trading,held-to-maturity or other securities. Securities held by the Company
and its subsidiaries are all classified as other securities. Other
securities with a determinable market value are mainly stated at fairvalue with any changes in unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. Other
securities without a determinable market value are stated at cost.
Cost of securities sold is determined by the moving average method.

(e) Derivatives
Derivatives are stated at fair value.

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

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

(h) Recoverable accounts under production
sharing and related allowance
Cash investments made by the Company during an exploration,
development and production project under a production sharing
contract are recorded as ”Recoverable accounts under production
sharing” so long as they are recoverable under the terms of therelevant contract. When the Company receives crude oil andnatural gas in accordance with the relevant contract, an amountcorresponding to the purchase costs of the products (i.e., a cost
recovery portion of the investments) is released from this account.
Because these investments are recoverable only where commercial

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the exchange rates prevailing at the balance
sheet date. All revenues and expenses associated with foreign
currencies are translated at the rates of exchange prevailing whensuch transactions were made. The resulting exchange gain or loss iscredited or charged to income.
The assets and liability accounts of overseas subsidiaries aretranslated into yen at the exchange rates prevailing at the balance
sheet date. The revenue and expense accounts of the overseas
subsidiaries are translated into yen at the average rates of exchange

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

115

oil or gas is discovered, an allowance for recoverable accounts
under production sharing is provided for probable losses oninvestments made during the exploration stage under production
sharing contracts arising from the failure to discover commercial oil
and gas. In light of this uncertainty, an allowance for recoverable
accounts under production sharing is provided for probable losses ondevelopment investment individually estimated for each project.

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

(j) Tangible ﬁxed assets (except leased assets)
Depreciation of overseas mining facilities is mainly computed by theunit-of-production method.
For other tangible fixed assets, the straight-line method ofdepreciation is applied. The useful lives of ﬁxed assets are based on
the estimated useful lives of the respective assets.

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

(q) Provision for loss on business
Provision for loss on business is provided for future potential
losses on oil and gas development, production and sales businessindividually estimated for each project.

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

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

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

(u) Income taxes

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

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

(m) Provision for exploration projects(v) Standards issued but not effective

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

• ”Accounting Standard for Retirement Benefits” (ASBJ Statement
No.26, issued on May 17, 2012)• ”Guidance on Accounting Standard for Retirement Beneﬁts” (ASBJ
Guidance No.25, issued on May 17, 2012)(Overview)
Revisions apply mainly to the accounting treatments of unrecognizedactuarial gains and losses as well as unrecognized prior service costs,
the calculation methods for retirement benefit obligations as well
as service costs, and broaden disclosures taking into consideration
improvements to ﬁnancial reporting and international trends.
(Scheduled Effective Date)
The revised accounting standard and guidance are scheduled totake effect from the end of the ﬁscal year ending March 31, 2014.
However, the revisions to the calculation method for retirement
benefit obligations and service costs will be applied from the
beginning of the ﬁscal year ending March 31, 2015.
(The impact of the adoption of the revised accounting standard andguidance)
The impact of the adoption of revised accounting standard andguidance on consolidated financial statements are now underevaluation.

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

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

(p) Accrued retirement beneﬁts to employees
Accrued retirement benefits to employees are provided at theamount calculated based on the expected retirement benefit
obligation and the fair value of pension plan assets at the end of
this period. Because certain subsidiaries are classified as small
enterprises, the simplified method (the amount which would be
required to be paid if all active employees voluntarily terminated116

their employment as of the balance sheet date) is applied for the
calculation of the retirement beneﬁt obligation of the subsidiaries.
Actuarial gains and losses are charged or credited to income as
incurred.

INPEX CORPORATION Annual Report 2013

3. U.S. DOLLAR AMOUNTS
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at¥93.99=US$1.00, the approximate exchange rate in effect as of March 31, 2013. This translation should not be construed as a representationthat yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

4. STATUS OF FINANCIAL INSTRUMENTS(a) Policy regarding ﬁnancial instruments
The Company raises funds for oil and gas development andproduction, construction or expansion of pipelines and LNG receiving
terminal primarily from cash flow on hand and from bank loans.
Oil and gas development projects are primarily funded from longterm loans that the Company has secured from the Japan Bank forInternational Cooperation, Japanese commercial banks and others.
Japan Oil, Gas and Metals National Corporation has provided
guarantees for the principal on certain outstanding amounts of theCompany’s long-term loans. The Development Bank of Japan andJapanese commercial banks have provided long-term loans for theconstruction or expansion of domestic pipelines and LNG receiving
terminal. The Company generally borrows loans with variable interest
rates, while some loans are with a ﬁxed interest rate depending on
the nature of each project.
Regarding the financing policy, the Company manages funds
mainly from deposits and government bonds, which are considered
to be of low-risk and high-liquidity. The Company limits the use ofderivative transactions for managing risks of forecasted transactions
and portfolio assets, and does not engage in speculative derivativetransactions.

(b) Details of ﬁnancial instruments,
associated risks and risk management(Credit risk related to trade receivables)
Trade receivables such as accounts receivable-trade and accounts
receivable-other are comprised mainly from sales of crude oil andnatural gas. Main trading partners are national oil companies, major
oil companies and others. In line with the criteria for trading andcredit exposure management, the Company properly analyzes thestatus of trading partners for early detection and reduction of default
risks.

(Market price ﬂuctuation risk related to securities)
For marketable securities and investment securities exposed tomarket price fluctuation risk, analysis of market values is regularly
reported to the Executive Committee. For shares of stock, theCompany mainly holds shares of trading partners and others
to establish close and smooth relationships for the purpose ofmaintaining a medium- to long-term stable business. A part ofthese shares are held for the purpose of investment. As for bonds,
the Company mainly holds bonds with short-term maturities byconsidering medium- to long-term cash outﬂow forecast and market
price ﬂuctuation risk.

(Interest rate ﬂuctuation risk related to short-term loans andlong-term debt)
Loans are mainly used to fund oil and gas development projects
and construction or expansion of domestic pipelines and LNG
receiving terminal and others. The borrowing period is determinedconsidering the financial prospects of the project and useful livesof the facilities. Loans with variable interest rates are exposed tointerest rate fluctuation risk, however, the Company analyzes theimpact of interest rate ﬂuctuation at the time of borrowing and on anannual basis, and leverages ﬁxed-rate-loans or interest rate swaps asnecessary.

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

(Management of derivative transactions)
For the above derivative transactions, the Company follows
its derivative transactions management outline. For derivativetransactions exposed to market price fluctuation, market values ofthese derivatives are regularly reported to the Executive Committee,
and the Company only transacts with ﬁnancial institutions with highcredit ratings to reduce counterparty risks for the use of derivatives.

(Management of liquidity risk related to ﬁnancing)
The finance and accounting division controls cash management
based on a monthly ﬁnancing plan prepared by each project divisionand secures sufﬁcient liquidity on hand to prepare for liquidity risk.

7
Financial /Corporate Information

INPEX CORPORATION Annual Report 2013117

5. SECURITIES(a) Information regarding other securities as of March 31, 2012 and 2013 is as follows:
Millions of yen
March 31, 2012

Acquisition cost

Unrealized gain
(loss)

Carrying value

Securities with carrying values exceeding their acquisition costs:
¥
4,499
¥
9,318
Stock
Bonds:
726,075
727,734
Public bonds
23,50023,589Corporate bonds
25,39625,503
Other debt securities
204,862
209,855
Other
984,332
995,999
Subtotal
Securities with acquisition costs exceeding their carrying values:
47,93944,103Stock
Bonds:
30,19029,950Public bonds
40,00039,779Corporate bonds
8,385
8,348
Other debt securities
4,338
4,335
Other
130,852
126,515
Subtotal¥1,115,184¥1,122,514
Total¥ 4,819
1,659
89
107
4,993
11,667(3,836)
(240)
(221)
(37)
(3)
(4,337)¥ 7,330

Millions of yen
March 31, 2013

Acquisition cost

Unrealized gain
(loss)

Carrying value

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

Thousands of U.S. dollars
Unrealized gain
Acquisition cost
Carrying value(loss)¥ 9,989$ 127,003$ 233,280$106,277

1,244
102
3,901
23,76338,9993,790,658
638,898
357,996
2,183,051
7,097,606

3,803,894
639,983
399,500
2,435,876
7,512,533

13,236
1,085
41,504
252,825
414,927(2,627)430,376

402,426(27,950)

(155)
(34)
(2,816)¥36,183

310,001
372,380
1,112,757$8,210,363

308,352
372,018
1,082,796$8,595,329(1,649)(362)(29,961)$384,966(b) Information regarding sales of securities classiﬁed as other securities for the years ended March 31, 2012 and 2013 is as follows:Year ended March 31, 2012

Proceeds
from sales

Bonds:
Public bonds
Total¥41,395¥41,395

Year ended March 31, 2013

Proceeds
from sales

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

Millions of yen
Gain onsales

Loss on
sales

¥82
¥82

¥—
¥—

Millions of yen
Gain onsales

Loss on
sales

¥187
¥187

¥—
¥—

Proceeds
from sales

Thousands of U.S. dollars
Gain onsales$1,295,680$1,295,680$1,990$1,990Loss on
sales

$—
$—

(c) Components of securities for which it is extremely difﬁcult to determine fair value as of March 31, 2012 and 2013 are summarized as follows:
Millions of yen
March 31,

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

Thousands of U.S. dollars

2012

2013

2013

¥ 28,395
5,000
71,700¥105,095¥ 30,728
5,000
110,655¥146,383$ 326,929
53,197
1,177,306$1,557,432

These securities are not included in (a) as they have no quoted market prices and it is extremely difﬁcult to determine their fair value. For sharesof exploration companies among unlisted securities and stocks of subsidiaries and afﬁliates, an allowance for investments in exploration isprovided at an estimated amount based on the ﬁnancial position of the investees.

118

INPEX CORPORATION Annual Report 2013

(d) Redemption schedule for securities with maturity dates classiﬁed as other securities as of March 31, 2013 is as follows:
Millions of yen

March 31, 2013

1 year or lessMore than 1
year but lessthan 5 years¥167,000
33,5008,500
66,000¥275,000¥185,000
61,50028,197132,100¥406,797

Bonds:
Public bonds
Corporate bonds
Other debt securities
Other
Total

Thousands of U.S. dollars

More than 5More than 10
years but less
1 year or lessyears
than10 years¥31,500———¥31,500

¥—
—
—
—
¥—

$1,776,785
356,42190,435702,202$2,925,843

More than 1
year but lessthan 5 years$1,968,294
654,325300,000
1,405,469$4,328,088

More than 5More than 10
years but lessyears
than 10 years$335,142———$335,142

$—
—
—
—
$—

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings as of March 31, 2012 and 2013 are as follows:
Millions of yen
March 31,

Short-term borrowings from banks and others(Interest rates ranging from 0.970% to 1.325% and from0.950% to 2.174% at March 31, 2012 and 2013)
Total

Thousands of U.S. dollars

2012

2013

2013

¥120

¥1,170$12,448¥120¥1,170$12,448

Long-term debt as of March 31, 2012 and 2013 is as follows:
Millions of yen
March 31,

Loans from banks and others, due through 2028
(Interest rates ranging from 0.700% to 2.700% and from0.509% to 2.700% at March 31, 2012 and 2013)
Less: Current portion

Thousands of U.S. dollars

2012

2013

2013

¥318,655¥474,300$5,046,281

4,682¥313,973

7,391¥466,909

78,636$4,967,645

Assets pledged as of March 31, 2012 and 2013 are as follows:
Millions of yen
March 31,

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

Thousands of U.S. dollars

2012

2013

2013

¥ 2,251
2,737
9,190
7,633
231
¥22,042¥ 2,091
1,214
8,974
7,395
227
¥19,901$ 22,247
12,916
95,47878,6792,415$211,735

The above assets were pledged against the following liabilities:
Millions of yen

Thousands of U.S. dollars

March 31,

2012

2013

2013

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

¥1,589
5,090
2,434
17
¥9,130

¥ 997
5,119
1,437
17
¥7,570$10,60754,463
15,289181$80,540

In addition, assets pledged as collateral for the Ichthys LNG Project Finance and the BTC Pipeline Project Finance are as follows:
Ichthys LNG Project FinanceMillions of yen
March 31,

¥—
—
—
—
—
—
¥—

Thousands of U.S. dollars

2013
¥

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

2013$

38,323
1,702
687,637
1,415
1,834,004
167,656$2,730,737

BTC Pipeline Project FinanceMillions of yen

Thousands of U.S. dollars

March 31,

2012

2013

2013

Investment securities¥4,704¥5,240$55,751

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

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

2012

119

The aggregate annual maturities of long-term debt subsequent to March 31, 2013 are summarized as follows:
Years ending March 31,

Millions of yen

2014
2015
2016
2017
2018
2019 and thereafter
Total

Thousands of U.S. dollars

¥

7,391
16,54722,321
56,981
32,029339,031¥474,300$

78,636
176,051
237,483
606,245
340,770
3,607,096$5,046,281

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to corporate taxes and other which, in the aggregate, resulted in astatutory tax rate of approximately 36.2% and 33.3% for the years ended March 31, 2012 and 2013, respectively.
The effective tax rates reﬂected in the consolidated statement of income for the ﬁscal years ended March 31, 2012 and 2013 differ from thestatutory tax rate for the following reasons:Years ended March 31,

2012

2013

Statutory tax rate
Effect of:Permanently non-taxable expenses such as entertainment expenses
Permanently non-taxable income such as dividends income
Valuation allowance
Foreign taxes
Foreign tax credits
Adjustment of deducted amounts of foreign taxes
Amortization of goodwill
Differences of effective tax rates applied to tax effect accounting
Other
Effective tax rates

36.2%

33.3%

0.3
(0.6)
5.7
61.8
(23.1)
(8.2)
0.3
(1.6)
(0.8)
70.0%

0.6
(0.7)
2.6
69.3
(22.1)(10.7)
0.3
(0.2)
1.3
73.7%

The signiﬁcant components of deferred tax assets and liabilities as of March 31, 2012 and 2013 are as follows:
Thousands of U.S.
dollars

Millions of yen
March 31,

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

120

INPEX CORPORATION Annual Report 2013

2012

2013

2013

¥ 88,582
3,959
3,889
5,258
2,928
35,612
39,042
37,777
1,989—¥ 90,332
3,959
3,205
6,992
2,579
33,28846,021
43,238
2,659
1,140

1,704

795

8,458

4,239
4,940
14,475244,394(174,115)
70,2795,574
5,974
17,683
263,439(195,665)
67,77459,30463,560188,137
2,802,841(2,081,764)
721,077

30,164

27,048287,775

16,326

3,551

37,781

5,070

5,377

57,208

1,694

1,759

18,715

7,910
283
2,352
4,660
68,459¥ 1,820

11,274
1,424
10,442
4,780
65,655¥ 2,119

119,949
15,151
111,097
50,856
698,532
22,545$$

961,081
42,122
34,10074,391
27,439354,165
489,637
460,028
28,29012,129

8. COMPREHENSIVE INCOME
Amount of reclassiﬁcation adjustments and income tax effects allocated to each component of other comprehensive income for the years ended
March 31, 2012 and 2013 are as follows:

Millions of yen
Years ended March 31,

Unrealized holding gain on securities
Amount recognized during the period
Amount of reclassiﬁcation adjustments
Before income tax effect adjustment
Amount of income tax effectUnrealized gain from hedging instruments
Amount recognized during the period
Amount of income tax effectTranslation adjustments
Amount recognized during the period
Share of other comprehensive income of
afﬁliates accounted for by the equity-method
Amount recognized during the period
Adjustment for acquisition cost of assets
Total other comprehensive income

Thousands of U.S. dollars

2012

2013

2013

¥ 5,082
539
5,621
(122)
5,499

¥ 29,075(138)
28,937(1,150)27,787$ 309,341(1,468)307,873(12,235)
295,638

6,456(2,338)4,118

24,873(8,104)
16,769264,634(86,222)
178,412

2,082

105,692

1,124,502(1,134)—(1,134)¥10,565(1,964)387(1,577)¥148,671(20,896)
4,118(16,778)$1,581,774

9. NET ASSETS
As of March 31, 2013, the total number of the Company’s sharesissued consisted of 3,655,809 shares of common stock and 1 Class A
Stock.
Class A Stock has no voting rights at the common shareholders’meeting, but the ownership of Class A Stock gives its holder a rightof veto over certain important matters described below. However,requirements stipulated in the Articles of Incorporation need to be
met in cases involving the exercise of the veto over the appointment
or removal of directors, the disposition of material assets or businessintegration;• Appointment and removal of directors• Disposition of material assets• Amendments to the Article of Incorporation with respect to (i) the
purpose of the Company’s business and (ii) the granting of voting
rights to the Company’s shares other than common stock• Business integration• Capital reduction• Dissolution
Class A Stock shareholder may request the Company to acquireClass A Stock. Besides, the Company may also acquire Class A Stockby a resolution of the meeting of the Board of Directors in case where
Class A Stock is transferred to a non-public entity.
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) shall betransferred to capital reserve and legal reserve, respectively, up to
the point where the total amount of capital reserve and legal reserve
equals 25% of the common stock account.
Distuributions can be made at any time by a resolution of
the meeting of shareholders, or the Board of Directors if certain
conditions are met, but neither capital reserve nor legal reserve isavailable for distributions.

7
Financial /Corporate Information

INPEX CORPORATION Annual Report 2013121

10. AMOUNTS PER SHARE
Yen

U.S. dollars

Years ended March 31,

2012

2013

2013

Net income per share¥ 53,137.93¥ 50,114.22$ 533.19

7,000.00

7,000.00

74.48¥596,908.99¥679,639.63$7,230.98

Cash dividends per share
Net assets per share

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

11. 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 March 31, 2012 and 2013 are
as follows:
Millions of yen
Contract amounts

March 31, 2012

Currency swap transactions

Due after one year

¥31,996

Fair value

Valuation gain

¥883

¥883

¥—

* Fair value is the price obtained from the counterpar ty financial institutions.

There is no derivative not subject to hedge accounting as of March 31, 2013.

(b) Derivatives subject to hedge accounting
Contract amounts and fair value regarding derivatives subject to hedge accounting as of March 31, 2012 and 2013 are as follows:

Millions of yen
March 31, 2012

Principal items hedged

Contract amounts

Due after one year

Forecasted
transactions inforeign currencies¥108,578¥—¥6,456Long-term debt¥

¥4,820*2

Fair value

Foreign exchange forwards *1:
Buy (USD)(Deferred hedge accounting)Interest rate swaps:
Payment ﬁxed, receipt ﬂuctuated (Special treatment)

6,240

Millions of yen
March 31, 2013

Principal items hedged

Contract amounts

Due after one year

Fair value

Forecasted
transactions inforeign currencies¥157,614¥—¥31,329

Long-term debt¥

¥4,760*21Foreign exchange forwards * :Buy (USD)(Deferred hedge accounting)Interest rate swaps:
Payment ﬁxed, receipt ﬂuctuated (Special treatment)

4,820

Thousands of U.S. dollars
March 31, 2013

Principal items hedged

Contract amounts

Forecasted
transactions inforeign currencies$1,676,923$—$333,323

Long-term debt$

$50,644*2

Due after one year

Fair value

1

Foreign exchange forwards * :Buy (USD)(Deferred hedge accounting)Interest rate swaps:
Payment ﬁxed, receipt ﬂuctuated (Special treatment)

51,282*1 Fair value is the price obtained from the counterpar ty financial institutions.
*2 Fair value of derivatives for which special treatment of interest rate swaps is applied is included in the estimated fair value of the longterm debt as disclosed in Note 12. (a) since the interest rate swap is treated together with long-term debt subject to hedging.

122

INPEX CORPORATION Annual Report 2013

12. OTHER FINANCIAL INSTRUMENTS(a) The carrying value and estimated fair value of financial instruments excluding marketable securities and investment securities which aredisclosed in Note 5.(a) and derivatives which are disclosed in Note 11 as of March 31, 2012 and 2013 are as shown below. The following
summary also excludes cash and cash equivalents, and accounts receivable-trade for which fair values approximate their carrying amounts.
Millions of yen
March 31, 2012

Carrying value

Estimated fair value¥ 4,802¥313,973¥ 4,830¥316,131

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

Millions of yen

Thousands of U.S. dollars

Estimated fairvalue

Estimated fairvalue

March 31, 2013

Carrying value

Time deposits¥284,469¥284,502$3,026,588$3,026,939

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

287,273

289,0073,056,421

3,074,870

8,561

8,507

91,08490,510¥466,909¥456,404$4,967,645$4,855,878

Carrying value(b) For other ﬁnancial instruments, computation methods of estimated fair value are as shown below.

Time deposits
The fair value of the current portion of long-term time deposits included in time deposits is calculated by the same method as long-term time
deposits. For other time deposits, the relevant carrying value is used since the item is settled in a short period of time and its market value isalmost the same as the carrying value.

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

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 these items are settled in a short periods of time and its fair value is almost the same as the carrying
value.

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

13. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in selling, general and administrative expenses amounted to ¥402 million and ¥99 million ($1,053
thousand) for the years ended March 31, 2012 and 2013, respectively.

14. RETIREMENT BENEFITS(a) Retirement beneﬁt obligations as of March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2013

2013

Retirement beneﬁt obligations
Plan assets at fair value¥(15,881)
9,540¥(19,388)
10,808$(206,277)
114,991

Unfunded retirement beneﬁt obligation
Unrecognized actuarial gain or loss
Accrued retirement beneﬁts to employees(6,341)—¥ (6,341)(8,580)—¥ (8,580)(91,286)—$ (91,286)

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

March 31,123

(b) Retirement beneﬁt expenses for the years ended March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain or loss
Other*
Retirement beneﬁt expenses

2012

2013

2013

¥ 877
301
(235)
2,211
473
¥3,627$ 9,3313,202(2,500)23,524
5,032$38,589

2012

2013

2.0%
2.0%
Amortized as
incurred

1.0%
2.5%
Amortized as
incurred

¥792
294
(170)
(205)
238
¥949

*“Other” consists of the amount of contribution to deﬁned contribution plan.

(c) The assumptions used in accounting for the above plans are as follows:
Years ended March 31,

Discount rate
Expected return rate on plan assets
Period for amortization of actuarial gain or loss

15. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2012

2013

2013

Balance at beginning of the year
Accretion expenses¥12,653434
322¥13,142711
429$139,823
7,565
4,564

Obligations settled

(265)

(359)

(3,819)322(324)¥13,142

1,997
1,475
¥17,395

21,247
15,693$185,073

New obligations

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

*1 ”Change in estimates” for the year ended March 31, 2013 mainly reﬂects increasing site restoration and decommissioning costs of certain
subsidiaries which became evident in the year ended March 31, 2013.
*2 ”Other” mainly includes the change due to foreign exchange rates ﬂuctuation.

16. GOODWILL
The changes in the carrying amount of goodwill for the years ended March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

124Years ended March 31,

2012

2013

Balance at beginning of the year
Goodwill acquired during the year
Amortization of goodwill
Balance at end of the year

¥101,362—(6,760)¥ 94,602¥94,602—(6,761)¥87,841

INPEX CORPORATION Annual Report 20132013
$1,006,511—(71,933)$ 934,578

17. LEASES
Future minimum lease payments subsequent to March 31, 2013 for operating lease transactions are summarized as follows:(a) As lesseeYears ending March 31,

Millions of yen

Thousands of U.S. dollars

20142015 and thereafterTotal¥ 2,873
7,291¥10,164$ 30,567
77,572$108,139

Millions of yen

Thousands of U.S dollars(b) As lessor
Years ending March 31,

20142015 and thereafter
Total

¥102
374
¥476

$1,085
3,979$5,064

18. CONTINGENT LIABILITIESAs of March 31, 2013, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of afﬁliates in theaggregate amount of ¥26,529 million ($282,253 thousand).
In addition, the Company guarantees for derivative transactions utilized to hedge exchange rate fluctuation risk regarding payments ofdevelopment costs for the Ichthys LNG Project. The relevant loss on valuation as of March 31, 2013, was ¥4,873 million ($51,846 thousand).
In connection with the Ichthys LNG Project Finance, the Company and other project participants provide lenders with a guarantee of liabilities
during the construction phase based on each participating interest. The portion guaranteed by the Company as of March 31, 2013, was¥128,864 million ($1,371,039 thousand).

19. SEGMENT INFORMATION
Segment information for the years ended March 31, 2012 and 2013
Overview of reportable segments
The reportable segments of the Group’s oil and gas development activities are composed of individual mining area and others for which
separate ﬁnancial information is available in order for the Board of Directors to make Group management decisions. Since the Group operates
oil and gas businesses globally, the Group’s reportable segments are the mining areas and others by geographical region, categorized in”Japan”, ”Asia & Oceania” (mainly Indonesia, Australia and East Timor), ”Eurasia (Europe & NIS)” (mainly Azerbaijan), ”Middle East & Africa”(mainly UAE) and ”Americas.”
The Company produces oil and gas in each segment. In addition, the Company conducts marketing activities for petroleum products andothers in ”Japan” segment.

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.”

Information on sales and income (loss), assets and other items by reportable segment
Millions of yen
Eurasia
Middle East &(Europe & NIS)
AfricaJapan

Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to afﬁliates
accounted for by theequity-method
Increase of tangible ﬁxed
assets and intangible
assets¥113,662
113,662
24,607
260,596¥483,187
483,187
299,599445,735¥ 84,325
84,32547,076
515,537¥500,033
500,033
354,136
198,987

18,485

12,775

8,503

—

—

—

—

49,156¥ 35,954¥ 27,146¥

AmericasTotal¥ 5,525
5,525(5,518)67,929¥1,186,732
1,186,732
719,900
1,488,784

6,550

374

—

(193)

—

6,860

9,606

519

¥ 10,388¥ 2,956¥

Adjustments *1 Consolidated *2——(10,542)
1,577,614¥1,186,732
1,186,732
709,358
3,066,398

46,687

1,339

48,026

(193)

6,953

6,760

65,622—

65,622

76,963

¥

¥

2,106

¥

79,069INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Year ended March 31, 2012

Asia &
Oceania125

Millions of yen
Year ended March 31, 2013

Japan

Asia &
Oceania

Eurasia
Middle East &(Europe & NIS)
AfricaSales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to afﬁliates
accounted for by theequity-method
Increase of tangible ﬁxed
assets and intangible
assets¥118,937
118,937
28,568265,467¥485,275
485,275
281,623
690,763¥ 85,541
85,541
41,752526,519¥520,835
520,835
357,343
266,649

17,603

17,033

9,066

—

—

—

1,857

46,818¥ 24,656¥203,853

Japan

Asia &
Oceania¥

Americas

¥

Total

5,945
5,945
(6,089)188,209¥1,216,533
1,216,533
703,197
1,937,607

5,850

1,012

—

(192)

—

53,243

1,024¥ 20,595

Adjustments *1 Consolidated *2¥——(9,749)1,678,552¥1,216,533
1,216,533
693,4483,616,159

50,564

1,352

51,916

(192)

6,953

6,761

4,159

106,077—

106,077¥108,373¥ 358,501

1,486¥ 359,987¥

Thousands of U.S. dollars
Year ended March 31, 2013

Sales to third parties$1,265,422
Total sales
1,265,422
Segment income (loss)
303,947
Segment assets
2,824,418
Other items
Depreciation and
187,286
amortization
Amortization of goodwill—
Investment to afﬁliates
19,758accounted for by theequity-method
Increase of tangible ﬁxed
$ 262,326
assets and intangible
assetsEurasia
Middle East &(Europe & NIS)
AfricaAmericas

Total

Adjustments *1 Consolidated *2$5,163,049
5,163,049
2,996,308
7,349,324$ 910,108
910,108444,217
5,601,862$5,541,387
5,541,387
3,801,926
2,836,993

181,22196,457

62,241

10,767537,972

14,385552,357———(2,043)(2,043)73,976

71,933

498,117—566,475

44,2491,128,599—

1,128,599

10,895$ 219,119$2,168,879$$

63,251 $12,943,217 $— $12,943,217
63,251 12,943,217— 12,943,217(64,783)
7,481,615(103,724)
7,377,891
2,002,437 20,615,034 17,858,836 38,473,870$1,153,027 $ 3,814,246 $

15,810 $ 3,830,056*1 Adjustments include elimination of inter-segment transactions and corporate incomes, expenses and assets that are not allocated to areportable segment.
*2 Segment income is reconciled with operating income on the consolidated statement of income.

Products and service information:
Sales to third parties

Millions of yen

Thousands of U.S. dollars

2012

2013

2013

Crude oil
Natural gas (excluding LPG)

¥ 726,223
404,735¥ 788,135
370,528$ 8,385,307
3,942,206

LPG
Other
Total

24,33031,444¥1,186,732

27,23830,632¥1,216,533

289,797
325,907$12,943,217

Years ended March 31,

Geographical information:
Sales

Millions of yen

2013

2013

Japan
Asia & Oceania (excluding Singapore)¥ 591,215
420,184¥ 634,788
421,505$ 6,753,782
4,484,573

Singapore
Other
Total

135,759
39,574¥1,186,732

142,748
17,492¥1,216,533

1,518,757
186,105$12,943,217

Tangible ﬁxed assets

126

Thousands of U.S. dollars

2012

Years ended March 31,

Millions of yen

Thousands of U.S. dollars

March 31,

2012

2013

Japan
Australia
Other
Total

¥229,889
77,98175,828¥383,698¥235,674
227,358
121,509¥584,541

INPEX CORPORATION Annual Report 20132013
$2,507,437
2,418,959
1,292,787$6,219,183

Information by major customer:
Sales to major customers
Millions of yen

Thousands of U.S. dollars

Years ended March 31,

2012

2013

PERTAMINA
Idemitsu Kosan Co., Ltd.

¥245,942¥103,631¥206,282¥132,908

2013

Segment$2,194,723$1,414,065

Asia & Oceania
Middle East & Africa

20. RELATED PARTY TRANSACTIONSThere are the following related party transactions for the year ended March 31, 2012:

Afﬁliated company
Name ofrelated party

Location

Ichthys LNG Western Australia,
Pty Ltd
Australia

Capitalinvestment$482,700
thousandNature ofoperations

Votinginterest

Description of
the business
relationshipAmounts

Transaction
detailMillions of yen

Contribution inTransportation, liquefaction
Serve the kind
Total inheritedand sales of oil and naturalofﬁcerIndirectlyassetsgas through pipeline in WAconcurrently,
76.00%
Total inherited
37-R block in offshore Western
capitalliabilities
Australia*2
subscription
Loans of funds *1¥34,752478¥38,062*1 The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.
*2 Upon the grant of production license, WA-37-R was registered as WA-50-L.

There are the following related party transactions for the year ended March 31, 2013:

Afﬁliated company
Descriptionof thebusinessrelationshipAmounts

Name ofrelatedparty

Location

Ichthys
LNG Pty
Ltd

Loans ofTransportation,liquefaction andServe the funds*
sales of oil and IndirectlyofﬁcerWestern$482,700
natural gas through 66.07% concurrently, Collection ofAustralia,
thousandpipeline in WA-50-L
capital loans*
Australia
block in offshore
subscription Debt
Western Australia
guarantee

Capitalinvestment

Nature ofoperations

Votinginterest

Transaction
detailExploration,
development,
Angola€18
Hague,
Indirectly Capital Subscription
production and sales ofBlock 14
Netherlands thousand
49.99% subscription for new shares
oil
in
Block
14
in
offshore
B.V.
Republic of Angola

Amounts
Title of
Millions of Thousands of account Millions of Thousands ofyen
U.S. dollars
yen
U.S. dollars¥141,153$1,501,787

Shortterm loans
receivable

119,139

1,267,571

128,864

1,371,039—¥ 37,621$ 400,266—¥58,700$624,535

—

—

—

¥

$

—

* The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.

Note related to the parent company or signiﬁcant afﬁliated companies
The signiﬁcant afﬁliated company for the year ended March 31, 2013 is Ichthys LNG Pty Ltd. The summary of its ﬁnancial information is asfollows:

Net sales
Net loss before income taxes
Net loss

Millions of yen

Thousands of U.S. dollars¥ 47,429
550,378
227,942
336,847
33,019$ 504,618
5,855,708
2,425,173
3,583,860
351,303

—
1,511
694

—
16,076
7,384¥$

Note: Ichthys LNG Pty Ltd has qualified as a significant affiliated company from the year ended March 31, 2013, due to an increase in its
materiality.

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Total current assets
Total ﬁxed assets
Total current liabilities
Total long-term liabilities
Total net assets

12721. Subsequent Events
Stock Split and Adoption of Share Unit System
The Company resolved to conduct a stock split of common stock and to adopt a share unit system for common stock and Class A Stock of theCompany at the Board of Directors meeting held on May 10, 2013, at the 7th ordinary general meeting of shareholders and necessary classshareholders meeting held on June 25, 2013.

(a) Purpose of the stock split and adoption of the share unit system
The Company resolved to conduct a stock split at a ratio of 400 shares per common stock for the purpose of increasing the number of the Company’s
investors by reducing the investment unit of shares of the Company considering the general price level for investment units of companies listed on theFirst Section of the Tokyo Stock Exchange. This measure is aimed at improving the investment environment for a variety of investors, including individual
investors, to facilitate their investments in the Company’s stock.
In addition, in accordance with the guidelines indicated in “Action Plan for Consolidating Trading Units” issued by the Japanese stock exchanges,
the Company intends to adopt a share unit system under which the number of shares constituting one share trading unit will be 100 shares. With these
initiatives implemented, the amount per investment unit of the Company’s shares will be one quarter (1/4) of that prior to the stock split and adoption of
the share unit system.
Meanwhile, no stock split will be implemented for Class A Stock (unlisted), and the share unit will be one share per unit.

(b) Outline of the stock split(Method of stock split)
With Monday, September 30, 2013, as the record date, shares of common stock held by shareholders registered or recorded in the final
shareholders’ register on the same date will be split at a ratio of 400 shares per common stock.

(Number of shares to be increased through the stock split)
Total number of shares issued before the stock split:
Common stock
Class A Stock
Total
Number of shares to be increased through the stock split:
Common stock
Total number of shares to be issued after the stock split:
Common stock
Class A Stock
Total
Total number of shares authorized for issuance after the stock
split:
Common stock
Class A Stock
Total

3,655,809
1
3,655,810
1,458,667,791
1,462,323,600
11,462,323,601
3,600,000,000
13,600,000,001(Schedule of the stock split)
Public notice of the record date: Friday, September 13, 2013
Record date: Monday, September 30, 2013
Effective date: Tuesday, October 1, 2013(c) Adoption of the share unit system(Number of share unit to be newly established)
A share unit system will be adopted as of the effective date in “(b) Outline of the stock split” above, according to which the share unit number
for common stock will be 100 shares and that for Class A Stock will be one share.

(Schedule for the new establishment)
Effective date: Tuesday, October 1, 2013
Note: The trading unit of the Company’s common stock on the Tokyo Stock Exchange will be changed from one share to 100 shares as ofThursday, September 26, 2013.

(d) Other information
Per share information based on the assumption that the stock split was conducted on April 1, 2011, is as follows:
Yen

U.S. dollars

Years ended March 31,

2012

2013

Net assets
Net income¥1,492.27¥ 132.84¥1,699.10¥ 125.29

Note: Diluted net income per share is not presented because there are no dilutive potential of shares of common stock.

128

INPEX CORPORATION Annual Report 20132013
$18.08$ 1.33

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7
Financial /Corporate Information-XQH
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INPEX CORPORATION Annual Report 2013

129

Subsidiaries and Afﬁliates
As of March 31, 2013

Consolidated Subsidiaries
Company name

Voting rights
held by us (%)

Main business

INPEX Natuna, Ltd.

5,000

100.00%Exploration, development, production and sales ofoil and natural gas in the South Natuna Sea Block B,
Indonesia

INPEX Sahul, Ltd.

4,600

100.00%Exploration, development, production and sales ofoil and natural gas in the JPDA03-12 Block and BayuUndan gas-condensate ﬁeld in the Timor Sea JPDA

INPEX Alpha, Ltd.

8,014

100.00%Exploration, development, production and sales ofoil and natural gas in the WA-35-L Block and others,
Australia

INPEX Tengah, Ltd.

1,020

100.00%Exploration, development, production and sales of oil
and natural gas in the Tengah Block in Offshore East
Kalimantan, Indonesia

INPEX Browse, Ltd.

305,690

100.00%Exploration and development of oil and natural gas in
the WA-285-P Block and others, Australia

INPEX Ichthys Pty Ltd(Thousands of
U.S. dollars)

100.00%Exploration and development of oil and natural gas in
the Ichthys gas-condensate ﬁeld in the WA-50-L Blockand others, Australia

INPEX Masela, Ltd.

33,34851.93%

Exploration and development of oil and natural gas in
the Masela Block in the Arafura Sea, Indonesia

INPEX Offshore North Mahakam, Ltd.

3,875

100.00%E x p l o r a t i o n of o il a n d n a t u r al g a s i n t h e E a s t
Kalimant an Block in O f f s hore Eas t Kalimant an,
Indonesia

INPEX South Makassar, Ltd.

1,097

100.00%Exploration and development of oil and natural gas in
the Sebuku Block in the Makassar Strait, Indonesia

INPEX Timor Sea, Ltd.

6,712

100.00%Exploration, development, production and sales of oil
and natural gas in the JPDA06-105 Block in the Timor
Sea JPDA(Thousands of
U.S. dollars)

100.00%Exploration and development of oil and natural gas in
the Prelude gas ﬁeld (WA-44-L) and others, Australia

INPEX Babar Selaru, Ltd.

1,107

51.02%

Exploration of oil and natural gas in the Babar Selaru
Block, Offshore Indonesia

INPEX Offshore North West Sabah, Ltd.

2,045

100.00%Exploration of oil and natural gas in the deepwater
Block S located offshore Sabah, Malaysia

INPEX Southwest Caspian Sea, Ltd.

53,59451.00%

Exploration, development, production and sales of oilin the ACG Oil Fields, Azerbaijan

INPEX North Caspian Sea, Ltd.

50,68045.00%

Exploration and development of oil in the Offshore
North Caspian Sea Block, Kazakhstan

Japan Oil Development Co., Ltd.

18,800100.00%Exploration, development, production and sales ofoil in the ADMA Block in Offshore Abu Dhabi, United
Arab Emirates

INPEX ABK, Ltd.

2,500

100.00%Exploration, development, production and sales of oilin the Abu Al Bukhoosh Block in Offshore Abu Dhabi,
United Arab Emirates

Teikoku Oil (D.R. Congo) Co., Ltd.

10100.00%Exploration, development, production and sales of oilin the Offshore D.R. Congo Block

Teikoku Oil (Algeria) Co., Ltd.

708

100.00%Exploration and development of oil and natural gas in
the El Ouar I/II Blocks, Algeria

100.00%Inves t ment in oil ex plor ation, develop ment,
production and sales in Block 14, Offshore Angola

100.00%F i n a n c i n g f o r o il a n d n a t u r al g a s ex p l o r a t i o n,development, produc tion and sales in the Copa
Macoya / Guarico Oriental Blocks, Venezuela(Thousands of
U.S. dollars)

100.00%Exploration, development, production and sales of oilin the United States

19,645100.00%Exploration and development of oil including oil sandsin Canada

INPEX Oil & Gas Australia Pty Ltd

INPEX Angola Block 14 Ltd.
Teikoku Oil (Venezuela) Co., Ltd.
Teikoku Oil (North America) Co., Ltd.
INPEX Canada, Ltd.

130

Issued capital*(Millions of yen)

INPEX CORPORATION Annual Report 2013

802,688

400,000

475,600(Thousands of
U.S. dollars)

100
18,253

Company name

Issued capital*(Millions of yen)

Teikoku Oil (Suriname) Co., Ltd.
INPEX Gas British Columbia Ltd.

7,257
1,043,488(Thousands
Canadian dollars)

Teiseki Pipeline Co., Ltd.

100
86,135INPEX DLNGPL Pty Ltd(Thousands of
AUS dollars)

INPEX BTC Pipeline, Ltd.

(Thousands of
U.S. dollars)

63,800

Voting rights
held by us (%)

Main business

56.78%

Exploration of oil in the Offshore Block 31, Suriname

45.09%

Exploration, development, production and salesof natural gas in the shale gas blocks of Horn River,
Cordova and Liard basins in British Columbia, Canada

100.00%Natural gas transportation, pipeline operation,
maintenance and management

100.00%Investment in Darwin LNG Pty Ltd, which constructs
and operates the undersea pipeline and LNG plantconnecting Bayu Undan Gas/Condensate Field andDarwin (Australia)

100.00%Investment in the pipeline construction andmanagement business that connects Baku (Azerbaijan),
Tbilisi (Georgia) and Ceyhan (Turkey)

INPEX Trading, Ltd.

50

100.00%

Sales, agency and brokerage of crude oil and market
research and sales planning in connection with oil andnatural gas sales

Saitama Gas Co., Ltd.

60

62.67%

City gas sales

31 other subsidiaries

Equity-Method Afﬁliates
Company name

Issued capital*(Millions of yen)

656,279

Voting rights
held by us (%)

Main business44.00%

Exploration, development, production and sales ofnatural gas in the Berau Block and the Tangguh LNG
Project, West Papua province, Indonesia

MI Berau B.V.

(Thousandsof euros)

Ichthys LNG Pty Ltd(Thousands of
U.S. dollars)

66.07%Engaged in laying the undersea pipeline from theIchthys gas-condensate ﬁeld to the Darwin Onshore
LNG Plant and building the LNG plant, Australia

Angola Japan Oil Co., Ltd.

8,000

19.60%Development, production and sales of oil in the
Offshore 3/05 Block, Angola

INPEX Offshore North Campos, Ltd.

6,852

37.50%

Financing for oil and natural gas exploration,
development, production and sales in the Frade Blockin Offshore North Campos, Brazil

49.99%

Exploration, development, production and sales of oilin Block 14, Offshore Angola

Angola Block 14 B.V.

482,700

18(Thousands ofeuros)

10 other equity-method afﬁliates

Subsidiaries of Equity-Method Afﬁliates

Frade Japão Petróleo Limitada

Issued capital*

103,051(Thousandsof reais)

Voting rights
held by us (%)

Main business

0.00%

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

2 other subsidiaries of equity-method afﬁliates

Financial /Corporate Information

Company name7

* Rounding off fractions less than the unit.
INPEX CORPORATION Annual Report 2013131

Business Risks

The following is a discussion on key items that can be considered potential risk factors relating to the business of INPEXCORPORATION, its subsidiaries and affiliates (the “Group”). From the standpoint of information disclosure to investors andshareholders, we proactively disclose matters that are not necessarily the business risks but that can be considered to have important
effects on the investment decisions of investors. The following discussion does not completely cover all business risks relating to theGroup’s businesses.
Unless stated otherwise, forward-looking statements in the discussion are the judgment of the Group as of June 26, 2013 and are
subject to change after such date due to various factors, including changes in social and economic circumstances.

1. CHARACTERISTICS OF AND RISKS ASSOCIATED WITH THE
OIL AND NATURAL GAS DEVELOPMENT BUSINESS(1) Risk of failure in exploration, development or
production
Payment of compensation is ordinarily necessary to acquireparticipating interests. Also, surveying and exploratory drilling
expenses (exploration expenses) become necessar y at thetime of exploration activities for the purpose of discoveringresources. When resources are discovered, it is necessary tofurther invest in substantial development expenses according tovarious conditions, including the size of the recoverable reserves,development costs and details of agreements with oil-producing
countries (including gas-producing countries; hereinafter thesame shall apply).
There is, however, no guarantee of discovering resources
on a scale that makes development and production feasible.
The probability of such discoveries is considerably low despite
various technological advances in recent years, and even whenresources are discovered the scale of the reserves does notnecessarily make commercial produc tion feasible. For thisreason, the Group conservatively recognizes expenses related to
exploration investment in our consolidated ﬁnancial statements.
The Group maintains financial soundness by booking 100% as
expenses in the case of concession agreements (including mining
rights awarded in Japan as well as permits, licenses and leases
awarded overseas) and by booking 100% of exploration project
investment as allowances in the case of production sharing
agreements. In addition, if there are impossibilities of recovery
of investment in a development project, we also book thecorresponding amount of investment in the development projectas allowances while considering the recovery possibility of eachproject.
To increase recoverable reserve and production volumes,
the Group plans to always t ake an interes t in promisingproperties and plans to continue exploration investment. At thesame time, we plan to invest in development projects, including
the acquisition of interests in discovered undeveloped ﬁelds andproducing ﬁelds, so as to maintain an overall balance between
assets at the exploration, development, and production stages.
A l t h o u g h e x p l o r a t i o n a n d d e ve l o p m e n t ( i n c l u d i n g
the acquisition of interes t s) are neces sar y to secure thereserves essential to the Group’s future sustainable businessdevelopment, each type of investment involves technologicaland economic risks, and failed exploration or development could
have an adverse effect on the results of the Group’s operations.

(2) Crude oil, condensate, LPG and natural gas reserves
1) Proved reserves
INPE X CO R P O R AT I O N (t h e “C o m p a ny ” ) c o m mi s s i o n e d
DeGolyer and MacNaughton, an independent petroleum
engineering consultant in the United States, to assess the main
proved reserves of the Group of which projects with a signiﬁcant

132

INPEX CORPORATION Annual Report 2013

amount of future development investment might materiallyaffect future performance. An assessment of other projects wasundertaken by the Company. The deﬁnition of proved reserves isbased on the U.S. Securities and Exchange Commission’s (SEC)
Regulation S-X, Rule 4-10(a), which is widely known among U.S.
investors. Regardless of whether the deterministic approachor probabilistic approach is used in evaluation, proved oil
and gas reserves are estimated quantities that geological andengineering data demonstrate with reasonable certainty to be
recoverable from known reservoirs under existing economic
and operating conditions, from the date of evaluation throughto the expiration date of the agreement granting operatingrights (or in the event of evidence with a reasonable certainty ofagreement, extension through to the expiration of the projected
extension period). For deﬁnition as “proved reserves,” operators
must have a reasonable degree of certainty that the recovery ofhydrocarbons has commenced or that the project will commence
within an acceptable period of time. This definition is widely
regarded as being conservative. Nevertheless, the strictness ofthe deﬁnition does not imply any guarantee of the production of
total reserves during a future production period.
For f ur t her det ails on proved reser ves of cr ude oil,condensate, LPG and natural gas held by the Group, including
affiliates accounted for under the equity method, please see
the section “Oil and Gas Reserves and Production Volume” on
P. 140.
2) Probable reserves and possible reserves
In addition to the assessment of proved reserves based on
the SEC standards, the Company commissioned DeGolyer
and MacNaughton to assess its probable reser ves and thepossible reserves of which projects with a significant amountof future development investment might materially affect the
future performance, similar to proved reserves. An assessmentof other projects was undertaken by the Company, based on
the Petroleum Resources Management System 2007 (PRMS)
published by four organizations: the Society of Petroleum
Engineers (SPE), the World Petroleum Congress (WPC), theAmerican Association of Petroleum Geologists (A APG), andthe Society of Petroleum Evaluation Engineers (SPEE). Probablereserves, as defined by PRMS guidelines established by thefour organizations, are reserves of oil and gas volumes outside
proved reserves that are less likely to be recovered than proved
reserves but more certain to be recovered than possible reserves
based on analyses of geological and engineering data. In thiscontext, when probabilistic methods are employed, there
should be at least a 50% probability that the quantities actually
recovered will equal or exceed the sum of estimated proved
and probable reserves. In addition, possible reserves are also
defined in accordance with PRMS guidelines as reserves of oiland gas volumes which are not categorized as proved reserves
or probable reserves and which are less likely to be recovered
than probable reserves based on analyses of geological andengineering data. In this case, it is unlikely that the actual
quantity of oil and gas recovered will exceed the sum of proved
reserves, probable reserves and possible reserves. Furthermore,when probabilistic methods are employed to calculate possible
reserves, there should be at least a 10% probability that thequantities recovered will equal or exceed the sum of proved
reserves, probable reserves and possible reserves. Probablereserves and possible reserves can be upgraded to proved
reser ves af ter the addition of new technical data or when
uncertainty has been reduced due to clarification of economic
conditions or operational conditions. Nevertheless, probablereserves and possible reserves do not offer a guarantee of the
production of total reserves during a future production periodwith the same certainty as proved reserves.
For fur ther details on probable reser ves and possible
reserves of crude oil, condensate, LPG and natural gas held by
the Group, including affiliates accounted for under the equity
method, please see the section “Oil and Gas Reser ves andProduction Volume” on P. 140.
3) Possibility of changes in reserves
A reserve evaluation depends on the available geological andengineering data from oil and gas reservoirs, the maturity ofdevelopment plans and a considerable number of assumptions,factors and variables including economic conditions as of thedate such an estimate is made. Reserves may be revised in the
future on the basis of geological and engineering data as well
as development plans and information relating to changes in
economic and other conditions made newly available throughprogress in production and operations. As a result, there is apossibility that reserves will be restated upwards or downwards.
As to the reserves under a PSC, not only production, but also
oil and gas prices, investments, recovery of investments due
to contractual conditions and remuneration fees may affectthe economic entitlement. This may cause reserves to increaseor decrease. In this way, the assessed value of reserves could
ﬂuctuate because of various data, assumptions and changes ofdeﬁnition.

(3) In the oil and natural gas development business theperiod from exploration to sales is highly capital intensive
and funds cannot be recovered for a long time(4) Operatorship
In the oil and natural gas development business, companies
frequently form business partnerships for the purpose of thedispersion of risk and financial burden. In such partnerships,
one of the companies becomes the operator, which performs
the actual work and bears the responsibility for operations onbehalf of the partners. The companies other than the operator,
as non-operators, participate in the business by providing apredetermined amount of funds and either carefully examining
the exploration and development plan devised and implemented
by the operator, or participating in some operations.
The integration of INPEX CORPORATION and Teikoku OilCo., Ltd., was completed on October 1, 2008. The resultant
company possesses abundant operational capabilities thanks
to the amalgamation of the former t wo companies’ knowhow based on extensive operation experience in exploration,
development and production both within Japan and overseas aswell as their high level proprietary technologies.
The Group intends to actively pursue operator projects
focusing on the two large-scale LNG Ichthys and Abadi projects
taking into consideration the effective application of businessresources as well as the balance between operator and nonoperator projects, based on the Group’s technical capability,
which has been considerably enhanced by the above-statedbusiness integration. Although the Company lacks operator
experience in LNG development projects, it has significant
expertise as an operator in the development and productionof crude oil and natural gas both in Japan and overseas as well
as a wealth of know-how and knowledge accumulated overmany years as a participant in LNG and other projects in suchcountries as Indonesia and Australia. In addition, we believe thatby utilizing the services of specialized subcontractors and highly
experienced external consultants, a practice similar to foreign
oil companies including the majors, it will be possible to executebusiness appropriately as an operator.
Engaging in projec t coordination as an operator willcontribute to the expansion of oppor tunities of block anda c r e a g e a c q ui s i t i o n t h r o u g h e n h a n c e m e n t o f t e c h nic alcapabilities and greater presence in oil-producing countries
and the industry. At the same time, there exist risks such as
constraints on the recruitment of personnel who have specialized
operational skills and an increase in ﬁnancial burden. Inability toadequately cope with such risks could have an adverse effect on
the Group’s results of operations.

(5) Project partners
In the oil and natural gas development business, as previously
mentioned, several companies often engage in joint businessfor the purpose of dispersion of risk and financial burden. In
such cases, the partners generally enter into a joint operating
agreement among themselves to decide on the decision-making
procedure for execution of the joint business, or to decide on
an operator that conducts business on their behalf. A company

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Considerable time and expense is required for explorationac tivities. Even when promising resources are discovered
through exploration, substantial expenses including production
facility construction costs, and an extended period of time, arenecessary at the development stage leading up to production.
For this reason, a long period of 10 years or more is required
from the time of exploration and development investment until
the recovery of funds through production and sales. In particular,
the development of the Ichthys and the Abadi, large-scale
LNG projects, being pursued by the Company requires a verylarge amount of investment, and the ﬁnancing of these projects
could be impacted by changes in the economic and financial
environment. Following the discovery of resources, a delay inthe development schedule or the loss of the economic viabilityof the properties during the development process leading up
to production and the commencement of sales could have an
adverse effect on the Group’s operational results. Such delays
or losses may occur due to changes in the business environment

including a delay in the acquisition or modiﬁcation of government
approvals, the occurrence of unanticipated problems related
to geological conditions, ﬂuctuations in the price of oil or gas,fluctuations in foreign exchange rates, or escalating prices ofequipment and materials. In the case of LNG projects, suchdelays or losses may occur due to an inability to complete suchprocedural requirements as FID owing to the lack of any longterm contractual agreement with prospective purchasers withrespect to production.

133

that is a partner in one property in which the Group is engaged
in joint business may become a competitor in the acquisition ofother participating interests, even though the relationship withthe partner may be good.
In undertaking the joint business, participants in principle
bear a ﬁnancial burden in proportion to their interest share. Any
inability by a joint business partner to fulﬁll this ﬁnancial burden
may adversely affect the project.

(6) Disaster and accident risks
Oil and natural gas development entails the risk that operational
accidents and disasters may occur in the process of exploration,
development, production and transportation. Should such an
accident, disaster or other such incident occur, there is the riskthat costs will be incurred, excluding compensation covered byinsurance, due to facility damage, as well as the risk of a major
accident or disaster involving loss of life. In addition, a costburden for recovery or opportunity loss from the interruption ofoperations could occur. For the domestic natural gas business,
the Company has continued to procure as source gas natural gas
regasiﬁed from imported LNG since January 2010. Furthermore,
the Company will take steps to procure imported LNG as source
gas in connection with its Naoetsu Receiving Terminal from
September 2013. An inability to procure natural gas regasified
from imported LNG and other imported gas as source gas due
to troubles concerning suppliers or the Company’s Naoetsu
Receiving Terminal may interfere with the Company’s ability tosupply to its customers. This could in turn have an adverse effecton 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 andEnvironment Policy,” and as a matter of course abides by theenvironmental laws, regulations, and standards of the countries inwhich we operate and give due consideration to the environment
in the conduct of business, based on our independent guidelines.
Nevertheless, in the event of an operating accident or disasterthat for some reason exerts an impact on the environment, a
response or necessary cost burden for recovery or loss fromthe interruption of operations could occur. Furthermore, in theevent of changes to or the strengthening of the environmental
laws, regulations, and standards (including support measures forthe promotion of new, renewable energies) of the countries inwhich we operate, it may be necessary for the Group to devise
additional measures, and an associated cost burden could occur.
Although the Group maintains accident insurance in thenatural conduct of its operations, should such an accident ordisaster be attributable to willful misconduct or negligence on
the part of the Group, the occurrence of a cost burden could
have an adverse effect on ﬁnancial results. Also, such accident
or trouble would result in receiving administrative punishment or
result in damage to the Group’s credibility and reputation as anoil and natural gas development company, and could therefore
have an adverse effect on future business activities.
In November 2011, an oil sheen was discovered spreading in
the vicinity of the Frade oil ﬁeld, in which an approximately 18.3%
interest is held by Frade Japão Petróleo Limitada (“FJPL”), which
is a subsidiary of INPEX Offshore North Campos, Ltd. (which isan equity-method afﬁliate of INPEX CORPORATION and in which
INPEX CORPORATION holds a 37.5% interest). According to
Chevron Brasil Upstream Frade Ltda. (“Chevron”), the operatorof the Frade oil field, the application of Chevron’s emergency

134

INPEX CORPORATION Annual Report 2013

response plan led to the responsible well being brought
under control within four days from the sheen’s discovery andsuccessfully plugged and abandoned(by operations to fill thewell with cement and close it off). While Chevron has continued
to monitor the subsequent state of oil seepage, the well closure
has succeeded in largely resolving the oil seepage and not one
drop of oil reached the beaches and there was no impact onmarine life.
In March 2012 Chevron also identified a small, new oil
seepage emanating from a location different from the November
2011 oil seep and quickly took measures to place containment
devices on the source. According to Chevron the volume of oilreleased in the seep detected in March 2012 has been about one
barrel. Chevron and its partner companies including FJPL had
requested a temporary suspension of production in the Fradeoil ﬁeld. Production had once been suspended since March 16,
2012 but production resumed on April 30, 2013 upon approval of
the relevant Brazilian agencies.
Relevant Brazilian agencies have filed multiple lawsuits
against, and other notices with, Chevron, the operator of
the field, and other companies requesting compensation fordamages and a suspension in operations and other measures inconnection with the oil seeps in November 2011 and March 2012.
As to some of them, discussions are being held for concrete
resolution with the Brazilian agencies, although their ultimate
outcomes remain unknown. On the other hand, among thosethat are being contested are lawsuits filed by Brazil’s Federal
Prosecution Ser vice against Chevron and other companies
demanding damages in the amount of 20 billion real (about 8
hundred billion yen at the rate of one real to about 40 yen) for
each of the incidents in November 2011 and March 2012, but
Chevron has publicly announced its opinion that Chevron is
not aware of any basis for damages to be awarded in any civil
lawsuit. The INPEX group (including FJPL) is not a direct party to
any of these suits or other actions, but if Chevron is made to pay
damages or settlement money, or bear any other ﬁnancial burden
as a result of these suits or actions, it is possible that FJPL will
be required to bear a ﬁnancial burden equivalent to the portionof interest held by FJPL in the Frade oil ﬁeld in accordance with
the Joint Operating Agreement. While a lawsuit ﬁled by Brazil’sFederal Prosecution Service seeking a suspension of operations
had been par tially granted by a cour t, after submission by
Chevron of counterarguments contesting the judgment, thelawsuit seeking the suspension of operations was dismissed. As
Brazil’s Federal Prosecution Service ﬁled an appeal against thisjudgment, if the appeal is ultimately upheld by the higher court,
it is possible that losses will be incurred due to a long-termsuspension of operations. As of the date of this document, thescope of each relevant party’s responsibility remains unclear andthe monetary impact of these oil sheen incidents on the resultsof operations of the INPEX group has not been ﬁxed yet. As ofthe date of this document, we are not aware of the existence ofany lawsuit concerning the oil sheen incidents that involves the
INPEX group (including FJPL) as a direct party. However, if legal
proceedings such as civil, criminal, or administrative proceedings
are brought by Brazilian government agencies, individuals, or any
other body against the INPEX group, it is possible that the INPEX
group will incur losses and/or that the operations of the INPEX
group in Brazil will be affected.

2. EFFECTS OF FLUCTUATIONS IN CRUDE OIL PRICES, NATURALGAS PRICES, FOREIGN EXCHANGE AND INTEREST RATES ON
FINANCIAL RESULTS(1) Effects of ﬂuctuations in crude oil prices and natural
gas prices on ﬁnancial results(2) The effect of ﬂuctuations in exchange rates on
ﬁnancial results

A large percentage of crude oil prices and natural gas prices
in overseas businesses are determined by international market
conditions. In addition, those prices fluctuate significantly inresponse to the inﬂuence of a variety of factors including global
or local supply and demand as well as trends and conditionsin the global economy and ﬁnancial markets. The vast majorityof these factors are beyond the control of the Company. In
this regard, INPEX is not in a position to accurately predict
movements in future crude oil and natural gas prices. The
Group’s sales and proﬁts are subject to the effects of such priceﬂuctuations. Such effects are highly complex and are caused by
the following factors.
1) Although a majority of natural gas selling prices in overseas
businesses are linked to crude oil prices, they are not in direct
proportion to crude oil prices.
2) Because sales and profits are determined on the basis of
crude oil prices and natural gas prices at the time sales arebooked, actual crude oil transaction prices and the averageoil price during the accounting period do not necessarily
correspond.
For the domestic natural gas businesses, the Company
has continued to purchase as source gas natural gas regasiﬁed
from imported LNG as a raw material in addition to natural
gas produced in Japan since January 2010. The price of theCompany’s natural gas sold in Japan is comprised of a ﬁxed priceportion as well as a portion that reﬂects ﬂuctuations in the priceof imported LNG. In addition to the direct impact of trends inthe market prices of LNG and competing energy sources on that
portion that reﬂects ﬂuctuations in the price of imported LNG,
contract negotiations held each ﬁscal year with end purchasers
could have an indirect effect on the ﬁxed price portion.

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

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

3. OVERSEAS BUSINESS ACTIVITIES AND COUNTRY RISKof OPEC production ceilings in OPEC member countries andchanges in the legal system and taxation system of thosecountries (including the establishment or abolition of laws or
regulations and changes in their interpretation or enforcement)
could have a signiﬁcant impact on the Group’s business or results
unless the impact is compensated by insurance.
Additionally, against the background of rising development
costs and other changes in the business environment, theprogress of oil and gas projects, and the need to addressenvironment al is sues, the gover nment s of oil- producing
countries may seek to renegotiate the ﬁscal conditions including
conditions of existing oil contracts related to par ticipatinginterests. In the event that the ﬁscal conditions of contracts were
to be renegotiated, this could have an adverse effect on theGroup’s business performance.

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

The Group engages in a large number of oil and natural gas
development projects overseas. Because the Group’s businessactivities, including the acquisition of participating interests,
are conducted on the basis of contracts with the governmentsof oil-producing countries and other entities, steps taken byoil-producing countries to further tighten controls applicable
to home country natural resources, suspension of operation
due to conflicts and other factors, and other such changes
in the political, economic, and social circumstances in such
oil-producing countries or neighboring countries (including
government involvement, stage of economic development,
economic growth rate, capital reinvestment, resource allocation,
res tr ic tion of economic ac tivities by global communit y,government control of foreign exchange or foreign remittances,and the balance of international payments), the application

135

4. DEPENDENCE ON SPECIFIC GEOGRAPHICAL AREAS OR
PROPERTIES(1) Production volume
The Group engages in stable production of crude oil and natural
gas in the Offshore Mahakam Block (Indonesia), the ADMA Block(United Arab Emirates), the Minami Nagaoka Gas Field (Japan)
and so on. Through a process of business integration, the Group
had established a wide ranging, diversiﬁed yet balanced portfoliothat encompassed the Asia-Oceania regions (particularly Japan,
Indonesia, and Australia), the Middle East and Africa, Eurasia
including Caspian Sea area and the Americas. For the year
ended March 31, 2013 however, the Asia and Oceania regions
accounted for about 44% of the Group’s production volume, andthe Middle East and Africa accounted for about 39% making up
the vast majority of the Group’s operations.
Looking ahead, the Group will endeavor to further enhance
the balance of its asset portfolio on a regional basis. However,the Group currently relies heavily on speciﬁc geographical areasand properties for its production volume, and the occurrence inthese properties of an operational problem or difficulty could
have an adverse effect on the Group’s operational results.

(2) Contract expiration dates in principal business areas
Expiration dates are customarily stipulated in the agreements
related to participating interests, which are prerequisites for theGroup’s overseas business activities. Although March 30, 1997
was the initial contract expiration date in the production sharing
agreement for the Offshore Mahakam Block of Indonesia, theGroup’s principal geographical business area, an extension wasapproved in 1991, and the current expiration date is December
31, 2017. On the basis of the concession agreement for the
ADMA Block, the concession expiration date is March 8, 2018.
(However, the expiration date for the Upper Zakum Oil Field
has been extended to March 8, 2026.) Although the Groupplans to make efforts together with partners to further extend
these agreements, inability to re-extend the agreements or
unfavorable contract terms and conditions at the time of reextension could have an adverse effect on the Group’s results.
Even should the agreements be re-extended, we anticipate

that remaining recoverable reserves may decrease at the timeof re-extension. Although the Group is striving to acquireinterests that can substitute these properties, failure to acquireparticipating interests in oil and gas ﬁelds to fully substitute forthese properties could have an adverse effect on the Group’s
results. In addition, the period for exploration in oil and gas ﬁelds
currently under exploration is ﬁxed by contracts, and in the caseof ﬁelds where oil and/or gas reserves are found that are deemed
to be commercialized, and the Company is unable to decideon the transition to the development stage by the expiration of
the current contract, efforts will be made through negotiations
with the government of the oil- or gas-producing country inquestion to have the periods extended. However, there remains
the possibility that such negotiations may not be successfully
concluded, in which event the Company would be forced towithdraw from operations in the oil or gas ﬁeld concerned. Also,
as a rule, when there has been a major breach of contract on
the part of one party, it is customary for the other party to havethe right to cancel the agreement before the expiration date.
The agreements for properties in these principal geographicalbusiness areas contain similar provisions. The Group has neverexperienced early cancellation of an agreement due to breachof contract, and we do not anticipate such an occurrence in the
future. Nevertheless, a major breach of contract on the partof a party to an agreement could result in cancellation of anagreement before the expiration date.
A n d i n t h e ove r s e a s n a t u r a l g a s d eve l o p m e n t a n d
production activities, in many cases we are selling and supplying
gas based on long-term sales and supply contracts in which
expiration dates are stipulated. We plan to make efforts withpartners to extend or re-extend the expiration date before thedeadline stipulated in these contracts. Nevertheless, inability
to extend the contracts, or the occurrence of cases in which
extension is made but sales and supply volumes are reduced,
could have an adverse effect on the Group’s business or results.

5. PRODUCTION SHARING AGREEMENTS(1) Details of production sharing agreements
The Group has entered into production sharing agreementswith countries including Indonesia and Caspian Sea area, andtherefore holds numerous par ticipating interests in thoseregions.
Production sharing agreements are agreements by which
one or several oil and natural gas development companies serveas contractors that undertake at their own expense explorationand development work on behalf of the governments of oilproducing countries or national oil companies and receive
production from the projects as cost recovery and compensation.
That is to say, when exploration and development work results inthe production of oil or natural gas, the contractors recover the
exploration and development costs they incurred by means ofa share in the production. The remaining production (crude oiland gas) is shared among the oil-producing country or nationaloil company and the contractors according to fixed allocation
ratios. (The contactors’ share of production after cost recovery
is called “profit oil and gas.” In the case of natural gas, sales
are conducted by Indonesia and the contractors receive cost
136

INPEX CORPORATION Annual Report 2013

recovery and proﬁt gas in the form of cash.) On the other hand,in cases when exploration fails and expected production is notrealized, the contractors are not to recover their invested funds.

(2) Accounting treatment of production sharing
agreements
When a company in the Group owns participating interests under
production sharing agreements, as mentioned above, in the roleof contractor it invests technology and funds in the explorationand development of the proper t y, recovers the inves ted
costs from the production produced, and receives a share of
the remaining production after recovery of invested costs ascompensation.
C o s t s i nve s te d o n t h e b a s i s of p r o d u c t i o n s ha r i n g
agreements are recorded on the balance sheet as assets forwhich future recovery is anticipated under the item “Recoverable
ac co u nt s u n d e r p ro d u c t io n s har ing.” Af te r t he s t ar t ofproduction, recovered costs on the basis of those agreements
are deducted from this balance sheet item.
A s produc tion received under produc tion sharing
agreements is divided 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 costof received production, and subsequently the amount of thecompensation portion is calculated and this amount is booked as

an adjustment item to cost of sales (“Free of charge production
allocated”). Consequently, only the cost recovery portion of
production after deduction of the compensation por tion isbooked as cost of sales.

6. RELATIONSHIP WITH THE JAPANESE GOVERNMENT(1) The Company’s relationship with the Japanese
government
Although the government of Japan (the Minister of Economy,
Trade and Industry) holds 18.94% of the Company’s commonshares issued and a Class A Stock as of June 26, 2013, theCompany autonomously exercises business judgment as a
private corporation. There is no relationship of control, such as
through the dispatch of officers or other means between the
Company and the Japanese government. Moreover, we believethat no such relationship will develop in the future. Furthermore,
there is no concurrent posting or secondment to the Company ofofﬁcers or employees from the Japanese government.

(2) Ownership and sale of the Company’s shares by theJapanese government (the Minister of Economy, Tradeand Industry)
The Ministry of Economy, Trade and Industry (METI) holds 18.94%
of the Company’s common shares issued. METI succeeded tothe shares that had been held by Japan National Oil Corporation(JNOC) following the dissolution of JNOC on April 1, 2005.
With regard to the liquidation and disposition of the oil andgas upstream assets owned by JNOC, the Policy Regarding
the Disposal of Oil and Gas Development-Related Assets Heldby Japan National Oil Corporation (hereinafter, the “Report”)

was announced on March 18, 2003 by the Japan National Oil
Corporation Asset Evaluation and Liquidation Deliberation
Subcommit tee of the Advisor y Commit tee on Energy andNatural Resources, an advisory body of the Ministry of Economy,
Trade and Industry. The Report describes the importance ofappropriate timing in selling the shares on the market, taking into
consideration enterprise value growth. In addition, METI may, in
accordance with the Supplementary Provision Article 13 (1) 2 of
the “Special Measures Act for Reconstruction Finance Keeping
After the Great East Japan Earthquake” (“the Reconstruction
Finance Keeping Act“ (provisional translation, the same shallapply hereinaf ter)) enacted December 2, 2011, sell of f theCompany’s shares in Japan or overseas after examining thepossibility of disposal of the said shares based on a review of theholdings from the perspective of energy policy. This could havean impact on the market price of the Company’s shares.
METI also holds one share of the Company’s Class A Stock.
As the holder of a Class A Stock, METI possesses veto rights
over certain resolutions of the Company’s general shareholders’meetings and meetings of the Board of Directors. For details on
the Class A Stock, please refer to “8. CLASS A STOCK” below.

7. TREATMENT OF SHARES OF THE GROUP’S PROJECT COMPANYOWNED BY JAPANESE GOVERNMENT AND JOGMEC(1) Treatment of shares of the Group’s projectcompany previously owned by Japan National Oil
Corporation (JNOC)

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

In the aforementioned Report, INPEX CORPORATION (prior to
the integration with Teikoku Oil; reorganized on October 1, 2008)
was identiﬁed as a company that should comprise part of a corecompany, and is expected to play a role in efficient realizationof a stable supply of energy for Japan through the involvement
by a national ﬂagship company. In response to the Report, theCompany (also, the Group since our acquirement of Teikoku Oil
on October 1, 2008) has sought to promote efﬁcient realizationof a stable supply of energy for Japan while taking advantage
of synergy with the efforts of active resource diplomacy on thepart of the Japanese government, and has aimed to maximize
shareholder value by engaging in highly transparent and efﬁcientbusiness operations.
As a result, with regard to the integration by means oftransfer of shares held by JNOC proposed in the Report, INPEXCORPORATION and JNOC concluded the Basic Agreement
Concerning the Integration of Assets Held by JNOC into INPEXCORPORATION of February 5, 2004 (hereinafter the “Basic
Agreement”) and a memorandum of understanding related
to Basic Agreement (hereinafter “MOU”). On March 29, 2004,
INPEX CORPORATION and JNOC entered into related contracts

including the Basic Contract Concerning the Integration ofAssets Held by JNOC into INPEX CORPORATION (hereinafter
the “Basic Contract”), achieving the agreement on the details
including the treatment of the project companies subject to theintegration and shareholding ratios.
I n 2 0 0 4 I N P E X C O R P O R AT I O N a c c o m p l i s h e d t h e
integration of Japan Oil Development Co., Ltd. (JODCO), INPEXJava Ltd. (disposal was completed on September 30, 2010) and
INPEX ABK, Ltd. which are three of four companies covered by
the Basic Agreement. Although INPEX Southwest Caspian Sea
Ltd. (hereinafter “INPEX Southwest Caspian”) would become awholly owned subsidiary of INPEX CORPORATION by means of ashare exchange and the procedures were undertaken, the shareexchange contract was invalidated owing to failure to accomplish
the terms and conditions of the share exchange contract and theplanned share exchange was cancelled. Following the dissolutionof JNOC on April 1, 2005, the Minister of Economy, Trade andIndustry succeeded to the INPEX Southwest Caspian shares
held by JNOC. The Company continues to study the possibility
to acquire the shares. However, the METI’s future treatmentof these shares is undecided and, depending on the result ofreview in accordance with the Reconstruction Finance Keeping
Act, acquisition of INPEX Southwest Caspian shares could be
unavailable.

137

The treatment of Sakhalin Oil and Gas Development Co.,
Ltd. (hereinafter “SODECO”), INPEX Offshore North Campos,
Ltd., INPEX Nor th Makassar, Ltd. (liquidation proceedings
completed on December 19, 2008), INPEX Masela, Ltd., and
INPEX North Caspian Sea, Ltd. was agreed between INPEXCORPORATION and JNOC in the MOU of February 5, 2004.
Regarding the treatment of shares of SODECO, refer to thesection “(2) Treatment of the shares of Sakhalin Oil and Gas
Development (SODECO) owned by the Japanese government”
below. With regard to the transfer to INPEX CORPORATION of
the shares in the above project companies other than SODECO,
it was decided that the shares are to be transferred for cash
compensation as soon as prerequisites such as the consent of
the oil-producing country and joint venture partners and thepossibility of appropriate asset evaluations are in place. However,
the transfer of shares held by JNOC in the above companies has
not been decided and the shares in the above project companies
were succeeded to by the Japan Oil Gas and Metals National
Corporation (hereinafter “JOGMEC”) on the dissolution of JNOC
on April 1, 2005, except shares related to INPEX North Makassar,
Ltd., to which the Minister of Economy, Trade and Industr y
succeeded. JOGMEC states in its “medium-term objective” and“medium-term plan” that the shares succeeded to from JNOC
will be disposed of at an appropriate time and in an appropriatemanner, but the timing and manner of the disposal for the shares
held by JOGMEC have not been decided, and it is possible that
the Company will be unable to acquire the shares.

(2) Treatment of the shares of Sakhalin Oil and Gas
Development (SODECO) owned by the Japanese
government
The Japanese government (the Minister of Economy, Tradeand Industry) owns 50% of the shares of SODECO. SODECO
was established in 1995 to engage in an oil and natural gas
exploration and development project located on the northeast
continental shelf off Sakhalin Island. SODECO owns a 30.0%
interest in the Sakhalin-1 Project, of which ExxonMobil of theUnited States is the operator. In October 2005, Phase 1 ofthis project started with the goal of advanced production ofoil and natural gas. Furthermore, there is a plan for additional
development operations (Phase 2) for the purpose of the fullscale production of natural gas. The Company holds 5.74% of
SODECO shares issued and outstanding.
In the previously mentioned Report, SODECO, along withINPEX CORPORATION and JODCO, has been identified as acompany that should comprise part of a core company in Japan’s
oil and natural gas upstream industry in the future.
In accordance with the Report, it is assumed that privatesec tor shareholders, including INPEX CORPOR ATION, will
acquire shares of SODECO issued and outstanding to which the
Minister of Economy, Trade and Industry succeeded and thatwere previously held by JNOC (50.0%). The Company plans tohold a maximum of 33% of the SODECO shares to become its
largest shareholder. In the event that the consent of SODECO’s
joint-venture par tner s, the relevant Rus sian gover nment
entity, or other parties is necessary for the acquisition of theshares, obtaining the consent is a prerequisite for acquisition.
In addition, it will be necessary to reach agreement on theshareholder composition for SODECO, the share transfer price,and other matters.
In the event that the additional acquisition of the SODECO
shares is realized, the Group will hold a substantial ownershipinterest in oil and natural gas assets in Russia, as well as in Asiaand Oceania, the Middle East, Caspian Sea area, and otherregions, and we expect the acquisition to contribute to theachievement of a more balanced overseas asset portfolio for theGroup.
However, at this time it is undecided whether agreement
concerning acquisition of the shares with the Minister of
Economy, Trade and Industry will be reached as anticipated andwill be realized. Also, even in the event that the acquisition isrealized, the conditions and time of acquisition are undecided
and, depending on the result of review in accordance with theReconstruction Finance Keeping Act, the acquisition by theCompany could be unavailable.

8. CLASS A STOCK(1) Overview of the classiﬁed share
1) Reason for the introduction
The Company was established as the holding company througha stock transfer between INPEX CORPORATION and Teikoku
Oil Co., Ltd. on April 3, 2006. Along with this, a classiﬁed shareoriginally issued by INPEX CORPORATION (prior to the merger)
was transferred and at the same time the Company issued aclassified share with the same effect (hereinafter the “Class A
Stock”) to the Minister of Economy, Trade and Industry. The
classified share originally issued by INPEX CORPORATION
was the minimally required and a highly transparent measure
to eliminate the possibility of management control by foreign
capital while not unreasonably impeding the efficiency andflexibility of management based on the concept in the Reportdiscussed in the above section 7. “TREATMENT OF SHARES OF
THE GROUP’S PROJECT COMPANY OWNED BY JAPANESEGOVERNMENT AND JOGMEC.” INPEX CORPOR ATION is
identified as a company that should comprise part of a corecompany for Japan’s oil and gas upstream industr y and is138

INPEX CORPORATION Annual Report 2013

expected to play a role in efﬁcient realization of a stable supplyof energy for Japan as a national ﬂagship company. On the basisof the concept of the Report, the Company issued the Class
A Stock because it can be considered an effective means ofpreventing risks such as a speculative hostile takeover.
2) Shareholders’ meeting resolutions, dividends, distributionof residual assets, and redemption
Unless otherwise provided by laws or ordinances, the Class A
Stock does not have any voting rights at the Company’s generalshareholders’ meetings. The holder of the Class A Stock will
receive the same amount of dividends, interim dividends, anddistributions of residual assets as a holder of common stock.
The Class A Stock will be redeemed by resolution of the Boardof Directors of the Company if the holder of the Class A Stockrequests redemption or if the Class A Stock is transferred to a
party other than the government of Japan or an independentadministrative body that is fully funded by the government ofJapan.

3) Veto rights in the Articles of Incorporation
The Articles of Incorporation of the Company provide that an
approval resolution of the meeting of the holder of the Class A
Stock is necessary in addition to resolutions of the Company’s
general shareholders’ meetings and resolutions of meetings ofthe Board of Directors for the decisions on certain important
mat ters such as the appointment or removal of Direc tors,
disposition of material asset s, changes to the Ar ticles ofIncorporation, business integration, capital reduction or company
dissolution in connection with the business of the Company.
Accordingly, the Minister of Economy, Trade and Industry, as theholder of the Class A Stock, has veto rights over these importantmatters.
4) Criteria for the exercise of veto rights provided in theguidelines
Guidelines concerning the exercise of the veto rights havebeen established in a Ministry of Economy, Trade and Industry
Notice (No. 220, 2008) (hereinafter the “Notice”). The guidelines
stipulate the exercise of veto rights only in the following speciﬁccases.
• When resolutions pertaining to appointment or removal of
Directors and integration are not voted down and it is judgedthat the probability is high that the Company will engage inmanagement inconsistent with the role that a core company
should perform for efficient realization of a stable supply ofenergy to Japan.
• When resolutions pertaining to disposition of material assets
are not voted down and the objects of disposition are oil andnatural gas exploration or production rights or rights similar
thereto or shares or ownership interest in the Company’s
subsidiary whose principal assets are said rights and it isjudged that the probability is high that the Company will
engage in management inconsistent with the role that a corecompany should perform for efficient realization of a stablesupply of energy to Japan.
• When resolutions pertaining to amendments to the Company’s
Articles of Incorporation relating to changes in the Company’sbusiness objectives, capital reduction, or dissolution are notvoted down and it is judged that the probability is high that
the Company will engage in management inconsistent withthe role that a core company should perform for efficient
realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Articles ofIncorporation granting voting rights to any shares other thanthe common shares of the Company are not voted down andcould have an effect on the exercise of the voting rights of theClass A Stock.
It is provided that the above guidelines shall not be limited in theevent that the Notice is changed in the light of energy policy.

(2) Risk in connection with the Class A Stock
Although the Class A Stock was issued as a minimally required
measure to eliminate the possibility of management controlled
by foreign capital while not unreasonably impeding the efﬁciency
and flexibility of management, anticipated risks in connection
with the Class A Stock include the following.
1) Possibility of conﬂict of interest between national policy
and the Company and its common shareholders
It is conceivable that the Minister of Economy, Trade and Industry
could exercise the veto rights in accordance with the above
guidelines provided in the Notice. As the guidelines have been
provided from the standpoint of efﬁcient realization of a stablesupply of energy to Japan, it is possible that the exercise of theveto rights by the Minister of Economy, Trade and Industry could
conflict with the interest of other shareholders who hold theCompany’s common shares. Also, it is possible that the above
guidelines could be changed in the light of energy policy.
2) Impact of the exercise of veto rights on the price ofshares of common stock
As mentioned above, as the holder of the Class A Stock has theveto rights over certain important matters in connection with thebusiness of the Company, the actual exercise of the veto rights
over a certain matter could have an impact on the price of theCompany’s shares of common stock.
3) Impact on the Company’s degree of freedom in businessand business judgment
As the Minister of Economy, Trade and Industry holds the Class
A Stock with the previously mentioned veto rights, the Company
needs a resolution of the meeting of the holder of the Class
A Stock concerning the above matters. For this reason, theCompany’s degree of freedom in management in those matters
could be restricted by the judgment of the Minister of Economy,
Trade and Industry. Also, attendant on the need for a resolutionof the meeting of the holder of the Class A Stock concerning theabove matters, a certain period of time is required for procedures
such as the convening and holding of meetings and resolutions
and for the processing of formal objections, if necessary.

9. CONCURRENTLY SERVING OUTSIDE DIRECTORSAt the same time, however, the shareholder corporations are
involved in businesses that overlap with those of the Company.
The Company therefore recognizes that it must pay particularattention to corporate governance to avoid conﬂicts of interest inconnection with competition and other matters.
To this end, all Company direc tors, including the four
outside directors described above, are required to sign a written
undertaking to carry out their duties as ofﬁcers of the Company
appropriately and with the highest regard for the importance ofsuch matters as their obligations in connection with noncompetitive
practices under the Japanese Companies Act, the proper mannerfor dealing with conﬂict of interest, and conﬁdentiality.
INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

The Board of Directors of the Company is composed of 16
members, ﬁve of whom are outside directors.
The four outside directors have many years of management
experience in the Company’s business and are able to offer
objective, professional advice regarding operations. For thisreason, they were asked to join the Board of Direc tors tocontribute to the development of the Company’s business.
The four outside directors concurrently serve as directors
or advisers of Japan Petroleum Exploration Co., Ltd., Mitsubishi
Corporation, Mitsui Oil Exploration Co., Ltd. and JX Holdings,
Inc. (hereinafter “shareholder corporations”), respectively.

139

Oil and Gas Reserves and Production Volume

1. OIL AND GAS RESERVES
Proved reserves
The following tables list the proved reser ves of crude oil,c o n d e n s a te, L P G a n d n a t u r a l g a s of o u r c o m p a ny, o u r
consolidated subsidiaries and equity-method afﬁliates on main
projec ts. Disclosure details applicable to proved reser ves
are presented in accordance with the rules and regulations
stipulated by the U.S. Financial Accounting Standards Board,Japan
Crude oil(MMbbl)Gas(Bcf)

Proved developed and undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201115
611
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates
2
87Interim production(1)(47)
As of March 31, 201216651
Equity-method afﬁliates
As of March 31, 2011——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2012——
Proved developed and undeveloped reserves
As of March 31, 2012
16651
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2012
16
651
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates
07Interim production(1)(49)
As of March 31, 201315609
Equity-method afﬁliates——
As of March 31, 2012
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2013——
Proved developed and undeveloped reserves
As of March 31, 2013
15
609
Proved developed reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201315609
Equity-method afﬁliates——
As of March 31, 2013
Proved undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2013——
Equity-method afﬁliates
As of March 31, 2013——

Asia & Oceania

and are reported in accordance with the Accounting Standard
Codiﬁcation Topic 932 “Extractive activities —Oil and Gas.”
Our proved reser ves as of March 31, 2013 were 929.38
million barrels for crude oil, condensate and LPG, 6,768.5 billionsof cubic feet for natural gas and 2,188.43 million boe in total.
Eurasia(Europe & NIS)

Middle East &AfricaAmericas

Total

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)

Gas
(Bcf)

85
190
—
2
(23)
255

1,208
5,364
—
181
(243)
6,509

210
—
—
(13)
(9)
188

—
—
—
—
—
—

404
—
(2)
1
(31)
371

—
—
—
—
—
—

0
—
—
0
(0)
0

162
—
—
59
(26)
195

715
190
(2)
(7)
(64)
831

1,980
5,364
—
327
(316)
7,354

2
—
—
1
(0)
2

470
—
—
(9)
(22)
439

—
—
—
—
—
—

—
—
—
—
—
—

179
—
—
(7)
(26)
147

—
—
—
—
—
—

3
—
—
(0)
(2)
1

0
—
—
0
(0)
0

184
—
—
(6)
(27)
150

471
—
—
(9)
(23)
439

257

6,947

188

—

518

—

1

195

981

7,793

255
—
(24)
(1)
(21)
208

6,509
—
(698)
(92)
(212)
5,507

188
—
—
4
(9)
183

—
—
—
42
—
42

371
—
—
23
(31)
363

—
—
—
—
—
—

0
—
9
(0)
(0)
9

195
63
7
55
(24)
296

831
—
(15)
26
(63)
779

7,354
63
(691)
12
(284)
6,454

2
0
—
0
(0)
3

439
11
—
(116)
(19)
314

—
—
—
—
—
—

—
—
—
—
—
—

147
—
10
12
(27)
142

—
—
—
—
—
—

1
—
—
5
—
6

0
—
—
0
—
0

150
0
10
17
(27)
151

439
11
—
(116)
(19)
315

211

5,821

183

42

505

—

15

297

929

6,768

32

604

36

—

306

—

—

162

390

1,375

3

267

—

—

126

—

6

0

135

267

176

4,904

147

42

57

—

9

134

389

5,079

(0)

47

—

—

16

—

—

—

16

47

Note 1. Based on SEC disclosure standards, INPEX discloses proved reserves in all countries representing 15% or more of its proved reserves. As of March 31, 2013, INPEX held proved reserves inAustralia of approximately 170.5 million barrels for crude oil and approximately 4,641.4 billions of cubic feet for natural gas, for a total of 1,035.61 million boe.
2. Proved reserves (as of March 31,2013) of the following blocks and fields include minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%), Americas: Copa Macoya (30%), Horn River Area (54.91%)
3. MMbbl: Million barrels
4. Bcf: Billions of cubic feet
5. Crude oil includes condensate and LPG

140

INPEX CORPORATION Annual Report 2013

Standardized measure of discounted future net cash ﬂows and changes relating to proved oil and gas reserves forthe year ended March 31, 2013
Disclosure details for the standardized measure of discounted
future net cash ﬂows relating to proved reserves and movements
for the year ended March 31, 2013 are presented in accordancewith the rules and regulations stipulated by the U.S. Financial
Accounting Standards Board, and are reported in accordancewith the Accounting Standard Codiﬁcation Topic 932 “Extractive
activities—Oil and Gas.”
In calculating the standardized measure of discounted
future net cash inﬂows, the period average of oil and gas prices
at the ﬁrst day of each month is applied to the estimated annual
future production from proved reserves to determine future cash
inflows. Future development costs are estimated based upon
constant oil price assumptions and assume the continuation ofexisting economic, operating, and regulatory conditions. Future
income taxes are calculated by applying the period-end statutory

March 31, 2012
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows
Equity-method affiliates
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Share of equity-method investees’ standardized measure of
discounted future net cash flows
Total consolidated and equity-method affiliates in standardized
measure of discounted future net cash flows

rate to estimated future pretax cash flows after provision fortaxes on the cost of oil and natural gas properties based upon
existing laws and regulations. The discount is computed byapplying a 10% discount factor to the estimated future net cash
ﬂows.
We use the exchange rates of ¥82.14 and ¥93.99 to US$1.00
as of March 31, 2012 and 2013, respectively.
These ﬁgures are calculated in accordance with the rules set
forth by the U.S. Financial Accounting Standards Board. Because
no economic value is attributed to potential reserves, a uniform
discount rate of 10% is applied, and the price of oil is subject
to constant fluctuation, these figures do not represent the fairmarket value of reserves of crude oil, condensate, LPG andnatural gas, or of the present value of the cash ﬂows.

Total¥12,233,012(3,931,090)(4,804,117)
3,497,805(2,253,957)
1,243,848

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
AfricaJapan¥ 841,649 ¥ 6,370,993(161,211)(2,427,986)(242,127)(1,921,324)
438,3112,021,683(219,401)(1,445,374)
218,910576,308¥1,585,214 ¥ 3,399,632(378,658)(940,940)(267,983)(2,370,085)
938,573
88,606(538,165)(47,863)
400,408
40,743

Americas¥ 35,524(22,295)(2,597)
10,632(3,153)
7,478

1,495,119(456,429)(954,555)
84,136(29,669)

—
—
—
—
—

105,683(56,512)(20,714)28,457(11,663)

—
—
—
—
—

1,379,368(394,701)(932,820)
51,846(17,761)

10,069(5,216)(1,021)
3,832
(246)

54,466—

16,794—34,086

3,586¥ 1,298,314¥ 218,910

593,103¥ 400,408

74,829¥ 11,065¥¥

Note: Reserves of the following blocks and fields include minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%)

March 31, 2013
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows

Total consolidated and equity-method affiliates in standardized
measure of discounted future net cash flows

Total

Japan

Americas¥12,788,034(4,119,855)(5,057,270)
3,610,909(2,264,436)
1,346,473¥960,873(176,309)(277,685)
506,879(244,270)
262,609¥6,238,258(2,242,999)(2,078,271)
1,916,987(1,369,592)
547,396¥1,702,492(438,236)(265,673)
998,583(545,223)
453,359¥3,736,754(1,188,643)(2,417,554)
130,557(80,178)
50,379¥149,658(73,669)(18,087)
57,903(25,172)
32,731

1,696,889(566,833)(974,897)
155,159(63,444)

—
—
—
—
—

168,545(76,271)(47,627)
44,647(31,381)

—
—
—
—
—

1,470,807(446,072)(925,608)
99,127(28,798)

57,537(44,490)(1,662)
11,385(3,265)91,715—

13,266—70,3308,119¥ 1,438,188¥262,609¥ 560,661¥ 453,359¥ 120,708¥ 40,850

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

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

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

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
Africa141

INPEX CORPORATION and Consolidated
Subsidiaries
Standardized measure, beginning of period
As of April 1, 2012
Changes resulting from:
Sales and transfers of oil and gas produced, netof production costs
Net change in prices, and production costs
Development cost incurred
Changes in estimated development costs
Revisions of previous quantity estimates
Accretion of discountNet change in income taxes
Extensions, discoveries and improved recoveries
OtherStandardized measure, end of the period
As of March 31, 2013

Millions of yen
Eurasia
Middle East &(Europe & NIS)
Africa

Total

Japan

Asia &
Oceania¥1,298,314¥218,910¥576,308(904,376)(51,736)

41,698292,003(113,146)(58,467)
146,696494,588
53,039187,837

28,997
1,439
77
6,794
21,7694,778—
31,581¥1,438,188¥262,609

Americas

Equity-method
afﬁliates¥400,408¥40,743¥7,478¥54,466(350,624)(79,754)(219,353)(2,909)(200,000)

182,985
200,104(11,257)(290,058)
67,94588,362—
83,630(40,912)58,771(26,155)
11,846
46,60024,740—57,816(94,700)
18,513(74,590)134,603
4,552
234,733
—
5,878

(633)
2,193
(2,047)
3,592
848
(827)
23,962
1,075(34,040)
10,984827
74,757
4,982
142,803
29,077
7,858¥547,396¥453,359¥50,379¥32,731¥91,715

Notes: 1. Reserves of the following blocks and fields include minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)
2. Extensions, discoveries and improved recoveries includes acquisition and sales.

Probable reserves and possible reserves
The following tables list the probable and possible reserves of crude oil, condensate, LPG and natural gas of our company, ourconsolidated subsidiaries and equity-method affiliates on main projects. Our probable reserves as of March 31, 2013 were 768.74
million barrels for crude oil, condensate and LPG, 6,275.0 billions of cubic feet for natural gas and 1,906.60 million boe in total. In
addition, the Group’s possible reserves as of March 31, 2013 were 120.40 million barrels for crude oil, condensate and LPG, 2,556.2
billions of cubic feet for natural gas and 604.44 million boe in total.

March 31, 2013
Probable reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

March 31, 2013
Possible reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericas

Subtotal

INPEX CORPORATION Annual Report 2013

Total

9

185

347

85

94

720

49

769

360

5,723

87

—

24

6,194

81

6,275

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericas

SubtotalInterest inreserves heldby equitymethod
afﬁliates

Total

2

88

3

2

11

106

14

120

64

2,381

—

—

38

2,483

73

2,556

Notes: 1. MMbbl: Million barrels
2. Bcf: Billions of cubic feet
3. Bitumen reserve volumes are included in the net probable and possible reserves of crude oil, condensate and LPG for the Americas.

142

Interest inreserves heldby equitymethod
afﬁliates2. OIL AND GAS PRODUCTION
The following tables list average daily production for crude oil, natural gas, and the total of crude oil and natural gas by region. The
proportional interests in production by our equity-method afﬁliates are not broken down by geographical regions.
Our production for the year ended March 31, 2013 was 245.9 thousand barrels per day for crude oil, condensate and LPG, 863.4
millions of cubic feet per day for natural gas and 407.8 thousand boed in total. Our method for calculating the conversion of natural gas
volumes to barrels of oil equivalent (boe) has been altered effective the previous ﬁscal year.
2008

2009

2010

2011

2012

2013

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

4.9
36.5
54.5
80.7
0.4
177.0
64.6
241.5
88.4

4.9
44.7
24.8
81.0
2.7
158.1
65.1
223.2
81.5

4.5
47.7
26.9
73.3
5.5
158.0
60.4
218.3
79.7

3.9
65.1
27.9
73.0
2.3
172.2
67.4
239.6
87.5

3.8
62.5
25.0
84.3
0.1
175.7
75.4
251.2
91.9

3.9
58.0
25.1
84.4
0.1
171.5
74.4
245.9
89.8

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

161.5
845.7
—
—
81.6
1,088.8—
1,088.8
398.5

164.9
842.8
—
—
82.3
1,090.0—
1,090.0
397.8

155.1
880.5
—
—
86.9
1,122.6—
1,122.6
409.7

128.7
836.0
—
—
81.1
1,045.9
56.6
1,102.5
402.4

127.6
665.0
—
—
72.4
865.0
62.7
927.7
339.5

133.7
586.4
—
—
90.9
811.0
52.4
863.4
315.1

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

31.9
177.4
54.5
80.7
14.0
358.4
64.6
423.0
154.8

32.4
185.1
24.8
81.0
16.4
339.7
65.1
404.9
147.8

30.4
194.5
26.9
73.3
20.0
345.1
60.4
405.4
148.0

25.3
204.4
27.9
73.0
15.8
346.5
76.8
423.3
154.5

27.7
189.5
25.0
84.3
13.1
339.7
86.5
426.2
156.0

29.0
169.4
25.1
84.4
16.2
324.0
83.8
407.8
148.8

Years ended March 31,

7
Financial /Corporate Information

INPEX CORPORATION Annual Report 2013

143

Oil and Gas Glossary■ LNG (Liqueﬁed Natural Gas)

■ BarrelIn the case of oil, 1 barrel is equal to 42
gallons (approx. 159 liters).
■ Barrel of Oil Equivalent

Barrel of oil equivalent (BOE) is mainly
used to convert a cubic volume of natural gas (i.e., cubic feet) into a cubic volume (i.e., a barrel) of crude oil. It is astandard unit of thermal energy basedon the energy released in the combustion of one barrel of crude oil.

■ EPC Contractor

The oil and gas exploration and development business involves the participation of a number of contractors, suchas drilling contractors and geophysicalexploration subcontractors. Of these,an engineering, procurement and construction (EPC) contractor is in charge ofengineering, procurement and construction work.

■ LPG (Liqueﬁed Petroleum Gas)
■ Exploratory wells

A type of crude oil that holds a major
position in the market for crude oil
prices. Brent crude is a light oil with low
sulfur content and is mainly extracted
from the Brent oil ﬁeld located in the
North Sea of the United Kingdom.

A well drilled to search for still unknown
oil ﬁelds. Drilling wells to conﬁrm thedimensions of a new oil ﬁeld and toacquire an overall image of an oil ﬁeld
is a part of exploration, and wells for thispurpose are referred to as exploratory
wells.

■ Concession contract■ FEEDA contract that directly grants mining rights (including mining rights inJapan and permits, licenses and leases
in other countries) to oil companies
through a contract or approval from thegovernment of oil-producing countries
or from national oil companies. The oilcompany itself makes the investment
and holds the right for disposition for
the acquired oil and gas. Oil-producing
countries receive taxes or royalties fromsales.

FEED is an acronym for Front End Engineering Design. FEED work is done
prior to engineering, procurement andconstruction (EPC) work. FEED work
involves ﬁeld studies and budgeting,including technical issue identiﬁcationand cost outlines, upon which biddingfor EPC work is based.

■ Brent crude` See pp. 100–101 for Accounting Methods for
Types of Agreements.

■ Floating LNG

A ﬂoating LNG is created by installingan LNG plant on a large vessel. Thisdevelopment method allows for natural
gas to be processed into liquid at thatplant and then directly ofﬂoaded to an
LNG carrier.

■ Condensate

Generally, a type of crude oil extracted
as a liquid from gas ﬁelds. Liquid (oil)that exists as a gas underground butthat condenses when extracted to thesurface is referred to as condensate oilor simply as condensate.

■ FPSOFPSO refers to a ﬂoating production,
storage and ofﬂoading system where
reﬁned crude oil and condensate arestored in tanks within a vessel. From
here, the vessel ofﬂoads oil directly totankers.

■ CoreCylinder rock samples extracted fromunderground geological formations inwells during various types of exploratory drilling. Normally, the samples are
extracted by core drilling.

144

INPEX CORPORATION Annual Report 2013

After removing impurities such as moisture, sulfur compounds and carbon
dioxide from natural gas with a chief
constituent of methane, the gas is liqueﬁed by cooling to ultra-low temperatures (-162 Celsius). This process compresses the volume of the gas to 1/600,
thus making it possible to transportlarge quantities in a single shipment.

■ International Energy Agency (IEA)

An autonomous organization comprisedof the main oil-consuming countries
established in 1974 under the OECD forcollective action on energy.

LPG is an oil product that is a mixtureof hydrocarbon gases with a carbon
number of 3 or 4, for example, propane, propylene, butane, butylene ora mixture of these as main constituents. Although LPG is a gas at ambient
temperature and normal pressure, it isliqueﬁed through exposure to low pressures or temperatures (cooling).
■ Lump-sum contract
A contract agreeing upon and approving
a ﬁxed total for construction and work.
It is distinguished from a cost-plus-fee
contract, which promises in advance thepayment of a certain fee added to a certain amount of actual incurred expenses.
■ Methane Hydrate
As one type of unconventional gas,methane hydrate is a solid crystalline
structure in which methane molecules
are trapped within a latticework formedby the hydrogen bonding of water molecules. Methane hydrate is stable under
low-temperature, high-pressure conditions, so it can be found within thepermafrost layer in Siberia, Canada andAlaska, as well as in the ocean at depthsof 500 meters or more.
■ Net Production Volume

Net production volume is the net economical portion of total production volume. Speciﬁcally, it is the volume of oil
and natural gas that can be sold after
deducting portions allocated to thegovernments of oil-producing countries
in accordance with production sharing
agreements, and portions allocated tointerest owners in accordance with concession agreements.

undergoing development.

■ Oil majors

Oil majors are also known as majorinternational oil companies. ExxonMobil (US), Royal Dutch Shell (UK/Netherlands), BP (UK), Chevron (US) and
TOTAL (France) are well-known as theﬁve oil majors. Each of these companies
possesses an integrated system including departments for conducting both
upstream and downstream business.
■ Oil sands

Sandstone beds that contain an extremely viscous tar-like crude oil thathas no ﬂuidity in its initial state. This is
as opposed to conventional crude oil,which can be easily pumped upward
using a well. Depending on the levelof viscosity, crude oil extracted from oilsand is referred to as bitumen or extra
heavy crude oil.
` See page 69 for the Joslyn Oil Sands Project.

■ Operator

In the case of multiple parties to a contract regarding blocks of oil/gas andassociated E&P work, a joint operating
agreement is entered into between theparties and it is necessary to achieve
agreement on the rights and obligations for all items required when conducting operations. At that time, theparty responsible for the execution
and management of the operations isreferred to as the operator. In contrast,
parties other than the operator arereferred to as non-operators.
■ Primary energy

Energy recovered directly from naturesuch as coal, oil, natural gas, fuelwood,hydroelectricity, nuclear power, wind
power, current power, geothermal andsolar energy.

■ Probable reserves (our company)

The deﬁnition of probable reserves is inaccordance with regulations (PRMS)
formulated by the Society of Petroleum
Engineers (SPE) through support fromthe World Petroleum Council (WPC),
the American Association of Petroleum
Geologists (AAPG) and the Society ofPetroleum Evaluation Engineers (SPEE).
The rule deﬁnes probable reserves as
the estimated quantities of crude oiland natural gas that can be added toproved reserves and commercially collected based on geological and engineering data.

■ Reserves-to-production ratio■ Production sharing contract (PSC)■ Royalty

A contract in which one or more companies involved in the development of oil
and natural gas acts as a contractor andundertakes operations for explorationand development on behalf of the governments of oil-producing countries or
national oil companies. The contractor is
responsible for the costs associated withthe operations. Corresponding amounts
for cost recovery and compensation arereceived from production by a contractor.

Royalty refers to a speciﬁc share of
production reserved by the owner ofunderground minerals (e.g., a state ora municipality) when granting mining
rights, without taking responsibility for
production costs. In some cases, theshare increases according to increases
in production. Royalties may be paid in
kind or in cash.

` See pp. 100–101 for Accounting Methods for
Types of Agreements.

The reserves-to-production ratio (R/P
ratio) is calculated by subtracting the
production for a given year from thereserves at the end of that year. The
resulting ﬁgure is applied to that particular oil ﬁeld or region and shows how
many years production can be continued if annual production continues at
the amount for that year.
■ Rig

Machinery for drilling a well that is used tosearch for and produce oil and natural gas.

■ Secondary energy

Electric power, city gas, coke, etc., which
are acquired by converting and processing primary energy sources, are referred
to as secondary energy.

■ Proved reserves

The deﬁnition of proved reserves is inaccordance with SEC Regulation S-X
Rule 4-10 (a), a rule that is well known
among investors in the United States.
The rule deﬁnes proved reserves as theestimated quantities of crude oil andnatural gas that can, with reasonablecertainty and under current economic
and operating conditions, be collectedfrom a given date forward based on
geological and engineering data.
■ Renewable energy

Shale gas is a kind of natural gas thatis considered to be an unconventional
natural gas. It refers to gas that is foundin hard shale beds and not in the usual
gas ﬁelds of conventional natural gas.
It is necessary to excavate the horizontal wells, using the hydraulic fracturingmethod to create a crack in the shale
bed so that the gas can be extracted.
In recent years, due to advancementsin these gas mining technologies, theproduction of shale gas is making great
strides, particularly in North America.
■ Unconventional natural gas

Natural gas not produced from regularoil and gas ﬁelds. Includes gas (tightgas sands, coal bed methane, biomass
gas and shale gas) that has alreadyundergone partial commercial production and gas (e.g., methane hydrate anddeep gas) expected to undergo futurecommercial production.
INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

A collective term used for energy
acquired from within natural phenomena
replenished repeatedly on earth such as
solar, wind, hydro, oceans and biomass,
as opposed to fossil fuels such as coaland oil, which are forecast to run out inthe future. There is no fear of renewableenergy running out, and it does not generate air pollution. Technology to use
renewable energy as an energy source is■ Shale gas

145

Index / Unit Conversion

Financial / Accounting

Non-Financial Information

12-year ﬁnancial information ............................................. 97­99
Background information(Oil and gas accounting policies and treatment) ............ 100­
Cash ﬂow related data.............................14–15, 97­99, 109, 114
Consolidated Balance Sheet .......................................... 110­111
Consolidated Statement of Cash Flows ..................................114
Consolidated Statement of Income ........................................112
Dividends / return for shareholders ............. 14–15, 16, 25, 97–99
Financial and operating highlights ................................14–15, 16
Finance and funding ......................................................26, 40, 96
Investment plan ............................................................ 40­41, 96
MD&A (Managementʼs discussion and analysis of
ﬁnancial condition and results of operations) ..................103–
Notes to Consolidated Financial Statements ........................115–
Stock splits and lowering the minimum investment unit ....20, 25, 128
Subsidiaries and afﬁliates ................................................130–131

Business model and strengths .............................................34–35
Business topics ....................................................................18–20
Comparison with peers .............................................................42
Gas supply chain .................................................................35, 71
Greetings from the representative directors .......................22–23
Market environment ............................................................38–39
Message from the President................................................24–32
Number of projects .............................................................58–59
Oil and gas demand forecast ..............................................37–39
Production volume ..............................14–15, 17, 28, 34, 42, 143
Production indices .....................................................................17
Reserves .............................................14-15, 17, 34, 42, 140–142
Reserves indices ........................................................................17
Oil price, exchange rate and INPEX share price .................14–15
Strategies and management plan
(Medium- to Long-Term Vision of INPEX) ...............27, 40–41

Projects

ESG (Environment / Social / Governance)

Abadi LNG Project (Indonesia) ......................................19, 26, 63
ACG Oil Fields (Azerbaijan) .......................................................65
ADMA Block (U.A.E.) .................................................................67
Bayu-Undan Project(Timor Sea Joint Petroleum Development Area (JPDA)) ..........62
BTC Pipeline Project ..................................................................65
Shale Gas Project (Canada) ................................................45, 69
Geothermal ...............................................................................46
Copa Macoya and Guarico Oriental Blocks (Venezuela) ...........69
Ichthys LNG Project (Australia) ..........................19, 26, 28, 48–56
Joslyn Oil Sands Project (Canada) .............................................69
Kitan Oil Field (JPDA) ................................................................62
Mega Solar Joetsu...............................................................20, 47
Minami-Nagaoka Gas Field ......................................................71
Naoetsu LNG Terminal ..............................................................71
Offshore Angola Block 14 (Angola) ....................................18, 67
Offshore D.R. Congo Block(Democratic Republic of Congo) ........................................67
Offshore Mahakam Block and Attaka Unit (Indonesia) ........26, 61
Offshore North Caspian Sea Contract Area
(Kashagan Oil Field (Kazakhstan)) ........................................65
Prelude FLNG Project (Australia) ...............................................63
South Natuna Sea Block B (Indonesia) ......................................61
Van Gogh Oil Field and Ravensworth Oil Field (Australia) ........62

Accident frequency occurrence ...........................................17, 77
Advisory committee.......................................................20, 82, 94
Anti-corruption initiatives ..........................................................88
Board of Directors, Auditors and Executive Directors................................................................................. 84–85, 90–94
Business risks ...................................................................132–139
Compensation for directors and auditors..................................83
Compliance ...............................................................................88
Contributing to local communities ..................................... 80­81
Corporate governance ..................................................74, 82–89
CSR initiatives ......................................................................74–81
Disclosure structure and IR activities .........................................89
Environmental activities .......................................................74, 78
General Meeting of Shareholders .............................................89
HSE ......................................................................................76–77
Human rights, human resources and diversity...........................79
Number of employees.......................................................74, 147
Class A Stock ............................................................ 86, 138–139

Unit Conversion
Crude oil

Natural gas

1 kl 㲈 6.29 barrels

1 cf 㲈 1,000 Btu*

Sale gas

1 ton 㲈 7.4 barrels

1 billion m3 㲈 700,000 tons (LNG)

1 barrel 㲈 6,000 cf (natural gas)

100 million cf/day
㲈 700,000 tons/year (LNG)

100,000 barrels/day
㲈 4 million tons/year (LNG)

1 trillion cf 㲈 1 million tons
(LNG) (20 million tons)

LPG

1 ton
1m 㲈 37.32 cf
3

㲈 10.5 barrels(crude oil)

LNG

1 ton
㲈 8.8 barrels (crude oil)
㲈 1,400 m3 (natural gas)
㲈 53 million Btu*

20 years*British thermal unit
Note: Unit-equivalent ﬁgures are estimates. Conversion ﬁgures used for production and reserves in this Annual Report may be different from the above conversion ﬁgures. We do notguarantee those ﬁguresʼ accuracy as applied to dealing or veriﬁcation.

146

INPEX CORPORATION Annual Report 2013

Corporate Information(As of March 31, 2013)

Corporate Data
Company Name
INPEX CORPORATION
Established
April 3, 2006
Capital¥290,809,835,000
Company Headquarters
Akasaka Biz Tower, 5-3-1 Akasaka, Minato-ku,
Tokyo 107-6332, Japan

Number of Employees (Consolidated) 2,455
Main BusinessResearch, exploration, development, production and sales of oil, natural gas and othermineral resources, other related businesses
and investment and lending to the companies
engaged in these activities, etc.

Organization Chart (As of June 30, 2013)
General Meeting of
Shareholders

Board of Directors

Board of Auditors

INPEX Advisory
Committee

Executive
Committee

President

CSR Committee

Audit Unit

Technical Division

Masela Project Division

HSE Unit

Oil & Gas Business Division 1

Ichthys Project Division

General Administration
Division

Oil & Gas Business Division 2

Domestic Project DivisionCorporate Strategy &Planning Division

Asia, Oceania & Offshore
Japan Project Division

Gas Supply &Infrastructure Division

New Ventures Division

America & Africa
Project Division

Finance & Accounting Division

Eurasia & Middle East
Project Division

Compliance Committee
Corporate HSE
Committee
Information Security
Committee

Logistics & IMT Division

Stock Data
Authorized Shares: 9,000,000 common stocks*1

Total Number of Shareholders and Issued Shares
Common Stocks:
40,609 shareholders / 3,655,809 shares*1
Class A Stock*2:
1 shareholder (Minister of Economy,
Trade and Industry) / 1 share

1 Class A Stock*1 Scheduled to implement a stock split at a rate of 1:400 of common stock at the effective
date of October 1, 2013.
*2 The Companyʼs Articles of Incorporation stipulate that certain major corporate decisions require a resolution by the holder of the Class A Stock in addition to the approvalof the shareholdersʼ meetings or Board of Directors.

Major Shareholders (Common Stocks)
Name

Shareholding by Shareholder Type
Number of Percentage ofshares total shares* (%)

Minister of Economy, Trade and Industry

692,307

18.9

Japan Petroleum Exploration Co., Ltd.

267,233

7.3

Mitsui Oil Exploration Co., Ltd.

150,760

4.1

The Chase Manhattan Bank, N.A. London Secs
Lending Omnibus Account

149,800

4.1

Japan Trustee Services Bank, Ltd. (Trust Account)

131,960

3.6

Mitsubishi Corporation

114,500

3.1

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

113,748

3.1

JX Holdings, Inc.

109,527

3.0

CBNY - Orbis Funds

78,166

2.1

JP Morgan Chase Bank 380055

76,155

2.1

Shareholder type

Number of Number of Percentage ofshareholders
shares total shares*1 (%)

Financial Institutions(Including Trust Accounts)

113

559,217

15.3

Securities Companies

60

34,534

1.0

Other Domestic Corporations

450

719,79419.7

1692,30718.9

653

1,529,380

41.8

39,331

115,661

3.2

1

4,916

0.1

Minister of Economy,
Trade and Industry*2
Foreign Corporations and Other
Individuals and Other
Treasury Stock*1 Percentage of total shares are for all issued and outstanding shares.
*2 Excludes one Class A Stock* Percentage of total shares are for all issued and outstanding shares.

Home Page

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

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

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