Note: The following report is an English translation of the Japanese-language original.

Presentation of Consolidated financial resultsfor ended March 31, 2011

May 16 , 2011

Japan Petroleum Exploration Co., Ltd.
copyright©2011 JAPAN PETROLEUM EXPLORATION Co.,LTD. All rights reserved.

Cautionary statement
Any information contained herein with respect to JAPEX’s plans, estimates, strategies
and other statements that are not historical facts are forward-looking statements about
the future performance of JAPEX. Readers should be aware that actual results andevents may differ substantially from these projections due to various factors.
The provision of this document should not be construed as a solicitation for investment.
Copyright : All information contained herein is protected by copyright, and may not be
copied or reproduced without the prior consent of JAPEX.
Note: The following abbreviations are used within this document:
1H = First half (1Q-2Q)
2H = Second half (3Q-4Q)(a) = Actual result(e) = Estimate
Any inquiries about the information contained herein or other Investor Relations questions
should be directed to:Investor Relations Group, Media & Investor Relations Department,
Japan Petroleum Exploration Co., Ltd.
TEL: +81-3-6268-7111

2

Contents

１．Business Overview
２．Actual results for FY2011
３．Estimates for FY2012
４．New Medium-term Business Plan
（ FY2012 - FY2016 ）3

Business Overview
President

Osamu Watanabe

4[JCC Price] $-denominated $/bbl

$120

$140
¥130

$130
¥125

$-denominated JCC price $/bbl(left axis)

$110
¥115

$100
¥110

$90

$80

Exchange rate \ /$(right axis)

Japan Crude Cocktail (JCC) Price in the first 20 days of April 2011
on a prompt report basis : USD 111.20 / bbl

Yen

82.45 / USD

5

¥105

¥100

¥95

$60
¥90

$50
¥85

$40
¥80

【 Exchange rate】 \ /$$70

2007-04
2007-05
2007-06
2007-072007-08
2007-09
2007-10
2007-11
2007-12
2008-01
2008-022008-03
2008-04
2008-05
2008-06
2008-072008-08
2008-09
2008-10
2008-11
2008-12
2009-01
2009-022009-032009-04
2009-05
2009-06
2009-072009-08
2009-09
2009-10
2009-11
2009-122010-01
2010-022010-032010-04
2010-05
2010-06
2010-072010-08
2010-092010-10
2010-112010-122011-01
2011-02
2011-03
2011-04

Business Overview

Trends in Crude oil prices and Foreign exchange rates¥120

Business Overview

Actual results for FY2011 and Estimate for FY2012 (Highlight)
223.4

60

Billion ￥225

Net Sales (right axis)
220

55
Operating income (left axis)

50

215

Ordinary income (left axis)
Net income (left axis)

45
40

210
205

199.6

35

200

30 ￥
Billion

195

25

190

20
15
10

185

23.2
17.9

179.7

13.1

180

17.1

15.6

13.8

11.7
10.0

5

11.5

175

■ Actual results for FY2011 ( vs FY2010)
FY2010(a)

FY2011(a)changeNet Sales

179.7

199.6

19.9

11%

Operating income

13.1

13.8

0.7

5%

Ordinary income

23.2

17.1

(6.1)

(26%)

Net income

17.9

10.0

(7.9)

(44%)

67.50

82.69

15.19

23%

92.74

86.24

(6.50)(7%)[ Billion ￥]JCC price
USD/bblExchange rate
Yen/USD■ Estimate for FY2012 ( vs FY2011)
FY2011(a)

FY2012(e)changeNet Sales

199.6

223.4

23.8

12%

Operating income

13.8

11.7

(2.1)

15%

Ordinary income

17.1

15.6

(1.5)

(9%)

Net income

10.0

11.5

1.5

15%

82.69

90.00

7.31

9%

86.24

85.00

(1.24)(1%)[ Billion ￥]JCC price170

USD/bblExchange rate
165

FY2010FY2011(e)
FY2012 (e)6

Yen/USD

Business Overview

Domestic exploration plan for FY2012◆Exploration well drilling schedule
FY2012
Total
Depth

1Q
4

Akeno A1
Exploration well

5

2Q
6

7

8

3Q
9

10

11

●Exploration well: 1 well■Seismic survey : 2 sites

4Q
1

12

2

3

5,070m

Akeno A1 (5,070m)◆ Geophysical prospecting survey plan : 2sites
2D seismic survey

25km in Niigata Prefecture (Yoneyama)

2D seismic survey

39km in Yamagata Prefecture (Southern Mt. Chokai)◇Result for FY2011

Southern Mt. Chokai 2D (39km)
FY2011

Total
Depth

1Q

2Q

3Q

4Q

4 5 6 7 8 9 10 11 12 1 2 3

Akebono SK-5D
Extension well
Otomo SK-1D
Exploration well

4,975m

Succeeded

3,102mAbandoned

7

Yoneyama 2D (25km)

Business Overview

CAPEX plan for FY2012[ Billion ￥]

FY08

FY09

FY10

FY11

FY12
(e)

CAPEX

41.7

30.9

28.8

21.9

30.7

Depreciation
andamortization

16.6

21.5

23.2

24.5

23.8

Billion ￥

40

45
40

5.1

35

Main items of CAPEX for FY201230

Domestic CAPEX ¥ 12.0 billion

25◆Hokkaido- LNG receiving terminal for domestic vessels- CO2 emission reduction facility(Both projects have continued from FY2010)◆Acquire a new facility for disaster recovery from theGreat East Japan Earthquake

Billion ￥

45

20
15

35

0.7

36.6

16.6

21.5

30

4.7

24.5

23.2

3.1

25
20
15

24.1
10

18.8

Overseas CAPEX ¥ 18.7 billion

8

18.7

30.2

10

◆Iraq
-Development of Garraf oil field◆Canada-Improvement of production facility for the oil sandproject◆Indonesia-Development of gas field (Ache Block A)

23.8

12.0

5
-

5
-

FY08

FY09

FY10

CAPEX（overseas）
CAPEX（domestic）
Depreciation and amortization

FY11

FY12
(e)

Business Overview

Overseas business : Activities in strategic regions
CanadaSakhalin-Oil sands development(production & exploration (reserve evaluation))-Sakhalin 1 Project(production)

North Africa

Middle East
-Iraq : Garraf oil field (development)-Legend-

Southeast Asia
Strategic regions
Blocks in which our consolidated subsidiaries,
equity-method affiliates, etc. hold interest.

Iran : JJI S&N B.V.
The project is planned to be closed after receiving thefinal reward from National Iranian Oil Company.

9-Kangean Block (production & development)-Ache Block A (development & exploration)-Buton (exploration)-Universe Gas & Oil (production)-Japan CBM (exploration)

Business Overview

Current status of overseas business ① Canada oil sands
Project company
Operator

Canada Oil Sands Co., Ltd. (CANOS)■Areas in which JACOS holds interest in oil sands leases(86.64% owned by JAPEX )Japan Canada Oil Sands Ltd. (JACOS)(Local subsidiary, wholly owned by CANOS)

BlockInterest

Hangingstone 3.75 section-Producing around 7,000 - 8,000 bbl/d-Cumulative production of 23.89 million bbl(as of end-January, 2011)

Expansion project of undeveloped part ofHangingstone area
-Additional production of 35,000 bbl/dat the maximum

100%

75%

Schedule
Apr. 20102011
Winter of2011 to 2012

Applied development approvalStarted FEED
Make FID after acquiring development approvalStart construction2013
End-2014■Areas where oil sand resources were evaluated:

Plan to commence production■ Contingent resources of undeveloped oil sands areas held by
JACOS : 1,717 million bbl (as of end-December 2008)10

The Hangingstone area, the Chard area, the Corner area and the Thornbury area
were evaluated. The evaluated areas consist of solely owned and jointly owned
areas, are 788.4km2 (gross) or 373.4km2 (net). Bitumen also exists in the Liegearea, but there is no bitumen development plan at present due to the subsurface
conditions of its existence.

Business Overview

Current status of overseas business ② Sakhalin 1 Project
Sakhalin 1 Consortium

Interest

Exxon Neftegas Ltd.

30%

Sakhalin Oil and Gas Development Co., Ltd. (SODECO)

30%

OdoptuMinister of Economy, Trade and Industry : 50.00%
JAPEX : 14.46%

ITOCHU Corp. : 14.46%

Marubeni Corp. : 11.68%

INPEX : 5.74%

ITOCHU Oil Exploration Co., Ltd. : 3.66%

ONGC

20%

SMNG-Shelf

11.5%

Rosneft - Astra

8.5%

Oct. 2005

Arkutun-Dagi

Chayvo oil and gas field

Commenced production of crude oil

Oct. 2006

Commenced exports of Sokol crude

Feb. 2007

Achieved peak gross production target (250,000 bbl/d)Jun. 2008

Achieved cumulative production of 100 million bbl

Sep. 2010

Odoptu oil and gas field

ChayvoCommenced production of crude oil

Arkutun-Dagi oil and gas fieldNow under preparation for development

11

Business Overview

Current status of overseas business ③ Iraq
Garraf development projectContractors

PETRONAS(Operator)

JAPEX

North Oil
Company(NOC)

Contract type

Development and Production Service Contract

Counterparty

South Oil Company (SOC)

Payment share

60%

40％

-

Contract term

20 years（may be extended for maximum 5 years）

Participating interest

45％

30％

25％

2010

The contract effect on Feb.10, 2010

2011
2012
～

Commence initial production at

50,000 bbl/dIncrease production gradually

2016
2017

Achieve plateau production target of

230,000 bbl/d

Garraf■ Expected cumulative production during
the contract term : around 1.3 billion bbl
12

Business Overview

Current status of overseas business ④ Indonesia: Kangean Block
Jakarta

Project
company

SurabayaJava Island

Kangean Energy Indonesia Ltd. (KEI)
and two other companies.
(Equity-method affiliates)

Pagerungan Utara oil field (Production)
West Kangean gas field (Exploration)
Kangean Island

Pagerungan gas field (Production)
East Java Pipeline

SepanｊSepanｊang Island oil field (Production)
To Surabaya

TSB gas field (Development)
Block

Kangean Block (offshore East Java）

Interest

25%

Operator

KEI■ Current gross production : Crude oil equivalent of around 10,000 boe/d.
■ Pagerungan Utara oil field : Commenced production of 6,000 bbl/d on January 2011.
□ TSB gas field : Plan to commence production of 300 million cf/d (around 50,000 boe/d in crude oil equivalent) in 1H 2012.
■ Plan to expand gross production to around 60,000 boe/d through the above additional production.
■ Production Sharing Contract (PSC) : Effective till 2030.

13

Business Overview

Current status of overseas business ⑤ Indonesia: Ache Block A
Project
company

Japex Block A Ltd.

Interest

16.67%
Ache Block A

BlockAche Block A(northern Sumatra)

Operator

Medco

Gross
production

Around 100 million cf/d(around 20,000 boe/d incrude oil equivalent ）

2010
2011

Approved extension PSC
Concluded extension PSC

Jakarta

Contract term : 20 years from September 1, 2011

Start development activities to commence gas production

2012
2013

Alur Rambong gas field
Julu Rayeu gas field
Alur Siwah gas field

Gross production of around 100 million cf/d

14

Business Overview

Current status of overseas business ⑥ Indonesia: Buton Block
Project company
Interest

Japex Buton Ltd.

2008

40%
Buton Block

Block(onshore/offshore block on Buton
Island, Southeast Sulawesi)

Jakarta

Buton Block15

Airborne gravity and magnetic surveys
2D seismic surveys

2009

Selected the exploration well structure

2011

Plan to drill 1st exploration well

Actual results for FY2011
Executive Vice President

16

Hiroshi Sato

Actual results for FY2011 ( Highlight )FY2011[ Million ￥]FY2010
ActualInitialestimate(May ‘10)

Revisedestimate ①(Nov. ‘10)

Revisedestimate ②(Feb. ‘11)

Actual179,752

196,891

192,319

194,606

199,651

Operating income

13,11913,267

8,144

9,396

13,849Ordinary income

23,206

14,90810,454

13,02817,122

Net income

17,93910,265

7,434

9,083

10,010Net Sales

JCC price

USD/bbl

67.50

80.00

79.53

81.62

82.69

Exchange rate

Yen/USD

92.74

90.00

87.56

86.37

86.24

Bitumen price

CAD/bbl

50.15

56.65

49.31

48.67

48.32

Exchange rate

Yen/CAD

88.07

85.00

80.00

81.47

81.47

 Initial estimate (May ‘10)

Revised estimate ① (Nov. ‘10)【－】 Downward revision of the production and sales plans for natural gas & crude oil【－】 Downward revision of crude oil prices & bitumen prices

 Revised estimate ① (Nov. ‘10)

Revised estimate ② (Feb. ‘11)【＋】 Rise in crude oil prices 【＋】Decrease in exploration expenses 【＋】Improve in non-operating income (expenses)

 Revised estimate ② (Feb. ‘11)

Actual results【＋】Rise in natural gas prices & crude oil prices 【＋】Increase in demand 【－】Loss on Great East Japan Earthquake
Ordinary income ¥ 17.1 billion (+¥4.0billion )Net income ¥10.0 billion(+¥0.9billion )17

Actual sales of Natural gas in FY2011 (vs FY2010)
FY2010Natural gas:
Of which,
Domestically produced gas:

FY2011

1H (a)

Full (a)1H (a)

Full (a)change1H

Full

Sales volume

Million M3

643

1,499

696

1,553

53

54

Net sales

Million ￥24,92455,59327,03961,090

2,115

5,496

Sales volume

Million M3

454

1,079

529

1,185

74

105

Sales volume of “Domestically produced gas” stated herein does not include purchased gas.

Natural gas

Million M3(supplied by gas pipeline )1,800

Sales volume （total）

1,600
1,400

1,499

1,553

Of which, domestically produced gas

1,200
1,000

1,185
1,079

Sales volume increased by 54 million M3 (+4%) vs FY10
-Increase in demand for industrial users and commercial-scaleutility gas customers

800
600

Net sales increased by ¥54 billion (+10%) vs FY10400

-Increase in demand (+54 million M3 (+4%))-Rise in sales prices

200
FY2010FY201118

Actual sales of Crude oil in FY2011 (vs FY2010)
FY 2010

Sales volume : Thousand KL
Net sales : Million ￥1H (a)

changeFY 2011

Full (a)1H (a)

Full (a)1H

FullSales volume

967

2,125

946

1899

(21)

(226)

Net sales

33,00880,742

38,242

77,6295,233(3,113)

Domestically produced
crude oil:

Sales volume

250

564

246

547

(4)

(16)

Net sales

9,394

23,122

11,08325,777

1,689

2,655

Overseas subsidiary
crude oil:

Sales volume

23

25

3

5

(20)

(20)

Net sales

598

690

117

187

(480)

(502)

Sales volume

188

411

197

409

9

(2)

Net sales

4,140

11,4335,512

10,141

1,372(1,292)

JCC price

USD/bbl

56.83

67.50

78.95

82.69

22.12

15.19

Exchange rate

Yen/USD

96.36

92.74

90.71

86.24

(5.65)(6.50)

Bitumen price

CAD/bbl

42.10

50.15

52.98

48.32

10.87

(1.83)

Exchange rate

Yen/CAD

82.97

88.07

83.76

81.47

0.79

(6.60)

Crude oil:
Breakdown of equity oil

Bitumen:Oil price and Exchange rate assumptions

Domestically produced crude oil : 【＋】 Rise in crude oil prices
Overseas subsidiary crude oil :【－】 Expiry of contract term for equity oil of Japex New Nanhai Ltd.
Bitumen : 【－】Rise in royalty 【－】Strong yen

FY
2011

547

5

FY
2010

564

25

411

600

800
1,000
Thousand KL

-

200

400

Sales volume and net sales of “Domestically produced crude oil” stated herein do not include purchased crude oil.
Royalty is excluded in the net sales and price of Bitumen.
Sales volume and net sales of “Overseas subsidiary crude oil” are the sum totals of the sales volumes and net sales reported by two
overseas consolidated subsidiaries (Japex New Nanhai Ltd. and Japex (U.S.) Corp.).

19

409

Actual results for FY2011 (vs FY2010)
FY2010(a)

FY2011(a)changeNet sales

179,752

199,651

19,898Gross profit

54,28554,732

447

Exploration expenses

10,396

9,798

(597)

SG&A expenses

30,76931,084314

Operating income

13,11913,849730

Non-operating income(expenses)

10,087

3,272(6,815)

Ordinary income

23,206

17,122(6,084)162(4,166)(4,328)

4,443

2,161

(2,282)

986

783

(202)

17,93910,010(7,928)[ Million ￥]Extraordinary income(losses)
Income taxes
Minority interests in income
Net income

20≪Causes of increase(+) or decrease(-) ≫Gross profit
Domestic crude oil and natural gas+ ¥2.1 billion
Overseas consolidated subsidiaries- ¥1.9 billion

Exploration expenses
Domestic exploration
Overseas exploration- ¥1.8 billion+ ¥2.4 billion

Non-operating income (expenses)
Dividends income- ¥5.5 billion
Loss on valuation of securities- ¥1.0 billion

Extraordinary income (losses)
Loss on adjustment for changes of accounting
standard for asset retirement obligations- ¥2.3 billion
Loss on Great East Japan Earthquake- ¥1.5 billion

Estimates for FY2012
Executive Vice President

21

Hiroshi Sato

Estimates for FY2012 (Point)
FY2012FY2011[ Million ￥]change1H (a)

Full (a)1H (e)

Full (e)1H

Full

Net Sales

92,369199,651

101,256

223,479

8,887

23,827

Operating income

3,845

13,8495,722

11,757

1,876(2,093)

Ordinary income

4,929

17,122

7,362

15,6342,433(1,488)Net income

1,896

10,0105,459

11,528

3,563

1,517

JCC price

USD/bbl

78.95

82.69

90.00

90.00

11.05

7.31

Exchange rate

Yen/USD

90.71

86.24

85.00

85.00

(5.71)(1.24)

Bitumen price

CAD/bbl

52.98

48.32

45.48

47.82

(7.50)(0.50)

Exchange rate

Yen/CAD

83.76

81.47

85.00

85.00

1.24

3.53

Point

FY2012 vs FY2011

Operating income-¥ 2.0 billion
Ordinary income-¥ 1.4 billion
Net income+¥ 1.5 billion¾ Gross profit-¥ 2.3 billion-Transportation on consignment income¾ Exploration expenses+¥ 0.3 billion+¥ 0.6 billion-Domestic Exploration expenses¾ Extraordinary income(losses)+¥ 3.9 billion-Application of new accounting standards-Loss on Great East Japan Earthquake¾ Income taxes-¥ 1.0 billion¾ Non-operating income(expenses)

22-Loss on valuation of securities

Estimated Natural gas sales in FY2012
FY2012FY2011Natural gas:
Of which,
Domestically produced gas:

1H (a)

Full (a)1H (e)

Full (e)change1H

Full

Sales volume

Million M3

696

1,553

754

1,714

58

160

Net sales

Million ￥27,03961,09032,49373,585

5,454

12,494

Sales volume

Million M3

529

1,185

545

1,210

15

25

Sales volume of “Domestically produced gas” stated herein does not include purchased gas.
Million M3

Natural gas( supplied by gas pipeline )

1,800
1,600
1,400

1,714

Sales volume （total）
Of which, domestically produced gas

1,553

1,200
1,000

1,185

1,210

Sales volume increased by 160 million M3 (+10%) vs FY11

800

-Increase in demand for utility gas customers and industrial users

600

Net sales increased by ¥124 billion (+20%) vs FY11400

-Increase in demand ( +160 million M3 (+10%))-Rise in sales prices

200
FY2011FY201223

Estimated Crude oil sales in FY2011
FY 2011

Sales volume : Thousand KL
Net sales : Million ￥1H (a)

changeFY 20121H (e)

Full (a)Full (e)1H

FullSales volume

946

1,899

948

1,949

2

50

Net sales

38,242

77,62941,77486,093

3,532

8,464

Domestically produced
crude oil:

Sales volume

246

547

256

553

10

6

Net sales

11,08325,777

12,52826,978

1,445

1,200

Overseas subsidiary
crude oil:

Sales volume

3

5

1

2

(2)

(3)

Net sales

117

187

56

102

(61)

(85)

Sales volume

197

409

191

403

(6)

(6)

Net sales

5,512

10,141

4,645

10,323(867)

183

Crude oil:
Breakdown of equity oil

Bitumen:Oil price and Exchange rate assumptions
JCC price

USD/bbl

78.95

82.69

90.00

90.00

11.05

7.31

Exchange rate

Yen/USD

90.71

86.24

85.00

85.00

(5.71)(1.24)

Bitumen price

CAD/bbl

52.98

48.32

45.48

47.82

(7.50)(0.50)

Exchange rate

Yen/CAD

83.76

81.47

85.00

85.00

1.24

3.53

Domestically produced crude oil :【＋】 Rise in crude oil prices 【＋】Increase in sales volume

FY
2012

553

2

403

Overseas subsidiary crude oil : 【－】 Decrease in sales volume

FY
2011

547

5

409

Bitumen :【＋】 Rise in prices 【＋】 Weak yen 【－】 Rise in royalty 【－】 Decrease in sales volume

200
400
Sales volume and net sales of “Domestically produced crude oil” stated herein do not include purchased crude oil.
Royalty is excluded in the net sales and price of Bitumen.
Sales volume and net sales of “Overseas subsidiary crude oil” are the sum totals of the sales volumes and net sales reported by
two overseas consolidated subsidiaries (Japex New Nanhai Ltd. and Japex (U.S.) Corp.).

24

600

800

1,000

Thousand KL

Estimates for FY2012≪Causes of increase(+) or decrease(-) ≫FY2011(a)

FY2012(e)changeNet sales

199,651

223,479

23,827Gross profit

54,73252,361(2,372)

Exploration expenses

9,798

9,446

(353)

SG&A expenses

31,084

31,15874

Operating income

13,84911,757(2,093)Non-operating income(expenses)

3,272

3,877

605

Ordinary income

17,122[ Million ￥]Extraordinary income(losses)
Income taxes
Minority interests in income
Net income

Gross profit
Domestic crude oil and natural gas+ ¥2.7 billion
Expenses incurred in connection with increasein purchase volume of LNG- ¥2.2 billion
Transportation on consignment income- ¥2.7 billion

Exploration expenses
Domestic exploration
Overseas exploration+ ¥0.8 billion- ¥0.4 billion

Non-operating income (expenses)
Loss on valuation of securities

15,634(1,488)Dividends income+ ¥1.0 billion- ¥0.3 billion(4,166)

(255)

3,912

2,161

3,245

1,084

Loss on adjustment for changes of accounting
standard for asset retirement obligations

783

607

(177)

10,01011,5281,517+ ¥2.3 billion
Loss on Great East Japan Earthquake+ ¥1.5 billion

25

Extraordinary income (losses)

Oil price and Exchange rate assumptions and impact on profits
JCC price
Assumption

Impact on Profits

USD 90 /bbl
USD 1 /bbl increase in
crude oil prices would pushprofits up by...

Exchange rate

Bitumen priceYen 85 /USD

CAD 47.82 /bbl
（ Yen 85 /CAD ）A weakening in the yen to

CAD 1/bbl increase in

Yen 5/USD would push

bitumen prices would pushprofits up by…

profits up by…

Operating income

320 million Yen

1,170 million Yen( 25.4 thousand CAD )220 million Yen

Net income

200 million Yen

800 million Yen(22.2 thousand CAD )190 million Yen

FY2011FY2012change1H (a)

2H (a)

Full (a)1H (e)

2H (e)

Full (e)USD/bbl

78.95

85.67

82.69

90.00

90.00

90.00

7.31

Exchange rate

Yen / USD

90.71

82.95

86.24

85.00

85.00

85.00

(1.24)

Bitumen price

CAD/bbl

52.98

43.98

48.32

45.48

49.93

47.82

(0.50)

Exchange rate

Yen /CAD

83.76

81.47

81.47

85.00

85.00

85.00

3.53

JCC priceNote1: Royalty is excluded in “Bitumen price”.
Note2: In addition to the impact of exchange rate fluctuations shown on the above, translation adjustments offoreign-currency- denominated receivables and payables also occur.
Actual profits are influenced by a variety of other factors besides crude oil prices and exchange rates.

26

New Medium-term Business Plan
（ FY2012 - FY2016 ）President

Osamu Watanabe27About the New Medium-Term Business Plan Covering the Period from
FY2012 to FY2016

Ⅰ．The New Medium-Term Business Plan
Ⅱ．JAPEX’s Perception of the Business Environment
and Preconditions(assumptions regarding crude oil prices and exchange rates)

Ⅲ Corporate Vision andBasic Strategies for JAPEX Expansion
Ⅳ．Growth Initiatives
1. E&P business
2. Domestic natural gas business
3. Environment and innovative technology business

Ⅴ. Consolidated Profit and Loss / Investment Portfolio
Ⅵ ．Summary28
28

I-1. The Level of Achievement against Previously Established Targets Leading
into the New Medium- Business Plan

In working toward the overarching goal of business growth and expansion, JAPEX is projected to achieve its targets
for proved reserves, natural gas sales volume as well as sales of natural gas and domestically produced crude oil
established under the mid-term business plan announced in May 2008 by the fiscal year ending March 31, 2012.
Proved reserves

millionBOE

Target 1
Proved reserves

350 million BOE by FY2013

Natural gas sales volume

2.0 billion m3 by FY2014(On a consolidated basis including satellite systems supply)

Target 3
Sales of natural gas and domestically produced crude oil¥110 billion by FY2013(On a consolidated basis including satellite systems supply)


Review of the forecast crude oil price （$80/bbl→$90/bbl）
Introduction of a feedstock cost adjustment systems formixed supplies

254
49

257
49

152

213

205

208

FY2009FY2010FY2011

Domestic

FY2012

Overseas

2.0
1.9
1.8
1.7
1.6
1.5

Growing demand for natural gas(Pipeline and satellite system supply)

272
59

73

2.1

Natural gas sales
volumeTarget 2

1.71

1.72

FY2008FY20091.74

1.82

FY2010FY2011FY2012billion m3

29
29

and domestically* FDP：Final Development Plan

225

FY2008billion m3

produced crude oil

Final investment decision (FID) regarding the Canada Oil
Sands Hangingstone Expansion Project (FY2012)
Note: Plan to bring the proved reserves (60 million BOE) of
the Garraf oilfield in Iraq to account following confirmation in
fiscal 2014

Sales of natural gas



400
350
300
250
200
150
100
50
0

120
110
100
90
80
70
60
50

91.4

FY200898.5

FY2009101
91.0

FY2010FY2011FY2012

I -2. Positioning of the New Medium-Term Business Plan


May
2009

Achievementof
ofnumericalnumericaltargets
targets(estimate)(estimate)
Achievement

May
2008

Drawing on the level of achievement against numerical targets established under the previous mid-term businessplan, took steps to draw up a new medium-term business plan (FY2012 to FY2016) with the aim of securing
further growth

May
2010
-- Reflects
Reflects businessbusiness circumstancecircumstancechangeschanges after
after MayMay 2009
2009⇒⇒ Follow-up
Follow-up-- Rapid
Rapid deterioration
deterioration in
in international
international
economic
economic conditions
conditions-Sharp-Sharp decline
decline inin crudecrude oiloil prices
prices⇒⇒ Partial
Partial revision
revision
Previous
Previous Mid-Term
Mid-Term BusinessBusiness Plan
Plan
（FY2009（FY2009 -- FY2013）
FY2013）30
30

New
NewMedium-Term
Medium-TermBusiness
BusinessPlan
Plan（（FY2012
FY2012––FY2016
FY2016））Furtherbusiness
growthII-1. JAPEX’s Perception of the Business Environment and Preconditions
Perceptions of the Business Environment
An increasingly competitive
resource development environment

Intense competition in the domestic
natural gas business

Growing nationalism in oil and gas producing
countries
Sharp increase in the energy prices fueled bysuch factors as pro-democracy movements in the
Middle east and North Africa
A return to fossil fuels in the aftermath of theGreat East Japan Earthquake

Aggressive natural gas infrastructuredevelopment by competitive companies
Escalating difficulty in procuring supplies of LNG
in the aftermath of the Great East Japan
Earthquake
Deregulation in line with structural reforms in thegas business

Trends in energy prices

Growing social awareness toward
environmental issuesMarked increase in crude oil prices from 2004;
Record high in July 2008
A sharp drop after July 2008; indications of asteady recovery
Increased volatility in both crude oil and LNG
pricesCommonly held GHG（Greenhouse Gas) reduction
goal leading up to 2050
GHG reduction efforts triggering newopportunities for business growthThe direction of long-term GHG reduction
initiatives to remain unchanged following theGreat East Japan EarthquakeNote: Taking into consideration current uncertainty surrounding the effects of the Great East Japan Earthquake on the Company’sbusiness, JAPEX has not factored in any explicit impact for the duration of the plan from fiscal 2013 and beyond.

3131II-2 JAPEX’s Perception of the Business Environment and Preconditions
assumptions regarding crude oil price and exchange rate
■Taking into consideration the current high level of crude oil price and the assumption thatprice would continue to hover at current levels for the foreseeable future, JAPEX has identified
the following crude oil price and exchange rate projections:■ Crude oil price ： Expected to plateau and remain steady at $90/bbl after FY2012■ Exchange rate ： Expected to maintain steady at ¥90/$ after FY2013

Preconditions of the New Medium-Term Business Plan
FY11 (a)FY12 (e)FY13 (e)FY14 (e)FY15 (e)Crude oil price ($/bbl）

82.69

90

90

90

90

Exchange rate (¥/$)

86.24

85

90

90

90

120

Crude oil price rose reflecting the
expectation of the global economic
recovery (including the U.S.)

Crude oil price jumped mainly
because of the influx of speculative
money in the market

100

Expected to plateau andremain steady at$90/bbl after FY2012

80
60
Pro-democracy movements
in North Africa and the
Middle East40
20

2004.01
2004.05
2004.09
2005.012005.05
2005.09
2006.012006.05
2006.09
2007.01
2007.05
2007.09
2008.01
2008.05
2008.09
2009.01
2009.05
2009.09
2010.01
2010.05
2010.09
2011.01$-denominated $/bbl[Crude oil price (JCC) ]

140

32
32

Impact on earnings attributable
to fluctuations in crude oil
price and exchange rate (FY2012)Increase of 1$/bbl in the price of
crude oil
 Increase in net income of¥200 millionImpact of a ¥5/$ depreciation in
the value of the yen Increase in net income¥800 million

Ⅲ-1. Corporate Vision and Basic Strategies for JAPEX Expansion
Three basic policies for JAPEX expansion


JAPEX’s overarching corporate vision and three basic policies remain unchanged
Corporate Vision

Three basic policies aimed at securingbusiness expansion
E&P
E&P
businessbusiness

Taking on the challenge of creating new value
from energy and increasing corporate value
 Contribute to the supply of energy through global
exploration and production (E&P) activities.

Sustaining andincreasing reserves
through explorationand development

Corporate
VisionDomestic
Domestic
naturalnaturalgas
gasbusinessbusiness

Environment
Environmentand
andinnovativetechnology
innovative technology
businessbusinessStrengthening our natural gas
integrated operation system

Contribute to coexistence between the planet andhumankind by promoting the use of environmentfriendly natural gas and taking on new businesschallenges.

Pursue sustainable growth and maximize
shareholder value by placing top priority on
maintaining mutual trust between society, customers,
shareholders and employees.

Pursuing technological R&D activities and initiatives toaddress global environmental challenges：Business targets identified at the time the previous mid-term business plan
(FY2009 to FY2013) was preparedNote2） E&P：Exploration and Production
Note1）

33
33

Ⅲ-2. Corporate Vision and Basic Strategies for JAPEX Expansion
Growth Story
While positioning E&P at the Company’s main activities, endeavor to increase business opportunities byshifting to E&P activities overseas and pursuing new investment in domestic natural gas as well as
environment and innovative technology as the means to help realize business expansion

Growth scenario under the new medium-term business plan←
Maximize
Maximizethe
thevalue
valueofof
existing
existingoverseas
overseasassets
assetsMaximizethevalue
Maximizethe valueofof
existing
domestic
existing
domestic
assetsassetsnew
newoverseas
overseas
investment
investment

PromotePromotelong-termlong-term
development
developmentthroughthroughoverseas
overseasexploration
exploration
investment
investment

Domestic
Domestic
naturalnaturalgas
gasbusinessbusiness
Cultivate natural gas

Cultivatenatural gas
demanddemandEngagein wideEngage in wideranging activities
ranging activities
including the upgrade
including the upgradeof infrastructureof infrastructure

The Garraf oilfield in Iraq andCanada Oil Sands Hangingstone
Expansion Project supporting toincrease production volume,
secure earnings and augment
proved reserves

Environment
Environment
andandinnovative
innovativetechnology
technology
businessbusiness
Acceleratelarge-scale

Accelerate(CCS, MH)large-scale
project(CCS,MH) project
activities
activities
Cultivate
new fields
Cultivate new fields
including renewable
including renewableenergyenergy34
34→ TimeFurther business growth

ReturnE&P
E&P
businessbusiness

Increase
Increase
earnings
earningsopportunities
opportunities
throughthroughⅣ-1．Growth Initiatives ① E&P Activities（1/2）


Focusing particularly on a shift overseas, organize E&P activities into three phases
over the next decade and establish clearly defined objectives for each phase
Overseas E&P activities under the new medium-term business plan
1st Phase

E&P Activity Objectives

Shift
Shiftinvestment
investmentoverseas
overseasLift the ratio of overseas E&P
investment

2nd Phase
Increase
Increaseproduction
productionvolume
volumeNorth America focusing
on Canada(Canada Oil Sands, etc.)
The Middle East
focusing on Iraq
(Garraf, etc.)

Ensure steady progress in the Garraf
oilfield in Iraq, Canada Oil Sands
Hangingstone Expansion Project andother new ventures

3rd PhaseSoutheast Asia focusing
on Indonesia(Kangean, etc.)

Augment
Augmentproved
provedreserves
reserves

Put in place a business promotion structure andsystems for each area in order to proactively pursue
overseas project development
35
35



Reinvest the cash flows generated by
the aforementioned production volumes

Ⅳ-2．Growth Initiative① E&P Activities（2/2）
Objective 2: Increase production volumes
Ensure the shift to production and cash in fromdevelopment projects slated for between fiscal 2012
and fiscal 2016

Objective 1:
Shift investment overseas (FY2013 to FY2016)

Overseas900

Overseas

1,700

BOE/D

70,000

Production Volume

Lift overall overseas investment as a ratio of the E&P
investment portfolio from the approximate 30%
recorded over the past five year to around 60%

40,000FY2011

Domestic

FY07～FY11

1,100

FY12～FY16

270

280

billion yen

billion yen

FY2016

Objective
3: Augment
overseas
provedreserves
Objective
3: Increase
provedreserves
Further increases in proved reserves projected
through the reinvestment of cash flows generated
from overseas projects

Domestic

1,800

Additional by new investment

Proved Reserves

million
BOE

Note: Including investments through loans to equity-method
affiliates

450

Previous Target 350＋α

257
170

FY2007

Reduction by production

FY2011FY2012

FY2021Note) Above “ Production volume” and “Proved Reserves” areequivalent to JAPEX group’s interest.

36
36

【Reference】 Development of the E&P business structure（Effective from June 24） or Restructuring of the E&P business organizationPlans are in place to implemented the following organizational structure as a part of efforts to expand
earnings through aggressive investment in overseas E&P businesses and the establishment of a robust
earnings platform

Basic concept: Development of E&P business structure
Current Organization（Excerpt recasting only)International Oil & Gas
Division
Iraq Project Division
Kangean Project Dept.

Function

Future Organization
Americas & Russia Project
Division
Asia & Oceania Project
DivisionMiddle East, Africa &Europe Project DivisionTo assume responsibility for the current division office function,business as well as corporate planning and work related toengineering operations



To upgrade and fine-tune technical evaluation standards
To assume responsibility for the systematic education andtraining of engineers and related technical personnel as well as
their flexible and effective allocation to business divisions

Domestic Project Division
Exploration Division
Technical Division

Development DivisionCorporate Planning
Dept.

Corporate Strategy Dept.
(New)
Project Solution Office37
37

To ensure a smooth decision-making process with respect tobusiness planning, promotion and management and to clarify all
appropriate responsibility structures and systems
To manage in an effective and appropriate manner the threemajor Canada Oil Sands, Kangean Block (Indonesia) and Garraf
oilfield (Iraq) development projects under a comprehensive
responsibility structure and system that includes the dispatch ofadditional designated engineers, and the discovery of new
projects



To strengthen the planning and investment assessment functionsof management strategies and policies
To consolidate the basic policy proposing functions currently
dispersed across an existing structure comprising the overseas,
exploration and development divisions

To assume responsibility for the Project Solution and Buildupfunctions relating to individual business division investment
project proposals

Ⅳ-3．Growth Initiatives
② Domestic Natural Gas BusinessContribute to the growing use of natural gas (amid, however, an uncertain business environment)

Domestic natural gas business under the new medium-term business plan
Domestic natural gas activities
FY2012
Expectations
Expectationsofofachieving
achievingaanatural
naturalgas
gas
sales
volumeof
2.0billionm3
sales volume of 2.0 billion m3
Changing factors in future

Uncertainties
Uncertaintiessurrounding
surroundingthe
thebusinessbusiness
environmentdue
largely
to
the
Great
environment due largely to the Great
East
EastJapan
JapanEarthquake
Earthquakeandandotherotherfactors
factors‘billion m3

Natural Gas Sales
Volume2.10

Decrease
DecreaseininHokkaido
Hokkaidonatural
naturalhashassalessales
volumefromfiscal2013
andbeyondvolume from fiscal 2013 and beyond

Steady growth trend from fiscal 2010 andbeyond (annual growth rate of around 7%)

2.00

Future initiatives

1.90
1.80

1.86

1.70
1.60
1.50

1.71

1.72

FY2008FY20091.74
FY2010FY2011FY201238
38

InInorderordertotocontributecontributetotothethegrowing
growinguse
useofofnaturalgas,
cultivate
demandandnatural gas, cultivate demand andfocus
focusononinfrastructure
infrastructureandandotherotherdevelopment
while
endeavoring
development while endeavoringtoto
optimally
optimallyadjust
adjustsales
salesprices
pricesⅣ-4．Growth Initiatives③ Environment and Innovative Technology Projects
Engage in full-fledged commercialization activities as one of the three basic policies that underpin JAPEX’s earnings
platform

Environment and innovative technology activities under the new medium-term business plan
Environment and innovative technology activity objectives

Methane hydrate Phase 2 Fiscal 2010 to Fiscal 2016

Existing activities

Plans in place to conduct two offshore production
tests in the Tobu Nankai trough Commissioned to serve as project operator,
JAPEX will drive business promotion forward Drawing on the results of phase 2, undertake acomprehensive evaluation from fiscal 2017


2010

2011

2012

2013

2014

2015

・・・・・

2018

Striving to reduce the environmental impact of our operations
Striving to reduce the environmental impact of our operations
and becoming proactively involved in tree-planting programs.
and becoming proactively involved in tree-planting programs.

Promoting technological R&D of CCS, methane hydrate, GTL
Promoting technological R&D of CCS, methane hydrate, GTL
and DME, etc.
and DME, etc.


2019



2020

Apr.2010
phase 2. Offshore production test

Established the Environment and Innovative Technology
Established the Environment and Innovative Technology
Projects Division
Projects DivisionStrengthen project promotions and the structure for uncoveringStrengthen project promotions and the structure for uncovering
opportunities
opportunities
phase 3.

CCS Demonstration ProjectJapan CCS Co., Ltd. established in 2008; Joint
private- and public-sector business promotion
 Preliminary surveys undertaken in threedomestic location including exploration wells off
the Tomakomai coastConsiderable emphasis placed on the early
implementation of CCS demonstration tests with aneye to commercialization from 2020 and beyond





2010

2011

2012

2013

2014

2015

・・・・・

2018

Future strategies


2019



Accelerate
Acceleratelarge-scalelarge-scaleproject-oriented
project-orientedactivities
activities
9 Methane hydrate phase 2
9 Methane hydrate phase 2
9 Pursue domestic CCS demonstration testing
9 Pursue domestic CCS demonstration testing
9 Participate in overseas CCS projects
9 Participate in overseas CCS projects

2020Survey

Cultivate
Cultivatenew
newfields
fieldsincluding
includingrenewable
renewableenergy
energy9 Target commercialization by fiscal 2016
9 Target commercialization by fiscal 2016

CCS demonstration test
Towardcommercialization

Note: The aforementioned schedule is based on projected scenarios by the Company
based on current conditions and events. There are no definitive plans currently in place.

39
39

V-1.

Consolidated Profit and Loss / Investment Portfolio
Consolidated Profit and Loss

Projected substantial recovery in the Company’s consolidated profit and loss
due to a variety of factors including the decrease in depreciation andamortization, adjustment to natural gas sales prices and contributions from the
Canada Oil Sands Hangingstone Expansion Project
Forecast consolidated profit and loss (net income)

Expectations ofcontributions to profit fromongoing progress in existing
projects (Kangean, Garraf
oilfield in Iraq, etc.) and theCanada Oil Sands
Hangingstone Expansion
ProjectOptimal adjustment to theprice of natural gas in linewith increases in crude oil
prices

Decrease in depreciation
and amortization

Factors contributing toincreased future earnings

11.5 billion yen
10.0 billion yen

FY2011（a）

FY2012（e）40
40

FY2016

[Reference] Forecast Depreciation and Amortization

Depreciation and amortization on a consolidated basis expected to peak
(approximately ¥25.0 billion) leading up to fiscal 2011 and to decline thereafter

Due largely to the completion of a round of investment aimed at expanding
domestic production capacity

Forecast Depreciation and Amortization

depreciation and amortizationbilion yen

Actual30

EstimaDepreciation and amortization：Cost Recovery（Garraf(Iraq), Block A(Indonesia) ）

te

25
20
15
10
5
0
FY2010FY2011FY2012FY2013

FY2014FY2015

Note: Potential for the aforementioned figure to rise depending on future exploration investment performance
Besides depreciation and amortization, cost recovery will occur for the Garraf (Iraq) and Block A (Indonesia) when
production commencement. They will offset by receiving production income.

41
41

FY2016

V-2. Consolidated Profit and Loss / Investment Portfolio
Investment PortfolioProjected investment scale of approximately ¥280.0 billion taking into
consideration free cash flows between fiscal 2012 and fiscal 2016 together withexternal funds procured
The investment portfolio is presented as follows

Investment portfolio (Image)Overseas Exploration
around 20 billion yen

Domestic development investment
Domestic natural gas activities
around 80 billion yen
FY2012– FY2016

280
billion yen

Domestic Exploration
around 30 billion yen

Overseas development investment
Environment and innovativetechnology activities
around 150 billion yen

4242

Ⅵ ． Summary

Expectations that the objectives identified in the mid-term business planannounced in May 2008 will be achieved by fiscal 2012
Steps taken to draw up a medium-term business plan covering the period
from fiscal 2012 to fiscal 2016
Business expansion across the three core business pillars of E&P, domestic
natural gas and environment and innovative technology
Aiming for sustainable growth particularly in E&P activities, JAPEX will pursue
the following initiatives aimed at shifting business overseasLift the ratio of overseas E&P investment (approximately 60% over the next five
years)
 Increase production volume mainly overseas by ensuring steady progress in suchactivities as the Garraf oilfield in Iraq and the Canada Oil Sands Expansion Project
as well as the shift of production overseas (70,000 BOED by fiscal 2016)
 Further augment proved reserves by reinvesting generated cash flows in new
projects(450 million BOE by fiscal 2021)


Steadily implement domestic natural gas activities and pursue environment
and innovative technology commercialization in concert with E&P activities

43
43