Expanding Energy Horizons

INPEX Holdings Inc.
ANNUAL REPORT 2007

1

INPEX Holdings Inc.

A Growing Presence Worldwide
24

PAGE

Caspian Sea Area

27

PAGE

Middle East
• United Arab Emirates: ADMA Block• Iran: Azadegan Oil Field• Kazakhstan: Offshore North Caspian Sea Block(Kashagan Oil Field and Others)• Azerbaijan: ACG Oil Fields• Azerbaijan-Georgia-Turkey: BTC Pipeline

29

PAGE

Africa• Offshore Democratic Republic of Congo• Egypt: West Bakr Block• Algeria: El Ouar l/ll Blocks• Algeria: Ohanet Block

21

PAGE

Australia andthe Timor Sea Joint Petroleum
Development Area (JPDA)• Australia: WA-10-L (Griffin Fields)
and Others• Australia: WA-285-P (Ichthys)• JPDA03-12, Bayu-Undan Project

INPEX Holdings Inc.

INPEX Holdings Inc. is a joint holding company established on April 3, 2006 throughthe business integration of INPEX CORPORATION, a leading Japanese E&P company,
and Teikoku Oil Co., Ltd., a pioneer of E&P in Japan.
The integration has enabled INPEX Holdings to achieve a well-balanced asset
portfolio, the strengthened presence as a global E&P company and enhanced
capabilities as an operator. INPEX Holdings is now Japan’s largest E&P company interms of production and reserve volume.

32

PAGE

35

PAGE

Japan
• Minami-Nagaoka Gas Field andDomestic Natural Gas BusinessAmericas• Venezuela: Copa Macoya and Guarico Oriental Blocks• Brazil: Frade Block• Mexico: Cuervito and Fronterizo Blocks• United States: Ship Shoal 72, Main Pass 117/118 andWest Cameron 401/402

17

PAGE

Indonesia• Offshore Mahakam Block and Attaka Unit
• South Natuna Sea Block B• Masela Block (Abadi)• Berau Block, Tangguh LNG Project

Projects described in this report
Our E&P operations

2

3

INPEX Holdings Inc.

Strengthening Our Position
Production Growth Rate

6.2%

Net production for the year ended March 31, 2007, was
418 MBOED, an increase of 10.6% compared with theprevious year. By production increase mainly from ACG Oil
Fields, we are envisaging a production growth rate of 6.2%
over the next two years.

67
25

With business operations covering 67 projects in 25
countries, we boast a balanced portfolio in terms of activity
area, type of contracts, operating stages and the proportionof crude oil to natural gas.

Projects in

Countries

Reserve Replacement Ratio (RRR)

293%
Proved Reserves

1,770

MMBOE

With our success in exploration, development and asset
acquisition, our three-year average RRR, indicating theincrease of proved reserves, stood at 293%, an excellent
result in comparison with other oil companies.
We have the largest proved reserves among Japanesecompanies, and our net probable reserves amount to 1,959
MMBOE, exceeding our net proved reserves. The reserveproduction ratio for the proved reserves equates to 11.6
years, or 24.5 years when adding probable reserves. From
this, we expect steady increases of production volume andproved reserves over the medium to long term.

Note: MBOED: thousands of barrels of oil equivalent per day
MMBOE: millions of barrels of oil equivalent
Net production volume and proved reserves are calculated based on U.S. Security and Exchange Commission (SEC) rules.

INPEX Holdings Inc.

JACK-UP DRILLING RIG(OFFSHORE MAHAKAM BLOCK,INDONESIA)

Contents
1
3
5
7
13
17

Net Production

37
41

Americas 3%
Japan 6%
NIS 11%

Middle East/
Africa36%

Asia /
Oceania44%

Total: 418 MBOED
Proved Reserves
Americas 1%
Japan 9%NIS 12%

Asia /
Oceania33%

Middle East/
Africa45%

Total: 1,770 MMBOE

42
43
44
76
87
88

A Growing Presence Worldwide
Strengthening Our Position
Financial Highlights/
Operating Highlights
An Interview with the President
Special Feature—The Ichthys Project
Global Business Activities
17 Indonesia
21 Australia & JPDA
24 Caspian Sea Area
27 Middle East
29 Africa
32 Americas
35 JapanCorporate Governance
Mission, Corporate Social
Responsibility Policy & Health,
Safety and Environment Policy
CSR Activities in Local Communities
Management Team
Financial Section
Operating Data and Corporate
Information
Stock Information
Corporate Data

Forward-Looking Statements
This annual report includes forward-looking informationthat reflects the Company’s plans and expectations.
Such forward-looking information is based on thecurrent assumptions and beliefs of the Company in lightof the information currently available to it, and involves
known and unknown risks, uncertainties, and otherfactors. Such risks, uncertainties and other factors may
cause the Company’s actual results, performance,
achievements or financial position to be materiallydifferent from any future results, performance,
achievements or financial position expressed or impliedby such forward-looking information. Such risks anduncertainties include, without limitations, fluctuationsin 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 forward-looking information).

4

5

INPEX Holdings Inc.

Financial Highlights
Holdings Inc. and Consolidated Subsidiaries
INPEX Holdings Inc. INPEXFor the year ended March 31, 2007

Millions of yen

Thousands of
U.S. dollars (2)

2007

2007

969,713559,077
165,092
231,982
1,608,107
248,969(169,667)
1,080,016$ 8,211,644
4,734,330
1,398,018
1,964,451
13,617,639
2,108,299(1,436,760)
9,145,703

Yen

U.S. dollars

Year ended March 31,

Net sales
Operating income
Net income
Cash flows from operating activities
Total assets (at period end)
Interest-bearing debt (at period end)
Net debt (at period end) (1)Net assets (at period end)¥

Net income per share¥ 70,423.45

Cash dividends per share$

596.35

7,000

59.28

Notes: (1) Net debt = Interest-bearing debt – Cash and cash equivalents – Restricted cash – Other debt securities with determinable market value.
(2) The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at¥118.09=US$1.00, the approximate rate of exchange in effect on March 31, 2007.

CORPORATION and Subsidiaries
INPEX CORPORATION INPEXFor the years ended March 31, 2003, 2004, 2005 and 2006

Millions of yen

2003

2004

2005

Net sales
Operating income
Net income
Cash flows from operating activities
Total assets (at period end)
Interest-bearing debt (at period end)
Net debt (at period end)(1)
Net assets (at period end)

¥ 201,533
97,27027,912
51,282
338,747
46,997(109,691)
253,570¥ 218,831
93,87634,782
44,464525,298
169,425
42,297278,114¥ 478,587
268,663
76,494
131,207779,228
177,867(52,482)
411,296¥

Net income per share
Net income per share(2)Cash dividends per share
Cash dividends per share(2)¥47,178.51
15,726.17
10,0003,333¥58,838.76
19,612.92
10,0003,333¥40,255.92
—
4,000
—

¥ 53,814.47
—
5,500
—

Years ended March 31,

2006704,235
426,651
103,477
218,240
972,438
220,293(89,097)
504,998
Yen

Oil Co., Ltd. and Consolidated Subsidiaries
Teikoku Oil Co., Ltd. Teikoku
For the years ended December 31, 2003, 2004, 2005, and for the three months ended March 31, 2006

Millions of yen

2003(3)

2004(3)

2005(3)

2006(4)

Net sales
Operating income
Net income
Cash flows from operating activities
Total assets (at period end)
Interest-bearing debt (at period end)
Net debt (at period end)(1)
Net assets (at period end)

¥ 78,498
8,739
6,796
19,955226,280
21,737(8,267)
156,463¥ 84,032
13,533
9,276
19,225240,513
17,936(8,828)
165,936¥100,716
21,077
15,485
15,118
293,767
29,022(2,019)197,216¥ 27,718
9,470
6,484
9,872
308,659
35,968(5,387)205,256

Net income per share
Cash dividends per share(5)

¥

¥

¥

¥

Yen

22.09
6.0

30.22
7.5

50.61
9.0

21.28
3.0

Notes: (1) Net debt = Interest-bearing debt – Cash and cash equivalents – Restricted cash – Other debt securities with determinable market value(2) INPEX CORPORATION made a three-for-one stock split of common stock effective May 18, 2004. The figures are the amounts after the stock split.
(3) Until December 31, 2005, the fiscal year-end of Teikoku Oil Co., Ltd. was December 31.
(4) Teikoku Oil Co., Ltd. had changed its fiscal period end from December 31, to March 31. The figures represent respective amounts as of and for thethree months ended March 31, 2006.
(5) Shareholders and registered pledges listed or recorded in the final shareholders’ register of Teikoku Oil Co., Ltd. on the day before the stock transfer date
had received stock transfer payments for each common share in Teikoku Oil Co., Ltd. in place of dividends for the three months ended March 31, 2006.

INPEX Holdings Inc.

Operating Highlights
INPEX Holdings Inc.
2007

Years ended March 31

Net proved reserves (End of period)(1):
Crude oil, condensate and LPG (MMbbls)
Gas (Bcf)
Total (MMboe)
Net production(1):Crude oil, condensate and LPG (Mbbls/day)Gas (MMcf/day)Total (Mboe/day)Average expenses per boe produced (US$)(2):
Production(3)General and administrative
Costs incurred (Millions of yen)(4):
Acquisition
Exploration
Development
Total
Reserves to production ratio (Years):
Proved reserves as of the end of the fiscal year / Production in the fiscal year
Proved reserves + Probable reserves, as of the fiscal year-end / Production in the fiscal year
Standardized measure of discounted future net cash flows from proved reserves (Millions of yen)(1)(5):Reserve replacement ratio (3-year average as %)(6):
Finding and development cost per boe (3-year average in US$)(2)(7):
Net probable reserves (End of period)(1):
Crude oil, condensate and LPG (MMbbls)
Gas (Bcf)
Total (MMboe)

1,139
3,782
1,770
242.5
1,051.1
417.7
8.5
1.7
1,144
30,544
185,957
217,646
11.6
24.5
1,347,128
293
6.9
1,610
2,095
1,959

Notes: (1) See item on page 77 regarding “Oil and Natural Gas Reserves and Production Volume.” Its proved reserves and production volume are calculated inaccordance with U.S. Security Exchange Commission (SEC) rules.
(2) Figures are translated into U.S. dollars based on the average exchange rate of the fiscal year ended March 31, 2007, which was ¥116.62 per U.S. dollar.
Figures exclude all equity-method affiliates except those of Japan Oil Development Co., Ltd. (JODCO).
(3) Operating expenses plus royalties due others.
(4) Excluding our proportional interest of equity-method affiliates except JODCO’s equity-method affiliate.
(5) The exchange rate as of March 31, 2007 was the telegraphic transfer middle (TTM) rate of ¥118.09 per U.S. dollar.
(6) Reserve replacement ratio = Proved reserves increase including acquisition/production(7) 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.

INPEX CORPORATION/Teikoku Oil Co., Ltd.
INPEX CORPORATION
Year ended March 31,
2004
2005

Net proved reserves (End of period)(1):
Crude oil, condensate and LPG (MMbbls)359
Gas (Bcf)
3,704
Total (MMboe)
977
Net production(1):Crude oil, condensate and LPG (Mbbls/day)
59.8
Gas (MMcf/day)
814.5
Total (Mboe/day)
195.5
Average expenses per boe produced (US$)(2):4.8
Production(3)General and administrative
0.7
Costs incurred (Millions of yen)(4):
Acquisition
167,792
Exploration
25,296Development
92,348
Total
285,436
Reserves to production ratio (Years):
Proved reserves as of the end of the fiscal year /Production in the fiscal year
13.7
Proved reserves + Probable reserves, as of the
fiscal year-end / Production in the fiscal year
35.3
Standardized measure of discounted future net cash flows
615,827
from proved reserves (Millions of yen)(1)(5):170
Reserve replacement ratio (3-year average as %)(6):
Finding and development cost per boe
12.1(3-year average in US$)(2)(7):
Net probable reserves (End of period)(1):
Crude oil, condensate and LPG (MMbbls)
904
Gas (Bcf)
3,834
Total (MMboe)
1,543

2006

Teikoku Oil Co., Ltd.
Year ended December 31,
2005

919
3,757
1,545

1,054
3,103
1,571

36
1,006
204

192.6
823.5
329.8

204.7
787.8
336.0

15.3
169.0
43.5

7.0
0.7

8.3
0.8

7.6
6.9

52,124
4,220
113,406
169,750405
8,369
167,611
176,385

—
4,098
6,543
10,641

12.8

12.8

12.8

29.7

27.7

16.2

873,197397

1,055,733
368

264,446
—

4.9

4.9

—

1,511
3,085
2,025

1,481
2,074
1,827

12
250
54

Notes: (1) See item on page 77 regarding “Oil and Natural Gas Reserves and Production Volume.” Teikoku Oil’s reserve volume is as of March 31, 2006 and its proved
reserves and production volume are calculated in accordance with U.S. Security Exchange Commission (SEC) rules.
(2) Figures are translated into U.S. dollars based on the average exchange rate of the relevant fiscal year. In the fiscal years ended March 31, 2004, 2005 and2006, the average exchange rates were ¥112.94, ¥107.28 and ¥113.17, respectively. In the fiscal period ended December 31, 2005, the average exchange
rate was ¥110.12. Figures exclude all equity-method affiliates except those of JODCO.
(3) Operating expenses plus royalties due others.
(4) Excluding our proportional interest of equity-method affiliates except JODCO’s equity-method affiliate.
(5) The exchange rates as of March 31, 2004, 2005 and 2006 were the TTM rates of ¥105.63, ¥107.41 and ¥117.47 per U.S. dollar, respectively .
(6) Reserve replacement ratio = Proved reserves increase including acquisition/production(7) 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.

6

7

INPEX Holdings Inc.

An Interview with the President

INPEX Holdings will secure a stable and efficient supply of oil and natural gas, reap the
benefits of business integration and move steadily forward in every one of its projects.
Through these efforts, we seek to enhance corporate value, and thereby gain andmaintain shareholder support, while fulfilling our obligations to
the national economy.
Naoki Kuroda
President & CEOINPEX Holdings Inc.

Question 1

The fiscal year ended March 31, 2007 represents the firstpost-integration business period. Could you give us a brief
overview of business performance during that period?

A: INPEX Holdings was established in April 2006 with the integration of INPEXCORPORATION and Teikoku Oil Co., Ltd. In our first business period following the
integration, on the back of increased sales and rising crude oil and natural gas prices
coupled with a depreciation of the yen, INPEX Holdings’ consolidated net sales amounted
to ¥969.7 billion, including ¥607.4 billion in crude oil sales and ¥332.9 billion in natural
gas sales.
Exploration expenses, primarily for exploration activities in Oceania, came in at ¥17.7
billion, selling, general and administrative expenses and depreciation expenses totaled¥49.2 billion and operating income was ¥559.1 billion.
Net income before income taxes and minority interests and net income were ¥586.2
billion and ¥165.1 billion, respectively, due to the booking of ¥33.5 billion in transfer
income from the partial transfer of interests in the WA-285-P (Ichthys) Block in offshore
Western Australia.
In the fiscal year ended March 31, 2007, INPEX CORPORATION and Teikoku Oil Co.,
Ltd. both enjoyed record-breaking sales and showed strong earnings growth.

Net Sales

Operating Income

Net Income(Billions of yen)(Billions of yen)(Billions of yen)

1,000
800

600

200

450

150

300

100

150

50

600
400
200
0
Fiscal Year

0
2003

2004

2005

2006

Fiscal Year

0
2003

2004

2005

2006

INPEX Group

Fiscal Year

2003

Teikoku Oil Group

2004

2005

2006

INPEX Holdings Group8

9

INPEX Holdings Inc.

results were achieved in the period under review
Question 2 What
and what progress has been made with the integration?

A: The two companies, which had been doing business in different regions, were
integrated, and our competitive position improved as a result of the excellent portfolio
balance that resulted from the highly complementary nature of the companies’ regional
coverage. The integration also further expanded our presence in global markets andstrengthened our project management capabilities by enabling us to combine
management know-how and technological expertise.
With the transition to an operating holding company—which will come with the final
stage of the business integration, the merger of the current joint holding company, INPEXCORPORATION and Teikoku Oil Co., Ltd.—scheduled for October 2008 looming into
view, we have been working hard to achieve mutual understanding and share intelligenceat the management and working levels. As a result, during this initial fiscal year
preparations for the transition moved smoothly ahead as we strengthened the
management capabilities and competitive position of the newly integrated company anddeveloped a shared awareness and values while working toward the early realization of
integration synergies.
Specifically, leveraging the strengths of both companies, we established the basic
framework for a new organization that emphasizes speed and efficiency. By
implementing an employee attitude survey, we took steps to foster a corporate culturethat is harmonious and appealing to the workforce, and developed a basic framework forpersonnel and wage systems. We also began building a system of internal controls tocomply with the Japanese version of the Sarbanes-Oxley (SOX) Act, which is scheduled
to take effect in April 2008, and began the preliminary design of a new information
system. At the same time, we created a stronger information disclosure system to serve
as a foundation for the operating holding company.
Through these efforts, we will aim to achieve integrated decision-making underefficiency-oriented investment and management strategies rather than waiting tocomplete business integration by shifting to an operating holding company.
Simultaneously, we will leverage the expertise of both companies’ specialists to organize
joint teams for each project, joining forces in the development of the Ichthys Project andthe acquisition of new oil and gas assets.

INPEX Holdings Inc.

Question 3

Business integration progressed favorably in the initialfiscal year. Tell us about your medium- to long-term
growth strategy.

A: The foundation of our business is securing our oil and natural gas reserves, ensuring
stable earnings through development, production and sales and sustaining the growth ofcorporate value.
Because reserves decline as a result of production activities, it is essential that INPEX
secure additional reserves by discovering new resources or by acquiring assets in order
to secure and maintain stable earnings over the medium to long term.
To secure working interests for the exploration, development and production of highquality crude oil and natural gas resources throughout the world, aggressive businessdevelopment that leads to promising business opportunities is essential. Last year’sbusiness integration gave us an even stronger foundation for achieving such expansion.
Our goal is to increase our net production volume to a level of equivalent to a leading
global independents by maximizing these integration effects to achieve the earlycommercial production of the large-scale discovered fields and by increasing investments
for aggressive acquisition of high-quality oil and gas assets. We are taking an aggressive
approach to business development so that we can further improve corporate value andsustain growth over the medium to long term.

Basic Growth Strategy
Strengthening International Competitiveness through Integration

A Well-Balanced Asset Portfolio• Overseas oil and gas assets• Domestic natural gas assets• Domestic gas pipeline network

Strengthened Presence• Expanded reserves andproduction volume• Strengthened financial baseEnhanced Capabilities as an Operator• Consolidation of technical capabilities
including human resources and know-how(Assembling 700 engineers)

Enhancement of operating activities creating further growth

Continuous gr

Production:
500,000 BOE/D• Maintaining the production volume of natural gas from
Offshore Mahakam Block in Indonesia

Year ending
March 31, 2011

Production equivalent
to top independentsowth• Early commercialization of large-scale discovered
assets such as Ichthys and Abadi• Steady promotion of ongoing projects(Medium and long term growth drivers)• Expanding proved reserves(acquisition of promising exploration claims,
acquisition of excellent oil and gas fields, etc.)• Scale expansion of the domestic natural gas business• Expansion of operating area
Years ending March 31,
2016 – 2021

10

11 INPEX Holdings Inc.

you tell us what progress you have made in major
Question 4 Could
large-scale projects, particularly the Ichthys Project?

A: The Ichthys gas condensate field (WA-285-P Block in Australia) is a groundbreaking
project in that it is the first in which a Japanese company has been involved as an operator
in every phase from the exploration and development of the field to LNG production andsales. We have positioned this project as one of our core assets that will support long-termbusiness growth. We are now vigorously engaging in the preparation for thecommercialization of the project with the goal of starting LNG production in 2012. We
started drilling an additional exploratory well to uncover further reserve volume from April
2007 and have been carrying out aggressive marketing efforts. In the first phase, we aretargeting an annual LNG production and sales volume of 7.6 million tons, but plan toconsider increases in production and sales volumes after taking into account future trends
in LNG demand and the supply capacity of the Ichthys field.
After Ichthys, our next major project with promising commercial potential is the Abadi
Gas Field (the Masela Block in Indonesia). In May 2007, we started appraisal well drilling toevaluate the extent of the gas reserve. In conjunction with this, we are formulating

Production Start-Up Schedule for Oil and Gas Fields in Which The INPEX Group Participates

Australia/JPDA

Indonesia

Ichthys

Abadi

Indonesia

Australia

Ravensworth

2014

Australia

Van Gogh
Australia

2013

North Belut

Kuda Tasi Jahal

KashaganIndonesia

JPDA

Kazakhstan

2012

TangguhKairanIndonesia

Sisi Nubi

Bayu-Undan

2015

Kazakhstan

2011

Indonesia

AktoteKazakhstan

Kashagan Southwest

JPDA

Kerisi

Kazakhstan

2010

Indonesia

Kalamkas
Kazakhstan

2009

SadewaAzadeganIndonesia

APN

Iran

Hiu

Indonesia

Algeria

Indonesia

Frade

Gunashli (Deepwater)

Brazil2007

BelanakEl Ouar I/II

2008

Azerbaijan

Apaika Nenke (Block 31*)

Indonesia

Ecuador

2006

West Cameron 401/402
U.S.A.

2005

Azeri

Main Pass 117/118

Azerbaijan

U.S.A.

2004

Ship Shoal 72
U.S.A.

Production/Development Phase

Americas

Development Plan Under Consideration* In a governmental approval process for interests transfer

Middle East/Africa

NIS
Gas

Oil/Condensate

INPEX Holdings Inc.

development scenarios for this gas field and conducting marketing activities with the goal ofstarting up this LNG project at an annual production scale of between 3.5 million to 5.0
million tons.
In addition, there are two major oil field development projects on the coast of the
Caspian Sea that we view as medium- to long-term growth drivers. We are expanding crude
oil production volume at the ACG Oil Fields in Azerbaijan and expect to achieve production
in excess of 1 million barrels per day by 2009. At the Kashagan Oil Field in Kazakhstan, we
are now in the midst of the first phase of development and are planning for peak crude oil
production of over 1.2 million barrels per day.
At the offshore Mahakam Block in Indonesia, a profit center for the INPEX Group, weare carrying out ongoing gas field development in order to maintain a stable gas supply to
the Botang LNG Plant.
Finally, thanks to access to abundant reserves and large markets, the domestic natural
gas business based on the Minami-Nagaoka Gas Field, Japan’s largest, has become astable earnings source for INPEX. We are further developing infrastructure, including apipeline, while also developing the northern part of the Minami-Nagaoka Gas Field.

Question 5 In closing, what message do you have for shareholders?
A: As we begin our second year of business as an integrated company, we are taking
steps to maintain and expand reserves and production volume by achieving businessintegration synergies. In parallel, we are steadily moving forward with each project,
optimally distributing business resources and maintaining a sound financial position. In
the medium to long term, we are working to ensure stable earnings and enhance longterm corporate value.
In addition, as we fulfill our corporate social responsibilities we continue to strengthen
corporate governance, promote rigorous compliance and fully ensure safety managementin operations. At the same time, our business activities are carried out with fullconsideration for development in harmony with the environment and local communities.
I respectfully thank our shareholders and ask for their continued understanding andsupport for the new INPEX Group.

1213 INPEX Holdings Inc.

Special Feature—The Ichthys Project
INPEX has been engaged in exploration as an operator in the WA285-P Block located in offshore Western Australia since 1998. As aresult, a large-scale natural gas and condensate field, Ichthys* wasdiscovered in 2000. Between 2000 and 2004, the total of six
exploratory wells were drilled with successful discoveries of natural
gas and condensate in all of the wells. The reserve volume isestimated to be at least 9.5 trillion cubic feet of natural gas and 300
million barrels of condensate and LPG and, based on the current
LNG annual production plan of 7.6 million tons, the expected
reserve production ratio for Ichthys is over 30 years. We place
special emphasis on the development of this large-scale project thatwill form a future pillar of the Group’s operations.
*Ichthys: A Greek scientific name for Paleozoic fish. All of the wells in WA-285-P are named for the largest size of ichthyolite in the Devonian period, the so-called “the fish era”.

Location of Ichthys Field
Lying about 200km off the coast of Western Australia, the Ichthys field
is located in Browse Basin, offshore of the northwestern continental
shelf, approximately 450km north of Broome in northwestern Australia,
and 850km west of Darwin. The block covers 3,041km2 and the water
depth ranges from 90m to 340m.

NDONESIA•

AUSTRALIA•

BroomeDarwinINPEX Holdings Inc.

1998
Commenced Exploration in WA-285-P Block in Western Australia
In August 1998, INPEX acquired a 100% working interest in the WA-285-P in
offshore Western Australia through an open bid and embarked on the projectas an operator for the first time in Australia.

2000 – 2001
Discovered Large-Scale Ichthys Gas and Condensate Structure
In its first drilling campaign, carried out from 2000 through 2001, INPEX
drilled three exploratory wells—Dinichthys-1, Gorgonichthys-1 andTitanichthys-1—all of which revealed gas and condensate. This discovery
confirmed that Ichthys possesses a large-scale gas and condensate structure.

2003– 2004
Confirmed Gas and Condensate Reservoirs in Entire Ichthys Structure
In the second drilling campaign, carried out from 2003 through 2004, additional
three exploratory wells—Ichthys-1A, Ichthys Deep-1 and Ichthys-2A—were drilledin the Ichthys structure. This drilling campaign resulted in the discovery of gas andcondensate reservoirs distributed over the entire structure.
During this period, the Australian Petroleum Production & Exploration
Association (APPEA) granted INPEX COPORATION the APPEA Safety Award inboth 2003 and 2004 in recognition of the Company’s safe operations in thesecond drilling campaign. This marked the first time for a Japanese company to
win an APPEA award.

14

Development Time Frame (Planned)
Development Stage
Commencement Completion
Development Concept Study
2006 1Q
2007 1Q
Pre-FEED*2007 2Q
2007 4Q
FEED*
2007 4Q
2008 4Q
Final Investment Decision2008 4Q
Development(drilling, construction, etc.)
From 2008 4Q
Production
From 2012
FEED* (Front End Engineering Design): Basic Design* Table shows calendar years

2006 – 2007
Toward Commercialization of Ichthys ProjectIn 2006, the project showed steady progress toward commercialization bycommencing environmental assessment and certification as a major promotion
project from the Australian government. In addition, the Company started drilling
new exploratory wells, Dinichthys North-1, in the Ichthys structure in April 2007, withthe expectation of an increase in gas reserve volume.
Environmental Referrals
In May 2006, the formal environmental approval process

documentation to gaining approval from both governments will

for LNG, condensate and LPG production was commenced

take approximately two years. During the process, thewith the submission of environmental referral documents toCompany will promote engineering works and the acquisition

the Commonwealth Department of Environment andof approvals for LNG, condensate and LPG production

Heritage in Canberra and the Environmental Protection

required to gear up for full-fledged development.

Authority in Perth, Western Australia.
process, the Company submitted application forms thatAwarded Major Project Facilitation Status from
Commonwealth Government

stipulate the development plan of this project and

The development of gas and condensate at the Ichthys Field

environment-related information to each authority. In

has been regarded as a project that will contribute to long-term

accordance with these documents, the Commonwealth andAustralian economic prosperity. To that end, the IchthysWestern Australia State governments will have discussions with

Project was granted Major Project Facilitation status from theother relevant organizations to produce guidelines for an

Australian Minister for Industry, Tourism and Resources. This

environmental impact assessment. The Company will abide bystatus will enable the Company to receive Commonwealththese guidelines when undertaking an assessment and makegovernment support for the smooth acquisition of thereports to both the Commonwealth and Western Australia

approvals necessary for the promotion of projects from theState governments. The entire process from submitting

Commonwealth, State and related local authorities.

As the first step in the formal environmental approval

INPEX Holdings Inc.

2012
Toward Commercial Production
Approach to Commencement of LNG Production
Natural gas produced from the Ichthys Field will be liquefied

Initially, the production and sales volumes are expected

and shipped as LNG. Given this, the Company is

to reach approximately 7.6 million tons of LNG per annum

implementing development studies targeting production

and 100,000 barrels of condensate and LPG per day.

commencement in 2012, while carrying out comprehensive

Depending on the future LNG market and the supply

marketing activities.

capacity of the Ichthys Field, the Company will examine thepossibility of increasing production.

Development Concept of the Ichthys Field
Offshore Production Facility(artist’s conception)

North Maret Island

A floating production facility (Semi-subtype) will be installed in the middle ofIchthys Field at a water depth ofapproximately 250m. The gas, produced
from nine or ten Drilling Centers, will besent to the floating production facility
through pipeline.

Pipeline Route Plan
Gas/Condensate will be gathered atand processed on the floatingproduction facility and transported
through subsea pipelines to the Maret
Islands, offshore Kimberley, Western
Australia, located 191 km from theIchthys Field.

WA-285-P

Echuca Shoal

Propo
sed
pipe
line
appr
ox. 1
91km

South Maret Island

Browse Island

Maret Islands
0

30

60

Kilometers

Onshore Facility(artist’s conception)
On the Maret Islands, natural gas will
be refined and liquefied by cooling
down to minus 162 degrees Celsius at
the onshore LNG plant. Currently theCompany expects to produce
approximately 7.6 million tons of LNG
per year. The Company also plans to
produce both LPG and Condensate.
To tackle the Greenhouse issues, INPEX is considering afforestation
program to offset CO2 that will be produced with natural gas.

The Maret Islands, located 35km offshore
Western Australia and 191km away from theIchthys gas and condensate Field, are an
ideal location for constructing an LNG plant.

16

17 INPEX Holdings Inc.

Global Business Activities

Indonesia

Production facilities (Offshore Mahakam Block)South Natuna Sea Block B
Offshore Mahakam Block and Attaka Unit
Masela Block (Abadi)
Berau Block, Tangguh LNG Project

2
1

4
3

INPEX Holdings Inc.

1

Offshore Mahakam Block and Attaka Unit
Contract Area
Offshore Mahakam

Interest Owned

Venture Company (est.)
INPEX CORPORATION(February 21, 1966)

Attaka Unit

INPEX CORPORATION 50%
TOTAL* 50%
INPEX CORPORATION 50%
Chevron* 50%*Operator

Bontang LNG Plants

Attaka Unit

Santan Terminal

Attaka Field

Senipah Terminal

entered into a production sharing

and Peciko Fields, all of which continue

contract (PSC) with the Indonesian

to produce crude oil and natural gas.
Once produced, crude oil andworking interest in the Offshore

condensate are shipped by tanker from

Nubi Field

Mahakam Block. The Attaka Unit was

the Santan and Senipah terminals,

Bekapai Field

established in April 1970, by themainly to petroleum refineries and power

unitization of parts of adjoining blocks

companies in Japan. Natural gas isowned by INPEX and Unocal (nowmainly supplied to the Bontang LNG

Chevron). Both Companies hold an

Plant, one of the largest facilities of its

equal 50% interest in the unit. Soonkind in the world, and shipped to Japanafter this, the Attaka Field wasand other countries.

Tunu Field

Tambora Field
Handil Field

the Bekapai, Handil, Tambora, Tunu

government and acquired a 100%

Badak Field
Nilam Field

In October 1966, INPEX CORPORATION

Sisi Field

Peciko Field
Balikpapan

Offshore Mahakam BlockGas field
Oil field
Oil and gas fielddiscovered and the production of crude

The PSC was extended 20 years

oil and natural gas commenced in 1972.

through 2017, continuing the Mahakam

INPEX farmed out 50% of its working

Block’s role as a key profit center in theinterest in the Offshore Mahakam BlockGroup’s business.

to TOTAL in July 1970. This venture
resulted in the successive discoveries of18

19 INPEX Holdings Inc.

2

South Natuna Sea Block B
Contract Area
South Natuna Sea Block B

Interest Owned

Venture Company (est.)
INPEX Natuna, Ltd.
(September 1, 1978)

INPEX Natuna 35%
ConocoPhillips* 40%
Chevron 25%*Operator

Natuna Sea

In July 1977, INPEX CORPORATIONThis pipeline commenced operationsacquired a 17.5% working interest in thein 2001, and the following year saw newSouth Natuna Sea Block B, which

gas sales to Malaysia from Block B.

includes the Udang Oil Field andOwing to these achievements, the PSC

Belanak Oil and Gas Field. In January

covering Block B was extended through1994, INPEX acquired an additional

2028.

North Belut

South Natuna Sea Block B
BelidaKerisiinterest in the block for a total of 35%.
Hiu
Sembilang Belanak

Gas field
Oil field
Oil and gas field

In the Belanak Field, where production

Subsequent to INPEX participation,

operations are orchestrated through theseveral new fields were discovered inworld-class Belanak FPSO (Floating

Block B, including the Hiu, Ikan Pari,

Production, Storage and Offloading)Belida, Sembilang, Kerisi, and Northsystem, crude oil and condensate

Belut Fields, contributing to crude oil

production began in December 2004

production that has continued since

and was followed by LPG production in

1979. In January 1999, a sales

April 2007.

Natuna Island

agreement was concluded to deliver gas

INPEX continues to engage into Singapore—from Block B, thedevelopment work related to the plannedneighboring Natuna Sea Block A andcommencement of production in the

Kakap

Kerisi Field in 2007 and the North Belut

Block—through

the

first

Indonesian subsea pipeline connecting
foreign markets.

Field in 2009.

INPEX Holdings Inc.

3

Masela Block (Abadi)
Contract Area

Interest Owned

Venture Company (est.)

MaselaINPEX Masela, Ltd.
(December 2, 1998)

INPEX Masela* 100%
*Operator

Masela Block

INDONESIA

AUSTRALIA

Timor Sea Joint
Petroleum
Development Area

Timor Sea

In November 1998, INPEX CORPORATION

raising expectations of a substantial

won an open bid for and acquired a 100%

volume of gas and condensate reserves.

working interest in the Masela Block.

INPEX will evaluate the reserves by

Pursuing exploration activities as an

drilling four additional appraisal wells

operator, INPEX discovered the large-

from May 2007. Simultaneously, INPEX

scale Abadi gas structure during theis devoting itself to development studies

drilling of the first exploration well in thefor future commercialization involving

block in 2000. This represented the first

LNG production.

discovery of natural gas in the Indonesian
Timor Sea. Subsequently, two appraisal
wells drilled in 2002 confirmed the
expanse of the Abadi structure, further

4

Berau Block, Tangguh LNG ProjectContract Area
Berau

Venture Company (est.)
MI Berau B.V.
(August 14, 2001)

Tangguh Unit

Interest Owned
Ml Berau B.V. 22.856% BP* 48.0%
Nippon Oil Exploration (Berau) 17.144%
KG Breau 12.0%
MI Berau 16.3% BP* 37.16%
CNOOC 16.96%
Nippon Oil Exploration (Berau) 12.23%
KG Berau 10.0% LNG Japan 7.35%*Operator

Papua Province (INDONESIA)

Kaimana

Berau BlockGas field

In October 2001, MI Berau B.V., a joint

annual supply of 7.6 million tons of LNG

ventureINPEX

to China, South Korea and NorthCORPORATION (44%) and Mitsubishi

America. In March 2005, the IndonesianCorporation (56%), acquired angovernment approved a development

approximate 22.9% interest in the Berauplan for the Tangguh LNG Project andBlock, a hub in the Tangguh LNG

extended the PSC through 2035.

Project. MI Berau holds a 16.3% working

Partners in the Project are drillinginterest in the Tangguh Unit, a unitized

production wells and constructing LNG

area between the Berau Block, theplants with production due to come on

adjoining Wiriagar Block and the Muturi

stream in late 2008.

establishedby

Block.
Long-term sales agreements havebeen concluded, stipulating a total

20

21 INPEX Holdings Inc.

Australia andthe Timor Sea Joint Petroleum
Development Area (JPDA)LNG shipping berth (Bayu-Undan Project)

WA-10-L (Griffin fields) and Others
WA-285-P (Ichthys)
JPDA03-12, Bayu-Undan Project

2
1

3

INPEX Holdings Inc.

1

WA-10-L (Griffin fields) and Others
Contract Area
WA-10-L

Venture Company (est.)
INPEX Alpha, Ltd.
(February 17, 1989)

Interest Owned
INPEX Alpha 20% BHPBP* 45%
ExxonMobil 35%

WA-155-P (Part I)

INPEX Alpha 28.5% BHPBP* 39.999%
Apache 31.501%

WA-155-P (Part II)

INPEX Alpha 18.67% Apache* 81.33%

WA-12-L (Deep)

INPEX Alpha 18.67%
ExxonMobil* 81.33%*Operator

BarrowIslandIndian Ocean

WA-155-P (Part I)

sale through a 70-kilometer subsea

acquired a 20% working interest in WA-

pipeline connected to an onshore trunk

Griffin

210-P in offshore Western Australia. As apipeline. In the area surrounding WA-10-

WA-155-P (Part II)

result of subsequent exploration activities,

L, INPEX acquired working interests in

the Griffin Fields were discovered and a

WA-155-P (Part II) and WA-12-L (Deep)

production license for four blocks in WA-

in July 1994 and in WA-155-P (Part I) in

10-L was granted by the Australian

July 1999. The Van Gogh andgovernment. Commercial production

Ravensworth Fields were discovered infrom these blocks commenced in

WA-155-P (Part I); crude oil production is

January 1994. The crude oil produced isscheduled to commence at the Van Goghprocessed and stored on the Griffin

Field in April 2009 and feasibility studies

Venture, an FPSO vessel, and thenfor commercial development are currently

shipped for sale.

under way in the Ravensworth Field.

WA-10-L
WA-12-L

In February 1989, INPEX CORPORATION

Onslow

AUSTRALIA

Oil field

Natural gas, which is also processedon the Griffin Venture, is transported for2

WA-285-P (Ichthys)
Contract Area
WA-285-P

Venture Company (est.)
INPEX Browse, Ltd.
(September 1, 1998)

Interest Owned
INPEX Browse* 76%
TOTAL 24%
*Operator

EAST TIMOR

Timor Sea

WA-285-P
DarwinAfter winning an open bid in Augustreserves. At the same time, INPEX is1998, INPEX CORPORATION acquired avigorously engaging in feasibility studies,working interest in WA-285-P in offshore

including engineering work, field data

Western Australia. Pursuing explorationcollection and environmental impact

activities as an operator, INPEX

assessments, as well as gas marketing for

discovered the highly promising Ichthyscommercial LNG production. INPEX

gas and condensate field in 2000. All six

initially plans to produce and sell 7.6

exploratory wells that have successfully

million tons of LNG per year from 2012.

discovered natural gas and condensate

In addition to LNG, a peak rate ofhave demonstrated sufficient reserves for

100,000 barrels per day of condensate

a large-scale gas and condensate project.

and LPG will be produced. We will

We started drilling an additional

consider LNG production expansion

exploration well in April 2007 and are

depending on the Ichthys Field’s supply

expecting to discover additional gas

capacity and the market situation.

AUSTRALIA

22

23 INPEX Holdings Inc.

3

JPDA03-12, Bayu-Undan ProjectContract Area
JPDA03-12

Venture Company (est.)
INPEX Sahul, Ltd.
(March 30, 1993)

Bayu-Undan Unit

Interest Owned
INPEX Sahul 19.0712244%
ConocoPhillips* 46.7144238%
Santos 19.2663518%
Petroz 14.948%
INPEX Sahul 10.527682%
ConocoPhillips* 48.466865%
Eni 12.038906% Santos 10.635396%
Tokyo Timor Sea Resources(Tokyo Electric/Tokyo Gas) 10.079568%
Petroz 8.251583%*Operator

East TimorIn April 1993, INPEX CORPORATION

Production of condensate and LPG

acquired a working interest in JPDA03-

commenced at the Bayu-Undan Project

12, located in the Timor Sea Jointin 2004. As for natural gas production,

Petroleum Development Area (JPDA).

LNG sales agreements stipulating a total

Timor Sea
Timor Sea Joint
Petroleum
Development Area
Bayu-Undan Gas-Condensate Field

Subsea Gas Pipeline
DarwinJPDA03-12 Block
AUSTRALIA

Gas field

The exploration in the contract area

supply of three million tons annually were

resulted in the discovery of oil and gas inconcluded with Tokyo Electric Power Co.,

the Elang, Kakatua, Kakatua North,

Inc. and Tokyo Gas Co., Ltd. in AugustBayu-Undan and Hingkip structures.

2005, and commercial LNG production

Production began in Elang in July 1999

commenced in February 2006.

and in Kakatua and Kakatua North thefollowing month.
In 1999, the Bayu-Undan Unit wasestablished between JPDA03-12 and
JPDA03-13 to carry out the developmentof and commence production at the
Bayu-Undan gas-condensate field, which
straddles both contract areas.

INPEX Holdings Inc.

Caspian Sea Area

Offshore production facilities (Kashagan Oil Field)

BTC Pipeline
ACG Oil Fields
Offshore North Caspian Sea Block (Kashagan Oil Field and Oth
Others)1
3

24

25 INPEX Holdings Inc.

1 Offshore North Caspian Sea Block (Kashagan Oil Field and Others)
Contract Area

Venture Company (est.)

Offshore North Caspian Sea

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

Interest Owned
INPEX North Caspian Sea 8.33%
Eni* 18.52% ExxonMobil 18.52%
Shell 18.52% TOTAL 18.52%
ConocoPhillips 9.26%
KMG 8.33%*Operator

KAZAKHSTAN

Kashagan

KairanCaspian Sea

Kashagan Southwest

AktoteOffshore North
Caspian Sea Block
Kalamkas

In September 1998, INPEX CORPORATION

largest fields ever discovered in theacquired an approximate 7.14% working

history of oil exploration. The first phaseinterest in the Offshore North Caspian Seaof the development is currently under

Block that lies within the Republic of

way and the production level is expected

Kazakhstan’s territorial waters. In

to reach a peak rate of over 1.2 million

September 2001, INPEX acquired

barrels per day. In addition to theadditional working interests, totaling

Kashagan Oil Field, hydrocarbon reserves

approximately 8.33%.

have been confirmed in four other

The Kashagan Oil Field was discovered2

structures:

Kalamkas,Kashaganduring the first exploratory drillings inSouthwest, Aktote and Kairan. INPEX

September 1999, representing the firstaims to increase production volume fromdiscovery in the Kazakhstan-controlled

the Offshore North Caspian Sea Blockarea of the Caspian Sea. The Kashagan Oil

through appraisal work for the existing

Field is considered to have great potential

structures along with the development ofand is expected to become one of thethe Kashagan Oil Field.

ACG Oil Fields
Contract Area
ACG Oil Fields

Interest Owned

Venture Company (est.)

INPEX Southwest Caspian Sea, Ltd. INPEX Southwest Caspian Sea 10% BP* 34.14%(January 29, 1999)
Chevron 10.28% SOCAR 10% Statoil 8.56%
ExxonMobil 8% TPAO 6.75%
Devon Energy 5.63%
Itochu 3.92% Hess 2.72%*Operator

AZERBAIJAN

BakuSangachal

ACG Fields

In April 2003, INPEX CORPORATION

Gunashli Field with the aim of starting

acquired a 10% working interest in the

production in 2008. Crude oil production

Azeri-Chirag-Gunashli Fields, known as

will reach a combined peak of one million

the ACG Oil Fields, located in thebarrels per day in 2009 in the entire

Republic of Azerbaijan-controlled area ofblock.

Oil Pipeline
Deep Water Gunashli Field
Chirag Field
Azeri Field
Caspian Sea

Oil field

the South Caspian Sea. Crude oil

The crude oil from these fields is

production began in the Chirag Field inbeing transported to Supsa on the Black

1997, in the Central Azeri and West Azeri

Sea coast, then along a route running

Fields in 2005 and in the East Azeri Field

from Baku in Azerbaijan to Ceyhan on

in 2006.

Turkey’s Mediterranean coast, via theCurrently, INPEX is engaged indevelopment work in the Deep Water

mainstay BTC Pipeline that commenced
operations in June 2006.

INPEX Holdings Inc.

3

BTC Pipeline
Contract Area
BTC Pipeline

Venture Company (est.)
INPEX BTC Pipeline, Ltd.
(October 16, 2002)

Interest Owned
INPEX BTC Pipeline 2.5%
BP* 30.1% SOCAR 25%
Chevron 8.9%
Statoil 8.71% TPAO 6.53%
Eni 5% TOTAL 5% Itochu 3.4%
ConocoPhillips 2.5% Hess 2.36%*Operator

RUSSIA

Black Sea

CaspianSea

GEORGIA
TbilisiAZERBAIJAN
ARMENIABTC Pipeline

TURKEYIRAN

CeyhanCYPRUS

SYRIA

Baku

In September 2002, INPEX CORPORATIONINPEX is participating in theacquired a 2.5% interest in the BTC

development of the ACG Oil Fields in

Pipeline Project.

Azerbaijan and the Kashagan Oil Field in

The 1,770-kilometer BTC Pipeline,

Kazakhstan, both of which rank among

which stretches from Baku in Azerbaijan

the world’s major oil fields. The

to Ceyhan on Turkey’s Mediterranean

completion of the BTC Pipeline enables

coast, via Tbilisi, Georgia, and has adirect shipments by large-scale vessels

transport capacity of one million barrels

from the Mediterranean Sea, thereby

per day. The BTC Pipeline commenced

avoiding the Turkish straits, which are

full-fledged operations in June 2006.

particularly prone to shipping traffic

Initially

wascongestion. This represents a major

constructed to transport crude oil

contribution to the transport of the ever-produced in the ACG Oil Fields ingrowing production of crude oil in

Azerbaijan. Now the partners have

Azerbaijan and Kazakhstan.

IRAQ
Mediterranean
Sea

the

BTC

Pipeline

basically agreed to also transport crude
oil produced in the Kashagan Oil Field
in Kazakhstan. Given this, the transportcapacity of the BTC Pipeline will be
increased to 1.6 million barrels perday. The Ceyhan marine terminal has
seven one-million barrel-capacity crude oil
storage tanks and a two-kilometer-longjetty capable of docking two 300,000-ton
tankers at the same time.

26

27 INPEX Holdings Inc.

Middle East

Zirku Island (ADMA Block)2
1
ADMA Block
Azadegan Oil FieldINPEX Holdings Inc.

1

ADMA BlockContract Area
Umm Shaif Field/Lower
Zakum Field

ADMA BlockDas Island

Umm Shaif Field
Upper Zakum/
Lower Zakum Field

Zirku Island

Satah Field

Umm Al-Dalkh Field
Abu Dhabi

UNITED ARAB EMIRATESOil field

Interest Owned

Venture Company (est.)
Japan Oil Development Co., Ltd.
(February 22, 1973)

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

Upper Zakum Field

JODCO 12% ADNOC 60%
ExxonMobil 28%

Umm Al-Dalkh Field

JODCO 12% ADNOC 88%

Satah Field

JODCO 40% ADNOC 60%

In May 2004, INPEX CORPORATION

These fields have since maintained steadymade Japan Oil Development Co., Ltd.

production levels. Crude oil production(JODCO) a wholly owned subsidiary by

has also continued at two existing fields,

acquiring all the shares held by the Japanthe Umm Shaif and Lower Zakum, since

National Oil Corporation through a share

1962 and 1967, respectively. The crude

exchange. JODCO was established in

oil is transported by subsea pipeline to the1973 and currently produces crude oil

islands of either Das or Zirku for onward

from five fields in the ADMA Block,

shipment.

located in offshore Abu Dhabi, the United

These five fields are operated by the

Arab Emirates. Production commenced inlocal operating venture companies,

the Upper Zakum Field, the area’s largest

ADMA-OPCO and ZADCO. JODCO

oil field, in 1982, and in the Umm Al-

regularly sends a number of its personnel,

Dalkh and Satah Fields, in which JODCO

primarily engineers, to these companies.

directly took part in development
operations, in 1985 and 1987, respectively.

2

Azadegan Oil Field
Contract Area
Azadegan Oil Field

Interest Owned

Venture Company (est.)
Azadegan Petroleum
Development, Ltd.
(February 18, 2004)

Azadegan Petroleum
Development 10%
NICO* 90%
*Operator

TehranBaghdad

IRAQ

Azadegan Oil Field

Ahwaz
IRAN
KuwaitOil field

In February 2004, INPEX CORPORATION

Naftiran Intertrade (NICO), an NIOC

entered into a service contract (a so-

subsidiary, and simultaneously delegatedcalled “buyback contract”) with theits responsibility as an operator. Under

National Iranian Oil Company (NIOC) forthe current plan, oil production from thethe integrated appraisal and development

field is scheduled to reach 150,000

of operations in the Azadegan Oil Field in

barrels per day in the first stage. In thethe Islamic Republic of Iran and acquired

optional second stage, the production

a 75% working interest. In October 2006,

level is expected to increase to 260,000

INPEX entered into a basic agreement tobarrels per day.

assign its 65% working interest to28

29 INPEX Holdings Inc.

AfricaCrude oil production well (West Bakr Block)3,42West Bakr BlockEl Ouar I/II Blocks, Ohanet Block
Offshore the Democratic Republic of Congo

1

INPEX Holdings Inc.

1

Offshore Democratic Republic of Congo
Contract Area

Venture Company (est.)

Interest Owned

Offshore Democratic Republicof Congo

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

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

In July 1970, Teikoku Oil acquired acumulative production volume in thisMwambe17.03% working interest and participatedblock has exceeded 200 million barrels.

MiasatoLibwa

in oil exploration and development in the

In May 1995, the contract at theoffshore Democratic Republic of Congo.

Offshore Congo Block was extended to

An additional interest was acquired in

2023, and the Company continues

July 1972, increasing current Teikoku

stable production at the existing oil field.

MibaleMotobaLukamiMoko

MuandaBananaTshialaOil’s share to 32.28%.

GCO
Soyo

The GCO Field was discovered in
1971, and oil production commenced in
1975. Including the GCO Field, 11 oil

Oil field

fields have been discovered, and2West Bakr BlockContract Area
West Bakr

Venture Company (est.)
The Egyptian Petroleum
Development Co., Ltd. (EPEDECO)(July 17, 1970)

Interest Owned
EPEDECO* 100%

*Operator
Mediterranean Sea

Gulf of Suez
Cairo

EGYPT

West Bakr

In June 1975, The Egyptian Petroleum

from 1989, with commercial production

Development Co., Ltd. (EPEDECO), a jointcommencing in 1990. In July 2005, theventure established by Teikoku Oil, Mitsui

contract term was extended throughand others, acquired a 100% working

2020. The Company maintains stableinterest in the West Bakr Block, located in

production operations in existing oil fields

a desert region on the west bank ofwhile pursuing possibilities for increased

Egypt’s Gulf of Suez, and conducted

production through additional exploration

exploration activities as an operator of theactivities.

project. As a result, three oil fields werediscovered and commercial production
has continued since 1980. In addition, a
new oil field was discovered throughadditional exploration work conducted30

31 INPEX Holdings Inc.

3

El Ouar I/II Blocks
Contract Area
El Ouar I

Venture Company (est.)
Teikoku Oil Algeria Co., Ltd.
(December 21, 2001)

El Ouar II

Interest Owned
Teikoku Oil Algeria 10.29%
Sonatrach* 67.33% Eni 22.38%
Teikoku Oil Algeria 10.29%
Sonatrach* 67.33% Eni 22.38%*Operator

In November 2001, Teikoku Oil acquired
a 10.29% working interest in the El Ouar
I/II Blocks, located in onshore eastern
Algeria. The drilling of exploration wells
Algeria
Libya

El Ouar Blockconfirmed the existence of natural gas
and condensate in El Ouar I in 1997, andin El Ouar II in 2001. Feasibility studies
for the commercial development of
natural gas are currently under way.

4

Ohanet BlockContract Area
OhanetVenture Company (est.)

Interest Owned

Japan Ohanet Oil & Gas Co., Ltd.
(JOOG) (March 15, 2001)

JOOG 30% BHPP* 45%
Woodside 15% Petrofac 10%*Operator

In January 2001, Japan Ohanet Oil & Gas

project involving a Japanese enterprise inCo., Ltd. (JOOG), a joint venture company

Algeria, which boasts one of the largest

with Itochu Oil Exploration Co., Ltd.,natural gas reserves in the world.

acquired a 30% working interest in theAlgeria
Libya

Ohanet Block

Ohanet Block in southeast onshore
Algeria. Based on a risk service contract,
this gas field development projectcommenced production of natural gas,condensate and LPG in October 2003.

Oil and gas field

This is the first large-scale gas development

INPEX Holdings Inc.

AmericasGas processing plant (Copa Macoya Gas Field)

Cuervito and Fronterizo Blocks
Ship Shoal 72, Main Pass 117/118 and West Cameron 401/402

34

Copa Macoya and Guarico Oriental Blocks
Frade Block

1

2

32

33 INPEX Holdings Inc.

1

Copa Macoya and Guarico Oriental Blocks
Contract Area
Copa Macoya

Interest Owned

Venture Company (est.)
Teikoku Oil and Gas Venezuela, C.A.
(June 7, 2006)

Guarico Oriental

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

Copa Macoya Block /Guarico Oriental Block

CaracasGeorgetown
VENEZUELAGUYANA

BogotaCOLOMBIA
BRAZIL

Teikoku Oil participated in the bidding

OSAs to joint venture agreements.

rounds and was awarded a 100%

Based on the new policy, Teikoku Oilworking interest in a central onshore

established gas and crude oil venturearea, the East Guarico Block, in Julycompanies jointly with Petróleos de1992, and the Sanvi-Guere Unit inVenezuela, S.A. (PDVSA), the Venezuelan

November 1993. The Company tooknational petroleum company, andpart in the reactivation of crude oil andcontinued the gas business in the Copa

natural gas fields, exploration andMacoya Block and the crude oil

development activities as an operator

business in the Guarico Oriental Blockunder an operating service agreementfrom April 1, 2006. With the shift to(OSA).

joint venture agreements, the contract

In 2006, the Venezuelan governmentchanged its policy to revise the existing2

periods of the two blocks wereextended to 2026.

Frade BlockContract Area
Frade Block

Venture Company (est.)
Frade Japão Petróleo Limitada (FJPL)(July 5, 1999)

Interest Owned
FJPL 18.2609%
Chevron* 51.7391%
Petrobras 30%*Operator

CamposBRAZIL

Macae

In July 1999, Frade Japão Petróleo

The Frade Oil Field was already

Limitada (FJPL), a joint venture

discovered in 1986 and the reserves

established by INPEX CORPORATION

volume was evaluated by two appraisal

and Sojitz Corporation, acquired awells in 2001, immediately after INPEX’s

12.75% working interest in the Fradeparticipation in the block.

Frade Block

Atlantic Ocean

Block in Brazil’s offshore Northern

In June 2006, the final investment

Campos Basin. In July 2001, FJPL

decision was made for the development

increased its working interest to 15%,of the Frade Oil Field, and INPEX isand in June 2006, FJPL’s total working

engaging in development and pursuinginterest rose to approximately 18.3% incommercial production in 2009. Thisaccordance with contractual agreements.

project will realize the first ever crude oil
production in Brazil by a Japaneseenterprise.

INPEX Holdings Inc.

3

Cuervito and Fronterizo Blocks
Contract Area
CuervitoInterest Owned

Venture Company (est.)
Teikoku Oil de Burgos, S.A. de C.V.
(September 9, 2003)

Fronterizo

Teikoku Oil de Burgos 40%
Petrobras* 45% Diavaz 15%
Teikoku Oil de Burgos 40%
Petrobras* 45% Diavaz 15%*Operator

UNITED STATES OF AMERICA

In October 2003, Teikoku Oil won an

multiple service contract. This project

open bid for and acquired a 40% working

represents the first involvement by ainterest in the Cuervito Block in theJapanese enterprise in an oil and natural

Burgos Basin in northeastern Mexico.

gas development project in Mexico.

The following month, Teikoku Oil also
Cuervitoacquired a 40% working interest in theadjacent Fronterizo Block. This natural
Fronterizo

gas development project fosters theredevelopment of gas fields and

MEXICO

production operations, based on a4

Ship Shoal 72, Main Pass 117/118 and West Cameron 401/402
Contract Area
Ship Shoal 72
Main Pass 117/118

Venture Company (est.)
Teikoku Oil(North America) Co., Ltd.
(May 30, 2003)

Interest Owned
Teikoku Oil (North America) 25%
PetroQuest* 50.5% Other 24.5%
Teikoku Oil (North America) 10%
Hunt* 50% Other 40%

West Cameron 401

Teikoku Oil (North America) 25%
PetroQuest* 38% Other 37%

West Cameron 402

Teikoku Oil (North America) 25%
PetroQuest* 25% Other 50%*Operator

West Cameron
401/402

UNITED STATESOF AMERICA

Main Pass
117/118
MEXICO

Ship Shoal
72

Teikoku Oil participated in oil and gas

To enhance its business portfolio in thefield development projects in the shallow

area, Teikoku Oil will strive to pursue

waters of the Gulf of Mexico in April

new promising projects while continuing

2006. In July of the same year, Teikoku

its efforts to maintain and expand

Oil commenced the production of oil

ongoing projects in the current

and gas in Ship Shoal 72. Following thiscontracted areas.

achievement, production was alsocommenced at Main Pass 118, andTeikoku Oil is currently involved in thedevelopment of West Cameron 401/402.

34

35 INPEX Holdings Inc.

Japan

Shizuoka Line

Minami-Nagaoka Gas Field andDomestic Natural Gas Business

1

INPEX Holdings Inc.

1 Minami-Nagaoka Gas Field and Domestic Natural Gas BusinessWith a ratio of reserves to production (R/P) of around 20 years—even though over 20
Mitsuke City
Sea of Japan

years have passed since the commencement of production in 1984—the MinamiNagaoka Gas Field, which was discovered in 1979, is the largest gas field in Japan.

Minami-Nagaoka Gas Field

Produced and processed natural gas, which is transported through a 1,300km trunk

Sekigahara Gas Field(Underground Strage)

pipeline network that stretches across the Kanto-Koshinetsu region surrounding the
Nagaoka City

Tokyo metropolitan area, is supplied to city gas companies and industrial customers

Higashi-Kashiwazaki
Gas Field

along the pipeline network.
In recent years, the demand for natural gas has grown substantially in Japan

Kashiwazaki City

because it is cleaner and more environmentally friendly compared with other fuels
Ojiya Cityand competing fuel prices have soared. Teikoku Oil’s sales volume for last year was

Gas field

double that of 1996 due to the expanding supply area through aggressive pipeline
development in new areas, and the company’s sales volume for this year is expected

LNG import terminal(planned)

Shin Oumi Line
(under construction)

Minami-Nagaoka
Gas Field

Tokyo Line

Offshore
Iwaki
Gas Field

Gunma Interconnection Line
Shin Tokyo Line
Oil/ Tokyo Gas:
Extension to Shin Tokyo Line (Teikokuplanned)(under construction)

Ryomo Line
Matsumoto Line

to increase 40% year over year.
Teikoku Oil is vigorously reinforcing production facilities in addition to enhancing
pipeline transport capacity with the aim of shoring up growth. Furthermore, westarted preparations to build an LNG import terminal in Joetsu City, Niigata
Prefecture. We will expand our gas business, forcusing on the establisment of a

Iruma Line

Kofu Line“natural gas value chain” that organically connects the domestic infrastructure with

Shizuoka Line
Minamifuji Line
(Teikoku Oil/ Shizuoka Gas/ Tokyo Gas)

Sodeshi LNG Terminal[Shizuoka Gas]
Second Suruga Trunk Line
[Shizuoka Gas]

Domestic Pipeline Network

our group’s overseas natural gas assets prospectively.

3637 INPEX Holdings Inc.

Corporate Governance
INPEX Holdings recognizes the importance of improving the efficiency and soundness of its
management and enforcing compliance in order to continue increasing corporate value andmaintain the trust of its stakeholders including shareholders and society at large, and willcontinue to reinforce corporate governance.
Corporate Governance Structure

their duties as officers of the Company appropriately and with the

Directors and Board of Directors’ Meeting

highest regard for the importance of such matters as their

The Board of Directors of INPEX Holdings (the “Company”) is

obligations in connection with non-competitive practices under
the Japanese Companies Act, the proper manner for dealing withcomposed of 16 members, four of whom are outside directors.
The Board of Directors meets once a month and when necessary

conflict of interest, and confidentiality.

to discuss and make decisions regarding important operational
matters and oversees the execution of directors’ operations.
The four outside directors (“interlocking directors”) have
many years of management know-how and experience in the

Executive Committee

Company’s business and are able to offer objective, professional
advice regarding operations. For this reason, they were asked todecision by the Board of Directors, and to conduct discussions
that facilitate the Board’s decisions by conducting meetings on ajoin the Board of Directors to contribute to the development of theCompany’s business. The four interlocking directors concurrently

weekly and an as-needed basis.

serve as directors or advisors of Japan Petroleum Exploration Co.,
Ltd., Mitsubishi Corporation, Mitsui Oil Exploration Co., Ltd. andNippon Oil Corporation (“shareholder corporations”), respectively.

Statutory Auditors and Board of Statutory Auditors

At the same time, however, the shareholder corporations are
involved in businesses that overlap with those of the Company.
The Company therefore recognizes that it must pay particularoutside the Company, who attend meetings of the Board of
Directors and the Executive Committee, conduct interviews withattention to corporate governance to avoid conflicts of interest inconnection with competition and other matters.
To this end, all Company directors, including the interlocking
directors, are required to sign a written undertaking to carry out

The Executive Committee has been established to speed up
decision-making and resolve matters that do not require a

The Company employs a statutory auditor system. The Board ofAuditors is composed of five members, including three fromdepartments as necessary and audit the business execution of
directors with regard to overall operations and individual
projects based on reports from relevant departments and otherinformation. The Board of Auditors also receives reports related
to audits from the independent auditors and internal audit

Corporate Governance System
Shareholders’ Meeting
Appoint/dismiss

Appoint/dismiss

Independent
Auditors

Board of Statutory Auditors/
Statutory Auditors
Accounting audit

Accounting audit

Audit

Appoint/dismiss
Audit

Board of Directors/
Directors
Appoint/
supervise/dismiss

Appoint

Executive Committee

President
Compliance Committee

ReportInternal Audit Unit

Internal audit

Each Division, Each Subsidiary

reports from the Internal Audit Unit ona regular and an as-needed basis.
Furthermore, statutory auditors attend
meetings between the Board of Auditors
and independent auditors at the Group’s
core businesses, INPEX CORPORATION
and Teikoku Oil Co., Ltd., whennecessary.
The three outside auditors have many
years of experience and extensive
knowledge in the Company’s sphere ofoperations and finance, and leverage thatknowledge in the auditing of theCompany. Two of the three outside
auditors concurrently serve as directors ofJapan Petroleum Exploration Co., Ltd.

INPEX Holdings Inc.

and Marubeni Corporation and are involved in businesses that

improvements by implementing inspections and evaluations ofoverlap with those of the Company.

these systems through audits carried out by the Internal Audit
Unit, which reports directly to the president.

Internal Audit
Composed of six full-time members, the Internal Audit Unit was

System for Administration and Storage of Information

established as an internal audit division independent frombusiness departments and directly responsible to the president,

Regarding Execution of Directors’ Business Duties

to ensure the appropriateness and efficiency of businessof Incorporation and in-house rules, directors administer andstore documents as well as information regarding the execution

activities. The Internal Audit Unit evaluates internal control
systems on a Group-wide basis. It examines and evaluates the

In accordance with laws and regulations, the Company’s Articlesof their business duties.

status of management bodies, the efficiency of business
operations and other matters, pinpointing problem areas, making
necessary reports and conducting follow-up audits to confirm thestatus of improvements. The Internal Audit Unit also contributes

Management System for Losses and Other Risks
To deal with all risks relating to the Group’s business activities,

to proper operational management by exchanging opinions with

the Company has designated a division to support risk
management conducted by directors and formulated a basic risk

independent and statutory auditors as necessary.

management policy. In concert with these initiatives, the

Accounting Audit

Company has established a group-wide risk management
system, which is handled in liaison with other Group companies
based on the Group Management Regulations.

The Company receives accounting audits from Ernst & Young
ShinNihon in accordance with the Companies Act and the
Securities Exchange Law. Certified Public Accountants (CPAs)
and assistants for audits during the fiscal year under review aredescribed as follows.
Names of CPAs:
Atsuhiro Umezawa, Kenji Endo and Yusuke Kosugi
Accounting audit members:
Seven CPAs and 14 assistant CPAs

Internal Control System
System to Ensure that Directors and Employees Conduct
Business in Compliance with Laws and Regulations as wellas with the Company’s Articles of Incorporation
In order to ensure that directors and employees conduct businessin compliance with laws and regulations as well as with theCompany’s Articles of Incorporation, the Company has formulated
a corporate social responsibility policy and is building a structure
to make sure that all concerned thoroughly abide by its contents.
To this end, the Company has appointed a representative
director with compliance responsibilities. Simultaneously, theCompany established a Compliance Committee chaired by theofficer responsible to ensure that directors and employees
remain in compliance with laws and regulations as well as theCompany’s Articles of Incorporation in the execution of theirbusiness duties. Furthermore, the Company set up an internal
notification system with the responsible in-house departments
and an outside specialist (lawyer) as points of contact.
In order to maintain an effective compliance system andrelated in-house rules, the Company also makes timely

With regard to the management of risks relating to everyday
business operations, the Company makes timely improvements
by implementing inspections and evaluations of these systems
through audits carried out by the Internal Audit Unit.
System to Ensure the Efficient Execution of
Directors’ Business Duties
To ensure efficient business execution, directors engage inbusiness operations with particular attention to the following:a. Holding executive committee composed of full-time directors
on a weekly and an as-needed basis in a timely manner, andto perform their duties promptly and appropriately.
b. For everyday business duties, responsibility is delegated inaccordance with rules governing job demarcation andadministrative authority, those responsible at each level
performing their duties in a prompt manner.
System to Ensure Appropriate Business Conduct in a BusinessGroup Composed of the Company and Its Subsidiaries
In accordance with the Group Management Regulations, theCompany entered into a business management agreement with
its core subsidiaries, INPEX CORPORATION and Teikoku Oil Co.,
Ltd. Important matters concerning the two companies arereported on and approved at the Company’s Board of Directors’
meetings as well as at management committees. In addition, theCompany has established subsidiary business management
standards to act as basic criteria in the management of eachcompany’s subsidiaries.
The Company and its Group companies coordinate risk
management, compliance control measures and internal audits.

38

39 INPEX Holdings Inc.

Matters Concerning Auditor-Approved Employees
Appointed to Assist Auditors’ Duties
A Company employee concurrently serves as an auditor’s

Major corporate decisions include the appointment andremoval of directors, the disposition of material assets,amendments to the Articles of Incorporation, mergers, shareassistant. The assistant concerned is engaged in business inaccordance with auditors’ instructions.

exchanges or share transfers, capital reductions andMatters Concerning the Impartiality of the Employee

the holder of special class share, provided 20 percent or

Mentioned in Preceding Clause
Any changes in personnel involving the auditors’ assistantmore of the voting rights attached to shares of common stock
are held by a single non-public entity or a single non-public

are discussed with auditors.

entity and its joint shareholders.

System for Directors and Employees to Report to Auditors,
Other Systems for Reporting to Auditors

The Minister of Economy, Trade and Industry
announced in his 74th bulletin dated April 3, 2006, theestablishment of guidelines for the exercise of special class

Directors and employees report and provide information toauditors for matters stipulated in law, matters that may causesignificant impact on the Company and its Group companies,
and other matters that are judged as necessary to bedissolutions. Director appointments or removals, mergers,
share exchanges or share transfers require a resolution byshareholders’ veto rights (with respect to decisions not
approved by a resolution of the special class shareholder).
The Minister of Economy, Trade and Industry may veto any
one of the aforementioned major corporate decisions only toreported in relation to the execution of auditors’ businessduties.
Auditors shall always obtain job-related information by

the extent that it determines a proposed action or transaction(1) will likely result in INPEX Holdings being managed in amanner inconsistent with its goal of securing a stable energy

attending the Board of Directors’ meetings and otherimportant in-house meetings as well as receiving in-housesupply for Japan as a national flag company; (2) will likely
adversely affect the goal of efficiently securing a stableenergy supply for Japan as a national flag company; or (3)approval documents.
System to Ensure Efficient Audit Implementation
Upon the implementation of audits, the Company ensuresclose coordination with outside specialists including lawyers,
CPAs and certified tax accountants.
In addition, the Company is in close liaison with theinternal audit system to enhance audit efficiency by receiving
reports as required.

Special Class Share
The Company’s Articles of Incorporation stipulate that certain
major corporate decisions require a resolution by the holder
of a special class share in addition to the approval of theshareholders’ meeting or Board of Directors. The Specialclass share is issued to the Minister of Economy, Trade andIndustry.

may affect the exercise of voting rights of special classshareholders.
The exercise of veto rights by special class shareholders
is, therefore, restricted. With the existence of this class ofshare, however, the Company can minimize the risk of losing
management control to foreign-owned concerns and an
unsolicited takeover for speculative reasons. Moreover,because the scope of the veto is limited and guidelines havebeen set for the exercise of veto rights, the special classshare is an absolute minimum necessary measure that is
highly transparent and does not unjustly impinge on the
Company’s ability to operate with flexibility and efficiency.

Risk Management and Corporate Ethics
The Company recognizes that two factors are vital to increase
corporate value amid drastic changes in its operating
environment: forestalling and mitigating losses by properly

INPEX Holdings Inc.

managing risk inherent in its business operations; andRegular Number of Directors

maintaining and strengthening trust with customers,
investors and other parties. As such, the Company will strive

The Company’s Articles of Incorporation stipulate that the
number of directors shall be up to 16.

on an ongoing basis to enhance its risk management.
Compliance is also a vital element of continuous
corporate development. The Company will methodicallydevelop its compliance system to ensure strict observance ofConditions for Appointment and Removal of
Directors
The Company’s Articles of Incorporation stipulate that thelaws, regulations and corporate ethics.

appointment of directors shall be approved by a majority ofthe voting rights with the presence of shareholders

Information Disclosure

representing at least one third of all shareholders.

The Compay seeks to improve management transparency
and accountability by disclosing information in a timely

The Articles of Incorporation also stipulate that theappointment and removal of directors requires approval froma General Meeting of Special Class Shareholders in addition

fashion through IR activities directed at shareholders andinvestors, the shareholders’ meeting, its Web site, public
relations activities and in other ways, and will constantly strive
to enhance these efforts.

Director Compensation
In the fiscal year ended March 31, 2007, the Company’scompensation to directors and auditors were as follows:

to that from an ordinary General Meeting of Shareholders.
For details, please refer to the preceding clause, “Special
Class Share.”Matters Arising from the General Meeting of
Shareholders Resolved at Board of Directors’ Meetings
In accordance with Article 165, Paragraph 2 of theCompanies Act, the Company may acquire its own shares by¥609 million for 15 directors(including ¥12 million for three outside directors)

resolution of the board of directors in pursuit of flexible
implementation of future capital policy.

¥46 million for five auditors(including ¥14 million for three outside auditors)

Furthermore, in order for directors and statutory auditors
to fulfill the roles expected of them and in accordance with
Article 426, Paragraph 1 of the Companies Act, theCompany may, within the limits of laws and ordinances,
exempt directors and statutory auditors (including a person

Notes:(1) The amount of compensation for directors does not include the portion ofsalaries for those who concurrently serve as ordinary employees.
(2) The total compensation includes a ¥110 million bonus (¥104 million for
directors and ¥5 million for auditors) approved at the first Ordinary General
Meeting of Shareholders held on June 26, 2007 as well as an allowancefor directors’ retirement benefits.
(3) Compensation was not paid to one of the 16 directors as of the end of
Fiscal 2006.
(4) The number of auditors include outside auditor Nobuo Kawa who retired
as of June 27, 2006.

Auditor Compensation
In fiscal 2006, INPEX Holdings’ compensation to Ernst &Young ShinNihon was as follows:
Compensation based on Article 2, Paragraph 1 of the Certified
Public Accountant Law (Act No. 103 of 1948): ¥32 million
Other compensation: ¥5 million
Note: Other compensation includes advisory services for the establishment of
an internal control system for financial reporting.

who was a director and a statutory auditor in the Company)
from liability, by resolution of the board of directors.
For the purpose of implementing flexible profit return toshareholders, the Company may make cash distribution(here and hereinafter, “interim dividends”) to the shareholders
or pledge right holders registered or recorded in the final
shareholders' register, and the holders of fractional sharesregistered or recorded in the register of fractional shares as of
September 30 of each year in accordance with Article 454,
Paragraph 5 of the Companies Act.

40

41 INPEX Holdings Inc.

Mission, Corporate Social Responsibility Policy &Health, Safety and Environment Policy

MissionHealth, Safety and Environment (HSE) Policy

The mission of the INPEX Holdings Group is to provide a

The INPEX Holdings Group is a global, independent

stable and efficient supply of energy to our customers

energy company and its vision is to provide a stable andby exploring and developing oil and natural gas

efficient supply of energy to customers. We recognize

resources throughout the world. Through its business,

our responsibility to sustainable development and, in

INPEX Holdings aims to become an integrated energy

this regard, we aim to protect the health and safety of allcompany, which contributes to the community andthose associated with our business activities and to

makes it more livable and prosperous.

minimize adverse impacts on the environment.

Corporate Social Responsibility Policy
The INPEX Holdings Group conducts our businessefficiently and proactively with a long-term perspective.
Guided by the leadership of top management, we arecommitted to fulfilling our corporate social

To accomplish this, we will:• Comply with all applicable HSE laws and regulations,and apply our standards where laws andregulations do not exist or are consideredinsufficient.

responsibilities. Our key principles include:• Implement and maintain HSE management systems,
1. Deliver energy in a safe, efficient and reliable
manner.

and perform regular audits of legal complianceand progress of our HSE activities to achieve
continuous improvement in our HSE performance.

2. Comply with laws, rules and regulations and adhereto ethical business conduct.

• Identify and assess health and safety hazards andeliminate or, if not possible, reduce risks to as

3. Communicate timely and openly with shareholders,

low as reasonably practicable to prevent incidents.

employees, customers, business partners
and other stakeholders.

• Conduct environmental assessments and promote
efficient energy consumption to reduce

4. Value the individuality of our employees, secure aadverse environmental impact.

safe, healthy and worker-friendly environment,
and provide opportunities for career development.

• Maintain and regularly test emergency plans toensure a quick and effective response in the

5. Recognize our responsibility to help preserve theevent of emergencies.

environment and contribute to sustainable
development.

• Provide resources that will enable our employees tomeet HSE objectives and targets.

6. Contribute to the development of our host countries
and communities based on the understandingof cultural diversity.

• Provide training in HSE activities and safe driving toensure all employees are aware of their
responsibilities and accountabilities in these areas.

• Require contractors to manage HSE in accordancewith this Policy, and to achieve agreed HSE targets.

• Communicate openly on HSE activities withstakeholders.

INPEX Holdings Inc.

CSR Activities in Local Communities
In the course of its global business development, INPEX Holdings will respect theculture and tradition of each country and region in pursuit of prosperous coexistencewith each project’s local society.
Mangrove Forestation Project in Abu Dhabi
INPEX CORPORATION’s subsidiary JapanOil Development Co., Ltd. has been jointly
engaged with the EAD*1 in the Mangrove
Forestation Project in Abu Dhabi City andZirku Island since 1999. This project,which serves to promote greening byplanting mangroves in the desert, ranked
sixth out of 62 candidate companies in anenvironmental safety contest hosted by
ADNOC*2 and received recognition for its
outstanding environmental activities.
This project has evolved into theAgro-Fish Project that combinesmangrove forestation and aquafarming tocreate an ecosystem. Mangrove leaves
that fall onto the surface of the water
decompose into organic matter toimprove the environment in which fish
can grow and develop, while fish
excretions function as fertilizer to help
mangroves grow. This cycle will create acoastal ecosystem to turn the desert Mangrove forestation
green. As a result, fish and prawns will besafely raised in Abu Dhabi, bringing a
growing expectation that the vast coastal
desert region can be effectively utilized
for the development of aquafarming.
*1 EAD: The Environment Abu Dhabi that promotes
environmental survey and preservation*2 ADNOC: Abu Dhabi National Oil Company

Planted mangroves

Social Contribution in Venezuela

Donation of and installation support for
personal computers

Cooperation with mural painting project

Teikoku Oil has engaged in exploration anddevelopment in the area around La Pasca
City in Venezuela since 1993. From an earlystage, Teikoku Oil was aware of theimportance of making social contributions tolocal communities and, therefore, hascontinued its social contribution activities byconducting health examinations for local
residents, repairing school buildings andoffering equipment to local projects.
In fiscal 2006, Teikoku Oil implemented
the following CSR projects based on therevenues from a crude oil production
business, a social contribution plan createdby the local government, as well as opinionsfrom local communities:

1. Participated in an education program
established by the Venezuelan government
to improve local residents’ IT knowledge
2. Made contributions to festivals that passon traditional folk dances to children
3. Conducted joint research with local medical
institutions into prostate cancer, which isoften caused by local dietary habits
4. Provided maintenance services for theelectricity network in local areas
5. Established and donated accommodation
facilities to La Pasca City to make it easierfor pregnant women to visit the city for
medical care
6. Cooperated in a mural painting project tobeautify school facilities in La Pasca City

Supporting Activities for Indonesian Students
In March 1981, INPEX CORPORATION established the INPEX
Scholarship Foundation to foster educational and academic
development in Indonesia and Japan, as well as contribute tobetter understanding, friendship and goodwill between the twocountries. The principal activity of this institution is to invite
Indonesian natural science graduates from Indonesian
universities to attend master’s courses in Japan as scholarshipstudents. The majority of these scholarship students are civil
servants (national university lecturers, research workers atnational laboratories and employees of state-run companies
and government agencies), who are expected to return to their

Cultural exchange with Indonesian students

posts after the period of study and to contribute to thedevelopment of industry in Indonesia. Simultaneously, INPEX
offers support to young Japanese researchers wishing to studysociology and social anthropology in Indonesia. The cumulative
number of scholarship students by fiscal 2006 was 127.

In addition to the above-mentioned activities, the INPEX Holdings Group and its partner companies across the world engage
in a variety of social contribution activities. For details, please refer to the INPEX Holdings Group’s CSR Report 2007.

42

43 INPEX Holdings Inc.

Management Team

Representative Director

Masatoshi Sugioka

Director and Chief Operating
Officer, Administration
Division

Director and Chief Operating
Officer, Corporate Strategy &Planning Division

Hisatake Matsuno Katsujiro Kida

Director and Deputy Chief
Operating Officer,
Corporate Strategy &Planning Division/
Technology Division

Masaharu Sano
Directors (Adjunct)

Director and Assistant Chief
Operating Officer, Corporate
Strategy & Planning Division/
Technology Division

Representative Director andChairman

Representative Director andPresident

Kunihiko Matsuo

Naoki Kuroda

Director and Chief
Operating Officer,
Accounting, Finance, &IT System Division

Director and Chief
Operating Officer,
Technology Division

Mutsuhisa Fujii

Director and AssistantChief Operating Officer,
Corporate Strategy &Planning Division

Director and Deputy Chief
Operating Officer,
Technology Division

Takeshi Maki Kyosuke Furukawa

Statutory Auditor

Statutory Auditor

Seiji Yui

Statutory Auditor

Shigeru Hayashi Haruhito Totsune Shigeru Watanabe

Akinori Sakamoto Seiya Ito

Kazuo Wakasugi Hisanori Yoshimura Yoshiyuki Kagawa Shigeo Hirai
Hiroshi Sato Koichi Mochizuki

Statutory Auditors (Adjunct)

Director and Deputy Chief
Operating Officer, Corporate
Strategy & Planning Division/
Technology Division

INPEX Holdings Inc.

Financial Section

Contents
Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

45

Consolidated Balance Sheet

57

Consolidated Statement of Income

59

Consolidated Statement of Changes in Net Assets

60

Consolidated Statement of Cash Flows

61

Notes to Consolidated Financial Statements

62

Report of Independent Auditors

74

44

45 INPEX Holdings Inc.

Management’s Discussion andAnalysis of Financial Condition and Results of Operations
INPEX Holdings Inc. was established on April 3, 2006 as a joint holding company with two
wholly owned subsidiaries, INPEX CORPORATION and Teikoku Oil Co., Ltd.. No comparative
financial results for previous fiscal years have been provided as the Company started to compile
consolidated financial results from the fiscal year ended March 31, 2007.

Overview
During this fiscal year under review, the overall
Japanese economy showed a steady recovering
trend, underpinned by strong global economic
growth that was primarily driven by buoyant conditions in the United States and China. This favorable
situation boosted exports and capital investment inJapan. As a result, Japanese corporate earnings
enjoyed solid growth, which prompted improvements
in consumer spending and in the labor market.
An important factor affecting our group businessperformance, global crude oil prices, initially gathered momentum in the first half of the fiscal year.
They remained high until summer due to an increasein demand for heating oil during the winter period in
the United States. As the year proceeded, otherevents also caused prices to move upwards. Therewas strong demand for oil from fast-growing emerging economies, including China and India. Increasing
uncertainty over the situation in the Middle East andthe large volume of speculative funds that flowed into
the oil markets during this period resulted in theprice of WTI (West Texas Intermediate) smashing its
previous all-time high and reaching the US$78.40
per bbl mark in July, 2006. However, oil prices
began to fall in September, 2006 in the wake of
rapidly diminishing concerns over the tight supply situation, reflecting several factors including a slowdown in U.S. demand resulting from the soaring oil
prices. The damage from hurricanes in the UnitedStates was far less than anticipated; this fact also
serving to allay concerns about oil supplies. WTI
dropped sharply to US$55 per bbl by November,2006 before recovering to the US$60 per bbl level by
the end of 2006, supported by a reduction in supply
following OPEC’s decision to cut supply and otherfactors. Crude oil prices fell temporarily in January,
2007 because of the mild winter but rebounded after
cold snaps in February and heightened international
tensions. Consequently, WTI crude closed at
US$65.87 at the end of the fiscal year. Meanwhile,
domestic crude oil and petroleum prices followed asimilar pattern to global price movements, the Group
recording an average sales price for crude oil for the
fiscal year of US$62.16 per bbl.

With regard to foreign exchange markets, which
also have a large impact on our business performance, the U.S. dollar began to trade at the upper
end of the ¥117 range for the year. The currency
then began to depreciate sharply following a special
statement issued at the G7 meeting held in
Washington D.C. in April, 2006. Member countries
agreed to embark on correcting global imbalances,namely disproportions in international income andexpenditure as well as the U.S. current accountdeficit. The U.S. dollar continued to decline against
the yen, falling below the ¥110 level at one time inMay, 2006. With rising market expectations of a U.S.
Federal Reserve Board interest rate hike, however,the currency moved upward against the yen. This
trend was accelerated by so-called “yen carrytrades,” trading that benefits from interest rates
spread between U.S. and Japan, boosting the U.S.
dollar to the ¥122 level in January, 2007. Following
that, the U.S. dollar lost momentum again andslipped to the lower end of the ¥115 level before edging up to nearly the same level as that at the beginning of the year. As a result, the U.S. dollar middle
rate (TTM) at the end of the fiscal year came in at¥118.09, down ¥0.62 from the end of the previous
fiscal year. The U.S. dollar average exchange rate forGroup sales was ¥116.90.
For the year ended March 31, 2007, the Group
recorded net sales of ¥969.7 billion and net incomeof ¥165.1 billion. Net sales of crude oil and natural
gas amounted to ¥607.4 billion and ¥332.9 billion,
respectively.
As of March 31, 2007, our total net proved
reserves were 1,770 MMboe, and for the year ended
March 31, 2007, our net annual production was 418
Mboe per day. Net proved reserves comprised 1,139
MMbbls of crude oil, condensate and LPG, and3,782 Bcf (billion cubic feet) of natural gas as ofMarch 31, 2007. Net proved undeveloped reserves
accounted for 27.4% of net proved reserves. Net
production for the year ended March 31, 2007 averaged 243 Mbbls per day of crude oil, condensate
and LPG, and 1,051 MMcf per day of natural gas.

INPEX Holdings Inc.

Our Method of Accounting for Types of Arrangements
Most of our group’s net sales and income comefrom its crude oil and natural gas business.
Currently, we have mainly entered into two types ofarrangements in connection with our oil and gas
business: production sharing contracts (PSCs) andconcession agreements which include domestic
mining rights and overseas permits, licenses orlease agreements.

Production Sharing Contracts
Cost Recovery and Production Sharing
The allocation of crude oil and natural gas production among the host country’s government (or government entity) and contractors (including
ourselves) must first be determined under PSCs.
Different PSCs provide for different formulas forallocating oil and gas production among the hostcountry’s government and contractors. The following discussion is based on one type of PSC arrangement that applies to projects in Indonesia, for which
the Company concludes many agreements. Under
this type of PSC, at the end of each fiscal year, total
production for that year is allocated to:(1) “first tranche petroleum,” which is a prescribed
portion of total production allocated between thehost country’s government and the contractors
pursuant to prescribed percentages;(2) “cost recovery portion,” which is the oil and gas
equivalent, determined based upon the current
unit price of crude oil and natural gas, of (i)non-capital expenditures incurred for production during the current period and (ii) scheduled
depreciation of the capital expenditures for thecurrent period, as calculated under the PSC,
and which is allocated only to the contractors;
because the oil and gas equivalent is determined based upon the current unit price, as theunit price of crude oil and natural gas increases,
the volume of oil and gas comprising the “costrecovery portion” decreases while that of the“equity portion” (explained below) increases;
and if the actual production for the year is notenough to cover the entire quantity of the oiland gas equivalent so calculated, the “costrecovery portion” will be reduced to the extent it
is covered by the actual production, and thequantity not so covered is carried forward to thesucceeding year in accordance with the relevant
PSC; and(3) “equity portion,” which represents the residual
and is allocated between the host country’s government and the contractors pursuant to prescribed percentages.
For purposes of our statements of income, we record:• as net sales, our share of total sales relating tocrude oil and natural gas production that are allocated to contractors, and• as cost of sales, a portion of “Recoverable
accounts under production sharing” that is recovered through the allocation of our share of the“cost recovery portion.”

Recoverable Costs under PSCs
Exploration Costs
Our share of all recoverable exploration costs
incurred under the terms of the relevant PSC iscapitalized under “Recoverable accounts under
production sharing.”
Development Costs
We record our share of all recoverable expenditures
under the terms of the relevant PSC under“Recoverable accounts under production sharing.”
Production Costs
During the production phase, operating costs
incurred for production are initially included under“Recoverable accounts under production sharing” ifsuch costs are recoverable under the relevant PSC.
Administrative Expenses
Administrative expenses are recorded under“Recoverable accounts under production sharing” ifsuch expenses are recoverable under the relevant
PSC. As explained above under “Cost Recovery andProduction Sharing,” such expenses are recovered
as capital or non-capital expenditures.

46

47 INPEX Holdings Inc.

Non-recoverable Costs under PSCs
Acquisition Costs
For projects under PSCs that are entirely in the
exploration phase, we expense costs relating to theacquisition of rights, or “Exploration and development rights,” as amortization of exploration anddevelopment rights of other expenses when they are
incurred. When we acquire rights to projects which
are already in the development or production
phase, we record the acquisition expenditures orcosts under “Exploration and development rights”
in our consolidated balance sheets, which areamortized under the unit-of-production method andaccounted for depreciation and amortization.
Generally, cost recovery provisions under PSCs do
not cover such expenditures or costs.
Interest on Loans
We expense interest on loans we obtain for PSC
projects.

Concession Agreements

Exploration Costs
Our share of costs incurred for exploration isexpensed as incurred.
Development Costs
Our share of costs related to mining facilities is capitalized under “Tangible fixed assets” in the balance
sheets. We depreciate overseas tangible fixed
assets primarily under the unit-of-production
method and domestic tangible fixed assets primarily
under the straight-line method during our production. Such depreciation expenses constitute cost of
sales.
Production Costs
During the production phase, our share of operating
costs is included in cost of sales.
Administrative Expenses
Our share of administrative expenses is expensed
as incurred.

Acquisition Costs
We account for acquisition costs related to projects
under concession agreements, or “Mining rights” inthe same manner as those related to projects under
PSCs, as described above.

Critical Accounting Policies and Estimates
We prepare our consolidated financial statements inconformity with Japanese GAAP. The preparation ofthese financial statements requires the use of estimates, judgments and assumptions that affect thereported amounts of assets and liabilities at the dateof the financial statements and reported amounts ofrevenues and expenses during the reporting period.
Actual results may differ from these estimates, judgments and assumptions.
An accounting estimate in our consolidated
financial statements is a critical accounting estimate
if it requires us to make assumptions about mattersthat are highly uncertain at the time the accounting
estimate is made, and if the presentation of our
financial condition or results of operations are materially affected either by different estimates that wereasonably could have used in the current period,or by changes in the accounting estimates that arereasonably likely to occur from period to period. We
have identified the following critical accounting estimates with respect to our financial presentation:

Allowance for Recoverable Accounts under
Production Sharing
We capitalize expenditures made during the exploration,
development and production phases under PSCs as“Recoverable accounts under production sharing,” ifthey are recoverable under the relevant PSC. A reservein equal amounts to exploration costs is provided for as“Allowance for recoverable accounts under production
sharing,” which is a reserve account for potential losses
from unsuccessful exploration. Generally, this allowance
continues to remain unchanged in our balance sheet
until the allowance balance exceeds the remaining balance of exploration cost previously capitalized during the
exploration phase under “Recoverable accounts under
production sharing.” In light of the uncertainly, a reserve
is provided for probable losses on development activities
individually estimated for each project as “Allowance forrecoverable accounts under production sharing.” While
we believe that the assessment and estimates are reasonable, future changes in the actual situation of projects may affect future results of operations.

INPEX Holdings Inc.

Unit-of-Production Method

Deferred Tax Assets

Overseas mining facilities, mining rights and exploration and development rights when such rights are
acquired during the production phase are mainly
amortized by the unit-of-production method. The
unit-of-production method requires a significant
estimate as to the reserves quantities. While webelieve that our reserves estimates are appropriate,changes in the estimates of the reserves may significantly affect future results of operations.

We record deferred tax assets for temporary differences (including net operating loss carry-forwards)
arising mainly from the write-down of investments inrelated parties and foreign tax payable. Valuation
allowances are provided when we believe that it ismore likely than not that assets will not be realized.
Also, we take into account the effect of foreign tax
credits in the calculation of valuation allowances.
Realization of deferred tax assets is principallydependent on our generating sufficient taxable
income based on available evidence. If future taxable income is lower than expected due to market
conditions, foreign exchange rates or poor operating
results, adjustments may be required.

Liabilities for Site Restoration andDecommissioning Costs
We recognize liabilities for the expected amount of
future decommissioning costs based on the futuredecommissioning plan. While we believe that theassessment and estimates are reasonable, futurechanges in the decommissioning plan may affectfuture results of operations.

Liabilities for Losses on Development
Activities
We recognize liabilities for the amount of provable
losses on oil and natural gas development activities
which are estimated individually for each project,such as delays in development. While we believethat the assessment and estimates are reasonable,
future changes in the actual situation of projects
may affect future results of operations.

Allowance for Investments in Exploration
Companies
We have made investments in companies that are
engaged in oil and gas activities, and have provided
an allowance for probable losses on such investments at an estimated amount based on the net
assets of the investees. While we believe that theassessment and estimates are reasonable, futurechanges in the actual production volume, prices
and foreign exchange rates may affect future resultsof operations.

Retirement Benefits to Employees
Our group recognizes the accrued retirement benefits to employees at the present value of the future
obligations at the end of this period and related
periodic benefit cost which have occurred during
this period. To determine the accrued retirement
benefits and periodic benefit cost, our group uses
assumptions, including discount rate, resignation
rate, rate of compensation increase, the expected
return on plan assets.
Differences between actual results and thoseassumptions or differences arising from changes in
the assumptions may generate actuarial gains andlosses, and the future results of operations may beaffected. Any actuarial gains and losses are charged
or credited to income during the period when they
are generated.
Since certain subsidiaries are classified as small
enterprises under Japanese “accounting standardsof retirement benefit” because an individual retirement benefit plan covers less than 300 people, we
employ a simplified method (at the amount which
would be required to be paid if all active employees
are voluntarily terminated their employment as of
the balance sheet date) for the calculation of theretirement benefit obligations of the subsidiaries.

48

49 INPEX Holdings Inc.

Result of Operation
The following table shows consolidated income statement data derived from audited consolidated financial statements:(Millions of yen, except percentages)
Year ended March 31,

2007

Net sales¥969,713

Cost of sales

343,795

35.5

Gross profit

625,918

64.5

Exploration expenses

17,6891.8

Selling, general and administrative expenses

36,285

3.7

Depreciation and amortization

12,8671.3

559,077

57.7

Interest income

12,843

1.3

Gain on transfer of mining rights

33,534

3.4

Foreign exchange gain

5,738

0.6

Operating income

100.0%

Other income:

Other

7,965

0.8

60,080

6.1

Interest expense

12,3891.3

Provision for allowance for recoverable accounts under production sharing

6,176

0.6

Provision for exploration projects

2,973

0.3

Other expenses:

Other

11,356

1.2

32,894

3.4

Income before income taxes and minority interests

586,263

60.4

Income taxes

413,239

42.6

Minority interests
Net income

7,932¥165,092

0.8
17.0%

INPEX Holdings Inc.

Net Sales
Net sales were ¥969.7 billion for the year ended
March 31, 2007 reflecting higher price of oil andnatural gas, an increase in oil and gas sales volume
and depreciation of the average exchange yen rate
for the year. Net sales of crude oil and natural gas
business were ¥966.1 billion. Of this figure, net
sales of crude oil were ¥607.4 billion, net sales ofnatural gas were ¥332.9 billion and net sales ofother oil and gas business, such as petroleum products, were ¥25.8 billion for the year ended March
31, 2007.
Sales volume of crude oil was 83,276 thousands
barrels, mainly due to an increase in production volume of crude oil at the ACG Oil Fields and ADMA
Block. Sales volume of natural gas was 366 Bcf,
mainly due to an increase in the supply volume of
raw gas for LNG plant at the Offshore Mahakam
Block and the sales volume of domestic natural gas.
The average overseas sales price of crude oil forthe year ended March 31, 2007, was US$62.16 perbbl and the average overseas sales price of natural
gas was US$7.51 per thousand cubic feet. The
average exchange rate for the Group’s sales was¥116.90 per U.S. dollar.
Cost of Sales
Cost of sales was ¥343.8 billion for the year ended
March 31, 2007. Of this figure, cost of sales fromcrude oil was ¥237.1 billion, from natural gas ¥86.0
billion.
Exploration Expenses
Exploration expenses were ¥17.7 billion for the year
ended March 31, 2007 primarily due to active
exploration in the Asia and Oceania areas.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were¥36.3 billion mainly due to personnel expenses andfreight expenses. Of this figure, amortization of
goodwill under business integration and so forthtotaled ¥7.0 billion.
Depreciation and Amortization
Depreciation and amortization for the year ended
March 31, 2007, amounted to ¥12.9 billion.
Under our accounting for PSCs, capitalized
costs included in “Recoverable accounts under production sharing” are reflected in cost of goods soldat the time of recovery, and thus the Company does
not have a substantial amount of fixed asset depreciation or amortization.

Other Income
Other income was ¥60.1 billion for the year ended
March 31, 2007. This was mainly due to the transfer of a part of interest in the WA-285-P in offshore
Western Australia of ¥33.5 billion, interest incomeof ¥12.8 billion and foreign exchange gain of ¥5.7
billion.
Other Expenses
Other expenses were ¥32.9 billion for the year
ended March 31, 2007. This was mainly due tointerest expenses of ¥12.4 billion, provision forallowance for recoverable accounts under production sharing of ¥6.2 billion and provision for exploration projects of ¥3.0 billion.
Income Taxes
Income taxes for the year ended March 31, 2007,
were ¥413.2 billion due to increased sales in aregion where a high tax burden was imposed. The
effective income tax rate for the year ended March
31, 2007, was 70%.
As explained in “Factors Affecting Our Resultsof Operations—Corporate Taxes Imposed on Us
Outside Japan,” the fact that most of theCompany’s corporate taxes are paid overseas,
where certain regions impose high corporate taxes,
and expenses incurred in Japan are not deductible
for such taxes results in a high effective income tax
rate.
Minority Interests
Minority interests for the year ended March 31,
2007 were ¥7.9 billion.
Net Income
As a result of the foregoing factors, net income was¥165.1 billion for the year ended March 31, 2007.

50

51 INPEX Holdings Inc.

Investment and Funding
Our Investments for Crude Oil and Natural
Gas Projects
In order to maintain stable earnings, we need tocontinuously explore for new reserves of crude oiland natural gas.
The following information, which includes thebreakdown of our investments among exploration
expenditures, development expenditures and operating expenses, has been prepared based on available data in the reports provided by operators. The
definition of each item is as follows:• Exploration expenditures include exploration
drilling, and geological and geophysical studies. If
the project (contract area) is entirely in the exploration phase, administrative costs, such as personnel costs and office operations costs in the
country where the relevant project is conducted
are included in this category.
• Development expenditures include development
drilling and production facilities.
• Operating expenses include well operations, maintenance, and supervision of production activities.
Administrative expenses in the project (contractarea) where there is a producing field and/or adevelopment field, are included in this category.

Our definition of exploration and development
expenditures and the basis of preparation of thefollowing table are different from those required
under the Statement of Financial AccountingStandard No. 69, “Disclosures about Oil and Gas
Producing Activities,” or SFAS 69. Such differences include, but are not limited to, the following:• Our expenditures reflected in the table are on a
cash-call basis as to joint ventures for PSCs where
we are not an operator, while SFAS 69 requiresthat expenditures be recorded on an accrualbasis.
• We prepared the table based on definitions in thereports from operators. These definitions may not
be consistent with that of SFAS 69.
• SFAS 69 requires that administrative costs notdirectly related to exploration and development
activities be excluded from exploration and development expenditures. However, administrative
costs are not necessarily excluded from those
expenditures.

The table below shows our expenditures for the year ended March 31, 2007:(Millions of yen, except percentages)
Year ended March 31,

2007

Exploration¥ 30,544

10.5%

Development

185,957

63.8

Subtotal

216,501

74.3

Operating expenses

74,95225.7¥ 291,453

100.0%Total

The table below shows our exploration and development expenditures for the year ended March 31, 2007 bygeographical region:(Millions of yen, except percentages)
Year ended March 31,

Japan

2007

¥ 11,318

5.2%

Asia & Oceania

112,434

51.9

NIS

70,67932.7

Middle East & Africa

19,2088.9

Americas

2,862

1.3

Total

¥ 216,501

100.0%

INPEX Holdings Inc.

The table below shows our operating expenses for the year ended March 31, 2007 by geographical region:(Millions of yen, except percentages)
Year ended March 31,

2007

Japan

¥ 8,978

12.0%

Asia & Oceania

43,126

57.5

NIS

4,760

6.4

Middle East & Africa

18,018

24.0

70

0.1

AmericasTotal¥ 74,952

100.0%

Our Expenditures for Acquisitions of Crude Oil and Natural Gas Projects
The table below shows our expenditures for acquisitions of oil and gas properties for the year ended March 31,
2007 by geographical region. Expenditures for acquisitions include the acquisition cost of mining rights, exploration and development rights, and signing bonuses, as well as the acquired tangible fixed assets and recoverable accounts under production sharing due to acquisitions.
(Millions of yen, except percentages)
Year ended March 31,

Asia & Oceania
Middle East & Africa
Total

Our expenditures for acquisitions were ¥1.1 billion for the year ended March 31, 2007.

2007

¥

509

44.5%

635

55.5%

¥1,144100.0%

52

53 INPEX Holdings Inc.

Analysis of Recoverable Accounts under Production Sharing
With respect to projects under PSCs, our share of costs arising during the exploration, development and production
phases are capitalized under “Recoverable accounts under production sharing.” The following table shows changes
in the balance of “Recoverable accounts under production sharing” during the year ended March 31, 2007:(Millions of yen)
Year ended March 31,

2007

Balance at beginning of period¥295,076

Add: Exploration costs

9,792

Development costs

160,114

Operating expenses

46,683

Other

17

Less: Cost recovery—capital expenditures

105,950

Cost recovery—non-capital expenditures

86,320

Other

262

Balance at end of period

319,150

Allowance for recoverable accounts under production sharing at end of period¥ (51,191)“Cost recovery—non-capital expenditures” aregenerally higher than “operating expenses”
because some of the exploration costs and development costs that are recoverable in the fiscal year
when such costs are incurred are included in addition to operating expenses.
Exploration costs for the year ended March 31,
2007 were primarily due to the explorations at the
Offshore Mahakam Block, Masela Block andKashagan Oil Field.
Development costs for the year ended March
31, 2007 were primarily due to the development
expenditures at the Offshore Mahakam Block, ACG
Oil Fields and Kashagan Oil Field.
Operating expenses for the year ended March
31, 2007 were primarily due to the operation
expenses at the Offshore Mahakam Block.
“Add: Other” for the year ended March 31,
2007 consisted of amount resulted from currencytranslations of foreign subsidiaries which are calculated at the rate of balance sheet date.
Cost recovery during the year ended March 31,
2007 primarily consisted of cost recovery at the
Offshore Mahakam Block, ACG Oil Fields and SouthNatuna Sea Block B.
A substantial portion of the amount under“Less: Other” for the year ended March 31, 2007
related to reductions in the balance of recoverable
accounts under production sharing with respect tofields being closed.

Liquidity and Our Funding Sources
Our policy is to maintain sufficient cash on hand at
any given time to fund expenditures for existing andnew crude oil and natural gas projects in a timely
manner and to provide for any steep decline of oil
and gas prices. For this purpose, our cash management policy is to invest excess cash in low-risk andliquid financial instruments. It is our strategy to
improve capital efficiency in the long term by business expansion while maintaining a sound financial
position with sufficient cash on hand.
Our primary sources of funding are cash on
hand and many other sources. We fund oil and gas
exploration projects with cash on hand and equity
financing; and oil and gas development projects,
construction or expansion of domestic pipeline andother supply infrastructure with cash on hand
and/or long-term loans. The Japan Bank forInternational Cooperation (JBIC) and Japanesecommercial banks have been providing long-termloans for oil and gas development activity. Certain
aggregate outstanding principal amounts of ourlong-term debt have been guaranteed by Japan Oil,Gas and Metals National Corporation (JOGMEC).
Development Bank of Japan and Japanese commercial banks have been providing long-term loans
for construction or expansion of domestic pipeline.
We are considering to diversify financing
sources in the future using non-recourse project
financing, arrangement, issuance of bonds andequity financing.

INPEX Holdings Inc.

Maturities of Long-term Debt
The following table summarizes the maturities of our outstanding long-term debt as of March 31, 2007:(Millions of yen and U.S. dollars)Long-term debt denominated inYears ending March 31,

U.S. dollars

Yen

Total yen equivalent

2008

$

376.1

¥ 5,859¥ 50,274

2009

130.0

4,839

20,191

2010

130.0

4,562

19,914

2011

130.0

4,480

19,831

2012

125.0

4,057

18,8182013 and thereafter
Total

756.2

30,262

119,566$ 1,647.3¥ 54,059¥ 248,594

Historical Cash FlowsThe following table summarizes our historical cash flows for the year ended March 31, 2007:(Millions of yen)
Year ended March 31,

Net cash provided by operating activities
Net cash used in investing activities

2007¥ 231,982(209,243)

Net cash provided by financing activities

13,794

Cash and cash equivalents at end of period

189,417

Cash Provided by Operating Activities
Cash provided by operating activities were ¥232.0
billion for the year ended March 31, 2007. This wasprimarily due to an increase of net income after
payments of income taxes and recovery of recoverable accounts under production sharing (capital
expenditures). Meanwhile, increase in recoverable
accounts under production sharing (operating
expenditures) represents investment in recoverable
accounts under production sharing (operating
expenditures), net of recovery of recoverable
amounts under production sharing (operating
expenditures).

Cash Used in Investing Activities
Cash used in investing activities were ¥209.2 billion
for the year ended March 31, 2007. This was mainly due to investment in recoverable accounts under
production sharing (capital expenditures), purchaseof investment securities and purchase of tangible
fixed assets.
Cash Provided by Financing Activities
Cash provided by financing activities were ¥13.8
billion for the year ended March 31, 2007. This wasprimarily due to proceeds from sales of treasury
stock.

54

55 INPEX Holdings Inc.

Factors Affecting Our Results of Operations
A number of factors affect our results of operations,
including the following:• crude oil and natural gas prices;• our crude oil and natural gas sales volumes;• level of exploration activities;• fluctuation in exchange rates between the U.S.
dollar and Japanese yen;
• fluctuation in interest rates; and• corporate taxes imposed on us outside Japan.

Crude Oil and Natural Gas Prices
While we negotiate sales prices for crude oil andcondensate with customers, those prices generally
take into account official prices, which are determined by governmental authorities in their respective oil producing regions, which fluctuate generally
in line with the fluctuation in international crude oil
prices. Sales contracts for crude oil are generally
one-year contracts but also include spot contracts.
In both cases, sales prices are those at the time ofsale and thus fluctuate.
For our natural gas, which is currently mostly
produced in Indonesia, the selling price is determined based on the Indonesian Crude Price, or
ICP, pursuant to each sales contract. Sales contracts for natural gas are long-term contracts, typically lasting over 10 years. Typically, natural gas
sales prices move in conjunction with crude oil
prices; however, movements in sales prices of natural gas are not directly proportional to those of
crude oil prices.
Most of our sales contract with domestic customers of natural gas sales are made and enteredinto by fixed sales prices for the fiscal year taking
into consideration the price of competing energy
such as LNG.
As mentioned above, we are exposed to fluctuations in prices of crude oil and overseas natural gas,
which are determined by reference to international
market prices. International oil and gas prices arevolatile and are influenced by global as well as
regional supply and demand conditions. This volatility has a significant effect on our net sales and net
income.

Our Crude Oil and Natural Gas Sales
Volumes
Our crude oil and natural gas sales volumes depend
primarily on the production level. As describedabove in “Our Method of Accounting for Types of
Arrangements, ” our sales volumes under production sharing contracts depend on not only production levels, but also on the price of crude oil andnatural gas, cost recovery and equity portion.

Level of Exploration Activities
Due to our policy of expensing exploration costs or,in the case of production sharing contracts, providing a full allowance for recoverable costs incurred in
the exploration phase, an increase in our level ofparticipation in exploration phase projects has amore immediate negative impact on our results ofoperations than would be the case if such costs
were accounted for using the successful efforts orfull cost method of accounting under U.S. GAAP.

Fluctuation in Exchange Rates between the
U.S. Dollar and Japanese Yen
Because our sales of crude oil and natural gas,
most of our expenses and a substantial portion of
our debt are denominated in U.S. dollars, our net
income, which is denominated in Japanese yen, isaffected by fluctuations in the exchange rate
between these currencies. Depreciation of theJapanese yen against the U.S. dollar positively
impacts our sales and related earnings, while aappreciation of the Japanese yen against the U.S.
dollar has the opposite effect. However, as a substantial portion of our long-term debt is denominated in U.S. dollars, revaluation of such long-term
debt at the end of each period results in a foreignexchange loss if the Japanese yen depreciates
against the U.S. dollar, while a appreciation of theJapanese yen against the U.S. dollar has opposite
effect. As a result, these positive and negative
effects cancel out each other to the certain extend.

INPEX Holdings Inc.

Fluctuation in Interest Rates
We fund certain development projects with long-termloans. A substantial portion of our long-term debt has
floating interest rates that are determined by reference to the six-month London Interbank Offered
Rate in U.S. dollars. Accordingly, we are exposed tofluctuation in interest rates in U.S. dollars.

Corporate Taxes Imposed on Us OutsideJapan
We conduct mostly operations outside Japan, andmost of corporate taxes are paid overseas. With
respect to the overseas taxes, expenses incurred inJapan are not deductible in general. Such domestic
expenses include those relating to administrative
expenses at our headquarters, foreign exchange
losses and the provision of various types ofallowances. When such domestic expenses
increase, pre-tax income recorded in our consolidated statement of income decreases, but the corporate taxes we pay overseas do not decrease,
thereby increasing our effective tax rate.
Indonesia imposes corporate taxes on oil andgas operations on a PSC basis and does not permit
the aggregating of expenses from different PSCs fortax purposes. Thus, even if our exploration activities
in Indonesia expand and related expenses increase
with respect to one PSC, we cannot deduct such
expenses from taxable income attributable to another PSC in that country.

Consolidated Financial Forecasts for the YearEnding March 31, 2008
For the year ending March 31, 2008, consolidated
net sales are expected to be ¥1,008.0 billion, an
increase of ¥38.3 billion, or 3.9%, operating income
are expected to be ¥529.0 billion, a decrease of¥30.1 billion, or 5.4%, ordinary income are expected to be ¥519.0 billion, a decrease of ¥67.3 billion,or 11.5%, and net income are expected to ¥120.0
billion, a decrease of ¥45.1 billion, or 27.3%, compared with those for the year ended March 31,
2007. The increases in sales are expected to mainlyreflect anticipated increases in sales volume. On theother hand, the decrease in income are expected tomainly reflect anticipated increase in investment for
exploration project and the gain recognized on thetransfer of a part of interest in the WA-285-P in offshore Western Australia during the year ended
March 31, 2007.
Average oil price of Brent crude was US$68.7 per
bbl and average exchange rate of the Japanese yen
against the U.S. dollar was ¥120.8 for the threemonths ended June 30, 2007. In these estimates
which we announced on August 9, 2007, the oil priceof Brent crude was assumed to be US$70.0 per bbl
for the three months ending September 30, 2007 andUS$60.0 per bbl for the six months ending March 31,
2008 with the exchange rate of the Japanese yen
against the U.S. dollar at ¥115 for the nine months
ending March 31, 2008 in the light of the result for
the three months ended June 30, 2007.

56

57 INPEX Holdings Inc.

Consolidated Balance Sheet
INPEX Holdings Inc. and Consolidated Subsidiaries
As of March 31, 2007

Millions of yen

Thousands of
U.S. dollars(Note 3)

2007

2007

Cash and cash equivalents¥ 189,417$ 1,604,005

Accounts receivable—trade81,955694,005

Marketable securities (Note 4)

46,618394,767

Inventories

13,255112,245

Deferred tax assets (Note 6)

17,242

146,007

Accounts receivable—other

81,689691,752

Other

43,960372,259

ASSETS

Current assets:

Less allowance for doubtful accounts

(12)

(102)

474,124

4,014,938

Buildings and structures

185,484

1,570,700

Wells

173,245

1,467,059

Machinery, equipment and vehicles

252,832

2,141,011

Land

28,310239,732

Construction in progress

24,730209,417

Other

8,787

74,410

Tangible fixed assets:

Less accumulated depreciation and amortization

673,388

5,702,329(454,161)(3,845,889)

219,227

1,856,440

Intangible assets:
Goodwill (Note 12)132,106

1,118,689

Exploration and development rights

127,110

1,076,382

4,365

36,963Mining rights
Other

2,241

18,978265,8222,251,012

Recoverable accounts under production sharing

319,150

2,702,599

Less allowance for recoverable accounts under production sharing(51,191)(433,491)

267,959

2,269,108354,851

3,004,920

Investments and other assets:

Investment securities (Notes 4 and 5)
Long-term loans receivable

3,389

28,698Other investments

34,879295,359

Less allowance for doubtful accounts(1,870)(15,835)

Less allowance for investments in exploration(10,274)(87,001)

Total assets
Refer to accompanying notes to consolidated financial statements.

648,934

5,495,249¥1,608,107$13,617,639

INPEX Holdings Inc.

Millions of yen

Thousands of
U.S. dollars(Note 3)

2007

2007

LIABILITIES AND NET ASSETS

Current liabilities:
Accounts payable—trade¥

21,794$

184,554

Short-term borrowings and current portion of long-term debt (Note 5)

50,649428,902

Income taxes payable (Note 6)

85,143721,001

Accounts payable—other

88,768751,698

Provision for exploration projects

6,900

58,430Accrued bonuses to officers

194

1,643

12,800108,391

266,248

2,254,619

Long-term debt (Note 5)

198,320

1,679,397

Deferred tax liabilities (Note 6)

38,995330,214

Accrued retirement benefits to employees

8,371

70,887

Other

Long-term liabilities:

Accrued retirement benefits to officers

1,712

14,497

Liabilities for site restoration and decommissioning costs

11,930101,025

Liabilities for losses on development activities

1,965

16,640Accrued special repair and maintenance

179

1,516

Other

371

3,141

261,843

2,217,317

528,091

4,471,936

30,000254,044

Capital surplus

418,491

3,543,831

Retained earnings

570,120

4,827,843(1,108)(9,383)

1,017,503

8,616,335

9,349

79,16918

152

Translation adjustments

2,025

17,148

Total valuation, translation adjustments and others

11,392

96,469Minority interests

51,121

432,899

1,080,016

9,145,703¥1,608,107$13,617,639

Total liabilities

Net assets (Note 7):
Common stock:
Authorized: 9,000,001.00 shares
Issued and outstanding: 2,358,410.13 shares

Less: Treasury stock: 1,089.63 shares
Total shareholders’equity

Unrealized holding gain on securities
Unrealized gain from hedging instruments

Total net assets
Contingent liabilities (Note 15)
Total liabilities and net assets

58

59 INPEX Holdings Inc.

Consolidated Statement of Income
INPEX Holdings Inc. and Consolidated Subsidiaries
For the year ended March 31, 2007

Millions of yen

Thousands of
U.S. dollars(Note 3)

2007

2007

Net sales¥969,713$8,211,644

Cost of sales

343,795

2,911,297

Gross profit

625,918

5,300,347

Exploration expenses

17,781

150,571

Exploration subsidies

(92)

(779)

36,285

307,266

Selling, general and administrative expenses (Notes 10, 11 and 12)
Depreciation and amortization

12,867

108,959

Operating income

559,077

4,734,330

Interest income

12,843

108,756

Dividend income

2,292

19,409Equity in earnings of affiliates

1,350

11,432Gain on transfer of mining rights

33,534283,970

Foreign exchange gain

5,738

48,590

Other income:

Other

4,323

36,60760,080508,764

Interest expense

12,389104,912

Provision for allowance for recoverable accounts under production sharing

6,176

52,299Provision for exploration projects

2,973

25,176

Other

11,356

96,16332,894

278,550

586,2634,964,544

432,894

3,665,798

Other expenses:

Income before income taxes and minority interests
Income taxes (Note 6):
Current
Deferred
Minority interests
Net income (Note 8)
Refer to accompanying notes to consolidated financial statements.

(19,655)(166,441)

413,2393,499,357

7,932

67,169¥165,092$1,398,018

INPEX Holdings Inc.

Consolidated Statement of Changes in Net Assets
INPEX Holdings Inc. and Consolidated Subsidiaries
For the year ended March 31, 2007

Millions of yen
Increase
Balance (decrease)
as of due to joint
Cash
March 31,
stock dividends Bonuses
2006
transfer
paid to officers
Common stock— ¥ 30,000 ¥—Capital surplus—

415,892———

Retained earnings—

415,734(10,559)(147)

165,092

Treasury stock—(19,641)———

Total shareholders’ equity—

841,985(10,559)(147)

165,092

Unrealized holding gain (loss)
on securities—(5,723)——

Unrealized gain from hedging
instruments

—

—

—

Translation adjustments

—

1,117

Total valuation, translation
adjustments and others—

Minority interests—

Total net assets

¥

¥

—

—

Purchaseof
Net treasury
incomestock—¥

30,000 ¥30,000—418,491

418,491———

570,120

570,120(1,725)

20,258—(1,108)(1,108)(1,725)22,857— 1,017,503

1,017,503———

15,072

9,349

9,349

—

—

—

—

18

18

18

—

—

—

—

—

908

2,025

2,025

(4,606)

—

—

—

—

—

15,998

11,392

11,39239,921

—

—

—

—

—

11,20051,121

51,121¥877,300 ¥(10,559) ¥(147)¥165,092

¥

— ¥

¥

— ¥

Balance
as ofMarch 31,
2007

2,599

¥

—

Net changes
in items
other than
Total
Disposal
those inchangestreasury shareholders’ during thestockequityperiod—¥(1,725) ¥22,857 ¥27,198 ¥1,080,016 ¥1,080,016

Thousands of U.S. dollars (Note 3)

Balance
as ofMarch 31,
2006
Common stock$

Increase(decrease)
due to joint
Cashstock dividends Bonuses
transfer
paid to officers— $ 254,044

$

—

— $

$

Purchaseof
Net treasury
income
stock
— $

— $

Net changes
in items
other than
Total
Disposal
those inchangestreasury shareholders’ during thestockequityperiod—$Balance
as ofMarch 31,2007

— $ 254,044 $ 254,044

Capital surplus—

3,521,822

—

—

—

—

22,009—3,543,831 3,543,831

Retained earnings—

3,520,484(89,415)(1,244)

1,398,018———

4,827,843 4,827,843

Treasury stock—(166,322)———(14,608)

171,547—

Total shareholders’ equity—

7,130,028(89,415)(1,244)

1,398,018(14,608)

193,556—

Unrealized holding gain (loss)
on securities—(48,463)

—

—

—

—

Unrealized gain from hedging
instruments

—

—

—

—

—

—

—

152

152

152

Translation adjustments

—

9,459

—

—

—

—

—

7,689

17,14817,148

Total valuation, translation
adjustments and others—(39,004)

—

—

—

—

— 135,473

96,46996,469Minority interests—

338,056

—

—

—

—

—

432,899

432,899— $7,429,080$(89,415)

Total net assets$— 127,632

94,843$(1,244) $1,398,018 $(14,608) $193,556 $230,316

Refer to accompanying notes to consolidated financial statements.

(9,383)(9,383)8,616,335 8,616,335
79,16979,169$9,145,703 $9,145,703

60

61 INPEX Holdings Inc.

Consolidated Statement of Cash Flows
INPEX Holdings Inc. and Consolidated Subsidiaries
For the year ended March 31, 2007

Millions of yen

Thousands of
U.S. dollars(Note 3)

2007

2007

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
Provision for site restoration and decommissioning costs
Other provisions
Interest and dividend income
Interest expense
Foreign exchange gain
Equity in earnings of affiliates
Gain on transfer of mining rights
Loss on the sale of investment securities
Accounts receivable—trade
Recovery of recoverable accounts under production sharing (capital expenditure)
Recoverable accounts under production sharing (operating expenditures)
Inventories
Accounts payable—trade
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Increase in time deposits
Decrease in time deposits
Purchase of marketable securities
Proceeds from sales of marketable securities
Purchase of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Investment in recoverable accounts under production sharing (capital expenditures)
Increase in short-term loans receivable
Long-term loans madeCollection of long-term loans receivable
Proceeds from transfer of mining rights
Other
Net cash used in investing activities
Cash flows from financing activities
Decrease in short-term loans
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from minority interests for additional shares
Purchase of treasury stock
Proceeds from sales of treasury stock
Cash dividends paid
Dividends paid to minority shareholders
Stock transfer payment
Restricted cash deposit
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Refer to accompanying notes to consolidated financial statements.

¥586,263 $4,964,544
30,599259,116
6,978
59,091
6,081
51,495
3,038
25,726
845
7,156
1,215
10,2891,377
11,661(15,135)(128,165)
12,389104,911(1,653)(13,998)(1,350)(11,432)(33,534)(283,970)
2,613
22,127(10,385)(87,941)
105,950
897,197(18,955)(160,513)(8,086)(68,473)(879)(7,444)(3,810)(32,264)
663,5615,619,113
20,560174,104(11,993)(101,558)(440,146) (3,727,208)
231,982
1,964,451(17,078)
2,798(5,141)
23,643(37,845)955(1,778)(109,823)
43,609(111,314)(6,524)
(832)
889
6,707
2,491
(209,243)(144,619)
23,694(43,535)
200,212(320,476)
8,087(15,056)(929,994)
369,286(942,620)(55,246)(7,045)
7,528
56,79621,094(1,771,894)(120)(1,016)30,083
254,746(38,662)(327,394)
3,606
30,536(1,170)(9,908)22,397
189,660(10,791)(91,379)
(81)
(686)
(868)
(7,350)79,6009,400
13,794
116,809
1,741
14,74338,274
324,109
151,143
1,279,896¥189,417 $1,604,005

INPEX Holdings Inc.

Notes to Consolidated Financial Statements
INPEX Holdings Inc. and Consolidated Subsidiaries

1

BASIS OF PRESENTATIONINPEX Holdings Inc. (the “Company”) is primarily

The accompanying consolidated financial statements

engaged in the exploration, development and produc-

have been prepared in accordance with accounting

tion of natural gas and crude oil.

principles generally accepted in Japan, which may dif-

The Company and its domestic subsidiaries main-

fer in certain material respects from accounting princi-tain their accounting records and prepare their finan-

ples generally accepted in the United States ofcial statements in accordance with accounting

America, and are compiled from the consolidated

principles generally accepted in Japan, and its over-financial statements prepared by the Company asseas subsidiaries maintain their books of account inrequired by the Securities and Exchange Law of Japan.

conformity with those of their countries of domicile.

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of consolidation and accounting forinvestments in affiliates

The excess of cost over underlying net assets
excluding minority interests at fair value as of their

The accompanying consolidated financial statements

dates of acquisition is accounted for as goodwill andinclude the accounts of the Company and companies

amortized over 20 years on a straight-line method.

controlled directly or indirectly by the Company.

(b) Cash equivalents

Companies over which the Company exercises signifi-

All highly liquid investments with a maturity of threecant influence in terms of their operating and financial

months or less when purchased are considered cash

policies are included in the consolidated financial

equivalents.

statements on an equity basis. All significant intercompany balances and transactions are eliminated in consolidation.
For the 39 companies for which the closing datediffered from the consolidated closing date, including
but not limited to, INPEX Sahul, Ltd., INPEX Browse,
Ltd., and INPEX Masela, Ltd., the financial statements
for the year ended December 31 were used. However,the necessary adjustments have been made to thefinancial statements of those companies to reflect any
significant transactions made between the Company’s
closing date and those of the consolidated subsidiaries.
For the 11 companies, including but not limited toJapan Oil Development, Co., Ltd., Teikoku Oil D.R.
Congo, Co., Ltd., INPEX Southwest Caspian Sea, Ltd.,and INPEX North Caspian Sea, Ltd., the financial statements for the year ended on the consolidated closing
date were used, even though their closing date is
December 31.

(c) Foreign currency translation
Monetary assets and liabilities denominated in foreign
currencies are translated into yen at the exchange
rates prevailing at the balance sheet date. All revenues
and expenses associated with foreign currencies aretranslated at the rates of exchange prevailing whensuch transactions were made. The resulting exchange
gain or loss is credited or charged to income.
The revenue and expense accounts of the overseas
subsidiaries are translated into yen at the average rates
of exchange during the period. Except for the components of net assets excluding minority interests, thebalance sheet accounts are translated into yen at therates of exchange in effect at the balance sheet date.
The components of net assets excluding minority interests are translated at their historical exchange rates.
Differences arising from the translation are presented
as translation adjustments and minority interests in theaccompanying consolidated financial statements.

6263 INPEX Holdings Inc.

(d) Securities

commercial oil and gas. In light of this uncertainty, an

In general, securities are classified into three cate-allowance for recoverable accounts under production

gories: trading, held-to-maturity or other securities.

sharing is provided for probable losses on development

Securities held by the Company and its subsidiaries

investment individually estimated for each project.

are all classified as other securities. Other securities(h) Allowance for investments in exploration

with a determinable market value are mainly stated at

The allowance for investments in exploration is provid-

fair value with any changes in unrealized holding gained for future potential losses on investments in explo-

or loss, net of the applicable income taxes, included

ration companies at an estimated amount based on the

directly in net assets. Other securities without a deter-

net assets of the investees.

minable market value are stated at cost. Cost of securities sold is determined by the moving average method.

(i) Provision for exploration projects
Provision for exploration projects is provided for future(e) Inventories

expenditures of consolidated subsidiaries at the explo-

Products are carried mainly at the lower of cost or mar-ration stage based on a schedule of investments inket, cost being determined mainly by the moving-aver-

exploration.

age method. Other inventories are carried at cost, cost
being determined by the moving-average method,
except for construction projects in progress which arecarried at cost, cost being determined by the individual
cost basis.
(f) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an
amount determined based on the historical experienceof bad debt with respect to ordinary receivables, plus
an estimate of uncollectible amounts determined byreference to specific doubtful receivables from customers which are experiencing financial difficulties.
(g) Recoverable accounts under production sharing
and related allowance
Cash investments made by the Company during exploration, development and production project under aproduction sharing contract and a service contract(buyback arrangement) are recorded as “Recoverable
accounts under production sharing” so long as they
are recoverable under the terms of the relevant contract. When the Company receives natural gas andcrude oil in accordance with the relevant contract, anamount corresponding to the purchase costs of the(j) Accrued bonuses to officers
Accrued bonuses to officers are provided at the
expected payment amount for the year ended March
31, 2007.
(k) Tangible fixed assets
Depreciation of overseas mining facilities is mainlycomputed by the unit-of-production method.
For other tangible fixed assets, the straight-line
method of depreciation is applied. The useful lives of
fixed assets are based on the estimated useful lives of
the respective assets.
(l) Intangible 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-ofproduction method.
Capitalized computer software costs are being
amortized over a period of five years.
Other intangible assets are amortized by thestraight-line method.

products (i.e., a cost recovery portion of the invest-(m) Accrued retirement benefits to employees

ments) is released from this account.

Accrued retirement benefits to employees are provided

Because these investments are recoverable onlyat the amount calculated based on the expected retire-

where commercial oil or gas is discovered, anment benefit obligation and the fair value of pension

allowance for recoverable accounts under production

plan assets at the end of this period. Because certain

sharing is provided for probable losses on investments

subsidiaries are classified as small enterprises, wemade during the exploration stage under production

employ a simplified method (at the amount whichsharing contracts arising from the failure to discover

would be required to be paid if all active employees

INPEX Holdings Inc.

voluntarily terminated their employment as of the bal-(r) Leases

ance sheet date) for the calculation of the retirement

Noncancelable leases are primarily accounted for as

benefit obligation of the subsidiaries.

operating leases except that lease agreements which

Actuarial gains and losses are charged or credited

stipulate the transfer of ownership of the leased assets

to income as incurred.

to the lessee are accounted for as finance leases.

(n) Accrued retirement benefits to officers(s) Hedge accounting

Accrued retirement benefits to officers are stated at the

The simplified accounting method is applied to interest

amount which would be required to be paid if all offi-

rate swaps. For certain equity accounted companies,

cers terminated their services as of the balance sheet

deferred hedge accounting is adopted. In addition, thedate, based on the relevant internal rules.

nominal amount of the derivative transaction is limited(o) Liabilities for site restoration and decommissioning costs
Liabilities for site restoration and decommissioning

to within the scope of actual demand, and theCompany does not engage in speculative derivativetransactions.

costs are provided for expected future costs for site(t) Research and development expenses

restoration and decommissioning.

Research and development expenses are charged to(p) Liabilities for losses on development activities

income as incurred.

Liabilities for losses on development activities are pro-(u) Income taxes

vided for provable losses on oil and natural gas devel-

Deferred tax assets and liabilities are determined

opment activities individually estimated for eachbased on the differences between financial reporting

project.

and the tax bases of the assets and liabilities and are(q) Accrued special repair and maintenanceAccrued special repair and maintenance are provided
for planned major repair and maintenance activities on

measured using the enacted tax rates and laws which
will be in effect when the differences are expected toreverse.

tanks in certain subsidiaries at amounts accumulated
through the next activity.

3

U.S. DOLLAR AMOUNTS
The translation of yen amounts into U.S. dollar amounts

2007. This translation should not be construed as a

is included solely for convenience, as a matter of arith-

representation that yen have been, could have been, or

metic computation only, at ¥118.09=US$1.00, thecould in the future be, converted into U.S. dollars at theapproximate rate of exchange in effect on March 31,

above or any other rate.

64

65 INPEX Holdings Inc.

4

SECURITIESa) Information regarding other securities with determinable market value as of March 31, 2007 is as follows:
Millions of yen
March 31, 2007

Acquisition
cost

Carrying
value

Thousands of U.S. dollars

Unrealized
gain (loss)

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥19,410$ 692,743$ 857,109$164,366

Securities with fair values exceeding their acquisition cost:Stock¥ 81,806¥101,216

Bonds:
Public bonds

61,212

61,272

60

518,350

518,858

508

Corporate bonds

325

345

20

2,752

2,922

170

Other debt securities

408

411

3

3,455

3,480

25

OthersSubtotal

501

502

1

4,243

4,251

8

144,252

163,746

19,494

1,221,543

1,386,620

165,077

Securities with acquisition costs exceeding their fair value:Stock24,626

19,938(4,688)208,536

168,838(39,698)

152,827

150,215(2,612)

1,294,157

1,272,038(22,119)

150

150

(0)

1,270

1,270

(0)

Bonds:
Public bonds
Other debt securities
Subtotal

177,603

170,303(7,300)1,503,963

1,442,146(61,817)

Total¥321,855¥334,049¥12,194$2,725,506$2,828,766$103,260b) Information regarding sales of securities classified as other securities for the year ended March 31, 2007 is as follows:
Millions of yen

Thousands of
U.S. dollars

Year ended March 31,

2007

2007

Proceeds from sales¥67,260$ 569,566

Loss on sales¥ 2,610$ 22,102c) Components of other securities without a determinable market value as of March 31, 2007 are summarized asfollows:

Year ended March 31,

Millions of yen

Thousands of
U.S. dollars

2007

2007

Other securities:
Unlisted securities*
Total¥38,274$324,109¥38,274$324,109*An allowance is provided for investments in exploration companies at an estimated amount based on the financial position of the investees.

INPEX Holdings Inc.

d) Redemption schedule for securities with maturity dates classified as other securities as of March 31, 2007 is
as follows:
Millions of yen

March 31, 2007

1 year or
lessMore thanMore than 1
5 years
year but less but less than
than 5 years
10 yearsMore than
10 yearsThousands of U.S. dollars

1 year or
lessMore thanMore than 1
5 years
year but less but less than
than 5 years
10 yearsMore than
10 years

Debt securities:
Public bonds
Corporate bonds
Other
Total

5

¥47,311 ¥122,770¥3,863¥37,543$400,635 $1,039,631$32,712 $317,919

—

345

—

—

—

2,922

—

—

150

375

35

—

1,270

3,175

297

—

¥47,461 ¥123,490¥3,898¥37,543$401,905 $1,045,728$33,009 $317,919

SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings as of March 31, 2007 are as follows:
Millions of yen

Thousands of
U.S. dollars

March 31,

2007

2007

Short-term borrowings from banks and others, at interest rates ranging
from 0.930% to 1.625%¥375$3,176

Total

¥375

$3,176

Millions of yen

Thousands of
U.S. dollars

2007

2007

¥248,594$2,105,123

Long-term debt as of March 31, 2007 consist of the following:

March 31,

Loans from banks and others, at interest rates ranging from1.000% to 6.340%, due through 2019:
Less: Current portion
Total

50,274

425,726¥198,320$1,679,397

Millions of yen

Thousands of
U.S. dollars

Assets pledged as of March 31, 2007 are as follows:

March 31,

Buildings and structures
Machinery, equipments and vehicles
Land
Investment securities
Other
Total

2007

2007

¥ 2,181
8,748
1,826
9,999
36
¥22,790$ 18,469
74,07915,46384,672
305$192,988

Millions of yen

Thousands of
U.S. dollars

2007

2007

The above assets were pledged against the following liabilities:

March 31,

Short-term loans
Accounts payable—other
Long-term debt
Other
Total

¥

95
5,480
15,272
17¥20,864$805
46,405
129,325
144$176,679

In addition, investment securities of ¥7,209 million ($61,047 thousand) are pledged as collateral for the BTC Pipeline
Project Finance.

66

67 INPEX Holdings Inc.

The aggregate annual maturities of long-term debt subsequent to March 31, 2007 are summarized as follows:

Years ending March 31,

Millions of yen

Thousands of
U.S. dollars

2008¥ 50,274$ 425,726

2009

20,191

170,980

2010

19,914

168,634

2011

19,831

167,9312012

18,818159,353

2013 and thereafter

119,566

1,012,499¥ 248,594$2,105,123

Total

6

INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to a number of taxes based on income which,in the aggregate, resulted in a statutory tax rate of approximately 40.7% in 2007.
The effective tax rate reflected in the consolidated statements of income for the year ended March 31, 2007 differs from the statutory tax rate for the following reasons:Year ended March 31,

2007

Statutory tax rate

40.7%

Effect of:Permanently non-taxable income such as dividends income(0.3)

Valuation allowance(0.1)

Foreign taxes

68.0

Foreign tax credits(18.4)

Adjustment of deducted amounts of foreign taxes(15.9)

Equity in earnings of affiliates(0.1)

Amortization of goodwill

0.5

Differences of effective tax rates applied to income of foreign subsidiaries

(4.6)

Other
Effective tax rate

0.7
70.5%

INPEX Holdings Inc.

The significant components of deferred tax assets and liabilities as of March 31, 2007 are as follows:

March 31,

Millions of yen

Thousands of
U.S. dollars

2007

2007

Deferred tax assets:
Investments in related parties¥ 42,305$ 358,244

Loss on revaluation of land

4,543

38,470Non-deductible accounts payable—other

5,499

46,566

Recoverable accounts under production sharing (foreign taxes)

3,482

29,486

Allowance for investments in exploration

3,223

27,293Foreign taxes payable

31,375

265,687

Net operating loss

10,49988,907

Accumulated depreciation

3,542

29,994

Accrued retirement benefits

3,883

32,882

Translation differences of asset and liabilities denominated in foreign currencies

1,395

11,813Liabilities for site restoration and decommissioning costs

2,091

17,707

Other

8,458

71,623

Total gross deferred tax assets

120,295

1,018,672

Valuation allowance(91,186)(772,174)

Total deferred tax assets

29,109246,498

Deferred tax liabilities:

7

Foreign taxes

7,371

62,418Translation differences due to an application of purchase accounting method

29,945

253,578

Reserve for exploration

5,479

46,397

Unrealized holding gain on securities

2,969

25,142

Other

7,178

60,784

Total deferred tax liabilities

52,942

448,319

Net deferred tax liabilities¥ 23,833$ 201,821

NET ASSETS
As of March 31, 2007, the total number of theand (ii) the granting of voting rights to theCompany’s shares issued consisted of 2,358,409.13

Company’s shares other than common stock

shares of common stock and 1 special class share.

• Mergers, share exchanges or share transfers

The special class share has no voting rights at the• Capital reduction• Dissolutioncommon shareholders’ meeting, but the ownership of
the special class share gives its holder a right of veto

The special class shareholder may request theover certain important matters by imposing the require-Company to acquire the special class share. Besides,

ment to obtain a class vote. However, requirements

the Company may also acquire the special class sharestipulated in the Articles of Incorporation need to beby the resolution of meeting of Board of Directors in

met in cases involving the appointment or removal ofcase of that special class share is transferred to a non-directors, the disposition of important assets or the

public subject.

exercise of the veto;

The new Corporate Law of Japan (the “Law”),• Appointment and removal of directors

which superseded most of the provisions of the• Disposition of all or part of the material assets• Amendments to the Article of Incorporation with

Commercial Code of Japan, went into effect on May 1,

respect to (i) the purpose of the Company’s businessof the amount to be disbursed as distributions of capi-

2006. The Law provides that an amount equal to 10%

6869 INPEX Holdings Inc.

8

tal surplus (other than capital reserve) and retained

Such distribution can be made at any time by reso-

earnings (other than legal reserve) be transferred to thelution of the shareholders, or by the Board of Directors

capital reserve and the legal reserve respectively until

if certain conditions are met, but neither the capitalthe total of capital reserve and the legal reserve equals

reserve nor the legal reserve is available for distribu-

25% of the common stock account.

tions.

AMOUNTS PER SHARE
Yen

U.S. dollars

2007

2007

¥ 70,423.45$ 596.35

7,000.00

59.28

436,467.92

3,696.06

Year ended March 31,

Net income
Cash dividends
Net assets

Net income per share is computed based on the net

dends proposed by the Board of Directors together

income available for distribution to shareholders ofwith the interim cash dividends paid.

common stock and the average number of shares ofcommon stock outstanding during the year.
Cash dividends per share represent the cash divi-

9

Net assets per share are computed based on the
net assets excluding minority interests and the numberof common stock outstanding at the year end.

DERIVATIVES(a) Hedging instruments and hedged items

rial because the Company enters into transactions only

The Company has entered into interest rate swap

with financial institutions or trading companies withtransactions in order to reduce its exposure to interest

high credit ratings.

rate fluctuations.

(d) Risk management(b) Hedging policies

The execution and control of derivative transactions are

The nominal amount of the derivative transaction is limit-

based on internal rules. All transactions are reported to

ed to within the scope of actual demand, and thethe director in charge on a timely basis and transaction

Company does not engage in speculative derivative

confirmations obtained from counterparties on a regu-

transactions.

lar basis.

(c) Credit risk(e) Fair value of derivatives

The Company is exposed to credit risk in the event of

No derivatives positions remained outstanding as ofnonperformance by the counterparties to those deriva-

March 31, 2007.

tive transactions, but any such risk would not be mate-

10

RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in selling, general and administrative expenses amounted to ¥301 million ($2,549 thousand) for the year ended March 31, 2007.

INPEX Holdings Inc.

11

RETIREMENT BENEFITS
1. Retirement benefit obligation as of March 31, 2007 is as follows:Year ended March 31,

Retirement benefit obligation

Millions of yen

Thousands of
U.S. dollars

2007

2007

¥(15,707)$(133,009)

Plan assets at fair value

7,336

62,122

Unfunded retirement benefit obligation(8,371)(70,887)——¥ (8,371)$ (70,887)

Unrecognized actuarial gain or loss
Accrued retirement benefits to employees

Some of the Company’s subsidiaries have pension assets of ¥1,634 million ($13,837 thousand) in the Multi-Employer
Pension Fund Plan.
2. Retirement benefit expenses for the year ended March 31, 2007 are as follows:
Millions of yen

Thousands of
U.S. dollars

Year ended March 31,

2007

2007

Service cost

¥ 912

$ 7,723

Interest cost

273

2,312

Expected return on plan assets

(106)

(898)

Amortization of actuarial gain or loss

(145)

(1,228)Retirement benefit expenses¥ 934$ 7,909

3. The assumptions used in accounting for the above plans are as follows:Year ended March 31,

2007

Discount rate

2.0%

Expected return on plan assets
Period for amortization of actuarial gain or loss

12

1.5%
Amortized as incurred

GOODWILL
The changes in the carrying amount of goodwill for the year ended March 31, 2007 are as follows:Year ended March 31,

Goodwill acquired during the year
Amortization of goodwill
Balance at end of year

Millions of yen

Thousands of
U.S. dollars

2007

2007

¥139,084$1,177,780

6,978

59,091¥132,106$1,118,689

Goodwill acquired during the year ended March 31, 2007 mainly consisted of goodwill related to the business integration.

70

71 INPEX Holdings Inc.

13

BUSINESS INTEGRATIONThe Company has been established as the joint holding company that owns INPEX CORPORATION (hereafter “INPEX”) and Teikoku Oil Co., Ltd., (hereafter“Teikoku”) as wholly owned subsidiaries, according tobusiness integration by stock transfer on April 3, 2006.
The purchase accounting method was applied for thistransaction. INPEX was treated as the acquiring company and Teikoku as the acquired company based on
the ratio of voting rights.
1. Name and main business of acquired company(a) Name of acquired company
Teikoku Oil Co., Ltd.
(b) Main business of acquired company
Exploration, development, production and distribution of crude oil and natural gas(c) Major purpose of integration
To establish a firm position in the global market, by
establishing a well-balanced asset portfolio, reinforcing a solid financial base, and concentrating
technological capabilities for resource development(d) Date of integration
April 3, 2006(e) Legal formalities of business integration
Establishment of a joint holding company througha stock transfer(f) Name after integration
INPEX Holdings Inc.
(g) Acquired ratio of the voting rights
100%

4. Stock transfer ratio for the acquisition and otherrelated information(a) Stock transfer ratio
Stock transfer ratio

INPEX
1

Teikoku
0.00144(b) Calculation of the stock transfer ratio
INPEX appointed J.P. Morgan Securities Asia Pte.
Limited and Teikoku appointed Goldman Sachs(Japan) Ltd. as their financial advisors in relation to thistransaction. The financial advisors analyzed the shareprice movements of the both companies, discounted
cash flow (DCF) / net asset value (NAV) analysis andcontribution analysis etc. in considering the stocktransfer ratio. The stock transfer ratio was determinedthrough discussion and negotiation by both companies
taking into consideration the analysis and advice of
their financial advisors and other various factors.
(c) Share allocation and estimated value
Based on the above stock transfer ratio,
438,577.82 shares were allotted to Teikoku’sshareholders since 0.00144 share of theCompany’s common share was allotted in exchange
for one (1) share of Teikoku’s common share.
Because the Company’s stock did not exist on thedate of public announcement on the stock transfer
agreement, the Company’s stock was valuated at¥809,200, which represents the average stock
price of the acquiring company for the 5 days
before the commencing date when main terms andconditions of business integration were agreed
upon and announced to the public.
5. Goodwill

2. Period of acquired company’s financial results
included in the consolidated financial statements
From April 1, 2006 to March 31, 2007
3. Acquisition cost and details of acquired company
Acquisition cost of acquired company is ¥355,756
million ($3,012,584 thousand). Acquisition costconsists of the fair value of acquiring company’s
stock in amount of ¥354,897 million ($3,005,310
thousand) that deemed to be issued to acquiredcompany’s shareholders and expenses of theacquisition in amount of ¥859 million ($7,274
thousand).

(a) Amount of goodwill¥139,059 million ($1,177,568 thousand)(b) Reason for goodwill revealed
The investment balance between the acquisition
cost of the acquired company and the amount distributed to identifiable assets and liabilities revealedby the overall value was valuated mining rights, production assets, development and operating technology, sales-use assets such as pipelines network,buyers, suppliers, and other factors totally.
(c) Method and period of amortization
Straight-line method over 20 years

INPEX Holdings Inc.

6. Acquired assets and liabilities on the date of integration

14

Millions of yen

Thousands of
U.S. dollars

Current assets¥ 65,864$ 557,744

Fixed assets

397,886

3,369,346

Total assets

463,750

3,927,090

Current liabilities

28,157

238,437

Long-term liabilities

77,519656,440

Total liabilities

105,676

894,877(Reference); Minority interests

¥

2,318

$

19,629LEASES
The following pro forma amounts represent the acquisition costs, accumulated depreciation and net book value of theleased assets as of March 31, 2007, which would have been reflected in the consolidated balance sheets if finance leaseaccounting had been applied to the finance leases currently accounted for as operating leases.
Millions of yen

Thousands of
U.S. dollars

As of March 31,

2007

2007

Acquisition costs of leased property¥955$8,087

Accumulated depreciation

518

4,386

Net book value¥437$3,701

Lease payments relating to finance leases accounted for as operating leases amounted to ¥182 million ($1,541 thousand), which were equal to the depreciation expense of the leased assets computed by the straight-line method over thelease terms, for the year ended March 31, 2007.
Future minimum lease payments (including the interest portion) subsequent to March 31, 2007 for finance leasetransactions accounted for as operating leases are summarized as follows:
Years ending March 31,

2008

15

Millions of yen

Thousands of
U.S. dollars¥165$1,3972009 and thereafter

272

2,304

Total

¥437

$3,701CONTINGENT LIABILITIESAs of March 31, 2007, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of affiliates in the aggregate amount of ¥31,511 million ($266,839 thousand). In addition, INPEX BTC Pipeline, Ltd.
a consolidated subsidiary, was contingently liable as guarantor of indebtedness of BTC Pipeline Project Finance in theamount of ¥7,252 million ($60,880 thousand) as of December 31, 2006.

72

73 INPEX Holdings Inc.

16

SEGMENT INFORMATIONAs net sales, operating income and total assets of the oil and natural gas business constituted more than 90% of the consolidated totals for the year ended March 31, 2007, the disclosure of business segment information has been omitted.
The geographical segment information for the Company and its subsidiaries for the year ended March 31, 2007 is summarized as follows:
Millions of yen
Japan

Asia &
Oceania (a)NIS (b)¥ 77,322¥ 387,543¥ 118,618

Year ended March 31, 2007

Sales to third parties

Intercompany sales andtransfers between segments

Middle East
& Africa (c) Americas (d)¥ 386,009¥

221

Total Eliminations Consolidated¥ 969,713¥—¥ 969,713

0

—

—

—

—

0

(0)

—

Total sales

77,322

387,543

118,618

386,009221

969,713(0)969,713

Operating expenses

54,306145,638

82,996

119,282

1,660

403,8826,754

410,636

Operating income

23,016

241,905

35,622

266,727(1,439)565,831(6,754)

559,077¥197,405¥322,116¥320,574¥254,072¥17,776¥1,111,943¥496,164¥1,608,107

Total assets(a) Asia & Oceania: Indonesia, Australia, East Timor, Vietnam(b) Newly Independent States (NIS): Azerbaijan, Kazakhstan(c) Middle East & Africa: UAE, D.R.Congo, Iran, Libya, Egypt, Algeria(d) Americas: Venezuela, Ecuador, USA
Thousands of dollars
Japan

Asia &
Oceania (a)NIS (b)$ 654,772$ 3,281,760$ 1,004,471

Year ended March 31, 2007

Sales to third parties

Intercompany sales andtransfers between segments

Middle East
& Africa (c) Americas (d)$ 3,268,770

$

1,871

Total
$ 8,211,644

Eliminations$

Consolidated— $ 8,211,644

0

—

—

—

—

0

(0)

—

Total sales

654,772

3,281,760

1,004,471

3,268,770

1,871

8,211,644(0)8,211,644

Operating expenses

459,870

1,233,280

702,820

1,010,094

14,0573,420,121

57,1933,477,314

Operating income

194,9022,048,480

301,651

2,258,676(12,186)

4,791,523(57,193)

4,734,330$ 1,671,649$ 2,727,716$ 2,714,658$ 2,151,512$ 150,529

Total assets$ 9,416,064 $4,201,575 $ 13,617,639(a) Asia & Oceania: Indonesia, Australia, East Timor, Vietnam(b) NIS: Azerbaijan, Kazakhstan(c) Middle East & Africa: UAE, D.R.Congo, Iran, Libya, Egypt, Algeria(d) Americas: Venezuela, Ecuador, USA

The geographical segment information for the Company and its subsidiaries has been reflected in the regions basedon the location of operations.

Overseas sales
Overseas sales, which include sales (other than exports to Japan) of its overseas subsidiaries, for the year ended
March 31, 2007 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Year ended March 31, 2007

Asia &
Oceania (a)Other (b)Total

Asia &
Oceania (a)Overseas sales¥319,548 ¥53,557¥373,105$2,705,970

Consolidated net sales
Overseas sales as a percentage ofconsolidated net sales

Other (b)$453,527 $3,159,497

969,713
33.0%

5.5%

38.5%

Total

8,211,644
33.0%

5.5%

(a) Asia & Oceania: South Korea, Taiwan, Indonesia, Singapore, Thailand, China, Malaysia, Philippines, Australia(b) Other: USA, Italy

38.5%

INPEX Holdings Inc.

Report of Independent Auditors

Report of Independent Auditors

The Board of Directors
INPEX Holdings Inc.
We have audited the accompanying consolidated balance sheet of INPEX Holdings Inc. andconsolidated subsidiaries as of March 31, 2007, and the related consolidated statements ofincome, changes in net assets, and cash flows for the year then ended, all expressed in yen.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of INPEX Holdings Inc. and consolidated subsidiaries at
March 31, 2007, and the consolidated results of their operations and their cash flows for theyear then ended in conformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2007 are presented solely for convenience. Our audit also included
the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 3 to the consolidated financial statements.

Tokyo, Japan
June 26, 200774

75 INPEX Holdings Inc.

INPEX Holdings Inc.

Operating Data andCorporate Information

Contents
Oil and Gas Reserves and Production Volume

77

Subsidiaries and Affiliates

8576

77 INPEX Holdings Inc.

Oil and Gas Reserves and Production Volume

1

Oil and Gas Reserves
Definition of Proved Reserves and Probable Reserves
INPEX Holdings commissioned DeGolyer andare employed, there should be at least a 50% probabil-

MacNaughton, an independent petroleum engineering

ity that the quantities actually recovered will equal or

consultant in the United States, to assess major proved

exceed the sum of estimated proved and probablereserves of our group. The definition of proved reserves

reserves. The difference between this definition andevaluated by DeGolyer and MacNaughton is based on

the definition of proved reserves based on SEC stan-

the U.S. Securities and Exchange Commission’s

dards is the degree of certainty that oil and gas can be

Regulation S-X, Rule 4-10, which is widely known

recovered as of the date such an estimate is made.

among U.S. investors. Proved oil and gas reserves are

Probable reserves can be upgraded to proved reserves

estimated quantities that geological and engineering

after the addition of new technical data, under different

data demonstrate with reasonable certainty to beeconomical conditions, and with advances in opera-

recoverable in future years from known reservoirs

tional conditions. Nevertheless probable reserves offer

under existing economic and operating conditions, as

no guarantee of the production of total reserves duringof the date such an estimate is made.

a future production period with same certainty as

According to SEC Standards, proved reserves areproved reserves.

classified into two categories: “Proved developed

A reserve evaluation is depends on the available

reserves” can be expected to be recovered throughgeological and engineering data from oil and gas reser-

existing wells with existing equipment and operating

voirs, maturity of development plan, economic condi-

methods and “proved undeveloped reserves” can betions, etc. as of the d such an estimate is made. Based

expected to be recovered from new wells on undrilled

on newly available with progress of productions andacreage or from existing wells where a relatively major

operations, reserves may be revised in the future. As a

expenditure is required for recompletion. To be defined

result, there is a possibility that reserves will be restat-as “proved reserves” assumes the existence of a mar-ed upwards or downwards. As to the reserves under

ket and economic means of recovery, process andProduction Sharing Contract, not only production but

shipment, or the certainty to gain such means in thealso oil and gas prices, investments and cost recover-short term. This definition is widely regarded as being

ies and remuneration fees may affect the economic

conservative. Nevertheless, the strictness of the defini-take under the contract. This may lead reserves totion does not imply any guarantee of the production ofincrease or decrease. In 2007, the SPE and WPC

total reserves during a future production period.

together with the American Association of Petroleum

In addition to the assessment of proved reserves

Geologists (AAPG) and Society of Petroleum Evaluation

based on SEC Standards, INPEX Holdings also com-Engineers (SPEE) modified the definition of reserve,

missioned DeGolyer and MacNaughton to assess its

and have been explaining the modified contents andprobable reserves based on guidelines established by

guidelines to oil companies and engineering compa-

the Society of Petroleum Engineers (SPE) and thenies. If the engineering consultant that assesses ourWorld Petroleum Congress (WPC). Probable reserves,

reserves applies the new guidelines in the future, ouras defined by the SPE and WPC, are reserves outside

probable reserves could be changed. In this manner,proved reserves that are more likely than not to bevarious data, assumptions and changes of definition

recoverable based on analyses of geological and engi-

may make reserves fluctuate.

neering data. In this context, when probabilistic methods

INPEX Holdings Inc.

Proved Reserves
The following tables list the proved reserves of crude

ended March 31, 2006. The reserves before the estab-oil, condensate, LPG and natural gas of our major sub-lishment are listed by each group, “INPEX Group” andsidiaries and equity method affiliates. Disclosure items“Teikoku Oil Group,” (In the subsequent tables we useof proved reserves are based on the U.S. Statement of

the former regional segments).

Financial Accounting Standards No. 69. INPEX

Our proved reserves as of March 31, 2007 were

Holdings was established on April 3, 2006. Therefore,

1,139.42 million barrels for crude oil, condensate andthe reserves as of March 31, 2006 in the following

LPG, 3,781.8 billion cubic feet for natural gas andtable “INPEX Holdings Group” assume that integration

1,769.73 million BOE (Barrels of Oil Equivalent) inof INPEX and Teikoku Oil took place in the year

total.

INPEX Holdings GroupJapan
Crude oil(MMbbls)

Asia/Oceania
Gas Crude oil(Bcf) (MMbbls)

Middle East/
AfricaNIS

AmericasInterest in
Reserves Held by
Equity-Method
Affiliates

Subtotal

Gas Crude oil Gas Crude oil Gas Crude oil Gas Crude oil(Bcf) (MMbbls) (Bcf) (MMbbls) (Bcf) (MMbbls) (Bcf) (MMbbls)

Gas Crude oil Gas(Bcf) (MMbbls) (Bcf)

Total
Crude oil(MMbbls)

Gas
(Bcf)

Proved developed andundeveloped reserves
As of March 31, 2006

22

886

105

2,655

116

— 542

—

— 120

785

3,662

Extensions anddiscoveries

305

447

1,090

4,109

—

—

—

—

99

—

—

—

—

—

99

—

8

1

107

1

Acquisitions and sales —

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Revisions ofprevious estimates

0

1

16

58

5

—

11

—

—

(6)

32

53

(2)

(2)

30

51

Interim production(1) (42) (15)(315) (18)

—

(30)

—

—

(21) (63)(378) (24)

—

(88)

(378)

21

845

106

2,398

203

— 523

—

—

93

853

3,336

286

446

1,139

3,782

20

783

65

1,270

46

— 522

—

—

81

653

2,134

277

—

929

2,134

As of March 31, 2007
Proved developed reserves
As of March 31, 2007

Notes: 1. Reserves of the following blocks and fields include minority interests.
Asia/Oceania: Offshore Northwest Java (16.5%), Offshore Southeast Sumatra (16.5%)
NIS: ACG (49%), Kashagan (55%)
Middle East/Africa: Abu Al Bukhoosh (5%), West Bakr (47.3%)
2. MMbbls: Millions of barrels
3. Bcf: Billions of cubic feet
4. Crude oil includes condensate and LPG

78

79 INPEX Holdings Inc.

INPEX Group

Asia/Oceania

Caspian Sea Area/
OthersMiddle East

Interest in
Reserves Held by
Equity-Method
Affiliates

Subtotal

Total

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

As of March 31, 2003

143

3,363

15

—

—

—

158

3,363

8

4

166

3,367

Extensions anddiscoveries

32

178

—

—

—

—

32

178

—

—

32

178

Acquisitions and sales

13

34

—

—

178

—

191

34

(2)

(25)

188

9

Proved developed andundeveloped reserves

Revisions ofprevious estimates

(4)

424

0

—

2

—

(3)

424

(3)

22

(6)

446

Interim production

(15)

(296)

(2)

—

(4)

—

(21)

(296)

(1)

(2)

(22)

(297)

As of March 31, 2004

168

3,704

14

—

176 *1

—

357

3,704

2

—

359

3,704

As of March 31, 2004

168

3,704

14

—

176 *1

—

357

3,704

2

—

359

3,704

Extensions anddiscoveries

—

32

—

—

—

—

—

32

2

450

2

481

Acquisitions and sales

—

—

361

—

—

—

361

—

308

—

669

—

Revisions ofprevious estimates

(1)

(128)

(0)

—

(40)

—

(41)

(128)

(0)

—

(41)

(128)

Interim production

(19)

(301)

(26)

—

(4)

—

(50)

(301)

(21)

—

(70)

(301)

As of March 31, 2005

148

3,307

348

—

131 *1

—

628

3,307

291

450

919

3,757

As of March 31, 2005

148

3,307

348

—

131 *1

—

628

3,307

291

450

919

3,757

Extensions anddiscoveries

—

—

—

—

—

—

—

—

—

—

—

—

Acquisitions and sales

—

—

—

—

—

—

—

—

—

—

—

—

Revisions ofprevious estimates

(27)

(364)

206

—

(5)

—

174

(364)

36

(2)

210

(366)

Interim production

(16)

(288)

(27)

—

(10)

—

(53)

(288)

(22)

—

(75)

(288)

As of March 31, 2006

105

2,655

528

—

116 *1

—

749

2,655

305

447

1,054

3,103

66

1,448

527

—

44

—

637

1,448

303

—

940

1,448

Proved developed reserves
As of March 31, 2006

Teikoku Oil Group

Asia/Oceania

Caspian Sea Area/
OthersMiddle East

Interest in
Reserves Held by
Equity-Method
Affiliates

Subtotal

Total

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

Crude oil(MMbbls)

Gas
(Bcf)

22

886

—

—

14

120

36

1,006

—

—

36

1,006

21

825

—

—

14

108

35

933

—

—

35

933

Proved developed andundeveloped reserves
As of March 31, 2006
Proved developed reserves
As of March 31, 2006

Notes: 1. Includes reserves attributable to a consolidated subsidiary in which there is a 49% minority interest.
2. MMbbls: Millions of barrels
3. Bcf: Billions of cubic feet
4. Crude oil includes condensate and LPG
5. Asia/Oceania in the table “Teikoku Oil Group” includes Japan.

INPEX Holdings Inc.

Standardized Measure of Discounted Future Net Cash Flows andChanges Relating to Proved Oil and Gas Reserves
In calculating the standardized measure of discounted

We believe that this information does not represent

future net cash flows, year-end constant price and cost

the fair market value of the oil and natural gas reserves

assumptions are applied to our estimated annual

or the present value of estimated cash flows since nofuture production from proved reserves to determine

economic value is attributed to potential reserves, thefuture cash inflows. Future development costs are esti-

use of a 10% discount rate is arbitrary, and prices

mated based upon constant price assumptions andchange constantly from year-end levels. Disclosure

assume the continuation of existing economic, operat-

items are based on the U.S. Statement of Financial

ing, and regulatory conditions. Future income taxes are

Accounting Standards No. 69. INPEX Holdings wascalculated by applying the year-end statutory rate toestablished on April 3, 2006. Therefore, the figures asestimated future pretax cash flows after provision forof March 31, 2006 in the following tables assume thattaxes on cost of the oil and natural gas properties

integration of INPEX and Teikoku Oil took place in thebased upon existing laws and regulations. The dis-

year ended March 31, 2006. We use the exchange

count is computed by application of a 10% discountrates of ¥117.47 and ¥118.09 to US$1.00 as of Marchfactor to the estimated future net cash flows.

31, 2006 and 2007, respectively.

INPEX
Group
INPEX
Holdings GroupAs of March 31, 2006

Millions of yen

Consolidated subsidiaries

Total

Japan

Asia/
Oceania

NIS

Middle East/
AfricaFuture cash inflows

8,160,104

848,888

2,767,694

823,434

3,690,970

29,118Future production and development costs (2,349,264)(164,669)(870,423)(170,871)(1,128,440)(14,861)

Future income tax expenses(3,508,793)(109,778)(841,928)(148,720)(2,404,197)(4,170)Future net cash flows

2,302,047

574,441

1,055,343

503,843

158,333

10,087

10% annual discount for
estimated timing of cash flows(1,031,132)(326,735)(415,410)(197,603)(88,529)(2,855)

Standardized measure of discounted
future net cash flows

1,270,915

247,706

639,933

306,240

69,804

7,232

49,263—25,619—23,644—

Share of equity method investees’
standardized measure of
discounted future net cash flows

AmericasNote: Reserves of the following blocks and fields include minority interests.
Asia/Oceania: Offshore Northwest Java (16.5%), Offshore Southeast Sumatra (16.5%)
NIS: ACG (49%)
Middle East/Africa: Abu Al Bukhoosh (5%), West Bakr (54.27%)
As of March 31, 2007

Millions of yen

Consolidated subsidiaries

Total

Japan

Asia/
Oceania

NIS

Middle East/
AfricaFuture cash inflows

8,540,286

814,449

2,645,392

1,444,902

3,612,733

22,810Future production and development costs (2,586,449)(143,763)(863,273)(425,072)(1,141,377)(12,964)

Future income tax expenses(3,430,774)(121,435)(765,801)(232,138)(2,308,577)(2,823)Future net cash flows

2,523,063

549,251

1,016,318

787,692

162,779

7,023

10% annual discount for
estimated timing of cash flows(1,239,469)(305,507)(386,207)(450,200)(95,905)(1,650)Standardized measure of discounted
future net cash flows

1,283,594

243,744

630,111

337,492

66,874

5,373

63,534—37,916—22,981

2,637

Share of equity method investees’
standardized measure of
discounted future net cash flows

Note: Reserves of the following blocks and fields include minority interests.
Asia/Oceania: Offshore Northwest Java (16.5%), Offshore Southeast Sumatra (16.5%)
NIS: ACG (49%), Kashagan (55%)
Middle East/Africa: Abu Al Bukhoosh (5%), West Bakr (47.3%)

Americas80

81 INPEX Holdings Inc.

Millions of yen
Total

Japan

Asia/
Oceania

1,270,915

247,706

639,933

306,240

Consolidated subsidiaries

NIS

Middle East/
AfricaAmericas69,804

7,232

712

Standardized measure, beginning of period
As of April 1, 2006

Changes resulting from:
Sales and transfers of oil andproduced, net of production costs

49,262(6,439)39,664

11,0754,250

Net change in prices, and production costs

276,80928,601

112,953

37,547

96,717991

Development cost incurred

142,896

6,394

94,382

29,69910,664

1,757

Changes in estimated development costs(78,604)(15,702)(25,211)(16,033)(18,852)(2,806)

Revisions of previous quantity estimates(571,647)(34,545)(281,095)(98,701)(154,175)(3,131)

5,355

38,855(58,980)

10,897

14,094489

Net change in income taxes

101,795

2,868

53,6605,630

40,344(707)

Extentions, discoveries andimproved recoveries

53,809——53,809

—

—

Other

33,004(23,994)

54,805(2,671)

4,028

836

1,283,594

243,744

630,111

337,492

66,874

5,373

Accretion of discountStandardized measure, end of period
As of March 31 2007

Note: Reserves of the following blocks and fields include minority interests.
Asia/Oceania: Offshore Northwest Java (16.5%), Offshore Southeast Sumatra (16.5%)
NIS: ACG (49%), Kashagan (55%)
Middle East/Africa: Abu Al Bukhoosh (5%), West Baker (47.3%)

Probable Reserves
The following tables list the probable reserves of crude

Our probable reserves as of March 31, 2007 wereoil, condensate, LPG and natural gas of our major sub-1,609.54 million barrels for crude oil, condensate andsidiaries and equity method affiliates. The reserves

LPG, 2,095.0 billion cubic feet for natural gas andbefore the establishment are listed by each group,

1,958.72 million BOE (Barrels of Oil Equivalent) in“INPEX Group” and “Teikoku Oil Group”. (in these

total.

tables we use the former regional segments).

INPEX Holdings GroupAs of March 31, 2007

Crude oil, condensate and LPG (MMbbls)
Natural gas (Bcf)

Asia/
OceaniaJapan

Middle East/
AfricaAmericas

NIS

Interest in
Reserves Held by
Equity-Method
Subtotal
Affiliates

Total

5

62

323

494

—

883

726

1,610

196

1,573

114

—

70

1,953

142

2,095

INPEX GroupAs of March 31, 2006

Asia/
Oceania

Middle East

Caspian Sea Area/
Others

67

495

462

1,025

456

1,481

1,810

—

123

1,932

142

2,074

Crude oil, condensate and LPG (MMbbls)
Natural gas (Bcf)

Interest in
Reserves Held by
Equity-Method
Affiliates

Subtotal

Total

Teikoku Oil GroupAs of March 31, 2006

Crude oil, condensate and LPG (MMbbls)
Natural gas (Bcf)

Asia/
OceaniaInterest in
Reserves Held by
Equity-Method
Affiliates

Middle East

Caspian Sea Area/
Others

5

—

7

12

—

12

184

—

66

250

—

250

Notes: 1. MMbbls: Millions of barrels
2. Bcf: Billions of cubic feet
3. Asia/Oceania in the table “Teikoku Oil Group” includes Japan.

Subtotal

Total

INPEX Holdings Inc.

2

Oil and Gas Production
The following tables list average daily productions for

March 31, 2006. The productions before the establish-

crude oil, natural gas, and the total of crude oil andment are listed by each group, “INPEX Group” andnatural gas by region. The proportional interests in pro-

“Teikoku Oil Group,” (In the subsequent t tables weduction by our equity-method affiliates are not broken

use the former regional segments).

down by geographical regions. INPEX Holdings was

Our productions for the year ended March 31,

established on April 3, 2006. Therefore, the figures for2007 were 243 thousand barrels per day for crude oil,the year ended March 31, 2006 in the following tablecondensate and LPG, 1,051 million cubic feet per day“INPEX Holdings Group” assume that integration of

for natural gas and 418 thousand BOE (Barrels of Oil

INPEX and Teikoku Oil took place in the year ended

Equivalent) per day in total.

INPEX Holdings Group
Fiscal year ended March 31

2006

2007

Crude oil (Thousands of barrels per day):Japan
Asia/Oceania
NIS
Middle East/Africa
Americas
Subtotal

3.2
44.7
27.1
79.6
2.2
156.8

3.9
40.4
47.9
82.3
0.1
174.7

61.2
218.0

67.8
242.5

Annual production (Millions of barrels)

79.6

88.5

Natural gas (Millions of cubic feet per day):Japan
Asia/Oceania
NIS
Middle East/Africa
Americas
Subtotal

96.7
787.8
—
—
76.6
961.2

127.8
865.8
—
—
57.5
1,051.1—
961.2—
1,051.1

Annual production (Billions of cubic feet)

350.8

383.6

Crude oil and natural gas (Thousands of barrels of oil equivalent per day):Japan
Asia/Oceania
NIS
Middle East/Africa
Americas
Subtotal

19.3
176.1
27.1
79.6
14.9
317.0

25.2
184.7
47.9
82.3
9.7
349.8

61.2
378.2

67.8
417.7

138.0

152.5

Proportional interest in production by equity-method affiliates
Total

Proportional interest in production by equity-method affiliates
Total

Proportional interest in production by equity-method affiliates
Total
Annual production (Millions of barrels of oil equivalent)
Note: Crude oil includes condensate and LPG.

82

83 INPEX Holdings Inc.

INPEX Group
Fiscal year ended March 31

2004

2005

2006

42.3

51.5

44.7

Middle East

4.7

72.2

72.7

Caspian Sea Area/Others

10.1

12.1

27.1

57.0

135.8

144.5

2.7

56.8

60.2

59.8

192.6

204.7

21.8

70.3

74.7

Asia/Oceania

809.9

823.5

787.8

Middle East

—

—

—

Caspian Sea Area/Others

—

—

—

809.9

823.5

787.8

4.6

—

—

814.5

823.5

787.8

297.3

300.6

287.6

177.3

188.8

176.1

Middle East

4.7

72.2

72.7

Caspian Sea Area/Others

10.1

12.1

27.1

192.0

273.0

275.8

Crude oil (Thousands of barrels per day)
Asia/Oceania

Subtotal
Proportional interest in production by equity-method affiliates
Total
Annual production (Millions of barrels)
Natural gas (Millions of cubic feet per day)Subtotal
Proportional interest in production by equity-method affiliates
Total
Annual production (Billions of cubic feet)
Crude oil and natural gas (Thousands of barrels of oil equivalent per day)
Asia/Oceania

Subtotal
Proportional interest in production by equity-method affiliates
Total
Annual production (Millions of barrels of oil equivalent)
Note: Crude oil includes condensate and LPG.

3.5

56.8

60.2

195.5

329.8

336.0

71.4

120.4

122.7

INPEX Holdings Inc.

Teikoku Oil Group
Fiscal year ended December 31

2004

2005

Asia/Oceania

3.0

3.2

Middle East

—

—

11.0

10.5

14.0

13.7

Crude oil (Thousands of barrels per day)

Caspian Sea Area/Others
Subtotal
Proportional interest in production by equity-method affiliates

1.3

1.6

15.3

15.3

5.6

5.6

Asia/Oceania

90.8

97.8

Middle East

—

—

Total
Annual production (Millions of barrels)
Natural gas (Millions of cubic feet per day)

Caspian Sea Area/Others

69.2

71.2

160.0

169.0

—

—

160.0

169.0

58.4

61.7

Asia/Oceania

18.1

19.5

Middle East

—

—

22.5

22.4

40.7

41.8

Subtotal
Proportional interest in production by equity-method affiliates
Total
Annual production (Billions of cubic feet)
Crude oil and natural gas (Thousands of barrels of oil equivalent per day)

Caspian Sea Area/Others
Subtotal
Proportional interest in production by equity-method affiliates
Total
Annual production (Millions of barrels of oil equivalent)
Notes: 1. Crude oil includes condensate and LPG.
2. Asia/Oceania in the table “Teikoku Oil Group” includes Japan.

1.3

1.6

42.0

43.5

15.3

15.9

84

85 INPEX Holdings Inc.

Subsidiaries and Affiliates
As of March 31, 2007

Consolidated Subsidiaries
Issued Capital(thousands)

Voting Rights
Held by Us (%)

INPEX CORPORATION¥29,460,000

100.00%

Teikoku Oil Co., Ltd.

¥19,579,010

100.00%Japan Oil Development Co., Ltd.

¥18,800,000

100.00%INPEX Natuna, Ltd.

¥5,000,000

100.00%INPEX Alpha, Ltd.

¥3,814,000

100.00%INPEX Sahul, Ltd.

¥4,600,000

100.00%INPEX Jawa, Ltd.

¥4,804,000

83.50%¥400,000

100.00%INPEX ABK, Ltd.

¥2,500,000

95.00%INPEX Southwest Caspian Sea, Ltd.

¥53,594,000

51.00%INPEX Tengah, Ltd.

¥1,020,000

100.00%INPEX Browse, Ltd.

¥27,190,000

100.00%INPEX Masela, Ltd.

¥15,813,000

51.22%INPEX North Caspian Sea, Ltd.

¥49,280,000

45.00%

Azadegan Petroleum Development, Ltd.

¥9,550,000

100.00%INPEX Timor Sea, Ltd.

¥3,347,000

100.00%¥973,000

100.00%¥3,675,000

100.00%INPEX Libya, Ltd.

¥930,000

100.00%INPEX Trading, Ltd.

¥50,000

100.00%INPEX Services, Ltd.
INPEX BTC Pipeline, Ltd.

¥65,000
US$63,800

100.00%100.00%INPEX DLNGPL Pty Ltd.

A$86,135

100.00%

Teikoku Oil (Venezuela) Co., Ltd.

¥100,000

100.00%

US$21,855

100.00%Company Name

INPEX Sumatra, Ltd.

INPEX Offshore Northeast Mahakam, Ltd.
INPEX Offshore North Mahakam, Ltd.

Teikoku Oil Libya UK LTD

Main Business

Exploration, development, production and sales ofoil and natural gas overseas, primarily in Indonesia
Exploration, development, production and sales ofoil and natural gas in Japan and overseas
Exploration, development, production and sales ofoil in ADMA Block, United Arab Emirates
Exploration, development, production and sales ofoil and natural gas in South Natuna Sea Block B,
Indonesia
Exploration, development, production and sales ofoil and natural gas in WA-10-L Block, Australia
Exploration, development, production and sales ofoil and natural gas in JPDA03-12 Block in the
Timor Sea JPDA
Exploration, development, production and sales ofoil and natural gas in Offshore Northwest Java
Block, Indonesia
Exploration, development, production and sales ofoil and natural gas in Offshore Southeast Sumatra
Block, Indonesia
Exploration, development, production and sales ofoil in Abu Al Bukhoosh Block, United ArabEmirates
Exploration, development, production and sales ofoil in ACG Oil Fields, Azerbaijan
Exploration, development and sales of oil andnatural gas in Tengah Block in Offshore East
Kalimantan, Indonesia
Exploration of oil and natural gas in WA-285-P
Block, Australia
Exploration of oil and natural gas in Masela Block,Indonesia
Exploration and development of oil and natural gas
in Offshore North Caspian Sea Block, Kazakhstan
Appraisal and development of Azadegan Oil Field,
Iran
Exploration of oil and natural gas in JPDA06-105
Block in the Timor Sea JPDA
Exploration of oil and natural gas in Saliki Block in
Offshore East Kalimantan, Indonesia
Exploration of oil and natural gas in East
Kalimantan Block in Offshore East Kalimantan,
Indonesia
Exploration of oil and natural gas in the 42-2&4
and 13-3&4 Blocks in the Great Socialist People’s
Libyan Arab Jamahiriya
Sales, agency, and brokerage of crude oil andmarket research and sales planning in connection
with oil and natural gas sales
Management of owned properties and facilities
Investment in pipeline construction and management companies
Investment in LNG plant operating company andoperation of pipeline businesses
Reactivation of oil and gas fields, exploration anddevelopment of new fields based on joint ventureagreement in the Guarico Oriental area, theBolivarian Republic of Venezuela
Exploration of oil in the western onshore of theGreat Socialist People’s Libyan Arab Jamahiriya

INPEX Holdings Inc.

Company Name

Issued Capital(thousands)

Voting Rights
Held by Us (%)

Teikoku Oil (North America) CO.,Ltd.

US$16,533

100.00%

Teikoku Oil SCT Exploration B.V.
Teikoku Oil Suez SEJ Co., Ltd.
Teikoku Oil Algeria Co., Ltd.

14,900¥838,000¥708,500

100.00%100.00%100.00%

Teikoku Oil (Con Son) Co., Ltd.

¥545,000

100.00%

Teikoku Oil Suez SOB Co., Ltd.

¥251,000

100.00%Teiseki Drilling Co., Ltd.

¥100,000

100.00%Teiseki Real Estate Co., Ltd.

¥100,000

100.00%Teiseki Pipeline Co., Ltd.

¥100,000

100.00%Teiseki Propane Co., Ltd.
Teiseki Topping Plant Co., Ltd.

¥80,000¥70,000

100.00%100.00%

Teikoku Oil Nile NQR Co., Ltd.

¥191,500

100.00%

Teikoku Oil (D.R. Congo) Co., Ltd.

¥10,000

100.00%

Offshore Iwaki Petroleum Co., Ltd.

¥10,000

100.00%

US$35

100.00%Saitama Gas Co., Ltd.
¥60,000
The Egyptian Petroleum Development Co., Ltd. ¥10,722,000

62.00%
52.70%

Teiseki Transport System Co., Ltd.

¥10,000

100.00%Daiichi Warehouse Co., Ltd.
Other 16 subsidiaries¥100,000

94.00%

Exploration, development and production of oil in
the United States of America
Being dissolved
Being dissolved
Exploration and development of oil and natural gas
in the eastern onshore of the People’s Democratic
Republic of Algeria
Exploration of oil in the southern offshore of theSocialist Republic of Vietnam
Exploration of oil in the Gulf of Suez, the Arab
Republic of Egypt
Geothermal production wells, crust activity
observation wells, wells for hot springs, civilengineering
Real estate rental, management and insurance
agency services
Natural gas transportation, pipeline operation,
maintenance and management
Sales of LPG and petroleum products
Petroleum refining related production, storage andshipment of petroleum products
Exploration of oil in the Western Desert of the Arab
Republic of Egypt
Exploration, development, production and sales ofoil in the Democratic Republic of the Congo
Development, production and sales of oil andnatural gas in the offshore Iwaki, Fukushima
Prefecture, Japan
Exploration, development, production and sales ofoil in the eastern onshore of the Republic ofEcuador
City gas sales
Exploration, development, production and sales ofoil in the West Bakr Block of the Arab Republic of
Egypt
Equipment and materials shipping, transport andsales of petrochemical products
Warehousing services

Voting Rights
Held by Us (%)

Main Business

Teikoku Oil Ecuador

Main Business

Equity Method Affiliates
Company Name

Issued Capital(thousands)

Albacora Japão Petróleo Limitada

R$6,52550.00%MI Berau B.V.

656,279

44.00%INPEX Offshore North Campos, Ltd.

¥6,852,000

37.50%

Angola Japan Oil Co., Ltd.

¥8,000,000

19.60%

36,88325.00%¥6,400,000

15.00%JJI S&N B.V.
Japan Ohanet Oil & Gas Co., Ltd.

Other seven equity method affiliates

Lease of production facilities in Albacora Block in
Offshore North Campos, Brazil
Exploration and development of natural gas inBerau Block, Indonesia
Financing for oil and natural gas exploration anddevelopment projects conducted by Frade Japão
Petróleo Limitada
Exploration, development, production and sales ofoil in Offshore 3/05 Block, Angola
Development and production of oil in Offshore
Soroosh and Nowrooz Fields, IranDevelopment and production of natural gas in thesoutheastern onshore of the People’s Democratic
Republic of Algeria

86

87 INPEX Holdings Inc.

Stock Information(As of March 31, 2007)

쐽 Share Data
Authorized Shares
9,000,000 common shares
1 special class share
Total number of issuable stock shares
Common shares:......................47,594 shareholders ..........................................2,358,409.13 shares
Special class share*: ........................1 shareholder (Minister of Economy, Trade and Industry) .....................1 share
Note: The company’s Articles of Incorporation stipulate that certain major corporate decisions require a resolution by the holder of thespecial class share in addition to the approval of the shareholders’ meeting or Board of Directors.

쐽 Shareholding by Shareholder Type*1
Treasury Stock: 0.05%
Shareholders: 1
Shares: 1,089,63

Individuals and Other: 4.48%

Financial Institutions(Including Trust Accounts): 12.85%
Shareholders: 184
Shares: 303,054.36

Shareholders: 46,117
Shares: 105,745.26

Securities Companies: 1.10%
Foreign Corporations and Other: 12.95%

Shareholders: 87
Shares: 25,805.98

Shareholders: 524
Shares: 305,345.20

Minister of Economy, Trade and Industry*2: 29.35%

Other Domestic Corporations: 39.22%

Shareholders: 1
Shares: 692,307.75

Shareholders: 680
Shares: 925,060.95

Notes: 1. Shareholding ratios are for all issued and outstanding shares
2. Excludes one special class share쐽 Major Shareholders (Common Shares)
Name
Minister of Economy, Trade and Industry

Number of Shares

Holding (%)

692,307.75

29.35

Japan Petroleum Exploration Co., Ltd.

267,232.68

11.33

Mitsubishi Corporation

193,460.40

8.20

Mitsui Oil Exploration Co., Ltd.

176,760.00

7.49

Nippon Oil Corporation

111,920.06

4.75

The Master Trust Bank of Japan, Ltd. (Trust Account)

64,549.00

2.74

Japan Trustee Services Bank, Ltd. (Trust Account)

59,165.00

2.51

Marubeni Corporation

46,446.00

1.97

Sumitomo Corporation

24,458.00

1.04

Trust & Custody Services Bank, Ltd. (Trust B Account)

23,366.00

0.99

INPEX Holdings Inc.

Corporate Data
(As of March 31, 2007)

쐽 Company Name
INPEX Holdings Inc.

쐽 Company Headquarters
Ebisu Neonato, 4-1-18, Ebisu, Shibuya-ku,
Tokyo 150-0013, Japan쐽 Established
April 3, 2006

쐽 Number of Employees (Consolidated)
1,672

쐽 Capital¥30 billion

쐽 Main Business
Management of subsidiaries and group companies engaged
in surveys, exploration, development and production of oil,natural gas and other energy resources.

쐽 Organization Chart
Internal Audit Unit
Administration Division• Secretary Unit
• General Administration Unit
• Human Resources Unit
Corporate Strategy & Planning Division
Shareholders’ Meeting

Board of Directors

Board of Auditors

Management Committee

Compliance Committee

President• Corporate Strategy & Planning Unit
• Corporate Communications Unit
• Overseas Project Planning & Coordination Unit
• Domestic Project Planning & Coordination Unit
Accounting, Finance & IT System Division• Accounting & Finance Unit
• IT System Unit
Technology Division• Technology Planning Unit
• Operator Project Support Unit
• HSE Unit

쐽 Homepage
The Company’s Web site provides investors with the most
up-to-date IR information, including financial statements.

http://www.inpexhd.co.jp/english/index.html

쐽 Inquiry
Please contact us via any of the following contact points:
INPEX Holdings Inc.
Corporate Strategy & Planning DivisionCorporation Communication Unit
Investor Relation GroupTel: +81-3-5448-0205
FAX : +81-3-5448-0220
e-mail : irgroup@inpexhd.co.jp

88

INPEX Holdings Inc.
Ebisu Neonato, 4-1-18, Ebisu, Shibuya-ku, Tokyo 150-0013, JapanTe l : +81-3-5448-0200
http: //www.inpexhd.co.jp/english/index.html

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