English Translation of News Release

May 21, 2008, TokyoJapan Petroleum Exploration Co., Ltd.

JAPEX Group Mid-term Business Plan

Japan Petroleum Exploration Co., Ltd. (JAPEX) has established a mid-term business plan for JAPEX and
its group companies for the next 5 years from fiscal year 2008 to 2012.

Our business environment has rapidly been changing as we experience price hikes in natural resources suchas crude oil in recent years, changes in the state of society due to the sense of priority concerning global
warming issues, and advancing deregulations resulting from the revisions in both the Electric Business Act
and Gas Business Act. With these business circumstances in mind, we aim to further enhance our corporate
value by identifying primary business objectives from a long-term perspective and establish policies toaccomplish these objectives.

1. Business Philosophy
Since our founding in 1955, Japex has been engaged in the E&P business with its primary purpose toexpand oil and natural gas supplies in Japan. Starting with zero oil reserves, our continued efforts haveestablished the foundation of our business, growing through numerous discoveries of oil and gas fields. As
a company that explores, develops and distributes oil and gas alike, we will continue to use our best
endeavors to secure reserves and increase production capacities to contribute to domestic energy supplies.
We acknowledge that we bear an increasing amount of social responsibility in maintaining a highly reliable,
sustainable oil and gas supply as the scale of energy supply expands, and that it is critical to establish a new
business model; one that builds and utilizes a transportation system to deliver natural gas. Given such
perspectives, we strive to further evolve as a company that is competitive and responsive to a changing
business environment, and set forth the following as our business philosophy.

[Aiming for New Value Creation in Energies and Elevation of the Corporate Value]¾ As a corporation engaged in the exploration, development and distribution of oil and natural gas,
we will contribute to the nation’s energy supply through our global business activities.
¾ By exploring new business development with environmentally-friendly natural gas and promoting
its usage, we are committed to realizing a harmonious coexistence between humans and the earth.
¾

By setting our priority on building trust from society, our clients, shareholders and employees, wewill maximize shareholder value and the continuance of corporate development.

12. Understanding the Business Environment(1) Prospects of the oil and natural gas business
Natural gas is our significant revenue base. Unlike oil and LPG, natural gas reserves are not centered in
the Middle East, and therefore, a stable energy supply can be expected. Furthermore, due to its
clean-burning and environmentally-friendly characteristics, natural gas has come under the spotlightlabeled as a crucial energy source for the future. Due to the recent price hikes in crude oil and LPG,
natural gas has particularly gained in popularity.
In terms of oil, making up more than half of our primary energy sources, there are serious concerns
over the supply and demand balance in future markets, triggered by geopolitical turbulence in the
Middle East, prolonging instability in Iraq, increasing fuel consumption by emerging markets such as
China, and a decreasing production spare capacity by oil-producing countries. Given these perspectives,
our domestic oil supplies and overseas production play an important role in meeting the increasing
demand.

(2) Rising energy prices
The recent price hikes in natural resources, including crude oil, have become significantly noticeable.
These hikes in energy market may boost our revenue in the short term, but from a mid-term revenue
sustainability and security perspective, our revenue and cash flow levels will heavily depend on how thecurrent price volatility and soaring oil prices play out in the market. Or worse, the escalation ofcompetition for access to energy and rising costs of exploration/development operations associated withoil price hikes may potentially have a negative impact on our revenue.
Furthermore, LNG import prices are also increasing in line with the price hikes in oil. We are facing asituation where we promptly need to adjust domestic retail gas prices in proportion with internationalenergy market conditions while not disturbing corporate relationships with our continued businessaccounts.

(3) Increase in social environmental awarenessWith increasing social awareness concerning environmental issues, we acknowledge that working
towards environmental management is essential for strengthening corporate competitiveness andbusiness development. With this in mind, we must implement “environmentally sound businesspractices” that will ensure corporate profitability. The industry organization that we are a member of has
also started taking action by setting its self-action objectives. We, as an environmentally-friendly
natural gas provider, must continue our endeavors to contribute to saving the environment in response
to our environmentally-conscious customers, and drive forward our proactive engagement in theenvironmental conservation business.

3. Primary Business Objectives2(1) Exploration/development efficiency and discovery of new reserves
We consider it extremely critical to sustain and increase our reserves, which otherwise only decrease
due to production and sales. And bolstering our long-term, secure oil and natural gas supply system isequally critical for a company like ours whose business is centered around exploration, development
and distribution of these resources.
In our effort to prosper in the high-risk exploration and development business, we aim to discoverand secure new oil and natural gas reserves through the participation in promising projects and theimplementation of an efficient exploration.
In order to increase domestic oil reserves, which currently account for our largest revenue source andare highly competitive in price, we will continue exploration/development activities in a proactive
manner by setting our priorities on restructuring our domestic oil and gas exploration/development
system. While carefully reviewing an investment balance, we aim to establish a new revenue basethrough the acquisition of overseas interests.

Domestic Operations:With the geological potential, future prospects and economic effects of the Hokkaido, Akita and Niigata
areas always in mind, we will conduct systematic exploration operations by effectively integrating“reserves expansion in areas surrounding existing oil and gas fields (field growth)” and “exploration
aimed at adding new large-scale gas reserves”.

Overseas Operations:
In addition to domestic reserves expansion projects, we also focus on the increase in overseas reserves& production and corporate revenues to build a long-term, stable business foundation.
To realize the above notion, we will identify target areas to invest in the E&P business. In order tosecure stable reserves, production and earnings, we will create a well-balanced investment portfolio
between relatively low-risk, early-return investments in already-in-production or discovered andundeveloped projects and high-return investments in exploration projects.
By taking future LNG needs into account for the domestic natural gas supply business, we will seek
opportunities to participate in upstream and midstream LNG projects primarily in the target areas statedabove. In addition to profit contributions through upstream and midstream LNG operations, by late
2010s, we aim to contribute to the stability of domestic natural gas supplies from secured LNG sources
for domestic use.

(2) Reinforcing an efficient, integrated natural gas operation system
In order to further prosper in the fiercely competitive market of the energy sector, we need to be
responsive to rapid changes in the natural gas market associated with advancing deregulations andincreasing environmental consciousness in society. To this end, not only do we simply fulfill a role in3

providing natural gas as a supplier, but it is essential that we foster the ability to understand and meetthe diverse range of needs and expectations of consumers in order to offer natural gas in a more
appealing fashion.
To put this into practice, we will implement an efficient, integrated natural gas supply system called“Gas Integration” by integrating upstream (E&P), midstream (transportation and storage) anddownstream (large-scale supply, wholesale, etc) operations in our core natural gas supply business. Bybuilding a natural gas business model that organically integrates our distinctive facilities and service
functions, we strive to differentiate ourselves from other gas suppliers.
To be more specific, we will focus on; the enhancement of an integrated natural gas supply systemthrough sales of large-scale gas supplies and wholesale distributions to utility gas companies, theintroduction of overseas gas sources to compensate for domestic reserves, and the establishment oftransportation/underground storage network utilizing JAPEX’s own upstream (E&P) operation. And inorder to diversify supply methods of natural gas by integrating our efforts into the environment-oriented
business, we will strive for further increase in sales along our existing natural gas pipeline network, aswell as the installation of new pipelines. We will also endeavor to promote the utilization of natural gas
in a broad area by introducing an LNG Satellite system in regions not equipped with pipelines. More
importantly, based on long-established principles for mutual benefits made with local gas suppliers, we
make our best efforts to continue to work with our wholesale clientele; the local gas suppliers.
To diversify revenue sources and further increase profits, we realize that it is significant to turn thecurrent natural gas supply system into new form of revenue base. To this end, by considering a newpolicy granting third party access to natural gas pipelines associated with the revisions in the Gas
Business Act as our new business opportunity, we will dedicate ourselves to the R&D of advanced
natural gas utilization technologies like GTL/DME technologies to advance to diversification of natural
gas supply system combined with eco-business.

(3) Corporate efforts to protect the global environment
We will accelerate our effort to reduce environmental burdens associated with our operations andproactively involve ourselves in tree-planting programs. In addition to exploring environment-oriented
business potentials such as emissions trading, we strive to heighten the added value of the natural gas
supply business, meet the diverse needs of our clients, and apply our technological expertise to theenvironmental business.

4. Specific measures
The above primary business objectives are vital elements for further growth of our business. In thismid-term business plan covering up to fiscal 2012, we will implement the following concrete measures toachieve our primary business objectives.

4(1) Domestic Exploration Investment Policy
1) Areas for “exploration aimed at discovering large-scale gas reserves” are; Yufutsu-type geologicalstructure in onshore and offshore mid southern Hokkaido and green tuff formation in the Niigata area.
Although geological risks are relatively high in these areas, upon successful exploration, a vast
amount of gas reserves are expected. While paying careful attention to the data acquired from theseismic surveys, we will map out focus plans for the execution of exploration drilling at an earlystage.
2) In terms of “exploration aimed at field growth,” we are looking at the Yufutsu area in Hokkaido, theKosei, Yurihara and Ayukawa areas in Akita prefecture, and in Niigata, the Kitakanbara area and thearea in the vicinity of offshore Higashi-Niigata and Iwafune-oki. Prospective reserves in thesurrounding areas of each of these oil and gas fields are relatively medium-scale, yet, geologicalrisks are low enough to generate earnings from additional reserves in relatively short term periods.
We will conduct exploration operations while leveling the workload by measuring the production
status of the existing fields, as well as cost burdens amongst our joint venture partners.
Based on the above policy, we will invest approx. 50 billion yen in domestic exploration projects,
including approx. 20 exploration or exploitation wells during the next 5 years in fiscal 2008-2012.

(2) Overseas Investment Policy
We identify the regions of Southeast Asia centering around Indonesia, Canada, the Middle East, North
Africa and Sakhalin as target areas. In these areas, we will continue to propel operations in projects inthe existing projects, and maximize the project value of all the projects that are already in production,
while focusing also on the discovery of new projects. Further, we strive for synergy effects between arevenue base expansion of our upstream & medium-stream operations in the natural gas business andlong-term, secure gas source in Japan, and will prepare ourselves for acquisitions of upstream andmedium-stream LNG interests.
1) Southeast Asia centering around Indonesia
Due to our proactive activities over the past few years, we have acquired oil and gas interests in
Block A and the Kangean Block in Indonesia. We will make further endeavors to optimize our asset
value by conducting exploration and development operations in these areas, and cultivate these areas
to serve as our overseas operation hub while focusing also on the discovery of new projects.
2) Canada
In the oil sands project, we will continue oil production using the Steam Assisted Gravity Drainage(SAGD) process in the producing area (the 3.75 section area), and are currently conducting
geological evaluation in the Hangingstone area. By carefully reviewing geological data, we will takepositive steps forward to begin development projects in the area. Meanwhile, we are set to conduct
environmental impact assessments as an initial step to this approach.
3) The Middle East

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In Iraq, based on the MOU for technical assistance with the Ministry of Oil, we will continue to
conduct joint studies, and provide technical assistance and training to bolster our relationships with
the Ministry. In other areas in the Middle East, we will seek opportunities to acquire interests indiscovered/undeveloped or in-production oil fields, and IOR/EOR projects, primarily in the Gulf
region.
4) North Africa
Both Libya and Algeria are said to possess sedimentary basins claimed to have one of the greatest
exploration potential in the world. In Libya, we will drive forward with exploration operations in the
2 blocks already acquired and continue to seek further interests. In Algeria, Egypt and other regions,
we continue our effort to acquire interests in discovered/undeveloped or in-production oil fields.
5) Sakhalin
Crude oil production is making steady progress by Sakhalin Oil and Gas Development Co., Ltd(SODECO). We will continue our involvement in the project, and look to optimize our asset value incollaboration with ExxonMobil Corporation.
6) Seeking participating opportunities in LNG upstream and medium-stream projects
In order to strengthen our domestic natural gas supply business in the future, we aim to secure stable
import LNG supplies. Further, in addition to investigating generating operation revenue fromupstream & medium-stream LNG operations, we seek participating opportunities in LNG upstream& medium-stream projects in the above listed target areas.
7) Overseas Investment Scale
During the period of this mid-term business plan, JAPEX will invest estimated 110 billion yen for
exploration operations in the existing projects and for development operations in the event that
exploration drillings lead to successful commercial discovery. We consider investment in new
projects essential for sustainable growth. While it is rather challenging to forecast the timing and thevalue of each prospective project, we will pay close attention to our financial standing in our
endeavors to seek and obtain new projects.

(3) Production and Sales Policy
As prices of crude oil and oil products have soared in the recent years, the relative price advantage ofnatural gas has become of particular note. Due to such a phenomenon, demand for natural gas amongindustrial consumers is particularly rising. We will make an effort to respond to such demand byinvesting in facilities to enhance our domestic gas supply capacities and by increasing LNG purchasesfrom overseas. Additionally, we will seek to adjust our gas selling prices to equivalent LNG import(CIF) prices.
Further, we take a proactive approach to expanding natural gas sales in the country with a sales
volume targeting at 2 billion m3 in fiscal 2012, about 0.3 billion m3 increase from actual results in fiscal

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2007.
We consider the enhancement in the efficiency of drilling production wells and expanding production
facilities important to realize an increase in domestic natural gas sales and security of stable gas
supplies. For these reasons, we will invest an estimated 80 billion yen over the next 5 years in fiscal
2008-2012.

(4) Technological Research and Development Policy
The oil and natural gas development industry is based on comprehensive engineering consisting ofseveral specialized fields, including geology, geophysical survey, well drilling technology, petroleum
reservoir engineering and information technology. As a company having pioneered an integrated
operation in the exploration and development business, we embrace our own unique cutting-edge
technologies that have been cherished to this date.
These technologies have already been utilized and developed in diverse applications by our group
entities. Yet to develop new business areas, we are committed to further elevating our technologicalstrengths to a higher level through the following framework.
1) Bolstering technological strengths for the efficiency of exploration and development operations
As technologies identified as critical to our business objectives, we will particularly bolster thefollowing areas: “fractured reservoirs modeling technology,” “geostatistical reservoirs modelingtechnology,” “high-accuracy geophysical survey technology,” which helps enhance the efficiency ofreserves evaluation and reduce the risk of exploration or exploitation drilling, and “enhanced heavy
oil recovery technology,” that is invaluable to oilfield development in the future.
2) Employment and establishment of new technologies for the realization of a new energy businessIn order to propel the effective utilization of natural gas, we will engage ourselves in thedevelopment and manufacturing of GTL (Gas-To-Liquids) and DME (Di-Methyl Ether) technologies
through participation in joint research programs of the public and private sectors.
3) Improvement of environment-oriented technologies
We will focus on technological development of Carbon dioxide Capture and Storage (CCS)
technologies to help reduce green gas emissions by optimizing the application of our oil and naturalgas E&P technologies.
4) Approach to unconventional resources development
Upon improvements in oil sands production technologies, including the SAGD process, andresolutions on cost-related challenges, we will seek commercial development opportunities in ourarea. At the same time, we will proactively participate in and cooperate with the methane hydrate
development project initiated by the Goverment aiming for commercial production of methane
hydrate by fiscal 2016.

(5) Environmental Policy7

We strive to develop and realize safe and secure supplies of unreproducible recourses, oil and naturalgas. As our environmental conservation principles, we endeavor to protect our neighborhood and theearth particularly through the promotion of the utilization of environmentally-friendly natural gas, andset forth the following action guidelines.
1) Integrating environmental concerns into our domestic/overseas business operations
2) Focusing on an energy supply beneficial to the environment
3) Fostering environmental partnerships

Furthermore, in addition to the implementation of the Environmental Management System (EMS), we
will take a more comprehensive approach to the environment through our social involvement inconservation activities such as contributions to the BioCarbon Fund (BioCF) and participations indomestic tree-planting projects, as well as compiling environmental reports. Likewise, we will continue
developing environment related businesses through development of GTL, DME and CCS technologies.

5. Numerical Targets
1) Natural gas sales volume
We aim to increase the sales volume of natural gas at 1.7 billion m3 (the domestic sales volume, incl.
LNG) in fiscal 2007 to 2.0 billion m3 with an increase of 0.3 billion m3 by fiscal 2012.
2) Operating Cash Flows Targets and Allocations
While ensuring leveling of our exploration activities, occasional occurrences of drilling operations
requiring high operation costs will inevitably have a considerable degree of impact on yearly profit
levels. Due to the nature of high risk for exploration works, a significant change in exploration plans
will also sometimes be necessary after exploration drilling is conducted. In addition, in anticipationof change in the future energy market, it is difficult to set numerical targets for performance (profit
levels) in future fiscal years. With these factors in mind, the following is a basic outlook for
operational cash flows and their allocations with certain preconditions involving crude oil prices andexchange rates for the period of this mid-term business plan.

5-year period : 2008 to 2012
Cash Inflows from operating activities(before exploration investments and deduction/tax)
Exploration investments(including exploration investments in existing overseas projects)
Capital expenditure(including development investments in existing overseas projects)

300 billion yen
80 billion yen
160 billion yen

The cash inflows from operating activities include an estimated increase in sales from the realizationof sales expansion of natural gas and a rise in natural gas prices.
The above investment figures do not include, however, costs for acquisition of new overseas

8projects and their exploration/development operations, or any new projects posing uncertainty, suchas new pipeline constructions in Japan. However, as we consider investing in new projects, such as
the above, vital in order to attain long-term, sustainable corporate growth, we will carefully examine
investment profitability and financing methods for these projects.
While looking at investments from a long-term perspective, we endeavor to sustain stabledividends to our stockholders.
3) Reserves
In our effort to sustain and raise the level of our reserves, which inevitably decrease due to
production and sales, we will implement the previously mentioned initiatives, and aim to raise 170
million barrels of oil equivalent (BOE) of recoverable reserves as of end-March 2007 to 350 million
BOE by end-March 2012.

<Reference Data>
Primary Preconditions for Cash Flows Assumption
Fiscal Year

2008

2009

2010

2011

2012

Crude Oil Price (JCC, $/bbl)

80

80

80

80

80

Exchange Rate (yen per dollar)

105

105

105

105

105

* JCC: Japan Crude Cocktail =The weighted average CIF price of crude oil imports into Japan

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