Note: The following press release is an English translation of the Japanese-language original

May 11, 2018

Company Name: Japan Petroleum Exploration Co., Ltd. (JAPEX)Securities Code: 1662 (First Section of Tokyo Stock Exchange)
Representative: Hideichi Okada, President
Inquiries:
Media and Investor Relations Dept.
Tel:+81-3-6268-7110

Long-term Vision and Mid-term Business Plan of JAPEXJapan Petroleum Exploration Co., Ltd. (JAPEX) hereby released "Long-term Vision 2030" (hereinafter"Long-vision") as our growth strategy toward 2030 and "Mid-term Business Plan" (hereinafter "Mid-plan") to
determine our management direction and business priority for coming five years from fiscal 2018.
JAPEX formulated Long-term Business Vision and Medium-term Business Plan in the first five years(hereinafter "former-plan") in May 2015, which is aiming for "Transformation to the Integrated Energy
Company with a focus on Oil and Gas E&P Business." Based on the former-plan, the JAPEX group had
struggled to strengthen our business basement with a large amount of investment including thedevelopment for full-scale commercial production of Canada Oil Sands Project in the Hangingstone leases
and the completion of Soma LNG Terminal at Soma port in Fukushima prefecture and to expand ourbusiness into related fields which have affinity to our fundamental business such as joining natural gas-fired
power generation project at Soma port, making contributions in national verification projects for next-gen
resource development, and others.
However, after formulation of the former-plan, our business profit in E&P business declined by downfall in
crude oil and natural gas prices, and the Pacific NorthWest LNG project which was planned to produce LNG
from its upstream shale gas reserves in British Columbia of Canada was decided not to proceed. Mainly bythese changes in our business condition, our mid-range targets were required to be revised. Furthermore, in
response to the situation change of energy sector by international climate protection agreements and carbon
emissions as well as the growing interest for companies' effort to ESG (Environment, Social, Governance)from stakeholders, we decided that reconsideration of our business vision was needed in the long-term view
with our recognition for making contributions to sustainable society and stable energy supply as our mission.
The summary of new Long-vision and Mid-plan is as follows:
1. Long-term Vision 2030
1) Aspiration toward 2030
"Growth to the Integrated Energy Company Utilizing our Oil and Gas E&P and its Supply Basis"
2) Long-term Strategy
・Under the recognition that oil and gas will play the key role as global primary-energy in mid-to-long
term, the JAPEX group continuously undertakes stable energy supply in response to the changes ofneeds in the market and clients.
1/3

・Playing active role for the resolution of global-scale issues particularly in low-carbon/decarbonization
listed in "Sustainable Development Goals (SDGs)" adopted by the United Nation, the JAPEX groupmakes effort to CO2 reduction in our business and is aiming to generate and expand new businesses ofenvironmentally-friendly in non-E&P field including realization of carbon offset technologies andrenewable energies.
3) Long-term Targets
・Aim to achieve "RRR(*2) > 1" by new opportunities and projects of oil and gas E&P
・Play the leading role for the realization of CCS(*3) technology by utilizing our E&P capabilities which
will contribute to carbon offset
・Transform our business structure so that the business profit ratio will be "6:4 of E&P to non-E&P" byensuring new investment funds under financial discipline of "Debt/EBITDA < 2" and allocate half ofthe new funds to non-E&P business2. Mid-term Business Plan 2018-2022
1) Mid-term Strategy
・Pursuing to be the aspiration toward 2030, we will be aiming to improve our profitability to achieve"ROE => 5%" level in fiscal 2022 under market circumstance with crude oil prices of 60USD/bbl
・In fiscal 2018 to 2019 as the first half of mid-term, we are focusing on the optimization of our businessportfolio and financial soundness as the immediate priorities
・After fiscal 2020 as the second half, we will drive concrete initiatives for sustainable growth including
new investment in E&P field as well as business generation in non-E&P field, using new investment
funds generated in the first half2) Mid-term Tactics and Targets<1> E&P Business: Proceed to improve operation efficiency of domestic oil and gas fields and additional
development in its around areas, to conduct offshore exploration mainly as national researches, and to
optimize our owned portfolio and discover new investment opportunities in overseas<2> Infrastructure & Utility Business: Ensure stable energy supply and promote natural gas use bydomestic-produced gas and various LNG sources for the targets of domestic gas sales amount of 1.6
million tons natural gas (equivalent LNG) per year and sales amount of 2.8 billion kWh electric power
per year, execute stable operation and improve utilization of Fukushima Natural Gas Power Plant(*4),
and pursue business development of renewable energies<3> New Business Development: Establish a dedicated team to strengthen the organization structure
for discovering new business opportunities with the utilization of our competitive and advanceresources including E&P technologies and knowledge of domestic natural gas supply network whichhave developed, and accelerate to develop business models and profitable projects

Please refer the appendix for details of Long-term Vision 2030 and Mid-term Business Plan 2018-2022.
The JAPEX group will endeavor to increase its corporate value through improvement to more profitablebusiness structure for sustainable growth under market circumstance of lower crude oil prices, andtransformation of our business structure being able to respond changes in society.

2/3Notes)*1: Exploration & Production*2: Reserve Replacement Ratio*3: Carbon dioxide Capture and Storage; JAPEX is playing a key role in a national verification test through joining Japan CCS
Co., Ltd.(JCCS) as a stakeholder*4: Owned by Fukushima Gas Power Co., Ltd. (JAPEX's investment ratio=33%)(Appendix) Long-term Vision 2030 and Mid-term Business Plan 2018-2022

###

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

Long-term Vision 2030
andMid-term Business Plan 2018-2022
May 11 , 2018

Japan Petroleum Exploration Co., Ltd.
1

Cautionary Statement
This document contains future prospects such as plans, forecasts, strategies, and others which are
not historical fact and these are made by the management’s judgement based on the obtainable
information at the time of the disclosure. Actual results may significantly differ from those future
prospects due to various factors.
This document is not intended to invite investment.
Copyright : All information contained herein is protected by copyright, and may not be copied or
reproduced without prior consent of JAPEX.

Any inquiries about the information contained herein or other Investor Relations questions
are requested to be directed to:Investor Relations Group, Media & Investor Relations Dept.
Japan Petroleum Exploration Co., Ltd.
Tokyo, JAPANTEL: +81-3-6268-7111

Long-term
Vision2030

Background

Current Status

Need to revise quantitative targets of Long-Term Business Vision
and Medium-Term Business Plan (proved reserves, production
volumes, natural gas handled volume) formulated in May 2015,
due to deterioration in E&P* business profit caused by low oil andgas prices and not proceeding the PNW LNG Project **.

Changes in
Social Needs

It is necessary to redefine our social role based on changing
social needs for the energy industry, including the United Nations'The 2030 Agenda for Sustainable Development' and the Paris
Agreement.

Long-term
Vision 2030 and
Mid-term
Business Plan

Newly formulated “Long-term Vision 2030 and Mid-term Business
Plan 2018-2022". Realize sustainable energy supply by reforming
business structure to respond to long-term social structuralchanges and improve profitability in the oil price range of US$5060/bbl.

(*) E&P: Exploration & Production(**) Refer to “Pacific NorthWest LNG Project in British Columbia, Canada, Is Not Proceeding” released on July 26, 20173

Contents
Mid-term Business Plan 2018-2022

Long-term Vision 2030
• Corporate Vision• What JAPEX Aims for by 2030
• Social Agendas JAPEX Address•

Relationship Between Long-term
Vision and Mid-term Business Plan•

Mid-term Tactics and Targets① E&P Business② Infrastructure & Utility Business③ New Business Development• Profit Target and Return toShareholders• Transition of Production Volume
and Proved reserves• Appendix• Business Environment Surrounding
JAPEX• Towards Integrated Energy Company• [Priority Business] CCS• ESG Efforts for Sustainable Growth• Transformation of Corporate Culture• JAPEX’s “Integrated Energy
Company”

4Long-term
Vision2030

Corporate Vision

Contribute to society through stable supply of energy, and solve
social issues to realize sustainable development agendas.
Explore, develop,
produce and deliver
oil and natural gas inJapan and overseas.

Further enhance natural
gas supply chain,consisting of ourdomestic
infrastructures, bypower supply business.

Contribute to solve problems
for sustainable society onenergy and climate change,
through development andcommercialization of newtechnology utilizing ourexisting technology andexpertise.

Trust with stakeholder as first priority
Achieve sustainable growth and maximize corporate value

E&P Business

Infrastructure
Utility Business5

New Business
Development

Long-term
Vision2030

What JAPEX Aims for by 2030

Growth to the Integrated Energy
Company Utilizing Oil and Gas E&P
and its Supply Base

Meet the Local communities and clients’ demands for stable
oil and Gas supply as well as play an active role to solve
global issues such as low-carbonization and decarbonization.

6

Long-term
Vision2030

Profit Composition

Business portfolio that enables sustainable growth••

Global oil and gas demand in 2050 is considered as similar to the current level
It is necessary to develop both E&P and non-E&P business for future uncertainty

 By creating new environmentally-friendly businesses utilizing full use
of our competence, JAPEX will transform our business structure andaim for the profit composition “6 : 4 of E&P to Non-E&P” in 2030
【Corporate profit composition**】2030 Ratio

：

4
E&P事業
 Maintaining “RRR＞1” * Infrastructure/Utility Business New Business Development（*）RRR：Reserve Replacement Ratio ＝Increase in reserves (during a certain period) ÷Production volume（**）Operating profit + Equity method investment income/loss basis

76Long-term
Vision2030

Social Agendas JAPEX Address

Focus on solving three social agendas of sustainable development goals(SDGs)* leveraging oil and gas E&P and its supply baseSocialAgendasOur
Efforts

Stable supply to meetprimary energy
demand, for the needsof local communities
and customers

Contribute to thereconstruction of Fukushima
prefecture and local
communities through arobust supply base startingfrom the Soma LNG
Terminal and the Fukushima
Natural Gas Power Plant

Play an active role tosolve global issues forlow carbonization anddecarbonization(*) Sustainable Development Goals：Agenda adopted at UN Headquarters in September 2015. Toward realization of asustainable society it consists of 17 goals to be achieved by 2030 and 169 targets

8

Long-term
Vision2030

Business Environment Surrounding JAPEXOur Business
Opportunities

$/bbl
120

Decarbonization

Trends and Forecasts for International
Crude Oil Prices and US Gas Prices

ESG$/MMbtu
20

Crude Oil Price

CCS*, **

90

15

60

10

Renewable Energy
Liberalizationof Electricity
and Gas Market

Power Supply
Energy Service

Business
Environment
Surrounding
JAPEX

Oil & Gas
Price Trend

30

Oil & Gas continue tobe the primary energy0Natural Gas Price

Future prospects

50Source: EIA

 Most predictions insist rise of oil and gas prices
 Current volatility is highDistributed
Power Supply
IoT・AI

Domestic
Population
DeclineNatural Gas –Fired Power
Generation as Flexible Power
SupplySmart Community
Compact City BusinessTransformation to a businessstructure capable of sustainablegrowth is necessary on the premise ofcontinuing the oil price of $50-60/bbl(*) CCS: Carbon dioxide Capture and Storage(**) There is also the concept of CCUS (Carbon dioxide Capture, Utilization and Storage) including the use of CO2

9

Long-term
Vision2030

Towards Integrated Energy Company
Allocation of Management Resources to Realize the Target••

Secure funds for new investment under financial discipline “Debt/EBITDA*< 2”Allocate approximately half of new investment resources to non-E&P business in the medium tolong term[Profit Contribution Image of Business Portfolio]
Example of
new project

LNG Overseas Rail Transport, Bunkering

Seafloor
Hydrothermal
Deposits

Non-E&P
Business

Creation and Promotion of New Business
CCS

Renewable Energy
Soma LNG Terminal /Power Generation

CO2-EOR
Underground storage of gas

Portfolio Review
Operation
Efficiency Improved
2018

Mid-term Business Plan

Methane Hydrate

E&P
Business“RRR＞1” on new projects

2022

2030

Long-term Vision(*) EBITDA: Earnings before Interest, Taxes, Depreciation and Amortization

102040-50

Post Long-term Vision

Long-term
Vision2030[Priority Business] CCS

 According to the International Energy Agency (IEA), CCS is expected to contribute
14% of the total CO2 reductions by 2060 in order to achieve the "2 °C target" of theParis Agreement
 If CCS is commercialized, there is the possibility of offsetting the substantial
amount of CO2 emitted at the time of combustion of oil and natural gas on theclient side, in addition to CO2 emitted during our business process.
Through Japan CCS Co., Ltd., we utilize the E&P underground technology we have accumulated so far andare leading the project of pioneering CCS technology development that is gaining global attention.
• Achieved 150,000 ton cumulative injected CO2 volume by large-scale CCS demonstration project at Tomakomai, Hokkaido.
About 2,000 visitors per year. (as of March 31, 2018)

Provided by Japan CCS Co., Ltd.

11

Long-term
Vision2030

ESG Efforts for Sustainable Growth
Relationship with
SHINE*

Environment

SocialGovernance• Commercialization of CCS• Energy saving and diffusion of natural gas as a clean energy• Create environmentally friendly new business

•
•
•
•

Safety first priority
Regional promotion through stable energy supply
Contribution to Fukushima reconstruction through Soma Project
Local production and local consumption of energy and disasterresistant community planning• Diversity & inclusion• Dialogue with stakeholders• Disclosure of ESG information under international standards（*）Five core CSR themes as “SHINE” initiatives[S]: Stable and sustainable energy supply [H]: HSE as our culture[N]: Being a good Neighbor [E]: The Employer of choice

12[I]: Integrity and governance

S
H

H
N

I
E

Long-term
Vision2030

Transformation of Corporate Culture- Transforming mindsets and Human Resource Development -While aiming to increasing the creativity and challenging spirit ofeach of the executives and employees, JAPEX aim to transform
into a company with abundant mobility and diversity.

Work Style
Reform
Employee
Training

Diversity &Inclusion

KGI・KPI
PDCA Cycle

13

Personnel
System Reform

Flexible
Personnel ShiftLong-term
Vision2030

JAPEX’s ”Integrated Energy Company”
E&P Business• Review portfolio• Improve operation efficiency• Additional proved reserves(RRR>1)

Infrastructure / Utility Business• Improvement of operating rate of
LNG terminal and power plant• Pursuit of additional power
generation business• Secure competitive gas source

SocialContribution
through
Sustainable
GrowthSource of competitive
advantage• E&P underground technology• Infrastructure of gas supply• Knowledge obtained throughcommissioned research

CSR Management
Change in Corporate Culture
14

Environmentally Friendly
New Business• Promote commercialization of CCS• Establishment of new businessspecialized organization• Proposal of new valueMid-term
BusinessPlan
2018-2022

Relationship Between Long-term Vision
and Mid-term Business Plan

Social Contribution throughSustainable Growth
Achieve
ROE=>5％Long-term
Vision2040-2050

2030

Mid-term
Business Plan

2022

Building a sustainable growth
portfolio

2018• Review portfolio• Financial soundness• Improve profitability ofexisting business

Pursuit of new business
opportunities

15

Compliance of stable supply ofenergy and low carbon societyMid-term
BusinessPlan
2018-2022

Mid-Term Tactics and Targets

LatterHalf

Achieve “ROE => 5%” level in 2022
(crude oil prices US$60/bbl)•

Active Investment 1 : 1 of E&P to Non-E&P (Investment allocation)•

Secure Investment Resources
Own funds 30 to 60 billion yen + Reserve capacity of borrowing
Domestic

Overseas

First Half

• Improve profitability thoroughly ofoverseas existing E&P project•

Maximizing the value of domestic
resources•

Sales expansion• Improve financial indicators
including asset sales

Gas:1.6 million ton
Power: 2.8 billion kWh

 Debt / EBITDA < 2•

16

Reduction of G&A expenses: 1
billion yen

Mid-term
BusinessPlan
2018-2022(1) E&P Business[Long-term Targets] Aim to achieve “RRR＞1”*

Overseas E&P

Domestic E&P• Maximize production rate /Additional development• Maximize the value of existing
projects / contribution to earnings• Maintenance and improvement offield operation capability andoperation efficiency• Appropriate portfolio including
asset sales• Discover new investment
opportunities• Promote offshore exploration
based on national researchCompatibility of E&P business and low-carbon society
Acceleration of CCS efforts utilizing E&P technology
Establishment of investment evaluation standard taking account ofclimate change response*(*) Considering introducing internal carbon pricing (Risk management system that quantitatively evaluates the impact ofcarbon emissions in current or future business activities)

17Mid-term
BusinessPlan
2018-2022(2) Infrastructure & Utility Business[2022 Target]
・Domestic natural gas sales volume: 1.6 million ton(Including LNG for power generation)・Electricity sales volume: 2.8 billion kWh(Equivalent to the annual electricity consumption of about 930,000 households in general households)

Domestic
gas supply
business• Promote natural gas use as clean energy• Construct robust supply base by adding gas undergroundstorage to the network Soma LNG Terminal and gas pipeline• Secure stable supply by domestically produced gas anddiversification LNG procurement sourcePowergeneration/
Electricity
sales• Establish electric power business structure through the
Fukushima Natural Gas Power Plant* and improvement ofoperating rate
• Pursuit of renewable energy development(*)Owned by Fukushima Gas Power Co., Ltd. (JAPEX investment ratio 33%)

18

Mid-term
BusinessPlan
2018-2022(3) New Business Development[Target] Commercialization by "new business model" utilizing thecompetitive advantage of JAPEX

Methane Hydrate
CCS

Energy Service

Seafloor
Hydrothermal Deposits

Accumulatetechnology
throughcommissioned
research

Establish
department for
creating new
business

LNG Rail Transport
at overseas
Bunkering

Developopportunity
utilizing
competitive
advantage

Commercialization
19

Underground gas storage
CO2-EOR
Merge existing
technology,
knowledge, knowhow
Smart community

RenewableenergyAppropriate humanresource allocation anddevelopment

Mid-term
BusinessPlan
2018-2022

Profit Target and Return to Shareholders

Profit Target and Return to Shareholders for Medium Term Business Plan Period••

JAPEX is aiming to achieve “ROE => 5%” as the minimum profit target corresponding
to our business size under the oil price of US$60/bbl around FY2022.
JAPEX will firmly maintain its policy for long-term and stable dividends to shareholders.
[Transition of Profit attributable to owners of parent (100M Yen)]
ActualImpairment loss on
Yufutsu Oil and Gas
Field

170

295

Effects ofdownfallin crudeoil prices
20-8
2011年度FY3/12

2012年度FY3/13Losses on the PNW
LNG Project290

Outlook

2013年度FY3/14

Medium-Term Business Plan (FY3/12-FY3/15)

2014年度FY3/152015年度FY3/169434-309
2016年度FY3/172017年度FY3/18/ Medium-Term Business Plan (FY3/16-FY3/18)

FY3/192018年度(Plan)(予想)

Commencement ofoperation at the
Fukushima Natural
Gas Power Plant
Commencement of
production of ashallow reservoir of
the Yufutsu Oil and
Gas Field

20

2022年度目安
Estimated
FY3/23(Target)Expansion ofoverseas project
earnings
Expansion of nonE&P businessearnings

Mid-term
BusinessPlan
2018-2022

Transition of Production Volume andProved Reserves•

Both production volume and proved reserves decreased due to development delay ofoverseas projects and re-evaluation due to the decision of not to proceed the PNW LNG
Project•

For the time being, we will aim to achieve long-term "RRR> 1" by compensating proved
reserves with high profitability without setting production volume and proved reserves target.
Production volume (10 thousands BOED)

Proved reserves (MMBOE)■Domestic ■Overseas■Domestic ■Overseas

7.4

7.3

7.2
6.0

4.8
3.8
0.8
3.0

3.6
1.1
2.5

5.4

5.4

5.2

2.7
2.1

2.0

307
223

4.2

38
185

1.9

1.9

1.8

160

147

349

352

305

313

193

203

255

277

112

110

94

74

302

229

73

FY3/12
FY3/13
FY3/16
FY3/14
FY3/17
FY3/15
FY3/18
2011年度
2012年度
2013年度
2014年度
2015年度
2016年度
2017年度

2011年度
2012年度
2014年度
2015年度
2016年度
2017年度FY3/16
FY3/17
FY3/18
FY3/12
FY3/13 2013年度
FY3/14
FY3/1521

Appendix

FY3/18 Overview of Key Projects in Progress

 E&P business Infrastructure・Utility Business

Domestic

Soma LNG Terminal







Investment decision on commencement of oil development of ashallow reservoir of the Yufutsu Oil and Gas Field in June 2017
Pursuing additional domestic E&P potential including utilizing
government basic surveys

Soma Natural Gas-Fired Power Generation Project

Canada: Shale Gas Development and Production Project

Upstream: Producing and marketing gas. Formulated
development plan to preferentially develop high economic
efficiency
Midstream: Decided not to proceed PNWL project in July 2017

CCS

Sold the Hangingstone Demonstration area in April 2018
Commenced production in the Hangingstone Joint Venture areain August 2017; expected to reach 20,000 bbl/d in second halfof 2018



Iraq : Garraf ProjectProceeding of CO2 injection in large-scale CCS demonstration
project from April 2016
Achieved 150,000 ton cumulative injected CO2 volume in
March 2018

Methane Hydrate

Ongoing stable crude oil production of approx. 90,000 bbl/dCommencement of further development to increase theproduction to 230,000 bbl/d under the Final Development Plan

Indonesia: Kangean ProjectCommenced of construction in October 2017

 New Business

Canada: Oil Sands Project in Hangingstone LeasesCommenced operation at Soma LNG Terminal in March 2018
Commenced operation on the Soma-Iwanuma Gas Pipeline in
November 2017

Completed the second offshore production test from April toJune 2017. Achieved 260,000 m3 cumulative production
volume during 36 days production test

Geothermal Power

Ongoing stable gas production from the Terang Gas Field
Under development of the Sirasun and Batur Gas Fields
expected to start production in 2Q 2019




22

Completed of evaluation work in the Mt. Musa area, Hokkaido
Ongoing study and evaluation work in other projects