Japan Petroleum Exploration Co., Ltd.

Corporate Repor t

2018
For the Year Ended March 31, 2018

COVER STORY

What JAPEX will do for a better future
What do you imagine the earth will be like100 years later?
We human beings have consumed the earth resources to develop a world economy.
If we keep consuming the resources as we do, we will apparently be unable to meet the social needs ofthe future.
In September 2015, the United Nations released the 2030 Agenda for Sustainable Development and its
17 Sustainable Development Goals* (SDGs) to achieve a better and more sustainable future and in order
to “leave no one behind.” In December of that same year, 196 countries adopted the Paris Agreement
addressing the need to limit the rise of global temperature. We decided to transform our world to promote
prosperity while protecting the planet.
* Sustainable development: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

2018We at JAPEX contribute to society through thestable supply of energy, and address social issues
toward realizing the sustainable development goals.
JAPEX announced “Long-term Vision 2030” in May 2018.
We had thought about how to meet the foregoing Corporate Vision and set up our own targets andmissions to achieve in 2030.
Fossil fuels have been primary energy sources for economic growth in Japan and they still willbe. However, conditions are rapidly shifting to a sustainable and decarbonized society. In orderto play active role for the resolution of the global scale issues, we will transform our businessstructure so that the business profit ratio will be “6:4 of E&P to non-E&P” in 2030.

2030

2050
Yufutsu Plant (Hokkaido)

Corporate Vision
Contribute to society through the stable supply of energy
and address social issues toward realizing the sustainable development goals.
●
●

●

●

Explore, develop, produce and deliver oil and natural gas in Japan and overseas.
Further enhance the natural gas supply chain, consisting of our domestic infrastructures and electric
power supply.
Contribute to addressing challenges toward realizing a sustainable society associated with energy andclimate change through the development and commercialization of new technology, drawing from ourexpertise.
Place top priority on maintaining trust with all stakeholders and achieve sustainable growth and maximize
corporate value.

JAPEX Group Code of Conduct
To put Corporate Vision in practice, the JAPEX Group's directors,
officers and employees shall act based on the following“JAPEX Group Code of Conduct” that represents our key values:
1. Comply with applicable laws and regulations of the countries and regions where our business
operations are based, respect international norms, and take actions by taking the stakeholders'interests into consideration;
2. Put the top priority on paying due attentions to HSE (health, safety and environment);
3. Respect human rights and do not engage in discriminations or harassments;
4. Engage in fair, transparent and free competition as well as appropriate trading practices;
5. Keep sound and normal relationships with the politicians, political parties and government
officials/agencies;
6. Resolutely confront antisocial forces and sever all relations with such individuals and groups;
7. Pay careful attentions to managing and protecting confidential information and personal/customerdata;
8. Have a strong will for innovative change from the status quo and energetically engage in tasks withflexible mindset and originality; and9. Be more responsive to information and engage in tasks in the professional manner.

02 | JAPEX Corporate Report 2018

Contents
Editorial Policy
We issue this Corporate Report for the purpose of introducing our
economic, social, and environmental performance in fiscal 2017and promoting better understanding of our worldwide businessactivities. We are aiming to integrate our growth strategy and CSR
management.
This report is in line with Guidance for Collaborative Value
Creation by the Ministry of Economy, Trade and Industry (METI)and Sustainability Reporting Standards by Global Reporting
Initiative (GRI). JAPEX considers this report to be a valuable tool
to facilitate communication with our stakeholders informing them
about our business activities.

Information Disclosure Sources

This report presents important information with the aim of gaining
understanding of JAPEX. More-detailed information is available on
our website.

Mission and Purpose
The JAPEX Group’s Value Creation Process .... 04

Strategy
President’s Message ........................................ 06
Long-term Vision 2030 ...................................... 10
Mid-term Business Plan 2018-2022 ................... 16
Aiming for Sustainable Development of
the JAPEX Group and of Society ....................... 18
Close Up:
Toward the Value Creation of the Future ....... 22

Value Creation Through Business Activities
Financial Information
Website: IR information

https://www.japex.co.jp/english/ir/

Corporate ReportNon-financial Information
Website: CSR

https://www.japex.co.jp/english/csr/

Stable and Sustainable Energy Supply
E&P Business .............................................. 24
Infrastructure & Utility Business ................... 30

Reference Guidelines
METI, “Guidance for Collaborative Value Creation”
GRI, “Sustainability Reporting Standards”
Organizations Covered by this Report
This report covers Japan Petroleum Exploration Co., Ltd. (JAPEX),
and its 23 consolidated subsidiaries and other Group companies.
Environmental performance data (P.36-39, 50-51) are for JAPEX
and Japex Offshore Ltd.
Reporting Period
Fiscal 2017 started on April 1, 2017 and ended March 31, 2018.
Some statements include data before March 31, 2017 or after
April 1, 2018.
Issuing Date
November 2018 (Next issue: November 2019)
Disclaimer
This report includes past and current facts about JAPEX and its
affiliate firms, their plans and prospects as of the issuing date, as
well as forecasts based on their business plans and corporate
management policies. These forecasts represent management’s
assumptions or decisions based on information currently available.
Readers should be aware that actual results may be different fromthese forecasts due to changes in the business environment.

New Business Development ......................... 32
Close Up:JAPEX Research Center Initiatives ........... 35

Initiatives to Support Value Creation
HSE as Our Culture........................................... 36
Integrity and Governance.................................. 40
Being a Good Neighbor.................................... 46
The Employer of Choice.................................... 48

Financial and Non-financial Highlights ............. 50
Corporate Data................................................. 52

JAPEX Corporate Report 2018 | 03

The JAPEX Group’s Value Creation Process
Given changes in the economic and social environments, the JAPEX Group aims tocontribute to all its stakeholders, achieving sustained and heightened corporate
value through business activities that take advantage of its strengths.

Business Activities

Capital to Support Business Growth●

Financial capital(a sound and stable financial base)●Production capital (a robust infrastructure)●Intellectual capital (technology)●

Human capital (experience)●

Social and relationship capital(relationships of trust with stakeholders)●Natural capital (reserves)

Awareness of the External Environment
Actualized volatility risk of global crude oil price
Geopolitical risks● Intensifying competition of domestic
natural gas business● The effects of the liberalization of energy
markets● Policies and legal systems● Measure for global environmental problems● Transforming the energy industry toward
a decarbonized society● Growing interest in Environment, Social,
Governance (ESG) factors● Distributed power supply, the IoT,
AI diffusion● Domestic population decline

Long-term Vision and Strategy

P.10

Growth to the Integrated Energy
Company Utilizing Our Oil and Gas
E&P and Its Supply Basis

Value Chain

P.20

●
●

04 | JAPEX Corporate Report 2018

Acquisition of Interests

Exploration

Development
andProduction

Foundations for Achieving Our Strategy(Efforts towards Five Core CSR Themes as “SHINE” Initiatives)

Stable andsustainableenergy supply
P.24

HSE as our culture

S

H
P.36

Integrity
andgovernance
P.40

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Increasing the
JAPEX Group’s
Corporate Value

An Accumulation of Credibility / Reinvestment in Business(Business Model)
Value Provided
E&P Business*1●

A stable supply of energy●

Supplying environmentally friendly energy●

Increased returns to shareholders, higher
revenues●

Working together with local communities andcontributing to their well-being through job creation●

Creating a rewarding workplace

Businesses
Infrastructure &Utility Business*2

Environmentallyfriendly New
Businesses

Contribution to Society
Sustainable Development Goals (SDGs)
Transportation

I

Being a goodneighbor
P.46

Sales

N

The employer ofchoiceE

P.48*1 Businesses engaged in exploring, developing, producing, transporting, and delivering oil and natural gas*2 Infrastructure & Utility Business, including business of supplying natural gas and business of power
generating/electricity sales

Transporting LNG by rail in tank containers

JAPEX Corporate Report 2018 | 05

President’s Message

Transforming into a company with
abundant mobility and diversity
capable of responding flexibly tochanges in business environment
In May 2018, we released our new “Long-term Vision2030” as the JAPEX group’s growth strategy toward2030 and our new “Mid-term Business Plan 20182022” representing our management direction andbusiness priority for the coming five years from fiscal
2018.
Based on the former Long-term Business Vision
and Medium-term Business Plan established in May
2015, the JAPEX group took steps to strengthen
its business base by large-scale investments tooverseas E&P business, including the developmentof Canada Oil Sands Project in the Hangingstone
leases, and the completion of Soma LNG Terminal
in Fukushima Prefecture, and to expand its
business into related fields which have affinity to
our fundamental business, such as participation to
the natural gas-fired power generation project andothers. However, facing with significant changes inour business environment, including deterioration of
profitability in E&P business due to downturn in crude
oil and natural gas prices, and the decision of notproceeding Pacific NorthWest LNG project in British
Columbia of Canada, we recognized that our Midterm Business Plan needs to be revised.
Furthermore, in response to the situation
change of the energy sector by international climate
protection agreements and carbon emissions, aswell as the growing interest for companies’ initiativefor ESG (Environment, Social, Governance) fromstakeholders, we decided that our business visionneed to be revised in light of the long-term view
including contributions to sustainable society.

06 | JAPEX Corporate Report 2018

Representative Director and President,
Chief Executive Officer

In the new Long-term
Vision, we have added
the new perspective of“contribution to sustainable society” to theexisting vision of “stable supply of energy”,
and set out our new
vision toward 2030
as “Growth to the Integrated Energy Company
Utilizing Our Oil and Gas E&P and Its Supply Basis.”
We aim for realization of the JAPEX group sustainable

New Long-term
Vision and Mid-term
Business Plan

Mission and Purpose

Strategy

Value Creation Through Business Activities

growth and contribution to society (i) by continuously
promoting E&P Business in Japan and overseas aswell as Infrastructure & Utility Business including
domestic natural gas supply infrastructure and newly
added electric power supply business; and (ii) byengaging in environmentally-friendly New Businesses
Development with full utilization of our expert is, such astechnology development of Carbon dioxide Capture andStorage (CCS) and development of renewable energy.
In our Mid-term Business Plan 2018-2022, we aim
to make an innovative change to a lean and resilientbusiness structure that will enable sustainable growth

Initiatives to Support Value Creationeven under continuing market circumstances of lower
crude oil prices. We have accordingly made it ourtarget to improve our profitability to achieve ROE
5% or more in fiscal 2022 based on the assumptionof crude oil prices at USD60/bbl. In order to achieve
this target, we will implement a portfolio review andtake measures for restoring financial soundness andimproving profitability of existing business as issues of
top priority during the first half of the mid-term plan
period; and we will strive for securing the resources
to invest in new E&P projects and new businessgeneration during the latter half of the plan period.

JAPEX Corporate Report 2018 | 07

We have also set specific business targets in
our three main areas of business. In E&P Business,
our long-term target is to continue maintaining
RRR*>1. In Infrastructure & Utility Business, wehave set the target figures of 1.6 million tons of
natural gas (LNG equivalent) for annual domesticgas sales amount and 2.8 billion kWh for annual
sales amount of electric power in fiscal 2022. In
New Business Development, we will prepare neworganization for new business development andaccelerate our activities to generate profitableprojects making full use of JAPEX competitive
advantages.
* RRR (Reserve Replacement Ratio) is a numerical indicator of whether acompany can recover a volume equivalent to the oil and gas production
from reserves in a single fiscal year (or specified period) so as to assure
continued production without problems in the next fiscal year and beyond.

Placing CSR management at the core of oursustainable growth andbased on the changes
in social needs for theenergy industry, we the
JAPEX group will strive forsolution of social issues.
Under the new Long-term Vision, we particularly
focus on the three UN Sustainable Development
Goals (SDGs), namely “Affordable and clean
energy,” “Industry, innovation and infrastructure,”Social Agendas thatJAPEX Addresses:
Aiming Toward
Social Contribution
through Sustainable
Growth08 | JAPEX Corporate Report 2018

and “Climate action.” In specific terms, JAPEX isengaged in strengthening the stable supply of energy
mainly natural gas, the cleanest-burning hydrocarbon,
and developing our robust energy supply base startingfrom the Soma LNG Terminal and Fukushima Natural
Gas Power Plant. Furthermore, we will contribute to
the reconstruction of Fukushima Prefecture and the
local communities through the Soma Project, and bycommercialization of CCS and other such activities,
we will play an active role in resolving global issues
for low carbonization and decarbonization.
In order to fulfill our engagement, we will strive
for ESG issues in accordance with the core CSR
strategic themes that we addressed as “SHINE” in2014.
In our core CSR themes, we emphasis first securing
occupational safety and health in our operations. In
December 2017, we recorded the third time one
year incident-free days at our domestic operations
since commencement of operations. We strive todevelop a corporate-wide consensus on HSE andbuild a strong safety culture through the following
approaches. For the first step, we have established asafety management system at our operation sites. In
addition, we hold HSE workshops for our employees
and are sharing the incident information over ourcompany intranet. At our overseas operations, we
focus on minimizing security risks.

Mission and Purpose

Strategy

Value Creation Through Business Activities

Secondary, we have continuously engaged forenhancing a diversity of human resources and Work
Style Reform. As these endeavors obtained external
recognition, JAPEX was selected for the Nadeshiko
Brand for the third year in a row as an enterprise that
had made outstanding efforts to encourage women’s
success in the workplace, and was also certified
as the Health and Productivity Management 500
Organizations (White 500) for the second year in arow, as a large company that implements outstanding
health management. We are creating a fair andrewarding workplace where all our employees canperform respecting each other. We aim to transform
into a company with abundant mobility and diversity
with a view to increasing creativity and challenging
spirit of each of our employees.
Finally, we emphasis corporate governance as
fundamental for transformation of our corporate

Initiatives to Support Value Creation

culture and sustainable growth of the JAPEX group.
The Corporate Governance Code was revised in June
2018. With our corporate business executed under
the strict oversight of outside directors, we will build ahighly reliable, efficient, and transparent governancesystem. In the interest of promoting dialogue with our
stakeholders, we will also enhance disclosure andprovide information relating to the elements of ESG
which are outlined in the Code.
JAPEX will endeavor to increase its corporate
value through improvement of profit structurecompetent for sustainable growth even under themarket environment of low crude oil prices, andtransformation of its business structure capable ofresponding changes in social needs.

JAPEX Corporate Report 2018 | 09

Long-term Vision 2030

The JAPEX Group Aspiration

Growth to the Integrated Energy Company
Utilizing Our Oil and Gas E&P and Its
Supply Basis
The JAPEX group has declared “Growth to the Integrated Energy Company Utilizing Our Oiland Gas E&P and Its Supply Basis” to be the vision we aspire to realize in 2030.
Where our previous Long-term Business Vision called for “Transformation to an Integrated
Energy Company with a Focus on Oil and Gas E&P,” we have advanced a step to declare thestable supply of oil and natural gas to meet the needs of local communities and clients as weplay an active role in solving global issues for low carbonization and decarbonization.

Corporate Vision
Contribute to society through the stable supply of energy and addresssocial issues toward realizing the sustainable development goals.

Explore, develop, produce, anddeliver oil and natural gas inJapan and overseas.

Further enhance the natural gas
supply chain, consisting of ourdomestic infrastructures andelectric power supply.

Contribute to addressing challenges
toward realizing a sustainable society
associated with energy and climatechange through the development andcommercialization of new technology,
drawing from our expertise.

Place top priority on maintaining trust with all stakeholders andachieve sustainable growth and maximize corporate value.

E&P Business

10 | JAPEX Corporate Report 2018

Infrastructure &Utility Business

New Business
Development

Mission and Purpose

Strategy

Initiatives to Support Value Creation

Value Creation Through Business Activities

The Profit Composition JAPEX Aims for in 2030
Recognizing that oil and gas will play the key role as global primary-energy in the mid- to long term, the JAPEX
group will continue undertaking the stable supply of energy as we respond to changing needs in the market andclients.
Meanwhile, it will be necessary to develop our business along multiple lines, both E&P and non-E&P, inorder for JAPEX to achieve the sustainable growth in the face of future uncertainty. We will generateenvironmentally-friendly new businesses that make use of our particular competence with the aim of achievinga profit composition that has E&P Business and non-E&P Business*1 in approximately 6:4 proportion in 2030.
*1 Non-E&P Business includes Infrastructure & Utility Business and New Businesses Development

Our Business Portfolio that Enables Sustainable Growth4

Corporate profit*2 composition

64
2030 Ratio&P
Non-E s
es
n
i
s
Bu

6
E&P B

usine

ss

2030

2018

*2 Operating profit + Equity method investment income/loss basis

JAPEX Corporate Report 2018 | 11

Long-term Vision 2030

JAPEX’s “Integrated Energy Company”

Developing Business Organically to Leverage
the Source of Competitive Advantage
Taking CSR management and the transformation of corporate culture as our core, we will
utilize the source of our competitive advantage to develop organically linked businesses
that make use of the respective synergistic effects of E&P Business, Infrastructure & Utility
Business, and Environmentally-Friendly New Business.

E&P Business
Review portfolio
Improve operation efficiency● Add 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 natural gas source●

Social Contribution
through
Sustainable GrowthCompetitive andAdvance Resources
E&P technology
Infrastructure of natural gas supply● Knowledge obtained throughcommissioned research●●

CSR Management
Transformation of Corporate Culture

12 | JAPEX Corporate Report 2018

Environmentally-Friendly
New Business
Promote commercialization of CCS
Preparation of new organization for
new business development● Proposal of new value●●

Mission and Purpose

Strategy

Initiatives to Support Value Creation

Value Creation Through Business Activities

Toward the Integrated Energy Company

In the mid- to long term, allocate about one-halfof new investment funds to non-E&P BusinessToward realization of the integrated energy company in 2030, we will take steps in the mid- tolong term to allocate about one-half of new investment funds to non-E&P Business, acting underfinancial discipline to keep the EBITDA*1 to debt ratio at less than two.
In the E&P Business, however, JAPEX will concentrate on reviewing the portfolio of E&P
assets and improving operation efficiency over the next several years. Our aim thereafter will be
to develop and promote new projects in order to keep RRR>1 over the mid- to long term.
*1 EBITDA: Earnings before Interest, Taxes, Depreciation and Amortization

Profit Contribution Image of Business Portfolio

Develop and promote
new business
Example of
new projectNon- E&P
Business

LNG overseas rail transport,
bunkering

Seafloor hydrothermal deposits

Soma LNG
Terminal andpower
generation

CCS
Renewable energy

E&P
Business

CO2-EOR*2
Methane hydrate

Underground storage of natural gas

Review portfolio
and improve theoperation efficiency

2018“RRR>1” on new projects

2022

Period of the Mid-term Business Plan

2030

2040–2050

Long-term Vision

Post Long-term Vision*2 Enhanced Oil Recovery: Enhanced method of recovering crude oil

JAPEX Corporate Report 2018 | 13

Long-term Vision 2030

Social Agendas the JAPEX Group Addresses

Actively Taking Measures Toward
Realization of a Low Carbon Society
In order to play an active role for the resolution of global-scale issues, particularly
low-carbon and decarbonization issues listed in the SDGs adopted by the United Nations,
the JAPEX group is making every effort to reduce CO2 in our business. We are also aiming
to generate and expand environmentally-friendly new businesses in the non-E&P field,
including realization of carbon offset technologies and renewable energies.

Measures to Realize the SDGs
Utilizing our oil and gas E&P and its supply business basis, we will address the SDGs withparticular priority on solving three social agendas.
Our Efforts

Social Agendas

Stable supply to meet primary energy demand by providing a stable supply of
its main components of oil and natural gas as a clean energy, for the needs of
local communities and clients.

Contribute to the reconstruction of Fukushima prefecture and the developmentof local communities through a robust supply base starting from the Soma LNG
Terminal and the Fukushima Natural Gas Power Plant.

Play an active role to solve global issues for low carbonization anddecarbonization

14 | JAPEX Corporate Report 2018

Mission and Purpose

Strategy

Initiatives to Support Value Creation

Value Creation Through Business Activities

ESG Efforts for the Sustainable Growth
We are to engage ESG energetically in accordance with the core CSR management themes of “SHINE*1.”

Environment

SocialGovernance● Commercialization of CCS PICK UP 1

● Safety first priority in operations● Energy saving and diffusion of● Regional promotion through stable

natural gas as a clean energy● Create environmentally-friendly

new business

P.19

energy supply● Promotion of diversity andinclusion

PICK UP 2● Dialogue with stakeholders● Contribution to Fukushimareconstruction through the Soma Project● Local production and local

consumption of energy anddisaster-resistant community planning● Disclosure of ESG information on

the basis of international
standards considerations

Relationship with SHINE

S

H

H

N

I

E

*1 Five core CSR themes as “SHINE” initiatives[S] Stable and sustainable energy supply, [H] HSE as our corporate culture, [I] Integrity and governance, [N] Being a good Neighbor, [E] The Employer of choice

PICK UP 1

PICK UP 2

CCS (Carbon Dioxide Capture and Storage)
According to the International Energy Agency (IEA),
CCS is expected to contribute 14% of the total carbon
dioxide (CO2) reduction by 2060 in order to achieve the“2°C target” of the Paris Agreement. The potential
market for CCS is thought to be extremely large. Thereis also a possibility that, if CCS is commercialized, it will
be able to offset not only the CO2 emitted in the courseof our business, but also the amount of CO2
corresponding to the emissions from combustion of oil
and natural gas on the client side.
JAPEX is pursuing commercialization of CCS. We
are utilizing the E&P technology we have obtained sofar, and working through Japan CCS Co., Ltd. toplay a leading role in a pioneering CCS technology
development project that is attracting global
attention.

Transformation of Corporate Culture and Human Resource
Development
A crucial element that is essential to our sustained
growth is the transformation of corporate culture.
In order to transform itself into a company with
abundant mobility and diversity while every individual
executive and employee heightens his or her own
creativity and challenging spirit, JAPEX will promote
diversity and inclusion among its other initiatives. We
will also engage in setting KGI*2 and KPI*3 andimplementing the PDCA cycle in a thoroughgoingmanner. In this way we will build a corporate culturethat frames these activities in figures, executes them infigures, and evaluates them in figures.
*2 KGI: Key Goal Indicator*3 KPI: Key Performance Indicator

P.48 The Employer of Choice

P.23 Recognition of Climate Change and a Response:
CCS (Carbon Dioxide Capture and Storage)

JAPEX Corporate Report 2018 | 15

Mid-term Business Plan 2018-2022

Mid-Term Tactics and Targets

Achieve ROE≥5% level in fiscal 2022
In order to realize our aspiration for 2030, we will be improving our profitability to achieve an“ROE≥5%” level in fiscal 2022 under market circumstances with crude oil prices of USD60/bbl. During the first half of the mid-term plan period, we focus on the optimization of ourbusiness portfolio and measures for financial soundness as the immediate priorities. During
the second half, we will use the new investment funds we acquire during the first half to takethoroughgoing initiatives for the sustainable growth including concrete new investment in the
E&P field as well as new business generation in the non-E&P field.

Resume Active Investment 1:1 of E&P to non-E&P ratio (Investment allocation)

First half (2018-2019)

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

Thoroughly improve profitability ofexisting overseas E&P projects●

Improve financial indicators
including asset sales

Japan
●

Maximize value of resources in Japan●

Sales target for section of FY2022

Stable dividends

Achieve “ROE≥5%” level in 2022 (With the assumption of crude oil prices of USD60/bbl)(2020 and after)

Second half

Mid-Term Tactics and Targets

Natural gas: 1.60 million tons (LNG equivalent)Electric power: 2.8 billion kWh

Return to Shareholders
JAPEX Firmly Maintains the Basic Policy of Stable Dividends
JAPEX makes it a basic policy to continue stable dividends over long term. The specific amount of dividends isdetermined through a comprehensive consideration of factors such as the orientation toward strengthening of
our financial base, seen in light of retained earnings applied to enable the sustainable growth and increase thecorporate value, the status of profit in each period, future capital requirements, and so on.

16 | JAPEX Corporate Report 2018

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Mid-Term Targets
E&P BusinessLong-Term Targets
Maintain“RRR>1”

We will take measures overseas to maximize the value ofongoing projects and to optimize our portfolio. In Japan, we
will take measures to maximize our production rate, pursue
additional development in surrounding areas, and so on.
At the same time, we will seek to achieve a balance
between promotion of E&P Business and realization of a low
carbon society by accelerating our CCS initiative while alsoestablishing an investment evaluation standard that takes our
response to climate change into account.

Infrastructure & Utility Business

For the supply of natural gas in Japan, our aim is to promotenatural gas use, construct a robust gas supply infrastructure,
Natural gas sales volume
and secure a stable supply by domestically produced gas
Electricity sales volume
in Japan
together with diversification of LNG procurement sources.
million tons
For power generation and electricity sales, we will pursue thebillion kWh(LNG equivalent)establishment of an electric power business structure throughthe Fukushima Natural Gas Power Plant*1, improvement ofoperating rates, and development of renewable energy.

Targets to 2022

1.6

2.8

*1 Owned by Fukushima Gas Power Co., Ltd. (JAPEX investment ratio 33%)

New Business Development

TargetBusiness Generation by the New
Business Model Utilizing Our
Competitive and Advance Resources

We aim to establish a department for generating new business,create a business model, and make projects profitable with aview to commercialization of technological strengths by utilizing
JAPEX E&P technology together with know-how from thedomestic natural gas supply network in Japan.

Accumulate technology throughcommissioned research

Merge existing technology, knowledge, know-how● CCS● Methane hydrate● Seafloor hydrothermal deposits

Preparation of new organization for
new business development

Develop business
opportunities that canutilize our competitive
advantages● Bunkering● LNG overseas rail transport● Energy service● Underground storage ofnatural gas● CO2-EOR● Renewable energy● Smart community

Appropriate human resource allocationand development

Commercialization

JAPEX Corporate Report 2018 | 17

Aiming for Sustainable Development of the JAPEX Group and of Society

CSR Activities of the JAPEX Group
Message from the Executive in Charge of the Corporate Strategy Dept.
Under the Corporate Vision of JAPEX we advocate “Contribute to society through stablesupply of energy, and address social issues toward realizing the sustainable development
agendas”, and aim for our business activities themselves to be an important CSR priority.
In realizing this Corporate Vision, we embed the CSR management in our businessdevelopment as fundamental basis, and accelerate our CSR activities according to “SHINE”
initiatives established as our core CSR themes. Each of our departments sets out its own CSR
action plans and targets corresponding to the “SHINE” initiatives and has been implementing
a process (the PDCA cycle) for continual improvements.
In order to achieve sustainable growth of our company and maximize the corporate value,
placing top priority on the trustworthy relationship with all of our stakeholders, our “Long-term

Kazuhiko Ozeki

Vision 2030” represents our continuous efforts for addressing ESG issues and for solving social

Director
Managing Executive Officer
Corporate Strategy Dept.

issues focusing on three agendas of the SDGs, in accordance with our CSR “SHINE” initiative.
For the next step, we will revisit our top-priority CSR issues by thoroughly reviewing
relevance of social issues, our business and the core CSR themes, in order to keep up with
global trends and change of our business environment and to respond to the expectations
and requests from all of our stakeholders.

Process of Identifying and Reviewing Core CSR Themes
February–April 2013

April–July 2013

February–June 2014

Evaluating Present
Status, Undertaking
Analysis, and Identifying
IssuesIn accordance with theitems in ISO 26000, we
surveyed the present
status of the JAPEXGroup's CSR efforts andidentified and selected
CSR topics.

Survey Regarding CSR

Identification of Core CSR
ThemesAfter a series ofworkshops andmanagement reviews, the
JAPEX Group compiled
and categorized its CSR
topics and identified fivecore CSR themes.

We surveyed theemployees about (1)corporate practices withrespect to economy,
governance, compliance,
and fairness, (2)products, services,
society, labor, and (3) theenvironment.

December 2017 toMarch 2018

September 2018
and on

Review CSR disclosure
information
We listed issues to raise
the level of CSR and ESG
information disclosure

Activities to review ourcore CSR themes
We are reviewing issues
based on changes in thebusiness environmentand growing interest in
ESG

The JAPEX Group Efforts to Achieve the Sustainable Development Goals
In September 2015, the United Nations released the2030 Agenda for Sustainable Development and its 17
Sustainable Development Goals (SDGs) to achieve a betterand more sustainable future. The 17 goals and their 169
targets were adopted by countries around the world.
We aim to contribute to achieving these goals, so wesettled on a relevance between our core CSR themes
and the SDGs according to the SDG Compass which
is a guidance for companies on how they can align theirstrategies as well as measure and manage their contribution
to realization of the SDGs.
We will review our core CSR themes in light of the SDGs, andwill address our own targets to make a proactive contribution.

18 | JAPEX Corporate Report 2018

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Five Core CSR Themes as “SHINE” Initiatives
JAPEX CoreCSR Themes

S

H

I

N

E

S table andsustainableenergy supply

HSE asour culture

Integrity andgovernanceBeing a goodeighborN

E

The mployerof choice

CSR Goals• Achieve a stable supply of energy by maintaining
stable supply sources and infrastructure for crude
oil and natural gas, efficient and safe operations,and ensuring the quality and safety of its products.
• Secure diverse sources of supply by actively
participating in the development of geothermal,
solar, and other renewable energy sources, as wellas unconventional energy sources such as shale
oil gas and methane hydrate, while contributing to
the development of related technologies such ascarbon dioxide capture and storage (CCS).

• Secure occupational health and safety, develop
various risk management policies and systems,
including security risks, and firmly establish a
corporate culture that places top priority on
health, safety, and the environment (HSE).
• In conducting its business, strive for energy
conservation and the efficient use of natural
resources to prevent global warming and ensure
the sustainability of resources.
• Reduce the environmental impact of its activities
by preventing water, air, and soil pollution andtaking care of our ecosystem.

• Practice highly efficient and transparent
management under its governance structure.
• Establish a compliance system that prevents
the occurrence of improper activities and legal
violations.
• Foster employee awareness to promote steadfast
work practices that are aligned with our Corporate
Vision.
• Through open and sound communication withstakeholders, gain an accurate understanding of
the requirements society places on the JAPEXGroup.
• By creating employment in regions where theGroup operates and pursuing fair businesspractices, achieve co-existence and growth withits business partners, clients, and oil- and gasproducing countries.
• Respect local cultures and maintain good
relationships with local communities throughsocial contribution and funding initiatives outside
our business activities.
• Establish a friendly workplace where all its
employees— encompassing a wide rangeof nationalities, academic qualifications, andcareers—recognize the diversity of each other’s
attributes, fulfill their individual potential, receive
appropriate evaluation and remuneration, improvetheir technical skills and knowledge, and are able
to grow.
• As a global company, provide an attractive work
environment where talented people choose towork.

Individual Issues

SDGs① Stable energy supply② Development of newtechnologies③ Occupational healthand safety④ Crisis management⑤ Measures to prevent
global warming⑥ Preserving biodiversity
and ecosystems⑦ Pollution prevention
and resource recycling⑧ Governance⑨ Compliance⑩ Growing together
with local
communities⑪ Building good
relationships withstakeholders⑫ Respecting
employee diversity⑬ Creating a fair andrewarding workplace⑭ Human resources
development andtraining

JAPEX Corporate Report 2018 | 19

Aiming for Sustainable Development of the JAPEX Group and of Society

Value Chain

Expansion of Business Fields

Issues to Consider in the JAPEX Group’s Value Chain

New Business Development

Infrastructure & Utility Business

LNG Procurement(Gas Business, Electric Power Business)

Acquisition of Interests /Exploration

E&P BusinessBusiness Flow

Common to Every Business

E&P Business
Clients
Shareholders and Investors
Local communities
Oil- and gas-producing countries
Business partners
Transaction partners
Employees●●

Details●● Increasing social requirements for low-carbonization anddecarbonization●● Ensuring occupational health and safety, and preserving
environment (HSE)● Establishing an efficient and transparent governance structure● Preventing unfair competition based on bribes and other corruption● Compliance with laws and regulations in countries andregions where we operate● Growing together with local communities where we operate● Quality control and product safety● Respecting employee diversity● Improving fair workplace environments and respect forhuman rights●● Establish investment evaluation standards taking into
account our climate change response●● Develop security systems and emergency response,
strengthen environmental management and enhance HSE
culture● Accelerate decision-making procedures and strengthensupervisory functions of operations● Ensure compliance with guidelines for preventing
corruption● Mutual understanding through dialogue with stakeholders
and appropriate information disclosure● Quality control, product safety, and appropriate
information disclosure● Develop an energy system locally produced and consumed
and plan a disaster-resistant community● Industrial integration through energy supply and creationof employment● Assure work-life balance● Create workplace environments where employees canfulfill their individual potential●

Countermeasures

Issues to Consider

Main
Stakeholders

Core CSR Themes: ● [S] Stable and sustainable energy supply

20 | JAPEX Corporate Report 2018

Intensified competition for resource acquisition
Geopolitical factors in countries and regions where we
operateHigh technical difficulty on the exploration frontier●
Decreasing production and declining reserves●
Fluctuations in selling prices due to volatile commodity●
prices and exchange rates●● Increasing social requirements for low carbon anddecarbonization●●● Incidents and mining pollution

Develop strategies and establish a department for
creating new business
Formulate business plans and conclude contracts taking●
into account of geopolitical factors●● Enhance oil and gas technologies to pursue exploration
potential
Keep increasing production and reserve volumes●●● Reduce carbon emissions at development andproduction stages and create environmentally friendly
new businesses●●● Carry out safe and responsible decommissioning● [H] HSE as our culture ● [I] Integrity and governanceMission and Purpose

Strategy

Initiatives to Support Value Creation

Value Creation Through Business Activities

erage Competitive Advantages
v
e
L
o
t
y
l
l
a
c
i
n
a
Org
g Business
n
i
p
o
l
e
v
e
D

Develop Business
Opportunities

LNG Regasfycation(with Third Party Access rights)

Renewable Energy
Carbon Dioxide Capture andStorage (CCS)
Methane Hydrate
Seafloor Hydrothermal Deposits

Commercialization

Gas Power Generation

Electric Power Supply

Gas Transmission

Gas Supply(with Third Party Access rights)

LNG Transportation
Development andProduction

Crude Oil Supply

Infrastructure & Utility Business(Gas Business, Electric Power Business)

New Business Development

Clients
Shareholders and Investors
Local communities
Gas-producing countries
Business partners
Transaction partners
Employees

Clients
Shareholders and Investors
Local communities
Business partners
Transaction partners
Industry groups
Employees●

Ensuring stable procurement of energy resources from overseas
and a stable supply● Increase of maintenance and management costs for gas supply
networks● Increasingly fierce competition for sales due to liberalization of theenergy markets● Reduction of sales volume due to decline of gas demand● Fluctuation in procurement prices due to volatile gas prices andexchange rates●● Interruption of supply due to accident and disaster●● Commercialization by new business model●●● Develop renewable energy business, establish and commercialize advanced
technologies in new energy fields

Ensure stable supply and cost competitiveness by diversification ofenergy resource suppliers from overseas and expansion of supply
infrastructure● Increase volume by expanding sales to new users● Create business schemes that are less affected by commodity
prices, and diversify our business●● Improve technical capacities for storing and transporting naturalgas●● Improve capacity to manage and carry out projects and technicalcapabilities. Train human resources● [N] Being a good neighbor● [E] The Employer of choice
JAPEX Corporate Report 2018 | 21

Aiming for Sustainable Development of the JAPEX Group and of Society

Recognition of Climate Change and a Response

Our Recognition
The SDGs and the Paris Agreement accelerated aworldwide movement toward a decarbonized society,such as creating regulations relating to the environment
and its resources. The energy industry is also transforming,and the global community has a higher interest in thedevelopment of sustainable societies. In addition, what
institutional investors and other stakeholders require forenterprises is shifting to positive and active approaches toraise the corporate values in a sustainable manner.
In 2017, Task Force on Climate-related Financial Disclosures(TCFD)*1 which was established by Financial Stability Board(FSB)*2 announced recommendations for information disclosure
regarding financial impacts by climate change.
The JAPEX group recognizes risks and opportunities
which climate change brings on our business as a criticalmanagement issue. In our “Long-term Vision 2030,”
we state that JAPEX plays an active role to solve social
agendas in order to realize a sustainable energy supply andthe sustainable development goals.

Close Up

Toward the Value Creation of the Future

Renewable Energy
Among the renewable energy initiatives seeking toresolve issues involved in the move toward low carbon
and decarbonization, JAPEX focuses particularly on
promoting commercialization in the areas of solar
power, geothermal power, and biogas.
The solar power business includes our mega-solar
power plant (1,800 kW) at the JAPEX Hokkaido District
Office site and Solar Power Tomakomai Co., Ltd.
(13,000 kW; JAPEX owns 20%), established by JAPEX
with the Sumitomo Corporation Group. We have hadthese two mega-solar power plants in commercial
operation since 2014.

*1 Task-oriented group engaged in disclosure of financial information related to theclimate*2 International body that monitors and makes recommendations about the global
financial system

Risks and Opportunities
We consider the progressive movement of lowcarbonization and decarbonization to be a risk which
threatens our E&P business. Our countermeasures
are to reduce CO2 emissions in our operations and to
generate environmentally-friendly new businesses. We willcommercialize renewable energy and CO2 emission offset
technology by utilizing the technology and know-how
acquired through our E&P Business. We also implement
processes to manage climate-related risks.
Particularly, we are promoting energy saving operations
and switching fuel to natural gas, the cleanest-burninghydrocarbon. At the same time, we are pursuing renewableenergy businesses such as geothermal and solar power.
We engage in development of technologies, including
CCS, which can contribute to limit global warming. Throughthese activities, we are transforming to a corporate groupcapable of contributing to development of sustainable
societies. In addition to risk management systems for
current businesses, we are implementing internal carbon
pricing as an investment evaluation standard to takeclimate change into account. We endeavor to meet dual
challenges of maximizing the value of our E&P projects andrealizing a low-carbon society.

22 | JAPEX Corporate Report 2018

Solar panels (Solar Power Tomakomai Co., Ltd.)In the geothermal power business, we have been
conducting commercialization surveys in the Mt.
Musa area of Shibetsu Town in Hokkaido and in the
Bandai region of Fukushima Prefecture. Now we havecompleted both surveys, and are pursuing the possibilityof geothermal development in other, new areas around
Japan.
In our biogas activities, JAPEX incorporated the
Shandong Bio-energy Corporation with the Chinese
Shandong Shifang Environmental Protection & BioEnergy Co., Ltd., in 2007. The Shandong Bio-energy
Corporation has been refining and compressing biogas
generated in landfill. We then sell the biogas as fuel fornatural gas-powered automobiles and as a raw material
for city gas.

Mission and Purpose

Strategy

Initiatives to Support Value Creation

Value Creation Through Business Activities

CCS (Carbon Dioxide Capture and Storage)
CCS is a technology to inject CO2 directly into
depleted oil and gas reservoirs, coal reservoirs deepin the ground, deep inside saline aquifers, and so on,
for storage. It is attracting worldwide attention as aninnovative technology for significantly reducing thedischarge into the atmosphere of CO2, which is acausal factor in climate change. Nationwide storage
potential quantity surveys have shown that up to 146
billion tons of CO2 could be stored in Japan. Detailed
surveys commenced in 2014.
With the aim of commercializing CCS technology,
JAPEX established Japan CCS Co., Ltd. (JCCS) withother private-sector companies in May 2008. The
Japanese government’s Basic Energy Plan of 2018,
taking into consideration the likelihood that CCS
technology will be commercialized around 2020, statedthat it would steadily promote measures to demonstrate
the CCS process and to survey suitable storage sites.
JCCS has been commissioned since FY2012 by the
Ministry of Economy, Trade and Industry (METI), andsince April 2018 by the New Energy and Industrial
Technology Development Organization (NEDO)
to implement a CCS demonstration project in the
Tomakomai area of Hokkaido. The injection of CO2 was

begun in April 2016, and as of the end of August 2018,
a cumulative total of 200,000 tons has been injected.
In April 2016, JAPEX also established the
Geological Carbon Dioxide Storage Technology
Research Association jointly with the ResearchInstitute of Innovative Technology for the Earth (RITE),
the National Institute of Advanced Industrial Scienceand Technology (AIST) and three private-sector
companies. Commissioned by METI, this association
has engaged in development of safety management
technology for large-scale CO2 injection and storage aswell as development of effective injection technology
utilizing micro-bubble techniques.
E&P Technologies Applicable to CCS●●

Technologies for identifying subsurface structures and estimating
petrophysical properties
Technologies for drilling extended reach wells at depths andhorizontal distances of several thousand meters●

Geophysical logging technologies●

Technologies for producing crude oil and natural gas safely●

Fluid movement simulation technologies●

Underground monitoring technologies

Overview of Tomakomai Demonstration Project Facility
Equipment to supply gas containing CO2
Oil refinery

CCS facility (CO2 capture/injection facility)
Injection
CO2 capture

Sending gas that contains CO2

Pressurization and separation
Compression

Sending
Pipeline

Gas containing CO2

Storage

Injection wells (2 wells)

More than 100,000 tons per year
Note: Depends on refinery operational status

Reservoir
Cap rock

Moebetsu formation Sandstone layer

Reservoir

1,000 - 1,200m under the seabed

Takinoue formation

Volcanic rock layer
2,400 - 3,000m under the seabed

Cap rockReservoir
Based on materials from Japan CCS Co., Ltd.

JAPEX Corporate Report 2018 | 23

S
Stable and sustainable energy supply

E&P Business1

In E&P business, JAPEX long-term target is "RRR>1",
and the JAPEX Group understands that our important
issues are to maintain and expand proved reserves,which decrease due to production and sales, and strive
for a fully functioning supply system for supplying crude
oil and natural gas consistently and over the long-term.
Our goals within Japan include maximizing recovery
rates and working toward the further development ofsurrounding areas. Outside Japan, we maximize the2value of ongoing projects, balance our portfolio, and3
4

discover and secure new proved reserves.

E&P Business in Japan5

We currently operate 10 domestic oil and gas fields

6
8 7
10 9

onshore and offshore of Hokkaido, Akita, Yamagata, andNiigata prefectures. We are working to further streamline
operations and maximize recovery rates of crude oil andnatural gas at each field. In exploration and development,
we are continuing to extract crude oil from shallow layers at
the Yufutsu Oil and Gas Field, and to explore offshore areas
through the national program for oil and gas prospecting
and other means.

Oil field

1

Yufutsu Oil and Gas Field

2

Gas field

Sarukawa Oil Field

Tomakomai City, Hokkaido

Oga City, Akita Prefecture

Discovered in 1989

Discovered in 1958

In production from 1996

In production from 1959

The Yufutsu Oil and Gas Field is one of the few oil and gas fields inthe world with oil and gas contained in naturally fractured reservoirs.
The field is formed by the Minami-Yufutsu, Numanohata, andAkebono structures. Currently we are in the process of developing
crude oil from the undeveloped shallow layers of this field, aiming
to start oil production in 2020.

24 | JAPEX Corporate Report 2018

Oil and gas field

The Sarukawa Oil Field extends offshore from the northern coastof the Oga Peninsula in Akita Prefecture. More than 50 years havepassed since the start-up of production and JAPEX has drilled
more than 100 wells. Here, we are employing the gas lift recovery
method, which is a type of artificial lift, and water flooding (hydraulicinjection), which is IOR (Improved Oil Recovery）.

Mission and Purpose

Strategy

S Stable and sustainable energy supply

Initiatives to Support Value Creation

Value Creation Through Business Activities

H HSE as our culture

3 Ayukawa Oil and Gas Field

I Integrity and governanceN Being a good Neighbor

E The Employer of choice

7 Shiunji Gas Field

Yurihonjo City, Akita Prefecture

Shibata City, Niigata Prefecture

Discovered in 1989

Discovered in 1962

In production from 1995

In production from 1963

JAPEX was the first to succeed in the commercial production oftight oil in 2014, at the Ayukawa Oil Field in Akita Prefecture, after
the first tight oil demonstration tests in Japan in 2012 in existing
well Kurosawa AK-1 in the Onnagawa formation of the filed. Oiland gas produced in the Ayukawa area is transported through theflow line to the Yurihara central facility.
4 Yurihara Oil and Gas Field

Natural gas is stored underground at the Shiunji Gas Field. The
underground reservoir that stores natural gas contributes to stablesupply of gas by functioning as an ideal gas tank that requires
no modification as well as a reserve for demand adjustments andemergencies.

8 Higashi-Niigata Gas Field

Yurihonjo City, Akita Prefecture

Niigata City, Niigata Prefecture

Discovered in 1976

Discovered in 1959

In production from 1984

In production from 1959

The Yurihara Oil and Gas Field extends across the Yuri highlandson the northern slopes of Mt. Chokai, in the city of Yurihonjo,
Akita Prefecture. The Yurihara SK-1 exploration well successfully
discovered shallow oil and gas deposits. IOR by gas injection
has been implemented since 2014 in an effort to improve the oilrecovery rate.

The Higashi-Niigata Gas Field is located in a wide area under thesand dunes and offshore area east of the mouth of the Agano
River. In 1959, gas shows were recognized from the shallow
layers in the exploration well Higashi-Niigata SK-1. Later, manygas layers were discovered there. The large size of the formationand the number of gas layers make the Higashi-Niigata Gas Field
one of the leading gas fields in Japan.

5 Amarume Oil Field

9 Katakai Gas Field

Shonai Town, Yamagata Prefecture

Ojiya City, Niigata Prefecture

Discovered in1960

Discovered in 1960

In production from 1960

In production from 1960

The Amarume Oil Field is a typical plain oil field located in the
middle of the Shonai plain. Full-scale production began in 1960,
and despite the gradual decline of the production volume,
continued efforts to streamline, such as centralizing management
and reducing well pads, have garnered praise for this field as amodel case of the successful use of a declining oil field.
6

The Katakai Gas Field is located in a hilly area with elevation 150
m to 200 m that straddles the cities of Nagaoka and Ojiya. The
field dates back to the success of Katakai SK-1 and Ojiya SK-2 in
1960, and in 1978, the exploration well Katakai SK-8 discovered
deep gas in a deep layer of green tuff.

10 Yoshii Gas Field

Iwafune-oki Oil and Gas Field
Approx. 4 km offshore from themouth of the Tainai River, Tainai
City, Niigata Prefecture

Kashiwazaki City, Niigata Prefecture

Discovered in 1983

Discovered in 1968

In production from 1990

In production from 1968

The Iwafune-oki Oil and Gas Field is located on the continental
shelf in the Sea of Japan roughly 30 km northeast of Niigata City,and the middle of the field is the location of the only offshore oil
platform in Japan. The crude oil and natural gas produced there
are transported to the onshore facility through a roughly 21 km
submarine pipeline.

The Yoshii Gas Field is located in the Chuo oil belt (Chuoyutai
anticline) that stretches from the Nagaoka Okozu Waterway to the
Yasuda area in the city of Kashiwazaki. The gas field had its origins
in the success of the Yoshii SK-1D exploration well in producing
gas from green tuff in 1968. Later, many extension wells were
drilled in the Yoshii, Myohoji and Yasuda areas.

JAPEX Corporate Report 2018 | 25

Stable and sustainable energy supply

Overseas E&P Business
CanadaOil Sands Project

24,000bbl/d(as of June 2018)

Oil field

Oil and gas field

Gas field

Lake Athabasca

JAPEX, through its subsidiary, Japan Canada Oil Sands
Limited (JACOS) succeeded to produce a bitumen utilizing
SAGD (steam-assisted gravity drainage) process at the3.75 Section Area of Hangingstone in 1999 as a pioneer
and continued production operations until the decision not
to restart them in 2017. The cumulative bitumen production
volume reached 35 million barrels.
Following the construction of an expansion project inareas adjacent to the 3.75 Section Area that commenced
in 2013, the bitumen production operations started inAugust 2017 and transitioned to stable bitumen production
operations of 20,000 barrels per day scale in June 2018.
Block

Hangingstone Leases

Project Company(Founded)

Canada Oil Sands, Ltd. (December 1978)
JACOS, a local subsidiary

Percent of Interest
Athabasca Region

JACOS (Operator)

75%

Nexen Energy

25%

Schematic of the SAGD Method

Hangingstone

Steam flow
Bitumen flow

Steam Injection Well
300m
Steam Injection Well

Bitumen
Production Well

Canada90,000(as of March 2018)

Oil and gas fieldboe/d

Oil sands layer

Area

North Montney Area

Project Company(Founded)

JAPEX Montney Ltd. (March 2013)

Gas field

Percent of Interest
North Montney

Alberta
BritishColumbia

Vancouver

26 | JAPEX Corporate Report 2018

m

5m

Bitumen Production
Well

We have been producing shale gas from North Montneyarea in BC, Canada since 2013 through our consolidated
subsidiary JAPEX Montney Ltd.(JML).
We produce 500 million cubic feet per day (90,000 boe/d)of shale gas, which are being sold in Western Canada.
We have confirmed abundant shale gas resources, pursue
investment by prioritizing the area based on economics
and keep efficiently develop and produce the resources.

Shale Gas Project

Oil field

5m

500～1,000

Calgary

PETRONAS Group (Operator)

62%

Sinopec Group15%

JAPEX Group10%

Indian Oil Group

10%

Petroleum Brunei Group3%*
Decided not to proceed PNWL project at Lelu Island near the Prince Rupert, British
Columbia in July 2017.

Mission and Purpose

Strategy

H HSE as our culture

S Stable and sustainable energy supply

I Integrity and governance

Iraq
Garraf Project

90,000bbl/d(as of March 2018)

N Being a good Neighbor

E The Employer of choiceThrough our consolidated subsidiary Japex Garraf Ltd., weare developing the Garraf Oil Field. We have produced a totalof roughly 160 million barrels since commencing commercial
production of crude oil in the field in 2013.
In April, 2018, the operator and partners reached anagreement to embark on further development to increase
production in accordance with the Final Development Planapproved by the Iraqi authority.
The production volume will be gradually ramped up to theplateau production target of 230,000 bbl/d by the end of 2020.
Field

Garraf Oil Field

Project Company (Founded)

Japex Garraf Ltd. (March 2010)

Contract Type

Development and Production Service
Contract (DPSC)

BaghdadContract Term

20 years (with an optional 5-year extension)

KarbalaRemuneration

USD1.49 per barrel of crude oil production

Contracting Party

Basra Oil Company (under the Iraqi Ministry of Oil)Oil field

Oil and gas field

Gas field

GarrafDevelopment Contractors

SamawahNasiriyah
BasrahIraq

Saudi Arabia
Persian Gulf

Indonesia
Kangean Project

33,000boe/d(as of March 2018)

Oil field

Oil and gas field

Gas field

East Java Gas
Pipeline

Kangean Island

Pagerungan←to Surabaya
Sirasun

TSB

Project ShareCost SharePETRONAS (Operator)

45％

60％

Japex Garraf Ltd.

30％

40％

25％

-*

North Oil Company(under the Iraqi Ministry of Oil)

KuwaitTerang
Batur

Initiatives to Support Value Creation

Value Creation Through Business Activities* JAPEX and PETRONAS are to provide the North Oil Company’s share of costs, which will berecovered from the produced oil.

In the Kangean block, where JAPEX has a 25% interest, weare producing natural gas and condensate from the Terang
Gas Field, which is a part of the TSB (Terang, Sirasun, Batur)
Gas Field Complex, and the Pagerungan Gas Field.
The Terang Gas Field went into commercial production in2012, and now it is producing 190 million cubic feet of natural
gas per day (33,000 boe/d), and the cumulative production
volume reached 80 million boe in November 2017. Afterbeing processed at the floating production unit (FPU), natural
gas produced from the Terang Gas Field is delivered throughthe East Java Gas Pipeline to a state-owned power company,a fertilizer factory and so on. Development at the Sirasun
and Batur Gas Fields is underway toward their productioncommencement in 2019.
Block

Kangean Block

Project Company(Date of shareacquisition)

Energi Mega Pratama Inc. (May 2007)

Percentage ofInterest

Kangean Energy Indonesia Ltd.
(Operator)

60％

EMP Exploration (Kangean) Ltd.

40％

Note: Kangean Energy Indonesia Ltd. and EMP Exploration (Kangean) Ltd. are subsidiaries
of Energi Mega Pratama Inc. JAPEX holds 25% of the shares of Energi Mega Pratama
Inc.

JAPEX Corporate Report 2018 | 27

Stable and sustainable energy supply

USA

Tight Oil Project

6,000

boe/d

(as of March 2018)

Japex (U.S.) Corp. participates in tight oil project in the
Eagle Ford play, located in the southern part of Texas.
Tight oil is a type of crude oil contained in low-permeability
shale and the like, extracted using a technology known as
hydraulic fracturing. In conjunction with Marathon Oil EF
LLC, we are acquiring the latest technology, and we will
employ the knowledge gained in this project to improve
productivity and economics in other existing and future
projects.
Oil and Gas Lease

Middle McCowen Lease

Project Company(Founded)

Japex (U.S.) Corp. (October 1980)

Marathon Oil EF LLC (Operator)

95%

Japex (U.S.) Corp.

5%

Percent of Interest

RussiaSakhalin-1 Project

JAPEX participates in the Sakhalin-1 Project throughits investment in the Sakhalin Oil and Gas Development
Co., Ltd. Crude oil and natural gas have been producedin the Chayvo Oil and Gas Field since 2005, and in 2015,
the project set the world record for a measured depth of
13,500 meters using extended reach drilling. In addition,
crude oil production commenced in 2010 at the Odoptu
Oil and Gas Field, and in 2015 at the Arkutun-Dagi Oil and
Gas Field.
Block

Chayvo, Odoptu and Arkutun-Dagi

Project Company(Founded)

Sakhalin Oil and Gas Development Co., Ltd.
(March 1995)

Percentage ofInterest

Provided by Exxon Neftegas Ltd.

GBR

U.K. North Sea Offshore BlockJAPEX UK E&P Ltd. is engaged in exploration andevaluation activities in the Seagull Field, about 300 km
offshore from Aberdeen. In 2015, we succeeded in
producing crude oil and natural gas in an appraisal well,and we are conducting further evaluation activities basedon those results.

28 | JAPEX Corporate Report 2018

Exxon Neftegas, Ltd. (Operator)

30%

Sakhalin Oil and Gas
Development Co., Ltd.

30%

ONGC Videsh Ltd.

20%

Sakhalinmorneftegas-Shelf

11.5%

RN-Astra

8.5%

Block

Seagull Field

Project Company(Founded)

JAPEX UK E&P Ltd. (March 2014)

Percentage ofInterest

Neptune Energy*

35％

BP

50％

JAPEX UK E&P Ltd.

15％

* Neptune acquired an interest from Apache North Sea Ltd. in August 2018. The timingof the transfer of operatorship is under discussion.

Mission and Purpose

Strategy

H HSE as our culture

S Stable and sustainable energy supply

Initiatives to Support Value Creation

Value Creation Through Business Activities

I Integrity and governanceN Being a good Neighbor

E The Employer of choice

Proved Reserves
Proved reserves owned by JAPEX and its consolidated subsidiaries as of March 31, 2018, along with our investment
equivalent in proved reserves of equity-method affiliates are presented in the following table.

Proved Reserves of the JAPEX GroupJAPEX and Consolidated Subsidiaries
Japan
Proved Reserves

Overseas

Equity-Method
Affiliates

Subtotal

Total

Crude oil

Naturalgas

Crude oil

BitumenNaturalgas

Crude oil

BitumenNaturalgas

Crude oil

Naturalgas

Crude oil

BitumenNaturalgas

ThousandkL

Million m3

ThousandkL

ThousandkL

Million m3

ThousandkL

ThousandkL

Million m3

ThousandkL

Million m3

ThousandkL

ThousandkL

Million m3

2,374

9,753

2,717

22,076

15,811

5,091

22,07625,564

1,904

2,173

6,995

22,076

27,737

-

-

464

-

-

464

-

-

-

-

464

-

-

Change due to revision ofevaluation standard

720

167

△ 734

△ 992

△ 7,959

△ 14

△ 992

△ 7,793

2,902

886

2,888

△ 992

△ 6,907

Change due to acquisition
and/or divestiture

-

-

-

-

-

-

-

-

-

-

-

-

-

△ 291

△ 815

△ 835

△ 132

△ 495

△ 1,126△ 132△ 1,309

△ 456

△ 561

△ 1,583△ 132△ 1,871

2,802

9,105

1,612

20,952

7,357

4,415

20,952

16,462

4,350

2,498

8,764

20,952

18,960

As of March 31, 2017
Increase due to expansion or
discovery

Decrease due to production
As of March 31, 2018

Notes: 1. Proved reserves of the following consolidated companies include reserves held by non-controlling interests. (Figures in parentheses are non-controlling interests’ percentage.)
Japan: Japex Offshore Ltd. (29.39%)
Overseas: Canada Oil Sands Co., Ltd. (5.42%), JAPEX Montney Ltd. (55.00%), Japex Garraf Ltd. (45.00%)
2.	Reserves of consolidated subsidiaries and equity-method affiliates whose fiscal year-ends differ from that of the Company are accounted for on the basis of the entity’s
respective fiscal year-end.
3. Based on the Preliminary Development Plan approved on January 19, 2011, our consolidated subsidiary, Japex Garraf Ltd. initiated development operations and began initial
production on August 31, 2013. Meanwhile, we continued discussions with the Iraqi government regarding the Final Development Plan (FDP) looking to gradually increase
production to the final goal of 230,000 bbl/d. Since the FDP has not yet been approved as of December 31, 2017, Japex Garraf’s fiscal year-end, we posted the company’splanned production for fiscal 2018 as its reserves at the end of the current fiscal year. With the FDP having gained approval from the Iraqi government in February 2018,
we subsequently intend to post additional reserves based on the FDP next fiscal year (as of March 31, 2018, we estimate the company’s planned production of crude oil at
13,837,000 kL in fiscal 2019 and subsequent fiscal years).
4. T he above proved reserves are figures based on our own evaluation using the definition of proved reserves in PRMS (Petroleum Resource Management System 2007).

Proved Reserves of the JAPEX Group: Crude Oil Equivalent (For Reference)
JAPEX and Consolidated Subsidiaries
Japan
Proved Reserves

As of March 31, 2017

Overseas

Equity-Method
Affiliates

Subtotal

Total

Crude oil

Naturalgas

Crude oil

BitumenNaturalgas

Crude oil

BitumenNaturalgas

Crude oil

Naturalgas

Crude oil

BitumenNaturalgas

Million bbl

Million boe

Million bbl

Million bbl

Million boe

Million bbl

Million bbl

Million boe

Million bbl

Million boe

Million bbl

Million bbl

Million boe

44

139

169

15

59

17

139

96

32

139

156

12

13
Total 352

Increase due to expansion or
discovery

-

-

3

-

-

3

-

-

-

-

3

-

-

Change due to revision ofevaluation standard

5

1

△5

△6

△ 48

△0

△6

△ 47

18

5

18

△6

△ 42

Change due to acquisition
and/or divestiture

-

-

-

-

-

-

-

-

-

-

-

-

-

△2

△5

△5

△1

△3

△7

△1

△8

△3

△3

△ 10

△1

△ 11

55

132

115

18

55

10

132

45

28

132

100

27

15

Decrease due to production

As of March 31, 2018

Total 302

JAPEX Corporate Report 2018 | 29

SStable and sustainable energy supply

Infrastructure & Utility Business
The JAPEX Group has the natural gas supply
network as infrastructure for supplying domestically
produced natural gas and LNG from overseas. We
supply natural gas and LNG, in response to clients’
Asahikawa

demands, via a pipeline network mainly consisting ofIshikari LNG Terminal(Hokkaido LNG Co., Ltd.)the Niigata-Sendai Gas Pipeline and a satellite

Iwamizawasystem for LNG liquid supply by tank trucks andObihirocoastal vessels for regions not served by gas
Coastal vessel

pipelines. By operation commencement of the

Yufutsu-Sapporo
Gas Pipeline

SapporoKitahiroshima
ChitoseSoma LNG Terminal in March 2018, capacity andstability of our network have further improved,

KushiroYufutsu LNG Plant /Yufutsu LNG Receiving Terminal

Tomakomai
Muroranadding the supply base in the Pacific Ocean side in
addition to the existing one in the Sea of Japan side.
Furthermore, in the utility business, which aims to
supply energy utilizing natural gas and LNG, a natural
gas-fired power plant is now under construction

Coastal vessel

adjacent to the Soma LNG Terminal with the scheduleof operation commencement in 2020.
By increasing our supply volume and clients ofnatural gas and LNG in response to demands forenvironmentally friendly energy, we are aiming tohandle 1.6 million tons (LNG equivalent) of natural gas
and 2.8 billion kWh of electricity per year in fiscal
2022.
Oga
Akita
Yurihonjo

Oil fields / Oil and gas fields / Gas fields

Nikaho

LNG terminal

Yamagata Gas
Pipeline (Tohoku
Natural Gas Co., Ltd.)Power plant
Natural gas pipeline

Sakata

LNG
tank truck

Amarume
Tsuruoka

LNG tank truck
LNG tank containers by rail
LNG coastal vessel

LN

Gf

r om

Murakami
o ve

r se

as

Niigata-Sendai
Gas Pipeline

Niigata LNG Terminal(Nihonkai LNG Co., Ltd.)

Sendai

Iwanuma
Yamagata
Shiroishi

Soma-Iwanuma
Gas Pipeline
Soma LNG Terminal
Fukushima Natural Gas Power Plant (under construction)

Fukushima

Aizu-wakamatsu
Kawaguchi
LNG tank truck

Kanazawa
Komatsu

30 | JAPEX Corporate Report 2018

LNG tank truck

KoriyamaL NG

f r omo ve rsea s

Shiroishi-Koriyama
Gas Pipeline
Koriyama North
Gas Pipeline

Mission and Purpose

S Stable and sustainable energy supply

Strategy

Initiatives to Support Value Creation

Value Creation Through Business Activities

H HSE as our culture

I Integrity and governanceN Being a good Neighbor

E The Employer of choiceRendering of the Soma LNG Terminal (Soma Port, Fukushima Prefecture)

Soma LNG Terminal
JAPEX commenced operations of the Soma LNG Terminal
in March 2018, as the first large-scale LNG terminal in
Fukushima Prefecture with a ground-type LNG tank witha capacity of 230,000 kiloliters, which is one of the largest
LNG tanks in Japan. This terminal is the one of the importantbases in our domestic natural gas supply network. Thisterminal plays the critical roles, from receiving and storing
LNG from overseas, to vaporizing LNG and sending
vaporized gases into our pipeline network, and finally toshipping LNG by our satellite system. LNG vaporized gas
is supplied to clients by our gas pipeline network via the
Soma-Iwanuma Gas Pipeline, which was constructedat the same time of the terminal construction. Also, theterminal can deliver LNG by tank trucks and coastal
vessel to our clients around the terminal and our receiving
terminals in Hokkaido.
In October 2016, Fukushima Gas Power Co., Ltd. (FGP),
which is funded by private companies including JAPEX,
decided on the commercialization of natural gas-fired
power plant at Soma Port. Following the decision, JAPEX
has outsourced the management of construction (“Phase
II construction”) and operation for the additional 230,000
kiloliters ground-type LNG tank and LNG vaporizer.
These additional facilities are scheduled to commence its
operations in 2020 to coincide with the commencement ofcommercial operation of the FGP power plant.

Fukushima Natural Gas Power Plant
Fukushima Natural Gas Power Plant is made of natural
gas-fueled power plants using LNG vaporized gas with alow environmental burden. This plant has two 590,000 kW
Gas Turbine Combined-Cycle (GTCC) power generation
units to generate electric power with higher efficiency andlower CO2 emissions.
This project adopts the tolling model to enable eachpartner to sell electricity individually. FGP will generate

electricity using the LNG brought by each partner and thendeliver electricity to each partner. Then, every partner canbring LNG to Soma LNG terminal and receive electricity inthe equivalent to the volume of LNG they brought.
JAPEX places this project as an important step towardrealizing our Long-term Vision: “Growth to the Integrated
Energy Company.” Aiming to provide a stable supply ofaffordable, environmentally friendly electricity to the Greater
Tokyo area, we will continue to support FGP for safetyfirst construction and stable plant operation. Also, JAPEX
will work towards the Phase II construction at Soma LNG
Terminal, which has a role to supply LNG vaporized gas topower plant.

Facility Overview
Soma LNG Terminal
Storage Tank

LNG tank with a capacity of 230,000 kiloliters*Currently constructing an additional tank as Phase II

Receiving
Facilities

Jetty for LNG carrier (maximum 210,000-m3 class)
Jetty for coastal LNG vessel (2,500-m3 class)*Also using for coastal LNG vessel shipping

Vaporizer

75 t/h x 2 units (1 unit as a backup)*Currently constructing an additional vaporization
facilities for shipping from FGP power plant as Phase II

Shipping
Facilities

LNG coastal vessel (maximum 4,800-m3 class)
LNG tank truck (30 t/h x 5 lanes)

Soma-Iwanuma Gas Pipeline
Gauge

20 inches

DesignPressure

6.86 MPa

Distance

Approx. 39 km (between Shinchi Town, Soma District,
Fukushima Prefecture and Iwanuma City, Miyagi Prefecture)

Fukushima Natural Gas Power Plant (Project Entity: FGP)
Generation
Power and
Methods

Gas turbine and steam power (gas turbine combinedcycle)

Fuel

Natural gas (vaporized LNG)

Plant Capacity Maximum 1.18 million kWh (590,000 kWh x 2 units)

JAPEX Corporate Report 2018 | 31

SStable and sustainable energy supply

New Business Development
The

JAPEX

Group

environmentally-friendly

aims

to

commercialize

businesses

as

a

new

revenuecontribute to global warming countermeasures, such as
CCS

P.23

solar power generation and other forms
P.2２

base for contribution to our sustainable growth whileof renewable energy

maintaining organic connections to our E&P business andcommercialize leading technologies in energy industry,

Infrastructure and Utility business. In addition, we believe

for example development of methane hydrate and surveythat the new businesses play major roles in resolving

technologies for deep sea mineral resources. In addition,issues to realize a sustainable society.

we will pursuit energy transportation projects that can

As for New Business Development opportunities,
we plant the seeds by merging the existing technology,. We will also establish andcontribute to reducing CO2 emissions, including bunkeringand LNG rail transportation overseas.

knowledge, and know-how accumulated through ourFurthermore, in order to make new businesses profitable,

existing projects, including the E&P projects and entrusted

we are preparing a new organization for new businessresearch projects. Also, we utilize competitive advantages

development, optimizing allocation and development of

to explore such opportunities.

human resources.

In addition, we intend to respond to our stakeholders’expectations. We will develop technologies that can

Provided by Japan CCS Co., Ltd.

32 | JAPEX Corporate Report 2018

Mission and Purpose

Strategy

S Stable and sustainable energy supply

Initiatives to Support Value Creation

Value Creation Through Business Activities

H HSE as our culture

I Integrity and governanceN Being a good Neighbor

E The Employer of choice

Survey Technologies for Deep Sea
Mineral Resources
The existence of useful mineral resources vital to modern
life has been confirmed under the seabed in the extensive
Japanese exclusive economic zone, which is the sixth-largest
in the world. Therefore, we are working to develop survey
technologies for deep sea mineral resources as a “nextgeneration technology for ocean resource exploration,” oneof the issues raised in the
Cross-Ministerial Strategic
Innovation
Promotion
Program(SIP),*
which
was established based on
the national science andtechnology strategy.
A smoke-emitting seabed that could
contain hydrothermal deposits

As a member of the Research and Development
Partnership for Next-Generation Technology of Marine
Resources Survey (J-MARES)—which was establishedin fiscal 2014 as a corporation authorized by the Ministryof Education, Culture, Sports, Science and Technology
in conjunction with our consolidated subsidiary JGI, Inc.
and others—we were active members of a technology
developing team that comprised numerous research
institutes from the commencement of this issue. Presently,
we are leading a team that is verifying an integrated survey
technology system for deep sea mineral resources toachieve the creation of a private industry as an exit strategy
for this issue.
In fiscal 2017, we performed an integrated interpretationand evaluation of various geophysical survey data obtained
through a new method developed by J-MARES. The data
was obtained for marine areas in which existing datasuggested the existence of hydrothermal deposits. We used
the results of our integrated interpretation and evaluation
to excavate samples that confirmed the existence ofhydrothermal deposits. We are also proceeding with thedevelopment of technology to establish a three-dimensional
visualization system that uses the latest virtual reality (VR)technology, which should be useful in interpretation work.
In fiscal 2018, we have explored multiple marine areas forwhich little data exists to narrow our focus on promisingocean areas, and we plan to conduct further sampling
excavation, which we expect will lead to the discovery of
new deep sea mineral resources.

Through these initiatives, the JAPEX Group is pursuing
the possibility of participation in the exploration market for
deep sea mineral resources, etc. which is expected to beestablished in the future.
In fiscal 2018, we have tackled ocean issues from
Phase II of SIP—which has already begun and overlaps
with current Phase I of the project—and have begun
developing technology to contribute to the exploration anddevelopment of deep sea mineral resources that involvethe extra challenge of operating in deeper sea areas over
2,000 m below the surface.
SIP Phase I Implementation System for “Next-Generation Technology of
Ocean Resources Survey”
Goal-Setting, Budgetary
Management Company
Allocation and Progress(budget and agenda
Management for Overall Issues
management)
Japan Agency for MarineEarth Science andTechnology (JAMSTEC)Management Committee
Program Director (PD)Tetsuro Urabe(emeritus professor at Tokyo University)
Acting Program Director /Sub PD

Shoichi Ishii,
Japan Petroleum Exploration Co., Ltd.
Sub Program Director
Tamaki Ura (Kyushu Institute of Technology)
Takafumi Tsujimoto (JOGMEC)
Wataru Azuma (JAMSTEC)
Office:Cabinet OfficeIntegrated Exploration
System Teamand others

Scientific GeologicalResearch Teamand others

Survey Technology
Development Teamand others

Environmental
Research Teamand others* A cross-organizational program that extends beyond the bounds of individual ministries
and sectors. The program was established to achieve scientific and technologicalinnovation, based on the Strategy on Science, Technology and Innovation” and the“Japan Revitalization Strategy”, which are major government policies, and it hasrecognized eleven issues, which include “Next-generation Technology for Ocean
Resource Exploration.” In addition, in March 2018, 12 issues were determined forPhase II. These issues include “Innovative Technology for Exploration of Deep Sea
Resources” and we are proceeding with work to prepare for the implementation ofthese items.

A three-dimensional image as seen by the operators

Yokosuka City

Bunkyo Ward, Tokyo

The VR visualization system enables operators at different locations to discuss the same three-dimensional data as they perform interpretation and evaluation work

JAPEX Corporate Report 2018 | 33

Stable and sustainable energy supply

Methane Hydrate
Methane hydrate is an ice-like crystalline solid formed bytype methane hydrate efficiently, effectively, and smoothly

methane and water that exists in highly pressurized andunder the nation-wide organizations in Japan and share

low-temperature environments, such as below the seabed

the knowledge obtained through the tests with the widein deep waters or permafrost layers in the polar regions. Due

range private companies.

to this reason, advanced technical capabilities are required

JMH engaged in the operator work concerning theto produce methane hydrate. In order to extract methane

second offshore methane hydrate production test ofgas from the methane hydrate layer, depressurization

methane hydrate on commission from Japan Oil, Gas andmethod is confirmed to be the most efficient method. In

Metals National Corporation (JOGMEC) in April 2015. FromJapan, it is known that there are two types of methane

May 2016, up-front works to drill five wells for evaluation,

hydrate to be deposited: “sand-layer type” and “shallow

observation, and production were carried out at the Dainitype”.*1

Atsumi Knoll, located between Atsumi Peninsula and Shima

1,742 gas chimney structures which are expected toexist methane hydrate were confirmed to exist at the sea
of Japan side, where shallow type methane hydrate exists,
by a national survey in 3 years from 2013 *2.

Peninsula. After that, production tests were undertakenfrom April to June in 2017.
Also, JAPEX will pursue the possibility for joining future
research and development activities of the shallow typemethane hydrate which is under the resources evaluation

R&D Activities for Methane Hydrate

phase.

In March 2013, the world’s first offshore production test

We have also continuously worked on investigating,of methane hydrate was conducted by the government

researching and developing technology for resource

using a deep-sea drilling vessel,” “CHIKYU”, targetingrecovery, exploration and other areas related to shallow-

sand-layer type methane hydrate at the Daini Atsumi Knoll,

type methane hydrate from 2016 to 2018, work that was

located between Atsumi Peninsula and Shima Peninsula

outsourced to us by the National Institute of Advanced

off the coast of Japan. It was confirmed that methane gas

Industrial Science and Technology.

continuously produced from an undersea methane hydrate
layer by applying the depressurization method (period of
six days with an average production volume of 20,000
m3 per day, and cumulative production of approximately
120,000 m3). *3*1 R
 eferred to the flyer of MH21 Research Consortium pamphlet published in March
2014
*2 R
 eferred to the news release by Ministry of Economy, Trade and Industry on
December 25, 2014 and January 22, 2016*3 R eferred to the news release by JOGMEC on March 19, 2013*4 R
 eferred to the Offshore Energy and Mineral Resource Development Plan formulatedby the Ministry of Economy, Trade and Industry (METI) on December 24, 2013.

Based on these results, the government is proceedingwith R&D activities related to methane hydrate whilelooking at the international situation, to have the private
sector-led commercialization project be initiated after 2023

減圧法概念図Schematic of Depressurization Method

as for sand-layer type.*4
Seawater surface
Water depth of
500m or deeper

JAPEX recognized the potential of methane hydrate
Production wellearlier and has been taking the initiative on research anddevelopment by providing our technologies, experiences

Gas
Water
Gas

JAPEX’s Contributions

Co., Ltd. (JMH) comprised of 11 private companies with

Perforation or
sand screen

Methanehydrate deposit

including JAPEX as the largest shareholder was established,

Formation

34 | JAPEX Corporate Report 2018

Gas
Water
Gas

Formation

capabilities of oil and gas E&P and plant engineering
aiming to conduct offshore production tests of sand-layer

decreases

3 Pressure within the formation

development. JAPEX also made a contribution by engaging
In October 2014, Japan Methane Hydrate Operating

2 Pressure inside the wellSeabedand knowledge which were acquired through oil and gas
in the operator work for the first offshore production test.

1 Pump up water from the welldecreases

4 Dissolution of methane hydrate

5 Gas and water flow into the well

Based on a diagram from MH21 Research Consortium

production
Gas
Water

Methane hydrate
is dissolved

Mission and Purpose

Strategy

S Stable and sustainable energy supply

Close Up

Initiatives to Support Value Creation

Value Creation Through Business Activities

H HSE as our culture

I Integrity and governanceN Being a good Neighbor

E The Employer of choice

JAPEX Research Center Initiatives

From the laboratory to the field ー JAPEX is commercializing technology
In order to reduce exploration risks and improve theinnovative technology can analyze more diverse classes

efficiency of reservoir development, JAPEX analyzes andand trace amount of chemicals. In steps with enhancing

evaluates molecular fossils (biomarkers) in petroleum

the corporate value, we aim to optimize reservoir

hydrocarbons at our research center. Biomarkers

development with fingerprint technology.

are diverse chemical components that result from theWe strive to commercialize these technologies bydegeneration of lipids and other substances of biological

implementing them in E&P projects, investigating marine

origin over long geological eras. They can show us thatoil spills and to identify origins of crude oil.

those petroleum hydrocarbons originated from rocks(source rocks) which were deposited and buried withonce-living things in ancient times.
Petroleum hydrocarbons have various characteristics
depending on the deposited organisms in the source
rocks and the maturity even if the sources are thesame. We use analytical data of biomarkers to figure out
paleoenvironment, age and maturity of hydrocarbons at
exploration stages. Based on such kinds of information,

Structural formula of a biomarker

we investigate which formation the hydrocarbons camefrom and explore other potential prospects.
At development and production stages, differencesin biomarkers enable us to determine whether multiple
reservoirs are connected and to estimate production
ratios on layers when a single well produces hydrocarbon
from multiple reservoirs. Recently, fingerprint technology,
which enables us to distinguish subtle differences of oil
reservoirs literally like “fingerprint,” was introduced. The

Chromatogram that reveals a fingerprint

JAPEX Corporate Report 2018 | 35
*For health and safety reasons, workers are required to wear protective glasses when working in the laboratory.

H

Health●Occupational health

Safety check using point-and-confirm technique at K Terminal at Niigata Field Office

HSE as Our Culture

JAPEX
HSE Policy

SafetyEnvironment
Measures to prevent
global warming● Pollution prevention andresource recycling● Preserving
biodiversity●

Occupational safety● Process safety● Crisis management●

Our ApproachSocial Background and Issue Recognition● Since the United Nations released the SDGs and the Paris

Agreement was adopted, taking responsibilities for globalscale issues has become a primary agenda for enterprises.
Furthermore, we are required to proactively contribute toclimate changes.
● Due to the nature of our business, any incident in ourfacilities could have a huge impact on the environmentand society. For that reason, we prioritize safe andstable operations, and place great importance on risk
management for controlling major accidents or disasters.

Present Focus and Goal Achievement

Main Measures● We

will proactively play a key role as an integrated
energy company in order to realize a low-carbon society,recognizing how our business and operations affect natural
capital. We strive to reduce CO2 emissions, minimize oureffects on the environment, and so on.
● In the regions where we operate, we will conduct
self-assessment and other activities in addition to theenvironmental impact assessments required by law in aneffort toward conservation of biodiversity.
● Health and safety of our employees is one of our top
priorities. We use the PDCA cycle to continuously improve
our HSE*1 Management System (“HSE-MS”) and minimizerisks. Also, we undertake efforts to improve and develop
an HSE culture, and promote healthy lifestyle to ouremployees.
*1 Health, Safety, and Environment

Mid-Term
Targets

World-Class HSE

Development of JAPEX-style HSE-MS:
2021-2023
Now

Inculcation of HSE-MS: 2018-2020

Introduction of HSE-MS: Completed, 2010-2017

36 | JAPEX Corporate Report 2018

Incident-Free Days at Domestic Operations

429

days

In fiscal 2017, we recorded 429 incident-free days at ourdomestic operations. This is the second-longest streak in our
history, and it was the third time since inception that we haveachieved one year of incident-free days.

Mission and Purpose

S Stable and sustainable energy supply

Strategy

H HSE as our culture

Initiatives to Support Value Creation

Value Creation Through Business Activities

I Integrity and governanceN Being a good Neighbor

E The Employer of choiceOccupational Health and Safety Initiatives
The JAPEX Group declared to secure occupational health and safety and conserve the natural environment in ourbusiness activities and formulated JAPEX HSE Policy. In order to put the policy into action, we have implemented the HSE
Management System at our domestic operations and JACOS since 2014. We strive for the continuous improvement of the
System through PDCA cycles.
● Development of Mid-Term HSE Plan
It is important to develop a corporate-wide consensus on

approved by the Management HSSE*2 Committee. In line

mid-term HSE strategy for the entire company to movewith the Plan, each district office set particular goals andtowards a same direction. Therefore, in fiscal 2017, weare striving to achieve them since April 2018.

developed the JAPEX Mid-Term HSE Plan, and it was*2 Health, Safety, Security and Environment

Mid-Term HSE Plan (2018-2020)
1. To achieve continuous reduction of the LTIF*3 and TRIR*4. The incident classification used in the domestic operations
will be aligned with the international standards.
2. To maintain necessary HSE resources and organization to implement HSE-MS and other HSE activities.
3. To enhance HSE awareness among employees and improve the company’s HSE culture.
4. To develop new HSE training programs to increase HSE competency.
5. To introduce process safety*5 approaches to prevent major accidents. The concepts and methodology will be
inculcated throughout the company.
6. To fully operationalize the contractor HSE management element to reduce contractors’ incidents.
7. To improve HSE governance in the JAPEX subsidiary companies by providing support to introduce HSE-MS or
equivalent systems.
8. Regarding GHG*6 emissions, implement more detailed monitoring and intensify reduction measures.
*3
*4
*5
*6

Lost Time Injury Frequency: The number of lost time injuries (fatalities + lost work day cases) per 1,000,000 work hours.
Total Recordable Injury Rate: The number of recordable injuries (fatalities + lost work day cases + restricted work day cases + medical treatment cases) per 1,000,000 hours worked.
Process safety is comprehensive, systematic and reasonable methods and means of preventing fires and explosions caused by loss of primary containment of flammable materials (petroleum, naturalgas, etc.), and minimizing the impact when they do occur. While the objective of occupational safety is preventing injuries, process safety aims to prevent major fires and explosions in facilities.
Greenhouse Gas● Introduction of Process Safety Approach
For the purpose of preventing major accidents, in fiscal
2017, we started to adopt the process safety approaches
that have been practiced among International Oil
Companies. Although major process safety events will
occur less frequently than occupational injuries, they can
result in massive loss of life, destruction of facilities, andsevere pollution. Therefore, process safety approaches are
employed thoroughly to make sure that the facilities aredesigned, operated, and maintained in accordance with
the industries’ safety recommendations and practices. We
expect that this initiative will not only improve the safety of
our facilities, but also foster productivity among employees.
In fiscal 2017, in order to inculcate process safety
approaches throughout the company, we organizedawareness sessions at each of our business sites in Japan,
and developed guidelines and manuals.

● HSE Training and Inculcation of HSE Culture
We provide planned and structured HSE training programs
for all the employees with an aim to create healthy andsafe working environment. The competency requirements
are identified by laws or company rules for HSE critical
positions such as HSE administrators, supervisors, andworkers in oil and gas fields. Hence, we have established
an incentive system to encourage employees to participate
in internal and external training and get certifications
required for the positions.
Also, we share incident information over our company
intranet, invite distinctive HSE lectures from outside of thecompany, and promote HSE Moments*7 at major meetings.
These activities are essential to inculcate the corporate
culture that put highest priority on HSE.
*7

Short talks on the topic of HSE given to increase awareness of HSE among meeting
attendees

JAPEX Corporate Report 2018 | 37

HSE as our culture

Measures to Prevent Global Warming● Reduction of Greenhouse Gas Emissions Graph 1
Since 2013, JAPEX has been participating in the Japan
Business Federation’s Commitment to a Low Carbon Society
initiative. We are striving to achieve the Japan Petroleum
Development Association’s target for reducing greenhousegas emissions by 2020 and its target for 2030. In specificterms, we set annual goals for reducing greenhouse gas
emissions into our CSR execution plans, that are based on
our medium- and long-term goals, and are undertaking awide range of initiatives in our daily activities, such as savingenergy, using abandoned low-pressure gas effectively, andreviewing how we handle flare gas.
We are developing environmental technologies such
as CCS and geothermal power generation to decrease
emissions of GHG, and cogeneration to realize highly
efficient use of energy. Also, we develop energy solution
business such as conversion of fuels from crude oil or coal
to natural gas.
● Promotion of Energy-Saving Activities Graph 2
As an integral part of our efforts to reduce greenhouse gas
emissions, we are proactively undertaking energy-saving
activities. At the business and production sites with highenergy consumption, we are employing “exergy” analysis(an index that measures the value of energy), which clearlypoints out waste and inefficient usage in order to make amore rational use of energy and reduce our overall usage.
At our Yoshii Gas Field in Niigata Prefecture, we
optimized the operation of our compressors and reduced

Scope 1

Scope 2

Scope 3382,311
11,127
41,631300,000

200,000

100,000

0

251,121
11,91441,042

198,164

2014/3

244,491
12,72240,934

190,835

2015/340,848241,360
10,98039,799177,942

190,581

230,636
11,846

2016/3● Afforestation Programs
As part of our efforts in combating global warming andreducing CO2 emissions, we have been carrying out
afforestation and forest management programs since Fiscal
2005. In fiscal 2017, we planted trees in Minamisoma Cityand Shinchi Town in Fukushima Prefecture. In Hokkaido,
Akita and Niigata Prefectures, where we have business
operations, we are putting our efforts into growing the trees
and managing their development to restore the forests.
These programs inspire each employee to consider climatechange and relationship between societies and us.

Preserving Biodiversity and Ecosystems
In the course of implementing all E&P business and otherprojects inside and outside Japan, the JAPEX Group
conducts voluntary environmental impact assessments aswell as legally required investigations. We utilize the resultsof those investigations and assessments to formulate ourdevelopment plans. Also, we regularly review and test to
minimize our impact on biodiversity.
In fiscal 2017, in cooperation with the Indigenous
Advisory Group and sub-committees consisting of JACOS

Energy Consumption Trends*1 Graph 2

Greenhouse Gas Emissions*1 Graph 1(t-CO2)400,000

the electric power consumption roughly 18% comparedto the previous year utilizing monthly analytical data. In
addition, we keep adjusting illuminance and turning off
lights during lunch hours in all the offices.

Scope 13,000

2,975.1
194.8

Scope 2

647.3
329,553

2017/3(TJ)
4,000

2018/3In fiscal 2017, our greenhouse gas emissions (excluding Scope 3)
were equivalent to 371 kilotons-CO2, an increase of 140 kilotons-CO2(60.7%) over the previous year. The main contributor to this increase
was the 150 kilotons-CO2 emissions from vents and flare gas diffusionfrom the commissioning of Soma LNG Terminal.

642.9

2,000

1,000

0

2,133.0

2014/3

2,543.8
169.8
646.1

2,609.3
156.8
636.4

2,559.0
159.2
689.3

1,873.3

1,727.9

1,816.1

1,710.5

2015/3

2016/32017/3

2018/3In fiscal 2017, our energy consumption (excluding Scope 3) was 2,400
TJ, which is a decrease of 53 TJ (2.1%) compared to the previous year.
*1 T he calculation and reporting of greenhouse gas emissions and energy consumption
are made for each scope of the Greenhouse Gas Protocol Standards. Internationally,
the Greenhouse Gas Protocol is standard used to calculate and report greenhousegas emissions.

Scope 1: Direct emissions of greenhouse gas from a company from the use of fuel and processes
Scope 2: Indirect emissions of greenhouse gas from the use of electricity or heating supplied by another company
Scope 3: Other indirect emissions from a company’s contracting of transportation services for the company’s product38 | JAPEX Corporate Report 2018

2,698.8
182.6

Scope 3

Mission and Purpose

Strategy

Value Creation Through Business Activities

H HSE as our culture

S Stable and sustainable energy supply

I Integrity and governanceemployees and local indigenous stakeholders, JACOS
continued working on wildlife monitoring activities andmarshland rehabilitation projects, in addition to conducting
inspection/assessment of the reclamation activities
occurring on the current operated site.
In the Musadake area in Shibetsu Town, Hokkaido, we
conducted conservation work for Ezo salamanders*2 which
inhabit areas around the well sites, during our work todecommission geothermal exploratory wells. That is, we
captured Ezo salamanders that had invaded in the sites
and their eggs being laid in watery places (e.g., water pits
and waste pits), and transferred them to a safe location in
May and June.
We are also conducting the restoration programs
considering local ecosystems.
*2 Categorized as “Note species” in Hokkaido’s Red List.

Pollution Prevention and Resource
Recycling● Preservation of Water Resources and
Pit-Wastewater Treatment Graph 3
The SAGD bitumen recovery process requires less large
scale civil engineering work in comparison with open-pit
mining, and is therefore said to have less environmental
burdens. The steam injected underground exchanges heatwith the oil sands reservoir and turns into condensed water.
Along with the bitumen that has become liquid upon heatexchange, the condensed water is recovered along withthe bitumen and is sent to the central processing facility.
More than 90% of the overall recovered water is recycled

N Being a good Neighbor● Reduction of VOC Emissions Graph 4
Volatile organic compounds (VOCs) are said to be thecausative agent of suspended particulate matter (SPM)
and photochemical oxidants in the atmosphere. Most
VOCs are volatile hydrocarbons, excluding methane, whichis released from crude oil storage tanks and in the courseof gas processing, such as removing water contained in
the gas, and they include Pollutant Release and Transfer
Register (PRTR) substances such as benzene, toluene,
and xylene (BTX). Measures to limit VOC emissions
generally consist of sealing crude oil storage tanks and theincineration and recovery and disposal of VOCs discharged
from gas processing facilities.
As part of our ongoing drive to reduce VOC emissions,
we have been participating in a voluntary action plan as amember of the Japan Natural Gas Association since fiscal
2005.

Emissions of VOC Graph 4(kL)
1,200,000

(t)
2,000

1,017,064

983,990

Amount of Pit-Wastewater Treated982,393991,672

900,000
786,049

1,132,699
824,718

722,001

699,333

E The Employer of choice

into fresh water for the steam, and is injected undergroundagain.
At our domestic production field offices and plants, weare promoting the recycling and reuse of water used as acoolant in processing facilities and natural gas cleaning, andalso as boiler water in order to preserve water resources byreducing the volume of water we use.
For example, we have adopted recycling systems forthe water used to cool equipment during drilling operations
and to make use of rain water for drilling mud.

Amount of Water Resources Usage and Pit-Wastewater Treated Graph 3
Amount of Water Resources usage

Initiatives to Support Value Creation

1,630
1,500

708,030913

1,000

600,000

770

0

622

613

2016/32017/3500

300,000

2014/3

2015/3

2016/32017/3

2018/3

Our domestic water usage in fiscal 2017 was 825,000 kL, a 117,000
kL (16.5%) increase over the previous year. The main contributors tothis increase were the 92,000 kL of water used for the commissioningof Soma LNG Terminal, and the temporary 29,000 kL increase whenswitching of snow melting equipment at production locations. At Soma
LNG Terminal, we use seawater and the heat from warm water in theprocess of vaporizing LNG.

0

2014/3

2015/3

2018/3In fiscal 2017, we made efforts to improve worksite VOC incineration
treatment facilities and raising operation rates as well as continued
efforts to reduce the environmental impact of our operations sites.
However, the effects of events such as flare gas diffusion caused by
the commissioning of the Soma LNG Terminal resulted in emissions of
1,630 tons of VOC, an increase of 1,017 tons (166%) compared to theprevious year. VOC emissions at Soma LNG Terminal were 1,112 tons;
the overall increase is due to emissions from the Soma LNG Terminal.

JAPEX Corporate Report 2018 | 39

I
Integrity and Governance
Basic Policy
JAPEX is committed to contributing to the local
communities through the stable supply of energy. In
order to achieve this commitment, we have to maximize
corporate value from the standpoint of medium tolong term while considering the characteristics andhistorical background of our company, which is mainly
in charge of high risk and long lead time oil and gas
E&P business, and the energy policy of the Japanese
government. Based on the above policy, we perceivethat our path to sustainable growth over the long termlies in efficient and transparent corporate management
and building relationships of mutual trust with our
stakeholders, including shareholders, through ensuring
our accountability, and we recognize that corporate
governance is the base as well as one of our important
challenges. We will enhance our corporate governanceby respecting the purpose and mind of the Japan’s
Corporate Governance Code.

Corporate Governance Overview

As of June 28, 2018

Organizational Structure

Company with Audit & Supervisory
Board

Executive Officer System

Yes

Number of Directors Provided for Under
Articles of Incorporation

18

Number of Directors

13 (includes 2 outside directors)

Chairman of the Board of Directors

President

Number of Audit & Supervisory Board
Members Provided for Under the
Articles of Incorporation

4

Number of Audit & Supervisory Board
Members

4 (includes 2 outside Audit &Supervisory Board members)

Corporate Governance and Internal Control Structure
General Meeting of Shareholders
Appoint
Board of Directors
Supervise

Appoint
Audit

Audit & Supervisory Board
Appoint

Audit

Representative Director and President
CSR Committee
Internal Control Committee

Executive Committee

HSSE Committee
Information Security Committee

Auditing Dept.
Internal Audit
Internal Control
Evaluation

Accounting Auditor
Audit

Corporate Divisions, Business Divisions, and Group Companies

Corporate Governance Structure
JAPEX holds meetings of the Board of Directors monthly
and retains decision-making authority over important
decisions. It also serves in a supervisory role by receiving
reports on the status of executions submitted by directors
and executive officers. To strengthen the supervisory
functions of the Board of Directors, two outside directors
have been appointed. These outside directors, being
independent from the management team, actively provide
opinions and advice regarding proposals and deliberations,
supporting lively debate in the Board of Directors.
JAPEX revised the Executive Officer System in June2018 to enhance governance. The new system provides
an environment in which the Board of Directors andindividual directors can more easily make decisions onimportant company management matters and supervise
business executions. It also clearly separates managementfrom business executions.

40 | JAPEX Corporate Report 2018

From the standpoint of accelerating the speed ofdecision-making, we composed the Executive Committeeof the directors and other executives based at theheadquarters to make decisions on the matters not involvedby the decision-making standard of the Board of Directors,
and to have a discussion to assist the decision-making in
the Board of Directors. The Executive Committee is held
basically two times each month, and extraordinary meetingis also held as needed.
We believe that promoting CSR activities in accordancewith ESG initiatives for sustainable growth is fundamental toenhance our corporate value. Therefore, we have established
the CSR Committee headed by the President as well asother committees; the Internal Control Committee, the
HSSE Committee, and the Information Security Committee.
These committees provide basic principles which we follow
to promote CSR activities in a structured way.

Mission and Purpose

S Stable and sustainable energy supply

Strategy

H HSE as our culture

Value Creation Through Business Activities

I Integrity and governanceEvaluation of the Overall Effectiveness of
the Board of Directors
With the aims of maximizing our medium-to-long term
corporate value, we evaluate the effectiveness of the Boardof Directors regularly, especially in how it supervises the
management and makes improvements.
In fiscal 2017, we dealt with issues which had beenrecognized through the evaluation process in fiscal 2016,
such as the attendance rate, revitalization of the board,smooth progress of the meetings and discussions about
the management strategy and the business plans. We also
conducted a survey on the progress of the improvements
to the Directors and Audit & Supervisory Board Members.
According to the results of the survey, we could saythat each issue was being resolved gradually and theeffectiveness of the Board of Directors had improved.
We keep making efforts to enhance the functionality of
the Board of Directors.

Audits Performed by Audit & Supervisory
Board Members● Internal Audits
Our internal auditing team audits a wide coverage ofour business activities. The team, which is a part of the
Auditing Department, is responsible solely to the President.
It reports to the President its findings of each internal audit
done with regard to accordance of laws and regulations
internal and public, as well as feeds back its opinions to theaudit departments, including recommendations and advice
thought necessary to be given during the audit works.
● Audit Performed by Audit & Supervisory Board Members
Audit & Supervisory Board Members, based on the audit
policies determined by the Audit & Supervisory Board andtheir designated duties, attend and collect information
for the meetings of the Board of Directors, the Executive
Committee, and other important committees. They
review requests for management approval documents
and undertake audits to ensure that directors comply
with the relevant laws and the Articles of Incorporationin the execution of their duties. Audit & Supervisory
Board Members also hold regular meetings to exchange
information and views with Audit & Supervisory Board
Members of major subsidiaries.
Audit & Supervisory Board Members also seek to raise
the efficiency of audits based on reports on internal audits
undertaken by the Auditing Dept. and information provided
periodically by Accounting Auditors and the Auditing
Dept. They also coordinate closely with outside directors
through a special committee established for the purpose

Initiatives to Support Value Creation

N Being a good Neighbor

E The Employer of choiceof providing information to, and exchanging information
with, outside directors and outside Audit & Supervisory
Board Members, and explaining proposals submitted to
the Board of Directors ahead of the meetings.

Risk Management Structure
As a part of decision-making process, the Director or
the Executive Officer responsible for each department
verifies not only business investment risks, but also ESG
risks such as compliance and occupational health andsafety. If necessary, the Executive Committee and theBoard of Directors assess those risks. In the case ofparticularly important investment projects, the risks andappropriateness of the investment are assessed by theInvestment Evaluation Committee and a submission ismade to the Executive Committee determining whether or
not to proceed with the project, as well as conditions andother matters.
After it has been decided to move ahead with a particular
project, the Project Total Management Committee,
especially with a major of projects, monitors the progressof the project regularly and, when necessary, considers
comprehensive and companywide response measures.
Based on this phased process, projects are undertaken
based on a process of consensual decision making, various
manuals are prepared for business execution across thedifferent implementation stages, and structures are put inplace to manage business risks.

IR and SR Activities
In order to achieve the sustainable growth over the
medium to long term and to increase the corporate
value, we regard it as important to establish relationshipsof trust with shareholders and investors. We actively
arrange opportunities for dialogue to facilitate a deeper
understanding of our business and strive to disclose
corporate information fairly, appropriately, and timely.
Opinions and information received through IR and SR
activities are fed back appropriately to senior management.

A briefing for individual investors

JAPEX Corporate Report 2018 | 41

Integrity and governanceCompliance
The JAPEX Group complies with all applicable laws and regulations, conventional wisdom and social norms. To ensure thatcompliance is firmly entrenched in its corporate culture, all directors, officers, and employees are expected and directed toact ethically and with integrity.
● Systems for Promoting Compliance and Education
JAPEX has established an Internal Control Committee todeliberate policies for systems to ensure the appropriate
conduct of business and to investigate the facts related
to compliance violations. Additionally, the JAPEX Group
strives to heighten awareness of compliance among its
directors, officers, and employees. To that end, the Groupappropriately revises its guidelines, which summarize
key matters and standards to be observed, as well as
its explanatory supplement containing case studies, withthe aim of ensuring that business duties are carried out inaccordance with the JAPEX Group Code of Conduct.
“CSR,” “Compliance,” and “Prevention of Insider
Trading” are considered as primary matters which JAPEX’s
employees must think of in the course of their daily business
operations. Accordingly, JAPEX’s new employees andemployees who are at certain stages in their careers are
required to take compliance training programs.
● Respect for Human Rights
The JAPEX Group Code of Conduct sets out respect
for international rules, models, or norms, and rules forbehavior, including respect for human rights as well as theprevention of discrimination and harassment. Based on
this code of conduct, a compliance manual gives concrete
instructions, particularly with respect to the Universal
Declaration of Human Rights and the International Bill on
Human Rights, and raises awareness among employees .
In our overseas businesses, we regard the rights ofindigenous peoples, respect for their cultures and customs,
and concern for human rights as extremely important.
JACOS has put in place a system that incorporates

the views of indigenous people and pursues businessin cooperation with them. In addition, in dealing withcompanies we aim to identify and eradicate any and all
instances of slave labor and human trafficking across our
supply chain based on the UK Modern Slavery Act 2015,
JAPEX Group’s policies and initiatives in are available on
our website.
For the details on how we comply with the UK Modern Slavery Act.,refer to the following URL
https://www.japex.co.jp/english/csr/slaveryactstatement.html● Prevention of Bribery and Corruption
In recent years, countries in North America and Europe
have been taking an increasingly strict approach to prevent
bribery. In tandem with economic growth, newly developing
countries also have been introducing and tightening related
laws and regulations.
The JAPEX Group Code of Conduct calls for its
directors, officers, and employees to keep sound andnormal relationships with politicians, political parties, andgovernment officials/agencies. Based on this code of
conduct, a compliance manual gives concrete instructions
and each of its directors, officers, and employees are
required to comply.
In line with growing awareness in recent years of the needto prevent bribery in Japan and overseas, we establishedand introduced “Anti-Bribery Guidelines” in April 2016
which sets out management and approval procedures inorder to ensure strict compliance with all applicable laws
and regulations. In fiscal 2017 we held training sessions onbribery prevention for our directors and officers. Moreover,
we also carried out awareness-building activities for our

Organization Chart to Address Compliance Matters under Compliance Reporting & Consulting System
President
ReportAudit & Supervisory Board Member
ReportInstruction / Approval

Officer in charge of internal control / Internal Control Committee (Chairman)(If necessary) Inside JAPEX, Group subsidiaries
Ensure that preventive measures against
Instruction / Approval
Reportrecurrence, etc. be widely disseminatedAdministration &Legal Department

Cooperative investigation / Report
External helpline (corporation lawyer)
Report / Consultation

Report / Consultation

Relevant Departments

Cooperative
Cooperative investigation /Investigation
ReportReporting of outcomes
Departments in charge

Reporting of outcomes
Reporter / Consulter

42 | JAPEX Corporate Report 2018

Request for taking preventive
measures against recurrence, etc.

Report / Consultation

Mission and Purpose

S Stable and sustainable energy supply

Strategy

H HSE as our culture

Value Creation Through Business Activities

I Integrity and governanceemployees assigned to overseas operations who are highly
susceptible to risks to involve in corruption. Additionally,annual compliance surveys on an ongoing basis have been
conducted to ensure our adherence to the Prevention ofBribery Guidelines.
There were no incidents or reports involving bribery
in fiscal 2017. Besides, we do not make any politicalcontributions.
● Compliance Reporting and Consulting System
We have established the Compliance Reporting andInitiatives to Support Value Creation

N Being a good Neighbor

E The Employer of choice

Consultation System which provides helplines that people
can turn to particularly with compliance matters related
to respect for human rights, engaging in fair procurement
together with other business transactions as well as
ensuring sound and normal relationships with politicians,
political parties and government officials/agencies. In
addition to assigning a corporate lawyer of JAPEX to act
as an external helpline, the system also enables individuals
to report and seek for consultation anonymously,
simultaneously safeguarding them to ensure theirconfidentiality and prevent unfair mistreatment by others.
In fiscal 2017, there were approximately 15 instances ofindividuals seeking for consultation.

TOPIC
Training on Workplace Harassment
Since fiscal 2016, we have been continuously conducting
corporate wide educational programs designed to foster
better understanding with regard to workplace harassment.
We have been developing the programs in-house, rather
than outsourcing such initiatives to external entities.
In fiscal 2016, we held more than 20 training sessions
targeting our entire workforce in headquarters and thedomestic district offices.

Overview of Training
Fiscal 2016 (training for all employees)
1. Company policies on workplace harassment
2. W hat kinds of workplace environments give rise toharassment?
3. T ypes of harassment that tend to occur in theworkplace (definitions and criteria for identifying
forms of harassment)
4. E
 xchange of opinions in groups while viewing
video footage
5. Approaches to preventing workplace harassment
Fiscal 2017 (training for directors, officers andother managers)
Introduction: Reflecting on training in fiscal 2016
1. R ecent developments in society and results of
JAPEX’s workplace survey

Training for employees in fiscal 2016

In fiscal 2017, additional training sessions for employees
were held as a means of follow-up sessions for those who
were not able to attend previously. Furthermore, training
sessions specifically concerning management werecarried out for directors, officers, and other managers inheadquarters five times in total, with content specifically
geared to management. This training will be extended todomestic district offices in fiscal 2018.
We have been drawing on feedback from training
encompassing our entire employee workforce to provide
training for our directors, officers and other managers
focused particularly on issues that explore businessrelated loss incurred as a result of harassment and realities
of JAPEX in that regard. Moreover, we also distribute amonthly e-mail magazine as a means of building awarenesson a daily basis, and take quick action in cases where an
individual reaches out to our points of contact with regard
to workplace harassment.

2. B
 usiness-related loss incurred due to harassment
3. Criteria for identifying power harassment
4. T aking action when an employee seeks
consultation
5. R esponsibilities of management

Training for directors, officers and other managers in fiscal 2017

JAPEX Corporate Report 2018 | 43

Integrity and governanceDirectors and Audit & Supervisory Board Members (As of June 28, 2018)* Years in office stated in square brackets “[ ]”Brief History

Reasons for Appointment

Attendanceat the Boardof Directors
Meetings

He joined the Ministry of International Trade and Industry(MITI) in 1964, and later became Vice Minister ofInternational Trade and Industry. He has also served as
Chairman of Japan External Trade Organization (JETRO).
Since joining JAPEX in 2007, he has served as Executive
Vice President and President. He has been in his current
position since June 2016.

He has distinguished insights through his extensive administrative
experience encompassing energy administration in government
agencies and other bodies, and served as Executive Vice President
and President at JAPEX in the period between 2007 and 2016.
Accordingly, he has been appointed on the basis of having greatly
contributed to the JAPEX Group’s business development, and as aresult of having appropriately provided managerial guidance from a
broad perspective since assuming the position of Chairman.

13 out of 13
meetings[11 years]*

He joined the Ministry of International Trade and Industry(MITI) in 1976, and has served as its Vice-Minister
for International Affairs. He has also served as Senior
Executive Vice President at NEC Corporation.
Since joining JAPEX in 2016, he has served as President.
He has been in his current position since June 2018.
He concurrently serves as President at JAPEX Offshore,Ltd., President at JAPEX Garraf Ltd., and Chairman at
JAPEX Montney Ltd.

He has distinguished insights through his extensive administrative
experience encompassing energy administration in government
agencies and managerial experience otherwise in private sector
companies. Accordingly, he has been appointed on the basis of
having played a central role in contributing to the JAPEX Group’sbusiness development amid a tough business environment since
assuming the position of President in 2016.

13 out of 13
meetings[2 years]

Since joining JAPEX in 1979, he has served as General
Manager of Domestic Exploration Dept., Exploration
Division, General Manager of Nagaoka District Office,Domestic Project Division, President of Domestic Project
Division, Vice President of Soma Project Division, andPresident of Inter-regional Gas Supply Division. He has
been in his current position since June 2018.

He specializes in the exploration of oil and natural gas, and has
extensive experience in and knowledge of our domestic and overseas
project divisions, and assists the President in the technical realm
overall, currently serving as Director and Senior Managing Executive
Officer. Accordingly, he has been appointed on the basis of having
significantly contributed to the JAPEX Group’s business development
by undertaking duties that involve being in charge of the HSE Dept.
and the Special Mission for Hidaka Offshore Exploration.

13 out of 13
meetings[6 years]

Since joining JAPEX in 1978, he has served as General
Manager of Procurement Dept., General Manager of
Administration Dept., President of Marketing & Sales
Division, Vice President of Soma Project Division,
Advisor to President (corporate), Executive in charge of Secretary Office, and Executive in
President of Marketing & Sales charge of Procurement Dept. He has been in his current
position since June 2018.
Division, Secretary Office,He has extensive experience in and knowledge of operations in
the areas of our procurement, administration, and marketing &sales divisions, and currently assists the President in the corporate
realm overall, currently serving as Director and Senior Managing
Executive Officer. Accordingly, he has been appointed on the basisof having significantly contributed to the appropriate operations
and management of JAPEX and the JAPEX Group’s businessdevelopment by undertaking duties that involve serving as Presidentof the Marketing & Sales Division and being in charge of the Secretary
Office and the Procurement Dept.

13 out of 13
meetings[6 years]

Since joining JAPEX in 1980, he has served as General
Manager of Operations Dept., Development Division, Vice
President of Development Division, General Manager
of Hokkaido District Office, Domestic Project Division,
President of Domestic Project Division, and Vice Presidentof Soma Project Division. He has been in his current
position since June 2018.

He specializes in oil and gas field development and production
and operations management in Japan and overseas, and has
extensive experience in and knowledge of our domestic project
divisions. Accordingly, he has been appointed on the basis of having
greatly contributed to the JAPEX Group’s business development
by undertaking duties as President of Domestic Project Division,
currently serving as Director and Senior Managing Executive Officer.

13 out of 13
meetings[2 years]

Since joining JAPEX in 1980, he has served as General
Manager of Iraq Project Dept., International Oil & Gas
Division, Vice President of Iraq Project Division, Vice
President of Middle East, Africa & Europe Project Division,
President of Environment and Innovative Technology
Projects Division, Executive in charge of Commercial Officefor Overseas Projects, Executive in charge of Corporate
Strategy Dept., and Executive in charge of Media &Investor Relations Dept. He has been in his current position
since June 2018.

He has extensive experience in and knowledge of operations in
the areas of our overseas project, and environment and innovativetechnology projects divisions. Accordingly, he has been appointed on
the basis of having greatly contributed to the appropriate operations
and management of JAPEX by undertaking duties that involve being
responsible for overseas projects, being in charge of Commercial
Office for Overseas Projects, being in charge of Corporate Strategy
Dept., and being in charge of Media & Investor Relations Dept.,currently serving as Director and Managing Executive Officer.

13 out of 13
meetings[3 years]

He joined the Ministry of International Trade and Industry(MITI) in 1980, and later became Deputy Director-Generalof the Ministry of Economy, Trade and Industry (METI).
Since joining JAPEX in 2012, he has served as President ofAmericas & Russia Project Division. He has been serving in
his current position since June 2018.
He concurrently serves as President of JAPEX Montney
Ltd.

He has international experience in government positions, as well as
extensive experience in and knowledge of energy administration ingovernment offices and our overseas project divisions. Accordingly,
he has been appointed on the basis of having greatly contributed to
the JAPEX Group’s business development by undertaking duties of
the President of Americas & Russia Project Division, currently serving
as Director and Managing Executive Officer.

11 out of 13
meetings[2 years]

Since joining JAPEX in 1978, he has served as General
Manager of Kangean Project Dept., President of Asia &Oceania Project Division, and Local President of Kangean
Project. He has been in his current position since June
2018.
He concurrently serves as President of Kangean Energy
Indonesia Ltd.

He specializes in drilling technology in the oil and mining industries,
and has extensive experience in and knowledge of our overseas
project divisions. Accordingly, he has been appointed on the basisof having greatly contributed to the JAPEX Group’s businessdevelopment by undertaking duties as President of Kangean Energy
Indonesia Ltd., currently serving as Director and Managing Executive
Officer.

13 out of 13
meetings[2 years]

Since joining JAPEX in 1981, he has served as Presidentof Canada Oil Sands Co., Ltd., Executive in charge of theCanada Oil Sands Project. He has been in his current
position since June 2018.
He concurrently serves as President of Canada Oil Sands
Co., Ltd. and Chairman of Japan Canada Oil Sands
Limited.

He specializes in oil and gas field development and production andoperations management in Japan and overseas, and has extensive
experience in and knowledge of the oil sand business. Accordingly,
he has been appointed because we expect JAPEX management will
benefit from his knowledge and experience, on the basis of having
greatly contributed to the JAPEX Group’s business development by
undertaking duties that include being in charge of the Canada Oil
Sands Project Dept., serving as President of Canada Oil Sands Co.,
Ltd., and Chairman of Japan Canada Oil Sands Limited, currently
serving as Director and Managing Executive Officer.

10 out of 10
meetings[1 year]Position, Name and Duties
Directors

Representative Director andChairman

Osamu Watanabe

Representative Director andPresident
Chief Executive Officer

Hideichi Okada

Director
Senior Managing Executive
Officer

Hikaru Fukasawa

Advisor to President (technical),HSE Dept., Special Mission for
Hidaka Offshore Exploration

Director
Senior Managing Executive
Officer

Yosuke Higai
Procurement Dept.

Director
Senior Managing Executive
Officer

Takahisa Inoue

President of Domestic Project
Division

Director
Managing Executive Officer

Kazuhiko Ozeki

Responsible for Overseas
Projects, Commercial Office forOverseas Projects, Corporate
Strategy Dept., Media &Investor Relations Dept.

Director
Managing Executive Officer

Hajime Ito

President of Americas & Russia
Project Division

Director
Managing Executive Officer

Hirotaka Tanaka

President of Kangean Energy
Indonesia Ltd.

Director
Managing Executive Officer

Toshiyuki Hirata

Canada Oil Sands Project Dept.

44 | JAPEX Corporate Report 2018

Mission and Purpose

S Stable and sustainable energy supply

Strategy

H HSE as our culture

Value Creation Through Business Activities

I Integrity and governanceInitiatives to Support Value Creation

N Being a good Neighbor

E The Employer of choice* Years in office stated in square brackets “[ ]”Position, Name and Duties

Brief History

Reasons for Appointment

Attendanceat the Boardof Directors
Meetings

Since joining JAPEX in 1982, he has served as
General Manager of Corporate Planning Dept.,
Vice President of Environment and Innovative
Technology Projects Division, and Executive incharge of Finance & Accounting Dept. He has
been in his current position since June 2018.

He has extensive experience in and knowledge of operations
in our finance and accounting divisions. Accordingly, he
has been newly appointed because we expect JAPEX
management will benefit from his knowledge and experience,on the basis of having greatly contributed to the appropriate
operations and management of JAPEX by undertaking duties
that involve being in charge of the Finance & Accounting
Dept., currently serving as Director and Managing Executive
Officer.

Newly
appointed[–]

Since joining JAPEX in 1981, he has served as
General Manager of Technical Dept., Nagaoka
District Office, General Manager of Nagaoka
District Office, Domestic Project Division, Vice
President of Inter-regional Gas Supply Division,and Vice President of Soma Project Division. He
has been in his current position since June 2018.

He specializes in drilling technology in the oil and mining
industries, and has extensive experience in and knowledgeof our domestic project divisions. Accordingly, he has been
newly appointed because we expect JAPEX management
will benefit from his knowledge and experience, on the basisof having greatly contributed to the JAPEX Group’s businessdevelopment by undertaking duties that include being incharge of Gas Pipeline Transportation Dept., and serving as
President of Inter-regional Gas Supply Division and Presidentof Soma Project Division, currently serving as Director andManaging Executive Officer.

Newly
appointed[–]

He joined Nikkei Inc. in 1965, and served asits Director, Chief Editor and Senior Managing
Director. He later served as Chairman at Japan
Center for Economic Research, and Adjunct
Professor at National Graduate Institute for Policy
Studies. He has been in his current position at
JAPEX since June 2015.
He concurrently serves as a member of the Boardof Trustees and Adjunct Professor at National
Graduate Institute for Policy Studies.

He has extensive experience and distinguished insights
gained through his career in a newspaper company and otherentities. Accordingly, he has been appointed because hesupervises and provides wide-ranging proposals for JAPEX
management, currently serving as Outside Director.

11 out of 13
meetings[3 years]

Having been appointed as a prosecutor in 1975,
he served as Head of Special Investigation Force,
Tokyo District Public Prosecutors Office, and as
Deputy Prosecutor-General, Supreme Public
Prosecutors Office. He has been in his current
position at JAPEX since June 2016.
He concurrently serves as a Recorded Attorney(Daiichi Tokyo Bar Association), and as Of Counsel
at Nishimura & Asahi.

He has extensive knowledge and experience as a legal
specialist. Accordingly, he has been appointed because hesupervises and provides wide-ranging proposals for JAPEX
management, currently serving as Outside Director.

11 out of 13
meetings[2 years]

Brief History

Reasons for Appointment

Attendance at
the Meetings

Since joining JAPEX in 1979, he has served as
General Manager of Technical Dept., Iraq Project
Division, General Manager of Iraq Project Dept.,
Middle East, Africa & Europe Project Division,
Advisor to President of Middle East, Africa &Europe Project Division, and Chief of Dubai
Representative Office, Middle East, Africa &Europe Project Division. He has been in his current
position since June 2017.

He specializes in oil and gas field development and production
and operations management in Japan and overseas, and has
extensive experience in and knowledge of our overseas project
divisions. Accordingly, he has been appointed because we
expect JAPEX management will benefit from his knowledge
and experience, on the basis of having greatly contributed to
the JAPEX Group’s business development, currently serving
as an Audit & Supervisory Board Member.

(Board of
Directors
meetings)
10 out of 10
meetings(Board ofCorporate
Auditors
meetings)
10 out of 10
meetings

Since joining JAPEX in 1982, he has served as
General Manager of the Media & Investor Relations
Dept., General Manager of International Planning
Dept., International Oil & Gas Division, General
Manager of First Project Dept., International Oil& Gas Division, General Manager of Canada Oil
Sands Project Dept., Americas & Russia Project
Division, Advisor to President of America & Russia
Project Division, Advisor to President of Middle
East, Africa & Europe Project Division. He has beenin his current position since June 2018.

He has extensive experience in and knowledge of project
management in our overseas project divisions. Accordingly,
he has been newly appointed because we expect JAPEX
audit will benefit from his experience and knowledge, currently
serving as Audit & Supervisory Board Member.

Newly
appointed

He joined the Ministry of Finance in 1969 where
he served as Director-General of the National Tax
Agency, and also served as Professor of Graduate
School of Finance, Accounting and Law, Waseda
University. He has been in his current position at
JAPEX since June 2015.
He concurrently serves as Advisor of Hibiya Park
Law Offices.

He has been appointed upon our having deemed that he willappropriately conduct audits from an objective standpoint
independent of the management team that carries out
JAPEX’s business operations, based on his extensive
experience and distinguished insights developed throughinvolvement in government administration of the Ministry of
Finance and other such entities.

(Board of
Directors
meetings)
13 out of 13
meetings(Board ofCorporate
Auditors
meetings)
13 out of 13
meetings

He joined the Industrial Bank of Japan, Limited
in 1970, and served as its Managing Director.
He also served as Managing Executive Officer ofMizuho Corporate Bank, Ltd., and President &CEO of DIAM Co., Ltd. He has been in his current
position at JAPEX since June 2014.

He has been appointed upon our having deemed that he willappropriately conduct audits from an objective standpoint
independent of the management team that carries out
JAPEX’s business operations, based on his extensive
managerial experience and distinguished insights developed
through involvement with financial institutions.

(Board of
Directors
meetings)
13 out of 13
meetings(Board ofCorporate
Auditors
meetings)
13 out of 13
meetings

Directors

Director
Managing Executive Officer

Michiro Yamashita
Finance & Accounting Dept.

Director
Managing Executive Officer

Yoshitaka Ishii

Gas Pipeline Transportation Dept.,
President of Inter-regional Gas
Supply Division, President ofSoma Project Division

Outside Director

Akira Kojima

Outside Director

Tetsuo Ito

Position and Name
Audit & Supervisory Board Members

Audit & Supervisory Board
MemberKenji Uchida

Audit & Supervisory Board
MemberKoichi Shimomura

Outside Audit & Supervisory
Board Member

Hiroyasu Watanabe

Outside Audit & Supervisory
Board Member

Norio Nakajima

JAPEX Corporate Report 2018 | 45

N

Stakeholders

Growing together
with local communities
Building good relationships
with stakeholders

Promotional event of male participation in childcare planned by senior high school students

Being a Good Neighbor
Our ApproachSocial Background and Issue Recognition● To continuously engage in business that has a big social

Main Measures● We

mission to provide a stable supply of energy, and that has
a huge impact on the economy and society, it is essential
to build relationships of understanding and trust withthat earns the trust of society.
● In regions where we operate, we are working on such issues

stakeholders.
● We

are making efforts to grasp diverse needs throughdialogues with various stakeholders, and to be a company

as infrastructure support, job creation, environmental
protection, and social engagement, donation activities.

are expected to contribute to the creation of

employment and development of local industries, in● We

regions where we operate.

are committed to safety, quality control, and theappropriate provision of information, aiming to build good
relationships with stakeholders so that clients can use our● Problems in product quality could do tremendous damage

oil and natural gas products with peace of mind.

to many stakeholders. We recognize that quality control
and product safety are extremely important.

● We● As Japan deregulates electric power and gas services,develop energy systems locally produced andconsumed and plan for a disaster-resistant community.

competition between energy businesses is growing.
Expenditures on Social Contributions(FY2017, non-consolidated)

57

million yen

Expectations and Requests from Stakeholders
Shareholders
andInvestors

Stable supply of energy
Product safety,
Quality control

Clients

Timely and accurate disclosure
Appropriate return of profits

Local
Communities

We support relief efforts for disasters
like earthquakes in Iraq and Iran andimplement social contributions.

Occupational
health and safety
Employees
Creation of anamenable working
environment
Human resource
development
Cooperation
SupportCompliance
Tax payment

The JAPEX
Group

Oil- and
Gas-Producing
Countries

TechnologicalsupportCreation of
employment

Business
Partners

NGOs and
NPOs

Government

Transaction
Partners
Fair transactions

46 | JAPEX Corporate Report 2018

Social contribution
Donation activities
Disaster relief support
Creation of employment
Consideration forliving environment(As an operator)
Formulation and operation of
appropriate business plans(As a non-operator)
Checking and proposal of
improvements to business plannedand conducted by operators

Mission and Purpose

S Stable and sustainable energy supply

Strategy

H HSE as our culture

Value Creation Through Business Activities

Initiatives to Support Value Creation

N Being a good Neighbor

I Integrity and governance

E The Employer of choiceHand-in-Hand with Local Communities

In July 2017, heavy rains caused a series ofdisasters such as flooding and landslides
around Akita Prefecture. Our employees
at the Akita District Office worked on
restoration projects twice as volunteers.

In September 2017, as a social contribution
related to the Sakhalin-1 Project, we held
tours of our Nagaoka District Office and
JPO Niigata District Office for students ofoil and gas engineering at Sakhalin State
University.

In December 2017, we invited local residents
of Soma City and Shinchi Town to a
ceremony for the arrival of the first LNG ship
to the Soma Port. A performance by theSoma Senior High School taiko club added
excitement to the ceremony.

TOPIC

Gastech Japan 2017
In April 2017, JAPEX exhibited at Gastech Japan2017. We had direct dialogues with various
stakeholders and gave out information about ourbusiness. The total number of interviews with
our stakeholders such as foreign governments,
LNG suppliers and engineering-related firms was
103 (237 individuals). Our executives, officers
and employees exchanged opinions with them.
About 1,700 people visited our booth that was far
exceeding our target. Through the exhibition, we
built trust with our stakeholders and were visible.

Commitment to Customers

Hand-in-Hand with Partners

Commitment to Shareholders

In October 2017, Shirone Gas Co., Ltd. helda gas exhibition, drawing more than 1,400
visitors, to set a new record.
Responding to a major changes in
the liberalization of the gas market, wemade efforts to respond to the various
needs of our customers, which eventually
led to topportunities for further businessdevelopment.

About 6,500 people live on the island ofPagerungan, Indonesia, where Kangean
Energy Indonesia Ltd. (KEI) operates gas
fields. KEI voluntarily provides the local
community with electric power, water, andvarious infrastructures, including 16 watertanks of roughly 2m3. KEI contributes toimprove the quality of life for local residents.

In January 2018, we held a ResearchCenter Tour for our shareholders to promotea deeper understanding of the oil andnatural gas E&P business, and encouraged
understanding in our operation.
Participants received a brief overview
of JAPEX’s main activities, while ourfrontline engineers explained cutting-edge
technology.

JAPEX Corporate Report 2018 | 47

E

Employees of Soma District Office

The Employer of Choice
Our ApproachSocial Background and Issue Recognition● Witha declining birthrate and aging population, Japanis facing a labor shortage. Therefore, it is important toempower women to take more active roles as well as
respect the needs of different generations and work
styles. Furthermore, securing diverse personnel who can
globalize our business and ensure sustainable businessactivities is essential.
● Honoring and making full use of the different personalitiesof our employees is not only a key to meet social demands
but also indispensable for creating new corporate value.
● We believe that a fair working environment where humanrights are respected is essential to ensure every employee
is able to work with confidence and passion.

Percentage of Male employees
who Take Paternal Leaves(FY2017, non-consolidated)

Average Monthly overtime
Hours(FY2017, non-consolidated)

18.6 9.5%

The childcare leave system has gained
more recognition among employees.
One out of five male employees eligible
for paternity leave took it in fiscal 2017.

Main Measures● We acknowledge that each employee is unique in sometangible (gender, nationality, career track, work style) as
well as invisible ways. Thus, we have mechanisms in placethat enable each employee to work as an autonomous
professional.
● We have been reforming work styles and establishing
personnel systems to diversify work and honor each
person’s roles, responsibilities, and capabilities more
efficiently. In addition, we have been putting in efforts toenhance employee training and strengthen communication
between management and employees.
● In addition, we strive to boost labor productivity by reducing
long working hours along with maintaining and promoting
employee health.

Strengthen Corporate Competitiveness
Reform Corporate Culture
Human resources and organizations that can cope instantly with a globalizing anddiversifying business environmenthours

In fiscal 2017, all departments set atarget to reduce monthly overtime hours(as compared to the same month of last
fiscal year).
As a result, the company wide average
overtime work hours decreased to 3.8
hours compared to previous fiscal year.

Provide an Attractive Work Environment where Talented People Choose to Work
Human Resources Development and Training
Establish workplaces and conditions that enable improvement of technical skills,
knowledge, and also growth

Create Workplace Environments where People can Fulfill Their Individual Potential
Respect Employee Diversity / Create a Fair and Rewarding Workplace
Human resources—encompassing different genders, nationalities, academic
backgrounds, and careers—recognize the diversity of each other’s attributes

Listed in Nadeshiko Brand in FY2017(3 consecutive years)

48 | JAPEX Corporate Report 2018

In 2018, Excellent Enterprise of Health andProductivity Management (2 consecutive years)

Mission and Purpose

S Stable and sustainable energy supply

Strategy

H HSE as our culture

Value Creation Through Business Activities

I Integrity and governanceInitiatives to Support Value Creation

N Being a good Neighbor

E The Employer of choice

Diversity Promotion & Human Resources Development
Based on the JAPEX Diversity Policy, we carry out a variety of initiatives to promote the success of all employees.
● Expand Career Support System

work early and eliminating core time on Premium Fridays.

In fiscal 2017, we established new career development

In fiscal 2017, we set a KPI of reducing overtime insystems in addition to the existing career support systems.

all departments, seeking year-on-year reductions. EachThe new systems include “job return,” “reduced working

department approached the task in ways suited to its

hours for schooling,” and “nursery cost support.” Thesebusiness processes and implemented a control systemsystems seek to help employees continue and build their

to lower overtime each month compared to the previous

careers without worrying about life changes (child rearing,year. Additionally, a system to report monthly results during

caregiving) or a spouse’s career change (job transfer).

the meetings of the Board of Directors and department
managers was implemented. Consequently, the Group-● Efforts to Recruit Women to Management Positions

wide target for reducing overtime year on year was

In October 2014, we set a goal to triple the percentage

achieved.

of women in management positions from 3.4% as of
October 2014, to 10.2% by 2020. As of April 1, 2018,
the percentage of female managers has reached 5.4%.
Besides, as another voluntary action, we have also beenpromoting human resources development towards thegoal to appoint female general managers by 2020.
In fiscal 2017, we held an in-house seminar inviting
an external female executive to present for our female
employees who could be manager candidates. In addition,

The President’s Award was presented to the winner of the work style reform campaign

on-the-job training and other training programs were
provided to assist employees in identifying and solving
problems, and build their communication skills.

● Personnel Development and Training Programs
In fiscal 2017, we organized more than 20 new
training programs designed to enhance employees’ skills● Initiatives to Change the Mentality of Male Managers

of project management, leadership and commercial

For our male managers, we held enlightenment seminars

evaluation. The training programs covered a wide range ofdesigned to eliminate unconscious opinions of “genderthemes; business laws, finance, accounting, taxes, HSE,

based roles”. Also, Corporate-wide “Iku-boss Seminars”

insurance, strategic theory, problem-solving, intercultural

were held. These seminars enable male managers to train

understanding, overseas travel safety and lessons-learned

their own subordinates and increase management skills.

from projects in the past.

We actively offered instructional sessions on JAPEX’s

Furthermore, guest lecturers provided sessions on

various childcare support programs available to men,

global financial systems and practical programs on project

including childcare leave and monetary benefits. As amanagement.

result, the rate of male employees taking childcare leave
has increased: while only 2.4% did so in fiscal 2015, the● Town Hall Meetings

rates were 21.1% and 18.6% in fiscal 2016 and fiscal

We held our second Town Hall Meeting in November

2017, respectively.

2017 (the first was in 2016) as an opportunity of direct
dialogue between the executives and the employees.

● Work-Life Balance

They discussed the corporate strategies. The video was

We officially implemented a flex-time system in April 2017.

delivered to expatriate employees. Feedbacks from all

Other efforts to ensure appropriate working hours andemployees were shared with all executives and officers towork-life balance include setting specific days to leave

improve the management system.

JAPEX Corporate Report 2018 | 49

Financial and Non-financial Highlights
2009/3

2010/3

2011/3202,127
134,447
15,352
32,237
20,09012,56036,381(23,342)(477)
51,975

179,752
125,467
10,39630,76913,11917,93938,948(29,300)(4,054)57,645

199,651
144,919
9,798
31,084
13,84910,01034,284(24,282)(521)
66,826

Total assets

500,444521,009

516,098

Net assets

378,227

398,747

393,689

Long-term loans payable

25,32524,471

26,8986,486.85

6,839.05

6,743.83

Basic earnings (loss) per share

219.77313.88175.16

Cash dividends per share (full-year)

40.00

40.00

40.00

Natural gas

22.1

21.5

25.5

Crude oil

22.0

17.6

15.0

Total

44.1

39.1

40.6

Overseas

59

49

49

Japan

213

205

208

Total

272

254

257

Frequency rate*3

0.73

1.41

1.59

Severity rate*4

0.00

0.00

0.00

Greenhouse gas emissions (t-CO2)

292,384

324,714303,146

Energy consumption (TJ)

3,458.7

3,566.5

3,475.7

1,678

1,735

1,728

833

869

867

Ratio of female managers (%)

1.4

1.4

2.1

Employees with disabilities (%)*6

1.70

1.65

1.53

For Fiscal Year (Millions of yen)
Net sales
Cost of sales
Exploration expenses
Selling, general and administrative expenses
Operating income
Profit (loss) attributable to owners of parent
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at end of period
At Fiscal Year-End (Millions of yen)

Per Share Data (Yen)Net assets per share

Production Volume in the Fiscal Year (daily)*1 (Thousand boe/d)

Production volume

Proved Reserve Volume at Fiscal Year-End (Million boe)

Proved reserves

Human resouces

HSE*2

Non-financial DataO
 ccupationalsafety umber ofN
employees

Consolidated
Non-consolidated*5*1 F igures for crude oil include bitumen (an extra-heavy crude oil extracted from oil sands). These figures
included production volumes of equity-method affiliates.
*2 Applies to JAPEX and Japex Offshore Ltd.
*3 Frequency rate = (Number of deaths and injuries caused by occupational accidents/Number of hours worked) x 1,000,000*4 Severity rate = (Number of days of work lost/Number of hours worked) x 1,000*5 Figures based on non-consolidated operations. Figures for the fiscal year ended March 31, 2014 and thesubsequent years are stated as of April 1 of the respective subsequent fiscal year.
*6 Figures based on non-consolidated operations. With respect to the fiscal year ended March 31, 2018,
employees with disabilities account for 2.42% of the workforce as of June 1, 2018.

50 | JAPEX Corporate Report 2018

Conversion Factors and Units:
Crude oil 1 kL = 6.29 bbl
Crude oil 1 kL = Natural gas 1,033 m3
boe: barrels of oil equivalentboe/d: barrels of oil equivalent per day

(Fiscal years ended March 31)

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

230,638
174,359
7,805
33,426
15,04517,027
37,172(13,950)
9,856
99,803231,086
172,075
13,08632,017
13,906(865)
34,254(14,836)(7,177)
112,639

276,588
210,460
9,800
31,692
24,63429,01545,226(131,600)
71,680102,830

304,911
234,649
4,489
33,62532,14629,56778,666(63,031)
18,475
142,657

240,302
193,022
6,516
32,426
8,336
2,090
57,659(125,771)
54,816
126,570

207,130
174,957
1,512
29,975685
3,443
43,672(84,686)
18,360103,630

230,629
191,366
1,324
29,1738,764(30,958)
52,881(54,218)(1,196)99,892532,890525,172

663,038

736,862

707,601

746,739

699,539406,773403,625

496,915

540,647

495,317510,609457,207

26,19824,197

21,636

20,726130,030

141,903

135,959

6,869.27

6,691.58

7,389.62

8,055.59

7,366.40

7,655.26

7,402.41

297.92(15.14)507.68517.35

36.58

60.24

(541.69)

40.00

40.00

50.00

50.00

50.00

15.00

20.00

22.8

23.3

26.4

32.3

34.0

33.7

31.2

15.8

13.3

21.8

42.1

39.7

38.3

29.5

38.6

36.6

48.3

74.4

73.7

72.0

60.7

38

160

193

203

255

277

229

185

147

112

110

94

74

73

223

307

305

313

349

352

302

0.80

0.00

0.84

1.02

1.15

3.53

0.00

0.00

0.00

0.10

0.03

0.02

0.18

0.00

256,561

267,446

251,121244,491

230,636

241,360

382,3113,329.3

3,168.0

2,975.1

2,698.8

2,543.8

2,609.3

2,559.0

1,743

1,747

1,782

1,818

1,847

1,825

1,788

880

882

874

886

902

897

920

2.0

3.3

2.9

4.1

4.5

4.5

5.4

1.89

1.75

1.57

2.03

2.21

2.01

1.97

JAPEX Corporate Report 2018 | 51

Corporate Data
Status of Important Subsidiaries (as of March 31, 2018)
Important Subsidiaries

Paid-In Capital(Millions of yen)

JAPEX’s Stake(%)

Principal Business Activities (Target Region)

Shirone Gas Co., Ltd.

3,000

100.0

Manufacturing, supply, and sale of gas in Tsubame City and Niigata
City

JGI, Inc.

2,100

100.0

Contract geophysical surveys and development of geophysicalexploration technologies

Geophysical Surveying Co., Ltd.

446

100.0

Geophysical surveys and contract mud logging operations

SK Engineering Co., Ltd.

300

100.0

Contract engineering and well drilling

Akita Natural Gas Pipeline Co., Ltd.

250

100.0

Pipeline transport of natural gas in Akita Prefecture
Manufacture and sales of petroleum products, real estate management, and insurance agent services

JAPEX SKS Corporation

90

100.0

Japex Pipeline Ltd.

80

100.0

Pipeline management and maintenance

80

100.0

Sale of crude oil, reprocessing of waste oil, contracted transportation of LNG and crude oil

773,593

100.0(100.0)Oil sands exploration, development, and production based on arealease agreement in Canada

100.0

Exploration, development, and production of oil resources in U.S.;
capital participation in LNG project in Malaysia

100.0

Exploration, development, and production of oil resources in U.K.’s
North Sea

34,86394.6(1.0)

Exploration, development, and investment of oil sands throughJapan Canada Oil Sands Limited

Japex Energy Co., Ltd.

90

90.0

Purchasing and sale of LNG, oil products, etc.

North Japan Security Service Co., Ltd.

30

87.3

Disaster protection for industrial facilities and security services

North Japan Oil Co., Ltd.
Japan Canada Oil Sands Limited(Thousands of
U.S. dollars)

Japex (U.S.) Corp.

(Thousands of
U.S. dollars)

JAPEX UK E&P Ltd.

(Thousands ofBritish pounds)

Canada Oil Sands Co., Ltd.

33,00033,449Japex Offshore Ltd.

5,963

70.6

Exploration, development, and production of petroleum resourcesfrom the continental shelf in the Sea of Japan

Japex Garraf Ltd.

20,93055.0

Exploration, development, and production of oil resources in Garraf
oil field, Republic of Iraq

45.0

Exploration, development, and production of shale gas in Canada

JAPEX Montney Ltd.

918,583(Thousands ofCanadian dollars)(Notes) 1. Parentheses appearing in the JAPEX’s Stake column indicate the indirect stake that is included in the total.
2. Capital in Japan Canada Oil Sands Ltd. was increased by 60,143,000 U.S. dollars between May 31, 2017 and October 6, 2017.
3. JAPEX UK E&P CENTRAL Ltd. conducted joint exploration and development with Apache and another company per a licensing agreement in U.K. North Sea, but withdrew when
the agreement was canceled in April 2018
4. JAPEX UK E&P Ltd. increased its capital by 1,749,000 British pounds on February 20, 2018

Status of Important Affiliates (as of March 31, 2018)
Affiliates
TELNITE CO., LTD.
TOHOKU NATURAL GAS Co., Inc.
JJI S&N B.V.

Paid-In Capital(Millions of yen)

JAPEX’s Stake(%)

Principal Business Activities (Target Region)

98

47.0

Manufacture and sales of drilling mud for well drilling and the provision of mud technical services

300

45.0

Purchasing and sales of natural gas in the Tohoku region of Japan

27,88341.7(62.5)Development and production of oil resources in Persian Gulf, Islamic
Republic of Iran(Thousands ofeuros)

Universe Gas & Oil Company, Inc.

5,080

33.4
(40.1)

Exploration, development, and production of oil resources in easternpart of Kalimantan Island, Republic of Indonesia

Fukushima Gas Power Co., Ltd.

537

33.3

Conduct of a natural gas-fired power generation project in Soma
Port, Fukushima Prefecture

Kitakyushu LNG Sales and Lorry Transport
Corp.

30

33.0

Transportation and sales of LNG in the Kyushu region

7,572

31.0

Contract drilling of petroleum resources offshore

25.0

Exploration, development, and production of oil resources off thecoast of the eastern part of Java Island, Republic of Indonesia

15.3(30.6)

Exploration, development, and production of oil resources on
Sakhalin Island and its continental shelf, Russian Federation

Japan Drilling Co., Ltd.
Energi Mega Pratama Inc.
Sakhalin Oil and Gas Development Co., Ltd.

52,000(Thousands of
U.S. dollars)

22,592(Notes) 1. Parentheses appearing in the JAPEX’s Stake column indicate JAPEX’s stake included in private shareholders’ investment, excluding investment by the Japanese government(Minister of Economy, Trade and Industry)

52 | JAPEX Corporate Report 2018

Corporate Profile (As of March 31, 2018)
Company NameJapan Petroleum Exploration Co., Ltd. (JAPEX)

Established		

April 1, 1970

Paid-in Capital

JPY14,288,694,000

Fiscal Year		April 1 to March 31 of the following year

Number of Employees 1,788 (Consolidated basis)

Main Businesses

Exploration, development, production, and sales of oil,natural gas, and other energy resources, and contract
service-related operations such as drilling

Main Offices		

Headquarters (see below), Hokkaido, Akita, Nagaoka,
Soma, JAPEX Research Center (Chiba), Aberdeen, Dubai,
Houston, Jakarta (as of September 2018)

Headquarters		

SAPIA Tower, 1-7-12 Marunouchi, Chiyoda-ku,
Tokyo 100-0005, Japan
TEL: +81-3-6268-7000
FAX: +81-3-6268-7300

				

Executives (As of June 28, 2018)
Representative Director
and Chairman

Osamu Watanabe

Representative Director
and President Chief
Executive Officer

Hideichi Okada

Directors
Senior Managing
Executive Officers

Hikaru Fukasawa

Directors
Managing Executive
Officers

Kazuhiko Ozeki

Outside Directors

Yosuke Higai

Outside Audit &Supervisory Board
Members

Hiroyasu WatanabeSpecial Advisor to
President

Ajay SinghManaging Executive
Officers

Kunio Suga

(Notes) 1.	
Akira Kojima and Tetsuo Ito are outside
directors as stipulated under Article 2-15 of theCompanies Act of Japan.
2.	
Hiroyasu Watanabe and Norio Nakajima areoutside audit & supervisory board members as
stipulated under Article 2-16 of the Companies
Act of Japan.
3.	The Special Advisor to the President assists withstrategy and commercials.
4. Fellows support executives through their highdegree of expertise in specialized fields.

Yasushi Hamada

Executive Officers

Akihisa Takahashi

Hajime Ito

Ryuhei Murayama

Hirotaka Tanaka

Senichiro Kaku

Toshiyuki Hirata

Minoru Kuniyasu

Michiro Yamashita

Junichiro Ando

Yoshitaka Ishii

Tadashi Matsunaga

Akira Kojima

Ryohei Wakishima

Tetsuo Ito
Audit & Supervisory
Board Members

Amane Waseda

Tsuyoshi Suga

Takahisa Inoue

Kenji Uchida
Koichi Shimomura

Satoru Yokoi

Fellows

Norio Nakajima

Tsuneta Nakamura
Masanori Amano
Takamasa Miyadai

Stock Information (As of March 31, 2018)
Exchange Listing		

Tokyo Stock Exchange, First Section(Securities Code Number: 1662)

Common Stock (Authorized)

120,000,000 shares

Common Stock (Issued)

57,154,776 shares

Number of Shareholders

13,197

Transfer Agent and Registrar

Mizuho Trust & Banking Co., Ltd.

Inquiries		

Mizuho Trust & Banking Co., Ltd.,
Stock Transfer Agency Division 8-4 Izumi 2-chome,
Suginami-ku, Tokyo 168-8507, Japan
TEL: 0120-288-324 (Toll-free in Japan)		

Major Shareholders
Shareholder Name

Number of
SharesVoting Rights(%)

Shareholding by Shareholder Type

Minister of Economy, Trade and Industry

19,432,724

34.00

Individuals and Other

Minister of Economy,
Trade and Industry

INPEX CORPORATION

2,852,212

4.99

7.62%

34.00%JFE Engineering Corporation

1,848,012

3.23

STATE STREET BANK AND TRUST COMPANY

1,440,020

2.52

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

1,244,200

2.18

THE BANK OF NEW YORK 133524

1,179,600

2.06

Japan Trustee Services Bank, Ltd. (Trust 4)

1,066,500

1.87

ORBIS SICAV

1,061,100

1.86Japan Trustee Services Bank, Ltd. (Trust)

937,000

1.64

Other Domestic
Corporations

Mizuho Bank, Ltd.

720,152

1.26

12.05%

Foreign
Corporations
and Other

29.55%

PublicOrganizations

1.36%
Securities Companies

0.74%

Financial Institutions

14.68%JAPEX Corporate Report 2018 | 53

Inquiries:

Japan Petroleum Exploration Co., Ltd.
Investor Relations Group,Media and Investor Relations Dept.

TEL : +81-3-6268-7111
FAX : +81-3-6268-7302

This report has been printed using environmentally friendly paper from FSC®-certified forests and VOC (volatile
2016.10organic compound)-free ink. Moreover, the printing process used a waterless system that does not emit wastewater.
Printed in Japan