2020
Corporate ReportJapan Petroleum Exploration Co., Ltd.

For the Year Ended March 31, 2020

Contents

Mission and Purpose

Corporate Vision • JAPEX Group Code of Ethics and Conduct..................  01
JAPEX Past and Future..............................................................................  02
JAPEX Our Strengths.................................................................................  04
The JAPEX Group’s Value Creation Process..............................................  06

Strategy

President’s Message.................................................................................  08
Finance & Accounting Dept. Director’s Message......................................  11
Long-term Vision 2030..............................................................................  12
Mid-term Business Plan 2018-2022..........................................................  13
Special Feature: The JAPEX Group aims to achieve sustainable
development with society• Special Dialogue.....................................................................................  16
• Initiatives for a Low-Carbon Society......................................................  18
• Climate Change Response.....................................................................  20
• CSR in the JAPEX Group.......................................................................  22
• The Risks, Opportunities and Value Chain of the JAPEX Group............  24

Value Creation Through Business Activities

At a Glance................................................................................................  26
E&P Business............................................................................................  28
Infrastructure/Utility Business...................................................................  32
New Business Development.....................................................................  34
CLOSE UP: From the field to the laboratory, from the laboratory
to underground—JAPEX commercializing technology............................  37

Initiatives to Support Value Creation

Governance: Integrity and Governance....................................................  38
JAPEX HSE Management.........................................................................  44
Environment: HSE as Our Culture.............................................................  45
Social: HSE as Our Culture/Stable and Sustainable Energy Supply.........  46
Social: The Employer of Choice/Being a Good Neighbor.........................  48

Financial and Other Information

Financial and Non-financial Highlights......................................................  50
Glossary*............................................................................................  52
Financial Data ...........................................................................................  53
Corporate Data .........................................................................................  105*

Editorial Policy
We issue our Corporate Report to facilitate the understanding of our economic, social and environmental
activities over the most recent fiscal year as well as
our business strategies, financial position and CSR
activities aimed at securing corporate sustainability
and growth potential. We position this report as a key
communication tool with our stakeholders, and are
striving to enhance its content.

Information Disclosure Sources
This report presents important information withthe aim of enhancing understanding of our company. More-detailed information is available on
our website.
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/

Reference Guidelines
METI, “Guidance for Collaborative Value Creation”
IIRC, “International Integrated Reporting Framework”
GRI, “Sustainability Reporting Standards”
Organizations Covered by this Report
This report covers Japan Petroleum Exploration Co.,
Ltd. (JAPEX), and its 19 consolidated subsidiaries
and other group companies.
Reporting Period
Fiscal 2019 started on April 1, 2019 and ended
March 31, 2020.
Some statements include data before March 31,
2019 or after April 1, 2020.
Issuing Date
December 2020 (Next issue: November 2021)

Items marked by the book icon are explained in the “Glossary” on page 52.

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 management­policies. These forecasts represent management’s
assumptions or decisions based on information currently available. Readers should be aware that actual
results may be different from these forecasts due tochanges in the business environment.

Mission and Purpose

Corporate Vision
Contribute to society through the stable supply of energy, addressing social
issues to realize the sustainable development goals.
Explore, develop, produce, and deliver crude oil and natural gas in Japan and overseas.
Enhance natural gas supply, utilizing our domestic infrastructure, and promote the electric power business.

Strategy ontribute to solving the challenges for a sustainable society, such as energy and climate change, by developing andC­commercializing new technologies based on our expertise.
Aim for sustainable growth and maximization of corporate value, placing trust with stakeholders as the top priority.

JAPEX Group Code of Ethics and Conduct

Value Creation Through Business Activities

To realize our corporate vision as a long-trusted company in society,
JAPEX established the “JAPEX Group Code of Ethics and Conduct”
to serve as the corporate ethics standards and action principles forbusiness execution by all officers and employees.
1. Comply with applicable laws and regulations, and respect international codes of conduct.
2. Place top priority on HSE (health, safety, and environment).
3. Strive to build trust with stakeholders and contribute to society.

Initiatives to Support Value Creation

4. Respect the human rights of all people.
5. Develop a good working environment.
6. Engage in fair and free competition and appropriate dealings.
7. Maintain sound and transparent relationships with politicians and administrative agencies.
8. Resolutely terminate any and all relationships with anti-social forces.
9. Properly manage and protect confidential information, including personal/client data.

Financial and Other Information
JA P E X C o rp o r a t e R ep or t 2 0 2 0

01

Past and Future

Since its founding, JAPEX has focused on the stable supply of crude oil and natural gas and the development of E&P technologies. In light of changing energy demands, we will continue with our aim of growing into the Integrated Energy Company by1955~

promoting the creation of electric power and environmentally friendly businesses.

Founded as a government-owned company toenhance Japan’s self-sufficiency for oil and gas
1955Founded as a government-owned company

1958

Discovered Mitsuke Oil Field in Niigata(In production from 1958 to 2016)
Discovered Sarukawa Oil Field in Akita(In production from 1959)

1959

Discovered Higashi-Niigata Gas Field in Niigata(In production from 1959)

1960

Discovered Amarume Oil Field in Yamagata(In production from 1960)
Discovered Katakai Gas Field in Niigata(In production from 1960)

1962

Discovered Shiunji Gas Field in Niigata(In production from 1963)

1965

Expanded the operation range overseas byrevision of the law

1967

Integrated into Japan Petroleum Development
Corporation (JPDC) as a division

1968

Discovered Yoshii Gas Field in Niigata(In production from 1968)

1970~
Reorganized as a
private company

1970

1999 Began oil sands production via SAGD ahead ofother companies in the Oil Sands Project in Canada

1955
Foundation

1958 Began production at Mitsuke Oil Field,
the first to succeed in commercial production

02

J A PE X C o rpo ra t e Re po rt 2 0 2 0

1970

Reorganized as a private company again by­separating from JPDC

1976

Discovered Yurihara Oil and Gas Field in Akita(In production from 1984)

1978

Participated in the Oil Sands Project in Canada (Started
trial production in 1999, began commercial production
from 2003)

1983

Discovered Iwafune-oki Oil and Gas Field in Niigata(In production from 1990)

1989

Discovered Yufutsu Oil and Gas Field in Hokkaido(In production from 1996)
Discovered Ayukawa Oil and Gas Field in Akita(In production from 1995)

1996

Commenced operation at the Niigata-Sendai Gas Pipeline

WHO WE ARE

Promoted overseas E&P
businesses and the electric
power businessParticipated in the Kangean Project in Indonesia

2010

Participated in the Garraf Project in Iraq

2012

Participated in the Tight Oil Project in the United States
for development in
Made final investment decision
Hangingstone lease in Canada for the Oil Sands Project

2013

Participated in the Shale Gas Project in Canada

2014

Participated in the Seagull Project in the United
Kingdom’s North Sea

2016

Decided on commercialization of the Natural­Gas-fired Power Generation Project in Fukushima

2018

Formulated the Long-term Vision 2030 and­Mid-term Business Plan 2018–2022
Commenced operation at Soma LNG Terminal
in Fukushima

2020

Commenced commercial operation at Fukushima
Natural Gas Power Plant (Fukushima Gas Power
Co., Ltd.)

2022• Improve ROE

1Resilient domestic
infrastructure

JAPEX’s Strengths

3

Relationships of trust withstakeholders

Initiatives to Support Value Creation

Listed on the Tokyo Stock Exchange First Section

2007

The JAPEX Group’s
comprehensive
technical
capabilities

Value Creation Through Business Activities

2003

2

Strategy

2000

Mission and Purpose

2000~

5% or more

(FY2022 goal in the Mid-term Business Plan 2018–2022)
Unit No. 1 of the Fukushima Natural Gas Power Plant
after commencing operations

Financial and Other Information

2030

2020

• Profit Composition Ratio of the E&P Business andNon-E&P Business* =6:4• Growth to the Integrated Energy Company Utilizing Oil and
Gas E&P and Its Supply Basis (Long-term Vision 2030)* The Infrastructure/Utility Business and New Business Development

JA P E X C o rp o r a t e R ep or t 2 0 2 003

Our Strengths

1

JAPEX will continue transforming and tackling challenges as an integrated energy company by leveraging the three strengths
that drive the corporate value it has cultivated over its 65-year history. Through the stable supply of energy, which is our mission, we will contribute to the creation of a sustainable society.

 Technical capabilities in the
E&P Business Application of technical capabilities
in new businesses development

The JAPEX Group’s
comprehensive
technical
capabilities• We possess comprehensive technical capabilities that can fully
augment the entire E&P Business.
• We are working to create environmentally friendly businesses,
expand renewable energy and other electric power businesses,
and develop CCS

technology that contributes to the realiza-tion of a low-carbon society by leveraging the technologies andexpertise cultivated in the E&P Business.
For more information, see

P.26-37.

The JAPEX Group’s wide range of technical capabilities in the E&P Businessdle
Op Strea
era m
tion

Mid

P
Eng roduc
ine tioneringF
and acility
Ma Planag nniem ng
ent

Eng Reser
ine voir
erin
g

eys
Sur
v
hol
e

DeliveryBore

Eng Driine llingeringProduction

Sei

sm
ic

Ima

Geo
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ogy

gin
g

Exploration

Japan Petroleum Exploration Co., Ltd.
JGI, Inc.

Geophysical Surveying Co., Ltd.

GEOSYS, Inc.

North Japan Security
Service Co., Ltd.

Akita Natural Gas PipelineCo., Ltd.
North Japan OilCo., Ltd.

Japex Pipeline Ltd.
JAPEX SKS Corporation

SK ENGINEERING CO., LTD.

Shirone Gas Co., Ltd.

Japan Canada Oil Sands Limited
Japex Offshore Ltd.

Group

04

J A PE X C o rpo ra t e Re po rt 2 0 2 0 Diverse gas supply network Resilient system for stable
operation of infrastructure

Strategy

Resilient domestic
infrastructure

Mission and Purpose

2

WHO WE ARE• We provide a stable supply of LNG and natural gas, which offer
low environmental burden, using diverse transportation methods,
such as JAPEX’s own natural gas pipeline network and railway
tank containers.
• In the Shiunji Gas Field (Niigata Prefecture), we are storing
domestic natural gas underground to meet variable seasonal
demand and prepare for emergencies, thereby contributing tostable energy supply.

Value Creation Through Business Activities• We are building a system for stable operation of infrastructure
without major accidents or injuries. We have been able to ensure
safety during crises, such as the Great East Japan Earthquake,achieving quick recovery and the restart of supply.
For more information, see Thorough safety andquality management Environmental conservation
initiatives Contributing to local
communities

Financial and Other Information

3.

Initiatives to Support Value Creation

Relationships oftrust withstakeholders

P.32-33

Rewarding workplaces• Since our founding, we have been able to build relationships oftrust by contributing to local communities and holding dialogue
with various stakeholders. These relationships have become thefoundation of our business.
For more information, see

P.02-03andP.44-49.

JA P E X C o rp o r a t e R ep or t 2 0 2 005

The JAPEX Group’s Value Creation Process

Given changes in the economic and social environment, the JAPEX Group aims to contribute to all its stakeholders, achieving
sustained and enhanced corporate value through business activities that take advantage of its strengths.

Business Model

Capital toSupportBusiness Growth
Awareness of
the External
Environment

Financial capital(Sound and stablefinancial base)

P.24

E&P Business

P.50-51

Changes in
global trends
toward therealization of adecarbonizedsocietyP.28-31

Production capital(Robustinfrastructure)(Specified Gas
Pipeline 800km in
length)Businesses

P.32-33

Fluctuations in oil
and natural gas
pricesIntellectual capital(Comprehensive
technological capabilities in E&P
business)

P.04-05

Infrastructure/
Utility Business*

New Business
Development

P.32-33

P.34-36

Human capital

Declining
population inJapan(Career building
through diverse
in-house training
programs)

P.48

Liberalization of
power and gas
businesses(Relationships of trustwith stakeholders)Natural capitalJ A PE X C o rpo ra t e Re po rt 2 0 2 0S  Stable and sustainable energy supplyI   Integrity and governanceN  Being a good neighbor
E  The employer of choice(Proved reserves 355
million barrels)* Infrastructure/Utility Business, including business of supplying natural gas and business of
power generation/electricity sales

P.28-29

06

P.22

H  HSE as our culture

Social andrelationshipcapitalP.49

Intensifying
competition for
securing
resources

Five Core CSR Themes “SHINE”

Corporate Vision

P.01

WHO WE ARE
Mission and Purpose

Long-term Vision 2030

Contribution toSocietyStrategy

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

Value Delivered
to Stakeholders

Clients andregional societies

E&P Business• Review our portfolio• Improve operational efficiency• Discover additional reserves(RRR >1)

We will stably supply
oil, a key resource
supporting primaryenergy demand, as
well as natural gas, aclean energy source,in accordance with
the needs of regionalsocieties and clients.

Value Creation Through Business Activities• Improve the operating rateof our LNG terminals andpower plants• Pursue additional power
generation business• Secure competitive natural
gas sources

Social Contribution throughSustainable Growth

Infrastructure/
Utility Business• Stable energy
supply• Supply environmentally friendly energy

Shareholders andinvestors

Environmentally
Friendly New Businesses• Promote commercializationof CCS• Establish a dedicated­organization for new business development• Propose new sourcesof value• E&P technology• Natural gas supply
infrastructure• Knowledge obtained throughcommissioned research• Work hand-in-handwith local communities/create
employment

Employees• An inclusive
workplace

We will proactively
play our part inresolving global
issues regarding low
carbonization anddecarbonization.

Financial and Other Information

CSR Management
Transformation of Corporate Culture

Local communities,
Oil-andgas-producing
countries

We will contribute to
the restoration ofcommunities inFukushima and thedevelopment ofregional societies bytaking advantage of arobust supply platform supported by
our Soma LNG
Terminal and
Fukushima Natural
Gas Power Plant.

Initiatives to Support Value Creation

Sources of Our
Competitive Advantage• Improve corporatevalue• Shareholder returns

Sustainable
Development
Goals (SDGs)

JA P E X C o rp o r a t e R ep or t 2 0 2 007

President’s Message

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

Representative Director and President,
Chief Executive Officer

08

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

Almost one year has passed since I assumed the position of Representative Director and President of JAPEX in October 2019.
Looking back on this year, the effects of the COVID-19 pandemic resulted in a major transformation to people’s lives, as well as
to the business environment, which was struck by plunging crude oil prices and disruptions in demand.
Since its foundation, JAPEX has pursued a social mission of ensuring a stable energy supply and thereby contributing to thedevelopment of Japan’s oil sector. Both broader society and the market surrounding our business have been greatly altered due
mainly to changes in our response to climate change and resource prices.
In 2018, we formulated our “Long-term Vision 2030” and Mid-term Business Plan 2018–2022 and announced the 2030 vision,“Growth to the Integrated Energy Company Utilizing Oil and Gas E&P and its Supply Basis.” Based on this vision, we will main-

Strategytain stable oil and gas supply to meet the needs of regional communities and customers while aiming for a profit composition
that is approximately a six-to-four ratio of E&P to non-E&P businesses by 2030. We will achieve this by promoting the use of low
environmental burden energy, such as natural gas-fired power generation and renewable energy; establishing a new businessmodel using our existing business; and operating new eco-friendly businesses.
In support of the U.N.’s sustainable development goals (SDGs), we are especially focusing our efforts on Goal 7 (Affordable
and clean energy), Goal 9 (Industry, innovation and infrastructure), and Goal 13 (Climate action). To implement specific initiatives,
we have formulated a detailed ESG promotion roadmap to fiscal 2022.
In December of fiscal 2019, the second year of the Mid-term Business Plan, we started to generate power with Unit No. 1 of the
Fukushima Natural Gas Power Plant at Soma Port in Fukushima Prefecture, as the first parallel operation in commissioning. We
thus made significant progress toward achieving full-scale operations of the electric power business, which forms the core of our

Value Creation Through Business Activities

non-E&P businesses.

FY2019 Business Performance
In fiscal 2019, operating profit was ¥14.2

owners of ­parent increased by ¥12.0 bil-billion, an increase of ¥11.9 billion year

lion year on year to ¥26.8 billion,

business, we started full-scale develop-on year. The increase was due to growth

approaching the record high since listing

ment work for the Seagull Project in thein sales volume of crude oil and diluted

in 2003 (set in fiscal 2014 at ¥29.5 billion).

U.K.’s North Sea in the E&P Business. In

As for major progress made in each

bitumen, as well as an improvement in

Due to this boost to profit, ROE

profit from diluted bitumen sales stem-

reached 6.5% in fiscal 2019, while theBusiness, we established a specialized

ming from the narrowing light-heavy dif-quantitative goal in the Mid-term Businessorganization related to procuring andferential (between Western Canadian

Plan is an ROE of 5% or more in fiscal

marketing LNG and developing the

Select, which is the reference price for2022. In fiscal 2020, we expect it will berenewable energy business, thereby

heavy crude oil from the oil sands, anddifficult to achieve the ROE goal due

strengthening the systems promoting

WTI, which is the reference price for lightmainly to the stagnation in crude oil pric-these endeavors. In the New Business,

crude oil) associated with our Canada

es caused by effects from the COVID-19

we continue initiatives aimed at develop-

Oil Sands Project. Ordinary profit was

pandemic. Nevertheless, we will continue

ing new business models and acquiring¥32.6 billion, an increase of ¥20.1 billion

carrying out the Mid-term Business Plan

new business seeds, such as beginning

year on year, due mainly to an increase

with the aim of securing a strong financial

feasibility studies about building a domes-

in dividend income and the turnaroundposition that is resilient against fluctua-

tic value chain for sustainable aviation fuelfrom foreign exchange losses to foreign

tions in crude oil prices.

(SAF)

Initiatives to Support Value Creationthat utilizes used cooking oil as

Financial and Other Informationexchange gains. Profit attributable toaddition, in the Infrastructure/Utility

a raw feedstock.

Promoting ESG
JAPEX specified five core CSR themes towith the aim of communicating them tobusiness risks, including those related tobe addressed through the “SHINE” initia-

various outside stakeholders in an

climate change, from fiscal 2019 totives and is carrying out initiatives for eacheasy-to-understand way.

enhance discussions about addressing

theme. In this report, we have organized

In terms of environment, we began

climate change. In fiscal 2020, we will

our initiatives from an ESG perspective

reporting to the Board of Directors on

continue moving forward with enhancing
JA P E X C o rp o r a t e R ep or t 2 0 2 009

President’s Message

our response to the recommendations of

Directors with the establishment of the

begin with an “HSE Value Moment” where

the Task Force on Climate-related

Nomination and Compensation Advisory

one participant introduces a topic related

Financial Disclosures (TCFD), beginning

Committee. In 2020, we also introduced

to HSE (health, safety and environment).

by setting targets for reducing greenhousea performance-linked share-based com-

This, of course, encourages safety in thegas (GHG) emissions.

pensation plan, increased the number ofworkplace as each employee maintains an

outside directors, and shortened direc-

awareness of ensuring safety every day.

tor terms.

We will continue to instill this safety-first

We are continuing to incrementallystrengthen our corporate governanceframework. In 2019, we strengthened
the supervisory functions of the Board of
Initiatives to Strengthen Corporate Governance

Increased the number ofoutside directors (1 2)Strengthened oversight­functions of the Board of
Directors, enhanced diversity
on the Board of Directors

Increased thenumber ofoutside­directors
(2 3)

2015

2016

JAPEX focuses most on initiatives thatmindset and roll out initiatives to entrench
this kind of culture.

prioritize safety. Our internal meetings
P.38–43

Began evaluating theeffectivenessof the Boardof Directors• Increased the number of outside directors (3 4) Raised the ratio of outside directors to more than one-third•C hanged director terms (shortening from two years to one) Built a management
framework that can respond to changes in the business environment, clarified management responsibilities• Reformed the officer compensation plan (introducing a performance-linked sharebased compensation plan)

2017

2018

2019

2020
(Year)

Reformed the executive officer system By changing how roles
are assigned to directors and executive officers, we clarified theboundaries between management and business execution as well as
fostered an environment where the Board of Directors and directors
can easily supervise business execution and make decisions on key
agenda items for corporate management.

• Established the Nomination and Compensation Advisory Committee
Strengthened the supervisory functions of the Board of Directors by enhancing the fairness, transparency and objectivity of processes related to determining the nominationand compensation of directors• Amended the Code of Conduct to establish the Code of Ethics and Conduct•C hanged the decision-making organization

Shareholder Returns
JAPEX’s basic policy is to maintain thewith the aim of achieving a quick recov-

investment aimed at securing greater

stable payout of dividends over the long

ery, bringing the level back up to ¥50 for

corporate value.

term. Specific dividend amounts are set in

the year in fiscal 2019. For fiscal 2020,

To continue achieving our businesscomprehensive consideration of the profit

we also aim to pay annual dividends ofgoals, we will maintain our efforts aimed

situation of each period and future funding¥50 per share, which comprise interim

at enhancing corporate value andneeds in line with medium- to long-term

dividends of ¥25 per share and year-end

achieving sustainable growth while flexi-

forecasts of the business environment. At

dividends of ¥25 per share. Over the

bly responding to changes in the situa-

the same time, we consider internal

medium to long term, we will strive totion. I would like to thank all our

reserves for maintaining and expanding

further enhance shareholder returns byshareholders and investors for their con-supply infrastructure and investment

improving the soundness of our financial

tinued support.

aimed at securing new reserves in Japanposition and executing growthand overseas as a company that is
responsible for the stable supply of oil andnatural gas indispensable to daily life.
Based on this policy, we set a base line of¥50 per share for the annual dividend,
which is the level before the decrease
made in fiscal 2016.
We have steadily increased dividends
in line with our business performance,

10

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Annual Dividends per Share(Yen) Interim

40
20

40
20

20

20

2011

2012

 Year-end

50
25

50
25

50
25

25

25

25

2013

2014

2015

20
15
10
10 5
10
2016

2017

40
30

50
25

50
25

25

25

2019

2020 (FY)(plan)

102018Finance & Accounting Dept. Director’s Message
Mission and Purpose

Assessment of the Business Environment
In a sharp turn from the stable crude oil prices that underpinned
2019, JAPEX faced major changes in its business environment
caused by stagnating economic activity and plunging crude oil
prices precipitated by the COVID-19 pandemic that began at
the start of 2020. If the effects of the pandemic continue todrag on, we may see structural changes in a wide range ofStrategy

areas, such as people’s lifestyles, corporate behavior, energy
consumption, and environmental problems.
Under the Long-term Vision and Mid-term Business Plan
released in 2018, JAPEX is working to shift to a profit composiMichiro Yamashitation resilient to the volatility in crude oil prices by accelerating

Director, Managing Executive Officer
Finance & Accounting Dept.

investments in the Infrastructure/Utility Business and other nonE&P businesses. We also aim to achieve sustainable growth in
the approaching low-carbon society by raising the percentage
of low-carbon businesses in our portfolio. I think this era of

In our E&P Business, we obviously need to ­prepare sufficient
risk capital in line with the business’s characteristics. We also

current pandemic, will require dynamic transformations thatneed to make long-term commitments to businesses for infra-

anticipate changes and management flexibility that can adapt tostructure investments, such as for LNG receiving terminals andan array of different situations.

natural gas pipelines, until the large amount of initial investment

In fiscal 2018 and 2019, during the first half of the Mid-term

is recouped. In addition, to stably procure LNG for power gen-

Business Plan, we focused on discovering new projects in both

eration for use in the natural gas supply business and electric

E&P and non-E&P businesses and enhanced the resilience of thepower business, we need long-term purchase contracts

E&P Business to fluctuations in oil prices mainly by optimizing

backed by a high-level of credit. From this perspective, JAPEX

development plans, reducing operating expenses, and revising

has positioned the maintenance of financial soundness as theour portfolio, such as by selling some assets. From fiscal 2020,

bedrock of its financial strategy.

we have been working to achieve the targets of the Mid-term

Value Creation Through Business Activities

unprecedented complexity and uncertainty, symbolized by the

Furthermore, increasing the efficiency of our balance sheet isBusiness Plan with an increased sense of urgency.

also a key issue. Regarding assets, we are working to improve
profitability and thoroughly manage business asset risks byconducting PDCA cycles and operating an investment evalua-

Under our Mid-term Business Plan, we plan to allocate funds

tion system. Regarding liabilities, we will maintain an optimal

totaling ¥60 billion to existing business and ¥65 billion to newlevel of leverage in line with strict financial discipline and consid-

growth investments by fiscal 2022. For this kind of investment,

er using project finance in our infrastructure and renewable

we need to ensure a robust financial foundation underpinned byenergy businesses. Through these kinds of initiatives, we aim toample internal reserves and liquidity on hand to overcome theimprove capital efficiency, in terms of both assets and liabilities,

volatile business environment.

and sustainably enhance corporate value.

Initiatives to Support Value Creation

Investment Plan and Financial Strategy

Financial and Other Information

Financial Discipline Targets

Results as of March 31, 2019

Results as of March 31, 2020

Target for March 31, 2022

Interest-bearing debt*¥151.7 billion¥140.8 billion

Reduce to about ¥100.0–120.0 billion

Debt-to-EBITDA ratio

3.6 times

2.4 times

2.0 times or less

* Including lease obligations, retirement benefit liabilities and contingent liabilities

JA P E X C o rp o r a t e R ep or t 2 0 2 0

11

Long-term Vision 2030

In May 2018, the JAPEX Group identified “Growth to the Integrated Energy Company Utilizing Oil and Gas E&P and Its Supply
Basis” as its vision for 2030. We will maintain stable oil and gas supply to meet the needs of regional societies and c­ ustomers
while also being active in helping resolve global issues calling for low carbonization and decarbonization.

Long-term Vision 2030
Growth to the Integrated Energy Company Utilizing Oil and
Gas E&P and Its Supply Basis<The Profit Composition JAPEX Aims for in 2030>

E&P Business: Non-E&P Business =6:4

Profit Contribution Image of Business Portfolio

CCS
Methane hydrate

CO2-EORLNG overseas rail transport

Seafloor Massive
SulfideLNG Bunkering

Non-E&P
Business

4

Renewable energy

Natural Gas-Fired Power Generation
Project at Soma Port

Underground storage of natural gas

Soma LNG Terminal

Review portfolio
and improve
operation efficiency

6

Launch andpromote new projects

E&P Business2018

2020: Commencement ofoperations at the Fukushima
Natural Gas Power Plant

2022

Period of the Mid-term Business Plan 2018-2022

12

J A PE X C o rpo ra t e Re po rt 2 0 2 0Completion of depreciation
associated with the Soma
LNG Terminal

2030
Long-term Vision

Mid-term Business Plan 2018-2022
Mission and Purpose

Under the Mid-term Business Plan, we have set long-term targets and fiscal 2022 targets for each of three Business segments.
) of USD60 per barrel, we are thus aiming to improve our ROE to 5% or more by theWith the assumed oil CIF price (JCC
end of fiscal 2022.

Strategy

Mid-term Business Plan 2018-2022

FY2022 Target: ROE of 5% or more(assumed oil price: USD60/bbl)

E&P Business

Value Creation Through Business Activities

Business Plans and Targets for Each Business Segment
P.28-31

Long-term Target.............. Maintain “RRR>1”
FY2022 Target................... Acquire new overseas interests while­maintaining or increasing reserves in Japan

Initiatives to Support Value Creation

Infrastructure/Utility Business

P.32-33

Long-term Target.............. Promote supply of energy with alow environmental impact

FY2022 Targets................. Annual natural gas transaction volume in Japan:
1.6 million tons (LNG equivalent)Electricity sales volume: 2.8 billion kWh

Financial and Other Information

New Business Development

P.34-36

Long-term Target.............. Generate environmentally friendly

new business

FY2022 Targets................. Develop a new business model

Identify new business seeds

JA P E X C o rp o r a t e R ep or t 2 0 2 0

13

Mid-term Business Plan 2018-2022

Toward Achieving Our Profit Targets
We will optimize the existing projects and enhance their profitability while accelerating the development of new projects ineach business field.

Forecasts and Progress in the Mid-term Business Plan by Fiscal Year

: Completed: Ongoing: Results

FY2018E&P BusinessMaximize the value of domestic resources Additional development of the 1,900-meter reservoir of
the Iwafune-oki Oil and Gas Field
Development of the Yufutsu shallow reservoir

Continue production at 10 domestic oil and gas fields

Commenced
production

Conducted development work
Conducted development work

Growth investment in overseas E&P
Canada Oil Sands ProjectTransition to 20,000 bbl/d stable production operations

Indonesia Kangean ProjectConducted development work

Iraq Garraf Project
U.K. North Sea Seagull Project

Commenced phase 2­ roduction operations at thep
TSB Gas Field Complex

Commenced development work to increase production to 230,000 bbl/d
Conducted exploration and evaluation work and formulated a development plan

OthersDiscover and acquire new reserves
Conduct exploratory drilling offshore the Hidaka Area
Optimize our asset portfolio

Sold Hangingstone 3.75 section, Canada an asset in the Oil Sands Project

Infrastructure/Utility Business
Natural gas supply in Japan

Continue with ongoing efforts to expand sales

Strengthen our LNG procurement capabilities
Electric power Natural Gas-Fired Power Generation Project at Soma Port
Renewable energy

Fukushima Natural Gas Power Plant
Promoted initiatives to acquire new projects

New Business Development
Development of next-generation technologies
Large-scale CCS Demonstration Project in Tomakomai
Develop a new business model

Strive to commercialize CCS/CCUS , methane hydrate,and survey technologies for deep-sea mineral resources
Conducted demonstration project
Constructing a new business model, including the overseas rail transport and bunkering of LNG The study group aiming to implement the LNG
Bunkeringframework at Tomakomai Port
Identifying unique business seeds

 stablished the New BusinessE
Promotion Office (renamed New
Business Promotion Dept. in June 2020)

14

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose
Strategy

FY2019FY2020

FY2021

FY2022

Commenced production

Value Creation Through Business Activities

Increase production to 230,000 bbl/dContinue development work
Continue development work

Note: Timing of achievement of the plateau production target is unforeseeable due
to COVID-19
Commencement of Production
Note: Timing of achievement is unforeseeable due
to COVID-19

Continue production operations associated with the Shale Gas Project (Canada), the Tight Oil Project (the United States), and the Sakhalin-1 Project (Russia)

Drilling survey

Initiatives to Support Value Creation

Opened an officein Singapore

Reporting on the analysis and evaluation of data

Established LNG Marketing and Procurement Dept.
(renamed LNG Marketing and Procurement Office in June 2020)

Unit No. 1 began commercial operations

Financial and Other Information

Operation in commissioning
Unit No. 2 began commercial operations
Established the Renewable
Energy Business Dept. under theSoma Project & Power Business Joined the consortium on wind power business in Akita and Yamagata prefectures
Division (renamed Renewable
Energy Business Dept., PowerBusiness Division in June 2020)

 chieved a cumulative total 300,000 tons ofA
CO2 injection target

Facilitated the study group

Announced an overview of the results

Began sales of oil absorption fiber Abura Kuraudo
Began the study to build a value chain for sustainable aviation fuel (SAF)

JA P E X C o rp o r a t e R ep or t 2 0 2 0

15

Special
FeatureThe JAPEX Group aims to achieve sustainabled­ evelopment with society

Special Dialogue
President Masahiro Fujita × Outside Director Yukari Yamashita

The themes of the dialogue centered on therole of JAPEX in realizing a sustainable
society and confronting how society iscurrently being transformed by COVID-19.

I would like to touch on that topic of
the inflection point. Following the 2011
Great East Japan Earthquake, Japan’s
3E+S energy policy (Energy security,
Environmental protection and Economic
efficiency + Safety) was the topic of muchdebate. With this in mind, JAPEX, which
has underpinned the supply of domestically
produced petroleum and natural gas, willcontinue to expand the options for Japan’s
energy supply by leveraging its technological capabilities. Essentially, it appears that
the Company has taken an important step
toward more robustly ensuring the security

Theme 1

The role of JAPEX in realizing asustainable society

For example, we are very efficiently supplyingof Japan’s energy by diversifying its

electric power from the Fukushima Naturalenergy sources.

Gas Power Plant, which began operations
at Soma Port in Fukushima Prefecture. In

Fujita In terms of environmental conser-

addition, we will continue to expand our

vation, we made a lot of progress in fiscal

Fujita JAPEX has the important mission

renewable energy business. One of our other2019. We introduced internal carbon

of contributing to society through the stable

important roles is encouraging customers to­pricing (ICP) in our investment assessment

supply of energy. Looking toward 2050,

switch their fuel from heavy oil, which has astandards and committed to GHG emission

this mission will essentially continue

large environmental impact, to natural gas.

reduction and other initiatives. In addition,unchanged. In light of the global issue of

The second is the creation of eco-friendly

we are directly addressing the TCFD recom-

addressing climate change, however, thebusinesses. Our carbon capture, utilization

mendations*1 by, for example, incorporating

Company’s position will continue to evolve.

and storage (CCUS) technologies standclimate change risks into the deliberations

Although the E&P Business has been theabove the rest in Japan and can really help

the Board of Directors holds.

core of the Company to date, going forward

us create new eco-friendly businesses.

we will continue to expand businesses out-

In this way, we will achieve our mission to

Yamashita I think the Board of Directors

side of E&P and are focusing on two strate-

stably supply energy. Moreover, by shiftinghas made progress in holding discussions

gies in particular.

our business components as much as pos-that foster understanding of the main points

The first is strengthening initiatives tosible to those with reduced environmental

regarding actions addressing climate

develop low-carbon energy sources andimpact and expanding the non-E&P field,change. Natural gas is the greenest energy

encourage use of these greener alternatives.

we aim to grow into an integrated energy

among fossil fuels. As we shift to a low-car-company. In the Long-term Vision

bon society, natural gas will remain anannounced in 2018, we laid out the goal ofimportant source of energy over the next

achieving a profit composition that is a six-

few decades. Simultaneously, it is important

to-four ratio of E&P to non-E&P businesses

that even as we carefully cultivate thisby 2030. JAPEX is now standing at a major

option, JAPEX must continue to play a role

inflection point.

in enabling Japan to shift to a low-carbon,
decarbonized society going forward.

Yamashita In its Corporate Vision, theIn addition, I think it will be necessary toCompany states that it will work to solve

hold dialogue with stakeholders to enhancesocial issues to help achieve the sustain-

energy literacy in a broad sense because ofable development goals (SDGs). The fact

the expenses associated with the shift to athat the Company positioned contributing

low-carbon, decarbonized society.

to the SDGs at the foundation is extremely
forward-looking.

*1 Recommendations on disclosures related to the financial impact of climate change from the Task Force on
Climate-related Financial Disclosure (TCFD), which was established by the Financial Stability Board (FSB)16

J A PE X C o rpo ra t e Re po rt 2 0 2 0

SPECIAL FEATURE
Mission and Purpose

Background of Outside Director Yukari Yamashita
October 1985 Joined the Institute of Energy Economics, Japan
June 2011
Became the Director and Head of the Climate Change and Energy Efficiency Unit
July 2011
Became a Board Member and Director in Charge of the Energy Data and Modelling Center
June 2019
Became an Outside Director at JAPEX (current position)
January 2020 Became President of the International Associate for Energy Economics, Inc. (current position)
June 2020	Became a Managing Director of the Energy Data and Modelling Center at the Institute ofEnergy Economics, Japan (current position)

Theme 2

Confronting how society is beingtransformed by COVID-19
Fujita In addressing COVID-19 as a company that supplies energy, we reaffirmed theStrategy

importance of our mission to continue business under any environment. On February
17, 2020, JAPEX established the Emergency
Response Headquarters to prioritize the
The sharp drop in crude oil prices

safety of our employees and the stable s­ upply

this new normal, we began trying out a

Fujitaof energy, initiating various measures toCompany-wide work-from-home systemand the disruption to the global economy­prevent the spread of infections, such as

from August 2020.

caused by the COVID-19 pandemic could

remote working. On the frontlines of produc-

Looking at business forecasts, however,cause major changes to JAPEX’s businessdemand for jet fuel, gasoline and otherenvironment. However, we have not decid-

in particular, we are working to conducttransportation fuels may not simply return

ed to hold back on new investments justbusiness with a critical sense of urgency,

to earlier levels. Europe is talking about abecause crude oil prices have fallen.

ensuring that the supply is never cut off.

“green recovery,” where the future econom-

JAPEX typically conducts business over

ic recovery accelerates a shift to a low-car-the span of ten to twenty years or so. We

this crisis as a unified group, I delivered abon society. We need to consider the risk

also view this as an opportunity for new

message to employees, encouraging eachof energy demand and supply structure

investment aimed at achieving ourteam member to carry out business while

continuing to change.

target portfolio.

Yamashita Regarding climate change,

ient to oil price fluctuations and enhancing

Furthermore, to pull together to overcome

By shifting to a business portfolio resil-taking every precaution to fulfill the
Company’s mission.

Value Creation Through Business Activities

tion and operations in areas across Japanthe profit ratio of non-E&P business as

to be frank, that there is some recognition

stated in the Long-term Vision, we reaf-

SHINE and HSE principles engrained inthat realizing a low-carbon, decarbonizedfirmed the importance of adapting to be

JAPEX and the activities of everyone on thesociety in Japan is challenging. Accordingly,

able to sustainably grow even in a low-car-frontlines, I was very impressed by the thor-

environmental measures to date have beenbon society. Thank you for sharing youroughgoing awareness of safety assurance,

top-down or decided by departments,

valuable insights today.

an altogether higher level than we are usu-

making it seem like they are not that rele-

ally cognizant of in our daily lives. To coexist

vant to individual people. The COVID-19

with COVID-19, society-wide countermea-

pandemic, however, has helped peoplesures are needed, and on that point, I got

realize that they need to proactively protect

the impression that JAPEX employees

their own lives to create a society where

already possess the appropriate mindset.

people can live life with some semblance of

Yamashita

Initiatives to Support Value Creation

Europe appears to be leading the way and,Yamashita When I first encountered theThank you.

normality. In this sense, the people of theworld are experiencing an atmosphereresponse measures, we have increased the­similar to the time right after the Great East

efficiency of operations in part by moving

Japan Earthquake, something that the peo-meetings and training online. We have alsople, especially of Northeast Japan, felt

discovered issues that should be addressed

keenly at that time.

by adjusting workstyles and operational

Financial and Other Information

Fujita Among our current emergency

Due to this change in consumer perspec-

structures, including internal approval pro-tive, it is clear that this is an unwavering

cesses and systems that cannot be

trend and we need to move in that direc-

accessed remotely.

tion. Going forward, we need to carefully

Perceiving this as a chance for transfor-

think about the timeline for shifting to amation, we intend to strengthen these mea-

low-carbon society, how to contribute tosures into sustainable mechanisms, goingthat shift, and how to continue fulfilling the

beyond emergency response alone. Facing

important mission of JAPEX.

JA P E X C o rp o r a t e R ep or t 2 0 2 0

17

The JAPEX Group aims to achieve sustainable development with society

Initiatives for a Low-Carbon Society

Our Recognition of Climate Change
Driven by global warming, the impacts of climate change arefaces rapid change, we will appropriately identify the risks andexpected to worsen going forward and extend from abnormal

opportunities of climate change and fully leverage the comprehen-

weather events to sea level rise. Accommodating a low-carbon

sive technological capabilities, resilient infrastructure, and expansive

society is becoming an international issue. The JAPEX Group has

knowledge we have cultivated since our founding.

positioned climate change response as a key management issue inorder to achieve sustainable growth in a low-carbon society.
We aim for “Growth to the Integrated Energy Company Utilizing

By realizing this vision, we will see through the JAPEX Group’s mission of contributing to society through the provision of a stable energy
supply and fulfill our proactive role in creating a low-carbon society.

Oil and Gas E&P and Its Supply Basis.” To achieve this as society

Initiatives to Reduce Greenhouse Gas Emissions
Since 2013, the JAPEX Group has worked to meet its GHG

Overseas, at our oil sand projects in Alberta, Canada, we are­reduction quota for the reduction targets set by the Japanrunning some of the most energy efficient operations in the country

Petroleum Development Association for 2020 and 2030 basedby effectively using the accompanying gas with the bitumen and by

on the Japan Business Federation’s Commitment to a Low Carbon

maintaining highly efficient boiler operations that constitute theSociety initiative.

majority of our energy consumption.

Specifically, in fiscal 2019, we installed waste heat recovery

Furthermore, the JAPEX Group set its own GHG reduction

equipment at the Yufutsu Plant in Hokkaido to conserve energy,­targets for fiscal 2020 and plans to continue working toward

thereby reducing energy costs by over ¥20 million while reducing

those reductions.

annual CO2 emissions by 973 tons.

JAPEX’s Vision of the Future

Infrastructure/
UtilityBusiness

Natural gas supply

E&P Business
Oil and gas development

LNG Terminal

Gas Pipeline

LNG transportation
via railways

Exploration
New
Business
Development* Projects currently at the pilot study phase or under consideration

18

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Next-generation technology development

Deep sea mineral
resources*

Methane hydrate*
Photo provided by MH21-S R&D
Consortium (the photo shows artificial methane hydrate being burned)

SPECIAL FEATURE
Mission and Purpose

Aiming for Business Growth in a Low-Carbon Society
The JAPEX Group is expanding businesses that contribute to theboth domestic and overseas, to join various renewable energy devel-transition to low-carbon society by leveraging the technologies andopment projects, including solar, geothermal, wind and biomass.

knowledge cultivated in our oil and gas E&P business and our

As for new business, we began considering establishing a produc-domestic natural gas supply business.

tion system and building a value chain for Sustainable Aviation Fuel(SAF), which utilizes used cooking oil as feedstock. By building ansions through highly efficient power generation at the Fukushima

SAF value chain, we aim to contribute to the establishment of a sus-

Natural Gas Power Plant, which began parallel operation throughtainable and circular society from the perspective of reducing GHG

commissioning in fiscal 2019. The plant runs on regasified LNG

emissions. In addition, Japan CCS Co., Ltd. (JCCS), which was(Liquefied Natural Gas), given its lower environmental burden, andestablished by JAPEX and other private-sector companies, is aiming

boasts two generation units utilizing Gas Turbine Combined-Cycle

to study the practical application of CCS technologies, which are(GTCC)

expected to be a future method of CO2 emission reduction. In fiscal, which is currently the most efficient method of gas

power generation. In addition, we established the new Renewable

2019, JCCS successfully injected a total of 300,000 tons of CO2 for a

Energy Business Dept. in May 2019 and are pursuing opportunities,

Tomakomai CCS Demonstration Project in Hokkaido.

Strategy

In the Infrastructure/Utility Business, we helped reduce GHG emis-

As part of our structure aimed at managing business risks arisingassessments of the impact of climate change on their current andfrom climate change, we have engaged in intensive discussion

future business activities. Through the utilization of the ICP system,

regarding the inclusion of an internal carbon pricing (ICP) system

which will make it easier to assess costs associated with CO2 emis-

into our investment evaluation criteria and, in fiscal 2019, begansions, we will curb the volume of CO2 emissions from our operations.

introducing this ICP system. ICP is the voluntary pricing of CO2 emis-

Value Creation Through Business Activities

The Introduction of an ICP System

With regard to climate change countermeasures, we also recog-

sions on a managerial accounting basis, taking into account bothnize the importance of constantly reducing greenhouse gas (GHG)

costs associated with and opportunities arising from responses toemissions, formulating emission targets and providing officers andclimate change. Therefore, the use of ICP systems is expected to

employees with environmental education. Accordingly, we areassist corporations in their strategic decision-making via quantitative

simultaneously implementing these activities.
Initiatives to Support Value Creation

Power generation

Infrastructure/
Utility Business
Natural gas power

Solar power

Geothermal power*

Wind power*

Biomass power*

Financial and Other Information

E&P BusinessNew business seed

New business model

New Business
Development

CCS/CCUS*

SAF*

LNG bunkering*

LNG trucks*

Photo provided by JapanCCS Co., Ltd.

JA P E X C o rp o r a t e R ep or t 2 0 2 019

The JAPEX Group aims to achieve sustainable development with society

Climate Change Response
Responding to climate change is a major global issue confronting society, and private sector companies are being called upon
to take more proactive measures aimed at achieving the long-term goals of the Paris Agreement, which went into effect in2016, as well as transitioning to a low-carbon society. In 2017, the Task Force on Climate-related Financial Disclosures (TCFD)
was established by the Financial Stability Board, which consists of central bank representatives and financial authorities frommajor economic powers. The TCFD in turn issued recommendations aimed at facilitating information disclosure with regard to
the financial impact of climate change.
In its Long-term Vision 2030, JAPEX announced a policy of aiming to reduce CO2 emissions in its businesses, commercializing CCS technologies by leveraging its expertise, and creating and expanding renewable energy and other businesses. Basedon this policy, we are strengthening our climate change response measures mainly by establishing an organization dedicatedto developing renewable energy, introducing an ICP system, and initiating risk reporting, including climate change and business risks, to the Board of Directors.
JAPEX’s Main Recent Initiatives for Climate Change

FY2018FY2019• Announced Long-term Vision 2030
(revealed initiatives for realizing sustainable energy supply and solving social
issues to achieve the SDGs)• Established an organization dedicated to developing renewable energy• Established an organization dedicated to creating and expanding new environmentally friendly business• Began sending annual reports to the Board of Directors regarding risks, including
climate change and business risks• Introduced an ICP system for evaluating investments of JAPEX’s main businesses

In this report, JAPEX explains its response to climate change in line with the four core elements of the TCFD recommendations: Governance;
Strategy; Risk Management; and Metrics and Targets.

Governance
JAPEX recognizes climate change response as an important man-will continue striving to expand our supervisory framework under-

agement issue. We began reporting overall business risks, including

pinned by the Board of Directors.

climate change risks, to the Board of Directors from fiscal 2019. We

For more information on our governance framework, see P.38 .

Strategy
Shifting to a low-carbon society is expected to have an outsize

2°C scenario released by the International Energy Agency (IEA), we

impact on the sustainability of our E&P Business. JAPEX has

have firmly grasped the impacts and risks for our businesses and­identified mid- and long-term risks and opportunities associatedare promoting discussion.

with climate change. Based on multiple scenarios, including the
JAPEX’s Climate Change Risks

Transition Risks
Policy and Legal Risks

Increase in additional expenses due to carbon taxes and other environmental laws
and regulations

Market and Technology Risks

Decrease in profit due to lower oil and gas demand

Reputation Risk

Reputation risks related to GHG emissions of oil and gas businesses

Physical Risks
Acute Risks

20

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Impacts on onshore and offshore facilities due to extreme changes in weather

SPECIAL FEATURE
Mission and Purpose

Risk Management
JAPEX assesses and manages business risks that are utilized in theother matters to the Executive Committee, which is the final deci-

investment decision and project execution phases.

sion-making authority, and, when necessary, to the Board of
Directors. JAPEX introduced an ICP system in July 2019, and conducts business risk assessments, including risk resilience to carbon

from technical, economic, commercial, organizational, and socio-

taxes and GHG emission regulations.

political aspects for consideration at each phase of the decision

For projects that have moved onto the execution phase, thegate (DG) process, then conduct a decision gate review (DGR) of

Project Total Management Committee qualitatively and quantitative-

possible countermeasures. The Investment Evaluation Committee,

ly assesses and manages risks by regularly monitoring their status.

which corresponds to DGR-4, assesses the risks and appropriate-

In addition, we also monitor carbon taxes, GHG emission targets,ness of the investment. The committee then reports its opinions

emission regulations, and other circumstances in the countries andregarding all these factors, whether to approve the project, andregions of our projects.

Strategy

When making business investment decisions that would entail acertain level of financial burden, we identify risks and opportunities

Risk Management Organization
Overview

Committee

Project Total Management Committee

The chair is appointed by the president fromamong the full-time executives.
Currently, the executive of the Finance &Accounting Dept. serves in this position.

This committee manages the progress of major projects as well as studies
and deliberates related issues.
The committee meets once a month.

The chair is appointed by the president fromamong the full-time executives.
Currently, the president serves in this position.

Value Creation Through Business Activities

Investment Evaluation Committee

Chair

This committee comprehensively evaluates important investment projects
based on the Company’s rules and reports its findings to the Executive
Committee (and the Board of Directors as necessary).

DG Process Overview
Phase-2

Phase-1

Identify(Project kick-off)Phase-3

Assess(Feasibility study)
DGR-2
Make a decision

Define(Detailed study)

DGR-3
Make a decision

Execute & Operate

Learn from Project

DGR-4 (Investment Evaluation Committee)
Make a decision (Executive Committee/Board of Directors)

Investment Decision Stage

Execution and Operation Stage

Deliberation
Topics

New investment projects that could have a particularly significant impact on the Company’s businessand investment projects that will be undertaken as additions to existing projects

Major overseas E&P projects andsome domestic projects

Evaluation
PointsConfirm the project’salignment with strategy,
then identify risks andopportunities based on
assessments of theexternal environment

Rules and
Guidelines

Identify all alternative
options and evaluate
their feasibility, risks,and opportunities

Select the concept
delivering maximumvalue

Get ready/Prepare toproceed into
execution phase

Review the progress ofproject execution

Initiatives to Support Value Creation

DGR-1
Make a decision

Phase-4

Select(Concept selection)

Add to knowledge for
future projects

Decision Gate (DG) Process and Guidelines
Investment Evaluation Committee Rules
Investment Evaluation Guidelines

Project Total Management Committee Rules
Project Management Guidelines

Financial and Other Information

Metrics and Targets
The majority of GHG emissions from JAPEX’s operations are

Furthermore, in line with the industry reduction targets set by theaccounted for by its E&P business sites. We have been working toassociation, we are striving to meet our GHG reduction quota.

reduce these emissions since 2013 as a participant in the Japan

Aiming to achieve further reductions, the JAPEX Group intends toBusiness Federation’s Commitment to a Low Carbon Society initia-

set its own GHG reduction targets for fiscal 2020 and establish ative through the Japan Petroleum Development Association.

monitoring system.

JA P E X C o rp o r a t e R ep or t 2 0 2 021

The JAPEX Group aims to achieve sustainable development with society

CSR in the JAPEX GroupWe emphasize corporate social responsibility (CSR) when executing business. In fiscal 2014, to meet the demands and­expectations of stakeholders and grow as a trusted global corporation, we specified five core CSR themes under the name“SHINE” that encapsulates the individual issues.

S
Stable & Sustainable
Energy Supply

H

I

N

E

HSE as Our Culture

Integrity & GovernanceBeing a Good Neighbor

The Employer of Choice

Under SHINE, we have currently identified 12 individual issues. The issues are revised as needed based on environmental changes surrounding the Company. When making revisions, the CSR Committee, which is chaired by the president, conducts reviews and makes decisions.
As for the promotion of CSR, all departments set CSR plans and targets in line

Overview of the core CSR theme matrix
High

PDCA cycles. In addition, the status of CSR
promotion is reported regularly to the CSR
Committee and the Board of Directors.
For more information on the Company’s
core CSR themes embodied in “SHINE” andits CSR action plans and targets, see thewebpages below.
https://www.japex.co.jp/english/csr/management.html
https://www.japex.co.jp/english/csr/csrdata.html

Importance to our stakeholders

with the individual issues and implement

Stable energy supply
1

Climate change response
3

High
Crisis management 8
Pollution prevention and 5
resource recycling
6

7

Compliance911

Preserving biodiversity
and ecosystems
12 Creating a fair and goodworking environment

4 Occupational health and safety

Governance

10 Growing together with stakeholders

Respecting
employee diversity and developing
human resources

2 Development of new technologies

Note: Items marked 1 through 12 are listed in the table below.

Importance to our business

ESG and Core CSR Themes (SHINE) Table

ESG Category

Core CSR Themes
S

H

I

N

E

Core Theme
Stable Energy Supply

Individual Issues
3

Climate change response

5

Pollution prevention and resource recycling
Preserving biodiversity and ecosystems

Environment

HSE as Our Culture2

Stable energy supply
Development of new technologies

HSE as Our Culture

4

Occupational health and safety

Being a Good Neighbor

10Growing together with stakeholders

11
12

Respecting employee diversity and developing human resources
Creating a fair and good working environment

7

Governance8

Crisis management

9Compliance

Stable Energy Supply

Social6

The Employer of Choice

1

GovernanceIntegrity and Governance

22

J A PE X C o rpo ra t e Re po rt 2 0 2 0

SPECIAL FEATURE
Mission and Purpose

UN Global Compact
On May 28, 2020, JAPEX joined the UN Global Compact and theWe specified our core CSR themes in “SHINE,” identified

Global Compact Network Japan (GCNJ), which comprises

12 ­individual issues, and have been taking measures related toJapanese companies.

the four areas of the UN Global Compact covering human rights,
labour, environment, and anti-corruption.
Strategy

The Ten Principles of the UN Global Compact

Principle 1: Businesses should support and respect the protection ofinternationally proclaimed human rights; andHuman Rights

Principle 2: make sure that they are not complicit in human rights abuses.
Principle 3: Businesses should uphold the freedom of association and theeffective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;

LabourPrinciple 5: the effective abolition of child labour; andPrinciple 6: the elimination of discrimination in respect of employment
and occupation.
Principle 7: Businesses should support a precautionary approach toenvironmental challenges;

Principle 9: encourage the development and diffusion of environmentallyfriendly technologies.

Value Creation Through Business Activities

For more information on UN Global Compact,
see the websites below.

Principle 8: undertake initiatives to promote greater environmental
responsibility; andEnvironment

https://www.unglobalcompact.org/

Principle 10: Businesses should work against corruption in all its forms,
including extortion and bribery.

Anti-Corruption

FY2019 Activities (relevant pages)

7

9

13

• Initiatives for a low-carbon society• Climate change response 

6

12

15

• Initiatives to Reduce VOC Emissions, Initiatives to Preserve the Quality ofWastewater and Initiatives to Effectively Use Water• Initiatives to Plant Trees of Native Species in Soma 

7

9

13

• E&P Business, Infrastructure/Utility Business and New Business Development• Promoting Digital Transformation

10

P.45
P.28-37
P.47

17
8

16

• Dialogue with Shareholders and Investors/Relationships with Local Communities

P.49• Initiatives to Promote Diversity, Human Resource Development, Health Management 

P.48• Corporate Governance Structure, Evaluation of the Overall Effectiveness of the Board of
Directors, Performance-linked Share-based Compensation Plan, Cross-Shareholdings

P.38-40• Business Continuity Planning and Our COVID-19 Response• Systems for Promoting Compliance and Education, Preventing Bribery,Compliance Reporting and Consulting System, Respect for Human Rights

Financial and Other Information

95

P.18-19
P.20-21•S
 trengthening Systems for Occupational Health and Safety, HSE Audits, HSE Training andP.46-47
Efforts to Improve HSE Culture, Initiatives to Strengthen the HSE Management of Contractors

124

Initiatives to Support Value Creation

SDGs

P.40
P.40-41

JA P E X C o rp o r a t e R ep or t 2 0 2 023

The JAPEX Group aims to achieve sustainable development with society

The Risks, Opportunities and Value Chain of the JAPEX Group

Awareness of the external environment

Changes in global
trends toward therealization of adecarbonized society

Volatility in oil andnatural gas prices

Declining populationin Japan

Liberalization of
power andgas businesses

Intensifying
competition for
securing resources

Business risks

Growing call for­withdrawal frominvestment in andfinancing for fossil
fuel businesses

Fluctuations in procurement costs/sales
prices of oil and gas

Our response to business opportunities and risks

Shift in the business portfolio to help
­create a low-carbon society while­continuously pushing ahead with the
E&P Business• Promote renewable energy development• Develop CCS technologies to achievecommercialization
Shift to a new portfolio that is resilient
against fluctuations in oil prices, etc.
• Strengthen the power generation­business, including the renewableenergy businessA decrease in sales
volume in step withshrinking domestic
demandIntensifying market
competition in Japan• Growing difficulties
in acquisitionof interests• Rising cost of
exploration anddevelopment

Strengthen market competitivenessin Japan• Expand sales of natural gas by switching fuels• Procure competitively priced LNG• Advance “smart community” and­“compact city” business
Expand our scope of services• Cultivate new clients in the power­generation business• Engage in commissioned businesses thattake advantage of existing infrastructure
Expand globally by leveraging ourstrengths in domestic operations

Pursue opportunities that will better
position us toemploy our technologies and expertise
Exploit the remaining potential of ourdomestic reserves

24

J A PE X C o rpo ra t e Re po rt 2 0 2 0

SPECIAL FEATURE
Mission and Purpose

While uncertainties associated with changes in the external environment are risks that pose a threat to the JAPEX Group’s operations, such changes may also lead to the creation of new opportunities for expanding our business scope. Accordingly, we areworking to predict and assess changes in the operating environment and specify risks and opportunities arising from suchchanges, in order to formulate our business strategies. We are thus planning our business strategies with an eye to pushingahead with organic business development that leverages our advantages via the shift in the business portfolio and transcends
the scope of our value chain.

Strategy

Value chain

Development

Commercialization

Infrastructure/

LNG Procurement

Gas Power
Generation

Electric Power Supply

Gas supply

Utility Business

Acquisition ofInterests/Exploration

Development/
Production

Financial and Other Information

Gas Supply
Chain

Expand the scope of business fields

Renewable
EnergyLNG Terminal(contract production)

Initiatives to Support Value Creation

New Business

CCS, Methane
Hydrate, Survey
Technologies for
Deep Sea Mineral
Resources, etc.

Identification of Business
Opportunities

Value Creation Through Business Activities

ing
erag
y lev
b
t
en s
pm
elo antage
v
e
d adv
ess
e
sin etitivubp
nic com
rga our
o
ve
hie
c
A

Crude oil supply

E&P Business

JA P E X C o rp o r a t e R ep or t 2 0 2 025

Value Creation Through Business Activities

At a Glance
Toward “Growth to the Integrated Energy Company Utilizing Oil and Gas E&P and its Supply Basis” as stated in the Long-term
Vision 2030, we have positioned the E&P Business, the Infrastructure/Utility Business, and the New Business Development as
areas of key importance.

Long-term Target

E&P Business

Infrastructure/
Utility Business

New Business
Development

26

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Since its founding, JAPEX has been involved in
the upstream oil and natural gas businesses of
exploration, development and production, as
well as transportation and supply, racking up
numerous accomplishments in Japan andoverseas. The wide range of technologies andexpertise we have accumulated over time havecontributed to the stable supply of energy.

To meet energy demand in Japan, we provide
a stable supply combining domestically produced natural gas and LNG procured fromoverseas. We also conduct contract services
using our infrastructure foundation, including
owned natural gas pipelines and LNG terminals. In addition, we are promoting the supplyof low-environmental-impact energy by supplying electricity from natural gas-fired power
generation and promoting the renewableenergy business.

Using technologies and experience acquired
through the E&P Business, we are striving
to develop eco-friendly next-generation
technologies and new energy sources,
construct a new business model in peripheral
areas of existing businesses, and identify
unique businesses seeds.

Maintain “RRR>1”

Long-term Target

Promote supply ofenergy with a low
environmental impact

Long-term Target

Generate environmentallyfriendly new businessFY2018 Sales Composition (Billions of yen)

FY2019 Sales Composition (Billions of yen)

127.0

(18%)

(48%)

54.6

175.4

(17%)

(55%)

267.9
91.7

Mission and Purpose

49.1

318.8
88.6

(34%)

Risks

• Fluctuations in the procurement and sales­prices of oil, natural gas, etc.
• Growing difficulties in acquisition of interests• Rising cost of exploration and development

Value Creation Through Business Activities

Strengths• A comprehensive suite of in-house technologicalcapabilities covering the entire spectrum of
E&P operations• A wide range of technologies and expertise
acquired through E&P operations, including thedevelopment of unconventional resources• Trusted relationships with stakeholders

Strategy

E&P Business(28%)
Infrastructure/Utility Business
Other: Contract business (drilling, geophysical surveys, etc.), sales of liquified petroleum gas (LPG), heavy oil and other petroleum products, etc.

The Iwafune-oki Oil and Gas Field

Risks• Decreasing energy demand due to the declining
population in Japan and subsequent decreases
in sales volume of natural gas and electricity• Intensifying competition in the Japanese market
due to the liberalization of the electric powerand gas businesses

Natural Gas Pipeline

Financial and Other Information

Strengths

Initiatives to Support Value Creation

Strengths• JAPEX’s own domestic natural gas supply
chain that combines domestic infrastructure
and transportation• Ownership of gas fields in Japan with underground storage capacity in case of supply-­demand adjustments and emergencies• A robust infrastructure and operational framework without major accidents or injuries• A wide range of E&P technologies and expertise• Natural gas infrastructure in Japan owned by JAPEX• Technologies and expertise acquired through contracted researchon developing next-generation technologies

JA P E X C o rp o r a t e R ep or t 2 0 2 0

27

E&P BusinessLong-term Target.............. Maintain “RRR>1”
FY2022 Target................... Acquire new overseas interests while­maintaining or increasing reserves in Japan

Medium- and long-term initiatives aimed at maintaining and increasing reserves will be key to achieving the E&P Business’s
long-term targets and fiscal 2022 target.
In fiscal 2019, in Japan, we conducted additional development of the shallow reservoir in the Yufutsu Oil and Gas Field in
Hokkaido Prefecture and completed exploratory drilling and survey offshore the Hidaka Area of Hokkaido Prefecture.
Overseas, we steadily proceeded with development work to increase oil production at the Garraf Oil Field in Iraq and­development work to begin oil production at the Seagull Project in the U.K. North Sea.
In terms of achieving our reserve replacement ratio (RRR) target, setting a specific number of years as a basis is difficult
because the E&P business requires an extended period for exploration, development and production. We therefore do not use
a set number of years as the basis for the calculation cycle. The single-year RRR for fiscal 2019 was -0.14, due mainly to adecrease in proved reserves in line with overseas production activities.

Proved Reserves and RRR(Unit for proved reserves: million boe)

 Reserves in Japan

 Reserves Overseas(RRR)

RRR (single year)

500

8.00

450

7.00

400
350

307
160

300
250
200
150

257
49
208

305
193

313
203

349
255

352
277

302
229

112

110

3.00

0.00

94

74
73

0

J A PE X C o rpo ra t e Re po rt 2 0 2 0

4.00

1.00

50

FY2011

5.00

2.00

147

FY2010

6.00

355
296

223
38
185

100

28

387
323

FY2012FY2013

FY2014FY2015FY2016FY201764

58

FY2018FY2019(1.00)(2.00)Mission and Purpose

Proved Reserves
Proved reserves owned by JAPEX and its consolidated subsidiaries as of March 31, 2020, along with our investment equivalent in proved
reserves of equity-method affiliates are presented in the following table.

JAPEX and Consolidated Subsidiaries
Japan
Proved Reserves

Crude oil Natural gas Crude oil

Equity-Method
Affiliates

Strategy

Proved Reserves of the JAPEX Group

Total

Overseas

Subtotal

Bitumen Natural gas Crude oil

Bitumen Natural gas Crude oil Natural gas Crude oil

Bitumen Natural gas

Thousand Thousand
Thousand Thousand
ThousandThousand Thousand
ThousandMillion m3
Million m3
Million m3
Million m3
Million m3
kL
kL
kL
kL
kL
kL
kL
kL
As of March 31, 2019

2,508

7,862 16,502 21,153

7,729 19,009 21,153 15,591

4,986

1,278 23,995 21,153 16,869

—

—

785

—

1,642

785

—

1,642

—

—

785

—

1,642

Change due to revisionof evaluation standard

(9)

130

(3,316)(148)(172) (3,326)

(148)

(41)

(136)

612

(3,462)

(148)

570

Change due to­acquisition and/or
divestiture

—

—

—

—

—

—

—

—

—

—

—

—

Decrease due to
production

(303)

(689)

(957) (1,040)(431) (1,259) (1,040) (1,121)(579)(478) (1,838) (1,040) (1,598)

As of March 31, 2020

2,195

7,303 13,014 19,965

8,769 15,210 19,965 16,072

4,270

1,412 19,480 19,965 17,483—

Value Creation Through Business Activities

Increase due to­expansion or discovery

1P roved 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. (45.00%), Japex Garraf Ltd. (45.00%)
2R eserves 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.

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

Overseas
Bitumen Natural gas Crude oil

Millionboe

Million
boe

16

48

104

133

47

120

Increase due to­expansion or discovery

—

—

5

—

10

Change due to revisionof evaluation standard

(0)

1

(21)

(1)

Change due to­acquisition and/or
divestiture

—

—

—

Decrease due to
production

(2)

(4)

As of March 31, 2020

14

44

Bitumen Natural gas Crude oil Natural gas Crude oil
Millionboe

Million bbl

Million
boe

133

95

31

8

5

—

10

—

(1)

(21)

(1)

(0)

—

—

—

—

(6)

(7)

(3)

(8)

82

126

53

96

Million bbl Million bbl

Total

Million bbl Million bbl

Bitumen Natural gas

Million bbl Million bbl

Million
boe

151

133
387

103

—

5

—

10

(1)

4

(22)

(1)

3

—

—

—

—

—

—

(7)

(7)

(4)

(3)

(12)

(7)

(10)

126

98

27

9

123

126
355

106

Financial and Other Information

Crude oil Natural gas Crude oil
Million bbl

As of March 31, 2019

Equity-Method
Affiliates

Subtotal

Initiatives to Support Value Creation

Japan

Conversion Factors and Units:
Crude oil 1 kL = 6.29 bbl
Crude oil 1 kL = Natural gas 1,033.1 m3
boe: barrels of oil equivalent

JA P E X C o rp o r a t e R ep or t 2 0 2 029

E&P Business

E&P Business
Block, lease or projects in which the JAPEX Group participates (Status)

U.K. North Sea
RussiaSeagull Project (Under development)

Sakhalin-1 Project(Producing crude oil/Under development)

Iraq
Japan

Garraf Project(Producing crude oil/Under development)

Domestic oil and gas fields: 10 locations(Producing crude oil and natural gas/
Under development)Indonesia
Kangean Project(Producing natural gas)

For an overview of each project, refer to the link below.
https://www.japex.co.jp/english/business/ep_o/overseasprojects.html

FY2019 Highlights in the E&P BusinessJapan

July 2017

Overseas
Commenced development work on crude oil­production from shallow reservoir of the Yufutsu
Oil and Gas Field in Hokkaido Prefecture

April 2018

Commenced development work to increase crude oil
production at the Garraf Oil Field in Iraq

March 2019

Commenced development work at the Seagull
Project in the U.K. North Sea(Began commercial production in June 2020)

August 2019

Completed exploratory drilling offshore the Hidaka
Area of Hokkaido PrefectureJapan
Yufutsu Oil and Gas Field in Hokkaido Prefecture
Commencement of Development Work on Crude Oil Production from Shallow Reservoir

30Exploration Project Offshore the Hidaka Area
of Hokkaido Prefecture

We started development work in 2017 on

JAPEX was commissioned by the government to

the Takinoue Formation, which is a proved

conduct exploratory drilling operations around 50

but undeveloped shallow reservoir that lies

kilometers offshore the Hidaka Area of Hokkaido

above the current crude oil and natural gas

Prefecture. We confirmed the presence of natural

production reservoir. In fiscal 2019, wegas. Going forward, we will continue to consider

installed production equipment for wellheads

the possibility of exploration at this offshore site inand the processing facilities for heavy oil.

part by analyzing and evaluating the data gained

Commercial production began in June 2020. Crude oil processing facility of the Yufutsu Plant

from this survey.

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Sarukawa Oil Field
Yurihara Oil and Gas Field
Iwafune-oki Oil and Gas Field

CanadaHigashi-Niigata Gas Field

Shale Gas Project (Producing crude oil/
Under development)

Yoshii Gas Field

Ayukawa Oil and Gas Field
Amarume Oil Field

Shiunji Gas Field

Strategy

Oil Sands Project (Producing bitumen)

Mission and Purpose

Yufutsu Oil and
Gas Field

Japan

Katakai Gas Field

U.S.
Tight Oil Project(Producing crude oil/
Under development)

Overseas
Value Creation Through Business Activities

Iraq Garraf ProjectConducting Development Work to
Increase Oil Production
Based on the Final Development Plan
agreed upon with the Iraqi government in
2018, we expanded our facilities and drilled
additional wells in 2019 as we aim toachieve the plateau production target of
230,000 barrels per day.

Garraf Oil Field production equipment

Japex Garraf Ltd. (JAPEX’s investment ratio: 55%)

Gross Production Rate

FY2019 average production volume: 96,000 bbl/dOperator

PETRONAS Carigali Iraq Holding B.V. (PCIHBV)Interest

30% (JAPEX Net: 16.5%)

Initiatives to Support Value Creation

Project Company

U.K. North Sea Seagull Project
Commenced development work at the Seagull Project in the U.K. North Sea
We made a final investment decision in March 2019 regarding moving to the development
Financial and Other Information

stage. In fiscal 2019, we ordered and prepared procurement of long lead items and made adetailed design for work on facilities. In addition, each company participating in this project,including JAPEX subsidiaries, won the MER UK Award in November 2019. This award isgiven to industry players who contributed to maximizing the economic recovery of oil and gas
from the U.K. North Sea by the Oil & Gas Authority (OGA), which is the organization governing
upstream oil and gas businesses in the United Kingdom.
Project Company

JAPEX UK E&P Ltd. (JAPEX’s investment ratio: 100%)

Operator

Neptune E&P UK Limited

Interest

15% (JAPEX Net: 15%)

At the awards ceremony (Second from right:
Kosei Yoshida, then director of JAPEX UK E&P Ltd.)JA P E X C o rp o r a t e R ep or t 2 0 2 0

31

Infrastructure/Utility BusinessLong-term Target.............. Promote supply of energy with a ­low environmental impact

FY2022 Targets................. Annual natural gas transaction volume in Japan:

1.6 million tons (LNG equivalent)Electricity sales volume: 2.8 billion kWh
In fiscal 2019, we sold approximately 1.2 million tons of natural gas (LNG equivalent) in Japan. These figures include a transaction volume of domestic natural gas and regasified LNG provided through our pipelines as well as sales through our LNG satellite
system. Going forward, following the April 2020 commercial operation commencement at the Fukushima Natural Gas Power
Plant, we established a new organization dedicated to enhancing our ability to procure LNG as we expect a large increase in thetransaction volume of natural gas, including the amount procured for use as fuel for electric power generation. In addition,
regarding the electric power business, JAPEX further cultivated buyers for the portion of electric power it takes over, and haslaunched full-scale initiatives to develop renewable energy.

FY2019 Highlights in the Infrastructure/Utility Business

May 2019

Established an organization dedicated to renewable energy (the Renewable Energy Business Dept.)

October 2019

Established an organization dedicated to overseas LNG procurement and marketing(currently the LNG Marketing and Procurement Office)December 2019

Commenced power generation of Unit No. 1 at the Fukushima Gas Power Plant(commenced commercial operations of Unit No. 1 in April 2020 and Unit No. 2 in August 2020)

Natural Gas Supply Chain
LNG from overseas

Establishing New Organization Dedicated to Overseas LNG Procurement and Marketing

Niigata Terminal(Nihonkai LNG Co., Ltd.)JAPEX supplies natural gas and LNG to clients in Japan through its proprietary natural gas­supply network. It includes a network of over 800 kilometers of pipelines connecting natural gas
production bases in Japan with LNG terminals on the country’s coasts along the Sea of JapanLNG tank trucks

and Pacific Ocean. It also includes an LNG satellite system that utilizes tank trucks and rail transport tank containers for areas neighboring our LNG terminals without pipelines.
We will need to procure LNG more strategically than ever before based on our forecasts thatdemand for LNG, which has the lowest environmental burden among fossil fuels, will remain
at a steady level in terms of expanding the supply of natural gas to domestic consumers andsecuring LNG for power generation fuel. To respond to these market environments, the LNG
Marketing and Procurement Dept. (currently the LNG Marketing and Procurement Office), which
was established in October 2019, and the Singapore Branch, which began operating from
December 2019, worked together with the aim of boosting profit by expanding international LNG
trading and promoting flexible and competitive LNG procurement.

32

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Kanazawa
KomatsuNatural Gas Supply Network in Japan

Iwamizawa

ObihiroSapporoCoastal vessel

Mission and Purpose

Asahikawa
Ishikari LNG Terminal Base
(Hokkaido Gas Co., Ltd.)

Kitahiroshima
ChitoseYufutsu-Sapporo
Gas Pipeline

KushiroNatural Gas-Fired Power Generation

Tomakomai
Yufutsu LNG Plant/
Muroran
Yufutsu LNG Receiving Terminal

Completion of the Construction of the Fukushima Natural Gas
Power Plant
Strategy

Fukushima Gas Power Co., Ltd. (FGP), which JAPEX funds as a business partner, is promoting the project of the Fukushima Natural Gas
Coastal vessel

Power Plant at Soma Port in Fukushima Prefecture. Construction
work proceeded according to plan toward the commencement ofcommercial operations. The commissioning of Unit No. 1 had been
conducted from autumn 2019, and the plant achieved the first parallel
operation in December 2019. Commercial operations began at Unit
No. 1 in April 2020 and at Unit No. 2 in August 2020.
The plant comprises two 0.59 million kW gas turbine combined-cycle(GTCC) power generation units and is fueled by regasified LNG,
Value Creation Through Business Activities

which has a low environmental burden. We added the latest elemenOga

tal technologies to the plant to achieve world-class power generation
Akita

efficiency, ensuring a cost advantage while lowering the burden on

LNG tank trucks

the surrounding environment. We also carefully consider the sur-Yurihonjo
Nikahorounding environment when designing and running nearby facilities,
such as emission stacks and drains for heated water from the plant.

SakataTsuruoka

The plant is run via a tolling model by the five business partners

Amarume
Yamagata Gas Pipeline(Tohoku Natural Gas Co., Inc.)

Murakami

Iwanuma
Yamagata

LNG in line with their electric power needs and brings it to the

Sendai
Soma-Iwanuma Gas Pipelinecompanies, which then receive the electric power from FGP andSoma LNG Terminal

Niigata-Sendai
Gas Pipeline

Fukushima Natural Gas Power Plant(Fukushima Gas Power Co., Ltd.)
Fukushima

Aizuwakamatsu
Kawaguchi

plant. FGP produces power based on the demand of the partner
Initiatives to Support Value Creation

Shiroishi

funding FGP, including JAPEX. Each company procures their own

sell it themselves. In addition, based on a business commission
contract, at the Soma LNG Terminal neighboring the plant, JAPEX
receives and stores LNG procured by each company, regasifies the
LNG, and delivers the regasified LNG to the power plant.

Koriyama

LNG from overseas
LNG tank trucks

Shiroishi-Koriyama
Gas Pipeline

Renewable Energy Development

Koriyama North
Gas Pipeline

Establishing Dedicated Organization and Launching Full-Scale Studies
Financial and Other Information

In May 2019, we established the Renewable Energy Business Dept.
to promote the development of renewable energy. In addition to the
Oil fields/Oil and gas fields/Gas fields

operation of the two existing mega solar projects running in

LNG terminal

Tomakomai, Hokkaido Prefecture, we moved ahead with detailed

Power plantstudies related to the development of new renewable energy, such

Natural gas pipeline

as geothermal, wind, and biomass. We are searching for opportuni-

LNG tank truck

ties to participate in various projects by leveraging the technologies

LNG tank containers by rail

we developed in our strong suit of oil and gas E&P operations, our

Coastal LNG vessel

solid relationships with local communities, and our experience inbuilding and managing facilities, as well as procuring fuels, in theelectric power business.

JA P E X C o rp o r a t e R ep or t 2 0 2 033

New Business Development

Long-term Target.............. Generate environmentally friendly

new business

FY2022 Targets................. Develop a new business model

Identify new business seeds

By conducting studies to assess ideas that are periodically solicited in-house as well as proposals from other companies, weare focusing efforts on uncovering and creating eco-friendly businesses that contribute to the sustainable growth of JAPEX
and solutions to global issues.
In fiscal 2019, we facilitated the study group aiming to implement the LNG Bunkering framework and began a study to build
a value chain for next-generation aviation fuel SAF that utilizes used cooking oil. We also made progress on building a new
business model for peripheral areas of existing businesses as well as identifying, considering and evaluating potential projects
that could become new business seeds not tied to existing business sectors.
In addition, we will continue promoting initiatives that help reduce carbon emissions and develop next-generation technologies, such as CCS, CCUS, methane hydrate, and survey technologies for deep-sea mineral resources.

FY2019 Highlights in New Businesses

Launched the study group aiming to implement the LNG Bunkering framework based on Tomakomai Port in Hokkaido
Prefecture (ended in April 2020)

November 2019

Successfully injected 300,000 tons of CO2 into the ground for a large-scale CCS demonstration project inTomakomai, Hokkaido Prefecture

January 2020

Started a study to build a value chain for sustainable aviation fuel with used cooking oil as feedstocksiness Ml

LNG Bunkering

Bu

e
od

Ne
w

February 2019

Facilitating a Study Group for LNG Bunkering at Tomakomai Port
Owing to its low emissions of greenhouse gases and sulfur oxides,

Tomakomai Port, which is the site of JAPEX’s Yufutsu LNG

expectations of rapid market growth in LNG’s popularity as bunker

Receiving Terminal, fulfills important roles both as the largest trading

fuel are mounting. This is in part due to such global developments

port in northern Japan and as the country’s leading hub port inas the International Maritime Organization’s (IMO) Marine

terms of volume. Given the recent trend toward lower environmen-

Environment Protection Committee’s decision to enact stricter limits

tal impact bunker fuel, JAPEX and the Tomakomai Port Authority

on the sulfur content of fuels used on the open ocean and its adop-

launched a study group aiming to implement the LNG Bunkeringtion of a GHG reduction strategy, which is a comprehensive set offramework based on Tomakomai Port between February 2019 togoals for reducing GHG emissions from international shipping as

April 2020, with JAPEX acting as the secretariat. The group waswell as countermeasures to achieve those goals. Therefore, in line

convened a total of six times to uncover issues for each LNG bun-with the growing number of LNG-fueled vessels, demand has

kering method and consider equipment and operational methods

increased for the supply of LNG to these vessels (LNG bunkering).

compliant with laws and regulations, before compiling the results

Feasibility studies on similar measures are accelerating acrossinto a report. We expect the results to be used to quickly realize

Japan as well.

LNG bunkering at Tomakomai Port and to promote LNG bunkering
elsewhere in Japan and overseas.

34

J A PE X C o rpo ra t e Re po rt 2 0 2 0

olog

y

Next-Geration Tec

hn

Carbon dioxide Capture and Storage (CCS)/Carbon dioxide Capture, Utilization and Storage (CCUS)

ne

Mission and Purpose

Successfully Injected 300,000 Tons of CO2 for a Large-Scale CCS Demonstration Project
Expectations are high for the establishment and practical applicationof revolutionary CCS technologies to greatly reduce atmospheric
CO2 emissions, which are one source of global warming. ThroughJapan CCS Co., Ltd., JAPEX participated in a large-scale CCS
demonstration project in Tomakomai, Hokkaido Prefecture. The
injection of CO2 was begun in April 2016, and reached the target ofa cumulative total of 300,000 tons in November 2019, after which
injection was suspended. We are currently monitoring the situation.

Strategy

Aboveground facilities for demonstration project in Tomakomai(Photograph provided by Japan CCS Co., Ltd.)

Carbon Dioxide Capture, Utilization and Storage (CCUS) Initiatives
In addition to initiatives aimed at developing CCS technologies, wedemonstration test on the storage efficiency through micro-bubbled

are conducting studies aimed at building a business model for CCUS,

CO2 injection at its Sarukawa Oil Field in Akita Prefecture. Goingwhich effectively uses the captured CO2 and stores it underground.

forward, we will continue to carry out initiatives aimed at the practi-

In fiscal 2019, as a member of the Geological Carbon Dioxideenhanced oil recovery through CO2 injection (CO2-EOR).
Value Creation Through Business Activities

Bu

siness S
e
ed

s

Ne
w

Storage Technology Research Association, JAPEX conducted a

cal application of micro-bubble technology in CO2 storage and

Bio Jet Fuel
Start of a Study to Build a Value Chain for Sustainable Aviation Fuel (SAF)

which has a long track record of producing and supplying biodiesel

the international aviation sector from 2020 onward, spurring anfuel made from used cooking oil, and JGC Japan Corporation, whichurgent need to build a system for developing and stably supplying

possesses extensive experience building plants and facilities andsustainable aviation fuel (SAF). In light of this situation, from January

actively promotes the development of environmental businesses.

2020, JAPEX and two other companies launched studies aimed at

JAPEX will continue to support the launch of projects to com-

establishing a production system for SAF in Japan and building amercialize SAF while leveraging its experience and knowledge invalue chain spanning the procurement of raw materials for SAF tohandling crude oil and operating facilities.
siness Ses

Oil Absorption Fiber, Abura Kuraudo

Bu

ed

Topic

Ne
w

its supply. The other two companies are Revo International Inc.,(ICAO) adopted the target of not increasing total CO2 emissions in

Initiatives to Support Value Creation

In the aviation industry, the International Civil Aviation Organization

Financial and Other Information

Developed to block oil spilled in rivers and seas, Abura Kuraudo is a high-efficiency oil
absorbent made of extra-fine polypropylene fiber. This product was developed by the venture company OLX LTD., based in Koriyama, Fukushima Prefecture. The JAPEX Group has been handlingits marketing and sales from October 2019.
Abura Kuraudo means “oil-eating cloud” in Japanese, and it can absorb 30 to 60 times its weight in oil,
floating on water for a long time like a cloud. Given its efficient absorption speed and holding capacity,
Abura Kuraudo is highly appreciated in wider situations, such as crude oil operation sites, disposal of usedcooking oil at restaurants, and cleaning up oil stains. JAPEX has donated Abura Kuraudo to disaster areas,
including oil spilled from an iron factory in Saga Prefecture following torrential rain in northern Kyushu in
2019, as well as a heavy oil spill caused by the 2020 grounding of a cargo ship in Mauritius.

Oil absorption fiber
Abura Kuraudo(cotton type)

JA P E X C o rp o r a t e R ep or t 2 0 2 035

ration Tec
ologyMethane Hydratenehn

Next-Ge

New Business Development

Methane hydrate is an ice-like crystalline solid formed by methaneproceeding with a private-sector led R&D project between FY2023

and water. It exists only in high-pressure and low-temperatureand FY2027, aiming for commercialization thereafter.*3­environments, such as below the seabed in deep waters or below

Taking notice of the potential of methane hydrate earlier than oth-permafrost in the polar regions. In Japan, there are two types of

ers, JAPEX has been taking the initiative with R&D by providing its

methane hydrate beneath the sea bed: “pore-filling type in sand”

technologies, experience and knowledge acquired through E&P to

and “shallow type.” The original gas-in-place for pore-filling typeacademic researchers. We will continue actively contributing tomethane hydrate in the eastern Nankai Trough region was evaluated

R&D to ensure that methane hydrate will be one source of clean

as being around 1.1 trillion cubic meters of methane.*1 As for theenergy resources in Japan.

shallow type methane hydrate in the Sea of Japan, 1,742 gas chim-

In 2014, JAPEX established Japan Methane Hydrate Operating

ney structures where methane hydrate may exist were confirmed.

Co., Ltd. (JMH) together with Japanese E&P companies and engi-

The Umitaka Spur, which is one of these structures, has been evalu-

neering companies. In 2015, JMH was assigned as an operator toated as containing 600 million cubic meters of methane.*2

conduct a second offshore production test by Japan Oil, Gas andIn 2013 and 2017, the Ministry of Economy, Trade and Industry

Metals National Corporation (JOGMEC). In April 2019, the MH21-S(METI) conducted the world’s first offshore production test of pore-­

R&D Consortium was formed by JOGMEC and the National

filling type methane hydrate at the Daini Atsumi Knoll, off the coast

Institute of Advanced Industrial Science and Technology and JMH,

of central Japan. Continuous gas production was successfully con-and was assigned to conduct R&D by METI.

firmed by this production test. Based on these results, METI is

neration Tec

hn
olog

y

Survey Technologies for Deep-sea Mineral Resources

Next-Ge*1 MH21-S R&D Consortium pamphlet*2 News release from the Ministry of Economy, Trade and Industry on September 16, 2016
*3 The Offshore Energy and Mineral Resource Development Plan revised by the Ministry of Economy, Trade and Industry on February 15, 2019

The existence of useful ocean mineral resources within Japan’s

5,000 meters. Due to its solid track record during SIP Phase 1,

exclusive economic zone (EEZ) has been confirmed. In 2014, the

J-MARES is the only private organization chosen to participate in thisgovernment selected “Next-Generation Technology for Ocean

technological development, which includes marine environmental

Resources Exploration” as one program of focus for its Cross-solutions and aims for future commercialization under SIP Phase 2.

ministerial Strategic Innovation Promotion Program (SIP)*4 with theaim of establishing the world’s first technologies for surveying these
deep-sea mineral resources with high efficiency and at low cost andthen transferring the technologies to private corporations under SIP
phase 1. In fiscal 2018, the government selected “Innovative
Technology for Exploration of Deep Sea Resources” as one program of focus for SIP Phase 2. The development of these technologies is proceeding apace.
In 2014, JAPEX and three other private corporations established
the Research and Development Partnership for Next-Generation

Environmental training
course onboard a ship
developing marine
human resources ofPacific island nations

Technology of Marine Resources Survey (J-MARES). J-MARES
succeeded in developing and using proprietary technologies in
exploration efforts that led to the discovery of new hydrothermal
deposits. Under SIP Phase 2, the aim is to be the first in the world
to establish innovative exploration technologies for rare-earth deposits, a deep seafloor mineral resource, at water depth exceeding

A large organism photographed at a depthof 5,500 meters in thewaters off Minamitorishima Island*4 A cross-organizational program that extends beyond the bounds of individual ministries and sectors. SIP was established to achieve scientific and technological innovation based on the “Comprehensive Strategy on Science, Technology and Innovation” and the “Japan Revitalization Strategy,” which are major government policies.

36

J A PE X C o rpo ra t e Re po rt 2 0 2 0CLOSE
UP
Mission and Purpose

From the field to the laboratory,
from the laboratory to underground
JAPEX commercializing technology

Strategy

In the JAPEX Research Center (hereinafter, the “Lab”), we study
and analyze volcanic rocks, which are the main reservoir rocks in
our oil and gas fields in Japan. We have been continuously producing oil and gas in several volcanic reservoir fields, and we areproud of our technologies for studying and analyzing the volcanic
rocks. Globally speaking, oil and gas E&P fields with volcanic­reservoir are quite rare. So there are no established methods for
exploration, development and production, unlike other morecommon types of reservoir rocks, such as carbonate rock

Value Creation Through Business Activities

and sandstone.
To increase the amount of production and reserves of oil andgas, we need to evaluate the data from existing wells and estimate
the volcanic reservoir rocks’ distribution and their facies.
To this end, we carry out geological fields surveys where we
can observe structures similar to our volcanic reservoirs. Throughthese surveys, we observe the morphology and the lithology ofFelsic volcanic deposits in Dogashima, Izu created from
subaqueous volcanic activity(similar to volcanic rock at JAPEX’s Katakai Gas Field in Niigata Prefecture)

the field. We often collect rock samples to analyze the petrographic and reservoir properties atthe Lab.

Initiatives to Support Value Creation

It is important to analyze rock samples, takenfrom wells and fields at the Lab. We analyze thecharacteristics of various rock properties, such as
JAPEX’s volcanic reservoir rock models for its Katakai Gas Field in Niigata Prefecture (left) and
its Yurihara Oil and Gas Field in Akita Prefecture (right)(The volcanic rock formations and distribution of reservoir layers are completely different by
exploration area.)

textures, chemical compositions, porosity andpermeability of the samples, then identify target
volcanic rocks that function as reservoir rocks.

We construct the facies and the alteration models of volcanic oil
and gas fields by integrating the results of data analyses of wells,
the Lab and fields. Finally, the volcanic reservoir model for each

Financial and Other Information

exploration area has been constructed.
Those volcanic reservoir models are constantly updated by
newly acquired drilling data. We repeatedly keep on field surveys
and analyses at the Lab as we strive to enhance our day-to-day
technical capabilities to assess underground conditions moreaccurately. We are striving to achieve stable energy supply andsustainable oil and gas development with our technologies andexpertise acquired from the Lab works.

Scanning Electron Microscope with Energy Dispersive X-ray Spectroscopy(SEM-EDS) in the JAPEX Research Center
Dr. Shimazu, in charge of carbonate rock (left), Ms. Nonaka, in charge ofvolcanic rock (right)

JA P E X C o rp o r a t e R ep or t 2 0 2 037

GovernanceG

Integrity and Governance

JAPEX recognizes contributing to society through stable energy supply as its mission and helping to realize the sustainable­development goals by addressing social issues as its Corporate Vision. To achieve its Corporate Vision and maximize its­corporate value from both the medium and long term perspectives, efficient and transparent corporate management and thebuilding of relationships of mutual trust with stakeholders, including shareholders, by ensuring its accountability are required.
Therefore, sound corporate governance, which is foundational to the Company, is one of its most important challenges.

Corporate GovernanceCorporate Governance Structure
JAPEX has an Executive Officer System. The representative direc-

provide opinions and advice that support lively debate in the Board

tors and Board of Directors appoint the directors as well as execu-

of Directors. Contrasting with the type of management carried out

tive officers, defining their responsibilities and charging the latterby business executives, this framework of independent directors

with business execution duties. The Board of Directors and theand an Audit & Supervisory Board in which members provide

Audit & Supervisory Board supervise said business execution. To­opinions and supervision is, we believe, well-configured to provide

strengthen the supervisory functions of the Board of Directors,

decision making that is sufficiently objective and appropriate.

highly knowledgeable and independent outside directors are

In June 2020, to strengthen our management system, we

appointed. These outside directors and Audit & Supervisory Board

increased the number of outside directors from three to four andmembers, being independent from the management team, actively

shortened the term of directors from two years to one.

Corporate Governance Overview (As of June 26, 2020)

Organizational Design

Company with Audit &Supervisory Board

Chairman of the Board of
Directors

President

Executive Officer System

Yes

Number of Directors Provided for
Under Articles of Incorporation

4

18

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

Number of Directors

12 (includes 4 outside directors)

Number of Audit & Supervisory
Board Members

4 (includes 2 outside members)

Corporate Governance and Internal Control Structure (As of June 26, 2020)

General Meeting of
Shareholders
Appoint/Dismiss

Nomination and Compensation
Advisory Committee

Appoint/Dismiss

Directors/Board of Directors(Outside Directors: 4)

Audit

Audit & Supervisory Board Members/
Audit & Supervisory Board

Select/Dismiss/Supervise

Executive
Committee

Auditing Dept.
Internal Audit
Internal Control
Evaluation

Corporate Divisions, Business Divisions, and Group Companies
Information Security Committee

38

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Audit

Accounting Auditor

HSSE Committee

Audit

Representative Director
and President

CSR Committee
Internal Control Committee

Appoint/DismissMission and Purpose

Evaluation of the Overall Effectiveness of the Board of Directors
With the aim of maximizing our medium-to-long term corporate

The result of the assessment was that we have achieved overallvalue, we evaluate the effectiveness of the Board of Directors regu-

improvement for each issue and determined that the effectivenesslarly, especially with regard to how it supervises the managementof the Board of Directors as a whole has been enhanced.

and makes improvements.
In fiscal 2019, we held an exchange of opinions between direc-

Going forward, we will continue working to further enhance thefunctionality of the Board of Directors by periodically identifying
issues regarding day-to-day operations through surveys of attend-

responses to issues identified to date through the analysis andees at Board of Directors meetings, and by making progress on theevaluation of the effectiveness of Board of Directors. Such issues

issues that are identified.

Strategy

tors and Audit & Supervisory Board members to assess our

included a reduction of the number of attendees at Board of
Director meetings, as well as the quality of discussions of management strategy and business plans.

Performance-linked Share-based Compensation Plancompensation and a stock compensation system because thecompensation plan with the purpose of highlighting the link between

board should design management remuneration systems that oper-

the compensation of directors and the Company’s performance andate as a healthy incentive to generate sustainable growth. With ashare price. By ensuring directors share the merits attributable tostrong awareness of this, we have adopted a plan that links thehigher share prices and the risks of lower share prices with share-

merits and risks faced by shareholders with management, and we

holders, we aim to encourage directors to enhance medium- andwill continue working to enhance shareholder value.

long-term business performance and boost corporate value.

Value Creation Through Business Activities

JAPEX decided to introduce a performance-linked share-based

After introducing this plan, we intend that approximately 20% of

Principle 4.2 and Supplementary Principle 4.2.1 of the Corporate

directors’ total compensation will be comprised of performance-linked

Governance Code recommend adopting performance-linked

compensation (bonuses and stock compensation).

Initiatives to Support Value Creation

Message from a New Director
Hideichi Kawasaki, Outside Director
I started out in the sales department of Oki Electric Industry Co., Ltd. and gained experience at headquarters and operating departments. Since then, I have supported management
as an officer, president, and chairman. The telecommunications industry was often assaulted in the past by major disruptions. In those times, we remained positive and overcame
these trials by relying on a compass called the future. This was an industry marked by rapidchange. From this perspective, JAPEX’s businesses, which have the social responsibility of

Financial and Other Information

stably providing energy, have been comparatively steady and the pace of change has beenslow moving. However, the environment surrounding these businesses has recently
changed significantly, and I think there are issues in expanding business along the samelines as before. In addition, amid rapid digital transformation, we will likely need strategies
imbued with innovative ideas, as has been stated in the Mid-term Business Plan. I will put
forth my best effort without fail to help management take the lead in this transformative
period based on my experience in the telecommunications business and the expertise
I have gained from that experience.

JA P E X C o rp o r a t e R ep or t 2 0 2 039

G: Integrity and Governance

Cross-Shareholdings
JAPEX owns cross-shareholdings comprising shares of companies

regarding the shares we decided to continue owning, we disclose thedetermined to be necessary to promote smooth business and to

purpose and number of shares held as specific investments in ourmaintain good business relationships with the purpose of enhancing

securities report. In addition, if we determine that it has become lesssustainable growth and medium- to long-term corporate value. To

reasonable to own certain shares, we reduce the number of those

ensure that these cross-shareholdings are reasonable, the Board of

shareholdings. In fiscal 2019, we sold the shares of one company.

Directors assesses the pros and cons of maintaining the holdings

Regarding the exercise of voting rights, we determine whether toevery year by conducting a qualitative evaluation related to the appro-

vote in favor of or against proposals only after individually evaluating

priateness of the purpose of owning the shares and a quantitative

the appropriateness of each and comprehensively considering wheth-evaluation about whether the benefits and risks of the holdings are

er or not the proposals contribute to the purpose of owning the sharesbalanced with the capital costs. As a result of this assessment,

and the enhancement of medium- to long-term corporate value.

Crisis Management
Safety assurance and crisis management are our top priorities when developing our business activities in Japan and overseas.
The HSSE Committee is working to strengthen the crisis management system mainly by formulating the basic policies for security
measures and crisis management. In addition, we are working to ensure stable business continuity by conducting drills and drafting plans to maintain, continue and quickly restore business activities during large-scale disasters and epidemics.

Business Continuity Planning and Our COVID-19 Response
Using the Basic Novel Influenza Response Plan formulated in 2010,
we raised awareness within the Company of measures to prevent
COVID-19 infections and stem its spread, and rolled out remote
working options at the headquarters and all work sites. On operating
front lines, we maintained safe operations in part through no-contact
task handovers that avoid face-to-face interaction, as well as entry
restrictions at the central monitoring office. Recognizing that it willtake some time until the pandemic is completely contained, we are
keeping an eye on new lifestyles and workstyles, and will continue toconsider appropriate countermeasures from various angles in accordance with our COVID-19 Response Action Plan.

Remote managers in an annex taking over tasks from the central monitoring officeComplianceTo ensure a corporate culture of compliance with all applicable laws and regulations, conventional wisdom, social norms, and its
own in-house rules, all JAPEX Group directors, officers, and employees are expected and directed to act ethically and with integrity.

Systems for Promoting Compliance and Education

40

JAPEX has established an Internal Control Committee to ensure thestandards to be observed on a daily basis with the aim of ensuring

appropriate conduct of business and to investigate compliance vio-that business duties are carried out in accordance with the JAPEX

lations. The JAPEX Group strives to heighten awareness of compli-

Group Code of Ethics and Conduct.

ance among its directors, officers, and employees. To that end, theFurthermore, for in-house training, we made CSR, compliance,

Group has created a compliance manual that lists consultation andand insider trading prevention mandatory subjects for training pro-reporting contact details and summarizes key matters andgrams for new hires and mid-career training programs.

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

Prevention of Bribery
The Group established the Anti-Bribery Guidelines in 2016 with theand the need for periodic compliance assessments. We regularly

aim of preventing violations of bribery-related laws and regulations

hold training sessions for directors, officers and employees, includ-in Japan and overseas while ensuring the steady expansion of busi-

ing those of subsidiaries.

ness. We are working hard to raise awareness within the Group of

There were no incidents or reports involving bribery in fiscal

the basic principles behind the prohibition of bribery; how to con-2019. Furthermore, we do not make any political contributions.
Strategy

duct risk assessments and take precautions in high-risk countries;

Compliance Reporting and Consultation System
JAPEX has established a system for reporting to and consulting

make a report or receive a consultation anonymously. Moreover,with relevant departments through the normal chain of command

the people in charge of the system, including the corporate lawyer(line of reporting) in the event that a problem related to a compli-of JAPEX who serves as an external helpline, are prohibited, whenance matter arises. We have also established the Complianceconducting an investigation or formulating countermeasures, from

Reporting and Consultation System, which stands independent

leaking information gained to a third party.

from internal lines of reporting. Under this system, anyone canVisit the link below to see the Organization Chart of the Compliance Reporting and Consultation System.

Value Creation Through Business Activities

https://www.japex.co.jp/english/company/compliance.html

Respect for Human Rights
human rights as extremely important. For the Canada Oil Sands

Conduct, which provides corporate ethics standards to be adhered

Project, we have put in place a system that incorporates the views of

to by all officers and employees. Regarding respect for human rights,

local indigenous people and pursue business in cooperation withincluding the prevention of slave labor and human trafficking, thethem. In line with the UK Modern Slavery Act 2015, which wascode requires behavior that respects the human rights of all people.

enacted with the aim of requiring companies to identify and eradicate

Furthermore, the compliance manual, which is based on the code,

any and all instances of slave labor and human trafficking across their

outlines compliance with respect for human rights in line with suchsupply chains, the JAPEX Group releases a statement on its website

international standards as the Universal Declaration of Human Rights,

every year detailing its relevant policies and initiatives.

Initiatives to Support Value Creation

The Company has established the JAPEX Group Code of Ethics andthe International Covenant on Human Rights, and the ILO’s
International Labour Standards.

Initiatives to Foster Workplaces Free of Harassment
Since fiscal 2016, we have been continuously conducting Company-

Initiatives Related to Preventing Slave Labor, Preventing Human Trafficking,wide training programs and daily educational activities designed toand Protecting the Rights of Indigenous Peoples

foster a better understanding of workplace harassment. In fiscal

In our Basic Procurement Policy, we clarify our reasons for requiring

2020, we will establish harassment prevention rules and create

our business partners’ compliance with relevant laws and regula-

guidelines. In addition, we plan to hold power harassment prevention

tions, the spirit of said laws and regulations, and social mores andtraining for directors and executives and steadily roll out the training

norms. We strive to avoid transactions that debase the trust society

to employees going forward.
Moreover, we also distribute a periodic in-house e-mail magazine

In the process of evaluating investments and operating projects,

as a means of building awareness on a daily basis. Reflecting the ris-

we work to identify not only problems related to profitability and tech-ing attention being given to harassment recently, the magazine has

nology but also explicit and implicit problems related to the environ-

been introducing personal cases and sharing information on legal

mental and social characteristics of the area in which said business isrevisions in light of recent developments.

being pursued. After evaluating the risks and potential solutions, we

In the event an individual consults it, the harassment hotline serv-

take appropriate action, such as conducting monitoring in line withing headquarters or the relevant district office takes quick action.

in-house rules.

When an instance of harassment occurs (as defined by internal

In our overseas businesses, we regard the rights of indigenous
peoples, respect for their cultures and customs, and concern for

Financial and Other Information

has placed in us.

rules), we implement a harsh response based on detailed interviews
and notify all employees of the incident to prevent a recurrence.

For 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

JA P E X C o rp o r a t e R ep or t 2 0 2 041

G: Integrity and GovernanceDirectors, Audit & Supervisory Board Members andExecutive Officers (As of July 1, 2020)• The date the board members were appointed
appears in parentheses next to their years in office• The attendance record for board meetings is forfiscal 2019

Directors
Representative Director
Executive Vice President
Representative Director
and President
Chief Executive Officer

Representative Director
and Chairman

Osamu Watanabe

1964 Joined the Ministry of International Trade andIndustry (MITI), later became Vice Minister ofInternational Trade and Industry and served as
Chairman of Japan External Trade
Organization (JETRO)
2007 Joined JAPEX, served as Executive Vice
President and President
2016 Assumed his current position in June
Attendance at the Board of Directors Meetings:­12 out of 13 meetings
Years in Office: 13 years (June 2007)

1977 Joined the Ministry of International Trade andIndustry (MITI), later became the head of the Tradeand Economic Cooperation Bureau at the Ministryof Economy, Trade and Industry (METI) and served
as Sumitomo Corporation’s Representative
Director, Executive Vice President
2019 Joined JAPEX, served as Representative Directorand Executive Vice President
2019 Assumed his current position in October
Attendance at the Board of Directors Meetings:
10 out of 10 meetings
Years in Office: 1 year (June 2019)

Yoshitaka Ishii

President of Overseas ProjectManagement Division, In
charge of the New Business
Promotion Dept.
1980 Joined JAPEX, 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 andInnovative Technology Projects Division, Executive
in charge of Corporate Strategy Dept., andExecutive in charge of Media & Investor Relations
Dept., Executive in charge of Commercial Officefor Overseas Projects, Executive in charge of New
Business Promotion Office, President of Asia &Oceania Project Division2020 Assumed his current position in June
Attendance at the Board of Directors Meetings:
13 out of 13 meetings
Years in Office: 5 years (June 2015)

President of the PowerBusiness Division

1981 Joined JAPEX, served as General Manager ofTechnical Dept., Nagaoka District Office, General
Manager of Nagaoka District Office, Domestic
Project Division, In charge of the Gas Pipeline
Transportation Dept., Vice President of Interregional Gas Supply Division, President of Soma
Project Division, President of the Soma Project &Power Business Division2020 Assumed his current position in June
Attendance at the Board of Directors Meetings:
13 out of 13 meetings
Years in Office: 2 years (June 2018)

Director
Managing Executive Officer

Director
Managing Executive Officer

Hajime Ito

Toshiyuki Hirata

President of the Americas &Russia Project Division

President of Middle East,
Asia & Europe Project Division1980 Joined the Ministry of International Trade andIndustry (MITI), later became Deputy DirectorGeneral of the Ministry of Economy, Trade andIndustry (METI)2010 Joined JAPEX, served as President of Americas& Russia Project Division2016 Became Managing Executive Officer*
2018 Assumed his current position in June
Attendance at the Board of Directors Meetings:
13 out of 13 meetings
Years in Office: 4 years (June 2016)

1981 Joined JAPEX, served as President of Canada Oil
Sands Co., Ltd., Executive in charge of theCanada Oil Sands Project2017 Became Managing Executive Officer*
2018 Assumed his current position in June
Attendance at the Board of Directors Meetings:
12 out of 13 meetings
Years in Office: 3 years (June 2017)

J A PE X C o rpo ra t e Re po rt 2 0 2 01978 Joined JAPEX, served as General Manager ofProcurement Dept., General Manager of
Administration Dept., President of Marketing &Sales Division, Vice President of Soma Project
Division, Executive in charge of Secretary Office,and Executive in charge of Procurement Dept.
2019 Assumed his current position in June
Attendance at the Board of Directors Meetings:
13 out of 13 meetings
Years in Office: 7years (June 2013)

Director
Senior Managing Executive
Officer

Kazuhiko Ozeki

42

Advisor to President,
President of the Marketing &Sales Division, In charge of theSecretary Office and theProcurement Dept.

Masahiro Fujita

Director
Senior Managing Executive
Officer* Executive officer system amended in June 2018

Yosuke Higai

Director
Managing Executive Officer

Michiro Yamashita
Finance & Accounting Dept.

1982 Joined JAPEX, served as General Manager ofCorporate Planning Dept., Vice President ofEnvironment and Innovative Technology Projects
Division, and Executive in charge of Finance &Accounting Dept.
2018 Assumed his current position in June
Attendance at the Board of Directors Meetings:
13 out of 13 meetings
Years in Office: 2 years (June 2018)

Mission and Purpose

Outside Director

Outside Director

Tetsuo Ito*¹

Yukari Yamashita*¹

Hideichi Kawasaki*¹

1985 Joined the Institute of Energy
Economics, Japan, reached theposition of Director and Head of the
Climate Change and Energy
Efficiency Unit, became a Board
Member at the Institute and Director
in charge of the Energy Data andModelling Center2019 Assumed her current position at
JAPEX in June
Concurrently serves as aManaging Director of the Energy
Data and Modelling Center at theInstitute of Energy Economics,
Japan and as President of theInternational Association for Energy
Economics, Inc.
Reasons for Appointment: To use theextensive knowledge of energy economics
and energy-and environment-related public
policy she acquired through focusedresearch activities in the Company’s
management
Attendance at the Board of Directors
Meetings: 10 out of 10 meetings
Years in Office: 1 year (June 2019)1970 Joined Oki Electric Industry Co.,
Ltd., served as President,
Representative Director and as
Chairman of the Board,
Representative Director
2020 Assumed his current position at
JAPEX in June
Concurrently serves as Chairman of
the Board of Oki Electric Industry
Co., Ltd.
Reasons for Appointment: To use his
extensive experience and insights related
to general corporate management in the
Company’s management
Attendance at the Board of Directors
Meetings: —Years in Office: —1965 Joined Nikkei Inc. and served as its
Director, Chief Editor and Senior
Managing Director, later served as
Chairman at Japan Center for
Economic Research and Adjunct
Professor at National Graduate
Institute for Policy Studies
2015 Assumed his current position at
JAPEX in June
Concurrently serves as a member ofthe Board of Trustees and Adjunct
Professor at National Graduate
Institute for Policy Studies and as
President of the Center forInternational Economic Collaboration
Reasons for Appointment: To use his
extensive experience and distinguishedinsights gained through his career in a
newspaper company and other entities in
the Company’s management
Attendance at the Board of Directors
Meetings: 13 out of 13 meetings
Years in Office: 5 years (June 2015)

1975 Appointed as a prosecutor, served
as Head of Special Investigation
Force, Tokyo District Public
Prosecutors Office, and as Deputy
Prosecutor-General, Supreme
Public Prosecutors Office2016 Assumed his current position at
JAPEX in June
Concurrently serves as a
Registered Attorney (Daiichi Tokyo
Bar Association), Of Counsel at
Nishimura & Asahi, Outside Auditor
at Takasago Thermal Engineering
Co., Ltd., and Outside Auditor at
Asahi Kasei Corporation
Reasons for Appointment: To use his
extensive knowledge and experience as alegal specialist in the Company’s
management
Attendance at the Board of Directors
Meetings: 10 out of 13 meetings
Years in Office: 4 years (June 2016)

Value Creation Through Business Activities

Outside Director

Akira Kojima*¹

Strategy

Outside Director

Audit & Supervisory Board Members

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member

Kenji Uchida

Koichi Shimomura

1982 Joined JAPEX, 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 ofCanada 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 Division2018 Assumed his current position in June
Attendance at the Board of Directors
Meetings: 13 out of 13 meetings
Board of Corporate Auditors meetings:
11 out of 11 meetings

Outside Audit &Supervisory Board
MemberHiroyasu Watanabe*2

Norio Nakajima*2

1969 Joined the Ministry of Finance where
he served as Director-General of the
National Tax Agency, and also
served as Professor of Graduate
School of Finance, Accounting andLaw, Waseda University
2015 Assumed his current position at
JAPEX in June
Concurrently serves as Advisor of
Hibiya Park Law Offices and Presidentof the Japan Tariff Association
Reasons for Appointment: To use his distinguished insights gained from his extensive
experience as a graduate school professor
and in government administration in the
Company’s management
Attendance at the Board of Directors
Meetings: 13 out of 13 meetings
Board of Corporate Auditors meetings:
11 out of 11 meetings

1970 Joined the Industrial Bank ofJapan, Limited (IBJ) where heserved as its Managing Executive
Officer and later in the same position at Mizuho Corporate Bank,
Ltd., then served as President &CEO of DIAM Co., Ltd.
2014 Assumed his current position at
JAPEX in June
Reasons for Appointment: To use his distinguished insights gained from his extensive
managerial experience with financial institutions in the Company’s management
Attendance at the Board of Directors
Meetings: 13 out of 13 meetings
Board of Corporate Auditors meetings:
11 out of 11 meetings

Initiatives to Support Value Creation

1979 Joined JAPEX, 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 Division2017 Assumed his current position in June
Attendance at the Board of Directors
Meetings: 13 out of 13 meetings
Board of Corporate Auditors meetings:
11 out of 11 meetings

Outside Audit &Supervisory Board
MemberFinancial and Other Information

Executives
Senior Managing Executive Officer
Managing Executive Officer
Managing Executive Officer
Managing Executive Officer
Managing Executive Officer
Managing Executive Officer
Managing Executive Officer

Tsuyoshi Suga
Yasushi Hamada
Senichiro Kaku
Minoru Kuniyasu
Tadashi Matsunaga
Tsuneta Nakamura
Masanori Amano

Executive Officer
Executive Officer
Executive Officer
Executive Officer

Ryohei Wakishima
Takamasa Miyadai
Yoshihiko Motoyama
Shinichi Takahata

Executive Officer
Executive Officer
Executive Officer
Fellow*³

Toshiaki Nakajima
Kazuhiko Tezuka
Satoshi Abe
Amane Waseda*1 Akira Kojima, Tetsuo Ito, Yukari Yamashita and Hideichi Kawasaki are outside directors as stipulated under Article 2-15 of the Companies Act of Japan.
*2 Hiroyasu Watanabe and Norio Nakajima are outside Audit & Supervisory Board members as stipulated under Article 2-16 of the Companies Act of Japan.
*3 Fellows support executives through their high degree of expertise in specialized fields.

JA P E X C o rp o r a t e R ep or t 2 0 2 0

43

JAPEX HSE Management

SafetyThe JAPEX Group declared its intention to secure occupational healthOccupational safety
and process safety
Crisis management

and safety and conserve the natural environment in its businessactivities and formulated JAPEX HSE*1 Policy. We are also asking ourcontractors to engage in HSE management that aligns with this policy.
In order to put the policy into action, we have implemented the HSE

JAPEX
HSE Policy

Management System at our domestic operations and JACOS since2014. We strive for the continuous improvement of the System throughHealthPDCA cycles.

Occupational health*1 Health, Safety and Environment

Environment
Measures to prevent
global warming
Pollution prevention andresource recycling
Preserving
biodiversity

Progress of Mid-term HSE Plan (FY2018–2020)
In line with the JAPEX Mid-term HSE Plan (FY2018–2020), we

progress of the HSE Plan and HSE activities are reported, and theintroduced international standards for calculating injury frequency

committee provides direction and advice as management. The HSE(e.g., LTIF*2 and TRIR*3), adopted contractor HSE management

department reflects these directions and advice in the annual HSE

methods, strengthened governance by concluding HSE-related

activity plan to continuously improve HSE activities.

agreements with Group companies, and created a GHG emission

In fiscal 2020, the last year of this mid-term HSE plan, the entire

reduction roadmap. The HSSE Committee*4 is chaired by theCompany will work together to achieve the goals of the plan by car-Senior Managing Director in charge of HSE, and its members arerying out effective HSE activities.

composed of upper management. In committee meetings, theProgress of Each Mid-term HSE Plan Goal
Goals

FY2019 Achievements

FY2020 Goals

To achieve continuous reduction of the LTIF
and TRIR

Reduced injury frequency rate
LTIF: 0.00, TRIR: 1.46

Further reduce injury frequency rate

To maintain necessary HSE resourcesand organization

Assigned an HSE officer to manage HSE at workplaces and conducted HSE officer training

Optimize the HSE personnel framework in line withbusiness scenarios

To foster the Company’s HSE culture

Conducted a survey on HSE levels
Held a Company-wide ESG seminar with an external
instructor and conducted safety training using virtual
reality (VR)Act on measures (education on laws, etc.) to address
what the survey of HSE levels brought to light

To develop new HSE training programs

Incrementally introduced a Company-wide HSEtraining program (set up a training program foryoung employees)

Finish preparing all Company-wide HSE training programs (set up manager training programs)

Developed the manuals for process safety

Continue developing manuals related to process safety
Conduct frontline workshops adapted to facilities

To fully operationalize the contractor HSE­management element

Strengthen management of contractors by qualification for HSE requirements during bidding process andassigning a HSE officer at target construction sites

Review the Contractor HSE management guidelines
through the actual operation of HSE officers

To strengthen HSE governance in the JAPEX­subsidiary companies

Concluded HSE agreements with five Group companies and clarified our cooperative relationships

Conclude HSE agreements with six Group companies to enhance HSE collaboration.

Regarding GHG emissions, implement more detailed
monitoring and intensify reduction measures

Created a GHG reduction road map
Adopted energy conservation activities based on
exergy analyses at business sites

Continue adopting energy conservation activities
based on exergy analyses at business sites

To introduce process safety approaches*2 Lost Time Injury Frequency: The number of lost time injuries per 1,000,000 work hours.
*3 Total Recordable Injury Rate: The number of total recordable injuries per 1,000,000 hours worked.
*4 Health, Safety, Security, and Environment Committee: An organization that deliberates issues related to health, safety, and the environment as well as security.

44

J A PE X C o rpo ra t e Re po rt 2 0 2 0Environment

HSE as Our Culture
Mission and Purpose

As part of the JAPEX HSE Policy, we resolve to “promote the conservation of natural resources including water and biodiversity
and prevent pollution from waste and other contaminants generated by our operations.” We recognize the importance of initiatives to prevent pollution. At each operation field, we identify pollution risks for the soil, water, and air and take measures toprevent pollution as necessary. In addition, from the perspective of recycling resources, we strive to protect and effectively use
water resources because we utilize a large quantity due to the unique characteristics of our businesses.

Strategy

Initiatives to Prevent Pollution and Recycled Resources
Initiatives to Reduce VOC Emissions
Volatile organic compounds (VOCs) are one cause of air pollution,

Association since fiscal 2005. As part of our ongoing drive toincluding PM 2.5 and other suspended particulate matter (SPM).

reduce VOC emissions, we are working to seal crude oil storage

The primary source of emissions for our businesses is the release oftanks better and incinerate VOCs that would otherwise be emitted

volatile hydrocarbons, including the Pollutant Release and Transferfrom gas processing facilities. Fiscal 2019 VOC emissions totaled

Register (PRTR) substances benzene, toluene, and xylene (BTX),

1,125 tons, a year-on-year decrease of 266 tons. The main factor

but excluding methane.

behind the decline was a reduction in the release of natural gas into
the air.

Value Creation Through Business Activities

We have been participating in a voluntary action plan to reduce
VOC emissions as a member of the Japan Natural Gas

Initiatives to Preserve the Quality of Wastewater
JAPEX appropriately disposes of the water resources it uses in its

inject it back underground or, after purifying it to meet wastewaterbusiness activities. Regarding water used in the production of oil andstandards set by laws and regulations, expel it into public waterways.

gas as well as pit water collected in the course of mining, we either

Initiatives to Effectively Use Water
In addition, for the Canada Oil Sands Project, we use the SAGD

effectively by promoting the recycling and reuse of water used as abitumen recovery process, which has been reported to impose fewer

coolant in processing facilities and water used as boiler water. In fiscal

environmental burdens in comparison with open-pit mining. The steam

2019, the amount of water we used in Japan amounted to 940,000

injected underground exchanges heat with the oil sands reservoir.

kiloliters, an increase of 130,000 kiloliters year on year. The main fac-

Along with the bitumen that has become liquid upon heat exchange,

tor behind the increase was construction of a LNG tank at the Soma

the condensed water is recovered and sent to the central processing

LNG Terminal.

facility. More than 90% of the overall recovered water is recycled into

Initiatives to Support Value Creation

At our domestic production plants, we are striving to use water more

fresh water for the steam and injected underground once again.

Preserving Biodiversity and Ecosystems
Financial and Other Information

Initiatives to Plant Trees of Native Species in Soma
JAPEX conducts voluntary environmental impact assessments that

During the construction of the

go beyond the legally required investigations when beginning a proj-

Fukushima Natural Gas Powerect, regardless of the business content or whether it is in Japan or

Plant, we carried out a greening

overseas. The assessments are appropriate for the specific condi-

policy with the guidance oftions in the environment surrounding the project, such as the exis-

experts. We aim to enable thetence of vulnerable species and the type of ecosystem. In addition togreen area to serve as a peacefulformulating development plans based on the results of the assess-habitat for local native wildlife byments, we conduct monitoring and take precautions as necessary

selecting tree species, especiallyafter the development stage concludes. We are thereby striving tolocal native species, to make it

reduce the impact of our business activities on biodiversity.

resemble a forest.

Potted saplings that have been plantedin the ground (greening construction)

JA P E X C o rp o r a t e R ep or t 2 0 2 045

Social

HSE as Our Culture/Stable and Sustainable Energy Supply

To ensure a stable supply of energy through safe and efficient operations, we position HSE as our top priority. To achieve thisgoal, we have established the JAPEX HSE Policy, appropriately control and reduce HSE risks, and continuously improve ourHSE management system. In addition, as activities for ensuring occupational safety, we are implementing initiatives to foster
our HSE culture and to manage and promote employee health.

Occupational Health and Safety
Strengthening Systems for Occupational Health and Safety
In fiscal 2019, we began to operate incident classifications for ourcommunication between management and workers on occupation-

domestic operations based on international standards. We collect-al health and safety, we hold safety committee meetings, safety

ed Company-wide working hour data for all employees and otherconferences, health committee meetings and other meetings forrelevant workers, including office workers and contractors. We also

active discussion about the Company’s HSE plan and HSE status.

switched the Company’s incident classifications to international

At headquarters, in addition to these committees, we established astandards. This change enabled us to compare JAPEX’s HSE level

place for discussions between management and the labor union,

with worldwide industry levels, and clarified our HSE target. From

namely the Central HSE Council.

the current fiscal year, we will set out a HSE target for injury frequency based on these international standards.
In an effort to prevent accidents, we conducted risk assessments

In addition, every year we convene the JAPEX Group HSE
Promotion Meeting organized by each Group company’s HSE representatives to share information and strengthen HSE governanceand registered the HSE hazards about the near miss reports andfor the entire Group. Under the Mid-term HSE Plan, we are conclud-accident reports from each worksite. Through safety committees

ing HSE agreements to raise Group-wide HSE levels and clarifying

and the corporate website, we are raising awareness of the results

the cooperative relationships related to HSE management withof risk assessment and hazard registration. As a forum ofeach Group company.

HSE Audits
Since introducing its HSE Management System (HSE-MS), we haveauditors. By fully surveying and applauding the many effective HSE

conducted internal audits to confirm our current HSE activities.

activities (strong points), we increase the motivation of our workers

With the growing sophistication of the HSE-MS, we began different

and encourage them to more enthusiastically engage in HSE activi-style audits from fiscal 2019 with the purpose of further enhancing

ties. In addition to HSE audits, the HSE personnel of each district

its effectiveness. We not only confirm whether it successfully main-

office conduct HSE patrols and continuously improve day-to-day

tains an organized record of HSE-MS operations, we also engage

HSE activities.

in two-way communication with employees on the frontlines and

HSE Training and Efforts to Improve HSE Culture
We provide planned and structured HSE training programs for all thetraining and get certifications required for the positions, based on theemployees with an aim to create healthy and safe working environ-

Company’s HSE competency requirements. Also, we have establishedments. The competency requirements are identified by company

an incentive system to secure the number of qualified employees forrules, not just laws and regulations, for HSE critical positions such aslegal requirements. In addition, we introduced various measures to

HSE administrators, supervisors, and workers in oil and gas fields.

enhance our “HSE-first” culture.

We are encouraging employees to participate in internal and external

46

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose• Sent out the internal email newsletter called The HSE Kawaraban every week to provide all employee with timely and useful HSE information• Shared HSE information using the intranet website (such as health management, accident reports, HSE activities of each site, education materials
of HSE laws and regulations)• Conducted the HSE Smile Award program to provide recognition to outstanding HSE activities• Started opening various meetings with an “HSE Value Moment” where one participant spends a few minutes talking about HSE• Promoted “refresh time” as a way of encouraging simple exercises employees can do at their desk and preventing people from sitting for too long

Strategy

The Power Business Division with its Zero Accident Award

A safety training session underway

Value Creation Through Business Activities

Initiatives to Strengthen the HSE Management of Contractors
In the promotion of its businesses, JAPEX works hard to ensure

environments and achieve zero accidents while thoroughly enforcing

safe operations in collaboration with a large number of other com-

JAPEX’s policy of putting the highest priority on HSE and fulfilling thepanies. With regard to contracts for commissioned work, weCompany’s ethical obligation as the commissioning party. By cooper-

request that contractors conduct HSE management in complianceating with the business departments, procurement departments andwith laws, regulations and the Company’s guidelines. In fiscal 2019,

the HSE officers that are charged with managing HSE at JAPEX’s

we began official deployment of the Contractor HSE management

workplaces, we aim for the seamless promotion of accident-freeguidelines, which include specific HSE-related management actions

operations that fully include our contractors by subjecting contracts

for contractors. In this way, we are working to further improve work

to these additional guidelines.
Initiatives to Support Value Creation

Promoting Digital Transformation
JAPEX launched internal discussions related to digital transformation

Although we have just begun to promote a digital transformation,(DX) from 2019 and set a DX goal of making its energy supply sys-

we intend to flexibly and swiftly move ahead with the consider-tem more resilient and achieving structural reforms. We establishedation and implementation of measures to help improvean organization dedicated to achieving DX within the Administration

operational efficiency.

& Legal Department.
Regarding the promotion of DX, our basic policy is to first startsmall with the aim of enhancing operational efficiency through the
Financial and Other Information

deployment of digital technologies. In addition to making office
operations more efficient, going forward, we plan to consider
strengthening stable operations by storing and optimizing operational data to detect and predict abnormalities.

A member attending a meeting remotely

Goal

Make our energy supply system more resilient and achieve structural reforms

Initiatives• Enhance operational efficiency through the deployment of digital technologies• Enhance the sophistication of our domestic production and supply systems that are responsible for the stable supply of energy

JA P E X C o rp o r a t e R ep or t 2 0 2 047

SocialThe Employer of Choice/Being a Good Neighbor

We believe that the maintenance of safe and stable business
operations depends on building relationships of understanding and trust with our stakeholders. With this in mind, we will
strive to respect the cultures and customs of the regions inwhich we operate while complying with various international
regulations. We will develop favorable relationships with thecommunities in which we operate through a variety of social

Stable supply of energy
Product safety,
Quality control

Clients

Occupational
health and safety
Employees
Creation of anamenable working
environment
Human resource
development
Cooperation
SupportNGOs and
NPOs

Shareholders
and Investors

Social contribution activities
Donation activities
Local
Disaster relief support
Communities Creation of employment
Consideration forliving environment

The JAPEXGroup

contribution activities, constructive dialogue, and the timely
and appropriate disclosure of information. In addition, we
believe that in order for JAPEX to achieve sustainable growthand enhance its corporate competitiveness, it must support

Compliance
Tax payment
Fair transactions

Timely and appropriate disclosure
Appropriate return of profits

Oil- and
Gas-Producing
Countries

TechnologicalsupportCreation of
employment(As an operator)
Formulation and operation of
appropriate business plans(As a non-operator)
Checking and proposing
improvements to business activities
planned and conducted by operators

Business
Partners

Government
Transaction
Partners

its employees in their autonomous and ongoing pursuits ofcareer development and personal growth without shying
away from transformation. To this end, we are working topromote diversity & inclusion, work-life balance, health management, career development, and personnel development.

Human Resources Development and Respecting Employee Diversity
Initiatives to Promote Diversity
We formulated our Basic Diversity Policy in 2016 and have been
striving to create a work environment and corporate culture that
respect diversity, including workstyles and career paths, in order toenable all employees to tap their full potential. As for our efforts toempower women to take on more active roles, we set numericaltargets for the percentage of female managers (10.2%), promoting
women to general manager (1 woman), and the percentage offemale university graduates hired (30% every year). Regarding thepercentage of female managers, we set a target of raising the figure
from 3.4% as of October 2014 three times to 10.2% by 2020. As of
April 2020, the percentage was 5.2%. We were, however, able topromote one woman to general manager in 2019, and the percentage of female university graduates hired was 30% or more from2017 on, except for fiscal 2018 when total hiring was extremely low.

Human Resource Development
Keeping an eye toward future business development, we launcheda management talent development program with the purpose of
selecting and continuously training the next generation of younger
managers that can lead and direct businesses with a Company-wide
perspective. In fiscal 2019, we trained 16 mid-level employees aged
30 to 37. Of this total, 12 trainees acquired managerial knowledge
through the program. After that, under the mentor of executives, they
identified management issues the Company faces and reported thesolutions to the issues to upper management. The other four trainees
participated in a cross­industry leadershipdevelopment project withthe aim of growing individually as a leader whileworking to solve realsocial issues and making
detailed proposals to theproject coordinators.
A session of the management talentdevelopment program

Create a Fair and Good Working Environment
Health Management
JAPEX is practicing health management, recognizing that being
mindful of employee health contributes to the Company’s sustainable growth. For the fourth consecutive year since 2017, JAPEX
was certified as a leader in Health and Productivity Management. Inline with the JAPEX HSE Policy based on the Representative
Director and President’s declaration, the entire Company is working

48

J A PE X C o rpo ra t e Re po rt 2 0 2 0

to improve the environment of each workplace and prevent lifestylediseases using a health promotion app from fiscal 2019 to enable all
to work vibrantly. In addition, as a company in charge of life lines forthe stable supply of energy, we are focusing our energy on infection
countermeasures for employees, with daily BCP countermeasuresthat include preventative education and group vaccinations
against influenza.

Dialogue with Shareholders and Investors
Mission and Purpose

We believe that establishing relationships of trust with our shareholders and investors is crucial to achieving sustainable growthover the medium to long term and increasing our corporate value.
Accordingly, we actively arrange opportunities for dialogue to promote a deeper understanding of our business and strive to disclose
corporate information in a timely, appropriate and fair manner.
Opinions and information received through IR and SR activities areappropriately communicated to senior management.

Fiscal 2019 Accomplishments• Held financial results briefings for institutional investors and­securities analysts• Held one-on-one meetings with institutional investors and­securities analysts• Participated in IR conferences for overseas institutional investors• Participated in briefings hosted by securities companies for­individual investors• Hosted tours of the JAPEX Research Center for shareholders

Relationships with Local Communities

Facilitating Mutual and Sustainable Prosperity with Indigenous
Communities—Canada
For more than 40 years,
JAPEX has been engaged in
the Canada Oil Sands
Project. Having worked forso long hand in hand withlocal communities in a broad
range of fields, including
environmental preservation,
A social event after an IAG quarterly meetingsocial development, and(right: Satoshi Abe, JACOS’s then President)
economic vitalization, partnerships between JAPEX and such communities have become an
integral component of the project. Examples of collaboration include
the establishment of the Indigenous Advisory Group (IAG), by indigenous residents with the support of our local subsidiary Japan Canada
Oil Sands Limited (JACOS), when oil sands development commenced at the Hangingstone Block. In fiscal 2019, JACOS and the
IAG conducted a wide range of activities, such as holding quarterly
meetings, hosting traditional cultural events, giving facility tours to
representatives from both sides, and conducting environmental monitoring activities. As for local education, we accepted three interns
from local universities and provided monetary and personnel support
for the local environmental monitoring education program.
Furthermore, we are working to ensure fair business opportunities
for indigenous operators and proactively providing information to
help promote orders.

Financial and Other Information

JA P E X C o rp o r a t e R ep or t 2 0 2 0

Initiatives to Support Value Creation

Building Favorable Relationships with Residents of RemoteIslands—Indonesia
In the Kangean Project, through indirect investment in Kangean
Energy Indonesia Ltd. (KEI) we are engaged in various activities

aimed at contributing to the well-being of the inhabitants ofPagerungan Island and of other islands in the surrounding waters.
We have been voluntarily providing electricity and water fromthe production facility’s power generation equipment to approximately 6,000 residents of Pagerungan Island. In addition, we dispatch doctors employed at the terminal to local clinics at no cost.
We are also committed to annually donating a fixed amount toisland communities, thereby providing financial support for the construction and repair of school buildings, establishment of ice-making
facilities for the fishery industry, and development of a soccer field
for recreation.
In 2019, we aided local communities by supporting infrastructuredevelopment, funding the repair and construction of piers and roads,
assisting mangrove tree planting, furnishing scholarships and othereducational assistance, and enabling the purchase of nutritional supplements for infants. Moving ahead, we will remain committed tohelping the communities in which we operate thrive by providing
ongoing assistance to aspects of education, healthcare, economic
vitalization, environmental protection, and infrastructure development.

Value Creation Through Business Activities

Contributing to Education and Social Welfare—Iraq
In Iraq, we are engaged in the Garraf Project. Residents in the areasurrounding our petroleum facilities number in the several tens of
thousands, and we are cognizant of the critical importance of building
favorable relationships with local communities. Accordingly, with­particular emphasis placed on providing educational assistance andenhancing social welfare, JAPEX and PETRONAS (the project operator) are working in tandem to contribute to the local communities invarious ways. With regard to education, we help repair and maintain
primary and secondary school facilities. We also donate water purification filters. With regard to social welfare, JAPEX and PETRONAS
have donated wheelchairs and medical equipment due to the need to
expand healthcare facilities. We also provide low-income householdswith food and fresh meat during the month of Ramadan. As such,
we are striving to ensure that our presence in the region helps builda ­harmonious community.

Strategy

Participating in a Redevelopment Project—Shinchi, Fukushima Prefecture
JAPEX is participating in a
“Smart Community” initiative
led by Shinchi Town. This initiative aims to redevelop thearea around JR Shinchi
Station where there is damage from the Great East
Japan Earthquake. Natural
gas from Soma LNG terminal Our booth at the Hometown Industry Festival
in Shinchi Town
is supplied to heat sources(heating, electricity) for public infrastructure, hotels and bathing facilities
in the area. These initiatives are expected to reduce CO2 emissions
from the communities and help curb energy consumption while reinvigorating the community around producing and using local energy.
In addition, we sponsored a local summer festival for the first timein nine years, after the earthquake. Other than that, every November,we participate in the Soma Citizens’ Festival and the Hometown
Industry Festival. Through these activities, we interact with local communities to promote an understanding of our operations and raiseawareness of the importance of efficient energy use and protecting
the environment. In 2019, we again held an event featuring Shinchi
Town specialties at our Tokyo headquarters building. In addition toselling fresh agricultural and marine products as well as preparedfoods in-house, we also offered popular lunch items using Shinchi
Town ingredients, contributing to positive PR for the area.

49

Financial and Non-financial Highlights

Basic earnings (loss) per share (left axis)/ROE (right axis)
(Yen)

(%)

700

 Basic earnings (loss) per share

15.0

ROE

469.18350

258.44

0

36.58

60.24

0.5

0.8

Crude oil price (CIF)*1 (USD/bbl)
Exchange rate*1 (JPY/USD)For Fiscal Year (Millions of yen)
Net sales

7.5

6.5

Cost of sales

3.5

Exploration expenses

0

Selling, general and administrative expenses
Operating profit

(350)

(7.5)

(7.2)

Ordinary profit
Profit (loss) attributable to owners of parent(541.70)(700)

EBITDA*2(15.0)

2016/32017/3

2018/3

2019/32020/3

Cash flows from operating activities
Cash flows from investing activities

Debt-to-EBITDA ratio

Cash flows from financing activities(Times)Cash and cash equivalents at end of period

12.0

199,651
144,919
9,798
31,084
13,84917,122
10,01043,20034,284(24,282)(521)
66,826

At Fiscal Year-End (Millions of yen)

516,098
393,689
26,89865,458

Total assets
9.0

Net assets

8.0

Long-term loans payable
6.0

5.2

Interest-bearing debt*3

5.1

Financial Ratios (Yen, %)
3.6

3.0

Basic earnings (loss) per share

2.4

Return on Equity
Debt-to-EBITDA ratio
Net assets per share0

2016/32017/3

2018/3

2019/32020/3

Cash dividends per share (full-year)
Natural gas(Yen)

Production volume

10,000

Crude oil
Total

7,366.40

175.162.6
1.5
6,743.83
40.00

Production Volume in the Fiscal Year (daily)*4 (Thousand boe/d)

Net assets per share

7,500

2011/3
82.69
86.24

7,655.26

7,438.23

7,287.32

7,046.18

25.5
15.0
40.6

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

Japan
Total

5,000

49
208
257

Non-financial Data
Frequency rate*6

2,500

Occupational safety*5
2016/32017/3

2018/3

2019/3HSE

02020/3

Production volume(Thousand boe/d)

100

73.7

 Crude oil

76.2

72.0
60.7

50

39.7

61.5
49.6

38.3
29.5

33.4

*1

25

34.0

33.7

31.2

28.1

26.6

2016/32017/3

2018/3

2019/32020/3050

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Human
resources75 Natural gas

Severity rate*7

1.59
0.00

LTIF*8
TRIR*9

Greenhouse gas
emissions (t-CO2)*10

JAPEX + 1 consolidated subsidiary*5

303,146

JAPEX + 12 consolidated subsidiaries

Energy consumption JAPEX + 1 consolidated subsidiary*5(TJ)*11JAPEX + 12 consolidated subsidiaries

3,137.4

Consolidated

1,728
867
2.1
1.5

Number of
employees

Non-consolidated

Ratio of female managers (%)*12
Employees with disabilities (%)*13

Domestic sales price average of crude oil referring to crude oil (CIF) price and its­conversion exchange rate
*2 EBITDA is the total of operating profit, depreciation and interest and dividends received.
*3 Interest-bearing debt includes lease obligations, retirement benefit liabilities and contingent liabilities.
*4	Figures for crude oil include bitumen.
These figures include production volumes of equity-method affiliates.
*5 JAPEX and Japex Offshore Ltd.
*6 Frequency rate = (Number of deaths and injuries caused by accidents/Number ofhours worked in mines) x 1,000,000*7 Severity rate = (Number of days of work lost/Number of hours worked in mines)
x 1,000

Mission and Purpose(Fiscal years ended March 31)

2016/351.48
121.062017/345.60
108.53

2018/356.20
111.67

2019/371.94
110.352020/368.11
109.15

230,638
174,359
7,805
33,426
15,045
22,15917,02746,042
37,172(13,950)
9,856
99,803231,086
172,075
13,08632,017
13,90628,082(865)
43,04634,254(14,836)(7,177)
112,639

276,588
210,460
9,800
31,692
24,63443,88929,01553,90545,226(131,600)
71,680102,830

304,911
234,649
4,489
33,62532,146
54,83929,56761,96378,666(63,031)
18,475
142,657

240,302
193,022
6,516
32,426
8,336
4,652
2,090
31,20057,659(125,771)
54,816
126,570

207,130
174,957
1,512
29,975
685
2,222
3,443
21,88743,672(84,686)
18,360103,630

230,629
191,366
1,324
29,1738,764
3,828(30,959)
33,211
52,881(54,218)(1,196)99,892

267,980
233,133788
31,743
2,313
12,523
14,77041,73630,970(13,969)(15,493)
100,633

318,822271,780893
31,864
14,28332,635
26,81558,29669,895(18,701)(13,743)
138,259

532,890406,773
26,19882,165525,172
403,625
24,197
77,325663,038
496,915
21,636
98,345736,862
540,647
20,726
121,827

707,601495,317130,030
163,575

746,739
510,609
141,903
176,012699,536459,255
135,959
170,193655,288
450,156
127,715
151,726

627,132
440,157
118,774
140,848297.924.4
1.8
6,869.27
40.00(15.14)(0.2)
1.8
6,691.58
40.00

507.687.2
1.8
7,389.62
50.00

517.356.7
2.0
8,055.59
50.00

36.58
0.5
5.2
7,366.40
50.00

60.24
0.8
8.0
7,655.26
15.00(541.70)(7.2)
5.1
7,438.23
20.00

258.44
3.5
3.6
7,287.32
40.00

469.186.5
2.4
7,046.18
50.00

22.8
15.8
38.6

23.3
13.3
36.6

26.4
21.8
48.3

32.3
42.1
74.4

34.0
39.7
73.7

33.7
38.3
72.0

31.2
29.5
60.7

28.1
33.4
61.5

26.6
49.6
76.2

38
185
223

160
147
307

193
112
305

203
110
313

255
94
349

277
74
352

229
73
302

323
64
387

296
58
355

0.80
0.00

0.00
0.00

0.84
0.10

1.02
0.03

1.15
0.02

3.53
0.18

0.00
0.00

0.00
0.00

0.00
0.00
0.00
1.46

256,561

267,446

251,121244,491

230,636

241,360
600,030

810,657

876,835

3,128.2

2,962.8

2,780.3

2,516.2

2,374.0

2,452.5

1,743
880
2.0
1.9

1,747
882
3.3
1.8

1,782
874
2.9
1.6

1,818
886
4.1
2.0

1,847
902
4.5
2.2

1,825
897
4.5
2.0

6,424.4
1,788
920
5.4
2.0

11,954.8
1,741
904
4.9
2.8

13,734.3
1,739
919
5.2
2.6

Lost Time Injury Frequency: The number of lost time injuries per 1,000,000 work hours.
Total Recordable Injury Rate: The number of total recordable injuries per 1,000,000
hours worked.
*10 Includes scope 1, 2, and 3 (scope 3 refers to greenhouse gas emissions from transportation commissioned by the Company as a cargo owner)*11 Includes scope 1 and 2*12	Figures based on non-consolidated operations. Figures for the fiscal year ended March
31, 2014 and subsequent years are stated as of April 1 of the respective subsequent­fiscal year.
*13	Figures based on non-consolidated operations.

Financial and Other Information

2015/396.48
106.23

Initiatives to Support Value Creation

2014/3110.51
99.31

Value Creation Through Business Activities

2013/3114.67
81.71

Strategy*8*9

2012/3112.4378.93

Conversion Factors and Units:
Crude oil 1 kL = 6.29 bbl
Crude oil 1 kL = Natural gas 1,033.1 m3
boe: barrels of oil equivalentboe/d: barrels of oil equivalent per day

For non-financial data, see the webpage below.
https://www.japex.co.jp/english/csr/csrdata.html

JA P E X C o rp o r a t e R ep or t 2 0 2 051

Glossary

E&P Business• Enhanced/Improved oil recovery (EOR/IOR)	EOR, also known as tertiary recovery, involves the injection of heat,gaseous carbon dioxide or other chemicals into the reservoir. While
primary recovery uses natural oil emission energy and secondary
recovery increases the volume of oil recovered by maintaining or raising pressure in the oil sands layer, EOR alters the physical or chemical
behavior of the residual crude oil, thereby enhancing oil recovery. IOR
is a broader term referring to a range of methods aimed at improving
oil recovery, including secondary recovery.
• Exploration & production (E&P)
	Businesses that engage in the exploration, development, production,transportation and sale of oil and gas.
• Final investment decision (FID)	In the context of oil and gas projects, FID often refers to the final decision regarding investment before entering the development phase(i.e., facility design, procurement and construction). Prior to FID, relevant parties must meet all requirements, such as formulating robust
plans for development, marketing and fundraising; signing necessarycontracts; obtaining approval from authorities; and securing sufficienthuman resources.

•	Steam assisted gravity drainage (SAGD)	A modern technology that employs a pair of horizontal wells, one set
five meters above the other, drilled into an oil sands layer locatedaround 300 meters below the ground surface, with their horizontal
lengths ranging from 500 to 1,000 meters. A continuous injection of
steam into the oil sands layer via the upper well (the injection well)heats the bitumen and increases its fluidity, enabling it to flow down
into the lower well (the bitumen production well) assisted by gravity.
Bitumen is thus recovered to the above-ground production facilities.
• Western Canadian Select (WCS)
Heavy oil produced in western Canada.

Infrastructure/Utility Business• Japan crude cocktail (JCC)	The average price of crude oil imported by Japan and determined inreference to cost, insurance and freight (CIF).

•	Gas turbine combined cycle (GTCC)	A power generation method that combines gas and steam turbines.
The gas turbines are used to produce electricity, and the heat of theexhaust gas from the turbine is used to power the steam turbines andgenerate more electricity.

• Oil sand	Oil sands refer to sandstones containing crude oil that is extremely
viscous like tar and lacking in fluidity, unlike the crude oil typicallyfound in reservoirs. Crude oil recovered from oil sands is generally
referred to as bitumen or extra-heavy crude oil in accordance with
its viscosity.

New Business Development• Operator	A contractual term used in the exploration, development and production of oil and gas via collaboration between multiple partners; the“operator” is the partner commissioned to handle and manage actual
operations. Any partner to the contract other than the operator is a“non-operator.” Signing a joint operation contract, both the operator
and non-operator determine methods for making operational decisions and raising necessary funds before they launch the project.
• Production sharing contract (PSC)	A contract between the government of a host country and one or moreinvestors regarding the exploration, development and production of oil
by the investors under license and management by the host country.
Under the PSC, the government and investors share oil production inaccordance with set rates after the investors have recovered theircosts and expenses from oil marketing revenues.
• Reserve replacement ratio (RRR)	RRR is the ratio of growth in volume of proved reserves against production volume in a single fiscal year or other specific period of time.
As a numerical indicator for measuring business performance interms of oil and gas exploration and development, RRR is calculatedby dividing growth in the volume of proved reserves by the production volume.

52• Risk service contract	A contract between the government of a host country and an oil
company where the oil company provides specified services for
exploration, development and production of oil, in return for fixed
payment or allocation of oil commensurate with its production volume.
The proprietary rights of produced oil vests with the government.

J A PE X C o rpo ra t e Re po rt 2 0 2 0•	Carbon dioxide capture and storage (CCS)
Carbon dioxide capture, utilization and storage (CCUS)	CCS technologies separate and recover CO2 from gas emissions ofelectric power plants, factories, and other facilities, then inject andstore the CO2 in stable underground geologic formations. CCUS technologies effectively use the separated and recovered CO2 to enhance
oil recovery and for other applications and then store it.
• LNG bunkering
Supplying LNG fuel to vessels.
• Sustainable aviation fuel (SAF)	Jet fuel produced from sustainable sources with low CO2 emissions
throughout the entire cycle, from raw material production/collection to
final usage. In recent years, the International Aviation Trade
Association (IATA) changed the name from bio jet fuel to sustainableaviation fuel (SAF) because it is produced from various raw materials.

Contents

Management’s Discussion and Analysis��������������������������������������������������������������54
Consolidated Balance Sheet��������������������������������������������������������������������������������56
Consolidated Statement of Income���������������������������������������������������������������������58
Consolidated Statement of Comprehensive Income�������������������������������������������59
Consolidated Statement of Changes in Equity����������������������������������������������������60
Consolidated Statement of Cash Flows���������������������������������������������������������������62
Notes to Consolidated Financial Statements�������������������������������������������������������63
Independent Auditor’s Report������������������������������������������������������������������������������92
Main Businesses��������������������������������������������������������������������������������������������������95
Affiliates����������������������������������������������������������������������������������������������������������������96
Business and Other Risks������������������������������������������������������������������������������������98
Corporate Data���������������������������������������������������������������������������������������������������105

Financial
Data
For the year ended March 31, 2020
(From April 1, 2019 to March 31, 2020)

JA P E X C o rp o r a t e R ep or t 2 0 2 053

Management’s Discussion and Analysis

Overview of Operating Results
Operating Results
During the fiscal year ended March 31, 2020 (FY2020/3), net sales was ¥318,822 million, an increase of ¥50,842 million(+19.0%) year on year. Gross profit was ¥47,042 million, an increase of ¥12,196 million (+35.0%) year on year. Major factors
behind the year-on-year increases for net sales were growth in sales volume of crude oil and diluted bitumen in Japan
Canada Oil Sands Limited (JACOS) Hangingstone leases. The major factor behind the year-on-year increase for gross profit
was an increase in sales volume of diluted bitumen as well as an increase of diluted bitumen sales price stemming froma narrowing of the light-heavy differential* in the oil sands business.
* The differential between Western Canadian Select (WCS), which is the reference price for heavy crude oil from the oil sands, and the WTI, which is the reference price oflight crude oil.

Exploration expenses was ¥893 million, an increase of ¥104 million (+13.3%) year on year. Selling, general and administrative expenses was ¥31,864 million, an increase of ¥121 million (+0.4%) year on year. Despite these increases, operating profit was ¥14,283 million, an increase of ¥11,970 million (+517.4%) year on year.
Ordinary profit was ¥32,635 million, an increase of ¥20,112 million (+160.6%) year on year, due mainly to an increase individend income and the turnaround from foreign exchange losses to foreign exchange gains, despite a decrease in share of
profit of entities accounted for using equity method and a decrease in gain on reversal of asset retirement obligations in theprevious fiscal year.
Profit before income taxes increased by ¥18,829 million year on year to ¥31,903 million, due mainly to a decrease in gainon sales of non-current assets and the recognition of impairment loss on business assets related to Amarume Oil Field. Profit
attributable to owners of parent increased by ¥12,044 million year on year to ¥26,815 million.

Overview of Financial Position
Total assets at the end of this fiscal year decreased by ¥28,155 million from the previous fiscal year-end to ¥627,132 million.
Current assets increased by ¥46,966 million from the previous fiscal year-end, mainly due to increases in cash and deposits, and notes and accounts receivable—trade. Non-current assets decreased by ¥75,122 million from the previous fiscal
year-end. This was mainly due to a decrease in investment securities resulting from the fall in market values and a decreasein property, plant and equipment resulting from depreciation.
Liabilities decreased by ¥18,155 million from the previous fiscal year-end to ¥186,975 million.
Current liabilities increased by ¥3,359 million from the previous fiscal year-end. This was mainly due to an increase in notes
and accounts payable—trade despite a decrease in advances received included in other in current liabilities. Non-current­liabilities decreased by ¥21,515 million from the previous fiscal year-end. This was mainly due to a decrease in deferred tax
liabilities resulting from the above-mentioned fall in market values of investment securities and a decrease in long-term borrowings resulting from the reclassification of borrowings with repayments due in one year or less to current liabilities.
Net assets decreased by ¥9,999 million from the previous fiscal year-end to ¥440,157 million. The main factor was adecrease in valuation difference on available-for-sale securities, despite an increase in retained earnings.

54

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

Cash Flows
As of March 31, 2020, cash and cash equivalents (hereinafter “net cash”) increased by ¥37,625 million compared to the endof the previous fiscal year to ¥138,259 million. Below is a summary of cash flows for each activity.
(Cash flows from operating activities)
Net cash provided by operating activities amounted to ¥69,895 million. The main factors were recovery of recoverable
accounts of ¥41,040 million and ¥31,903 million in profit before income taxes.

Strategy(Cash flows from investing activities)
Net cash used in investing activities amounted to ¥18,701 million. Net cash was mainly used in payments of recoverable
accounts of ¥30,226 million and purchase of property, plant and equipment of ¥7,566 million, while net cash was mainly
provided by interest and dividends received of ¥18,820 million.
(Cash flows from financing activities)
Net cash used in financing activities was ¥13,743 million. Net cash was mainly used in repayments of long-term borrowingsof ¥6,307 million, interest paid of ¥4,729 million and dividends paid of ¥3,141 million.

Value Creation Through Business Activities

Dividend Policy
JAPEX has the basic policy on profit distribution to maintain long-term and stable dividends for shareholders. As a company
with the role of providing a stable supply of oil and natural gas essential for society to function, the specific dividend amountis set after giving comprehensive consideration to investments aimed at securing new, proved reserves worldwide and retaining earnings to fund development and expansion of our supply infrastructure in light of the medium- to long-term outlook forthe business environment. In addition to the above, we need to consider the level of earnings for each fiscal year and any
future funding needs.
Our basic policy is to pay dividends on surplus twice a year, in the form of interim and year-end dividends. The interim dividend is determined by resolution of the Board of Directors, whereas the year-end dividend is determined by resolution of theInitiatives to Support Value Creation

General Meeting of Shareholders.
Based on this policy, we decided to issue an annual dividend for FY2020/3 of ¥50 per share, split equally between theinterim dividend and the year-end dividend.
In accordance with the stipulations of Paragraph 5, Article 454 of the Companies Act of Japan, JAPEX’s Articles ofIncorporation permit the interim dividend to be determined by resolution of the Board of Directors, with September 30 as thedate of record.

Financial and Other Information
JA P E X C o rp o r a t e R ep or t 2 0 2 055

Consolidated Balance SheetJapan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2020

ASSETS

Millions of yen

Thousands of
U.S. dollars(Note 1)

2020

2019

2020

Current assets:
Cash and deposits (Notes 11 and 20)¥160,077¥117,468$1,482,194

Notes and accounts receivable—trade (Note 11)27,51020,825

254,722

Securities (Notes 4, 11 and 20)

4,000

2,330

37,037

Merchandise and finished goods (Note 3)

5,223

4,559

48,361

167

362

1,546

Work in process (Note 3)
Raw materials and supplies (Note 3)

11,141

7,589

103,157

Short-term loans receivable (Note 11)

19

4,575

175

4,946

8,410

45,796

(31)

(33)

(287)

213,054

166,087

1,972,722  Land16,67016,732

154,351   Buildings and structures

335,240

335,648

3,104,074  Wells

117,964

116,070

1,092,259   Machinery, equipment and vehicles

146,113

146,276

1,352,898   Construction in progress

31,466

26,825291,351  Other

37,96537,316

351,527  Less—accumulated depreciation(391,383)(369,754)(3,623,916)

Total property, plant and equipment

294,038

309,1142,722,574

6,823

7,399

63,175

6,823

7,399

63,175   Investment securities (Notes 4 and 11)

88,922

137,794

823,351   Long-term loans receivable (Note 11)

43

42

398

8,003

7,713

74,101

971

1,319

8,990

Other
Less—allowance for doubtful accounts
Total current assets

Non-current assets:
Property, plant and equipment (Notes 5 and 17)

Intangible assets:  Other
Total intangible assets

Investments and other assets:   Deferred tax assets (Note 7)   Retirement benefit asset (Note 8)   Other (Note 4)

16,03426,920148,462   Less—allowance for doubtful accounts

(44)

(46)

(407)

   Less—allowance for overseas investment loss

(715)

(1,057)(6,620)113,216

172,686

1,048,296

Total non-current assets

Total investments and other assets

414,078

489,200

3,834,055

Total assets¥627,132¥655,288$5,806,777

See notes to consolidated financial statements.

56

J A PE X C o rpo ra t e Re po rt 2 0 2 0

2020

2019

2020

¥ 12,237¥  7,666$  113,305

75

25

694

Other (Note 6)

23,425

24,686

216,898

Total current liabilities

35,73832,378330,907

118,774

127,715

1,099,759

9,878

22,33091,462

LIABILITIES AND NET ASSETS

Mission and Purpose

Millions of yen

Thousands of
U.S. dollars(Note 1)

Current liabilities:
Notes and accounts payable—trade (Note 11)
Provision for bonuses for directors (and other officers)

Strategy

Non-current liabilities:
Long-term borrowings (Notes 6 and 11)
Deferred tax liabilities (Note 7)
Provision for retirement benefits for directors (and other officers)

86

814

3,528

3,452

32,666

Asset retirement obligations (Note 13)

15,432

15,335

142,888

Other (Note 6)

3,535

3,831

32,731

Total non-current liabilities

151,236

172,752

1,400,333

Total liabilities

186,975

205,131

1,731,250

14,28814,288132,296

Value Creation Through Business Activities

88

Retirement benefit liability (Note 8)

Commitment and contingent liabilities (Notes 10, 12 and 14)
Net assets (Note 9):
Shareholders’ equity:
Share capital:   Issued—57,154,776 shares as of March 31, 2020 and 2019
Capital surplus
Retained earnings
Treasury shares; 2,303 shares as of March 31, 2020
2,207 shares as of March 31, 2019
Total shareholders’ equity

—

157

—

350,934

331,306

3,249,388

(11)

(10)

(101)

365,212345,741

3,381,592

33,061

66,296306,120

Initiatives to Support Value Creation  Authorized—120,000,000 shares

Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment

181

(2)

1,675

3,494

3,338

32,351Remeasurements of defined benefit plans

756

1,114

7,000

Total accumulated other comprehensive income

37,49470,747347,166

Non-controlling interests

37,45033,668346,759

Total net assets

440,157

450,156

4,075,527

Total liabilities and net assets¥627,132¥655,288$5,806,777

Financial and Other Information

Deferred gains or losses on hedges

See notes to consolidated financial statements.

JA P E X C o rp o r a t e R ep or t 2 0 2 057

Consolidated Statement of Income
Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2020

Millions of yen

Thousands of
U.S. dollars(Note 1)

2020

2019

2020

Net sales¥318,822¥267,980$2,952,055

Cost of sales (Note 3)

271,780

233,133

2,516,481

Gross profit

47,042

34,846435,574

Exploration expenses

893

788

8,268

Selling, general and administrative expenses (Note 16)

31,864

31,743

295,037

Operating profit

14,283

2,313

132,250

Interest income

1,096

1,598

10,148Dividend income

5,618

2,102

52,018

239

2

2,212

11,96012,550110,740

—

3,293

—

Foreign exchange gains (losses)

2,425(5,296)22,453

Interest expenses(4,641)(4,130)(42,972)

Gain (loss) on sales of non-current assets, net

(13)

656

(120)

Loss on retirement of non-current assets

(193)

(74)

(1,787)

Impairment loss (Note 17)

(524)

(30)

(4,851)Other, net

1,652

91

15,296

17,61910,760163,138

31,903

13,074295,398

Other income (expenses):Gain (loss) on sales of securities, net
Share of profit (loss) of entities accounted for using equity method
Gain on reversal of asset retirement obligations

Profit before income taxes
Income taxes (Note 7):
Income taxes—current

4,318

3,925

39,981

Income taxes—deferred469(5,179)

4,342

Profit(1,254)44,333

14,328251,055

Profit (loss) attributable to non-controlling interests

299

(441)

2,768

Profit attributable to owners of parent (Note 19)¥ 26,815¥ 14,770$  248,287

See notes to consolidated financial statements.

58

4,788
27,114J A PE X C o rpo ra t e Re po rt 2 0 2 0

Consolidated Statement of Comprehensive Income
Mission and Purpose

Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2020

Millions of yen

Thousands of
U.S. dollars(Note 1)

2020

2019

2020

¥27,114¥14,328$251,055(33,236)(20,366)(307,740)

184

(5)

1,703

Foreign currency translation adjustment(34)(1,705)(314)

Remeasurements of defined benefit plans, net of tax

(357)

(38)

(3,305)

74

(16)

685

ProfitValuation difference on available-for-sale securities
Deferred gains or losses on hedges Share of other comprehensive income of entities accounted for using
equity method
Total other comprehensive income(33,369)(22,132)(308,972)

Comprehensive income¥ (6,254)¥ (7,804)$ (57,907)¥ (6,437)¥ (7,455)$ (59,601)

183

(348)

1,694

Strategy

Other comprehensive income (Note 21):Comprehensive income attributable to:Non-controlling interests

Value Creation Through Business Activities

Owners of parent

See notes to consolidated financial statements.

Initiatives to Support Value Creation
Financial and Other Information
JA P E X C o rp o r a t e R ep or t 2 0 2 059

Consolidated Statement of Changes in Equity
Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2020
Millions of yen
Shareholders’ equity

Balance as of April 1, 2018
Dividends from surplus
Profit attributable to owners of parent Change in ownership interest of parent due to transactions with
non-controlling interests
Purchase of treasury shares Net changes in items other thanshareholders’ equity
Total changes during period
Balance as of April 1, 2019
Dividends from surplus
Profit attributable to owners of parent Change in ownership interest of parent due to transactions with
non-controlling interests
Change in scope of consolidation
Purchase of treasury shares Transfer from retained earnings tocapital surplus Net changes in items other thanshareholders’ equity
Total changes during period
Balance as of March 31, 2020

Share capital

CapitalsurplusRetainedearnings¥14,288¥  183¥317,679(1,143)
14,770Treasury shares

¥(10)

(26)
(0)

—
14,288(26)
157

13,627331,306(3,143)
26,815(0)(10)(4,192)(7)(0)—¥14,288

4,035(4,035)

(157)
¥   —

19,628¥350,934

Total shareholders’equity¥332,140(1,143)
14,770(26)(0)

13,600345,741(3,143)
26,815(4,192)
(7)
(0)
—

(0)
¥(11)

19,470¥365,212
Millions of yen

Accumulated other comprehensive income

Balance as of April 1, 2018
Dividends from surplus
Profit attributable to owners of parent Change in ownership interest of parent due to transactions with
non-controlling interests
Purchase of treasury shares Net changes in items other thanshareholders’ equity
Total changes during period
Balance as of April 1, 2019
Dividends from surplus
Profit attributable to owners of parent Change in ownership interest of parent due to transactions with
non-controlling interests
Change in scope of consolidation
Purchase of treasury shares Transfer from retained earnings tocapital surplus Net changes in items other thanshareholders’ equity
Total changes during period
Balance as of March 31, 2020
See notes to consolidated financial statements.

60

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Valuation­difference on
available-forsale securities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated othercomprehensive
incomeNoncontrollinginterests¥86,667¥  3¥5,149¥1,152¥92,973¥34,140

Total net
assets¥459,255(1,143)
14,770(26)(0)(20,370)(20,370)
66,296

(5)
(5)
  (2)

(1,810)(1,810)
3,338

(38)
(38)
1,114

(22,225)(22,225)
70,747(472)(472)
33,668(22,698)(9,098)450,156(3,143)
26,815(4,192)(7)(0)—(33,235)(33,235)¥33,061

184
184
¥181

156
156
¥3,494(357)(357)¥  756(33,252)(33,252)¥37,494

3,782
3,782
¥37,450(29,470)(9,999)¥440,157

Mission and Purpose

Thousands of U.S. dollars (Note 1)
Shareholders’ equity
Share capital$132,296

Retainedearnings$ 1,453 $3,067,648(29,101)
248,287

Treasury shares$ (92)(38,814)(64)(0)
37,361—$132,296(37,361)(1,453)
181,740$    — $3,249,388

Total shareholders’equity$3,201,305(29,101)
248,287
Strategy

Balance as of April 1, 2019
Dividends from surplus
Profit attributable to owners of parent Change in ownership interest of parent due to transactions with
non-controlling interests
Change in scope of consolidation
Purchase of treasury shares Transfer from retained earnings tocapital surplus Net changes in items other thanshareholders’ equity
Total changes during period
Balance as of March 31, 2020

Capitalsurplus(38,814)
(64)
(0)
—

(0)
$(101)

180,277$3,381,592
Thousands of U.S. dollars (Note 1)

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated othercomprehensive
income$613,851$  (18)$30,907$10,314$655,064

Noncontrollinginterests

Total net
assets$311,740 $4,168,111(29,101)
248,287(38,814)(64)(0)

Initiatives to Support Value Creation

Balance as of April 1, 2019
Dividends from surplus
Profit attributable to owners of parent Change in ownership interest of parent due to transactions with
non-controlling interests
Change in scope of consolidation
Purchase of treasury shares Transfer from retained earnings tocapital surplus Net changes in items other thanshareholders’ equity
Total changes during period
Balance as of March 31, 2020

Valuation­difference on
available-forsale securities

Value Creation Through Business Activities

Accumulated other comprehensive income—(307,731)(307,731)$306,120

1,703
1,703
$1,6751,444
1,444$32,351(3,305)(3,305)$ 7,000(307,888)
35,018 (272,870)(307,888)
35,018(92,583)$347,166 $346,759 $4,075,527

See notes to consolidated financial statements.

Financial and Other Information
JA P E X C o rp o r a t e R ep or t 2 0 2 061

Consolidated Statement of Cash Flows
Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2020

Cash flows from operating activities:
Profit before income taxes
Depreciation
Impairment loss
Loss on retirement of property, plant and equipment
Loss (gain) on valuation of short-term and long-term investment securities
Increase (decrease) in allowance for doubtful accounts
Decrease (increase) in retirement benefit asset
Increase (decrease) in retirement benefit liability Increase (decrease) in provision for retirement benefits for directors(and other officers)
Increase (decrease) in allowance for overseas investment loss
Gain on reversal of asset retirement obligations
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)
Loss (gain) on sales of short-term and long-term investment securities
Share of loss (profit) of entities accounted for using equity method
Recovery of recoverable accounts
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in accrued consumption taxes
Other, net   Subtotal
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of securities
Proceeds from sales and redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for asset retirement obligations
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Payments of recoverable accounts
Loan advances
Collection of loans receivable
Interest and dividends received
Proceeds from dividends of residual property
Proceeds from capital reduction of investments
Proceeds from transfer of mining rights
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from short-term borrowings
Repayments of short-term borrowings
Repayments of long-term borrowings
Purchase of treasury shares
Dividends paid
Dividends paid to non-controlling interests
Interest paid
Repayments of lease obligations
Proceeds from share issuance to non-controlling shareholders
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 20)
See notes to consolidated financial statements.

62

J A PE X C o rpo ra t e Re po rt 2 0 2 0Millions of yen

Thousands of
U.S. dollars(Note 1)

2020

2019

2020

¥ 31,903
25,190
524
136
—
(4)
347
75

¥ 13,074
23,296
30
74
4
(4)
132
(43)

$  295,398
233,240
4,851
1,259
—
(37)
3,212
694

2
(342)
—
(6,714)
4,641(2,986)(239)(11,960)
41,040(6,695)(4,029)3,831(668)(2,140)71,914(2,018)69,8952(924)(3,293)(3,700)
4,130
5,444
(2)
(12,550)
11,1185,217(1,188)(11,131)970
8,443
39,101(8,130)30,97018(3,166)—(62,166)
42,972(27,648)(2,212)(110,740)
380,000(61,990)(37,305)
35,472(6,185)(19,814)665,870(18,685)
647,175(77,870)
70,869——(7,566)
11
(111)
(78)
(373)
1,024
(30,226)(26)
4,484
18,820
5
2,138
—
196
(18,701)(68,859)
66,992(30)
500(12,955)
1,337
(734)
(221)
(52)
2
(25,107)(26)
6,912
16,126
21
1,636
543
(56)
(13,969)(721,018)
656,194——(70,055)101(1,027)(722)(3,453)9,481(279,870)(240)
41,518174,259
46
19,796—
1,814(173,157)

49,918(48,615)(6,307)(0)(3,141)(516)(4,729)(357)
4(13,743)
175
37,625
100,633¥138,259

2,939(7,877)(4,990)(0)(1,143)(183)(3,865)(404)
32(15,493)(766)
740
99,892¥100,633

462,203(450,138)(58,398)(0)(29,083)(4,777)(43,787)(3,305)37(127,250)
1,620
348,379
931,787$1,280,175

Notes to Consolidated Financial Statements
Mission and Purpose

Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2020

1. Basis of Presenting Consolidated Financial Statements

Strategy

The accompanying consolidated financial statements of Japan Petroleum Exploration Co., Ltd. (the “Company”)
and its consolidated subsidiaries (together, the “Group”) have been prepared in accordance with the provisions
set forth in the Financial Instruments and Exchange Act of Japan and its related accounting regulations and in
conformity with accounting principles generally accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial Reporting Standards (“IFRS”).
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan.

Value Creation Through Business Activities

The consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates.
As permitted by the regulations under the Financial Instruments and Exchange Act of Japan, amounts of lessthan one million yen have been rounded down. As a result, the totals shown in the accompanying consolidated
financial statements in yen do not necessarily agree with the sums of the individual amounts.
The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto
were translated from the presented Japanese yen amounts into U.S. dollar amounts at the rate of ¥108 = U.S.
$1, the approximate rate of exchange at March 31, 2020, and were then rounded down to the nearest thousand. As a result, the totals shown in the accompanying consolidated financial statements in U.S. dollar do notnecessarily agree with the sums of the individual amounts. This translation of Japanese yen amounts into U.S.
dollar amounts is included solely for convenience of readers outside Japan. Such translation should not be construed as a representation that Japanese yen could be converted into U.S. dollars at that or any other rate.

2. Significant Accounting Policies

Initiatives to Support Value Creation(1)	Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The consolidated financial statements as of and for the year ended March 31, 2020 include the accounts of theCompany and its 19 (21 in 2019) significant subsidiaries.
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able
to exercise control over operations are consolidated, and those companies over which the Group has the ability
to exercise significant influence are accounted for using the equity method.
For the year ended March 31, 2020, 11 (11 in 2019) affiliates are accounted for using the equity method.
Investments in the remaining unconsolidated subsidiaries and affiliates are stated at cost. If the equity methodof accounting were applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
The difference between the cost and the underlying net equity at fair value of investments in entities accounted for using the equity method is amortized by the straight-line method over a period not exceeding 20 years,
except for minor accounts that are charged to income in the period of acquisition.
The accounts of certain consolidated subsidiaries with a fiscal year-end of December 31 are consolidated on
the basis of their fiscal year-end. The necessary adjustments have been made to the consolidated financial
statements for any significant transactions that took place between the day following their balance sheet date
and the consolidated balance sheet date.
Entities accounted for using the equity method whose fiscal year-ends are different than that of the Company
are accounted for on the basis of the entities’ respective fiscal year-end.

Financial and Other Information(2) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rates
prevailing at the consolidated balance sheet dates.
All revenues and expenses associated with foreign currencies are translated into yen at the exchange rates
prevailing when such transactions were made. The resulting exchange gains or losses are credited or charged
to income.
The revenue and expense accounts as well as balance sheet accounts of the foreign consolidated subsidiaries are translated into yen at the exchange rates in effect at their balance sheet dates, except for the components of net assets excluding non-controlling interests. The components of net assets excluding non-controllinginterests are translated into yen at their historical exchange rates.
Differences arising from the translation are presented as foreign currency translation adjustments andnon-controlling interests in the accompanying consolidated financial statements.

JA P E X C o rp o r a t e R ep or t 2 0 2 063

Notes to Consolidated Financial Statements(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, the Company considers cash on hand, readily available
deposits and highly liquid short-term investments with maturities of three months or less when purchased thatare exposed to an insignificant risk of changes in value to be cash and cash equivalents.
(4) Securities and investment securities
In general, securities are classified into three categories: trading, held-to-maturity or available-for-sale securities.
Available-for-sale securities with a determinable market value are stated at fair value based on market value atthe balance sheet date, and unrealized gains and losses, net of applicable income taxes, are reported as a separate component of net assets. Cost of securities sold is computed based on the moving average method.
Available-for-sale securities without a determinable market value are stated at the moving average cost.
(5) Inventories
Merchandise and finished goods are mainly stated at the lower of cost, determined by the first-in, first-out method, or net realizable value. Raw materials and supplies are mainly stated at the lower of cost, determined by themoving average method, or net realizable value.
(6) Property, plant and equipment (excluding leased assets)
Buildings (excluding attached facilities) acquired on or after April 1, 1998 and facilities attached to buildings andstructures of certain domestic consolidated subsidiaries acquired on or after April 1, 2016 as well as the Sendai
pipelines, the Shiroishi-Koriyama gas pipelines, Soma-Iwanuma gas pipelines, assets of the Hokkaido District
Office and Soma District Office of the Company and property, plant and equipment held by three domestic consolidated subsidiaries are depreciated by the straight-line method.
Property, plant and equipment held by three foreign consolidated subsidiaries are depreciated by the unit ofproduction method.
Other property, plant and equipment (excluding leased assets) are depreciated by the declining-balance method.
The useful lives of property, plant and equipment are summarized as follows:   Buildings and structures
2 to 60 years   Wells
3 years   Machinery, equipment and vehicles 2 to 22 years(7) Intangible assets (excluding leased assets)
Intangible assets are amortized by the straight-line method.
Capitalized computer software costs are amortized by the straight-line method over a period of five years, andthose of one foreign consolidated subsidiary are mainly amortized by the unit of production method.
(8) Share issuance costs and development expenses
Share issuance costs and development expenses are charged to income when incurred.
(9) Leased assets
For finance leases which do not transfer ownership of the leased assets to the lessee, leased assets are amortized by the straight-line method over the lease terms with no residual value.
(10) Impairment on non-current assets
The Group reviews its non-current assets for impairment whenever events or changes in circumstance indicate
the carrying amount of an asset or asset group may not be recoverable.
The impairment loss is measured as the amount by which the carrying amount of the asset or asset groupexceeds its net realizable value, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling value at balance sheet date.
(11) Provision for retirement benefits for directors (and other officers)
Consolidated subsidiaries recognize provision for retirement benefits for directors and other officers at theamount required according to the internal regulations at the end of the fiscal year.
(12) Allowance for doubtful accounts
The allowance for doubtful accounts is stated at the amount determined based on the historical experience ofbad debt with respect to ordinary receivables, plus an estimate of uncollectible amounts determined by reference to specific doubtful receivables from customers which are experiencing financial difficulties.

64

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose(13) Provision for bonuses for directors (and other officers)
The provision for bonuses for directors and other officers is stated at the estimated amount of payment at theend of the fiscal year.
(14) Allowance for overseas investment loss
The allowance for overseas investment loss is stated at the amount determined based on the investees’ financial
position and certain other factors for possible losses arising from investments in the exploration and development of overseas natural resources.

Strategy(15) Asset retirement obligations
Asset retirement obligations recognized by the Group are determined based on the estimated costs of decommissioning oil and natural gas wells and production facilities in accordance with laws, land lease contracts, etc.
for wells and production facilities in Japan and overseas, and the appropriate discount rates.
(16) Retirement benefits(a) Method of attributing expected benefit to periods
The retirement benefit obligations for employees are attributed to each period by the benefit formula method
over the estimated years of service of the eligible employees.

Value Creation Through Business Activities(b) Accounting treatment of actuarial gains and losses and prior service costs
Prior service costs are amortized by the straight-line method over a certain period (10 years), which is shorter
than the average remaining years of service of the employees.
Actuarial gains and losses are amortized in the following year in which the gains or losses are recognized by
the straight-line method over a certain period (10 years), which is shorter than the average remaining years ofservice of the employees.
(c) Application of simplified method for smaller enterprises
Certain consolidated subsidiaries apply the simplified method for calculating retirement benefit expenses and liabilities based on the assumption that the benefit payable, which are calculated as if all eligible employees voluntarily terminated their employment at fiscal year end, approximates the retirement benefit obligation at year end.

Initiatives to Support Value Creation(17) Hedge accounting
Deferral hedge accounting is adopted for hedge transactions. Foreign exchange forward contracts are accounted
for by the allocation method if the foreign exchange forward contracts meet certain criteria to adopt the method.
The following summarizes hedging derivative instruments used by the Group and items hedged:   Hedging instruments: Foreign exchange forward contracts and crude oil swaps   Hedged items:
Accounts receivable—trade, accounts payable—trade and accounts payable—otherIn addition, the nominal amount of the derivative transaction is limited to within the scope of actual demand,and the Group does not engage in speculative derivative transactions.
(18) Recognition of revenue and costs of construction contracts
The Group applies the percentage-of-completion method (the cost-comparison method is used to estimate theprogress of the construction activity) for construction contracts, if the outcome of the construction activity isdeemed certain at the end of the fiscal year. For contracts where the outcome of activity is uncertain, the completed-contract method is applied.

Financial and Other Information(19) Research and development expenses
Research and development expenses are charged to income when incurred.
(20) Income taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts forincome tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which the temporary differences are expected to be settled or realized.
The effect of deferred tax assets and liabilities due to change in tax rate is recognized in the statement of income
for the period including the enacted date.

JA P E X C o rp o r a t e R ep or t 2 0 2 065

Notes to Consolidated Financial Statements(21) Accounting standards issued but not yet effective- “ Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (“ASBJ”) Statement No.
29, revised on March 31, 2020)- “ Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, revisedon March 31, 2020)- “ Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19,
revised on March 31, 2020)(a) Overview
International Accounting Standards Board (“IASB”) and Financial Accounting Standards Board of the United Statesof America (“FASB”) jointly developed a comprehensive accounting standard for revenue recognition and issued“Revenue from Contracts with Customers” (IFRS No. 15 issued by IASB and Topic 606 issued by FASB) in May
2014. Considering the situation that IFRS No. 15 has become applicable from the fiscal year beginning on andafter January 1, 2018 and Topic 606 from the fiscal year beginning after December 15, 2017, ASBJ developed acomprehensive accounting standard for revenue recognition and issued it together with implementation guidance.
ASBJ’s basic policy in developing the accounting standard for revenue recognition was to establish accounting standards as a starting point to adopt basic principles of IFRS No. 15 from the viewpoint of comparability offinancial statements which is one of benefits of maintaining consistency with IFRS No. 15, and to add alternative
treatments to the extent not to impair comparability in case where previous practice and others in Japan should
be considered.
Date of application
The “Accounting Standard for Revenue Recognition,” etc. are applied effective from the beginning of the fiscal year
ending March 31, 2022.
Effect of application
The effect of applying the “Accounting Standard for Revenue Recognition,” etc. on the consolidated financial statements is currently under assessment.
- “ Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, issued on July 4, 2019)- “ Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9, revised on July 4, 2019)- “ Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, revised on July 4, 2019)- “ Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, issued
on July 4, 2019)- “ Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19,
revised on March 31, 2020)(b) Overview
The ASBJ promoted an initiative to enhance comparability of the requirements between the Japanese accounting
standards and international accounting standards, primarily in the areas of guidance on the fair values of financial
instruments and their disclosures, and issued “Accounting Standard for Fair Value Measurement,” etc., considering
the circumstance where the IASB and the FASB have prescribed almost the similar detailed guidance (IFRS 13“Fair Value Measurement” issued by IASB and Accounting Standards Codification Topic 820 “Fair Value
Measurement” issued by FASB).
The ASBJ’s fundamental policies adopted for developing the “Accounting Standard for Fair Value Measurement,”
etc. are, in principle, to implement all the requirements of IFRS 13 from the viewpoint of enhancing the comparability of the financial statements of domestic and overseas companies by prescribing unified measurement methods,
and also to prescribe exceptional treatments for individual matters so that comparability would not be impaired
while the accounting practices that have conventionally been adopted in Japan are taken into account.
Date of application
The “Accounting Standard for Fair Value Measurement,” etc. are applied effective from the beginning of the fiscal
year ending March 31, 2022.
Effect of application
The effect of applying the “Accounting Standard for Fair Value Measurement,” etc. on the consolidated financial
statements is currently undetermined.
- “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31, issued on March 31, 2020)

66

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose
Strategy(c) Overview
The ASBJ developed and issued “Accounting Standard for Disclosure of Accounting Estimates” considering thecircumstance where the ASBJ received comments requesting consideration for notes disclosure requirement
regarding sources of estimation uncertainty in the Japanese accounting standards since disclosure of such information is required by Paragraph 125 of IAS 1 “Presentation of Financial Statements” (“IAS 1”) issued by the IASB in2003 and is highly useful for users of financial statements.
The ASBJ’s fundamental policies adopted for developing the “Accounting Standard for Disclosure of Accounting
Estimates” are, in principle, to make reference to the requirements of Paragraph 125 of IAS 1 by presenting principles (disclosure objectives), not enhancing existing notes disclosures, and requiring each entity to determine specific contents of disclosure along with the disclosure objectives.
Date of application
The “Accounting Standard for Disclosure of Accounting Estimates” is applied effective from the end of the fiscal
year ending March 31, 2021.
- “ Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” (ASBJ
Statement No. 24, revised on March 31, 2020)

Value Creation Through Business Activities(d) Overview
The ASBJ made required revisions and issued the revised “Accounting Standard for Accounting Policy Disclosures,
Accounting Changes and Error Corrections” considering the circumstance where the ASBJ received proposals forconsideration of enhancement of notes disclosure information on “accounting policies and procedures adopted
when requirements under the relating accounting standards are not clearly defined.”
When enhancing notes disclosure on “accounting policies and procedures adopted when requirements under
the relating accounting standards are not clearly defined,” note 1-2 of the Business Accounting Principles should
be followed to avoid affecting accounting practices when requirements under the relating accounting standards areclearly defined.
Date of application
The “Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” isapplied effective from the end of the fiscal year ending March 31, 2021.

Initiatives to Support Value Creation(22) Additional information
Financial covenants
A part of loans from financial institutions of JAPEX Montney Ltd., a consolidated subsidiary of the Company,
amounting to ¥29,690 million ($274,907 thousand) includes certain financial covenants clauses. JAPEX MontneyLtd. has been breaching the financial covenants clauses as it has been in a state of insolvency. However, creditor
financial institutions have agreed to suspend execution of their rights in relation to the forfeiture of the benefit oftime until March 2021.

JA P E X C o rp o r a t e R ep or t 2 0 2 0

Financial and Other Information

Accounting estimates in connection with the spread of COVID-19 infection
The spread of COVID-19 infection is still expanding at March 31, 2020 and domestic and overseas economic
activities have been considerably stagnant due to restriction on movement including stay-at-home request andothers. The business activities of the Group have also been affected to a certain degree, such as suspension of thedevelopment and production operations in the Garraf Oil Field in the south of the Republic of Iraq as explained in
Note. 23 Subsequent Events.
The effect of COVID-19 infection on business activities of the Group is considered to be short-term and the situation will recover gradually in the fiscal year ending March 31, 2021 and thereafter although degree of its spreadand timing of its cessation is uncertain and difficult to determine. The effect is assumed to be limited although sales
volume of crude oil, natural gas, diluted bitumen, electricity and others may temporarily decline. The CIF price of
crude oil is expected to recover gradually to $40 per barrel during the year ending March 31, 2021 and to the pricelevel before the spread of COVID-19 infection thereafter.
The accounting estimates on impairment of non-current assets and recoverability of deferred tax assets arehighly uncertain if there are changes in assumptions including period for recovery in economy and effect of COVID19 infection is prolonged. There is a possibility to recognize impairment losses on non-current assets or a writedown of deferred tax assets recorded on the consolidated balance sheet if revenue and cash flows are expected
to decrease further due to decline in the sales prices and the sales volume as these items are largely dependent on
estimates of future revenues and cash flows generated from the primary business activities of the Group.

67

Notes to Consolidated Financial Statements

3. Inventories
The amount of book value reduced due to a decline in profitability which is included in cost of sales for the years
ended March 31, 2020 and 2019 are ¥566 million ($5,240 thousand) and ¥2,033 million, respectively.

4. Securities and Investment Securities
Securities and investment securities held by the Group are all classified as available-for-sale securities.
(1) Information of available-for-sale securities as of March 31, 2020 and 2019 is as follows:
Millions of yen

Thousands of U.S. dollars

Acquisition
cost

Unrealized
gain (loss)

Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥68,709¥23,220¥45,489$636,194$215,000$421,194  Corporate bonds

—

—

—

—

—

—

   Other debt securities

—

—

—

—

—

—

—

—

—

—

—

—

68,70923,22045,489636,194

215,000

421,194

11

11

(0)

101

101

(0)

  Corporate bonds

59

60

(0)

546

555

(0)

   Other debt securities

—

—

—

—

—

—

4,000

4,000

—

37,03737,037—

March 31, 2020
Carrying value
Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Debt securities:

Other
Subtotal
Securities whose carrying value does not exceed theiracquisition cost:
Equity securities
Debt securities:

Other
Subtotal
Total

4,071

4,071

(0)

37,694

37,694(0)¥72,781¥27,292¥45,488$673,898$252,703$421,185

Millions of yen
Acquisition
cost

Unrealized
gain (loss)¥114,340¥22,552¥91,787  Corporate bonds

30

30

0

   Other debt securities

—

—

—

—

—

—

114,370

22,582

91,787

1,326

1,464

(137)

—

—

—
—

March 31, 2019
Carrying value
Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Debt securities:

Other
Subtotal
Securities whose carrying value does not exceed theiracquisition cost:
Equity securities
Debt securities:  Corporate bonds   Other debt securities

—

—

Other

2,300

2,300

—

Subtotal

3,626

3,764

(137)

¥117,997¥26,346¥91,650

Total

68

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

Unlisted equity securities, carrying values of which as of March 31, 2020 and 2019 were ¥2,023 million ($18,731
thousand) and ¥1,830 million, respectively, are not included in the above tables as no quoted market prices wereavailable and it was extremely difficult to determine the fair value.
(2)	Information on sales of securities classified as available-for-sale for the years ended March 31, 2020 and2019 is as follows:
Millions of yen

Thousands of U.S. dollars

Aggregate
loss

Sales amount

Aggregate
gain

Aggregate
loss¥1,024¥240¥1$9,481$2,222$9  Corporate bonds

—

—

—

—

—

—

   Other debt securities

—

—

—

—

—

—

—

—

—

—

—

—

¥1,024¥240¥1$9,481$2,222$9March 31, 2020

Strategy

Sales amount

Aggregate
gain

Available-for-sale securities:
Equity securities
Debt securities:

Other
Total

Millions of yen
Aggregate
gain

Aggregate
loss

¥—

¥—

¥—

  Corporate bonds

—

—

—

   Other debt securities

—

—

—

—

—

—

¥—

¥—

¥—

Value Creation Through Business Activities

Sales amountMarch 31, 2019
Available-for-sale securities:
Equity securities
Debt securities:

Other
Total

Initiatives to Support Value Creation(3)	During the year ended March 31, 2020, the Group recorded no loss on valuation of securities. During theyear ended March 31, 2019, the Group recorded losses on valuation of securities in the amount of ¥4 million(loss on valuation of available-for-sale securities whose fair value is extremely difficult to determine). However,allowance for overseas investment loss was recorded, and there was no impact on profit and loss during theyear ended March 31, 2019. In addition, if the market value of the security declines by 50% or more from its
acquisition cost as of the end of the fiscal year, the Group recognizes the difference between the market
value and the acquisition cost as an impairment loss. If the decline ranges between about 30% and 50%, theGroup recognizes an impairment loss for the necessary amount considering its recoverability.
(4)	Investments in unconsolidated subsidiaries and affiliates at March 31, 2020 and 2019 were ¥18,117 million($167,750 thousand) and ¥20,297 million, respectively.
(5)	As of March 31, 2020 and 2019, investment securities of ¥624 million ($5,777 thousand) and ¥503 million
were pledged as collateral for loans payable of subsidiaries and affiliates.

Financial and Other Information

5. Reduction Entry for Property, Plant and Equipment
The amount deducted from the acquisition costs of property, plant and equipment due to government subsidies
received, etc. as of March 31, 2020 and 2019 is as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

Buildings and structures¥   42¥   73$   388

Machinery, equipment and vehicles

4,841

4,892

44,824

198

198

1,833

Other

JA P E X C o rp o r a t e R ep or t 2 0 2 069

Notes to Consolidated Financial Statements

6. Long-term Borrowings and Lease Obligations
Long-term borrowings at March 31, 2020 and 2019 consist of the following:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥125,607¥134,115$1,163,027

125,607

134,115

1,163,027(6,833)(6,399)(63,268)¥118,774¥127,715$1,099,759

Loans from banks and others
Unsecured
Less—current portion

As of March 31, 2020, the weighted-average interest rate for the long-term borrowings balance was 2.84%.
The aggregate annual maturities of long-term borrowings subsequent to March 31, 2020 are as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars¥  6,833$   63,268

2021
2022

12,731

117,879

2023

12,731

117,879

2024

12,731

117,8792025

12,721

117,7872026 and thereafter

68,258632,018¥126,009$1,166,750

Total

The Company and certain consolidated subsidiaries have entered into overdraft agreements and loan commitment
agreements amounting to ¥143,419 million ($1,327,953 thousand) with six banks and ¥151,652 million with six
banks at March 31, 2020 and 2019, respectively, to facilitate efficient procurement of working capital. The borrowings outstanding under the overdraft agreements and loan commitment agreements as of March 31, 2020 and2019 were ¥62,558 million ($579,240 thousand) and ¥63,381 million, respectively; therefore, the unused balancewas ¥80,860 million ($748,703 thousand) and ¥88,271 million as of March 31, 2020 and 2019, respectively.
Lease obligations included in other in non-current liabilities at March 31, 2020 and 2019 consist of the following:
Millions of yen

Lease obligations
Less—current portion

Thousands of
U.S. dollars

2020

2019

2020

¥2,209¥2,519$20,453

(321)

(348)

(2,972)¥1,888¥2,171$17,481

The aggregate annual maturities of lease obligations subsequent to March 31, 2020 are as follows:
Millions of yen

Thousands of
U.S. dollars

2021¥  321$ 2,972

2022

255

2,361

2023

208

1,925

Year ending March 31,

70

J A PE X C o rpo ra t e Re po rt 2 0 2 0

2024

184

1,703

2025

177

1,638

2026 and thereafter

1,063

9,842

Total

¥2,209$20,453

Mission and Purpose

7. Income Taxes
Income taxes imposed on the Company and its domestic consolidated subsidiaries comprise corporation,
inhabitants and enterprise taxes. The statutory tax rate applicable to the Company was approximately 28.0% for
the years ended March 31, 2020 and 2019. Income taxes of five foreign consolidated subsidiaries (six in 2019)are based principally on the tax rates applicable in their countries of incorporation.
The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2020
and 2019 differ from the statutory tax rates for the following reasons:

Effect of: Unrecognized tax effect accounting on net tax loss carried forward of
consolidated subsidiaries

2020

2019

28.0 %

28.0 %

3.1

25.4

Exploration expenses deducted for income tax purposes

(0.8)

(2.6)

Dividends income, etc. not taxable for income tax purposes

(5.1)

(3.3)

—

(11.0)

Utilization of tax loss carried forward

0.2

11.2

Consolidation adjustment for equity method(5.7)(15.5)

Change in valuation allowance

(7.6)

37.8

—

(20.3)Tax rate difference with consolidated subsidiaries

(1.7)

(2.9)

Tax system differences for foreign consolidated subsidiaries

(0.3)

(2.5)

Consolidation adjustment

2.5

(9.0)

Tax credits—(46.5)

Foreign tax

Other, net

2.4

1.6

Effective tax rates

15.0%(9.6)%

Value Creation Through Business Activities

Expenses not deductible for income tax purposes

Strategy

Statutory tax rates

Initiatives to Support Value Creation
Financial and Other Information
JA P E X C o rp o r a t e R ep or t 2 0 2 071

Notes to Consolidated Financial Statements

The significant components of deferred tax assets and liabilities at March 31, 2020 and 2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

Allowance for overseas investment loss¥   200¥    296$  1,851

Net tax loss carried forward (Note)

12,238

11,563

113,314Retirement benefit liability

1,032

1,008

9,555

Depreciation

26,85625,559248,666

Deferred tax assets:

Payable for retirement benefits for directors and other officers

64

69

592

4,197

4,285

38,861

907

894

8,398

Investment securities

1,318

1,454

12,203

Tax credit carried forward

6,139

6,795

56,842

Other

6,651

8,832

61,583

Subtotal

59,60560,760551,898

Asset retirement obligations
Impairment loss on non-current assets

Valuation allowance for net tax loss carried forward (Note)(5,846)(5,184)(54,129) Valuation allowance for total of deductible temporary differences(33,069)(36,399)(306,194)

Total valuation allowance(38,916)(41,584)(360,333)

Total deferred tax assets

20,68919,176

191,564

Deferred tax liabilities:
Reserve for exploration(5,398)(5,752)(49,981)

Valuation difference on available-for-sale securities(12,431)(25,355)(115,101)

Reserve for advanced depreciation of non-current assets

(221)

(230)

(2,046)

Undistributed earnings of foreign subsidiaries and affiliates

(437)

(375)

(4,046)

Reserve for special depreciation

(56)

(84)

(518)

Retirement benefit asset

(272)

(369)

(2,518)(23,611)

Depreciation of foreign subsidiaries(2,550)—Other(1,197)(1,626)(11,083)

Total deferred tax liabilities(22,564)(33,793)(208,925)

Net deferred tax liabilities¥ (1,875)¥(14,617)$ (17,361)(Note) Net tax loss carried forward and breakdown of deferred tax assets thereof by expiration dates
Millions of yen

March 31, 2020

Net tax loss carried forward (*1)

Expire in
one yearor less

Expire after
one yearthroughfive years

Expire after
five years
throughten years

Expire after
ten years/No
expiration date

Total (*2)

¥51

¥311

¥796

¥11,078¥12,238

Valuation allowance

(51)

(254)

(781)

(4,759)(5,846)

Deferred tax assets

¥—

¥ 57

¥ 15

¥ 6,318¥ 6,391

Expire in
one yearor less

Expire after
one yearthroughfive years

Expire after
five years
throughten years

Expire after
ten years

Total (*2)

¥47

¥248

¥933

¥10,334¥11,563

Millions of yen

March 31, 2019

Net tax loss carried forward (*1)
Valuation allowance

(47)

(248)

(809)

(4,079)(5,184)

Deferred tax assets

¥—

¥  —

¥124

¥ 6,254¥ 6,378

Expire in
one yearor less

Expire after
one yearthroughfive years

Expire after
five years
throughten years

Expire after
ten years/No
expiration date

Total (*2)$472

$2,879$7,370$102,574$113,314

Thousands of U.S. dollars

March 31, 2020

Net tax loss carried forward (*1)
Valuation allowance(472)(2,351)(7,231)(44,064)(54,129)

Deferred tax assets$ —$  527$  138$ 58,500$ 59,175(*1) Net tax loss carried forward is calculated using the statutory tax rate.
(*2) Deferred tax assets of ¥6,391 million ($59,175 thousand) and ¥6,378 million are recognized for net tax loss carried forward of¥12,238 million ($113,314 thousand) and ¥11,563 million (calculated using statutory tax rate) for the years ended in March 31,
2020 and 2019, respectively. Valuation allowance has not been recognized for the net tax loss carried forward which is expected to be recoverable from the estimated taxable income in the future.

72

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

8. Retirement Benefit Plans(1) Overview of retirement benefit plans
The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e., defined benefit corporate
pension plans and lump-sum payment plans. The plans cover substantially all employees, and the amounts to be
paid are determined by their respective basic rates of pay at retirement, length of service, and termination reasons.
Certain domestic consolidated subsidiaries participate in the Smaller Enterprise Retirement Allowance Mutual Aid
System and calculate retirement benefit liability and retirement benefit expenses using the simplified method.
Strategy(2) Defined benefit plans(a) 	The reconciliation between retirement benefit obligations at the beginning of period and the end of period(excluding plans applying the simplified method shown in (c)) is as follows:

Retirement benefit obligations at beginning of period

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥16,226$148,231

940

949

8,703

Interest costs

139

141

1,287

Actuarial gains and losses

(426)

(14)

(3,944)Retirement benefits paid

(1,116)(1,293)(10,333)¥15,546¥16,009$143,944

Retirement benefit obligations at end of period

Value Creation Through Business Activities¥16,009

Service costs(b)	The reconciliation between plan assets at the beginning of period and the end of period (excluding plans
applying the simplified method shown in (c)) is as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

Plan assets at beginning of period¥14,861¥15,144$137,601

Expected return on plan assets

148

151

1,370

Actuarial gains and losses

(635)

(27)

(5,879)

473

496

4,379

Retirement benefits paid

(813)

(903)

(7,527)

Plan assets at end of period¥14,035¥14,861$129,953

Initiatives to Support Value Creation

Contribution from employer(c)	The reconciliation between retirement benefit liabilities of plans applying the simplified method at the beginning of period and the end of period is as follows:

Retirement benefit liability at beginning of period

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥962

$9,129

215

229

1,990

Retirement benefits paid

(72)

(128)

(666)

Contribution to plans

(83)

(77)

(768)

¥1,045¥986$9,675Retirement benefit liability at end of period

JA P E X C o rp o r a t e R ep or t 2 0 2 0

Financial and Other Information¥  986Retirement benefit expenses

73Notes to Consolidated Financial Statements(d) 	The reconciliation between retirement benefit obligations and plan assets at the end of period and retirement
benefit liability and retirement benefit asset on the consolidated balance sheets is as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

Funded retirement benefit obligations¥13,063¥13,542$120,953

Plan assets(14,035)(14,861)(129,953)(971)(1,319)(8,990)Unfunded retirement benefit obligations
Net retirement benefit liability (asset) on
consolidated balance sheet

3,528

3,452

32,666

2,557

2,133

23,675Retirement benefit liability

3,528

3,452

32,666Retirement benefit asset
Net retirement benefit liability (asset) on
consolidated balance sheet(971)(1,319)(8,990)¥ 2,557¥ 2,133$ 23,675

Millions of yen

Thousands of
U.S. dollars(e) The breakdown of retirement benefit expenses is as follows:

Service costs

2020

2019

2020

¥940

¥  949$8,703

Interest costs

139

141

1,287

Expected return on plan assets

(148)

(151)

(1,370)(1,703)

Amortization of actuarial gains and losses

(184)

62

Amortization of prior service costs

(103)

(103)

(953)

Retirement benefit expenses calculated by simplified method

215

229

1,990

Retirement benefit expenses on defined benefit plans¥858¥1,127$7,944(f) Remeasurements of defined benefit plans recorded under other comprehensive income
The breakdown of items recorded in remeasurements of defined benefit plans, before tax, recorded under othercomprehensive income is as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

Prior service costs¥(103)¥(103)$  (953)

Actuarial gains and losses

(393)

50

(3,638)

Total¥(496)¥ (53)$(4,592)(g) 	Remeasurements of defined benefit plans recorded under accumulated other comprehensive income
The breakdown of items recorded in remeasurements of defined benefit plans, before tax effect, recorded underaccumulated other comprehensive income is as follows:
Millions of yen

Unrecognized prior service costs
Unrecognized actuarial gains and losses
Total

74

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Thousands of
U.S. dollars

2020

2019

2020

¥   82¥  185$  759

968

1,361

8,962

¥1,050¥1,547$9,722

Mission and Purpose(h) Plan assets(i) Breakdown of plan assets
The percentage of various assets to total plan assets by main category is as follows:2019

Debt securities

56%

55%

Equity securities

31%

33%

Cash and deposits

4%

3%

Other

9%

9%

Total

100%

100%

Strategy2020(ii) Determination of long-term expected rate of return
In order to determine the long-term expected rate of return on plan assets, the Group considers the current andexpected allocation of plan assets and the current and expected long-term rate of return from various assets
constituting plan assets.
(i) Actuarial assumptions
The main actuarial assumptions for the years ended March 31, 2020 and 2019 (weighted averages) are as follows:
2020

2019

0.9%

0.9%

1.0%

1.0%

Value Creation Through Business Activities

Discount rateLong-term expected rate of return

9. Shareholders’ Equity
The Companies Act of Japan provides that an amount equal to at least 10% of the amount to be disbursed as
distributions be transferred to the capital reserve and the legal reserve, respectively, until the total of capitalreserve and the legal reserve equals 25% of the share capital account.
Such distributions can be made at any time by resolution of the shareholders’ meeting or the Board of
Directors if certain conditions are met.

Initiatives to Support Value Creation

10. Leases
Operating leases
Future minimum lease payments under non-cancelable operating leases subsequent to March 31, 2020 are as follows:(Lessee)Year ending March 31,

Millions of yen

Thousands of
U.S. dollars$1,0002021¥1082022 and thereafter

175

1,620

Total

¥284

$2,629Financial and Other Information

JA P E X C o rp o r a t e R ep or t 2 0 2 075

Notes to Consolidated Financial Statements

11. Financial Instruments(1) Overview(a) Policy for measures relating to financial instruments
The Group’s policy is to obtain operating funds ensuring funding liquidity and controlling risks. The Group raises
necessary funds through funds on hand and bank loans. Domestic capital investment is financed by commercial
banks, and overseas business investment is financed by Japan Bank for International Cooperation and othercommercial banks. The Group does not enter into derivative transactions for trading or speculative purposes but
uses them to hedge the undermentioned risks.
(b) Descriptions of financial instruments and related risk and risk management
Operating receivables such as notes and accounts receivable—trade are exposed to credit risk. The Group
works to prevent bad debts by monitoring credit conditions, etc. of customers on a timely basis in accordancewith internal credit management rules.
Securities and investment securities mainly consist of equity securities of partner companies, and for those
exposed to market fluctuation risk, fair value evaluation is reported to the directors on a regular basis in accordance with the internal regulations. Investment securities mainly consist of equity securities of INPEXCORPORATION recorded at ¥65,076 million ($602,555 thousand) and ¥112,825 million as of March 31, 2020
and 2019, the proportions of which to investment securities are 73.2% and 81.9%, respectively.
Loans receivable are mainly loans to our subsidiaries and affiliates for their operating capital and are exposedto credit risk and foreign currency fluctuation risk. The Group manages the credit risk appropriately by monitoring the collection status of the loans receivable. The Group reduces the foreign currency fluctuation risk mainly
by being financed for the loans receivable by bank loans denominated in the same foreign currency.
Notes and accounts payable—trade and accounts payable—other are due within one year. Accounts payable—trade and others relating to LNG are exposed to foreign currency fluctuation risk, and the risk is hedged
mainly by foreign exchange forward contracts.
Loans payable are mainly for domestic capital investment and overseas business investment. Floating interest
rate loans are exposed to interest rate and foreign currency fluctuation risks, and the Group reduces the risks byproviding the funds from the loans to our subsidiaries and affiliates as loans with the corresponding floating rateand in the same currency.
In addition, foreign currencies to provide for overseas business investment are exposed to foreign currency
fluctuation risk. The Group reduces such risk by utilizing foreign exchange forward contracts.
The Group utilizes foreign exchange forward contracts as mentioned above. Implementation and management of derivative transactions are based on the internal regulations which prescribe the authorization and maximum upper limit of the transactions, and the department responsible for derivative transactions executes
transactions after obtaining approval from the person responsible for authorization. The Group enters into transactions only with creditworthy financial institutions to reduce the counterparty risk.
Liquidity risk associated with financing is managed mainly by preparing monthly financial plans.
(c) Supplemental information on fair value of financial instruments
As well as the values based on market prices, fair values of financial instruments include values which are reasonably calculated when market prices do not exist. As the calculation of those values includes variable factors,
those values may vary if different assumptions are applied.
Also, for the contract amount, etc. regarding derivative transactions described in Note 12. Derivative
Transactions, the contract amount itself does not indicate market risk related to derivative transactions.

76

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose(2) Fair value of financial instruments
Carrying value in the consolidated balance sheets, fair value and the difference as of March 31, 2020 and 2019are as follows. The financial instruments whose fair value is extremely difficult to determine are not included below.
Millions of yen
Carrying value

Fair value

Difference¥160,077¥160,078¥1

27,51027,510

—

19

19

—

72,781

72,786

5

Notes and accounts receivable—trade
Short-term loans receivable
Securities and investment securities
Long-term loans receivable

43

43

—

Total assets¥260,432¥260,438¥6¥—

Notes and accounts payable—trade¥ 12,237¥ 12,237

Long-term borrowings

118,774

118,774—

Total liabilities¥131,011¥131,011

¥—

¥282

¥282

¥—

March 31, 2019

Carrying value

Fair value

Difference

Cash and deposits¥ 1

Derivative transactions (*)

Strategy

March 31, 2020
Cash and deposits

Millions of yen¥117,469

20,82520,825—

Short-term loans receivable

4,575

4,575

—

117,997

118,005

8

Securities and investment securities

42

42

—

Total assets

Long-term loans receivable¥260,908¥260,918¥10

Notes and accounts payable—trade¥  7,666¥  7,666¥—

Long-term borrowings

127,715

127,7150Total liabilities¥135,382¥135,382¥ 0

Derivative transactions (*)¥     (3)¥     (3)¥—March 31, 2020

Carrying value

Fair value

Difference

Cash and deposits$1,482,194$1,482,203$ 9

254,722

254,722

—

175

175

—

673,898

673,944

46

398

398

—

Value Creation Through Business Activities¥117,468

Notes and accounts receivable—trade

Thousands of U.S. dollars

Short-term loans receivable
Securities and investment securities
Long-term loans receivable
Total assets$2,411,407$2,411,462$56

Notes and accounts payable—trade$  113,305$  113,305$—

Long-term borrowings

1,099,759

1,099,759—

Total liabilities$1,213,064$1,213,064$—

Derivative transactions (*)$    2,611$    2,611$—

Initiatives to Support Value Creation

Notes and accounts receivable—trade

Financial and Other Information(*) N et assets and liabilities arising from derivative transactions are presented on a net basis, and the liability position is shown in parenthesis.

JA P E X C o rp o r a t e R ep or t 2 0 2 077

Notes to Consolidated Financial Statements

Note 1.

Calculation method for fair value of financial instruments and information on securities and derivative transactions

Assets• Cash and deposits	As for deposits without maturities, the fair value is based on the carrying value since the fair value is considered to be the equivalent of the carrying value. As for deposits with maturities, the present value is calculated by discounting future cash flows foreach segment based on the term, using a deposit interest rate which is assumed to be applied to a new deposit.
• Notes and accounts receivable—trade
The carrying value is deemed as the fair value since these are scheduled to be settled in a short period of time.
• Short-term loans receivable
The carrying value is deemed as the fair value since these are scheduled to be settled in a short period of time.
• Securities and investment securities
	The fair value of equity securities is based on the price on stock exchanges, and that of debt securities is based on the price onbond markets or provided by counterparty financial institutions. The fair value of investment trusts is based on the constantvalue or price provided by counterparty financial institutions. Please refer to Note 4. Securities and Investment Securities, formatters relating to securities by holding purpose.
• Long-term loans receivable
	The carrying value is deemed as the fair value for long-term loans receivable with floating interest rates since these loans reflect
the market interest rates in a short period of time and the carrying value approximates the fair value unless the credit condition
has changed dramatically since the loans were executed.
Liabilities• Notes and accounts payable—trade
The carrying value is deemed as the fair value since they are scheduled to be settled in a short period of time.
• Long-term borrowings	With regard to floating rate loans, the carrying value is deemed as the fair value since these loans reflect the market interest
rates in a short period of time and the credit condition of the Company has not changed dramatically since the loans were executed. For fixed rate loans, the present value is calculated by discounting the total amount of principal and interest for each segment based on the term, using a loan interest rate which is assumed to be applied to a similar loan.
Derivative transactions
Please refer to Note 12. Derivative Transactions.
Note 2.

Financial instruments whose fair value is extremely difficult to determine
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥20,141¥22,127$186,490

Carrying value:
Unlisted equity securities

The above securities are not included in securities and investment securities in the tables above, as there were no market prices
available and it is extremely difficult to determine the fair value.

(3)

Redemption schedule for monetary claims and securities with maturities
Millions of yen

March 31, 2020

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Cash and deposits¥160,075

¥—

¥—

¥—

27,510

—

—

—

19

—

—

—

Notes and accounts receivable—trade
Short-term loans receivable
Securities and investment securities:
Available-for-sale securities with maturities:  Equity securities

—

—

—

—

   Debt securities (Corporate bonds)

—

60

—

—

  Other

—

—

—

—

Long-term loans receivable

—

37

5

—

¥187,606

¥97

¥5

¥—

Total

78

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

Millions of yen

March 31, 2019

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Cash and deposits¥117,467

¥ —

¥—

¥—

Notes and accounts receivable—trade20,825———

Short-term loans receivable

4,575

—

—

—

  Equity securities

—

—

—

—

   Debt securities (Corporate bonds)

30

—

—

—

  Other

—

—

—

—

Long-term loans receivable

—

38

3

—

¥142,897

¥38

¥3

¥—

Securities and investment securities:

Total

Strategy

Available-for-sale securities with maturities:

Thousands of U.S. dollars
Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Cash and deposits$1,482,194

$ —

$—

$—

254,722

—

—

—

175

—

—

—

Notes and accounts receivable—trade
Short-term loans receivable

Value Creation Through Business Activities

March 31, 2020

Securities and investment securities:
Available-for-sale securities with maturities:  Equity securities

—

—

—

—

   Debt securities (Corporate bonds)

—

555

—

—

  Other

—

—

—

—

Long-term loans receivable

—

342

46

—

$1,737,092

$898

$46

$—

Total
(4)

Scheduled maturities of long-term borrowings
Millions of yen
Due after one year
through five years

Due after five years
through ten years

Due after
ten years

Long-term borrowings¥—¥50,917¥62,359¥5,898

Total¥—¥50,917¥62,359¥5,898Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Long-term borrowings¥—¥45,762¥63,687¥18,715

Total¥—¥45,762¥63,687¥18,715

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Long-term borrowings$—$471,453$577,398$54,611

Total$—$471,453$577,398$54,611

Initiatives to Support Value Creation

Due in one
year or lessMarch 31, 2020

Millions of yen

March 31, 2019

Thousands of U.S. dollars

JA P E X C o rp o r a t e R ep or t 2 0 2 0

Financial and Other Information

March 31, 202079

Notes to Consolidated Financial Statements

12. Derivative Transactions
The Group utilizes derivative transactions for the purpose of hedging its risks to adverse fluctuations in foreign currency exchange rates and crude oil prices but does not enter into such transactions for trading or speculative purposes.
The Group is exposed to credit risk in the event of nonperformance by the counterparties to the derivativetransactions, but any such risk would not be material because the Group enters into transactions only with creditworthy financial institutions.
(1)

Derivative transactions for which hedge accounting is not applied	  Currency related transactions
Millions of yen

Thousands of U.S. dollars

Contract
Valuationamount, Due after Fair value
gains/(*)
etc. one year
(losses)

Valuation
Contract
gains/
amount, Due after Fair value(*)(losses)etc. one year   Canadian dollars (Selling)¥14,637

¥—

¥29

¥29

$135,527

$—

$268

$268

Total

¥14,637

¥—

¥29

¥29

$135,527

$—

$268

$268

March 31, 2020
Over-the-counter transactions Foreign exchange
forward contracts(*)Fair value is measured based on quotes, etc. provided by financial institutions, etc.
No currency related derivative contract was outstanding as of March 31, 2019.

(2)

Derivative transactions for which hedge accounting is applied	  Currency related transactions
Millions of yen
Due after
one year

Fair value(*)

Contract
amount, etc.

Due after
one year

Fair value(*)

Deferral hedge accounting Foreign exchange
forward contracts  U.S. dollars (Buying)- Accounts payable—trade  U.S. dollars (Buying)- Accounts payable—other  U.S. dollars (Selling)- Accounts receivable—trade¥1,084¥—¥ (4)$10,037$—$ (37)

31

—

0

287

—

0

2,628

—

(40)

24,333

—

(370)

Total

¥3,743¥—¥(44)$34,657$—$(407)March 31, 2020

80

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Thousands of U.S. dollars

Contract
amount, etc.

Mission and Purpose

Millions of yen

March 31, 2019

Due after
one year

Fair value(*)¥3,303

¥—

¥(34)

20

—

0

2,197

—

33

Deferral hedge accounting Foreign exchange
forward contracts  U.S. dollars (Buying)- Accounts payable—trade  U.S. dollars (Buying)- Accounts payable—other  U.S. dollars (Selling)- Accounts receivable—trade
Allocation method Foreign exchange
forward contracts  British pound (Buying)- Accounts payable—other
Total

1

—

(0)

¥5,523¥—¥ (1)StrategyContract
amount, etc.

(*) Fair value is measured based on quotes, etc. provided by financial institutions, etc.

	  Commodity related transactions

March 31, 2020

Value Creation Through Business Activities

Millions of yen
Contract
amount, etc.

Thousands of U.S. dollars

Due after
one year

Fair value(*)

Contract
amount, etc.

Due after
one year

Fair value(*)

Deferral hedge accounting
Crude oil swap contracts  Receive fixed price/
pay market price- Accounts receivable—trade¥2,453¥—¥296$22,712$—$2,740Total¥2,453¥—¥296$22,712$—$2,740(*) Fair value is measured based on quotes, etc. provided by financial institutions, etc.

Initiatives to Support Value Creation

No commodity related derivative contract was outstanding as of March 31, 2019.

Financial and Other Information
JA P E X C o rp o r a t e R ep or t 2 0 2 081

Notes to Consolidated Financial Statements

13. Asset Retirement Obligations(1) Asset retirement obligations recognized in the consolidated balance sheets
Asset retirement obligations recognized by the Group are determined based on the estimated costs of decommissioning oil and natural gas wells and production facilities in accordance with laws, land lease contracts, etc.
for wells and production facilities in Japan and overseas, and the appropriate discount rates.
The Group estimates the periods in which the obligations are paid out to be approximately 2 to 46 years (2 to44 years in 2019) from acquisition of assets. This estimate is reasonably made based on the plans for decommissioning wells and facilities or the estimated producing lives of fields if no such plan exists. Discount rates
applied are (0.217)% to 2.287% ((0.217)% to 2.287% in 2019) for domestic obligations and 1.76% to 7%(2.09% to 7% in 2019) for overseas.
Although the future costs to be incurred upon decommissioning and timing when the obligations are incurred
are based on the Group’s best estimate, uncertainty exists regarding both the amount and timing of incurring
these costs.
Changes in the balance of asset retirement obligations for the years ended March 31, 2020 and 2019 are as follows:

Balance at beginning of period

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

$144,379¥15,593¥18,887

Increase due to acquisition of new assets

36

55

333

Accretion expense

230

361

2,129

Liabilities settlement

(151)

(252)

(1,398)Foreign currency translation adjustment

65

(410)

601

(113)

(3,047)(1,046)¥15,660¥15,593$145,000

Other changes, net (*)
Balance at end of period(*) Other changes, net, are mainly related to the reversal of asset retirement obligations as a result of completion of transfer of oil and natural gas wells and production facilities in the year ended March 31, 2019.

(2) Asset retirement obligations other than those recognized in the consolidated balance sheets
The Group has obligations to restore sites to their original condition in accordance with laws, land lease contracts,
etc. regarding oil and natural gas production facilities. However, in the natural gas supply business, which is theGroup’s primary business operation, maintaining and ensuring the stable supply of natural gas is of high public
interest; therefore, even after completion of production activities, the Group plans to continue to use some of theassets held for the purpose of producing and selling oil and gas on a permanent basis in order to fulfill the
responsibilities as a supplier for users of natural gas by holistically integrating these assets. Thus, the Group does
not recognize the relevant asset retirement obligations since it is impossible to determine the timing of decommissioning and estimate asset retirement obligations on a reasonable basis as of March 31, 2020 and 2019.
The following table summarizes the details of balance of asset retirement obligations for the year ended March
31, 2020.
Millions of yen

March 31, 2020
Under provisions of Petroleum and Inflammable Natural
Gas Resources Development Law
Under provisions of Environmental Protection and Enhancement Act, etc. enforced in Canada
Under provisions of Act on Prevention of Marine Pollution
and Maritime Disaster
Under provisions of land lease contracts and other
Total

82

J A PE X C o rpo ra t e Re po rt 2 0 2 0

At beginningof period

Increase

Decrease

At end ofperiod¥ 8,520¥ 94¥ —¥ 8,615

2,198

200

147

2,251

2,294

50

—

2,345

2,579

22

152

2,449

¥15,593

¥368

¥300

¥15,660

Mission and Purpose

Thousands of U.S. dollars
Increase

Decrease

At end ofperiod$ 78,888$  870$   —$ 79,768

20,351

1,851

1,361

20,842

Under provisions of land lease contracts and otherTotal

21,240462—

21,712

23,879203

1,407

22,675$144,379$3,407$2,777$145,000

Strategy

March 31, 2020
Under provisions of Petroleum and Inflammable Natural
Gas Resources Development Law
Under provisions of Environmental Protection and Enhancement Act, etc. enforced in Canada
Under provisions of Act on Prevention of Marine Pollution
and Maritime DisasterAt beginningof period

14. Contingent Liabilities
At March 31, 2020 and 2019, the Group had the following contingent liabilities:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

INPEX North Caspian Sea, Ltd.

¥8,012¥ 9,090$74,185

Employees (Housing loans)

61

97

564

Kumamoto Mirai LNG Co., Ltd.

44

51

407

Greenland Petroleum Exploration Co., Ltd.

18

16

166

Value Creation Through Business Activities

Guarantee obligation for loans payable fromfinancial institutions, etc.:

Guarantee obligation relating to production facilities:
Kangean Energy Indonesia Ltd.
Total

1,364

2,382

12,629¥9,501¥11,638$87,972(1)

Initiatives to Support Value Creation

15. Information Related to Consolidated Statement of Changes in Net Assets
Dividends paid to shareholders

2020
Resolution
Date of approval approved byJune 27,2019
November 8,
2019Type ofsharesAnnualGeneral Common
Meeting ofstock
Shareholders

Amount(Millions of yen)Amount(Thousandsof U.S. dollars)

Amountper share(Yen)

Amount per
share(U.S. dollars)¥1,714$15,870

¥30

$0.27

$13,222

¥25

$0.23

Commonstock¥1,428Resolution
Date of approval approved byType ofsharesAmount(Millions of yen)Amount per
share
(Yen)

¥571

¥10

¥571

¥10

Effective date

March 31,2019

June 28,2019

September 30, December 16,
2019
2019
Financial and Other Information

Board ofDirectors

Shareholders’
cut-off date2019

June 28,
2018
November 9,
2018

AnnualGeneral Common
Meeting ofstock
Shareholders
Board ofDirectors

Commonstock

Shareholders’
cut-off date

Effective date

March 31,2018

June 29,2018

September 30, December 13,
2018
2018

JA P E X C o rp o r a t e R ep or t 2 0 2 083

Notes to Consolidated Financial Statements(2)	Dividends with a shareholders’ cut-off date during the fiscal year but an effective date subsequent
to the fiscal year
2020

Resolution
Date of approval approved byJune 26,2020

Type ofsharesAnnualGeneral Common
Meeting ofstock
Shareholders

AmountAmount per
Amount(Thousands ofshare(Millions of yen) U.S. dollars) Paid from(Yen)

¥1,428$13,222

Retainedearnings¥25

Amount per
share
(U.S.
Shareholders’dollars)
cut-off date Effective date

$0.23

March 31,2020

June 29,2020

2019
Resolution
Date of approval approved byJune 27,2019Type ofsharesAnnualGeneral Common
Meeting ofstock
Shareholders

Amount(Millions of yen)

¥1,714

Amount per
share
Paid from(Yen)

Shareholders’
cut-off date Effective date

Retainedearnings

March 31,
2019

¥30

June 28,
2019

16. Selling, General and Administrative Expenses
The main components of selling, general and administrative expenses for the years ended March 31, 2020 and2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥11,152¥10,789$103,259

Retirement benefit expenses

506

637

4,685

Provision for bonuses for directors (and other officers)

75

22

694

25

24

231

Freightage costs

6,595

7,517

61,064

Depreciation

4,446

4,705

41,166

Selling, general and administrative expenses:
Personnel expenses
Significant components of personnel expenses: Provision for retirement benefits for directors (and other officers)

Research and development expenses included in general and administrative expenses for the years ended
March 31, 2020 and 2019 were ¥360 million ($3,333 thousand) and ¥173 million, respectively.

84

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

17. Impairment Loss
For the purpose of recognition and measurement of impairment loss, business-use assets of the Group such as
oil and gas fields are principally grouped into minimum cash generating units. However, idle assets are individually considered.
For the year ended March 31, 2020, the Group recorded an impairment loss on the following asset groups:
Thousands of
U.S. dollars

2020

2020

   Buildings and structures¥148$1,370   Machinery, equipment and vehicles

305

2,824

  Land67620  Other

2

18

¥524

$4,851Strategy

Millions of yen

Business-use assets related to Amarume oil field:
Shonai Town, Yamagata Prefecture

Total

Value Creation Through Business Activities

For the business-use assets related to Amarume oil field, the carrying value of the business-use assets used for
production operations was reduced to the recoverable amount based on estimated future cash flows mainly in
relation to the decline in crude oil prices, and the reduction was recorded as impairment loss in other expenses.
The recoverable amount was measured mainly at value in use. For the year ended March 31, 2020, its cash
flow generated from those assets was expected to be negative so that the memorandum value is used for thebook value of this asset group.

18. Information on Related Party Transactions

Millions of yen

Transactions:Purchase of crude oil (*1)

Balances:
Accounts payable—trade

Initiatives to Support Value Creation(1) Related party transactions
Principal transactions between the Company and Sakhalin Oil and Gas Development Co., Ltd., the affiliate
accounted for using the equity method, for the years ended March 31, 2020 and 2019 and related balances are
as follows.
Thousands of
U.S. dollars

2020

2019

2020

¥66,274¥62,550$613,648

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥3,180¥—$29,444
Financial and Other Information

Principal transactions between the Company and Fukushima Gas Power Co., Ltd. (FGP), the affiliate of theCompany, for the years ended March 31, 2020 and 2019 are as follows:

Transactions:
Pledge of collateral (*2)

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥40,862¥31,102$378,351(*1) Prices for purchase of crude oil from Sakhalin Oil and Gas Development Co., Ltd. are determined based on the market price.
(*2) The Company provides FGP with certificates of FGP shares held by the Company as collateral for its borrowings from financial institutions. The amount of the transactions indicates the balance of borrowings corresponding to assets pledged as collateral as of theyear-end.

JA P E X C o rp o r a t e R ep or t 2 0 2 085

Notes to Consolidated Financial Statements(2) Note to significant affiliates
For the years ended March 31, 2020 and 2019, the summarized consolidated financial information of all affiliates
accounted for using the equity method (11 companies in 2020 and 2019), including a significant affiliate,
Sakhalin Oil and Gas Development Co., Ltd. (Energi Mega Pratama Inc. in 2019) is as follows:

Total current assets
Total non-current assets

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥105,489¥110,341$  976,750

43,70554,701

404,675

Total current liabilities

66,698

77,137

617,574

Total non-current liabilities

27,523

27,951

254,842

Total net assets

54,972

59,953509,000

Net sales

286,711285,533

2,654,731

Profit before income taxes

129,788

132,092

1,201,740

Profit81,07882,707750,722

19. Amounts per Share
Basic earnings per share is computed based on the profit attributable to common shareholders of parent andthe average number of shares of common stock outstanding during the period, which is 57,152 thousand
shares during the years ended March 31, 2020 and 2019.
Net assets per share is computed based on net assets available to common shareholders of parent and thenumber of shares of common stock outstanding at the year-end.
Yen

U.S. dollars

2020

2019

2020

Basic earnings per share¥  469.18¥  258.44$ 4.34

Net assets per share

7,046.18

7,287.32

65.24

Diluted earnings per share is not disclosed due to the absence of dilutive shares for the years ended March 31,
2020 and 2019.

20. Cash Flow Information
Reconciliations between cash and cash equivalents in the consolidated statements of cash flows for the years
ended March 31, 2020 and 2019 and cash and deposits in the consolidated balance sheets as of March 31,
2020 and 2019 are as follows:
Millions of yen

Cash and deposits
Time deposits with maturities in excess of three months

Thousands of
U.S. dollars

2020

2019

2020

¥160,077¥117,468$1,482,194(25,817)(19,134)(239,046)

Short-term investments with maturities of three months or less, etc.:
Money management fund and otherCash and cash equivalents

86

J A PE X C o rpo ra t e Re po rt 2 0 2 0

4,000

2,300

37,037¥138,259¥100,633$1,280,175

Mission and Purpose

21. Other Comprehensive Income
Reclassification adjustments and tax effects allocated to each component of other comprehensive income forthe years ended March 31, 2020 and 2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

¥(45,921)¥(28,286)$(425,194)

(239)

—

(2,212)(46,161)(28,286)(427,416)

Gains (losses) arising during the year
Reclassification adjustments  Pre-tax amount  Tax effect

12,924

7,919

119,666   Valuation difference on available-for-sale securities(33,236)(20,366)(307,740)

Strategy

Valuation difference on available-for-sale securities:

Deferred gains or losses on hedges:
256

(8)

2,370

Reclassification adjustments

—

—

—

  Pre-tax amount

256

(8)

2,370

  Tax effect

(71)

2

(657)

   Deferred gains or losses on hedges

184

(5)

1,703

Gains (losses) arising during the year(140)

(1,705)(1,296)

Reclassification adjustments

105

—

972

(34)

(1,705)(314)

Gains (losses) arising during the year

(209)

(12)

(1,935)

Reclassification adjustments

(287)

(40)

(2,657)

(496)

(53)

(4,592)

Value Creation Through Business Activities

Gains (losses) arising during the year

Foreign currency translation adjustment:   Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax:  Pre-tax amount

139

14

1,287

   Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted forusing equity method:

(357)

(38)

(3,305)

(95)

(16)

(879)

170

—

1,574

Gains (losses) arising during the year
Reclassification adjustments  Share of other comprehensive income ofentities accounted for using equity method
Total other comprehensive income

74

(16)

685

¥(33,369)¥(22,132)$(308,972)

Initiatives to Support Value Creation  Tax effectFinancial and Other Information
JA P E X C o rp o r a t e R ep or t 2 0 2 087

Notes to Consolidated Financial Statements

22. Segment Information(1) Overview of reporting segments
Reporting segments are defined as components of the Group for which separate financial information is available and whose operating results are regularly evaluated by the Board of Directors to make decisions about how
resources are allocated among the Group and assess its performance.
The Group is involved primarily in oil and natural gas related business. In addition to our domestic operations,
the Group develops its overseas operations through project companies established at each operational site.
Therefore, the Group consists of segments based on the operational site, and identifies “Japan,” “North
America,” “Europe” and “Middle East” as its reporting segments.
“Japan” is engaged in exploration, development, production, purchasing, sales and transportation of crude oiland natural gas, manufacture, purchasing, sales and transportation of petroleum products, and well drilling contracts, etc. in Japan.
“North America” is engaged in exploration, development, production, purchasing, sales, etc. of crude oil, natural gas and bitumen (extra-heavy oil extracted from oil sands) in North America.
“Europe” is engaged in exploration and development of crude oil and natural gas in Europe.
“Middle East” is engaged in development, production, sales, etc. of crude oil and natural gas in the Middle East.
(2)	Basis of measurement for the amounts of net sales, profit (loss), assets and other items for eachreporting segment
The accounting policies of each reporting segment are basically consistent with those disclosed in Note 2.
Significant Accounting Policies. Segment profit is measured on a basis of operating profit. Intersegment sales
and transfers are accounted for based on actual market prices.
(3)

Information about net sales, profit (loss), assets and other items
Millions of yen
Reporting segment

Amounts on
Adjustments consolidated
andfinancialeliminations
statements(Note 2)
(Note 3)

Japan

North
America

EuropeMiddle
East

Total

Other
(Note 1)

Total

Sales to third parties Intersegment sales
and transfers¥268,365¥ 48,703¥   —¥ 1,754¥318,822¥    —¥318,8228——

42,13642,144—

42,144(42,144)—

Total sales

268,373

48,703—43,890360,967—

360,967(42,144)

318,822

March 31, 2020
Net sales:¥318,822

Segment profit (loss)

18,834

3,422

(164)

612

22,705(1)

22,703(8,419)14,283

Segment assets

97,780191,611

6,018

13,628309,038—

309,038

318,093

627,132

12,407

12,1380293

24,839—24,839351

25,190

152

—

—

(8)

144

11,816

11,960—11,960

347

—

—

286

634

20,494

21,128—21,128

3,787

4,907

1,697

—

10,392—

10,392

255

10,648Other items: Depreciation andamortization Share of profit (loss) of entities accounted forusing equity method Investments in entities accounted for using
the equity method Increase in property, plant and equipment
and intangible assets

88¥     —J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

Millions of yen
Reporting segment

Amounts on
Adjustments consolidated
andfinancialeliminations
statements(Note 2)
(Note 3)

Japan

North
America

EuropeMiddle
East

Total

Other
(Note 1)

Total

Sales to third parties Intersegment sales
and transfers¥232,089¥ 34,270¥   —¥ 1,620¥267,980¥    —¥267,980

18——

13,195

13,213—

13,213(13,213)—

Total sales

232,10734,270—14,816281,194—

281,194(13,213)

267,980

March 31, 2019
Net sales:¥     —

¥267,980(9,751)

(157)

955

10,355(7)

10,348(8,034)

2,313

199,522

4,230

24,736335,337—

335,337

319,950

655,288

12,095

10,3480293

22,738—22,738557

23,296

165

(10)

—

2

157

12,392

12,550—12,550

347

—

—

286

634

22,784

23,419—23,419

8,958

1,619

129

—

10,707—

10,707

195

10,903

Other items: Depreciation andamortization Share of profit (loss) of entities accounted forusing equity method Investments in entities accounted for using
the equity method Increase in property, plant and equipment
and intangible assets

Value Creation Through Business Activities

19,308106,848

Strategy

Segment profit (loss)
Segment assets

Thousands of U.S. dollars
Reporting segment

Total

Other
(Note 1)

$ 16,240 $2,952,055$     —

North
America

EuropeSales to third parties Intersegment sales
and transfers$2,484,861 $  450,953$    —

74——

390,148

390,222—390,222(390,222)—

Total sales

2,484,935

450,953—

406,388

3,342,287—

3,342,287(390,222)

2,952,055

March 31, 2020

Japan

MiddleEast

Amounts on
Adjustments consolidated
andfinancialeliminations
statements(Note 2)
(Note 3)Total

Net sales:$2,952,055 $       —$2,952,055

31,685(1,518)

5,666

210,231(9)

210,212(77,953)

132,250

905,370

1,774,175

55,722

126,185

2,861,462—

2,861,462

2,945,305

5,806,777

114,879

112,388

02,712

229,990—229,990

3,250

233,240

1,407

—

—

(74)

1,333

109,407

110,740—

110,740

3,212

—

—

2,648

5,870

189,759

195,629—

195,62935,06445,435

15,712—

96,222—

96,222

2,361

98,592Other items: Depreciation andamortization Share of profit (loss) of entities accounted forusing equity method Investments in entities accounted for using
the equity method Increase in property, plant and equipment
and intangible assets

Financial and Other Information

174,388

Segment assets

Initiatives to Support Value Creation

Segment profit (loss)

Note 1: “Other” which does not belong to reporting segments includes the Southeast Asia, etc.

JA P E X C o rp o r a t e R ep or t 2 0 2 089

Notes to Consolidated Financial Statements

Note 2: “Adjustments and eliminations” includes the following:(a) Segment profit (loss)

Millions of yen

Intersegment elimination

Thousands of
U.S. dollars

2020

2019

2020

¥     16¥     15$    148

Corporate expense (*)(8,436)(8,050)(78,111)

Total¥(8,419)¥(8,034)$(77,953)(*) “Corporate expense” represents mainly general and administrative expenses and experiment and research expense that are notallocated to reporting segments.
(b) Segment assets

Millions of yen

Intersegment elimination
Corporate assets (*1)

Thousands of
U.S. dollars

2020

2019

2020

¥   (600)¥   (616)$   (5,555)

3,204

3,387

29,666

Other assets (*2)

315,489

317,179

2,921,194

Total¥318,093¥319,950$2,945,305(*1) “Corporate assets” represents mainly the assets administrated by the head office that are not allocated to reporting segments.
(*2) Assets allocated to reporting segments consist of property, plant and equipment, intangible assets and recoverable accounts
included in investments and other assets. “Other assets” consists of property, plant and equipment, intangible assets andassets other than recoverable accounts, which are not allocated to reporting segments.
Note 3: Segment profit (loss) is reconciled to operating profit in the consolidated statements of income.

(4) Related information(a) Information by product and service
Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

Crude oil

¥128,152¥ 94,579$1,186,592

Natural gas

67,231

67,820622,509

LNG

19,39522,913

179,583

Diluted bitumen

45,02530,116

416,898

Contract services

15,003

7,342

138,916

Oil products/merchandise

37,50239,820347,240

Other

6,512

5,387

60,296¥318,822¥267,980$2,952,055

Millions of yen

Thousands of
U.S. dollars

2020

2019

2020

Japan

¥159,815¥156,043$1,479,768

Canada48,06233,555445,018

Russia66,341

62,612

614,268

Iraq

43,96014,829407,037

Sales to third parties:

Total(b) Information by geographical area

Net sales:

Other
Total

642

938

5,944

¥318,822¥267,980$2,952,055

Note: Net sales are accounted for by country or geographical area on the basis of the location in which products have been delivered orservices have been rendered.

90

J A PE X C o rpo ra t e Re po rt 2 0 2 0Thousands of
U.S. dollars

2020

2019

2020

Japan

¥ 99,523¥108,657$  921,509

Canada186,499

194,263

1,726,842

Other

8,015

6,193

74,212¥294,038¥309,114$2,722,574

Millions of yen

Thousands of
U.S. dollars

Mission and Purpose

Millions of yen

Property, plant and equipment:

Strategy

Total(c) Information by major customer

Segment

2020

2019

2020

Japan

¥34,707¥7,754$321,361

Net sales:
BP Singapore Pte. Ltd.
(5)

Information about impairment loss on non-current assets by reporting segment
Millions of yen

March 31, 2020

Japan

North
America

EuropeMiddleEast

Other

Corporate/eliminations

Total

Impairment loss

¥524

¥—

¥—

¥—

¥—

¥—

¥524

Value Creation Through Business Activities

Reporting segment

Millions of yen
Reporting segment

March 31, 2019

Japan

North
America

EuropeMiddleEast

Other

Corporate/eliminations

Total

Impairment loss

¥30

¥—

¥—

¥—

¥—

¥—

¥30

Thousands of U.S. dollars
Reporting segment
Japan

North
America

EuropeMiddleEast

Other

Corporate/eliminations

Total

Impairment loss

$4,851

$—

$—

$—

$—

$—

$4,851

Initiatives to Support Value Creation

March 31, 2020

23. Subsequent Events

JA P E X C o rp o r a t e R ep or t 2 0 2 0

Financial and Other Information

Temporary suspension of development and production operations at the Garraf Oil Field in the south of
the Republic of Iraq
The Company’s consolidated subsidiary, Japex Garraf Ltd., participates in the Garraf Oil Field development andproduction projects (30% participating interest) in the south of the Republic of Iraq. Following the spread ofnovel coronavirus disease (COVID-19), as a preventative measure to ensure the health and safety of employees,
from March 16, 2020 all expatriates have been evacuated from the country, necessitating the suspension ofdevelopment and production operations. Preparations are currently being made to restart the operation after
July 2020.
The Garraf Oil Field started crude oil production in August 2013. The average daily production volume for
2019, the most recent year, was approximately 96,000 barrels.
It is difficult at this time to rationally calculate the impact of the operational suspensions on the Company’s
financial position, business results, and cash flows for the fiscal year ending March 31, 2021 and onwards.

91

Independent Auditor’s Report92

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

93

JA P E X C o rp o r a t e R ep or t 2 0 2 0Independent Auditor’s Report

94

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Main Businesses
Mission and Purpose

As of March 31, 2020, the JAPEX Group comprises 23 subsidiaries and 19 affiliates. The Group’s principal business line is
the “oil and gas related business.” In addition to business activities in Japan, the Group has developed business activities
overseas through a project company established at each business location.
Therefore, the Group consists of segments classified by business location. The business lines of each segment and therelationships between the Company and its affiliates are as follows.
Business Segment(1) Oil and gas
JAPEX and its consolidated subsidiary Japex Offshore Ltd. produces, procures, and sells crude oil and natural
gas in Japan. JAPEX also buys and sells all of the crude oil and natural gas produced by Japex Offshore Ltd. In
addition, the consolidated subsidiary North Japan Oil Co., Ltd. buys and sells JAPEX’s crude oil. The consolidated subsidiary Shirone Gas Co., Ltd. and the affiliate TOHOKU NATURAL GAS CO., Inc. buy and sell JAPEX’s
natural gas.

StrategyJapan

Main Businesses

Value Creation Through Business Activities(2) Contract services
The consolidated subsidiary SK Engineering Co., Ltd. is contracted by JAPEX and other companies to conduct
drilling and workover services.
The consolidated subsidiary Geophysical Surveying Co., Ltd. is contracted by JAPEX and other companies to conduct geophysical surveys and mud logging related to the drilling and workover of wells. Mud logging refers to recording the results of surveys and analyses of the mud that circulates within wells that are
being drilled as well as the drill cuttings that are pushed to the surface by the mud.
The consolidated subsidiary JGI, Inc. is contracted by JAPEX and other companies to conduct geophysical exploration.
The consolidated subsidiary Japex Pipeline Ltd. is contracted by JAPEX to maintain and manage JAPEX’s
trunk gas pipelines.
The consolidated subsidiary North Japan Security Service Co., Ltd. conducts security for JAPEX and theconsolidated subsidiary Japex Offshore Ltd.

Oil and gas
In many cases, the Company establishes companies for each project to ensure efficient operations when
conducting exploration and development of crude oil and natural gas fields overseas. These companies areoften joint ventures with other companies in an effort to distribute risks.
In North America, the Company is the project company taking a leading role and has consolidated subsidiaries engaged in production, namely Japex (U.S.) Corp., Japan Canada Oil Sands Limited (a subsidiary ofCanada Oil Sands Co., Ltd.), and JAPEX Montney Ltd.

EuropeOil and gas
The consolidated subsidiary JAPEX UK E&P Ltd. engages in development operations in the U.K. North Sea.

Middle East

Oil and gas
The consolidated subsidiary Japex Garraf Ltd. is engaged in production in the Garraf Oil Field in the Republicof Iraq.

Other

Oil and gas
We also have business segments in Southeast Asia (the affiliate Energi Mega Pratama Inc. for production)
and Russia (the affiliate Sakhalin Oil and Gas Development Co., Ltd. for production).

JA P E X C o rp o r a t e R ep or t 2 0 2 0

Financial and Other Information

North America

Initiatives to Support Value Creation(3) Other business
JAPEX buys and sells oil products. In addition, the Company accepts contracts to transport crude oil andnatural gas.
The consolidated subsidiary JAPEX SKS Corporation procures the Company’s crude oil and natural gas,
produces oil products, and sells said products. In addition, the subsidiary sells LPG and other products to
the Company and accepts contracts to manage the Company’s real estate.
The consolidated subsidiary North Japan Oil Co., Ltd. is contracted to transport the Company’s crude oil.
The consolidated subsidiary Japex Energy Co., Ltd.’s principal business is the sale of oil products andother products. In addition, the subsidiary sells LPG and other products to the Company as well as oil products
and other products to JAPEX SKS Corporation and other companies.
The consolidated subsidiary Akita Natural Gas Pipeline Co., Ltd. transports the Company’s natural gas in
Akita Prefecture.

95

Affiliates

Status of Important Subsidiaries

Name

Principal Business Activities

Akita Natural Gas Pipeline Co., Ltd.

250

Pipeline transport of natural gas in Akita Prefecture

100.00SK Engineering Co., Ltd.

300

Contract engineering and well drilling

100.00JAPEX SKS Corporation

90

Manufacture and sale of petroleum products, real estate
management, and insurance agent services

100.00

North Japan Oil Co., Ltd.

80

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

100.00Shirone Gas Co., Ltd.

3,000

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

100.00Japex Pipeline Ltd.

80

Pipeline management and maintenance100.002,100Contract geophysical surveys and development of geophysical exploration technologies

100.00446

Geophysical surveys and contract mud logging operations

100.00Japex (U.S.) Corp.

33,000(Thousands of
U.S. dollars)

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

100.00Japan Canada Oil Sands Limited*1

788,255(Thousands of
U.S. dollars)

Oil sands exploration, development and production
based on area lease agreement in Canada

100.00(100.00)

JGI, Inc.
Geophysical Surveying Co., Ltd.

34,863

Investment in oil sands business through Japan Canada
Oil Sands Limited

94.58(0.98)JAPEX Montney Ltd.

918,583(Thousands ofCanadian dollars)

Exploration, development and production of shale gas
in Canada

55.00

JAPEX UK E&P Ltd.

51,162(Thousands ofBritish pounds)

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

100.00Disaster protection for industrial facilities andsecurity services

89.42

5,963

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

70.61

GEOSYS, Inc.*1

49

Contract services for geophysical exploration andsales of equipment for geophysical exploration

57.82(57.82)Japex Energy Co., Ltd.

90

Purchasing and sale of LNG, petroleum products, etc.

90.00

20,930Exploration, development and production of petroleum
resources in Garraf oil field, Republic of Iraq

55.00

Canada Oil Sands Co., Ltd.*1

North Japan Security Service Co., Ltd.

Japex Offshore Ltd.

Japex Garraf Ltd.
One other company

96

Share Capital(Millions of yen)

Ownership
Percentage of
Voting Rights(%)

J A PE X C o rpo ra t e Re po rt 2 0 2 030

Mission and Purpose

Status of Important Affiliates

Name

Share Capital(Millions of yen)

Ownership
Percentage of
Voting Rights(%)

Principal Business Activities

Purchasing and sale of natural gas in the Tohoku regionof Japan

45.00

TELNITE Co., Ltd.

98

Manufacture and sale of drilling mud for well drilling andthe provision of mud technical services

47.00

22,592

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

15.29

Energi Mega Pratama Inc.

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

Exploration, development and production of petroleum
resources off the coast of the eastern part of Java
Island, Republic of Indonesia

25.00

Kangean Energy Indonesia Ltd.*2, 3

10(Thousands of
U.S. dollars)

Exploration, development and production of petroleum
resources off the coast of the eastern part of Java
Island, Republic of Indonesia—[100.00]

EMP Exploration (Kangean) Ltd.*2, 3

100(Thousands ofBritish pounds)

Exploration, development and production of petroleum
resources off the coast of the eastern part of Java
Island, Republic of Indonesia—[100.00]

Diamond Gas Netherlands B.V.*1

5,536(Thousands of
U.S. dollars)

Investment in Malaysia LNG Tiga, which produces LNG
in Malaysia

20.00(20.00)

Sakhalin Oil and Gas Development
Co., Ltd.

Value Creation Through Business Activities

300

Strategy

TOHOKU NATURAL GAS CO., INC.

Four other companies
Notes: 1 Figures in parentheses in the final column represent the percentage of indirect holdings included in the figure given for Ownership Percentage of Voting Rights.
2 Figures in brackets in the final column indicate the percentage of voting rights, owned by parties who are closely related to or in agreement with the Group, that are
not included in the figure given for Ownership Percentage of Voting Rights.
3 Although Ownership Percentage of Voting Rights is less than 20%, the company is accounted for using the equity method because it has the potential to materially
impact the Group’s business.

Initiatives to Support Value Creation
Financial and Other Information
JA P E X C o rp o r a t e R ep or t 2 0 2 097

Business and Other Risks

The following section describes the main factors that could impact the Group’s business performance and financial standing.
The Group’s policy is to recognize the probability of these risks occurring and then work to prevent those occurrences andtake appropriate action if they do occur.
Specifically, JAPEX established the Investment Evaluation Committee and the Project Total Management Committee,
both of which are chaired by the president, to address “1 Risks related to market conditions and foreign exchange” and risks
related to the “2.2 Infrastructure/Utility Business.” These committees identify risks associated with making decisions on executing businesses that come with a certain level of financial responsibility, consider the likelihood of those risks and analyze
measures to avert and address those risks. These committees also work to assess and manage risks (both qualitatively andquantitatively) by regularly monitoring the status of businesses that have begun operations.
Furthermore, the risks mentioned below are the main risks recognized by the Company. It is possible that the Group’sbusiness performance and financial standing may be impacted by risks not listed below. In addition, this section includes
matters related to the future that were determined by the Company as of June 26, 2020.

1 Risks related to market conditions and foreign exchange
1.1 Price variation risk for crude oil and natural gas
The Group operates its E&P Business mainly in Japan, North America, Europe and the Middle East. Net sales and operating
profit are significantly affected by variation in the price of crude oil and natural gas.
Furthermore, in the event that the Group forecasts that it will be unable to collect future profit in line with the book valueof business assets when, for example, the expected medium- to long-term sales price of crude oil, natural gas and otherproducts declines, the Group will record an impairment loss on said assets. This could have a negative impact on theGroup’s business performance.

1.2 Foreign exchange risk
As the crude oil and natural gas that the Group produces in Japan is sold in Japanese yen with reference to the CIF prices ofcrude oil and LNG, variation in the exchange rate of U.S. dollars and yen affects the Group’s business performance including
net sales and operating profit. In addition, the domestic sales price of natural gas, which uses imported LNG as a raw material,
and the procurement cost (cost of sales) are affected in a similar way.

2 Risks related to business
2.1 E&P Business2.1.1 Risks related to E&P Business investments
The following types of investment risks are generally characteristic of the Company’s E&P Business.
(a) Risks related to exploration investments
Exploration activities encompass first analyzing the geological properties of target areas, assessing the structures throughgeophysical surveys and other methods, and, in the event of a promising prospect, conducting drilling tests to confirm
the distribution of the oil and gas formations, as well as the resource volume. However, geological uncertainty cannot be
dispelled, even with recent geophysical technology, and there is no guarantee of finding the anticipated scale of crude oiland natural gas. Therefore, the Group may be unable to recoup the expenditures in unsuccessful exploration activities
and investment losses may be incurred.

98

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose(b) Risks related to development investments
When moving onto the development of oil and gas fields, the Group works to make logical final investment decisions
based on the wide range of data and forecasts available at the time. Specifically, the Group looks at estimates of theamount of resources obtained through exploration activities; the construction and operation costs for wells, production
and transportation equipment, and other facilities to ensure economical production; and the sales price forecast of products. However, there is a possibility that investment losses may be incurred due to a variety of factors making the Groupunable to make a final investment decision or unable to recover sunk costs due to business profitability being lower than

Strategy

expected when the final investment decision is made. These factors include changes to facility design due to detailed
technical considerations made subsequently; surging prices for materials, equipment and services needed for development; delays in work like drilling or getting government approvals; unexpected geological problems that occur in the­production stage; and falling prices for crude oil and natural gas.
(c) Risks related to future abandoned wells and mines
After production is terminated at currently producing wells and mines, the Group needs to conduct abandonment work.
The Group records the present value of costs in relation to abandonments of wells and mines based on current estimatesas asset retirement obligations. In the near term, if the Group forecasts that said estimates are insufficient due to such­factors as changes to abandonment plans, tightening legal and regulatory restrictions, or surging material costs, thenValue Creation Through Business Activities

asset retirement obligations may increase, which could have a negative impact on the Group’s financial standing and­business performance.
(d) Risks attributable to the period for return on investment 
The E&P Business requires a large amount of investment over the long term in the exploration stage, which encompasses
initial basic surveys, drilling and resource discovery, as well as in the development and production stage, which encompasses drilling production wells after discovering resources, constructing production and transportation facilities, andmore. Accordingly, changes in the business environment, including delays to development schedules, could cause theamount invested to expand, demand to decrease, sales prices to fall, operating costs to rise, exchange rates to vary andbusiness profitability to decline. There is therefore a possibility that the Group may be unable to recover sunk costs andinvestment losses may be incurred.

Initiatives to Support Value Creation(e) Risks related to reserves and production volumes
To maintain and develop the E&P Business, the Group needs to expand both reserves and production volumes over the
medium to long term through continuous efforts to acquire interests in blocks and conduct exploration and development
activities as existing reserves decrease in line with production activities. However, due to the aforementioned “(a) Risks
related to exploration investments,” “(d) Risks attributable to the period for return on investment,” and the following risks
related to the overseas E&P Business and climate change, if these efforts do not succeed, it is possible that reserves andproduction volumes will decrease over time and have a negative impact on the Group’s business performance.
Assessed reserves are the volume of oil and gas expected to be economically extractable from existing oil and gas
fields based on geological and engineering data at the time of assessment. This figure may be revised upward or down-

Financial and Other Information

ward going forward in line with reviews based on newly acquired data, changes in economic conditions, and changes tothe internationally recognized definition of reserves.

JA P E X C o rp o r a t e R ep or t 2 0 2 099

Business and Other Risks

2.1.2 Risks specific to overseas E&P Business investments
The overseas E&P Business faces the following risks as a general trend in addition to the aforementioned “2.1.1 Risks related to E&P Business investments.”(a) Country risks
Some overseas E&P Business operations are conducted in areas with relatively high country risks. The political, economic
and social turmoil (including marked deterioration in civil order) in these countries as well as changes to laws, taxes andpolicies may have a negative impact on the smooth execution of the Group’s overseas businesses.
(b) Market risks
To maximize the profitability of crude oil and natural gas produced in the overseas E&P Business, the Group sells those
products in the most promising markets for each project after comprehensively considering pipeline transport ability, production and sales costs, and other factors. However, due to the characteristics of the products, the supply-demand trends andother factors, the Group may be forced to sell the products at a huge discount compared with the representative crude oiland natural gas price indices such as WTI, Henry Hub, etc., and this may lower the profitability of the business.
(c) Partner risks
If a large amount of investment is required to successfully conduct business or if there are major risks from a technicalperspective, the Company does not work alone. Instead, to reduce funding and disperse risks, the Company partners
with other companies to jointly run operations.
As for decision making related to joint operations, in general voting rights are recognized in proportion to the shareheld by each partner. In joint operations in which the Company holds only a minor share, the Company does not havecontrolling authority. Therefore, the Company’s opinion is not always reflected in decisions regarding exploration anddevelopment plans, and in the event that these plans are carried out in such a way that does not contribute to theCompany’s profit, the Company may not achieve its anticipated profit.
Furthermore, the risks for major overseas E&P projects that are currently producing oil and gas and that require a­certain level of funding are as listed in the following section.
2.1.3 Risks related to main individual projects of the overseas E&P Business(a) Oil Sands Development Project at Hangingstone Block in Alberta, Canada
The Company conducts oil sands development project in Alberta, Canada through its consolidated subsidiary Canada Oil
Sands Co., Ltd. (93.60% share as of March 31, 2020; 94.58% share including indirect holding) and is engaged in production operations via its wholly owned subsidiary, Japan Canada Oil Sands Limited (JACOS). Moreover, this is a joint business with JACOS, which owns a 75% working interest, and CNOOC Petroleum North America ULC, which owns a 25%
working interest.
The Company strives to improve the profitability of the project through the operator JACOS. If the performance of
JACOS deteriorates due in part to long-term stagnation of the price of diluted bitumen in Alberta, the Group’s businessperformance and financial standing could be adversely affected by, for example, the fulfilment of guarantee obligations on
the borrowings pledged by the Company.
(b) Shale Gas Development Project in British Columbia, Canada
The Company participates in the shale gas development and production project operated by the Malaysian state-owned
oil company Petronas through its consolidated subsidiary JAPEX Montney Ltd. (JML; 55% share as of March 31, 2020),
which holds 10% working interest in the project.

100

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose	  The Company strives to enhance the profitability of the project in cooperation with the operator Petronas. In the event
there is a decrease in production or an unforeseen rise in costs due to long-term stagnation of gas prices or delays in thedevelopment schedule, the Group’s business performance and financial standing could be adversely affected by, forexample, a deterioration in JML’s performance or the fulfilment of guarantee obligations on the borrowings pledged by
the Company.
Furthermore, although the JML’s functional currency is the Canadian dollar, its borrowings are denominated in U.S. dollars.
Variation in the Canadian and U.S. dollar exchange rates could therefore generate foreign exchange gains or losses due toStrategytranslation differences of said borrowings.
(c) Garraf Oil Field Development Project in Iraq
The Company participates in the Garraf Oil Field development and production project in the southern region of Iraq
through its consolidated subsidiary Japex Garraf Ltd. (55.00% share as of March 31, 2020), which holds 30% working
interest in the project and provides 40% of funding. The company engages in the development business jointly with theoperator PETRONAS Carigali Iraq Holding B.V. (a subsidiary of Petronas).
Production began in August 2013, the project is currently promoting additional development work while allocating crude
oil sales income to capital investment based on the final development plan with the aim of boosting crude oil production.
The Company conducts business while amply cautious of the country’s political, social and civic situation. If those cir-

Value Creation Through Business Activities

cumstances significantly worsen, there is a risk that production volume and income will decline due to a delay in the additional development work and a suspension of oil production. In addition, if costs increase, the development schedule isdelayed, or production volume decreases, there is a possibility that the crude oil sales income allocated to capital investment would not be sufficient and the Company would increase its funding for the project.
(d) Sakhalin Project in Russia
The Company participates in the crude oil and natural gas development business off the coast of Sakhalin, Russia(Sakhalin 1 Project) through its affiliate Sakhalin Oil and Gas Development Co., Ltd. (15.29% share as of March 31, 2020).
In Sakhalin 1 Project, the Company is moving ahead with additional development work at currently producing oil andgas fields. As this work and further additional development plans make progress, the Group’s return on investment
through the equity method could decrease in the short term or the Company could incur guarantee obligations.

Initiatives to Support Value Creation

2.2 Infrastructure/Utility Business2.2.1 Risks related to sale of natural gas
The Company is expanding its natural gas transaction volume as part of its Infrastructure/Utility Business from the perspective of mitigating the impact of various risks in the E&P Business. The Company is actively working to cultivate new demandusing its existing natural gas pipelines as well as tanker trucks outside of its pipeline network. However, the Group’s businessperformance could be adversely affected by a decrease in the transaction volume of natural gas (including the commissioned
supply by third parties), weak cultivation of new demand, or a fall in sales prices. The main factors for these potential scenarios are a decline in population due to the falling birth rate and graying population, a fall in the capacity u­ tilization of consumers, and intensifying competition with other companies against a backdrop of systemic reforms in the gas business.

Financial and Other Information

Regarding the LNG that the Company anticipates it will need for future sales, the Company is working to ensure stableprocurement and also flexibility to adjust to changes in demand mainly by using a combination of long-term and spot contracts. If there is an unanticipated drop in demand, the Company may not be able to respond solely through adjustments inthe amount procured with spot contracts, and it may be necessary to resell the LNG at a cheaper price or to incur a payment under the take or pay clause in long-term contracts. The Company has taken measures to appropriately pass onchanges in the procurement price of LNG to the sales price, but the Group’s financial standing and business performance
could be adversely affected if it is not able to sufficiently pass on the changes.

JA P E X C o rp o ra t e R ep or t 2 0 2 0101

Business and Other Risks

2.2.2 Risks related to the Soma Electric Power Business
The Company provides funding to Fukushima Gas Power Co., Ltd. (33% share as of March 31, 2020), which is the operatorof the natural gas-fired power generation business at the Soma Port in Fukushima Prefecture, and promotes the ElectricPower Business using the power generation capability of its affiliate in proportion to its share.
The Company has concluded long-term sales contracts with multiple customers, mainly electricity retailers, regarding the
portion of electricity taken by the Company. However, if the sales volume declines or sales prices fall due to intensifying competition between power sources or procurement of alternative power owing to problems with power generation equipment,
the Group’s business performance could be adversely affected.

2.3 Business overall
2.3.1 Risks related to accidents and disasters
The Group is working to upgrade its emergency response measures, including security systems and business continuity
plans (BCPs), and to maintain the soundness of its equipment (including natural gas pipelines) related to its drilling wells; theproduction and transport of crude oil and natural gas; and the storage, regasification and transport of LNG. Due to operating
accidents and disasters (including abnormal weather and natural disasters), pandemics, crime and terrorism, it is impossible
to completely prevent the risk of inoperability of oil and gas fields or the risk of damage to people and equipment. In such an
event, insurance may not necessarily cover all damage, nor may damage be restricted to direct damage. Collateral damage
may arise including, but not limited to, reduced earnings due to canceled sales; payment of damages to retailers theCompany is obliged to supply; payment of damages or governmental penalties; and a loss of social trust due to environmental pollution of soil, air, water, and oceans.
2.3.2 Risks related to climate changeWith the adoption of the Paris Agreement, the trend toward realizing a low-carbon society is accelerating as countries
around the world promote initiatives aimed at reducing greenhouse gas emissions, which are driving climate change andglobal warming. The Company recognizes the importance of addressing climate change and is promoting necessary measures in the fields of governance, business strategy, risk management and emission management. Going forward, if eachcountry strengthens climate change policies (tightening or introducing environmental laws and regulations such as carbon
taxes), the Group’s business value could be diminished due to a decline in oil and natural gas demand in Japan and overseas, as well as by additional expenses.

3 Unique laws and regulations
3.1 Laws and regulations related to the Gas Business and Electric Power BusinessIn the Gas Business in Japan, the amended Gas Business Act went into force on April 1, 2017 as part of the easing of various regulations aimed at introducing competition. In addition to natural gas pipelines that have been obligated to transport
third-party gas, LNG terminals of a certain size are now obligated to open up to third parties under the regulations of the Gas
Business Act. A trend of easing regulations will help expand demand for natural gas and stimulate the overall gas market in
Japan, as well as increase the degree of freedom for the Group’s marketing, leading to an expansion in the business fieldand customer base. On the other hand, this kind of progress in structural reform will bring about intense price competition,
which could adversely affect the Group’s natural gas sales.

102

J A PE X C o rpo ra t e Re po rt 2 0 2 0Mission and Purpose

Furthermore, the Company’s future sales of electricity could be adversely affected by revisions to policies regulating electric
power businesses, along with accompanying market changes, as the government pushes ahead with electric power system
reforms with the aim of ensuring a stable supply, suppressing the upper limit on electricity fees, and expanding corporate
business opportunities as well as options for consumers, including households.
3.2 Other unique laws and regulations related to the Group’s businesses
Due to their specific characteristics, the Group’s businesses will or could put various burdens on the environment throughStrategy

their operational processes. The Group therefore legally and appropriately goes through required procedures, such as
obtaining approval from oversight agencies, submitting notifications, and providing product information to customers inaccordance with relevant laws and regulations like the Mine Safety Act and the High Pressure Gas Safety Act. To date, there
have been no major problems. However, if laws and regulations are strengthened in line with rising global environmental
awareness and expenses related to additional equipment and operational measures increase, the Group’s performance
could be adversely affected.

4 Risks associated with variation in INPEX’s share price
Value Creation Through Business Activities

As of March 31, 2020, the Company held 7.32% of INPEX Corporation’s shares, which accounted for ¥65,076 million of
the Group’s ¥88,922 million in investment securities. If INPEX’s share price fluctuates, the Group’s financial standing could
be affected.

5 JAPEX’s shares owned by the Japanese government
The Company’s shares were listed on the First Section of the Tokyo Securities Exchange when privately held shares of
JAPEX were sold by the former Japan National Oil Corporation (JNOC) in December 2003. As a result, JNOC’s percentage

Initiatives to Support Value Creationof owned shares fell from 65.74% to 49.94%.
Furthermore, the remaining shares of JAPEX held by JNOC were then transferred to the Japanese government (theMinistry of the Economy, Trade and Industry) on April 1, 2005 following the abolishment of JNOC. An equivalent of 15.94%
of those shares was sold with the transfer date of June 15, 2007. As a result, the percentage of shares held by the Ministry
was reduced to 34.00%, which is the current level. The remaining shares could still be sold, which could have an effect on
the Company’s share price depending on the timing, method, volume and other factors.
Moreover, regarding the ownership of these shares, the Company and the Japanese government have a memorandum of
understanding that sets out discussions between the two parties on changing the articles of incorporation; changes in capital or issuance of corporate bonds; financial results and appropriation of retained earnings; transfer or reception of some or
all of operations; determination of executive nominees; and matters that have a material impact on assets or business management. The memorandum is managed in a way that respects the independence of JAPEX’s management. The existence

Financial and Other Informationof the memorandum has not interfered with or restricted the Company’s business.

JA P E X C o rp o ra t e R ep or t 2 0 2 0103

Business and Other Risks

6 Compliance and social responsibility
When conducting business in Japan and overseas, the Group needs to fulfill its social responsibility.
(a) Compliance with laws and regulations
The Group complies with laws and regulations, including various industrial laws like the Companies Act, tax laws,
Financial Instruments Exchange Act, Antimonopoly Act, Labor Standards Act, various environmental laws, various data
security laws, various anti-bribery laws, Mining Act, and Gas Business Act.
(b) Information security measures
The Group appropriately manages confidential information, including personal data collected in the course of business
operations, to ensure it does not leak and is not used for unspecified purposes.
(c) Prohibition of unfair trade
The Group does not conduct unfair trade, such as bribery and provision of profit to antisocial forces.
(d) Respect for human rights
In the overall supply chain, the Group does not infringe human rights or abet such activities, namely discrimination,harassment, forced labor, child labor or unfair interference in the rights of native peoples.To fulfill these social responsibilities, the Group works to raise awareness of compliance and human rights among executives and employees through in-house training, upgrades internal regulations and committees, and builds necessary
systems, such as internal control systems related to internal audits and financial reporting. The Group cannot guaranteethat it can completely prevent executives and employees from committing illegal or unfair acts. If such acts were to becommitted, the Group could suffer tangible damage, namely the suspension of production operations at oil and gas fields
and the incurrence of litigation expenses, in addition to intangible damage, namely a loss of social trust. This could
adversely affect the Group’s business performance.
Note: Regarding the effects of the COVID-19 pandemic on business activities, “Note (22) Additional information” related to P. 67 of the consolidated financial statements lists
the Group’s estimated sales volumes and sales prices, the assumptions that serve as the basis for those estimates, and the expected level of uncertainty. In addition,from the perspective of the business continuity plan (BCP) related to pandemics, which is described in the aforementioned “2.3.1 Risks related to accidents and disasters,” as a way to prevent the spread of infections, the Company established an in-house emergency response headquarters related to addressing the COVID-19 pandemic, expanded flextime systems, introduced telecommuting, and restricted unurgent domestic and international business travel. In addition, at domestic production
sites, the Company maintained contactless operations that avoid in-person interactions and instituted restrictions on entering the central oversight control room.

104

J A PE X C o rpo ra t e Re po rt 2 0 2 0

Corporate Data (As of March 31, 2020)
Mission and Purpose

Corporate Profile
Company NameJapan Petroleum Exploration Co., Ltd. (JAPEX)
Established
April 1, 1970
Paid-in Capital
JPY 14,288,694,000
Fiscal Year
April 1 to March 31 of the following year
Number of Employees 1,739 (Consolidated basis)

Strategy

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, Sendai, JAPEX Research Center (Chiba),
Houston, Jakarta, Aberdeen, Dubai, Singapore
Headquarters 	SAPIA Tower, 1-7-12 Marunouchi, Chiyoda-ku,
Tokyo 100-0005, Japan
TEL: +81-3-6268-7000 (Administration & Legal Dept.)

Organization (As of September 9, 2020)

Board of Directors

Audit & Supervisory
Board

Technical Division

President

Domestic E&P Project Division

Project Planning & Coordination Dept.

Strategic Planning Dept.

Technical Solution Dept.

Exploration & Development Dept.

New Business Development Dept. I

Subsurface Evaluation Dept.

Operations Dept.

New Business Development Dept. II

Development Engineering Dept.

Executive Committee

Aberdeen Representative Office

Supply Planning & Coordination Dept.

Dubai Representative OfficeMarketing & Sales Division

Auditing Dept.
Corporate Strategy Dept.
Administration & Legal Dept.
Human Resources Dept.

Americas & Russia Project Division

Hokkaido Marketing & Sales Office

Hokkaido District OfficeMarketing & Sales Planning Dept.

Akita District Office

Project Dept.

Marketing & Sales Dept. I

Nagaoka District Office

Canada Shale Project Dept.

Marketing & Sales Dept. II

Soma District Office

Middle East, Asia & Europe Project DivisionMarketing & Sales Dept. III

Finance & Accounting Dept.

Project Dept.

Sendai Liaison Office

Procurement Dept.

Iraq Project Dept.

LNG Marketing and Procurement OfficeInformation Technology Dept.

Power Business Division

Singapore Branch

HSE Dept.

Value Creation Through Business Activities

Corporate Communication Office

Jakarta Representative OfficeBusiness Planning & Coordination Dept.

Research Center

Gas Pipeline Transportation Office

Houston Representative OfficeInter-regional Gas Supply Division

Environmental Engineering Dept.
Secretary Office

Overseas Project Management Division

Technical Planning & Coordination Dept.

Power Business Dept.
Renewable Energy Business Dept.
New Business Promotion Dept.

Initiatives to Support Value Creation

Stock Information
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
10,874

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 and Shareholding by Shareholder Type
Number of Shares Voting Rights (%)

19,432,724

34.00

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

2,897,900

5.07

INPEX CORPORATION

2,852,212

4.99

JFE Engineering Corporation

1,848,012

3.23

ORBIS SICAV

1,670,904

2.92

Japan Trustee Services Bank, Ltd. (Trust)

1,233,400

2.16

THE BANK OF NEW YORK MELLON 140051

1,171,900

2.05

MLI FOR CLIENT GENERAL OMNI NON COLLATERAL NON TREATY-PB

1,040,499

1.82

SSBTC CLIENT OMNIBUS ACCOUNT

1,025,211

1.79

969,352

1.70

STATE STREET BANK AND TRUST COMPANY 505103* Voting rights are calculated without treasury shares (2,303).

Financial and Other Information

Shareholder Name

Minister of Economy, Trade and Industry

Shareholding by Shareholder Type
Individuals and Other

Minister of Economy,
Trade and Industry

6.12%

34.00%

Foreign
Corporations
and Other

29.97%

PublicOrganizations

1.36%

Other Domestic
Corporations

11.74%

Financial Institutions
Securities Companies

16.22%

0.59%
Note: Percentage figures are rounded up to the second
decimal place.
JA P E X C o rp o ra t e R ep or t 2 0 2 0105Inquiries:
Japan Petroleum Exploration Co., Ltd.
Corporate Communication Office
TEL : +81-3-6268-7111
FAX : +81-3-6268-7302

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