Japan Petroleum Exploration Co., Ltd.

Corporate Report

2 0 19For the Year Ended March 31, 2019

What JAPEX can do fora better future
In September 2015, the United Nations put forth the 2030 Agenda for Sustainable
Development highlighting 17 Sustainable Development Goals (SDGs) as growth objectives common to international society to achieve a society “leaving no one behind.”
Upon the November 2016 enactment of the Paris Agreement, the Japanese government pledged a long-term national target of reducing greenhouse gas emissions by
80% by the end of 2050.
JAPEX announced its “Long-term Vision 2030” in May 2018.
While contributing to the creation of a sustainable society and aiming to realize ourvision for 2030, we will achieve growth as a company trusted by its stakeholders.

2018

2030

Corporate Vision
JAPEX contributes to society through stable supply of energy,
and solve social issues to realize sustainable development agendas.
P Explore, develop, produce and deliver oil and natural gas in Japan and overseas.
P Further enhance natural gas supply chain, consisting of our domestic infrastructures,by power supply business.
P Contribute to solve problems for sustainable society on energy and climate change,
through development and commercialization of new technology utilizing our existing
technology and expertise.
P Trust with stakeholder as first priority and achieve sustainable growth and maximize
corporate value.

2050

Named the “JAPEX Jomon Forest,” these trees were planted by the JAPEX Group
as part of its forest nurturing activities. (Nagaoka City, Niigata Prefecture)

JAPEX Group Code of Ethics and Conduct
To realize our Corporate Vision and sustain as a company trusted bysociety, we hereby establish the JAPEX Group Code of Ethics andConduct, which provides corporate ethics standards and action principles
to be adhered by all officers and employees.
1. Comply with applicable laws and regulations both domestically and internationally, and respect international
code of conduct
2. Place top priority on HSE (health, safety and environment)
3. Strive to build trusting relationship with stakeholders and contribute to society
4. Respect the human rights of all people
5. Develop a good working environment
6. Engage in fair and free competition and maintain appropriate trading practices
7. Maintain sound and transparent relationships with politicians, political parties and government officials/agencies
8. Oppose to any anti-social forces with resolute attitude and be free of any relations with such forces
9. Handle confidential information and personal/customer data with discretion

In light of changes in the external environment and in consideration of the revisions made in the Charter of Corporate Behavior issued by the Keidanren (Japan
Business Federation), we updated the JAPEX Group Code of Conduct in November 2019. Doing so entailed undertaking a comprehensive review of the previous
Code of Conduct, with particular focus placed on building relationships of trust with stakeholders, respecting human rights, and developing good workplace environments. Simultaneously, we have decided to announce concrete action plans aimed at putting this Code of Ethics and Conduct into practice.

Editorial Policy
We issue our Corporate Report to facilitate the understanding of
our economic, social and environmental activities over the mostrecent fiscal year as well as our business strategies, financial­position 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.

P Information Disclosure Sources
This report presents important information with the aim of enhancing under-

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 21 consolidated subsidiaries and other group companies.
Environmental performance data (P.23, P.39, P.50-51) are for
JAPEX and Japex Offshore Ltd.
Reporting Period
Fiscal 2018 started on April 1, 2018 and ended March 31, 2019.
Some statements include data before March 31, 2018 or after April
1, 2019.

standing of our company. More-detailed information is available on our website.

Financial Information

Corporate Report

Website: IR information

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

02

JAPEX Corporate Report 2019Non-financial Information

Website: CSR

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

Issuing Date
December 2019 (Next issue: October 2020)
Disclaimer
This report includes past and current facts about JAPEX and its
affiliate firms, their plans and prospects as of the issuing date, as
well as forecasts based on their business plans and corporate
management policies. These forecasts represent management’s
assumptions or decisions based on information currently available.
Readers should be aware that actual results may be different fromthese forecasts due to changes in the business environment.

Contents  

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

Strategy
President’s Message�������������������������������������������� 06
Messages from Outside Directors������������������������ 11
Long-term Vision 2030���������������������������������������� 12
Mid-term Business Plan 2018-2022�������������������� 13
Aiming for the Sustainable Development of the
JAPEX Group and Society• Review of Core CSR Themes�������������������������� 18• The Risks, Opportunities andValue Chain of the JAPEX Group ������������������� 20• Recognition of and Response to
Climate Change���������������������������������������������� 22

Value Creation Through Business Activities
Stable and Sustainable Energy Supply• E&P Business������������������������������������������������� 24• Infrastructure & Utility Business����������������������� 30• New Business Development��������������������������� 32   CLOSE UP:
JAPEX Research Center Initiatives������������������ 35

Initiatives to Support Value Creation
HSE as Our Culture��������������������������������������������� 36
Integrity and Governance������������������������������������� 40
Being a Good Neighbor��������������������������������������� 46
The Employer of Choice�������������������������������������� 48
Financial and Other Information
Financial and Non-financial Highlights������������������ 50
Oil and Gas Glossary*������������������������������������ 52

Corporate Data���������������������������������������������������� 53
Budding leaves on a tree planted by the JAPEX Group*  Items marked by the book icon are explained in the “Oil and Gas
Glossary” on page 52.

JAPEX Corporate Report 201903

The JAPEX Group’s Value Creation Process
Given changes in the economic and social environments, 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.

Capital to Support
Business GrowthBusiness Model

Financial
capital(Sound and stablefinancial base)P.16, 50

Awareness of
the External
Environment

Production
capitalE&P Business*1(Robust infrastructure)(Specified Gas
Pipeline 800km
in length)

P.30

P.20
P.24

 Changes in global
trends toward therealization of adecarbonized society Fluctuations in oil andnatural gas prices
 Declining populationin Japan Liberalization of
power and gas
businesses Intensifying competition for securingresources

Intellectual
capital(Comprehensive
technologicalcapabilities in E&P
business)

Businesses

P.10

Infrastructure &Utility Business*2

New Business

P.30

P.32

Human capital(Employee education
programs: more than
20 per year)

P.49

Social andrelationshipcapital(Relationships of trustwith stakeholders)Five Core CSR Themes “SHINE”

P.46

P.19

S

Natural capital(Proved reserves
387 million barrels)

I

Stable andsustainableenergy supply

Integrity andgovernanceN

H

Being a goodneighbor

HSE as ourcultureE

The employerof choiceP.28*1 Exploration & Production: Businesses that engage in exploring, developing, producing, transporting, and delivering oil and natural gas*2 Infrastructure & Utility Business, including business of supplying natural gas and business of power generation/electricity sales

04

JAPEX Corporate Report 2019

Mission and Purpose

Strategy

Value Creation Through Business Activities

Long-term Vision 2030

Initiatives to Support Value Creation

Value delivered
to stakeholders

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

Clients andregional societies
 Stable energy supply
 Supply environmentallyfriendly energy

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

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

Infrastructure &Utility Business*²
 Improve the operating
rate of our LNG terminals
and power plants
 Pursue additional power
generation business Secure competitive
natural gas sources

SocialContribution
through
Sustainable
GrowthFinancial and Other Information

Shareholders
and investors
 Improve corporatevalue
 Shareholder returns

Environmentally
Friendly New Businesses
 Promote commercialization of CCS
 Establish a dedicatedorganization for new
business development
 Propose new sourcesof valueSources of Our
Competitive
Advantage
 E&P technology Natural gas supply
infrastructure Knowledge obtained
through commissioned
research

Local Communities
Oil-and
Gas-Producing
Countries
 Work hand-in-handwith local
communities/create
employment

We will contribute to therestoration of communities in Fukushima and thedevelopment of regionalsocieties by taking
advantage of a robust
supply platform supported
by our Soma LNG Terminal
and Fukushima Natural
Gas Power Plant.

Employees
 An inclusive workplace

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

CSR Management
Transformation of Corporate Culture

Sustainable Development Goals(SDGs)JAPEX Corporate Report 201905

President’s Message

I assumed the position of Representative Director,
President and CEO of JAPEX in October 2019 and am
pleased to extend my greetings to all of our stakeholders.
Since its foundation in 1955, JAPEX has pursued asocial mission of ensuring a stable energy supply andthereby contributing to the development of Japan’s oil
sector. With oil and natural gas thus positioned ascore businesses, we have striven to secure corporate
growth and improve corporate value and, in thecourse of doing so, have established a solid trackrecord and legacy.
We believe that oil and natural gas will continue toplay essential roles as primary energy sources forcountries around the globe. However, we are wellaware of radical changes in social attitudes and themarket environment surrounding oil and natural gas
businesses, including an ever stronger call for countermeasures to climate change and the recent trend
toward a low-carbon/decarbonized society.
Moreover, due to growing stakeholder interest in thecorporate approach to environmental, social and governance (ESG) issues, companies are expected toembrace a long-term, multifaceted perspective andstrengthen their focus on contributing to a sustainable
society. Making such issues an essential part of corporate management and business is now a requirement.
In light of these circumstances, we formulated our“Long-term Vision 2030” and Mid-term Business Plan
2018-2022 in May 2018. We remain committed to thisvision and business plan while cherishing our
deep-seated corporate culture, in which the utmost
priority is placed on safety. In so doing, we will take on
the challenge of pursuing further corporate growth andenhancing corporate value.
We ask for our stakeholders’ further understanding
and continued support of these endeavors.
In the sections that follow, I wish to explain our fiscal
2018 operating results and outline the progress being
made in executing our growth strategies.

Representative Director and President,
Chief Executive Officer

06

JAPEX Corporate Report 2019

Mission and Purpose

Q1

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Could you outline the operating results for fiscal 2018, the first year of the Mid-term
Business Plan?
In fiscal 2018, profit attributable to owners of

the full-year operation of the Soma LNG Terminal resulted inparent totaled ¥14.7 billion, a turnaround of

a rise in operating costs. The JAPEX Group was neverthe-¥45.7 billion compared with the previous fis-less able to record profit attributable to owners of the parent

cal year. This caused our ROE to improve significantly fromthanks mainly to an upturn in existing businesses backed bya negative 7.2% in fiscal 2017 to 3.5%.

rising crude oil prices and the absence of the temporary

A1

Factors contributing to this improvement include favorable changes in the operating environment, such as anloss recorded in the previous fiscal year.
Aiming to secure a strong financial position that is resilient

approximately 28% year-on-year rise in the Japan Crudeagainst external factors, such as fluctuations in crude oil

Cocktail (JCC) price to USD71.94/bbl in fiscal 2018. We

prices, we have taken an aggressive approach to promoting

have, however, met with some negative factors, including a

cost reduction. Thanks to the success of operational

decline in profit from diluted bitumen sales stemming from

reviews and streamlining we have conducted at our sites

the widening light-heavy differential (between Westernaround Japan, we have saved hundreds of millions of yen in

Canadian Select, which is the reference price for heavy

costs and improved the profitability of our production oper-

crude oil from the oil sands, and WTI, which is the reference

ations. Looking ahead, we will continue implementing theseprice for light crude oil) associated with our Canada Oil Sands

initiatives, stepping up ongoing efforts to transform our

Project

Q2
A2. In addition, the March 2018 commencement ofbusiness structure and secure future growth.

Could you elaborate on progress in the Group’s initiatives in the E&P Business,
the Infrastructure & Utility Business, and New Business Development?
In the E&P Business, we are engaged inphase 2 production operations at the TSB Gas Field

operational streamlining in Japan, the addi-

Complex. In addition, JAPEX and its partners made a final

tional development of areas around ourinvestment decision regarding the oil and natural gas

existing oil and gas fields, and offshore exploration under a­development of the Seagull Project in the United Kingdom’s

government-commissioned project. We are also optimizing

North Sea. Moreover, we obtained government approval

our overseas portfolio while striving to discover new invest-

for a plan to boost daily production to 230,000 barrels per

ment opportunities.

day at the Garraf Project in Iraq. As such, we made steady

Examples of our initiatives include the additional develop-

progress in the E&P Business.

ment of areas adjoining to our Iwafune-oki Oil and Gas

In the Infrastructure & Utility Business, we strove to diver-

Field in Niigata Prefecture and a government-commis-

sify our LNG sources in an effort to ensure a stable supply

sioned project involving exploratory drilling operations offof energy not dependent solely on domestic production.

the coast of the Hidaka Area of Hokkaido Prefecture. We

We have also pushed ahead with initiatives aimed at facili-also reorganized our portfolio by, for example, divesting ourtating the use of natural gas as well as developing theownership interest in the DEMO Area of the Hangingstone

Renewable Energy Business while engaging in sales ofleases in the province of Alberta, Canada. On the otherelectric power with an eye toward the start of commercial

hand, our Canada Oil Sands Project succeeded in securing

operations at the Fukushima Natural Gas Power Plant.

stable daily production at approximately 20,000 barrels.
Meanwhile in Indonesia, the Kangean Project commenced

As part of efforts to strengthen our organizational structure, we opened an office in Singapore with the aim of
JAPEX Corporate Report 201907­bolstering our LNG procurement capabilities while in Japan

new fields by fully taking advantage of its technologies andestablishing the Renewable Energy Business Dept., anexpertise. This body played a key role in the launch of theorganization dedicated to promoting new projects, understudy group aiming to implement the LNG Bunkering

the Soma Project & Power Business Division.

framework based on Tomakomai Port and is currently

We also launched the New Business Promotion Office,­acting as the secretariat for the study group. Going forward,

an organization charged with creating new businesses in a

we will continue striving to achieve targets set for eachflexible manner that enables JAPEX to make entries intobusiness division.

Q3
A3

Please explain the relationship between the Mid-term Business Plan 2018 – 2022
and the “Long-term Vision 2030.”
Our “Long-term Vision 2030,” established inimportant in terms of the implementation of foundational

May 2018, represents a long-term growthmeasures aimed at better positioning the JAPEX Group to

strategy to be implemented during the period

realize Long-term Vision targets. Over the course of thisleading up to 2030, while the Mid-term Business Plan 2018

period, we will exercise solid financial discipline and main-– 2022 (hereafter the “Mid-term Business Plan”) summarizes

tain the Debt-to-EBITDA ratio at less than 2 times while

management direction for and priority initiatives to be under-

simultaneously allocating equal resources to E&P and non-taken over a five-year course that began in fiscal 2018.

E&P businesses for growth investments. For investments

To secure sustainable growth, we must take future uncer-

outside E&P, we are looking to such areas as renewable

tainties into account and employ a multifaceted approach toenergy, LNG bunkering, and overseas LNG transportation

business development. In line with the Long-term Vision

via railways. We also intend to improve the profitability of2030, we therefore aim to create new businesses that areexisting businesses and review their portfolios. These initia-

environmentally friendly and take full advantage of our com-

tives will help us establish new business models that, in

petencies, with operations other than the E&P Business

turn, will yield profit even as we steadily promote existingaccounting for 40% of the profit target set for 2030.

projects and achieve our aspiration for 2030, “Growth toWith this in mind, we earmarked the five-year period forthe Integrated Energy Company Utilizing Oil and Gas E&P

the Mid-term Business Plan. This period is particularly

and its Supply Basis.”

Relationship between the Long-term Vision and the Mid-term Business Plan

Raise ROE to
5% or more
Mid-term Business Plan

Long-term Vision Plan

2022

08

JAPEX Corporate Report 2019

Targeted profit composition for 2030
E&P Business: non-E&P businesses = 6:4
Build a portfolio capable of achieving
sustainable growth

2018 Review our portfolio Secure financial soundness Improve profitability ofexisting ­businesses

2030

Pursue new business
opportunities

Simultaneously realize the stable supplyof energy and the creation of a­low-carbon society

Mission and Purpose

Q4
A4Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Please share your thoughts on CSR management.
Our Corporate Mission states that we will

In order to achieve sustainable development and improve“contribute to society through the stable

our corporate value, we must engage in dialogue with our

supply of energy and address social issues

stakeholders and assess their expectations and require-

toward achieving our sustainable development goals.”

ments. This is essential to identifying the issues we must

Accordingly, we believe that our business activities in them-address to promote CSR management.

selves constitute CSR activities.
Since our establishment, when we started from zero, theWe recognize that in recent years, companies have been
facing growing calls from stakeholders to take concrete

growth of our oil and gas supply base has resulted in aaction to address societal issues such as those specified­significant increase in our social responsibility to provide aunder the SDGs as well as climate change related issues.

stable supply.

Q5
A5

Please cite some examples of initiatives undertaken by the JAPEX Group to
help resolve societal issues.
It has been five years since we specified the2022. In addition, we are steadily implementing such initia-

five core CSR themes to be addressed

tives as incorporating an internal carbon pricing system*

through the “SHINE” initiatives. With the aim

into our investment evaluation criteria and considering tar-of stepping up our CSR activities, we have reviewed thegets to be set for our GHG emission reductions. Drawing

priorities of these initiatives, giving due consideration tolessons from the September 2018 Hokkaido Eastern Iburichanges in the external environment P.18 . As a result, theEarthquake, efforts are also under way to update businessrevised SHINE initiatives place greater emphasis on climate

continuity plans (BCPs) for the entire Group. Looking ahead,change countermeasures and corporate governance. Withwe will begin upgrading the Board of Directors’ risk

regard to governance in particular, we also clarified initia-­management functions.

tives to be undertaken to enhance the Group’s overall­governance systems.

CSR management can easily lose focus and become amake-everybody-happy policy. However, JAPEX aims toWith regard to our Long-term Vision, we identified theremain accurately aware of key issues it must address toissues to be addressed in each aspect of ESG in order tosecure long-term growth. We will thus rally our strengths toincrease the likelihood of resolving societal issues. In May

promote CSR management, which is a cornerstone of our2019, we disclosed a roadmap for promoting our involve-

business expansion efforts.

ment in ESG initiatives. This road map indicates what the*A risk management system that quantitatively evaluates the impact of CO2 emissions
from a corporation’s current or future business activities.

JAPEX Group must do during the period leading up to fiscal

JAPEX Corporate Report 2019

09

Q6
A6

What are the key strengths of JAPEX in its pursuit of sustainable growth?
The JAPEX Group has three sources of cor-

network comprising a main pipeline connecting Niigata andporate value.

Sendai as well as a variety of transportation methods, hasFirst, we have a comprehensive suite ofsupplied natural gas to meet the needs of our customers

in-house technological capabilities covering the entire

along this network. Thanks to the 2018 launch of full-scale

spectrum of technologies necessary to undertake E&P

operations at the Soma LNG Terminal, we have become

operations, ranging from geological surveying, geophysicalcapable of supplying natural gas from not only the Sea of

exploration, drilling, reservoir evaluation, and facility design

Japan side but the Pacific Ocean as well, enhancing ourand management to oil and gas production. Furthermore,gas supply capacity and stability.

we are focusing our efforts on the research of cutting-edge

Third, we have nurtured trusting relationships with ourtechnologies, applying our capabilities beyond E&P to thestakeholders. While placing the utmost priority on safety indevelopment of carbon dioxide capture and storage (CCS)

our oil and gas operations and supply, we take extra careand renewable energy, technologies that contribute to miti-

to provide our stakeholders with opportunities for obtaining

gating global warming. We are confident these efforts will

detailed explanations of our ventures. We are also helping

also contribute to the practical realization of new resource

to vitalize regional economies and create employment.

areas, such as methane hydrate development andnext-generation marine resources.
Second, we possess a robust domestic natural gas supply infrastructure. The JAPEX Group, by way of a pipeline

I must emphasize that the foundation of these strengths
are our people, who do not fear failure in challenging new
fields and are able to bring about change. I believe thatstepping up the development of human resources capableof adapting to a rapidly evolving business environment is
key to strengthening our corporate competitiveness. I ask
our employees to hone their skills in their areas of specialty
and, in new areas extending beyond their expertise, toembrace a multifaceted perspective and engage inopen-ended discussion, be sensitive to the external environment, be unafraid of change, and continue taking on
new challenges. On the other hand, I believe it is the
responsibility of senior management, including myself, tocreate an environment where diversity is respected, andwhere it is easy to work.
Going forward, we will strive to further enhance ourstrengths while nurturing human resources that support
these strengths as we aim to realize our Corporate
Mission and Long-term Vision as well as the achievementof our overarching goal of contributing to sustainablesocial development.

10

JAPEX Corporate Report 2019

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Messages from Outside Directors

Kojima, Yamashita and Ito(from left)

Outside Director Akira Kojima

JAPEX Should Be an Overwhelming Winner

The present is said to be a disruptive era, wherein a company’s future development cannot be foreseen from an extension of its past. The samecan be said for entire countries and societies. Aspects of markets (demand) are similarly undergoing structural change. For businesses to remain
successful in fulfilling their social missions and roles, they must maintain an acute awareness of changes and opportunities arising not only on the
supply side but the demand side as well. For JAPEX, the importance of embracing a long-term perspective and strategy is greater than it is foralmost any other company. JAPEX’s mission, the stable and efficient supply of energy sources is quite clear. In pursuing this mission, the perspective of social responsibility and CSR will become increasingly important. However, “sustainability” will be key, as it is a prerequisite for companies
remaining strong, surviving and securing sustained profit. Undertaking CSR activities on a pro forma basis will not secure sustainability. I want
JAPEX to be an overwhelming winner against market competition while maintaining strict compliance. I will harness my experience as a journalist
for the Nikkei newspaper and as a researcher at the Japan Center for Economic Research as well as the knowledge I have gained from many­people through joint academic research for the sustainable development of JAPEX.

Outside Director Tetsuo Ito

Determined to Fulfill a Challenging Duty Requiring Precise Analytical Skills andDecisive Boldness

It has been four years since I assumed the office of outside director at JAPEX. After serving as a prosecutor for 36 years, I went into private practice nine years ago. When I was a prosecutor, I was charged with investigating mainly corporate crime. In private practice, I have undertaken theinspection of a number of forms of corporate misconduct. This experience has afforded me a glimpse into what goes on in the course of corporate management. As I have also been appointed to such positions as outside Audit & Supervisory Board member at several corporations, I havelearned quite a few things about how difficult corporate management can be. I know that handling a prosecution case is not easy; however, thelevel of difficulty is no comparison to that of corporate management. Furthermore, for businesses like JAPEX that are adversely affected by external factors, decision-making in situations where one seemingly can neither retreat nor advance are everyday occurrences. Extreme composure,precise analytical skills and decisive boldness are a must. My favorite motto is the words of the philosopher Shinzo Mori, “Place one eye far into
history, the other eye on what you must do right away.” I will keep these words strongly in mind while working to fulfill my duties as a directorof JAPEX.

Outside Director Yukari Yamashita

Cherishing a Sincere Attitude while Making Straightforward Inquiries

I assumed the office of outside director of JAPEX in June 2019. For many decades, I worked at a think tank specializing in the energy sector,
engaging in the analysis of trends, assessing future energy outlooks and making policy recommendations for domestic and international concerns.
I am honored by the new duty entrusted to me by JAPEX. Today, against a backdrop of increased uncertainty and opacity due to issues like energy
transformation as well as global politics and geopolitics, many companies are faced with the task of enhancing their competitiveness while managing
risk. On the other hand, despite the increasing significance of decarbonization as part of long-term global warming countermeasures, the importanceof oil and gas will not diminish over the next several decades. The importance of a stable energy supply is expected to intensify as emerging Asian
economies become increasingly dependent on imports. JAPEX must continue to support sustainable growth by supplying energy and playing a pioneering role in technological innovation. But, maintaining solid governance and developing risk management will be more important to the global
expansion of its business. As an independent outside director with a sincere attitude, I will always place importance on straightforward questions suchas “why?”. I will spare no effort in studying what is best for JAPEX, and assume my duties sincerely based on a long-term and global perspective.

JAPEX Corporate Report 201911

Long-term Vision 2030
In May 2018, the JAPEX Group has 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 customers while also being active in helping resolve global issues calling for low carbonizationand 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*1 =6: 4*¹ Infrastructure & Utility Business and New Business Development

Profit Contribution Image of Business Portfolio
LNG overseas rail transport

Seafloor hydrothermal
deposits

Bunkering

Non-E&P
Business

4

Renewable energy
CCS*2

Natural Gas-Fired Power Generation
Project at Soma Port

Soma LNG Project

Methane hydrate

CO2-EOR
Underground storage of natural gas

Review portfolio andimprove theoperation efficiency

2018

2020: Commencement ofoperations at the Fukushima
Natural Gas Power Plant

2022

Period of the Mid-term Business Plan
2018-2022

12

JAPEX Corporate Report 20196

Launch andpromote new projects

Completion of depreciation associatedwith the Soma LNG Terminal

E&P Business

2030
Long-term Vision*2 CCS: Carbon dioxide capture and storage

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Mid-term Business Plan 2018-2022
Under the Mid-term Business Plan, we have set quantitative targets and formulated business plans for each of three
Business segments. With the assumed oil price of USD60 per barrel, we are thus aiming to improve our ROE to 5%
or more by the end of fiscal 2022.

Mid-term Business Plan 2018-2022
Fiscal 2022 target: ROE of 5% or more(assumed oil price: USD60/bbl)

Business Plans and Targets for Each Business Segment

E&P BusinessLong-term Targets

Maintain “RRR >1”

In addition to promoting development associated with the existing projects,
we are stepping up initiatives to identify potential projects.

Infrastructure & Utility Business

Targets to 2022

Natural gas
transaction volume
in JapanElectricity sales volume

1.6 million tons

(LNG equivalent)

2.8 billion kWh

We are reaching out to new clients to expand domestic gas sales while engaging in sales of electric power with an eye
toward the start of commercial operations at the Fukushima Natural Gas Power Plant* in 2020.
At the same time, we are promoting the development of renewable energy sources.
* Owned by Fukushima Gas Power Co., Ltd. (JAPEX’s investment ratio 33%)

New Business Development
Business Generation under a New Business Model
Utilizing Our Competitive and Advanced Resources

JAPEX Corporate Report 201913

Mid-term Business Plan 2018-2022

Toward Achieving Our Profit Targets
As we aim to improve ROE to 5% or more by the end of fiscal 2022 in line with our profit target under the Mid-term
Business Plan and become a “comprehensive energy company” as stated in the Long-term Vision, we will optimize
the existing projects and enhance their profitability while accelerating the development of new projects in eachbusiness field.

Forecasts of Progress in the Mid-term Business Plan by Fiscal Year
PPP: Results pp: Plan

FY2018E&P BusinessMaximize the value of domestic resources Additional development of the 1,900-meter reservoir of
the Iwafune-oki

Continue production at 10 domestic oil and gas fields

P Commenced

Conducted development work

production Development of the Yufutsu shallow reservoir

Conducted development work

Growth investment in overseas E&P
Canada Oil Sands Project

P Transition to 20,000 bbl/d stable

Indonesia Kangean ProjectConducted development work

P Completed additional­production operations

Iraq Garraf ProjectPC ommenced development work to increase production to 230,000 bbl/dU.K. North Sea Seagull ProjectConducted exploration and evaluation and formulated development plansdevelopment of andcommenced phase 2
production operations
at the TSB Gas
Field Complex

P Made a final investment

and comd­ ecision
menced development work

OthersDiscover and acquire new reserves Conduct exploratory drilling offshore the Hidaka Area

Optimize our asset portfolio

P Sold Hangingstone 3.75 section, an asset in the Canadian Oil Sands

Infrastructure & Utility Business
Natural gas supply in Japan

Continue with ongoing efforts to expand sales

Strengthen our LNG procurement capabilities

Power generation Natural Gas-Fired Power Generation Project at Soma Port

Fukushima Natural Gas Power Plant

Renewable energy

New Business Development
Pursue new business opportunities

Strive to commercialize CCS, methane hydrate, and innovative technology for exploration of deep sea resources

Discover business seeds

Discover business seeds, including those associated with the overseas rail transport and bunkering of LNG

P E stablished the study group aiming to

implement the LNG Bunkering framework

P Established the New Business
Promotion Office

14

JAPEX Corporate Report 2019

Mission and Purpose

Strategy

FY2019

Value Creation Through Business Activities

FY2020Initiatives to Support Value Creation

FY2021

Financial and Other Information

FY2022p Commence production

Continue development work

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

p Commence production

Continue production operations associated with the Shale Gas Project (Canada), the Tight Oil Project (the United States), and the Sakhalin-1 Project (Russia)p Reporting on the analysis and evaluation of data

Drilling survey

P Opened an office in Singapore

p Commence trial operations
Trial operations

p Commence commercial operations
Promote initiatives to secure new projects

P Established the Renewable Energy Business Dept. under the Soma Project & Power Business Division

JAPEX Corporate Report 201915

Mid-term Business Plan 2018-2022

Our Financial Position and Fund Allocation Policy
During the period of the Mid-term Business Plan, we will undertake investment in our E&P operations in Japan andoverseas to maintain and improve the profitability of existing businesses while repaying debt. We will also execute
growth investment in both E&P and non-E&P businesses.

Consolidated financial position
as of the end of fiscal 2018

Fund allocation for the
fiscal 2019 – 2022 period

Fiscal 2022 targets•C ash and deposits*1: ¥88.1 billion

1 Investment in existing projects*1:
Approx. ¥60 billion•R educe interest-bearing debt byapprox. ¥100 billion to ¥120 billion

2 Repayments of debt, etc.: Approx. ¥55 billion•F acilitate growth investment while
maintaining the Debt-to-EBITDA
ratio at less than 2.0 times• Investment securities:¥137.7 billion• Interest-bearing debt*2: ¥151.7 billion• EBITDA*3:

¥41.7 billion

3 Growth investment:
Approx. ¥65 billion• Debt-to-EBITDA ratio:Approx. 3.6 times

4 Shareholder returns*4: ¥9 billion or more

• Further enhance shareholder returns
over the medium to long term

To achieve a fiscal 2022 target of raising ROE to 5% or more, we will execute the ­following
measures, giving consideration to the impact of highly volatile oil and gas prices.
1 Allocate necessary funds to improve the profitability of existing projects
2 Set aside new investment funds while maintaining financial discipline aimed at maintaining the Debt-to-EBITDA ratio at less than 2 times
3 Place equal weight on E&P and non-E&P operations in terms of growth investment
4 In line with a basic policy of securing a stable stream of dividends, aim to enhance both
corporate value and shareholder returns over the medium to long term via the strengthening of financial position and the facilitation of growth investment
5 Verify the propriety of our cross-shareholdings in light of their benefit, risk, capital costand other factors*1 Cash and deposits and investment in existing projects do not include remaining funds set aside for the Garraf Project (approx. ¥29.3 billion) as well as additional investment to be­allocated to achieve the daily production of 230,000 barrels.
*2 Interest-bearing debt includes lease obligations, retirement benefit liabilities and contingent liabilities.
*3 EBITDA is the total of operating income, depreciation and interest and dividends received.
*4 Funds to be allocated for shareholder returns are based on the premise that amount of dividends being paid remain unchanged from the current dividend forecasts for fiscal 2019­annual dividends.

Shareholder returns
Annual dividends (yen)InterimYear-end

25
20

20

20

20

20

20

25

25

25
(Planned)

30
25

25

25

10
5

2010

16

2011

2012

2013

2014

JAPEX Corporate Report 2019

2015

2016

10

25

10

10

2017

2018

2019 (FY)In line with its basic policy of maintaining the stable payoutof dividends, annual dividends paid by JAPEX for fiscal
2018 amounted to ¥40 per share, up ¥20 per share fromfiscal 2017. For fiscal 2019, we aim to pay annual dividends of ¥50 per share, which comprises interim dividendsof ¥25 per share and year-end dividends of ¥25 per share.
Over the medium to long term, we will strive to further
enhance shareholder returns by improving the soundnessof our financial position and executing growth investment
aimed at securing greater corporate value.

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Mid-term Business Plan 2018-2022

Roadmap for Promoting Our Involvement in ESG Issues
We are stepping up our involvement in environmental, social and governance (ESG) issues in line with a perspectiveof facilitating sustainable development and contributing to society. In addition to continuing with initiatives undertaken by the JAPEX Group thus far, we have identified core themes that have to be prioritized in environmental,social and governance fields, and are taking concrete action. Furthermore, we will enhance the content of information disclosure associated with these themes.

Existing initiatives

Initiatives to be started by fiscal 2022

Established the
New Business
Promotion Office

Introduced the
ICP system*1

Established theRenewable
Energy Business
Dept.

Identified quantitative targets forthe reduction of
GHG emissions

Decided on­equally allocating
new investment
funds for both
E&P and non-E&P
operations

SocialCertified as a
Health andProductivity
Management 500
Organization (White
500) for the third
consecutive year

Achieved thetarget for thenumber of
female employees hired

Revision of
the personnel
system underway (e.g., job
role-based­compensation)

Building an evenstronger energy
supply structure
via DX*2

Governance
Established theNomination andCompensation
Advisory
Committee

Updated the
JAPEX Group
Code of Ethics
and Conduct

Made the Boardof Directors’
composition
more diverse

Upgraded theBoard ofDirectors’ risk
management
functionsSet targets for
issues other thanclimate change

Social Contribution through Sustainable Growth

Environment*1 The internal carbon pricing system being incorporated into JAPEX’s investment evaluation criteria*2 Digital transformation

JAPEX Corporate Report 201917

Aiming for the Sustainable Development of the JAPEX Group and Society

Review of Core CSR Themes
On the basis of our view that our business—the stable supply of energy—in itself conforms with our commitment to CSR
activities, in fiscal 2014 we specified five core CSR themes under the name “SHINE” that comprise 14 individual issues.
Although SHINE widely encompasses the social issues of each aspect of ESG, we have revised each individual issue
it covers, reorganizing the items and their relative importance in light of changes in the business environment and ourcore business areas.

Essentially, we recognize that we need to place greater
emphasis on climate change response and corporate­governance. As for climate change, we have shifted ouremphasis to the pursuit of business activities that contributeto the realization of a low-carbon society in light of environmental concerns pertaining to our operations. Accordingly,
we added “Climate change response” to the individual
issues listed under the theme “S” (Stable and sustainableenergy supply). With regard to governance, we enhanced
individual items such as information management andoverall governance systems while placing crisis management under the theme “I” (Integrity and governance). In
addition, with regard to the theme “N” (Being a good neighbor), the importance of maintaining trusting relationships
with our stakeholders through various communications
channels, such as co-existence and development activities
with local communities, placing importance on local culturesand continued dialogue, was recognized and descriptionsof the issues were revised.

Our Review Process and CSR Plans/Targets
1. E
 valuating present status
and identifying issues

Identify topics that may be CSR issues by taking into account to various guidelines

2. Analyze and evaluate
these issues

Prioritize each issue by importance, thereby updating the core CSR theme matrix

3. C onduct in-house ­surveys
via questionnaires

Send out and collect questionnaires targeting senior management and others in managerial positions

4. Review

Modify the matrix based on feedback from questionnaires and reorganize issues under SHINE into
12 items Please also see the document featuring our CSR plans and targets by visiting the following URL.
https://www.japex.co.jp/english/csr/pdfdocs/JAPEX_CSRresult2017-18_e.pdf

New Core CSR Themes
Overview of the core CSR theme matrix

Importance to our stakeholders

High

1 Stable Energy Supply
Climate change response

3

High

Crisis management 8
Pollution prevention andresource recycling

6

Compliance

95Preserving biodiversity and ecosystems

12 Creating a fair andgood working environment

11

4 Occupational health and safety
7 Governance

10 Growing together with stakeholders

Respecting
employee diversityand developing
human resources

2 Development of new technologies

Importance to our business

18

JAPEX Corporate Report 2019

Note: Items marked 1 through B are listed under “Individual
Issues (new)” in the chart on the facing page.

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Five Core CSR Themes as “SHINE” Initiatives

Stable andsustainableenergy supply

1 Stable energy supply
2 Development of newtechnologies

1 Stable Energy Supply
2 Development of newtechnologies
3 Climate change
response

H

HSE as ourculture3 Occupational healthand safety
4 Crisis management
5 Measures to prevent
global warming
6 Preserving biodiversity and ecosystems
7 Pollution prevention
and resource recycling

4 Occupational healthand safety
5 Pollution prevention
and resource recycling
6 Preserving biodiversity
and ecosystems

I

Integrity andgovernance

8 Governance
9 Compliance

7 Governance
8 Crisis management
9 ComplianceN

Being a good
Neighbor? Growing together withlocal communities
A Building good­relationships withstakeholders

0 Growing together
with stakeholders

The Employerof choiceBR especting employee
diversityCC reating a fair andrewarding workplaceDH uman resources
development and­training

A Respecting employee
diversity and developing humanresources
B Creating a fairand good working
environment

ESG

GovernanceSocialS

SDGs

SocialIndividual Issues(new)Environment

Individual Issues(hitherto)

JAPEX Core CSR Themes

E

JAPEX Corporate Report 201919

Aiming for the Sustainable Development of the JAPEX Group and Society

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

Risk Management and the Creation of Business Opportunities
Awareness of the­external environment

Business risks

Our response to business opportunities and risks

Changes in global
trends toward the­realization of a­decarbonized society

Growing call for withdrawal
from investment in and financing
for fossil fuel businesses• Shift in the business portfolio to help create a
low-carbon society while continuously pushingahead with the E&P Business> Promote renewable energy development> Develop CCS technologies to achieve­commercialization

Fluctuations in oil andnatural gas prices

Fluctuations in procurement
costs/sales prices of oil and gas

Declining populationin JapanA decrease in sales volume
in step with shrinking­domestic demand• Shift to a new portfolio that is resilient against
fluctuations in oil prices, etc.
> Strengthen the power generation business,
including the renewable energy business• Strengthen market competitiveness in Japan> Expand sales of natural gas> Procure competitively priced LNG> Advance “smart community” and “compact city”
business• Expand our scope of services

Liberalization of powerand gas businesses

Intensifying competition
for securing resources

20

JAPEX Corporate Report 2019

Intensifying market competitionin Japan> Cultivate new clients in the power generation business> Engage in commissioned businesses that takeadvantage of existing infrastructure• Expand globally by leveraging our strengths indomestic operations• Growing difficulties in­acquisition of interests• Pursue opportunities that will better position us
to employ our technologies and expertise• Rising cost of exploration anddevelopment• Exploit the remaining potential of our­domestic reserves

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Value chainytb
elopmeness dev
in
s
s
e
u
g
b
ta
ic
advan
organ
Achieve our competitivegingleveraIdentification ofBusiness Opportunities

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

Commercialization

Renewable Energy

Infrastructure &Utility Business
LNG Procurement

Gas Power Generation

Electric Power
SupplyGas Supply Chain

Gas supply

LNG Terminal(contract production)

Expand the scope of business fields

New Business
Development

E&P Business
Acquisition of Interests/
Exploration

Development/
Production

Crude oil supply

JAPEX Corporate Report 201921

Aiming for the Sustainable Development of the JAPEX Group and Society

Recognition of and Response to Climate Change
Our Recognition of Climate Change
In 2017, following the 2016 enactment of the Paris
Agreement, 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 from major economic powers.
The TCFD in turn issued recommendations aimed at­facilitating information disclosure with regard to the financial
impact of climate change. At the same time, with growing
public awareness of the need for international collaboration
aimed at creating a sustainable society, businesses arebeing called upon to help resolve global issues arising fromclimate change and to disclose information on what they

are doing to this end.
Having identified “SDGs 13: Climate Action” as a priority
issue, the JAPEX Group is striving to reduce CO2 emissions
from facility operations. Simultaneously, we are pushingahead with the commercialization of technologies aimed
at offsetting CO2 emissions via the application of technicalexpertise we have nurtured in the course of the E&P­business while endeavoring to create environmentallyfriendly new businesses, such as those associated withrenewable energy. In addition, we are developing a process
for managing risks that the Group may confront due to­climate change.

Our Response to the TCFD Recommendations
The TCFD recommendations provide businesses with avoluntarily framework for information disclosure on risks
and opportunities arising from climate change and require
the disclosure of information regarding four core elements,
namely: Governance; Strategy; Risk Management; andMetrics and Targets. Moreover, Japan’s Ministry of
Economy, Trade and Industry announced the Guidance forGovernance
Strategy

Climate-related Financial Disclosure, which includes­recommended disclosure items by industry, in
December 2018.
The TCFD recommendations include undertaking a number of initiatives over the medium to long term and we will
adapt our in-house structure to maintain appropriate disclosure practices to conform.

The organization’s governance around climate-related risks and opportunities
The actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and­financial planning

Risk Management

The processes used by the organization to identify, assess, and manage climate-related risks

Metrics and Targets

The metrics and targets used to assess and manage relevant climate-related risks and opportunities

The Introduction of an ICP System
As part of our structure aimed at managing business risks
arising from climate change, we have engaged in intensive
discussion regarding the inclusion of an internal carbon
pricing (ICP) system into our investment evaluation criteria
and, in fiscal 2019, began introducing this ICP system in aphased manner. ICP is the voluntary pricing of CO2 emissions on a managerial accounting basis, taking into
account both costs associated with and opportunities arising from responses to climate change. Therefore, the useof ICP systems is expected to assist corporations in theirstrategic decision-making via quantitative assessments of

22

JAPEX Corporate Report 2019

the impact of climate change on their current and futurebusiness activities. Through the utilization of the ICP system, which will make it easier to assess costs associatedwith CO2 emissions, we will curb the volume of CO2 emissions from our operations.
With regard to climate change countermeasures, we also
recognize the importance of constantly reducing greenhouse gas (GHG) emissions, formulating emission targets
and providing officers and employees with environmental
education. Accordingly, we are simultaneously implementing these activities.

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Reducing Greenhouse Gas (GHG) Emissions
The majority of GHG emissions from JAPEX’s operations
are accounted for by its E&P business sites. We have beenworking to reduce these emissions since 2013 as a participant in the Japan Business Federation’s Commitment to a
Low Carbon Society initiative. Furthermore, in line with theindustry reduction targets set by the Japan Petroleum
Development Association for 2020 and 2030, we are striving to meet our GHG reduction quota. Specifically, we
annually set reduction targets based on our medium- tolong-term targets and incorporate them into our CSR
action plans and targets as well as the Mid-term HSE Plan
P.36 . To achieve these targets, we are promoting energy
saving, flaring emitted gas and effectively utilizing excess
low-pressure gas at in-house facilities. The status of these
initiatives is being reported to the HSSE Committee
chaired by the executive in charge of HSE to formulateaction plans for the subsequent fiscal year. In addition,please also refer to P.32, 33 for our initiatives to create
environmentally friendly businesses, such as those related
to CCS and renewable energy.

Volume of GHG Emissions*2
Scope 1

Scope 2

Scope 3(t-CO2)400,000

382,604
11,127
41,631300,000

47,698244,491
12,722200,000

320,883
10,59640,934

230,636
11,846
40,848241,360
10,98039,799190,835

177,942

190,581

2014

2015

2016

329,846

262,589

2017

2018

100,000

0(FY)

In fiscal 2018, the volume of GHG emissions (excluding Scope 3) totaled
310,000 t-CO2, down 61,000 t-CO2 (16.5%) from the previous fiscal year.
This reduction was mainly attributable to the lower volume of emissions
from the Soma LNG Terminal, which released gas from its vent and flareequipment in the previous year as part of trial operations.
Scope 1: Direct GHG emissions arising from the use of fuel by the company or its own process
Scope 2: Indirect GHG emissions arising from the use of electricity or heat purchased by thecompany from other companies
Scope 3: Of other indirect emissions, emissions associated with transportation commissioned
to third parties by the company as a cargo owner

Energy Saving Activities
Currently, approximately 60% of GHG emissions fromJAPEX’s E&P business sites are accounted for by emissions associated with energy consumption. With this inmind, we have positioned curbing energy consumption as
an important initiative in terms of GHG emissions reduction
and are pushing ahead with energy saving.
Specifically, we have made it a rule for our energy-intensive bases to compile concise monthly reports on theirenergy consumption so that we may analyze year-on-year
differences and confirm any abnormalities. Moreover, we
conduct exergy*¹ analyses at our energy-intensive facilities
to determine and quantitatively assess the existence of
redundant energy use, verify the effect of the energy-saving
measures in place and optimize such measures. In theseways, we are striving to promote the efficient use of energy.
In fiscal 2018, we introduced nine measures aimed atsaving energy. The introduction of these measures, which
are focused on enhancing operational efficiency for existing
facilities without additional investment, helped us savemore than ¥40 million in costs through a significant cut inenergy consumption while resulting in approximately 2,400
ton reduction in the volume of annual CO2 emissions.
*1 Exergy is an indicator based on the assessment of energy inputs that quantitatively
determines the volume of energy being utilized for intended purposes and the volume
of energy lost.

Volume of Energy Consumption*2
Scope 1

Scope 2

Scope 3

(TJ)
3,000

2,698.8
182.6

2,543.8
169.8

642.9
2,000

1,000

0

646.1

2,609.3
156.8

2,564.7
159.2

2,869.5
151.7

815.5
636.4

689.3

1,873.3

1,727.9

1,816.1

1,716.2

1,902.3

2014

2015

2016

2017

2018

(FY)

In fiscal 2018, the volume of energy consumption (excluding Scope 3)
totaled approximately 2,718TJ, up 312TJ (13.0%) from the previous fiscal
year. This rise was mainly attributable to increases in energy and natural
gas consumption at the Soma LNG Terminal due to its commencement offull-scale operations.
*2 The JAPEX Group calculates and discloses the volume of GHG emissions and energy
consumption in accordance with classifications under the GHG Protocol Corporate
Standard, which represents an international standard for the calculation and reportingof GHG emissions.

JAPEX Corporate Report 201923

Stable and Sustainable Energy Supply

S HINEE&P BusinessLong-term Target

Maintain “RRR>1”

To achieve our target of maintaining our reserve-replacement

Garraf Project in Iraq, our proved reserves increased aroundratio (RRR) at 1 or higher over the medium to long term, it

85 million barrels year on year to 387 million barrels, and ourwill be important to maintain and increase our reserves. In

RRR was around 5 on a single year basis. We will continue

fiscal 2018, due in part to receiving approval for a plan toworking to acquire new reserves over the medium to longincrease daily production to 230,000 barrels per day at theterm to offset declines in reserves due to production.

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

Reserves in Japan

Reserves Overseas

RRR (single year)

(RRR)

500

8.00

450

7.00

400
350

307
160

300
250
200

254
49

257
49

205

208

150

305
193

313
203

349
255

352
277

387
323
302
229

3.00

223
38

2.00

185

100

1.00

112

110

50

0.00

94

74

64
73

0

FY2010

5.00
4.00

147

FY20096.00

FY2011FY2012FY2013

FY2014FY2015FY2016FY2017(1.00)(2.00)FY2018RRR Policy
Regarding our long-term vision and RRR target as outlined in the­difficult to specify a standard period. In addition, our ­target of

Mid-term Business Plan, we have refrained from fixing the number

maintaining an RRR of at least 1 is not meant to be achievedof years used for the RRR calculation period. Because the periods

during the Mid-term Business Plan; we aim to achieve it over theneeded for exploration and production in the E&P business varymedium to long term and hold it steady.

wildly, ranging between a few years and a few decades, it is24

JAPEX Corporate Report 2019

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

E&P Business
Main Blocks Owned by the JAPEX Group

U.K. North Sea

CanadaRussiaSeagull Project

Oil Sands Project
Shale Gas Project

Sakhalin-1 Project

Japan

Iraq
Garraf Project

the U.S.

Oil and gas fields (10 locations)

Tight Oil ProjectIndonesia
Kangean Project

FY2018 Highlights in the E&P Business in Japan
July 2017

March 2019
April 2019

Commenced development work on oil production from shallow reservoir of the Yufutsu Oil and Gas Fieldin Hokkaido Prefecture
Commenced production at an additional development of the 1,900-meter reservoir of the Iwafune-oki Oiland Gas Field in Niigata Prefecture
Commenced a drilling survey offshore the Hidaka Area of Hokkaido Prefecture

Yufutsu Oil and Gas Field in Hokkaido Prefecture
Commencement of Development Work on Oil Production from Shallow Reservoir
At the Yufutsu Oil and Gas Field, we started development work in 2017 on the
Takinoue formation, which is a proved but undeveloped shallow reservoir that lies
above the current oil and natural gas production reservoir. We aim to commence production of crude oil (heavy oil) in the first half of 2020. In fiscal 2018, we conducted aworkover of the existing wells and commissioned work on the aboveground facilities,
including crude oil processing facilities.

The Yufutsu Plant

Iwafune-oki Oil and Gas Field in Niigata Prefecture
An Additional Development of the 1,900-meter Deep Reservoir
At the Iwafune-oki Oil and Gas Field, we drilled one additional development wellinto the 1,900-meter deep reservoir currently producing crude oil. We started drilling operations in December 2018 and began producing 100 kiloliters of crude oil
per day in March 2019.

Exploration Project Offshore the Hidaka Area of
Hokkaido Prefecture

Drilling operations at the Iwafune-oki Oil and Gas Field

JAPEX was commissioned by the government to conduct exploratory drilling operations to confirm the hydrocarbons initially in place (HCIIP) around 50 kilometers
offshore the Hidaka Area of Hokkaido Prefecture.
JAPEX Corporate Report 201925

FY2018 Highlights in the Overseas E&P Business
April 2018

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

June 2018

Transitioned to stable production operations of 20,000 barrels per day at the Oil Sands Project in Canada
Commenced Phase 2 production operations at the TSB Gas Field Complex in the Kangean block in Indonesia

March 2019

Iraq

Made a final investment decision regarding development at the Seagull Project in the U.K. North Sea

Garraf Project

Production equipment

Commencement of Development Work to Increase Oil Production
In February 2018, the Iraqi government approved the Final Development Plan
aimed at increasing crude oil production at the Garraf Oil Field to 230,000 barrels
per day, and we started development work on this plan in April 2018. The production volume will be gradually ramped up to the production target of 230,000 barrels
per day by the end of 2020.
For the project, we produce oil from the field based on a service contract with
the Iraqi government and receive remuneration fees based on the amount of oil produced. In addition, we are responsible for funding the development of the field andperiodically recoup an amount equivalent to our investment in the form of crude oil.
Iraq
BaghdadProject Company

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

Field

Garraf Oil Field

Percentage of Interest*

30% (responsible for 40% of funding)

Status

Production and development under way

Operator

The PETRONAS GroupGross Production
Volume92,000 bbl/d (as of March 2019)

CanadaOil Sands Project

Garraf Oil Field(production
under way)

SamawahBasrahNasiriyah

Central processing facility

Transition to Stable Production Operations of 20,000 Barrels per Day
We transitioned to stable bitumen production operations of 20,000 barrels per day
at Hangingstone in June 2018. The bitumen produced is diluted to the equivalentviscosity of heavy oil and is sold via pipeline within Canada as well as to theMidwestern United States.
Although we have confirmed that the maximum daily production capacity of theoil sands layer is around 30,000 barrels per day, we flexibly adjust production volume in line with the conditions of the local market, such as the mandate to curtailproduction in the province of Alberta beginning in January 2019.

Project Company

Block, Percentage ofInterest*, and Status

Gross Production
Volume26

Canada Oil Sands, Ltd. (CANOS) (JAPEX’s investment ratio: 94.58%)
Japan Canada Oil Sands Ltd. (JACOS), an overseas subsidiary
Hangingstone Leases
Percentage of Interest: 75% (operator)

Production under way

Corner JV Lease
Percentage of Interest: 12%

Appraisal under way

Other bitumen leases (including Corner and Chard)

Under consideration

26,000 bbl/d (as of March 2019)

JAPEX Corporate Report 2019

Calgary

Fort McMurray
Area
Hangingstone
Leases(production
under way)
63

Corner JV
Lease

69
63

Chard

Mission and Purpose

Indonesia

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Kangean Project

Financial and Other Information

TSB Phase 2 gas distribution ceremony

Commencement of Phase 2 Production Operations at the TSB Gas Field Complex
The TSB Gas Field Complex comprises the three gas fields of Terang, Sirasun, andBatur in the Kangean Block. We moved ahead with development in the Sirasun
and Batur Gas Fields from 2014 in what we refer to as TSB Phase 2, and production of natural gas started in March 2019. Water and other superfluous components of the natural gas produced from these fields are removed at a floatingproduction unit (FPU). The gas is then supplied via pipelines to a state-owned fertilizer plant, an electric power company, andPagerungan Gas
Field (production
under way)other local clients in the area surrounding
Java

Surabaya in the province of East Java.

Bali
Terang Gas Field

Project Company

Energi Mega Pratama Inc. (EMPI)(JAPEX’s investment ratio: 25% through two subsidiaries of EMPI)

Block

Kangean Block

Percentage of Interest*

100%

Status

Production under way

Operator

Kangean Energy Indonesia Ltd. (KEI)

Gross Production
Volume4,400,000 m3/d (27,000 boe/d) (as of March 2019)

Sirasun Gas Field

U.K. North Sea

TSB Gas Field
Complex (production
under way)
Batur Gas Field

Seagull ProjectA production test under way at the Seagull Project

A Final Investment Decision
JAPEX and its partners made a final investment decision in March 2019 regarding
oil and natural gas development in the offshore Seagull Project. We are currently
moving ahead with development operations with the aim of starting production by
the end of 2021.
We will commission the processing of the oil and gas produced at the Seagull
Project to the central processing facility (CPF) of the Eastern Trough Area Project(ETAP). The oil will then be transported to the Kinneil Terminal in Grangemouth ineastern Scotland via the Forties pipeline system, and the gas will be transported to
the Central Area Transmission System (CATS) processing terminal in Teesside in

Norwaynorthern England.
Aberdeen

Project Company

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

Block

Seagull Discovery

Percentage of Interest*

15%

StatusDevelopment under way

Operator

Neptune E&P UK Limited

Seagull

UnitedKingdom* The ratio of ownership interest held via a project company

JAPEX Corporate Report 201927

Proved Reserves
Proved reserves owned by JAPEX and its consolidated subsidiaries as of March 31, 2019, along with our investment equivalent in proved
reserves of equity-method affiliates are presented in the following table.

Proved Reserves of JAPEXJAPEX and Consolidated Subsidiaries
Japan
Proved Reserves

Crude oilOverseas

Naturalgas

Crude oil

BitumenEquity-Method
Affiliates

Subtotal
Naturalgas

Crude oil

BitumenNaturalgas

Crude oil

Naturalgas

Total
Crude oil

BitumenNaturalgas

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, 2018

2,802

9,105

1,612 20,952

7,357

Increase due to­expansion or discovery−

Change due to revisionof evaluation standard

(30)

(517)

254

979

19

Change due to­acquisition and/or
divestiture

−

−

(1)

−

Decrease due to­production

(264)

(726)

(363)

(778)

As of March 31, 2019

2,508

7,862 16,502 21,153− 15,000−

4,415 20,952 16,462

815 15,000

4,350

2,498

8,764 20,952 18,960

−

815

−

− 15,000

−

815

223

979

(497)

1,174

(726)

1,397

979

(1,223)

4

(1)

−

4

1

(1)

(1)

−

3

(466)

(627)

(778) (1,192)(538)(493) (1,165)

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

4,986

1,278 23,995 21,153 16,869(778) (1,685)• Proved reserves of the following consolidated companies include reserves held by non-controlling interests. (Figures in parentheses are non-controlling interests’ percentage.)
Japan: Japex Offshore Ltd. (29.39%)
Overseas: Canada Oil Sands Co., Ltd. (5.42%), JAPEX Montney Ltd. (55.00%), Japex Garraf Ltd. (45.00%)• Reserves of consolidated subsidiaries and equity-method affiliates whose fiscal year-ends differ from that of the Company are accounted for on the basis of the entity’s respective fiscal
year-end.

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

Crude oilOverseas

Naturalgas

Crude oil

BitumenEquity-Method
Affiliates

Subtotal
Naturalgas

Crude oil

BitumenNaturalgas

Crude oil

Naturalgas

Total
Crude oil

BitumenNaturalgas

Million bbl Million boe Million bbl Million bbl Million boe Million bbl Million bbl Million boe Million bbl Million boe Million bbl Million bbl Million boe

132

115

55

10

132

45

28

132

100

27

15

Increase due to­expansion or discovery

−

−

94

−

5

94

−

5

−

−

94

−

5

Change due to revisionof evaluation standard

(0)

(3)

2

6

0

1

6

(3)

7

(4)

9

6

(7)

Change due to­acquisition and/or
divestiture

−

−

(0)

−

0

(0)

−

0

0

(0)

(0)

−

0

Decrease due to­production

(2)

(4)

(2)

(5)

(3)

(4)

(5)

(7)

(3)

(3)

(7)

(5)

(10)

As of March 31, 2019

16

48

104

133

47

120

133

95

31

8

133

103

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

28

55

18

As of March 31, 2018

JAPEX Corporate Report 2019

302

151

387

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Definitions Used for JAPEX’s Reserves
The proved reserves detailed in the table on the previous page

affiliates, we disclose figures based on the percentage of owner-

represent the amount of oil and gas that is projected to be eco-

ship as specified in contracts for each company and the local

nomically and feasibly extractable based on geophysical andgovernment or other authorities.

­engineering data taken from the currently known hydrocarbon

In addition, Ryder Scott Company, L.P. has been commissioned­layers at the time of evaluation. The figures do not include previousby the Company to conduct third-party assessments and apprais-

production volumes or resource volumes related to undiscovered

als of the fairness of its evaluations and determinations regarding

mineral deposits.

an amount equivalent to around 66% of the proved reserves*1 of

As for the definition of reserves, we apply the Petroleum Resources

JAPEX and its consolidated subsidiaries in Japan as of March 31,

Management System (PRMS), a widely accepted international

2019, as disclosed on the previous page. Overseas, Japan

standard established by the Society of Petroleum Engineers (SPE),

Canada Oil Sands Limited similarly commissioned GLJ Petroleum

the World Petroleum Council (WPC), the American Association ofConsultants Ltd. to conduct a third-party assessment*2 of its bitu-

Petroleum Geologists (AAPG), and the Society of Petroleum

men reserves. In addition, JAPEX Montney Ltd., Japex (U.S.)

Evaluation Engineers (SPEE).

Corp., and Kangean Energy Indonesia Ltd. also commissioned

Figures presented in the tables on the previous page are based

third-party assessments of their reserves. Third-party assessments

on JAPEX’s own evaluations in line with the PRMS definition ofwere thus conducted for an amount equivalent to around 61% ofproved reserves, which was revised in 2018. The figures do not

the total proved reserves*3 as of March 31, 2019, listed on the

include probable or possible reserves, i.e., reserves that have high-­previous page.

er uncertainty regarding future extractability than proved reserves.

Reserves are ultimately a projection of future production capaci-

Further, under the same definition, confirmed hydrocarbon

ty shrouded in uncertainty. Nevertheless, JAPEX strives to secureresources for which no commercial development plan has been

accurate assessments based on currently available scientific evi-

devised are classified as contingent resources—not reserves.

dence, including geophysical and engineering data. Despite these

Accordingly, the figures presented on the previous page do notefforts, our figures may need to be later revised upward or down-

include the Group’s contingent resources in areas lacking definedward, depending on a host of factors, including projections based

development plans.

on newly available data, fluctuations in economic conditions, andWe acknowledge that the definition of proved reserves used bychanges in internationally accepted definitions for reserves.

the U.S. Securities and Exchange Commission (SEC) is also widely
accepted, especially among U.S. investors; however, as it is fundamentally the same as the PRMS, we have opted to use the latter.
JAPEX discloses figures based on its own assessments in linewith the PRMS definition of proved reserves. In addition, regarding*1 We calculate 1 kiloliter of crude oil or bitumen as 1,033.1 cubic meters of natural gas.
*2 The assessment was conducted based on the Canadian Oil and Gas Evaluation
Handbook published by the Society of Petroleum Evaluation Engineers (Calgary
Chapter) and other organizations.
*3 Same as note 1.

the reserves owned by overseas subsidiaries and equity-method

JAPEX Corporate Report 201929

Infrastructure & Utility Business

Target to 2022

1.6 million tons

Natural gas transaction volume
in Japan(LNG equivalent)

2.8 billion kWh

Electricity sales volume
We are working to increase sales of natural gas in Japan mainly

the Fukushima Natural Gas Power Plant in spring 2020. In

by acquiring new industrial customers. Our target figures

addition, we established an office in Singapore with the aim

include a transaction volume of domestic natural gas andof bolstering our capabilities regarding the procurement ofregasified LNG provided through our pipelines as well as sales

LNG, including LNG as a fuel for power generation. In May

through our LNG satellite system. In fiscal 2018, we sold around2019, we established an organization dedicated to the devel-

1,130,000 tons of natural gas (LNG equivalent) in Japan.

opment of the renewable energy business. In this and otherAs for sales of electric power, we are promoting sales activ-

ways, we are strengthening our framework related to gas

ities with an eye toward the start of commercial operations atand electricity.

Asahikawa
Ishikari LNG Terminal(Hokkaido LNG Co., Ltd.)Natural Gas Supply Chain

Iwamizawa
ObihiroJAPEX has constructed a proprietary natural gas supply network in

SapporoKitahiroshima
ChitoseCoastal vessel

Japan. It includes a network of over 800 kilometers of pipelines
connecting natural gas production bases in Japan with LNG termi-

KushiroYufutsu-Sapporo
Gas Pipeline
Yufutsu LNG Plant /Yufutsu LNG Receiving Terminal

Tomakomai
Murorannals on the country’s coasts along the Sea of Japan and Pacific
Ocean. It also includes an LNG satellite system that utilizes tanktrucks and rail transport tank containers for areas without pipelines. We sell natural gas and LNG to clients in areas along andCoastal vessel

surrounding our network.
The Soma LNG Terminal has one of Japan’s largest

Oil fields / Oil and gas fields /Gas fields­aboveground LNG tanks at 230,000 kiloliters. The terminal

LNG terminal­commenced operations in March 2018 as a base that fulfills thePower plant

important roles of enhancing the stability of JAPEX’s natural gas

Natural gas pipeline

network in Japan and increasing sales and transaction volume.

LNG tank truck
LNG tank containers by railThis t­erminal enables us to supply LNG to a wider area as well as

Oga

Coastal LNG vessel

Akita

to receive and store LNG from overseas on the Pacific side of thecountry in addition to the Sea of Japan side.

Yurihonjo
NikahoFurthermore, by transporting LNG between

Yamagata Gas
SakataPipeline (Tohoku
Natural Gas Co., Ltd.)the Soma LNG Terminal and the Yufutsu

LNG tank truck

Amarume
Tsuruoka

LNG Receiving Terminal via coastal vessels,
we have optimize the balance of supply

LN

and demand.

Gf

Murakami

r om

o ve

r se

as

Iwanuma Sendai
Yamagata
Soma-Iwanuma Gas Pipeline
Shiroishi
Soma LNG Terminal

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

Niigata-Sendai
Gas Pipeline

Fukushima Natural Gas Power Plant (under construction)
Fukushima

Aizuwakamatsu
Kawaguchi
LNG tank truck

Kanazawa
Komatsu

30

JAPEX Corporate Report 2019

LNG tank truck

KoriyamaL NG

f r omo ve rsea s

Shiroishi-Koriyama
Gas Pipeline
Koriyama North
Gas Pipeline

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Electric Power Business
Natural Gas-Fired Power Generation Project at Soma PortJAPEX participates in the natural gas-fired power generation project

The power plant is currently under construction with the firstat Soma Port in Fukushima Prefecture through investment in

power generation unit slated to come on line in spring 2020 andFukushima Gas Power Co., Ltd. (FGP), the operator of the project.

the second in summer 2020. In addition, with the aim of com-

The project’s core is the Fukushima Natural Gas Power Plant,

mencing operations when the power plant comes on line, we arewhich will comprise two 590,000 kW gas turbine combined-cycle

constructing an additional vaporizer facility and a second LNG tank

(GTCC) power generation units. The plant will be fueled byat the Soma LNG Terminal.

­regasified LNG, which has the lowest environmental burden among

FGP plans to commission JAPEX to store and regasify the LNG

fossil fuels. Also, the plant’s systems for the intake and discharge

procured by each business partner as well as pipe it to theof seawater are designed in consideration of the impact on the

power plant.

surrounding environment.

Moreover, we are steadily pursuing sales activities for our portion

In addition, this project uses a tolling model involving five businessof the electric power. We will continue striving to establish thispartners, including JAPEX. Each partner company will receive elec-

power generation project as a new business foundation that willtricity from FGP in exchange for self-procured LNG sufficient to meetensure our growth as an integrated energy company.

its electric power needs and sell it themselves.

The Soma LNG Terminal and the Fukushima Natural Gas Power Plant, which is currently under construction

Renewable Energy BusinessWe are working on developing renewable energy as a new envi-

and natural gas businesses, the strong relationships we have built

ronmentally friendly business that contributes to solutions towith regional communities, and the experience we have gained by­global-scale issues, namely the realization of a low-carbon andprocuring fuel and operating power generation equipment in natu-

decarbonized society.

ral gas-fired power generation projects.

We aim to develop solar, biomass, wind, and geothermal powerbusinesses, leveraging technologies we have acquired through the

Furthermore, in May 2019, we established an organization dedicated to promoting the renewable energy business.

development and production operations of our mainstay ­petroleum

JAPEX Corporate Report 201931

New Business Development

Business Generation under a
New Business Model Utilizing Our Competitive
and Advanced Resources
We established the New Business Promotion Office inDecember 2018. The office identifies new business seeds inthose seeds.
We aim to create and expand new businesses in non-E&P

fields adjacent to our existing business that leverage ourareas with the aim of achieving a profit composition that has

technologies and experience in E&P, natural gas supply, andthe E&P business and non-E&P businesses in approximately

other areas. The office also promotes initiatives to develop

a 6:4 proportion by 2030.

Business Seed Identification
Reorganizing the Technical Division, we established an organization
dedicated to the continual and dynamic pursuit of new businesses

E&P and domestic natural gas supply businesses.
Regarding new projects that are now ready for commercializa-

with a focus on the creation and expansion of new environmentallytion owing to these initiatives, we aim to establish them as fully

friendly businesses. The purpose of this move was to better posi-­realized businesses by transferring them to pertinent existingtion JAPEX to play an active role in solving global-scale issues,

departments or to newly established organizations to promote

such as the realization of a low-carbon and decarbonized society,the business.

by utilizing the knowledge acquired through its oil and natural gas
P Establishment of New Business Promotion Office
In December 2018, we established the New Business Promotion

drafting and studying business plans. It also solicits ideas

Office independently of existing departments with a mission toCompanywide for businesses in new fields where the JAPEX

actively pursue new business with an eye toward the transforma-Group’s technologies and knowledge can be leveraged. In short,tion of JAPEX’s business structure over the medium to long term.

the office’s primary purpose is to examine new business pros-

The office promotes the Company’s new business creation cycle

pects, study the commercial feasibility of interdepartmental initia-

and is responsible for identifying new business seeds as well astives and business alliances, and construct business models.

P Reorganization Technology Fields
In June 2019, with the aim of unifying processes implemented inand developing applied environmental technologies as well as its

technological development related to new businesses, we integrat-

associated business planning functions were absorbed by the lat-ed the Environmental and Innovative Technology Projects Division

ter. This optimization further strengthens our new business devel-with the Technical Division, reorganizing the internal structure of

opment framework.

the Technical Division. The former division’s processes for studying
P System for Soliciting Ideas

32

In June 2018, we established the internal website JEN (E) B

These include everything from specific business ideas in new busi-(JAPEX’s Engine for New Era Business) and started soliciting ideas

ness fields utilizing our strengths to proposals for expanding exist-

unencumbered by conventional ideas from across the Company.

ing businesses through operational improvements and techniques

Since launching the site, we have received a multitude of ideas.

discovered in the course of daily work.

JAPEX Corporate Report 2019

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

LNG Bunkering
Owing to its low emissions of greenhouse gases and sulfur oxides,

of issues related to operations and applicable regulations, facility

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

upgrades, and countermeasure formulation.

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

To meet demand for natural gas in Hokkaido Prefecture during

as the International Maritime Organization’s Marine Environmentthe 2011–2012 winter, the Company conducted Japan’s firstProtection Committee’s decision to enact stricter limits on the sul-

ship-to-ship

fur content of fuels used on the open ocean and its adoption of aing LNG vessel to the coastal LNG vessel Akebono Maru in

GHG reduction strategy, which is a comprehensive set of goals for

Tomakomai Port harbor. With this experience under our belts, wereducing GHG emissions from international shipping as well as

have proceeded with efforts aimed at the early realization of LNG

countermeasures to achieve those goals. Therefore, a growing

bunkering at Tomakomai Port as we continue pursuing the possi-

number of LNG-fueled vessels are making their debut in Europe

bility of conducting similar operations at other locations in Japan

along with a supply of LNG for these ships (LNG bunkering), andand around the world.

transfer of LNG in liquid form, from an ocean-go-

feasibility studies on similar measures are accelerating acrossJapan as well.
Tomakomai Port, which is the site of the Company’s Yufutsu
LNG Receiving Terminal, fulfills important roles both as the largest
trading port in northern Japan and as the country’s leading hub
port in terms of volume. Given the recent trend toward lower environmental impact bunker fuel, in February 2019, JAPEX and theTomakomai Port Authority launched a study group aiming to implement the LNG Bunkering framework based on Tomakomai Port.
JAPEX serves as the organizer, facilitating discussions and studies
LNG being transferred from an ocean-going LNG vessel (background)to the domestic LNG vessel Akebono Maru (foreground)

Carbon Dioxide Capture and Storage (CCS)CCS is a technology involving directly injecting CO2 into depleted

the end of March 2019, a cumulative total of 235,000 tons has

oil and gas fields, deep coal reservoirs, deep saline aquifers, andbeen injected.

other such areas for storage. It is garnering international attention

In April 2016, JAPEX also established the Geological Carbon

as an innovative technology that significantly reduces atmospheric

Dioxide Storage Technology Research Association jointly with theemissions of CO2–the primary driver of climate change. According

Research Institute of Innovative Technology for the Earth (RITE),

to the International Energy Association (IEA), CCS is expected to

the National Institute of Advanced Industrial Science andaccount for 14% of total CO2 reductions by 2060 that will makeTechnology (AIST) and three private-sector companies.

the achievement of the 2°C temperature reduction goal of theCommissioned by METI, this association has engaged in the

Paris Agreement possible, so it seems the latent market for CCS isdevelopment of safety management technology for large-scalevery large. In addition, if CCS can be commercialized, it could be

CO2 injection and storage as well as the development of effective

used to offset CO2 emitted through business processes as well as

injection technology utilizing micro-bubble techniques.

CO2 emitted when customers combust petroleum and natural gas.
With the aim of commercializing CCS technology, JAPEX established Japan CCS Co., Ltd. (JCCS) with other private-sector companies in May 2008. The Japanese government’s Basic Energy
Plan of 2018, taking into consideration the likelihood that CCS
technology will be commercialized around 2020, stated that it
would steadily promote measures to demonstrate the CCS process and to survey suitable storage sites. JCCS has been commissioned since FY2012 by the Ministry of Economy, Trade andIndustry (METI), and since April 2018 by the New Energy andIndustrial Technology Development Organization (NEDO) to implement a CCS demonstration project in the Tomakomai area of
Hokkaido. The injection of CO2 was begun in April 2016, and as ofAboveground facilities for the Tomakomai pilot project(Photograph provided by Japan CCS Co., Ltd.)JAPEX Corporate Report 201933

Methane Hydrate
Methane hydrate is an ice-like crystalline solid formed by methane

Operating Co., Ltd. (JMH) together with Japanese E&P companies

and water and exists only in high-pressure and low-temperatureand engineering companies.

environments, such as below the seabed in deep waters or below

In April 2015, JMH was assigned as an operator to conduct apermafrost in the polar regions. Due to these characteristics,

second offshore production test by Japan Oil, Gas and Metals

methane gas cannot be easily produced from methane hydrate.

National Corporation (JOGMEC).

There are two types of methane hydrate beneath the sea bed:

In April 2019, the MH21-S R&D Consortium was formed by“pore-filling type in sand” and “shallow type.” The original gas-in-

JOGMEC and the National Institute of Advanced Industrial Scienceplace for pore-filling type methane hydrate in the eastern Nankai

and Technology and JMH, and was assigned to conduct R&D

Trough region was evaluated as being around 1.1 trillion cubic

by METI.

meters of methane.*1 As for the shallow type methane hydrate in

Taking notice of the potential of methane hydrate earlier thanthe Sea of Japan, 1,742 gas chimney structures where methane

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

hydrate may exist were confirmed. The Umitaka Spur, which is one

its technologies, experience and knowledge acquired through E&Pof these structures, has been evaluated as containing 600 million

to academic researchers and will continue actively contributing to

cubic meters of methane.*2

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

In March 2013, the world’s first offshore production test of
pore-filling type methane hydrate was conducted by the Ministry of
Economy, Trade and Industry (METI) at the Daini Atsumi Knoll, off
the coast of central Japan. Continuous gas production was successfully confirmed by this production test.*3
In 2017, the second offshore production test was conducted atresources in Japan.
*1 M
 H21 Research Consortium pamphlet published in March 2014
*2 News release from the Ministry of Economy, Trade and Industry on September 16, 2016*3 N ews release from JOGMEC on March 19, 2013*4 T he offshore production test page of MH21 Research Consortium’s website andmaterials distributed at the 33rd Methane Hydrate Development Committee convenedon March 26, 2018*5 T he Offshore Energy and Mineral Resource Development Plan revised by the Ministryof Economy, Trade and Industry on February 15, 2019the same place. 263,000 cubic meters of gas were produced over
36 days through the two wells.*4
Based on these results, the government is proceeding with a
private-sector led R&D project between FY2023 and FY2027, aiming for commercialization thereafter.*5
In October 2014, JAPEX established Japan Methane Hydrate

Survey Technologies for Deep Sea Mineral Resources
The existence of useful ocean mineral resources within Japan’sestablish and test technology for surveying and collecting deep

exclusive economic zone (EEZ) has been confirmed. In 2014, thesea resources at 2,000 meters or deeper. J-MARES is the only pri-government selected “Next-Generation Technology for Ocean

vate organization chosen to participate in this technological devel-

Resources Exploration” as one program of focus for its Cross-opment due to its solid track record during SIP Phase 1.

ministerial Strategic Innovation Promotion Program (SIP)* with the*6 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.

aim of establishing the world’s first technologies for surveying
these deep sea mineral resources with high efficiency and at low
cost and then transferring the technologies to private corporations
under SIP phase 1.
JAPEX and three other private corporations established the
Research and Development Partnership for Next-Generation
Technology of Marine Resources Survey (J-MARES). In fiscal 2018,
J-MARES succeeded in using its proprietary technologies in exploration efforts that led to the discovery of new ocean mineral

Hydrothermal
activity area
Deep-sea mud
containing rareearth elements

deposits. This achievement was confirmed through a sampling ofrock from the seabed 1,600 meters below sea level. In addition,
the government selected “Innovative Technology for Exploration ofDistribution of deep sea mineral resources

Deep Sea Resources” as one program of focus for SIP Phase 2,

around Japan (image provided by JAMSTEC

which began in fiscal 2018. The aim is to be the first in the world to34

JAPEX Corporate Report 2019

(items in boxes added by JAPEX))

Collected sediment samples in EEZ waters
around Minamitori-shima Island (sphericalmaterials are manganese nodules containing copper and nickel).

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

CLOSE UPJAPEX Research Center Initiatives
From the laboratory to the field—JAPEX is commercializing technology
The JAPEX Research Center is working to develop well stimulation­geothermal projects. As wetechnology that improves the flow of oil and gas from the reservoir

incorporate the latest techno-

to the wellbore. This technology is indispensable to extracting oil

logical trends with our know-how, we are moving ahead with R&D

and gas trapped in shale at our shale oil and gas projects in North

related to the commercialization of tight oil and gas in Japan andAmerica and our tight oil and gas projects in Japan.

the enhancement of profitability of North American shale oil andHydraulic fracturing is one method of well stimulation. In hydraulic fracturing, first a fluid is injected into a well to create and extend

gas projects.
To enhance the profitability of our projects, we need to maximize

fractures around the wellbore. Then, to prevent the fractures fromthe efficiency and results of hydraulic fracturing. Japex Researchclosing, particles of sand or other material called proppant is used

Center conducts indoor rock mechanics testing using rock sam-to fill the fractures. This method creates a highly permeable series

ples collected from wellbores. We also analyze well-logging dataof fractures that function as channels for the fluid to flow throughand seismic data. After studying the mechanical properties of eachfrom the reservoir to the wellbore. Since around 2010, shale oil

reservoir (including its fracability, deformability, in-situ stress, andand gas businesses have expanded rapidly all over North America.

distribution of faults), they construct a model of the strata. BasedA huge number of wells have undergone hydraulic fracturing, andon numerical simulations of mechanics and fluid flow interaction,

the E&P industry as a whole has incorporated various technologicalthe Research Center studies and proposes specifications for the

methods and improvements.

hydraulic fracturing operation, for example, the viscosity of the

Before the North American shale oil and gas businesses started

injection fluid, the amount to be injected, or a variety of otherin earnest, JAPEX had been conducting hydraulic fracturing in theparameters. In addition, by monitoring the process of fracturedevelopment of its oil and gas fields in Japan as well as its

extension during the hydraulic fracturing, we can help improvespecifications for and examine the results of the hydraulic fracturing. We are therefore also engaged in R&D of reservoir monitoring

Overview of shale gas extraction (hydraulic fracturing)

technologies, such as microseismic technology.
Through R&D focused on hydraulic fracturing methods, we have

A large volume of water is
injected into the shale formation
to create fractures

Oil/gas is extracted
through the fractures

advanced the technologies and know-how needed for reservoir

Land surface

Land surface

JAPEX is planning to apply these technologies in new business

Shale
formation

Shale
formation

Numerical simulation of fluid flow interaction

monitoring and analysis of mechanics and fluid flow interaction.
areas, including CCS and the extraction of methane hydrates, aswell as in external technical consulting.

Rock mechanics testing equipment

JAPEX Corporate Report 201935

HSE as Our Culture

H INE

S

Our Basic Policy

SafetyThe JAPEX Group declared its intention to secure occupational

O Occupational safety
and process safety
O Crisis management

health and safety and conserve the natural environment in its business activities and formulated JAPEX HSE*1 Policy. In order to put
the policy into action, we have implemented the HSE Management
System (“HSE-MS”) at our domestic operations and JACOS since

JAPEX
HSE Policy

2014. We strive for the continuous improvement of the Systemthrough PDCA cycles.
*1 Health, Safety, and Environment

HealthO Occupational health

Our Approach

Environment

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

Social Background and Issue Recognition

Main Measures

P Due to the nature of our business, any incident in our facilities

P The health and safety of our employees are among our top pri-could have a huge impact on the environment and society. For

orities. We use the PDCA cycle to continuously improve ourthat reason, we prioritize safe and stable operations, and place

HSE-MS and minimize risks. Also, we undertake efforts togreat importance on risk management for controlling major acci-

improve and develop an HSE culture and promote healthy life-

dents or disasters.

style among our employees.

Present Focus and Goal Achievement

P In the regions where we operate, we will conduct self-assessment and other activities in addition to the environmental impact

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

assessments required by law in an effort toward the conservation of biodiversity.

Inculcation of HSE-MS: 2018–2020

Introduction of HSE-MS: Completed, 2010–2017

Progress of Mid-term HSE Plan
In fiscal 2018, the first year of the JAPEX Mid-term HSE Plan (2018–2020), we focused on taking measures that will form the basis for
activities in fiscal 2019 and beyond. Specifically, we introduced international standards for injury frequency indicators, (e.g., LTIF*2 andTRIR*3), enhanced our HSE training programs, deliberated themanner of managing contractors’ HSE, and created a GHG emission
reduction roadmap.
In fiscal 2019, we will roll out effective activities for each item
and work across the Company to achieve the Mid-term HSE Plan.
Turn to P.23 for information regarding our initiatives to reduce
GHG emissions.
In addition, the HSSE Committee,*4 which is chaired by the Senior
Managing Director in charge of HSE and attended by the president,
received reports on the progress of HSE activities carried out under
the Mid-term Plan in fiscal 2018. Management decisions have beenreflected in the HSE planned activities for fiscal 2019, and the committee is working to continuously improve activities in order to achieve
the mid-term goals.
36

JAPEX Corporate Report 2019

Overview of the Mid-term HSE Plan (2018–2020)
1. To achieve continuous reduction of the LTIF and TRIR. The incident
classification used in the domestic operations will be aligned with theinternational standards.
2. To maintain necessary HSE resources and organization to implement
HSE-MS and other HSE activities.
3. To enhance HSE awareness among employees and improve the company’s HSE culture.
4. To develop new HSE training programs to increase HSE competency.
5. T o introduce process safety approaches to prevent major accidents. The
concepts and methodology will be inculcated throughout the company.
6. To fully operationalize the contractor HSE management element to
reduce contractors’ incidents.
7. To improve HSE governance in the JAPEX subsidiary companies by
providing support to introduce HSE-MS or equivalent systems.
8. Regarding GHG emissions, implement more detailed monitoring andintensify reduction measures.
*2 Lost Time Injury Frequency: The number of lost time injuries (fatalities + lost work day cases)
per 1,000,000 work hours.
*3 Total Recordable Injury Rate: The number of recordable injuries (fatalities + lost work day
cases + restricted work day cases + medical treatment cases) per 1,000,000 hours worked.
*4 Health, Safety, Security, and Environment Committee: A committee that discusses issues
related to security in addition to health, safety, and the environment

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

E nvironment

HSE Audits
Our HSE-MS stipulates that HSE audits be conducted every fiscal
year, and HSE audits were conducted at each workplace in Japanand overseas in fiscal 2018. Under these audits, JAPEX auditors
who have received specialized training assure appropriate andeffective operations at each workplace in line with the HSE-MS.
Not only do the audits focus on highlighting items of non-compliance,
they also recognize the beneficial efforts of each workplace as best

S ocialFinancial and Other Information

G overnance

Other Activities to Improve HSE Culture• Set a goal for all departments to introduce “refresh time” as a way of
preventing people from sitting for too long• Shared accident information using the intranet• Solicit HSE slogans, including from Group companies, and select one• Promoted a series of HSE essays to raise awareness of each workplace’s HSE activities• Promoted a series of HSE messages in the form of interviews
with executives• Sent out the internal email newsletter called The HSE Kawaraban

practices. This method has been rolled out across the Company
and is now established.
In fiscal 2018, we launched the HSE Smile Award program toprovide Companywide recognition to outstanding HSE initiatives.

Occupational Health and Safety Initiatives

The program also focuses on best practices highlighted in the HSE

In fiscal 2018, we endeavored to align the incident classifications

audits and promotes them to other workplaces so that HSE audit-

and calculation methods used in domestic operations with interna-

ing activities can help enhance our HSE culture.

tional standards and to maintain the HSE resources organization

In addition to the HSE audits, HSE patrols are conducted atneeded to implement HSE-MS and other HSE activities. As foreach workplace by each HSE department, and we will maintainaligning our classifications and methods, we amended our calcula-efforts to reduce HSE risks at workplaces with relatively high risks.

tion methods, which had included only JAPEX workers in oil andWith the establishment of the HSE-MS being confirmed via con-gas fields, to include all workers, including office workers and con-ventional HSE audits, in fiscal 2019 we upgraded our audit prac-

tractors. We also began collecting Companywide working hourtices to assess whether the HSE-MS is effectively utilized anddata. In addition, we amended the HSE-MS documentation tofunctioning in workplaces.

reflect changes in incident classifications. These efforts have
improved the accuracy of our calculations for Companywide injury

HSE Training and Efforts to Improve HSE Culture
We provide planned and structured HSE training programs for all
the employees with an aim to create healthy and safe working
environments. The competency requirements are identified by laws
or company rules for HSE critical positions such as HSE administrators, supervisors, and workers in oil and gas fields. Hence, wehave established an incentive system to encourage employees toparticipate in internal and external training and get certifications
required for the positions.
In addition, to ensure that training is systematically provided forall employees, we started formulating an HSE training program in
fiscal 2018. We selected topics for the program, revised HSE texts
for new hires, appointed and developed HSE lecturers, and raisedfrequency indicators, made it easier to compare our data withthose of other companies, and clarified our target HSE levels
and benchmarks.
In addition, we aim to maintain the HSE resources and organization needed to implement HSE-MS and other HSE activities as outlined in the Mid-term HSE Plan. To this end, we need to thoroughlymanage HSE for not only JAPEX employees but also contractors.
We introduced a new framework that places a “HSE Officer” fromJAPEX in charge of managing HSE issues in contract construction
projects. The framework came into effect in April 2019.

Initiatives to Strengthen the
HSE Management of Contractors

awareness of the program Companywide. In fiscal 2019, we are

In the promotion of its businesses, JAPEX works hard to ensure

continuing to develop HSE texts and lecturers with the aim ofsafe operations in collaboration with a large number of otherenhancing the program.

­companies. With regard to contracts for commissioned work,

We are working hard to foster a corporate culture that puts thewe request contractors carry out HSE management, primarily tohighest priority on HSE. To this end, we hold lectures led bycomply with laws and regulations. In fiscal 2018, we created thein-house and external instructors to educate executives and weContractor Management Guidelines, which spell out specific HSE-

promote HSE Moments, which are short HSE-related talks held at

related management actions regarding contractors, with the aim of

the start of meetings. We will continue to further enhance theseclarifying our method for managing contractors’ HSE. This was

activities to improve our HSE culture.

done in line with JAPEX’s policy of putting the highest priority on
HSE, the Company’s ethical obligation as the commissioning
party, and efforts to further improve work environments. The
guidelines were formally introduced in fiscal 2019. Regarding­contracts concluded based on these guidelines, we aim for thesmooth promotion of accident-free business that includes contractors while cooperating with the business departments, procurement departments and the aforementioned HSE officers.

JAPEX Corporate Report 201937

Crisis Management

Overseas Security Initiatives

Safety assurance and crisis management are our top priorities

In consideration of recent international developments, we arewhen developing our business activities in Japan and overseas. At

focusing on bolstering employee security overseas from a multifac-

JAPEX, the HSSE Committee formulates the basic policies foreted approach. In fiscal 2018, we conducted overseas emergency

security measures and crisis management and deliberates material

response training with a focus on confirming and mastering thematters. In addition, we are working to strengthen our crisis man-protocol to follow directly after an emergency overseas, with theagement capabilities through a variety of measures and drills.

aim of developing organizational crisis management capabilities.
We upgraded the style of drills from simply following a set routine

Revisions to Our Business Continuity Plans (BCPs)
After the 2018 Hokkaido Eastern Iburi Earthquake, the Japan
Natural Gas Association, which JAPEX is a member of, formed the
BCP Guideline Creation Working Group. JAPEX participates in theworking group. In addition, we have begun revising the crisis preparedness rules of our workplaces to reflect the guidelines. In fiscal
2019, we are working to ensure the soundness of our BCPs,
including recovery plans in case of an earthquake or tsunami.
We have compiled a set of responses for the headquarters tospecify what must be done in the first week after a crisis situation
caused by an earthquake with a seismic intensity of lower 6 andabove or other large-scale natural disaster. This set of responses istreated as an earthquake initial response manual with the aim ofassuring physical safety, alleviating damage, and recovering,­maintaining, and continuing key operational activities.
In April 2019, we established the new Disaster Prevention
Planning Group within the HSE Department. In addition, we strovein the face of a prepared scenario on the day of the drill to assigning scenarios after the drill begins so people have to think about
responding on the spot as they would in a real incident. This hashelped with uncovering issues and problem solving. The drill for
initializing the overseas emergency contact network involves overseas offices, the relevant department at the headquarters, andexecutives. It is conducted twice, once in the early morning andonce on a weekend in Japan. This ensures the drill is practical andvery similar to real world conditions.
In addition, to enhance crisis response capabilities on the individual level, external experts and specialized operators provide
instruction for business travelers and those slated to be stationed
overseas. This includes overseas travel security classes and workshops to explain the content of overseas medical assistance contract services. In fiscal 2018, amid the growing participation of
women in the workforce, we held a special lecture on overseas
security specifically geared toward women.

to improve crisis management awareness by regularly holding­various drills, including instruction on walking home and safety
confirmation drills, as well as holding comprehensive disaster­preparedness drills (conducted by the secretariat) in line with theearthquake initial response manual, including earthquake BCPs.

A lecture on overseas security for women

We also held specialized overseas security drills to provide
hands-on experience for people traveling to high-risk regions andcountries, such as Iraq. Our unique drills simulate active shooters,
A walk-home drill under way

terrorist bombings, muggings, abductions, confinement, and otherharsh scenarios so that the participants can practice responses inreal time while physically moving their bodies.
The foundation of overseas security is obviously the steady
implementation of intelligence activities, namely the collection, analysis, and evaluation of information. This does not stop at analysis
and evaluation behind a desk. We regularly conduct on-the-groundsurveys, including checking public safety conditions and security
systems, with a focus on uncovering and solving problems.
In this way, JAPEX is working hard to comprehensively
strengthen its overseas security framework through various drills
and measures.

38

JAPEX Corporate Report 2019

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

E nvironment

Initiatives to Preserve Biodiversity
and Ecosystems
JAPEX conducts voluntary environmental impact assessmentsthat go beyond the legally required investigations when beginninga project, regardless of the business content or whether it is inJapan or overseas. The assessments are appropriate for the specific conditions in the environment surrounding the project, such

S ocialFinancial and Other Information

G overnanceand incinerate VOCs that would otherwise be emitted from gas
processing facilities. Fiscal 2018 VOC emissions totaled 1,357
tons, a year-on-year decrease of 273 tons. The main factor behindthe decline was a reduction in the release of natural gas into the air.

Emissions of VOCs
(t)
2,000

1,630

as the existence of vulnerable species and the type of ecosystem.
In addition to formulating development plans based on the resultsof the assessments, we conduct monitoring and take precautions as necessary after the development stage concludes. We
are thereby striving to reduce the impact of our business activities
on biodiversity.
In fiscal 2018, at the Canada Oil Sands Project, we cooperated

1,500

1,357
913

1,000

622

613

2015

2016

500

0

2014

with the Indigenous Advisory Group and sub-committees consisting

2017

2018

(FY)

of local indigenous stakeholders to monitor wildlife, undertake
marshland rehabilitation projects, and assess reclamation activities
in the operational area.

Initiatives to Preserve the Quality of Wastewater
JAPEX appropriately disposes of the water resources it uses in its
business activities. Regarding water used in the production of oil andgas as well as pit water collected in the course of mining, we
either inject it back underground or, after purifying it to meet
­wastewater standards set by laws and regulations, expel it into
public waterways.

Initiatives to Effectively Use Water
At our domestic production plants, we are striving to use water
more effectively by promoting the recycling and reuse of water used
Reclamation work under way in the operational area (JACOS)

as a coolant in processing facilities and water used as boiler water.
In fiscal 2018, the amount of water we used in Japan amounted to689,946 kiloliters, a decrease of 134,772 kiloliters year on year. The

Initiatives to Prevent Pollution andRecycled Resources

main factor behind the drop was our effort to reduce the amount ofwater used in the production of oil and gas.
In addition, for the Canada Oil Sands Project, we use theWe established “preventing pollution and minimizing the environ-

SAGD

mental impact of our business activities” as part of the JAPEX HSE

impose fewer environmental burdens in comparison with open-pit

Policy. We recognize the importance of initiatives to prevent pollu-

mining. The steam injected underground exchanges heat with thetion. At each operation field, we identify pollution risks for the soil,

oil sands reservoir. Along with the bitumen that has become liquidwater, and air and take measures to prevent pollution as necessary.

upon heat exchange, the condensed water is recovered and sent

In addition, from the perspective of recycling resources, we strive toto the central processing facility. More than 90% of the overall

protect and effectively use water resources because we utilize arecovered water is recycled into fresh water for the steam andlarge quantity due to the unique characteristics of our businesses.

injected underground once again.

Initiatives to Reduce VOC Emissions

Amount of Water Resources Usage and
Pit-Wastewater TreatedVolatile organic compounds (VOCs) are one cause of air pollution,
including PM 2.5 and other suspended particulate matter (SPM).

Water Resources Usage

Transfer Register (PRTR) substances benzene, toluene, and xylene(BTX), but excluding methane.

Pit-Wastewater Treated(kL)
1,200,000

The primary source of emissions for our businesses is the releaseof volatile hydrocarbons, including the Pollutant Release andbitumen recovery process, which has been reported to

1,132,699
983,990982,393991,672

900,000

722,001

969,185824,718
699,333

708,030

689,946

600,000

We have been participating in a voluntary action plan to reduce
VOC emissions as a member of the Japan Natural Gas Association
since fiscal 2005. As part of our ongoing drive to reduce VOC
emissions, we are working to seal crude oil storage tanks better

300,000

0

2014

2015

2016

2017

2018 (FY)JAPEX Corporate Report 201939

I

Integrity and Governance

S H    N E

Basic Policy
JAPEX recognizes contributing to society through the provision of

Corporate Governance Overview (As of November 5, 2019)a stable energy supply as its mission and helping to realize theOrganizational Design

Company with Audit &Supervisory Board

Executive Officer System

Yes

Number of Directors Provided for
Under Articles of Incorporation

18

shareholders, by ensuring its accountability are required. Therefore,

Number of Directors

12 (includes 3 outside directors)

sound corporate governance, which is foundational to the company,

Chairman of the Board of Directors

President

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

4

Number of Audit & Supervisory
Board Members

4 (includes 2 outside members)sustainable development goals by addressing social issues as its
Corporate Vision. To achieve its Corporate Vision and maximize
its corporate value from both the medium and long term perspectives, efficient and transparent corporate management and thebuilding of relationships of mutual trust with stakeholders, including

is one of its most important challenges.

Corporate Governanceprovide opinions and advice that support lively debate in the Board

Corporate Governance Structureof Directors. Contrasting with the type of management carried out

JAPEX has an Executive Officer System. The representative direc-

by business executives, this framework of independent directors

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

and an Audit & Supervisory Board in which members provide opin-

tive officers, defining their responsibilities and charging the latterions and supervision is, we believe, well-configured to provide

with business execution duties. The Board of Directors and thedecision making that is sufficiently objective and appropriate.

Audit & Supervisory Board supervise said business execution.
To strengthen the supervisory functions of the Board of Directors,

In March 2019, we established the Nomination and Compensation
Advisory Committee under the Board of Directors to strengthen thehighly knowledgeable and independent outside directors aresupervisory functions of the Board of Directors by enhancing theappointed. These outside directors and Audit & Supervisory Board

fairness, transparency, and objectivity of processes related to deter-

members, being independent from the management team, actively

mining the nomination and compensation of directors.

Corporate Governance and Internal Control Structure (As of November 5, 2019)
General Meeting of Shareholders
Appoint / Dismiss

Nomination and Compensation
Advisory Committee

Directors/ Board of Directors

Appoint / Dismiss

Audit

Appoint / Dismiss

Audit & Supervisory Board Members/
Audit & Supervisory Board

Select / Dismiss /Supervise

Audit

Internal Control Committee
HSSE Committee

Executive Committee

Auditing Dept.
Internal Audit
Internal Control
Evaluation

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

40

JAPEX Corporate Report 2019

Audit

Accounting Auditor

Representative Director and President
CSR CommitteeMission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

E nvironment

S ocialFinancial and Other Information

G overnanceEvaluation of the Overall Effectiveness of the Boardof Directors

review (DGR) is conducted that evaluates business opportunities

With the aim of maximizing our medium-to-long term corporate

nizational, environmental, and social. The Investment Evaluation

value, we evaluate the effectiveness of the Board of Directors reg-Committee, which corresponds to DGR-4, assesses the risks andularly, especially with regard to how it supervises the management

appropriateness of the investment. The committee then reports its

and makes improvements.

opinions regarding all these factors, whether to approve the proj-

and risks from all angles—technical, economic, commercial, orga-

ect, and other matters to the Executive Committee, which is the

In fiscal 2018, we considered responses to and planned
improvements addressing issues identified in fiscal 2017 throughfinal decision-making authority, and, when necessary, to the Boardan evaluation process entailing discussions of management strate-of Directors. As for other investments, the director or the executive

gy and business plans. We also considered responses to andofficer responsible for each department verifies the risks related toplanned improvements addressing issues identified in the course

business planning, strategy, financing, and credit as well as risksof day-to-day operations, such as the content of materials andrelated to the environment and community of the relevant businessappropriate time management.

area. A decision is then made.

In addition, we conducted a survey of all directors and Audit &As for businesses that are at the execution and operation stage

Supervisory Board members in February and March 2019 as a(following the decision to proceed), the Project Total Management

regular assessment. Based on the results, we conducted discus-

Committee manages their progress, monitoring risks that could

sions and analyses of the following points.

develop into serious problems. The committee also supports

1. The diversity, knowledge, experience, and abilities of the mem-problem-solving efforts by departments in charge of projects andconsiders comprehensive and Companywide responses thatbers comprising the Board of Directors
2. The state of operations of the Board of Directors, such as theencompass multiple projects.

frequency of meetings and time allotted for deliberation

Regarding other risks, we are working to strengthen risk man-

3. The state of discussions at Board of Directors meetings

agement through deliberations by Companywide and cross-depart-

Each item received a generally positive evaluation, and we deter-mental committees, namely the Internal Control Committee, the
HSSE Committee P.36 , and the Information Security Committee.

mined that the effectiveness of the Board of Directors had been
secured. However, we acknowledge that there is room for improve-

Committee

ment in the regular discussion of periodic reports, management strat-

Investment
Evaluation
Committee

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). The chair is appointed by the president fromamong the full-time executives, and, currently, theexecutive of the Corporate Strategy Dept. serves inthis position.

Project Total
Management
Committee

This committee manages the progress of major projects as well as studies and deliberates issues related
to them. The committee meets once a month. The
chair is appointed by the president from among thefull-time executives, and, currently, the president
serves in this position.

egies, and business plans at Board of Directors meetings. Goingforward, we will look for ways to improve the problems discoveredand strive to enhance the functionality of the Board of Directors.

Risk Management Structure
JAPEX has mechanisms in place to identify and manage businessrisks that are utilized in the investment decision and project execution phases.
For important investment projects, we introduced the decision

Overview

gate (DG) process. At each stage of a project, a decision gate

Risk Management Structure
Phase-1

Phase-2

Identify(Project kick-off)

Assess(Feasibility study)

DGR-1
Make a decision

Deliberation
Topics

Evaluation
PointsRules and
Guidelines

Phase-3

Phase-4

Select(Concept selection)

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

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

Major overseas E&P projects andsome domestic projects• Confirm the project’salignment with­strategy• Assess the external
environment• Identify risks andopportunities

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

Select the concept
delivering maximumvalue

Get ready/Prepare
to proceed into
­execution phase

Review the progressof project execution

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

JAPEX Corporate Report 201941

Internal Audits and Audits Performed by Audit &Supervisory Board Membersof the Board of Directors, the Executive Committee, and other

P Internal Audits

approval documents and undertake audits to ensure that directors

important committees. They review requests for management

The scope of our internal audits encompasses a wide range ofcomply with the relevant laws and the Articles of Incorporation inbusiness activities. Responsibility for the internal auditing team,the execution of their duties. Audit & Supervisory Board members

which is a part of the Auditing Department, rests solely with thealso hold regular meetings to exchange information and views with

President. The team reports to the President its findings of each

Audit & Supervisory Board members of major subsidiaries.

internal audit done with regard to and in accordance with internal

Audit & Supervisory Board members also seek to raise the effi-

and public laws/regulations, and provides feedback in the form ofciency of audits based on reports on internal audits undertaken by

opinions to the various audit departments, including recommenda-

the Auditing Dept. and information provided periodically bytions and necessary advice.

Accounting Auditors and the Auditing Department. They also coordinate closely with outside directors through a special committee

P Audits Performed by Audit & Supervisory Board Members

established for the purpose of providing information to, andAudit & Supervisory Board members, based on the audit policies

exchanging information with, outside directors and outside Audit &determined by the Audit & Supervisory Board and in line with their

Supervisory Board members, and explaining proposals submitted

designated duties, attend and collect information for the meetings

to the Board of Directors ahead of the meetings.

Compliance
The JAPEX Group complies with all applicable laws and regulations, conventional wisdom, social norms, and its own in-houserules with the aim of realizing its Corporate Vision. To ensure thatcompliance is firmly entrenched in its corporate culture, all directors, officers, and employees are expected and directed to act­ethically and with integrity.

Prevention of Bribery and Corruption
In recent years, countries in North America and Europe have been
taking an increasingly strict approach to the prevention of bribery.
In tandem with economic growth, newly developing countries also
have been introducing and tightening related laws and regulations.
In light of these trends, the Group established the Anti-Bribery

Systems for Promoting Compliance and Education

Guidelines in 2016 with the aim of preventing violations of brib-

JAPEX has established an Internal Control Committee to deliberate

ensuring the steady expansion of business. We are working hardpolicies for systems to ensure the appropriate conduct of businessto raise awareness within the Group of the basic principles behindand to investigate facts related to compliance violations.

the prohibition of bribery; how to conduct risks assessments andAdditionally, the JAPEX Group strives to heighten awareness oftake precautions in high-risk countries; and the need for periodic

compliance among its directors, officers, and employees. To thatmonitoring. We hold training sessions on bribery prevention led byend, the Group has created a compliance manual that summarizes

experts for our directors and officers. We also hold training ses-

key matters and standards to be observed on a daily basis withsions for employees of relevant departments, worksites, and sub-the aim of ensuring that business duties are carried out in accor-

sidiaries in Japan and overseas, including employees assigned todance with the JAPEX Group Code of Ethics and Conduct.

overseas operations with high bribery risks. We also conduct

In the manual, key matters to be observed are categorized bytype and the contact details for consultations and reports are listed. In addition, to ensure that employees pay careful attention
during operations, we publish a compliance manual case study

ery-related laws and regulations in Japan and overseas whileannual surveys aimed at assessing the status of and ensuring
compliance with the aforementioned guidelines.
There were no incidents or reports involving bribery in fiscal
2018. Besides, we do not make any political contributions.

collection that lists specific instances of violations for each matter.
Furthermore, for in-house training, we position CSR, compliance, and insider trading prevention as fundamental matters that
employees must be especially aware of during their daily operations. These three matters are mandatory subjects for training programs for new hires and mid-career training programs.

Compliance Matters to Be Observed (Excerpt)• Prohibition of actions that conflict with the Company’s interests• Appropriate accounting procedures and tax reporting• HSE • Respect for human rights • Fair procurement and trade• Maintenance of sound and proper relationships with politicians
and government officials• Prohibition of providing benefits to antisocial forces• Prohibition of insider trading

42

JAPEX Corporate Report 2019

Respect for Human Rights
P Policy on Respect for Human Rights
The Company has established the JAPEX Group Code of Ethics
and Conduct, which provides corporate ethics standards to beadhered to by all officers and employees. Regarding respect forhuman rights, including the prevention of slave labor and humantrafficking, the code requires behavior that respects the humanrights of all people. Furthermore, the compliance manual, which isbased on the code, outlines compliance with respect for humanrights in line with such international standards as the Universal
Declaration of Human Rights, the International Covenant on
Human Rights, and the ILO’s International Labour Standards.

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

E nvironment

P Initiatives Related to Preventing Slave Labor, Preventing Human
Trafficking, and Protecting the Rights of Indigenous Peoples

S ocialFinancial and Other Information

G overnanceheadquarters; they are also rolled out to each district office
and affiliate.

In our Basic Procurement Policy, we clarify our reasons for requir-

Moreover, we also distribute a monthly e-mail magazine as aing our business partners’ compliance with relevant laws and regu-means of building awareness on a daily basis. Reflecting the risinglations, the spirit of said laws and regulations, and social mores

attention being given to harassment, especially recently, the maga-

and norms. We strive to avoid transactions that debase the trustzine has been introducing personal cases and sharing informationsociety has placed in us.

on legal revisions in light of recent developments.

In the process of evaluating investments and operating projects,

In the event an individual consults it, the harassment hotline

we work to identify not only problems related to profitability andserving headquarters or the relevant district office takes quicktechnology but also explicit and implicit problems related to theaction. When an instance of harassment occurs (as defined byenvironmental and social characteristics of the area in which saidinternal rules), we implement a harsh response based on saidbusiness is being pursued. After evaluating the risks and potential

internal rules and notify all employees of the incident to prevent

solutions, we take appropriate action, such as conducting moni-a recurrence.

toring in line with in-house rules.
In our overseas businesses, we regard the rights of indigenous
peoples, respect for their cultures and customs, and concern forhuman rights as extremely important. For the Canada Oil Sands
Project, we have put in place a system that incorporates the viewsof local indigenous people and pursue business in cooperation withthem. In line with the UK Modern Slavery Act 2015, which wasenacted with the aim of requiring companies to identify and eradicate any and all instances of slave labor and human trafficking
across their supply chains, the JAPEX Group releases a statementon its website every year detailing its relevant policies and initiatives.
 For details on how we comply with the UK Modern Slavery Act, refer to thefollowing URL.
https://www.japex.co.jp/english/csr/slaveryactstatement.html

Compliance Reporting and Consulting System
JAPEX has established a system for reporting to and consultingwith relevant departments as listed in the compliance manual
through the normal chain of command (line of reporting) in theevent that a problem related to a compliance matter or the suspicion of such a problem arises. In addition, to ensure readiness inthe event a line of reporting fails for whatever reason, we haveestablished the Compliance Reporting and Consulting System,
which stands independent from internal lines of reporting. Because
it is designed to allow users to report or solicit consultation anonymously, Group employees can be confident in using this system.
Anyone who makes a report or receives a consultation is protectedfrom unfair treatment for doing so. Moreover, the people in charge

P Initiatives to Foster Workplaces Free of Harassmentof the reporting and consulting system, including the corporate

Since fiscal 2016, we have been continuously conducting

lawyer of JAPEX who serves as an external helpline, are prohibited

Companywide training programs and daily educational activities

when conducting an investigation from leaking any information

designed to foster a better understanding of workplace harassment.

gained to an unaffiliated third party or from formulating retaliatory

In addition to the training we held for all employees in fiscal 2016, we

measures against the complainant.

held training for directors, officers and other managers between
fiscal 2017 and 2018. Such initiatives are carried out not just at

Organization Chart of the Compliance Reporting and Consulting System
Representative Director and President
ReportAudit & Supervisory Board Members

Instruction / ApprovalInternal Control Committee(Chair: Executive in charge of Administration & Legal Dept.)
ReportInstruction / Approval

ReportAdministration &Legal Dept.

Report /Consultation

Ensure that preventive­measures against recurrence,
etc., be widely disseminatedRequest for taking
preventive measuresagainst recurrence, etc

Relevant departments

Cooperative investigation / Report

Cooperative investigation / Report

External helpline(corporate lawyer)

Persons anddepartments subject to investigation

Report / Consultation

Feedback

Feedback

Group employees, etc.

Cooperative
investigation

Internal helpline(except Administration & Legal Dept.)
Report /Consultation

JAPEX Corporate Report 201943

Directors and Audit & Supervisory Board Members (As of November 1, 2019)* ( ) indicate date appointed

Position, Name and Duties

Attendanceat the Boardof Directors
Meetings

Years in
OfficeBrief History

Reasons for Appointment

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

He possesses a unique level of insight derived fromextensive administrative experience encompassing
energy administration in government agencies andother bodies as well as service as Executive Vice
President and President at JAPEX in the period
between 2007 and 2016. Accordingly, he has been
appointed on the basis of having greatly contributed to
the JAPEX Group’s business development, and as aresult of having appropriately provided managerial
guidance from a broad perspective since assuming theposition of Chairman.

14 out of 14
12 yearsmeetings(June 2007)

He joined the Ministry of International Trade andIndustry (MITI) in 1977 and later became the head of
the Trade and Economic Cooperation Bureau at the
Ministry of Economy, Trade and Industry (METI). He
has also served as Sumitomo Corporation’s representative director, vice president and executive officer as well as the assistant to the representative
director and president. Having joined JAPEX in
2019, he served as Representative Director andExecutive Vice President and then assumed his current position in October 2019.

He possesses a unique level of insight regarding international resources and energy business derived fromextensive administrative experience encompassing
energy administration in government agencies andmanagerial experience otherwise in private sector
companies. Accordingly, he has been appointed
because we expect JAPEX management will benefit
from his knowledge and experience.

Newly
appointed

Since joining JAPEX in 1978, he has served as
General Manager of Procurement Dept., General
Manager of Administration Dept., President ofMarketing & Sales Division, Vice President of Soma
Project Division, Executive in charge of Secretary
Office, and Executive in charge of Procurement
Dept. He has been in his current position sinceJune 2019.

He has extensive experience in and knowledge of
operations in the areas of our procurement, administration, and marketing & sales divisions, and currently
serves as Director and Executive Vice President.
Accordingly, he has been appointed on the basis of
having significantly contributed to the appropriate
operation and management of JAPEX and the JAPEXGroup’s business development by undertaking duties
that involve serving as President of the Marketing &Sales Division and being in charge of the LNG
Marketing and Procurement Dept., the Secretary
Office and the Procurement Dept.

14 out of 14
6 years
meetings(June 2013)

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

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

14 out of 14
3 years
meetings(June 2016)

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

He has extensive experience in and knowledge of management in such areas as our overseas projects as wellas environmental and innovative technology projects
and divisions. Accordingly, he has been appointed on
the basis of having greatly contributed to the appropriate operation and management of JAPEX by undertaking duties that involve being responsible for overseas
projects overall, being in charge of Commercial Officefor Overseas Projects, being in charge of Corporate
Strategy Dept., and being in charge of New Business
Promotion Office. He is currently serving as Director
and Managing Executive Officer.

14 out of 14
4 years
meetings(June 2015)

He joined the Ministry of International Trade andIndustry (MITI) in 1980, and later became Deputy
Director-General of the Ministry of Economy, Tradeand Industry (METI). Since joining JAPEX in 2010,
he has served as President of Americas & Russia
Project Division. He has been serving in his current
position since June 2018.
He concurrently serves as President of JAPEXMontney Ltd.

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

14 out of 14
3 years
meetings(June 2016)

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

He specializes in oil and gas field development andproduction and operations management in Japan andoverseas, and has extensive experience in and knowledge of the oil sand business. Accordingly, he has
been appointed on the basis of having greatly contributed to the JAPEX Group’s business development by
undertaking duties that include being in charge of theCanada Oil Sands Project Dept., He is currently serving as Director and Managing Executive Officer.

14 out of 14
2 years
meetings(June 2017)

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

He has extensive experience in and knowledge of
operations in our finance and accounting divisions.
Accordingly, he has been appointed on the basis of
having greatly contributed to the appropriate operations and management of JAPEX by undertaking
duties in the Finance & Accounting Dept. He is currently
serving as Director and Managing Executive Officer.

10 out of 10
1 yearmeetings(June 2018)

Directors

Representative Director
and Chairman

Osamu Watanabe

Representative Director
and President
Chief Executive Officer

Masahiro Fujita

Representative Director
Executive Vice President

Yosuke Higai
Advisor to President
President of the Marketing &Sales Division; In Charge of the
LNG Marketing and Procurement
Dept. and the Secretary Officeand the Procurement Dept.

Director
Senior Managing
Executive Officer

Takahisa Inoue
In Charge of the HSE Dept.,
President of the Domestic Project
Division

Director
Managing Executive Officer

Kazuhiko Ozeki
Responsible for Overseas
Projects; In Charge of theCommercial Office for Overseas
Projects, the Corporate Strategy
Dept., and the New Business
Promotion OfficeDirector
Managing Executive Officer

Hajime Ito
President of the Americas &Russia Project Division

Director
Managing Executive Officer

Toshiyuki Hirata
Canada Oil Sands Project Dept.

Director
Managing Executive Officer

Michiro Yamashita
Finance & Accounting Dept.

44

JAPEX Corporate Report 2019—

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

E nvironment

Position, Name and Duties

S ocialFinancial and Other Information

G overnanceAttendanceat the Boardof Directors
Meetings

Years in
OfficeBrief History

Reasons for Appointment

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

He specializes in drilling technology in the oil and mining industries, and has extensive experience in andknowledge of our domestic project divisions.
Accordingly, he has been appointed on the basis of
having greatly contributed to the JAPEX Group’s business development by undertaking duties that include
being in charge of Gas Pipeline Transportation Dept.,and serving as President of Inter-regional Gas Supply
Division and President of Soma Project & PowerBusiness Division. He is currently serving as Director
and Managing Executive Officer.

10 out of 10
1 yearmeetings(June 2018)

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

He has extensive experience and distinguishedinsights gained through his career in a newspaper
company and other entities. Accordingly, he has been
appointed because he supervises and provides
wide-ranging proposals for JAPEX management. He iscurrently serving as Outside Director.

13 out of 14
4 years
meetings(June 2015)

Having been appointed as a prosecutor in 1975, heserved as Head of Special Investigation Force,
Tokyo District Public Prosecutors Office, and as
Deputy Prosecutor-General, Supreme Public
Prosecutors Office. He has been in his current
position at JAPEX since June 2016.
He concurrently serves as a Recorded Attorney(Daiichi Tokyo Bar Association), Of Counsel at
Nishimura & Asahi, Outside Auditor at Unizo
Holdings Company, Outside Auditor at Takasago
Thermal Engineering Co., Ltd., and Outside Auditor
at Asahi Kasei Corporation.

Although he does not have direct experience in corporate management, he has extensive knowledge andexperience as a legal specialist. Accordingly, he has
been appointed because he supervises and provides
wide-ranging proposals for JAPEX management. He iscurrently serving as Outside Director.

13 out of 14
3 years
meetings(June 2016)

She joined the Institute of Energy Economics,
Japan in 1985. After reaching the position of
Director and Head of the Climate Change andEnergy Efficiency Unit, she more recently became a
Board Member at the Institute and Director in
Charge of the Energy Data and Modelling Center.

Over the years and through focused research activities, she acquired an extensive knowledge of energy
economics and energy-and environment-related­public policy. Although without explicit experience incorporate management, JAPEX appointed her as
an Independent Director in June 2019 and expects togreatly benefit from her guidance and wide-ranging
suggestions.

Newly
appointed

Brief History

Reasons for Appointment

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

He specializes in oil and gas field development andproduction and operations management in Japan andoverseas, and has extensive experience in and knowledge of our overseas project divisions. Accordingly,
he has been appointed after we deemed that heappropriately conducts audits related to the directors’
execution of duties and fulfills his responsibilities.

Board ofDirectors meetings:
14 out of 14 meetings

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

He has been appointed upon our having deemed that
he appropriately conducts audits related to the directors’ execution of duties and fulfills his responsibilities
by tapping into his extensive experience in project
management in our overseas project divisions.

Board ofDirectors meetings:
10 out of 10 meetings

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

He has been appointed upon our having deemed that
he appropriately conducts audits related to the directors’ execution of duties and fulfills his responsibilities
since becoming a member of JAPEX’s Audit &Supervisory Board in 2015 and that, although he does
not have direct experience in corporate management,
he has distinguished insights gained from his extensive experience as a graduate school professor and ingovernment administration of the Ministry of Financeand other such entities.

Board ofDirectors meetings:
13 out of 14 meetings

He joined the Industrial Bank of Japan, Limited(IBJ) in 1970, where he served as its Managing
Executive Officer and later in the same position at
Mizuho Corporate Bank, Ltd. He then served as
President & CEO of DIAM Co., Ltd. He has been in
his current position at JAPEX since June 2014.

He has been appointed upon our having deemed that
he appropriately conducts audits related to the directors’ execution of duties and fulfills his responsibilities
since becoming a member of JAPEX’s Audit &Supervisory Board in 2014 and that he has distinguished insights gained from his extensive managerial
experience with financial institutions.

Board ofDirectors meetings:
14 out of 14 meetings

Directors

Director
Managing Executive Officer

Yoshitaka Ishii
In Charge of the Gas Pipeline
Transportation Dept., President of
the Inter-regional Gas Supply
Division, President of the Soma
Project & Power Business Division

Outside Director

Akira Kojima

Outside Director

Tetsuo Ito

Outside Director

Yukari Yamashita

Position and Name—

Attendance at the
Meetings

Audit & Supervisory Board Members

Audit & Supervisory
Board Member

Kenji Uchida

Audit & Supervisory
Board Member

Koichi Shimomura

Outside Audit &Supervisory Board Member

Hiroyasu Watanabe

Outside Audit &Supervisory Board Member

Norio Nakajima

Board of Corporate
Auditors meetings:
12 out of 12 meetings

Board of Corporate
Auditors meetings:
10 out of 10 meetings

Board of Corporate
Auditors meetings:
12 out of 12 meetings

Board of Corporate
Auditors meetings:
12 out of 12 meetings

JAPEX Corporate Report 201945

N

Being a Good Neighbor

S H I      EBasic Policy
We believe that the maintenance of safe and stable business oper-

Expectations and Requests from Stakeholders

ations depends on our accurately understanding the requirements

Timely and appropriate disclosure
Appropriate return of profits

society places on the JAPEX Group as well as 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 in which we operate while complying with various international regulations and engaging in a variety of social
contribution activities aimed at helping to ensure the sustainable
development of local communities and win their trust. In addition,
we will develop favorable relationships with the communities inwhich we operate through constructive dialogue and the timely
and appropriate disclosure of information.

Shareholders
and Investors

Stable supply of energy
Product safety,
Quality control
Occupational
health and safety
Creation of anamenable working
environment
Human resource
development
Cooperation
Support

Local
Communities

Clients

Employees

The JAPEX
Group

Oil- and
Gas-Producing
Countries

TechnologicalsupportCreation of
Employment

Business
Partners

NGOs and
NPOs

Compliance
Tax payment

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

Government(As an operator)
Formulation and operation of
appropriate business plans(As a non-operator)
Checking and proposing improvements
Fair transactions
to business activities plannedand conducted by operators
Transaction
Partners

Our ApproachSocial Background and Issue Recognition

Main Measures

P Continued engagement in the provision of a stable supply ofP Through dialogue with various stakeholders, we are striving toenergy, a business that entails a substantial social mission andsignificantly impacts the economy and society requires building

understand their diverse needs and be a company that earns
the trust of society.

relationships of understanding and trust with our stakeholders.

P We promote the local production and consumption of energy

P We must address expectations regarding our contribution to job

and establishment of towns resistant to disaster and help

creation and the development of local industries in the regions inaddress such issues as infrastructure support, job creation,

which we operate.

­environmental protection, social exchange and donation activities.

P Problems with product quality could significantly harm various

P We are committed to safety, quality control, and the appropriate

stakeholders. We recognize that quality control and productprovision of information as well as to building good relationships

safety are extremely important.

with our stakeholders so that they can utilize our oil and natural
gas products with peace of mind.

Dialogue with Shareholders and Investors
We believe that establishing relationships of trust with our shareholders and investors is crucial to achieving sustainable growthFiscal 2018 Accomplishments

over the medium to long term and increasing our corporate value.

P Held financial results briefings for institutional investors andsecurities analysts

Accordingly, we actively arrange opportunities for dialogue to facilitate 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.

P Held interviews with institutional investors and­securities analysts
P Participated in IR conferences for overseas­institutional investors
P Participated in briefings hosted by securities companies forindividual investors
P Hosted facility tours for shareholders

46

JAPEX Corporate Report 2019

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

E nvironment

Relationships with Local Communities
Helping a “Smart Community” Initiative—Shinchi,
Fukushima Prefecture

S ocialFinancial and Other Information

G overnance

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 for so long hand in hand withThe Soma Project supports a “Smart Community” initiative led by

local communities in a broad range of fields, including environmental

Shinchi Town. This initiative aims to redevelop the area around JR

preservation, social development, and economic vitalization, part-

Shinchi Station where there is damage from the Great East Japannerships between JAPEX and such communities have become an

Earthquake. Natural gas from Soma LNG terminal will be supplied

integral component of the project. Examples of collaboration include

to public infrastructure, hotels and bathing facilities that are cur-the establishment of the Indigenous Advisory Group (IAG) by indige-

rently being constructed in the area. These initiatives are expectednous residents under the initiative of subsidiary Japan Canada Oil

to reduce CO2 emissions from the communities and help curb

Sands Limited (JACOS) at the time of commencement of oil sands

energy consumption.

development at the Hangingstone Block. JACOS and the IAG are

In addition, we sponsor a local summer festival and an industrial

engaged in a longstanding ongoing discussion aimed at sharing

festival held every August and November, respectively, in Shinchi

expertise in and ideas for environmental preservation and to put

Town, and participate in the Soma Citizens’ Festival eachthese insights into practice. In fiscal 2018, the IAG and JACOS

November. Also, last December, we invited elementary school stu-held quarterly meetings in addition to hosting various events, withdents from local communities to take a site tour of our LNG tankrepresentatives from both sides participating in facility tours, culturaland related facilities. Through these activities, we interact with local

exchange ceremonies and environmental monitoring activities.

communities to promote an understanding of our operations andThanks to this approach, JACOS has been highly evaluated by theraise awareness of the importance of efficient energy use and pro-Canadian Association of

tecting the environment.

Petroleum Producers as an

In October 2018, we held a promotional event featuring

exemplar of a locally-rooted,

Shinchi Town specialties, such as fresh agricultural and marine

unique and proactive

products as well as preparedapproach to community part-foods, at our headquarters

nership development.

building, thereby introducing

Building Favorable Relationships with Residents ofRemote Islands—Indonesia

the attractiveness of the community to a number of visitorsfrom the Marunouchi andneighboring Yaesu districts.

A quarterly meeting with IAG members

A promotional event featuring the specialties ofShinchi Town (JAPEX’s headquarters building)Contributing to Education and Social Welfare—Iraq

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 ofPagelungan Island and of other islands in the surrounding waters.

In Iraq, we are engaged in the Garraf Project. Residents in the area

We have been voluntarily providing electricity and water from thesurrounding our petroleum facilities number in the several tens ofterminal’s power generation equipment to approximately 6,000 resi-

thousands, and we are cognizant of the critical importance of build-dents of Pagerungan Island. In addition, we dispatch doctors

ing favorable relationships with local communities. Accordingly, with

employed at the terminal to local clinics at no cost. We are also

particular emphasis placed on providing educational assistancecommitted to annually donating a fixed amount to island communi-

and enhancing social welfare, JAPEX and PETRONAS (the projectties, thereby providing financial support for the construction andoperator) are working in tandem to contribute to the local commu-

repair of school buildings, establishment of ice-making facilities fornities in various ways. With regard to education, we help repair

the fishery industry, and development of a soccer field for recreation.

and maintain primary and secondary school facilities. We also

In 2018, our donations aided local communities by easing the­dispatch medical personnel to conduct eyesight checks for children

financial burdens of impoverished households, supporting infrastruc-and ­provide corrective lenses where needed in addition to distribut-

ture development, funding the repair and construction of piers anding educational equipment. Our educational support activities also

roads, assisting mangrove tree planting, furnishing scholarships andinclude hosting science and math classes for primary school

other educational assistance, and enabling the purchase of nutri-­students. With regard to social welfare, JAPEX and PETRONAS

tional supplements for infants.

have donated small-scale water purification facilities, helping
resolve issues arising from poor access to good water.
We also provide low-income households with food andIn 2019, we are planning to maintain donations at the 2018 level.
We will remain committed to helping the communities in which we
operate thrive by providing

fresh meat during the monthongoing assistance toof Ramadan. As such,aspects of education, health-

we are striving to ensurecare, economic vitalization,that our presence in theenvironmental protection, andregion helps build ainfrastructure development.

­harmonious community.

Distributing food during Ramadan

Assisting in mangrove tree planting
on Raas island

JAPEX Corporate Report 201947

The Employer of Choice

S H I N  E

Basic Policy
We believe that in order for JAPEX to achieve sustainable growth and enhance its corporate competitiveness, it must encourage its officers and employees to realize their creativity
and take on challenging goals. At the same time, JAPEX must continue to transform itself
into a more flexible organization supported by a diverse workforce. Therefore, JAPEX­supports its employees in their autonomous and ongoing pursuits of career development
and personal growth, believing that allowing them to enjoy professional success, regardless of gender, age, nationality, job category, or workstyle, is essential.
To this end, we are proactively revising our personnel systems while hosting seminars
and other educational events on diversity, work-life balance and career development, with the aim of fostering a corporate culture that
respects diversity and is capable of realizing the potential of diverse workers.

Our ApproachSocial Background and Issue Recognition

Main Measures

P With a declining birthrate and aging population, Japan is facing
a labor shortage. Therefore, it is important to empower women
to take on more active roles while respecting the needs of different generations and work styles.
P Honoring and making full use of the different personal attributesof our employees is not only a key to meet social demands but
also indispensable to creating new corporate value.
P We believe that a fair working environment where human rights
are respected is essential to ensure every employee is able towork with confidence and passion.

P We acknowledge that each employee is unique in both tangible(gender, nationality, career track, work style) and intangible
ways. Thus, we have mechanisms in place that enable each
employee to work as an autonomous professional.
P We have been reforming work styles and establishing personnel
systems to honor each person’s roles and responsibilities and toallow them to realize their capabilities more efficiently. In addition,
we have been striving to enhance employee training and strengthen communication between management and employees.
P Furthermore, looking to boost labor productivity, we have been
making efforts to reduce the need for overtime while striving tomaintain and promote employee health.

Create a Fair and Rewarding Workplace
Allowing General Staff and Career Track Employees
to Switch Job Categories
We are engaged in work style reforms aimed at ensuring that all
employees stay highly motivated and realize their full potential. As
part of these reforms, in April 2019 we revised our conventional job
categories, abolishing the designation associate staff (AS), a type ofgeneral staff charged solely with administrative assistance that had
been accounting for approximately 50% of our female employees.
Those formerly categorized as AS have been reclassified as business staff (BS) and folded into the career track category.
In conjunction with this shift, each employee has been granted acareer interview with their direct supervisor and staff from the HR
department. They are also being given opportunities to sign up fortraining aimed at helping them formulate 10-year career plans,
develop a spontaneous working attitude, and enhance their job
skills. As such, we are painstakingly striving to ensure smooth transition. Furthermore, the abolishment of AS resulted in the reallocationof administrative operations, and JAPEX has rallied its strengths tostreamline these operations and redefine the roles of each employee. In particular, we expect this change in job categories to help
raise the proportion of women in management positions.

48

JAPEX Corporate Report 2019

Revising Personnel Systems
In April 2019, JAPEX revised its personnel systems, doing away withconventional seniority-based practices. In line with the policy of helping each employee enhance their skills and develop a healthy level ofcompetitiveness, our revised personnel systems place a stronger
focus on the role of the individual. The revisions also helped JAPEX
secure conformity with the Equal Pay for Equal Work Guidelines
announced by the Ministry of Health, Labour and Welfare in
December 2018. This move is intended to make it easier for employees to understand their roles and responsibilities and encouragethem to pursue higher accomplishments and acquire robust skills.
We expect the revised personnel systems to raise employee
awareness of their responsibilities while better positioning JAPEX
to acquire and develop human resources who can flexibly support
a variety of projects.

Health Management
JAPEX was certified as one of the Health and Productivity
Management 500 Organizations (White 500) under a program
co-sponsored by the Ministry of Economy, Trade and Industry andNippon Kenko Kaigi Health Promotion Association with the aim of

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

E nvironmentcommending large companies that implement outstanding healthmanagement. This is JAPEX’s third such certification since 2017.
In line with the JAPEX Group Code of Ethics and conduct, we“place top priority on HSE (health, safety and environment)” whiledeveloping an inclusive workplace environment. We are thus rallying our entire strength to promote various initiatives to create aworking environment in which all employees can vibrantly workwith confidence.
In terms of employee health management, we offer follow-up
counseling after in-house health checkups and stress checks. We
also provide smokers with a program aimed at helping them quit
smoking while hosting various in-house events to enhance employee health literacy. In these ways, we are extending ongoing assistance to employees’ health improvement efforts, with the hope thatsuch activities help them maintain good health even after retirement. In addition, we are striving to raise employee awareness oflifestyle-related diseases by, for example, implementing annual“JAPEX Diet Campaigns,” which aim to assist those who haveweight issues in their efforts to lose weight and help them tochange their eating habits in a systematic and smooth manner.

Respect Employee Diversity
Work-Life Balance
Since fiscal 2016, we have been engaged in the “Summer Work
Style Reform Campaign,” a program held each year over the July–
September period aimed at improving work-life balance throughthe trial implementation of various programs. For the fiscal 2018
campaign, we implemented a staggered lunch break and allowed
eligible employees to work at home.
Specifically, the staggered lunch break allowed employees totake one-hour breaks at any time between 11:45 and 13:15,
extending the conventional lunch hour time by 15 minutes in both
directions. Employee questionnaires issued after the introductionof this program furnished mostly positive feedback, with some citing the ability to beat the crowds at restaurants and thus more
effectively utilize break time as a deciding factor. Having thus confirmed the benefits of a staggered lunch break, we continued thisprogram past the end of the campaign period, officially adopting itat the beginning of fiscal 2019.
The work at home program for eligible employees also ran overJuly and August on a trial basis in line with our participation in thegovernment-sponsored “TELEWORK DAYS 2018” campaign.
Although we were able to confirm the benefits of this program interms of an improved work-life balance achieved through, forexample, a reduction in hours spent commuting and higher operational efficiency, we have also identified multiple system-and facility-related issues that must be overcome. We will continue striving
to fully accommodate this work style and, to this end, are taking
steps to address these issues.

S ocialFinancial and Other Information

G overnanceway, we will strive to eliminate the gender gap in our workplaces.
As another voluntary action, we have also been promoting
human resources development toward the goal of appointing
female general managers by 2020 while striving to maintain theratio of women to the number of new recruits from university­graduates at 30% or more.

Personnel Development
In fiscal 2014, we launched the Career Development Plan, which is
aimed at encouraging employees to strive for a fulfilling work life
and to pursue their career goals. This plan defines three distinct
career paths for key individuals expected to play crucial roles in
JAPEX’s business operations: “global leaders,” individuals charged
with strategic planning and business promotion; “business leaders,”
individuals who manage functionally separate business units; and“specialists,” individuals who bring to bear highly specialized skills.
Having formulated our Career Development Guidelines in line withthese definitions, we are currently implementing various humanresource development programs. These include the Career Design
Training Program, which helps each employee design their future
career goals themselves, and the Job Level-Based Training
Program, which aims to help raise employees’ awareness of theroles and responsibilities commensurate with job level.
In fiscal 2018, we expanded the scope of employees subject tothe latter program to include general managers. This move isintended to help employees who are expected to become senior
management candidates understand the competencies they are
expected to acquire in the face of an evolving business environment that will, in turn, make their duties more challenging. Morespecifically, the Job Level-Based Training Program for general managers is focused on ensuring that participants adopt an approachthat looks to optimize overall operations, learn how make responsible decisions, and be acutely aware of the beliefs, motives, andstandards they must uphold.
We provide overseas study and training programs aimed at nurturing human resources capable of handling business operations incountries abroad, with a number of employees undergoing handson business training at overseas business bases or being dispatched to educational institutions in Europe and the United States.
In fiscal 2017, we also launched the Overseas Business Skills
Training Program focused on instilling project management andother commercial skills. Currently, employees ranging from new
recruits to mid-level managers are benefiting from this program
thanks to the well-organized content it provides.
Furthermore, we held in-house seminars titled “Introductory Skill
Training by Specialists” in fiscal 2018, with senior specialists andspecialists at JAPEX serving as lecturers.

Efforts to Recruit Women to Management Positions
In October 2014, we set a goal to triple the percentage of womenin management positions from 3.4% as of October 2014 to 10.2%
by 2020. As of April 1, 2019, however, the percentage of female
managers had reached only 4.9%. Going forward, we will placestronger emphasis on creating a fair and rewarding workplace by,for example, holding in-house seminars aimed at helping all managers who supervise female employees raise their awareness. In thisParticipants in the Overseas Business Skills Training Program

JAPEX Corporate Report 201949

Financial and Non-financial Highlights
Net sales

2010/3
For Fiscal Year (Millions of yen)

(Millions of yen)

320,000

304,911
267,980
240,302240,000

230,629
207,130

160,000

80,0000

2015/3

2016/32017/3

2018/3

2019/3

Basic earnings (loss) per share

(%)

ROE

700

15.0

517.35350

258.44

6.7
60.24

36.58
0

0.5

179,752

Cost of sales

125,467

Exploration expenses

10,396

Selling, general and administrative expenses

30,769Operating income

13,119Profit (loss) attributable to owners of parent

17,939Cash flows from operating activities

38,948Cash flows from investing activities(29,300)

Cash flows from financing activities(4,054)

Cash and cash equivalents at end of period

57,645

At Fiscal Year-End (Millions of yen)

Basic earnings (loss) per share/ROE(Yen)

Net sales

7.5

521,009

Net assets

398,747

Long-term loans payable

24,471

Financial Ratios (Yen, %)Net assets per share

3.5
0

0.8

Total assets

6,839.05

Basic earnings (loss) per share

313.88Return on Equity
(350)

(7.5)

(7.2)

Cash dividends per share (full-year)(541.70)(15.0)

2016/32017/3

2018/3

2019/3

Net assets per share

Production volume

10,0007,500

Proved reserves
7,366.40

Natural gas

21.5

Crude oil

17.6

Total

39.1

Proved Reserve Volume at Fiscal Year-End (Million boe)(Yen)8,055.59

40.00

Production Volume in the Fiscal Year (daily)*1 (Thousand boe/d)(700)

2015/34.7

7,655.26

7,438.23

7,287.32

Overseas

49

Japan

205

Total

254

Non-financial Data

2,500

0

2015/3

2016/32017/3

2018/3

2019/3

Production volume(Thousand boe/d)

100

75

50

Natural gas

Crude oil

74.4

73.7

72.0

42.1

39.7

38.3

60.7

61.5

29.5

33.4

25

32.3

34.0

33.7

31.2

28.1

2015/3

2016/32017/3

2018/3

2019/30

50

JAPEX Corporate Report 2019

Human
resources

HSE*2

5,000

Occupational safety

Frequency rate*3

1.41

4

Severity rate*

0.00

Greenhouse gas emissions (t-CO2)

324,714

Energy consumption (TJ)

3,566.5

Number of employ- Consolidated
ees
Non-consolidated

1,735
869

5

Ratio of female managers (%)*

1.4

Employees with disabilities (%)*6

1.65*1 Figures for crude oil include bitumen (an extra-heavy crude oil extracted from oil sands).
These figures include production volumes of equity-method affiliates.
*2 Applies to JAPEX and Japex Offshore Ltd.
*3 Frequency rate = (Number of deaths and injuries caused by occupational accidents/
Number of hours worked) x 1,000,000*4 Severity rate = (Number of days of work lost/Number of hours worked) x 1,000*5 Figures based on non-consolidated operations. Figures for the fiscal year ended
March 31, 2014 and subsequent years are stated as of April 1 of the respective­subsequent fiscal year.
*6 Figures based on non-consolidated operations.

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information(Fiscal years ended March 31)

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/3

199,651

230,638

231,086

276,588

304,911240,302207,130

230,629

267,980

144,919

174,359

172,075

210,460

234,649

193,022

174,957

191,366

233,133

9,798

7,805

13,086

9,800

4,489

6,516

1,512

1,324

788

31,08433,42632,017

31,692

33,62532,42629,97529,17331,743

13,84915,045

13,906

24,63432,146

8,336

685

8,764

2,313

10,01017,027(865)

29,01529,567

2,090

3,443

(30,959)

14,77034,28437,172

34,25445,22678,66657,65943,672

52,88130,970(24,282)(13,950)(14,836)(131,600)(63,031)(125,771)(84,686)(54,218)(13,969)

(521)

9,856

(7,177)

71,68018,47554,816

18,360(1,196)(15,493)

66,82699,803112,639

102,830

142,657

126,570

103,630

99,892

100,633

516,098

532,890525,172

663,038

736,862

707,601

746,739

699,536

655,288393,689

406,773403,625

496,915

540,647

495,317510,609459,255

450,156

26,89826,19824,197

21,636

20,726130,030

141,903

135,959

127,715

6,743.83

6,869.27

6,691.58

7,389.62

8,055.59

7,366.40

7,655.26

7,438.23

7,287.32

175.16297.92(15.14)507.68517.35

36.58

60.24

(541.70)258.44

2.6

4.4

(0.2)

7.2

6.7

0.5

0.8

(7.2)

3.5

40.00

40.00

40.00

50.00

50.00

50.00

15.00

20.00

40.00

25.5

22.8

23.3

26.4

32.3

34.0

33.7

31.2

28.1

15.0

15.8

13.3

21.8

42.1

39.7

38.3

29.5

33.4

40.6

38.6

36.6

48.3

74.4

73.7

72.0

60.7

61.5

49

38

160

193

203

255

277

229

323

208

185

147

112

110

94

74

73

64

257

223

307

305

313

349

352

302

387

1.59

0.80

0.00

0.84

1.02

1.15

3.53

0.00

0.00

0.00

0.00

0.00

0.10

0.03

0.02

0.18

0.00

0.00

303,146

256,561

267,446

251,121244,491

230,636

241,360

382,604

320,883

3,475.7

3,329.3

3,168.0

2,975.1

2,698.8

2,543.8

2,609.3

2,564.7

2,869.5

1,728

1,743

1,747

1,782

1,818

1,847

1,825

1,788

1,741

867

880

882

874

886

902

897

920

904

2.1

2.0

3.3

2.9

4.1

4.5

4.5

5.4

4.9

1.53

1.89

1.75

1.57

2.03

2.21

2.01

1.97

2.75

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

JAPEX Corporate Report 201951

Oil and Gas Glossary52

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 secondary recovery increases the volume
of oil recovered by maintaining or raising pressure in the oil sands layer, EOR alters thephysical 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 andsale of oil and natural 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 andconstruction). Prior to FID, relevant parties must meet all requirements, such as formulating robust plans for development, marketing and fundraising; signing necessary contracts;
obtaining approval from authorities; and securing sufficient human resources.

Japan crude cocktail (JCC)

The average price of crude oil imported by Japan and determined in reference to cost,
insurance and freight (CIF).

Oil sandOil sands refer to sandstones containing crude oil that is extremely viscous like tar andlacking in fluidity, unlike the crude oil typically found in reservoirs. Crude oil recovered fromoil sands is generally referred to as bitumen or extra-heavy crude oil in accordance with
its viscosity.

Operator

A contractual term used in the exploration, development and production of oil 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 signed by an oil-producing country, which exercises overall management over oil
development and production, and a foreign oil company, which invests in exploration,
development and production. The PSC determines proportions of oil to be shared between
the two parties after the latter has recovered its investment from oil marketing revenues.

Reserve replacement ratio (RRR)

RRR is the ratio of growth in volume of proved reserves against production volume in asingle fiscal year or other specific period of time. As a numerical indicator for measuringbusiness performance in terms of oil and gas exploration and development, RRR is calculated by dividing growth in the volume of proved reserves by the production volume.

Service contract

Signed by an oil-producing country and a foreign oil company, the service contract usually details the retention of ownership by the government of the former of any oil produced
while placing responsibility on the latter, which handles exploration, development and production, for fund raising for and bearing risks arising from these operations. As the remuneration fee for these operations, the latter is entitled to a fixed proportion of the oil
produced or revenues from said oil commensurate with production volume.

Ship-to-ship (STS)An LNG bunkering method, STS involves bringing an LNG bunker ship alongside a natural
gas powered vessel berthing or anchoring at a quay or pier and directly providing it with
LNG fuel.

Steam assisted gravity drainage (SAGD)An EOR technology that employs a pair of horizontal wells, one set five meters above theother, drilled into an oil sands layer located around 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 andincreases its fluidity, enabling it to flow down into the lower well (the bitumen productionwell) assisted by gravity. Bitumen is thus recovered to the above-ground production facilities along with heated water.

Western Canadian Select (WCS)

Heavy oil produced in western Canada.

JAPEX Corporate Report 2019

Mission and Purpose

Strategy

Value Creation Through Business Activities

Initiatives to Support Value Creation

Financial and Other Information

Corporate Data
Corporate Profile (As of March 31, 2019)
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

1,741 (Consolidated basis)

Main Businesses 	Exploration, development, production, and sales of oil,natural gas, and other energy resources, and contract
service-related operations such as drilling
Main Offices 	Headquarters (see below), Hokkaido, Akita, Nagaoka,
Soma, Sendai, JAPEX Research Center (Chiba),
Houston, Jakarta, Aberdeen, Dubai, Singapore(as of April 2019)
Headquarters	SAPIA Tower, 1-7-12 Marunouchi, Chiyoda-ku,
Tokyo 100-0005, Japan
TEL: +81-3-6268-7000

Executives (As of November 1, 2019)
Representative Director
and Chairman

Osamu Watanabe

Outside Audit &Supervisory Board Members

Hiroyasu Watanabe*2
Norio Nakajima*2

Representative Director
and President, Chief
Executive Officer

Masahiro Fujita

Special Advisor to President

Ajay Singh*3
Tsuyoshi Suga

Representative Director
Executive Vice President

Yosuke Higai

Senior Managing
Executive Officer
Managing Executive Officer

Yasushi Hamada

Executive Officers

Ryuhei Murayama
Senichiro Kaku
Minoru Kuniyasu
Junichiro Ando
Tadashi Matsunaga
Ryohei Wakishima
Tsuneta Nakamura
Masanori Amano
Takamasa Miyadai
Yoshihiko Motoyama
Shinichi Takahata
Toshiaki Nakajima

Director, Senior Managing
Executive Officer

Takahisa Inoue

Director, Managing
Executive Officers

Kazuhiko Ozeki
Hajime Ito
Toshiyuki Hirata
Michiro Yamashita
Yoshitaka Ishii

Outside Directors

Akira Kojima*1
Tetsuo Ito*1
Yukari Yamashita*1

Audit & Supervisory
Board Members

Kenji Uchida
Koichi Shimomura

Fellows

Satoru Yokoi*4
Amane Waseda*1 A
 kira Kojima, Tetsuo Ito and Yukari
Yamashita are outside directors as
stipulated under Article 2-15 of theCompanies Act of Japan.
*2 H iroyasu Watanabe and Norio
Nakajima are outside audit & supervisory board members as stipulated
under Article 2-16 of the Companies
Act of Japan.
*3 T he Special Advisor to the President
assists with strategy and commercials.
*4 F ellows support executives throughtheir high degree of expertise in specialized fields.

Stock Information (As of March 31, 2019)
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

11,878Transfer Agent and Registrar	Mizuho Trust & Banking Co., Ltd.
Inquiries 	Mizuho Trust & Banking Co., Ltd.,
Stock Transfer Agency Division 
8-4 Izumi 2-chome, Suginami-ku,
Tokyo 168-8507, Japan
TEL: 0120-288-324 (Toll-free in Japan)

Major Shareholders
Shareholder Name

Number of Shares

Voting Rights (%)

Minister of Economy, Trade and Industry

19,432,724

34.00

OASIS INVESTMENTS II MASTER FUND LTD.

2,856,240

5.00

INPEX CORPORATION

2,852,212

4.99

ORBIS SICAV

1,981,704

3.47

JFE Engineering Corporation

1,848,012

3.23

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

1,699,800

2.97

Japan Trustee Services Bank, Ltd. (Trust)

1,556,100

2.72

SSBTC CLIENT OMNIBUS ACCOUNT

1,457,157

2.55

THE BANK OF NEW YORK MELLON 140051

1,235,600

2.16Japan Trustee Services Bank, Ltd. (Trust 5)765,300

1.34

Shareholding by Shareholder Type
Individuals and Other

6.98%

Minister of Economy,
Trade and Industry

34.00%

Foreign
Corporations
and Other

29.53%

PublicOrganizations

1.36%

Other Domestic
Corporations

12.14%

Securities Companies

Financial
Institutions

0.67%

15.31%

Note: Percentage figures are rounded up to the second decimal place.

JAPEX Corporate Report 201953

Inquiries:
Japan Petroleum Exploration Co., Ltd.
Investor Relations Group,Media and Investor Relations Dept.
TEL : +81-3-6268-7111
FAX : +81-3-6268-7302

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