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

May 2, 2017
Company Name: Japan Petroleum Exploration Co., Ltd. (JAPEX)Securities Code:

1662

Representative:

Hideichi Okada, President

Inquiries:

Media and Investor Relations DepartmentTel:+81-3-6268-7110

Steam injection starts in Hangingstone Oil Sands Projectat Hangingstone leases in the Province of Alberta, Canada

Japan Petroleum Exploration Co., Ltd. (JAPEX) has started steam injection into the oil sands
layer on April 28, 2017, for start-up of bitumen (ultra heavy crude oil extracted from oil sands)
production utilizing SAGD at the Hangingstone leases in the Province of Alberta, Canada, whereJAPEX, through its consolidated subsidiary, Japan Canada Oil Sands Limited (JACOS), isproceeding with development work (the Hangingstone Oil Sands Project).
JACOS started field construction of the Hangingstone Oil Sands Project in February 2013.
Bitumen production from the operation is expected to be 20,000 barrels per day. The drilling ofproduction and steam injection wells for the production operation was completed in February, 2015.
In February, 2017, JACOS completed the construction work on the Central Processing Facility andwork began to prepare for the start of steam injection.
The start of steam injection is the final preparation phase for start-up of production operations.
JACOS will raise the temperature and pressure of the oil sands layer located at 300m undergroundover the next two to three months, and the start-up of production is expected around the middle ofthe year, as planned. Production volumes of bitumen will gradually increase and are expected toreach 20,000 barrels per day by mid-2018.
JAPEX has been pursuing oil sands development in Canada for 40 years, since 1978. In 1999, as
the forerunner, JAPEX succeeded in bitumen production utilizing SAGD at the Hangingstone
Demonstration Project. (The production operation has been temporarily suspended*3)

After that,JAPEX has been advancing a development project at Hangingstone to achieve full-scale commercial
production operations.
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With the Hangingstone Oil Sands Project, JAPEX will achieve an increase of bitumen productionand establish a long term and sustainable production base, making the oil sands business one ofJAPEX’s core business areas. The Hangingstone Oil Sands Project is operated by JACOS holding a75% participating interest in a joint venture with Nexen Energy ULC, a CNOOC Limited Company,
who holds the remaining 25% interest.
This start of steam injection is in line with the current consolidated financial forecasts forFY2017/3, and the impact on the consolidated financial result of FY2018/3 is expected to be taken
into account in the financial forecast to be announced later.
###*1: Press Release by JAPEX, November 8, 2016, “Updating Production Schedule and Cost Forecast ofthe Hangingstone Oil Sands Project in the Province of Alberta, Canada”*2: In SAGD, two wells with horizontal sections of between 500m and 1,000m in length are drilledwith a spacing of approximately 5m between the upper and lower wells in the oil sands layer
located at 300m underground. The extraction process involves heating the oil sands layer bycontinuously injecting high-temperature, high-pressure steam into the upper well to provide
liquidity to the bitumen, which in turn flows down to the lower well and is recovered along with
hot water. JACOS has been achieving operational efficiencies that minimize freshwater
consumption by recycling at least 90% of the hot water produced.

*3: Press Release by JAPEX, May 12, 2016, “Temporary Suspension of the Production Operation atthe Hangingstone Demonstration Project area in the Province of Alberta, Canada”
2/4*4: History of JAPEX’s Oil Sands Development
1978

JACOS was established to promote a national project by Japanese
government and private companies.

1997

After testing various extraction methods, viability of the SAGD method inAthabasca region was proved.
JACOS started developing the Demonstration Project to recover bitumen
utilizing SAGD.

1999

Production started at the Demonstration Project.

(Following is the Hangingstone Oil Sands Project)
2005

Geological evaluation to support development began.

2012(December)

Development approval from the relevant authority of the provincial
government of Alberta was received and the Final Investment Decision wasmade.

2013(February)Construction began. (Early civil work)

2015(February)

Drilling of horizontal well pairs was completed.

2017(February)Field construction of facility was completed.

2017(April)

Steam injection into horizontal wells began.

Mid-2017

Bitumen production is expected to commence.

Mid-2018

Bitumen production is expected to achieve peak rate (20,000 barrels per day)

*5: Picture of starting steam injection in the Hangingstone Oil Sands Project (April 28, 2017)(Picture 1: the Central Processing Facility has started providing steam to the horizontal wells)

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(Picture 2: Steam is being injected through the Wellhead facilities)

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