September 21, 2004
Work to Go Forward on ACG Project’s Phase Three Development
On September 20, INPEX CORPORATION (INPEX) and other international
consortium partners signed an agreement to carry out phase-three development of theAzeri-Chirag-Gunashli (ACG) project: development of the Azeri and Chirag oil fields aswell as the deep-water portion of the Gunashli field in Azerbaijani territorial waters of
the Caspian Sea. The signing took place at a ceremony in the Azerbaijani capital ofBaku marking the 10th anniversary of the production-sharing agreement for thatproject, with President Ilham Aliyev of the Republic of Azerbaijan, Prime Minister
Zurab Zhvania of Georgia, and Energy Minister Hilmi Guler of the Republic of Turkey
in attendance. INPEX holds a 10% interest in the ACG oilfields through its subsidiary
INPEX Southwest Caspian Sea, Ltd.
The ACG project is devoted to the phased development of one of the world’s largest oilfields (with recoverable reserves estimated at 5.4 billion barrels) by an international
consortium operated by the British oil company BP p.l.c. The project aims to achieve anoutput of more than one million barrels of crude oil per day by 2009. Production of"early oil" began in 1997 at the Chirag oil field, which currently produces 157,000
barrels per day. Plans call for work to be carried out successively on development phaseone, the central portion of the Azeri oil field (scheduled to begin production in 2005);
phase two, the western and eastern portions of the Azeri oil field (scheduled to start
producing in 2006 and 2007, respectively); and phase three, the deep-water portion of
the Gunashli oil field (scheduled to begin production in 2008).
The crude oil produced by this project is currently transported via the "western route,"
which runs from Baku to Supsa on the Black Sea. However, to ensure that transportcapacity keeps up with increasing production as the project proceeds, the consortium’s
core members have been working on the construction of the Baku-Tbilisi-Ceyhan (BTC)
Pipeline since September 2002. Upon completion, scheduled for 2005, most of the crude
oil will be transported through this pipeline to Ceyhan on the Mediterranean Sea, andfrom Ceyhan delivered to world markets. INPEX is also involved in the BTC Pipeline
project, holding a 2.5% interest.

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* Supplemental Information
1. On September 20, 1994, an international consortium and Azerbaijan’s state oilcompany SOCAR signed a production-sharing agreement for the ACG project to develop
the Azeri, Chirag, and deep-water Gunashli oil fields, previously discovered fields lying
beneath Azerbaijani territorial waters in the southern Caspian Sea. The agreement
went into effect in December the same year.
2. The ACG development project concession area measures 432.4 square kilometers andlies some 100 to 400 meters under the Caspian Sea in Azerbaijan’s territorial waters.
The Gunashli, Chirag, and Azeri fields were discovered during the Soviet era in 1979,1985, and 1987, respectively, by Khezerdenizneft, but during that era development
never progressed beyond the shallow-water portion of the Gunashli field. After the fallof the Soviet Union, the oil fields became part of the territory of Azerbaijan, and aproduction-sharing agreement covering the concession was concluded, as described in(1) above. In November 1997, production of "early oil" in the Chirag field began, and byAugust 2004 volume had reached 154,000 barrels per day. The Chirag field has yielded
approximately 255 million barrels to date.
3. The international consortium involved in the ACG development and production
project currently consists of 10 companies based in six countries: INPEX (10%), BP (theoperator, with an interest of 34.1%), UNOCAL (10.3%), SOCAR (10%), Statoil (8.6%),
ExxonMobil (8%), TPAO, the state oil company of Turkey (6.8%), Devon (5.6%), Itochu
Oil Exploration (3.9%), and Amerada Hess (2.7%).
4. INPEX’s subsidiary INPEX Southwest Caspian Sea, which directly controls theinterest in the ACG project, has received funding and debt guarantees from Japan
National Oil Corporation (JNOC), as well as joint financing by a number of Japanesebanks, including the Japan Bank for International Cooperation. (The company’s capitalstands at ¥53.594 billion, with INPEX holding a 51% interest and JNOC 49%.) In April
2003, the Russian Federation’s Lukoil transferred its 10% interest in the ACG project toINPEX Southwest Caspian Sea.

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