Annual Report 2019Year ended March 31, 2019

About INPEX

INPEX is the largest oil and gas E&P Company inJapan. Together with its exploration,
development and production activities, theCompany currently is engaged in approximately
70 projects spread across more than 20 countries
worldwide.
Our Mission

We are committed to contributing to the creationof a brighter future for society through ourefforts to develop, produce and deliver energy
in a sustainable way.
Our Goal

We aim to become a leading energy company
serving an essential role in global society
by meeting the energy needs of Japanand countries around the world.

CONTENTS
02 INPEX Snapshot
10 Results and New Strategies
10

Message from the Representative Directors

12

Message from the President

20

Vision 2040 and Medium-term Business Plan
2018 – 2022

22

Financial and Operating Highlights

24

The Structure and Mechanism of Oil and Natural
Gas Exploration and Development

26 Project Overview
26

Segment Overview

28

Project Overview by Region

42 Sustainability and Governance42

Sustainability

46

Corporate Governance50

Directors, Audit Supervisory Board Members andExecutive Officers

53 Financial and Corporate Information
54

11-Year Financial Information

56

Background Information: Oil and Gas Accounting
Policies and Treatment

58

Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

64

Consolidated Financial Statements/
Notes to Consolidated Financial Statements

83

Independent Auditor’s Report84

Subsidiaries and Affiliates

86

Business Risks

94

Oil and Gas Reserves and Production Volume

97

Corporate Information

DISCLAIMER
Information contained in this Annual Report is not an offer or a solicitation of an
offer to buy or sell securities. You are requested to make investment decisions
using your own judgment.
Although the Company has made sufficient effort to ensure the accuracyof information provided herein, the Company assumes no responsibility forany damages or liabilities including, but not limited to, those due to incorrect
information or any other reason.

FORWARD-LOOKING STATEMENTS

INPEX announced details of its “Vision 2040: Delivering Tomorrow’s Energy Solutions” and “Medium-term Business Plan 2018-2022: Growth & Value Creation” inMay 2018. For an overview, please refer to on page 20-21 in this Annual Report
and the Company’s Web site for more information.

▶ https://www.inpex.co.jp/english/ir/strategy.html

This Annual Report includes forward-looking information that reflects the Company’s plans and expectations. Such forward - looking information is based on
the current assumptions and beliefs of the Company in light of the information
currently available to it, and involves known and unknown risks, uncertainties
and other factors. Such risks, uncertainties and other factors could cause theCompany’s actual results, performance, achievements or financial position to
be materially different from any future results, performance, achievements orfinancial position expressed or implied by such forward-looking information.
Such risks and uncertainties include, without limitations, fluctuations in thefollowing: the price of and demand for crude oil and natural gas; exchange rates; and the costs associated with exploration, development, production and otherrelated expenses.
The Company undertakes no obligation to publicly update or revise any
information in this Annual Report (including forward-looking information).

NOTES REGARDING FIGURES
Financial figures in this Annual Report have been basically rounded to thenearest unit (e.g., millions, billions) for convenience. The “Project Overview by
Region” section (starting on p. 28 basically describes the operating situation asof June 30, 2019. Figures in parentheses denote negative amounts. Natural gas
production volume for projects in production is not the volume at wellheads,
but corresponds to sales to buyers.
INPEX CORPORATION is listed on the First Section of the Tokyo Stock
Exchange under the securities code 1605. The Company is also included in the
Nikkei Stock Average (Nikkei 225) and the JPX-Nikkei Index 400 (JPX400).

INPEX Snapshot

2

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Sustainable Growth of
Oil and Natural Gas
E&P Activities

Results and New Strategies

Together with its exploration, development and production
activities, we are currently engaged in approximately 70
oil and natural gas projects spread across more than 20
countries worldwide, including large-scale projects such as
the Ichthys LNG Project in Australia, the Abadi LNG Projectin Indonesia, and the Abu Dhabi Oil Fields. In addition, we
possess the largest reserves and production volume of any
Japanese company.
In our core business, oil and natural gas E&P activities, weare aiming to grow into a top 10 international oil company by2040 in terms of production volume, reserves, profitability,
and technical capabilities.

Project Overview

Target for the Period until 2040

10

A top
international oil company
Oil and natural gas reserves(barrels of oil equivalent)

5.21

Sustainability and GovernanceTotal proved and probable reserves as of end-March 2019billion barrels

Oil and natural gas net production
volume per day (barrels of oil equivalent)
FY2019 (April 2018 – March 2019) average volume per day

424

thousand barrels
Financial and Corporate Information

Net income attributable to ownersof parent
FY2019 (April 2018 – March 2019)

¥

96.1

billionINPEX CORPORATION Annual Report 20193

INPEX Snapshot

Development of
Global Gas Value Chain
In Japan, we provide a stable supply of natural gas throughan approximately 1,500 km long natural gas pipeline network
and Naoetsu LNG Terminal located in Niigata Prefecture
which commenced operation in 2013. In addition, we are taking measures to develop a global gas value chain by developing gas demand in Asian and other growing markets as well
as by strengthening trading functions. Through these measures, we are aiming to be a key player in natural gas development and supply in Japan, as well as in Asia and Oceania
regions by 2040.

Target for the Period until 2040

key player

Be a
in natural gas development andsupply in Asia & Oceania
Natural gas sales volume in Japan
FY2019 (April 2018 – March 2019)

2.17
Develop Gas
Demandbillion m

in Asia and other growing markets

Globally

Strengthening
TradingFunctions
4

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Results and New Strategies

Project Overview

Sustainability and Governance

Financial and Corporate Information

5

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

6

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Reinforcement ofRenewable Energy
Initiatives
Results and New Strategies

To proactively address climate change and meet long-term
demand for renewable energy, we will accelerate the development of our renewable energy business. In addition todomestic solar power projects, we are currently engaged
in geothermal power generation businesses in Japan andIndonesia. In the future, INPEX intends to expand its participation in wind power generation and other areas, further
expanding our business, while also promoting technology
research and development related to greenhouse gas reduction. INPEX aims for renewable energy to account for 10%
of its project portfolio by 2040.

Project Overview

Target for the Period until 2040

10

% of project portfolio

Sustainability and GovernanceSarulla Geothermal Independent Power
Producer (IPP) Project in Indonesia
The world’s largest single-contract
geothermal power project

Total output approximately

330 MW(3 units total)

Active entry into the

INPEX CORPORATION Annual Report 2019

Financial and Corporate Information

Wind Power
Generation
Field
7

INPEX Snapshot

Developing CSRManagement and a
Dynamic Corporate
CultureWith the aim of sustainable energy development, we engage in CSR management that focuses on the 6 CSR material
issues. In the future, we will continue to strengthen our corporate governance, ensure thorough compliance, address
safety management and environmental preservation, contribute to the local community and solidify ESG initiatives
throughout our entire supply chain and build relationshipsof trust with our stakeholders to promote CSR management.
In addition, our promotion of continuous initiatives for stable energy supply and addressing climate change will contribute to the achievement of the SDGs related to our busi-

6 CSR MaterialIssuesGovernance, Compliance, HSE,
Local Communities, Climate Change,
Employees
Announced position paper:“Corporate
Position on
Climate Change”(Issued in December 2015, updated in July 2018)

8

INPEX CORPORATION Annual Report 2019

INPEX Snapshot
Results and New Strategies
Project Overview

Our stakeholders
Stockholders
andinvestors

Employees

Compliance

GovernanceNGOs

Our CSR
Material
IssuesLocal
Communities

Sustainability and Governance

Local
Communities

Customers

HSE

Employees

Business
partners

ClimateChangeFinancial and Corporate Information

Suppliers
andcontractors

Oil and gas
producingcountries

INPEX CORPORATION Annual Report 20199

Annual Report 2019: Message from the Representative Directors

10

INPEX CORPORATION Annual Report 2019

Toshiaki Kitamura

Takayuki Ueda

Representative Director
and Chairman

Representative Director,
President and CEO

INPEX Snapshot
Results and New Strategies

Our goal is to becomea leading energy company serving
an essential role in society bymeeting the energy demand ofJapan and the world.

Sustainability and Governance
Financial and Corporate Information

Representative Director
and Chairman

Project Overview

The operating environment for INPEX is currently characterized by a global
expansion in the middle-class population and expectations for further economic
growth, particularly in emerging economies. Given these conditions, we believe
demand for energy will likely continue to grow. On the other hand, the international community is increasingly focused on efforts to reduce its carbon footprint
and respond to climate change, leading us to expect a long-term and substantial
increase in demand for natural gas, which emits less CO than other fossil fuels, aswell as for renewable energy that has a relatively small environmental footprint.
Global LNG transaction volume in 2018 reached about 313 million tons, up about
30% over the past five years. Amid intensifying competition around the world
to secure energy sources, particularly LNG, it is vital for Japan, which is almost
entirely dependent on imports, to secure a stable supply of energy and improve
its self-development ratio.
With a clear understanding of this operating environment, INPEX in May 2018created “Vision 2040”, the company’s long-term vision for the years leading up to
2040. Our goal is to become a leading energy company serving an essential rolein society, and in addition to our core business of oil and natural gas explorationand production, we are focused on the sustainable development, production,and supply of alternative energy solutions, including renewable energy, to meetthe energy needs of Japan and the world.
INPEX will continue to contribute to the creation of a sustainable society
through activities that help to resolve social issues, including by promoting initiatives that lower the carbon footprint of our business activities and measures that
effectively respond to climate change, while simultaneously taking action to
boost our self-development ratio in natural gas and oil, ensure a stable supply ofenergy, and adapt to expanding global demand for energy.
We will continue to conduct our business with a deep sense of responsibility
and with the goal of further improving corporate value and ask for the continued
support and understanding of all our stakeholders.
Representative Director,
President and CEO

INPEX CORPORATION Annual Report 201911

Annual Report 2019: Message from the President

Takayuki Ueda
Representative Director,
President and CEO

12

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Looking back on the past fiscal year
ended on March 31, 2019

annual average rate of ¥110.93. This was generally
flat compared to the average for the previous fiscal
year.
Lifted by the rise in oil prices, as well as the contribution to earnings from the Ichthys LNG Projectin Australia, where production commenced in July
2018, consolidated sales at INPEX improved 4.0%
compared to the previous fiscal year to ¥971.3 billion,
while operating income expanded 32.7% year on
year to ¥474.2 billion and recurring profit grew 34.1%
year on year to ¥519.2 billion. Net income attributable to owners of the parent was up a strong 138.1%
year on year to ¥96.1 billion, resulting in sales andprofit across the board rising on a year on year basis.
Net production volume (the total of crude oil andnatural gas, oil equivalent) decreased by 26 thousand barrels a day compared with the previous fiscal
year, to 424 thousand barrels of oil equivalent per
day (BOED). Proven reserves (the total of crude oiland natural gas, oil equivalent), which represents asource of future earnings, increased around 0.15
billion barrels of oil equivalent (BOE) compared withthe previous fiscal year-end, to roughly 4.01 billion
BOE as of March 31, 2019 (The total of proven andprobable reserves is approximately 5.21 billion BOE).
I am proud to see that we are making favorable
progress in meeting the quantitative and qualitative
targets in our Medium-term Business Plan 2018-2022,
as well as key project milestones, including commencement of production and shipments at the Ichthys LNG Project.
Through a resolution at the Ordinary General
Meeting of Shareholders held in June 2019, the company moved to revise its fiscal year from ending on
March 31 to ending on December 31. As a result, thecurrent fiscal year is scheduled to be a transitional,
nine-month accounting period from April 1, 2019 to
December 31, 2019.

Sustainability and Governance
Financial and Corporate Information

INPEX CORPORATION Annual Report 2019

Project Overview

Looking at the global business environment, it isclear to see that global energy demand is continuing
to expand amid ongoing economic growth, including in emerging economies. This has contributed toheightened competition to secure energy sources.
Moreover, with the international community focusedon answers to the issue of climate change, there are
growing calls to enact proactive measures aimed at
reducing greenhouse gas emissions and realize asociety with a low carbon footprint. While we expect
demand for oil to remain strong, we believe demand
for natural gas, which emits less CO than other fossil
fuels, and for renewable energy with a relatively
small environmental footprint, is likely to expand at
an even faster pace. The Japanese government’s
energy policy is focused on ensuring a stable supplyof energy and bolstering the country’s self-development ratio, though with the self-development ratioin fiscal 2018 at under 30%, there remains significant
room for improvement before the national target of
40% by 2030 can be met.
Turning to earnings at INPEX in the fiscal year
ended March 31, 2019, Brent crude, a benchmark
index for the company, stood at US$67 per barrel atthe beginning of the year and climbed at the startof October on growing concerns over a tightening
in supply and demand. While the price again moved
lower at the end of 2018, it again climbed after thestart of the new calendar year, and ended the fiscal
year at about US$68 per barrel. On this basis, averageannual Brent crude came in at US$70.86 per barrel,
up 22.5% compared with the previous fiscal year. As
far as foreign currency exchange rates are concerned, the yen traded against the U.S. dollar at an

Results and New Strategies

The Ichthys LNG Project has commenced
production and is now making
a contribution to earnings.
As INPEX enters this new stage,
we are moving steadily forward
toward meeting the targets outlined
in our Medium-term Business Plan.

13

Annual Report 2019: Message from the President

Medium-term Business Plan
2018–2022, based on Vision 2040:
initiatives and results
Our Medium-term business plan, covering fiscal
2018 through fiscal 2022, is based on Vision 2040,
our long-term vision for the company, and establishes three business targets for achievement: 1) sustainable growth in the upstream oil and natural gas E&P
activities; 2) development of a global gas value chain
business; and 3) reinforcement of renewable energy
initiatives. I would like to take this opportunity totalk about the progress we have achieved in meeting each of these goals.
① Sustainable growth in the upstream oil andnatural gas E&P activities
INPEX is currently developing approximately 70 oil
and natural gas projects in more than 20 different
countries around the world. In the fiscal year ended
March 31, 2019, we commenced production andshipments at the Ichthys LNG Project in Australia,
which is the first large-scale LNG project operated
by a Japanese company. Marking a major turning
point for the company, the project started gas production in July 2018, and commenced the first ship-

ment of LNG in October without incident.
Ichthys LNG Project is scheduled to produce
approximately 8.9 million tons of LNG and approximately 1.65 million tons of LPG per year, along withapproximately 100,000 barrels of condensate per
day at peak. Starting from a point where water
depth is about 200 meters, drilling extends to about
3,000–4,000 meters below the sea floor. Natural gas
retrieved from this drilling is then sent to Darwin,
Australia via an 890 kilometers long gas export pipeline. It is then converted into LNG at the onshore gasliquefaction facility. It is important that the project
advance carefully and steadily on the way to plateau
production, as the huge and complex production
facility is essentially one system and a breakdown at
any point effectively grounds the entire operation.
Production ramp ups have proceeded in line withexpectations, and we expect to reach plateau production in roughly two to three years after the commencement of LNG production. That being said, if
there are fewer problems than initially expected,
and the scope of issues we encounter is relatively
small, there is a potential that production ramp ups
could be accelerated. The project shipped 55 LNG
cargoes from Darwin by the end of June 2019, andwe target an average of seven to eight cargo shipments per month in fiscal 2019, with about 120 LNG

Ichthys LNG Project
LNG carrier (Pacific Breeze) arriving at the onshore gas liquefaction plant in Darwin

14

INPEX CORPORATION Annual Report 2019

INPEX Snapshot
Results and New Strategies

INPEX receiving approval of revised plan of developmentfrom the Indonesian authorities in the presence of Joko Widodo,
President of the Republic of Indonesia

Project Overview

United Arab Emirates (UAE), we are working to
improve production capacity in each of the oil fields
in the Abu Dhabi Onshore Concession and the Abu
Dhabi Offshore Oil Fields, where INPEX owns participating interests. In the Lower Zakum Oil Field, INPEX
is currently leading development activities in closealignment with ADNOC toward increasing the oilfield’s production capacity to 450,000 barrels perday. In Abu Dhabi Onshore Concession, INPEX andits partners are in the process of further developing
the fields to achieve a production capacity of 2 million barrels per day by the end of 2020.
The Prelude FLNG Project in Australia is a project
involving developing the gas field and separating
and liquefying the condensate as well as gas produced from offshore wells at a floating liquefied natural gas (FLNG) facility. The products will then be
directly loaded from the FLNG facility onto tankers
and shipped in sequence. The project commenced
production from a production well in December
2018, with condensate shipments beginning inMarch 2019 and LNG shipments commencing shortly afterward in June of the same year.
The Kashagan Oil Field Project in the Offshore
North Caspian Sea Contract Area, located in Kazakhstan’s territorial waters, began shipping crude oil in
2016. With a focus on maintaining safety moving
forward, we are targeting to maintain stable production at the rate of 370,000 barrels per day at an earlystage.
In September 2017, INPEX and its partners
entered into an agreement with the State Oil Com-

Sustainability and Governancecargoes on an annual basis once plateau production
is reached.
Abadi LNG Project in Indonesia is the firstlarge-scale integrated LNG development project
operated by INPEX in Indonesia and follows on fromthe INPEX-operated Ichthys LNG Project in Australia.
A Pre-FEED work, based on an onshore LNG development scheme envisioning annual production
capacity of 9.5 million tons, was completed in October 2018. Based on the results of the Pre-FEED work,
we submitted a revised development plan to theIndonesian authorities in June 2019 and received theapproval in July, 2019. Alongside the approval of therevised development plan, the Indonesian authorities also approved a 20-year extension of the production sharing contract (PSC) and our application
for a seven-year additional time allocation, extending the term of the PSC until 2055. By receiving a
notification from the Indonesian authorities, theproject’s development concept has been changed
from a floating LNG scheme to an onshore LNG
scheme. However, following constructive discussions with the Indonesian authorities, we are confident that economics of the project based on therevised development plan are now sufficiently
strong given the PSC term until 2055 and sufficientfinancial conditions have been secured. INPEX aims
to make the project competitive and will continue
to work closely with its partner Shell, toward the
production startup scheduled in the latter half of the2020s and to begin necessary preparations to commence FEED (Front End Engineering Design) work.
Within the Abu Dhabi Oil Fields Project in the

Financial and Corporate Information

Abadi LNG Project drilling ship

INPEX CORPORATION Annual Report 201915

Annual Report 2019: Message from the President

pany of the Azerbaijan Republic extending the duration of the Production Sharing Agreement (PSA) for
the ACG oil field, also located on the Caspian Sea, by
25 years to December 31, 2049. The revised PSA
allowing an extension came into force in January
2018. In April 2019, we made our final investment
decision on further development at the ACG Oil
Fields, including in regard to a new platform toexpand the development area.
INPEX was able to acquire new participatinginterests and exploration projects in fiscal 2018. The
company was awarded two exploration licenses in
Norway (PL1027, located in the western Barents Sea
offshore region and PL1016, located in the northern
Norwegian Sea offshore region). The areas coveredby the licenses were recently discovered to containhundreds of millions of barrels of oil and gas. INPEX
was also awarded rights for the Onshore Block 4 in
Abu Dhabi following a successful bid in March, 2019.
In March 2019, the company reached an agreementwith GulfTex Energy to acquire multiple tight oil
development and production assets in the Eagle
Ford shale region in the state of Texas, the UnitedStates. This marks the company’s first tight oil development and production project in the US. Excluding
a portion of the project assets, INPEX will act as theoperator on the project.

16

INPEX CORPORATION Annual Report 2019

② Developing a global gas value chain
In Japan, the natural gas produced from the Minami-Nagaoka Gas Field in Niigata Prefecture since
1984, as well as the LNG from overseas received at
the Naoetsu LNG terminal in Niigata Prefecture,
which commenced operations in December 2013,
are transported through INPEX’s trunk pipeline network of approximately 1,500 km stretching acrossthe Kanto-Koshinetsu and Hokuriku regions, andsold to customers including city gas companies
and large-scale factories along the aforementioned
network. In the fiscal year ended in March 2019, we
received the first LNG cargo from the Ichthys LNG
Project at the Naoetsu LNG Terminal. The arrival of
LNG produced from the Ichthys LNG project at the
Terminal is a significant milestone for INPEX, as itorganically links the company’s LNG development
business overseas to its gas distribution network inJapan. By reaching this milestone, INPEX has taken asignificant step toward the development of a global
gas value chain business. We believe this represents
a significant step forward for the company in termsof contributing to the stable supply of energy inJapan.
Natural gas is used not only as a raw material forheating, but can be used in a wide variety of applications, including as a raw material for chemical products, fuel for natural gas-fired power plants, and fuelfor home-power generation and cogeneration. We
aim to lift annual domestic gas volume supply from
2.2 billion cubic meters at present to 2.5 billion cubic
meters by fiscal 2022. In addition to developing newcustomers in the conventional manner, we are also
focused on demand creation, including in next-generation energy systems for smart cities and local
production, local consumption models, and target
a further strengthening of our global gas value chain
with an eye toward participating in mid and downstream businesses not only in Japan, but in overseas
locations such as Asia. One of the steps towardachieving this involves studying the LNG bunkering(suppling LNG fuel for use by ships) business. In December 2018, the company signed its first LNG bunkering partnership deal with an ADNOC subsidiaryin the UAE. We believe the UAE offers many potential business opportunities, as the country is not only
a major LNG production and export base, but is strategically located as a bunkering hub. We will also
pursue an expansion in the bunkering network inother regions, such as Southeast Asia.

INPEX Snapshot

Idemitsu Kosan and Mitsui Oil Exploration in Oyasu,
Akita Prefecture, where we commenced environmental assessment operations for the full-scale commercialization of geothermal power generation in
December 2018. We intend to continue our study on
the construction of geothermal power plants withthe goal of commercialization from 2024. Finally, weare preparing for joint geothermal resource researchin the Azuma and Adatara regions of Fukushima Prefecture.

Results and New Strategies

Outlook for the fiscal term ending
December 31, 2019
We are making favorable progress toward achieving
these three business targets, and expect to achieve
our milestone for the fiscal term ending on December 31, 2019, the second year of our Medium-term
Business plan. In regard to ensuring sustainablegrowth in the upstream oil and natural gas businesses, the first important step is to steadily and quickly
ramp up production and shipments at the Ichthys
LNG Project. For the Abadi LNG Project, we are working toward a swift FID, and will continue to work
toward bolstering production capacity in Abu
Dhabi. Moreover, we will continue to study explora-

Project Overview③ Bolstering our efforts in renewable energies
as a third pillar for growth
We implemented reorganization in June 2018 withthe goal of further strengthening our efforts todevelop the electric power and renewable energy
businesses. In particular, we are expanding the existing unit system to form a new renewable energy
and power business, and intend to enhance humanresources and the scope of the business in linewith the pace of development moving forward. In
regard to renewable energy, we are developing theSarulla Geothermal IPP Project, which involves theoperation of the world’s largest geothermal power
plant under a single development contract in the
Sarulla district of Sumatra, Indonesia. The first unit
commenced commercial operations in March 2017,
followed by the second unit in October of the same
year, and the third unit in May 2018. Total output
is now 330MW, which is enough energy to power
approximately 2.1 million households in Indonesia.
The plant is expected to supply electricity to Indonesia’s government-owned electricity company forthe next 30 years.
In Japan, we are continuing our research in Hokkaido and Akita Prefecture so that we can advancecommercialization of geothermal power generation.
In particular, we are conducting joint research with

Medium-term Business Plan 2018–2022 progress and FY 2019/12 outlook

FY 2019/12 Initiatives
and Outlook

FY 2022/12 Targets(First year in the Medium-term
Business Plan)
April 2018–March 2019

(Second year in the Medium-term
Business Plan)
April 2019–December 2019
(Nine-month accounting period)(Final year in the Medium-term
Business Plan)

Assumptions:crude oil price (Brent)and exchange rate

US$70.86/bbl¥110.93/US$

US$65/bbl¥110/US$

US$60/bbl¥110/US$

Investment for growth¥488.4 billion(nine-month accounting period)¥285.0 billion

Around ¥1,700 billion

Net sales¥971.3 billion¥958.0 billion

Around ¥1,300 billion

Net income attributableto owners of parent¥96.1 billion¥90.0 billion

Around ¥150.0 billion

Net production volume

424 KBOED

577 KBOED

700 KBOED

Shareholder returns(End of 2Q: ¥9 + End of FY: ¥15(Ordinary dividend ¥9,Commemorative dividend ¥6))

Payout ratio: 36.5%

Annual dividend:¥24 per share(End of 2Q: ¥12 + End of FY: ¥12)

Payout ratio: 38.9%

for the 5-year period

Financial and Corporate Information

Annual dividend:¥24 per share

Sustainability and Governance

FY 2019/03 Results• Maintain base dividend not
falling below ¥24 per share• Enhance annual dividends instages by increasing thedividend per share inaccordance with the growth of
the Company’s financial results• Payout ratio: 30% or higher

Note: In accordance with a proposal resolved at the Ordinary General Meeting of Shareholders held in June 2019, the Company's accounting period (fiscal year closing date) has beenchanged from March 31 to December 31.

INPEX CORPORATION Annual Report 201917

Annual Report 2019: Message from the President

tion activity in priority areas such as Norway and the
Gulf of Mexico. We expect net production in thefiscal term ending December 31, 2019 to rise to arecord high of 577,000 barrels per day (crude oil
equivalent) given that the ramping up of production
at the Prelude FLNG Project and the Ichthys LNG
Project.
In terms of building a global gas value chain, we
expect domestic natural gas sales volume to reach
2.1 billion m, 4% higher compared to Apr–Dec 2018.
In overseas, we will continue to conduct marketing
activities aimed at reaching an FID for the Abadi LNG
Project while working toward commercialization inline with our goal of creating natural gas demand.
In terms of bolstering our efforts in renewableenergy, we believe it is vital to focus on medium- tolong-term strategies as part of our efforts to address
climate change. We aim to enhance our research anddevelopment in renewable energy-related technologies, further promote development of the geothermal power business, and aggressively move to enter
the wind power generation business.
Turning to shareholder returns, the annual dividend for the fiscal year ended March 31, 2019 was¥24 per share, including an interim dividend pershare of ¥9 and a year-end dividend per share of ¥15,
which included a commemorative dividend of ¥6
per share on the commencement of production andshipments at the Ichthys LNG Project and the regular
year-end dividend of ¥9. For the fiscal term ending
on December 31, 2019, a nine-month fiscal term, wetarget interim and year-end dividends of ¥12 pershare in line with shareholder returns policy outlined in the Medium-term Business Plan, resulting in
the annual dividend remaining at ¥24 per share.

Recognizing short-term and medium- tolong-term opportunities and risks
Amid global trends such as an ongoing increase inenergy demand, as well as growing demand forrenewable energy in particular and a focus on
low-carbon footprint, INPEX faces a number of risks
and opportunities in its business.
Given the uncertain outlook for the global economy, geopolitical risks, including tension in the Middle East and growing trade friction between China
and the US, are having a strong impact on the international oil and gas markets, and the INPEX advisorycommittee has also devoted considerable discussion
in regard to the impact of geopolitical risks on theinternational oil and gas markets.
When looking at primary energy demand on a
global basis over the long term, we expect oil andgas, our core products, to continue to occupy thelion’s share of demand through 2040. That being
said, CAGR for renewable energy since 2016 stands
at 7%, and the International Energy Agency (IEA)
estimates market for renewable energy will growfivefold from 2016 to 2040. While promoting a shift
in energy consumption to natural gas, which has arelatively light environmental footprint, we are also
focused on bolstering the renewable energy projectto account for 10 % of our project portfolio over thelong term in line with our goal of promoting
low-carbon footprint in our companywide businessactivities. To achieve low carbon footprint, we will
also exercise proper management of greenhousegas emissions as a result of our business activities
and proceed with technological development forthe practical application of carbon capture and storage (CCS) to capture and sequester GHG emissions.

Organizational reform andstrengthening corporate governance tobetter move into new growth areas
The INPEX Group will continue to focus on creating
economic and social value through initiatives aimed
Ichthys LNG Project
Onshore liquefaction plant in Darwin

18

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

energy industry, as well as in the legal, financial andother specialty fields and as seasoned leaders in academia or the corporate world who come to us witha wealth of experience and knowledge. The Boardof Directors, including these members, undergoes
an annual evaluation to ensure that it is working as
intended, as well as an evaluation to assess continued its effectiveness in addressing issues and implementing measures for improvement. The fiscal 2018
evaluation showed an improvement in effectiveness, through with a focus on strengthening cooperation between the Board of Directors and the Nomination and Compensation Advisory Committee, as
well as deepening discussion on important items,
the company continues to work toward further
improvement.

Results and New Strategies

Now that the fruit of our efforts with the Ichthys LNG
Project are becoming apparent, we believe INPEX ismoving into a new management stage. With thisunderstanding, all of the employees and executives
are working with the deepest sense of responsibility
and we ask for the continued support and understanding of all our stakeholders.

Project Overview

2019/7
Representative Director,
President and CEO

Sustainability and Governance
Financial and Corporate Information

at resolving social issues, including by advancing
low carbon footprint in our business activities andresponding effectively to climate change, while
simultaneously contributing to an increase in Japan’s
self-development ratio in oil and gas and meeting
growing global energy demand. We believe these
efforts will lead to an ongoing improvement in corporate value and the maximization of shareholder
value.
To address climate change, we are strengthening
our governance system in line with our basic policies
so that we can proactively contribute to the formation of a low-carbon society meeting the long-termgoals of the Paris Agreement. We are also establishing a system for the execution of business, assessing
risks and opportunities as well as our business strategies, and advancing initiatives in a number of areas
aimed at managing emissions. Our new Medium-term Business Plan also states that the company’s efforts and information disclosures will be inline with the recommendations of the Task Force on
Climate-related Financial Disclosure (TCFD).
Our long-term vision states that the goal of INPEX
is to become a leading energy company serving
an essential role in society, and our Medium-term
Business Plan forwards strategies aimed at achieving
this. In order to further promote the goals of the Medium-term Business Plan, we implemented organizational reform in June 2019, bolstered the explorationand M&A systems in the upstream oil and natural
gas businesses, enhanced project management andpromotion systems, and advanced the building of efficient promotion systems in the overseas upstream
oil and natural gas businesses. In addition, INPEX has
actively been promoting diversity in its organization,and has received considerable praise for its efforts. In
fiscal 2018, the company was selected by the Tokyo
Stock Exchange as a “Nadeshiko brand” for its efforts
in promoting the careers of women.
As the external environment undergoes rapidchange, the content of our business continues toexpand. Of course, corporate governance is essential
to our ability to appropriately and rapidly adjust tothese changes. Our Board of Directors includes eight
directors appointed from within the company. These
members have a deep familiarity of the company’s
operations as well as international experience and afirm understanding of the technology and knowhow of the business. The Board also includes fiveoutside directors who are able to offer objective perspectives differing from those held among directors
recruited from within the company. These outside
directors have served as leaders in the resource and

INPEX CORPORATION Annual Report 201919

“Vision 2040” and “Medium-term Business Plan 2018 – 2022”
Although demand for energy continues to grow all over the world, the long-term business environment is changing with emphasis on addressing climate change and transitioning to a low-carbon society. In May 2018, we established “Vision 2040: Delivering
Tomorrow’s Energy Solutions,” our long-term vision up to 2040, and formulated “Medium-term Business Plan 2018 – 2022:
Growth & Value Creation,” a shorter 5-year plan continuing steps toward the achievement of this vision.

Medium-term Business Plan 2018 – 2022: Growth & Value Creation(US$60/bbl and ¥110/US$1)

Cash Allocation for the Five-Year Period

Allocate cash flow from operations and others in order of priority to (1) Debt Reduction, (2) Shareholder Returns, and (3) Investment for Growth
Cash Allocation for the Five-Year Period of the Medium-term Business Plan¹▶ About ¥1.7 trillion for upstream, global gas value chain and renewable energy

Investment
3 for Growth¥1.7 trillion

Cash Flow fromOperations
before Exploration
Expenditure¥2.5 trillion

Others²▶ About 30% for new projects including exploration▶ Disciplined investment, emphasizing value and volume, as well as a strategic fit,
while monitoring oil prices and the ramp-up of the Ichthys LNG Project2

Shareholder
Returns▶ Enhance shareholder returns (For details, see the shareholder returns section below.)1

Debt
Reduction▶ Scheduled repayment of Ichthys LNG project finance loans, etc.

Cash-inCash-out

1. Figures are for guidance only and are inclusive of the Ichthys downstream JV. Subject to adjustment as necessary based on criteria such as crude oil prices, investment
opportunities, the allocation of shareholder returns, etc.
2. Including asset sales proceeds, equity capital from Japan Oil Gas and Metals National Corporation (JOGMEC), etc.

Major Business Initiatives
Eridu Oil Field (Block 10 in Iraq)

NorwayE&P Business targets for FY2022

Kashagan Oil Field

Minami-Nagaoka Gas Field

Net production
volume700 KBOED³
in FY2022

RRR⁴(3-year average)

Maintain 100%or higher
during the 5 years

Production cost
per BOE⁵

Reduce to
US$5/bbl

ACG Oil Fields
Abadi LNG ProjectPrelude FLNG ProjectJapan

Gulf of Mexico

Abu DhabiIndonesia
Abu Dhabi Offshore andOnshore Oil Fields
Northwest Shelfof Australia

Australia

Core business areas

Ichthys LNG Project

Priority exploration areas

Shareholder Returns

Financial Targets⁶(US$60/bbl and ¥110/US$1)

Net sales

FY2022 Targets
Around ¥1,300 billion

Net income attributableto owners of parent

Around ¥150 billion

Cash flow from operations

Around ¥450 billion

ROE
●

●

Maintain financial strength (target an equity ratio of 50% or
higher)
Maintain financial and corporate resilience even if crude oil
prices drop to US$50/bbl

INPEX CORPORATION Annual Report 2019

During the Medium-term Business Plan period, shareholder returns policy will
be as follows:● Maintain dividends not falling below ¥24 per share● Enhance annual dividends in stages increasing the dividend per share inaccordance with the growth of the Company’s financial results● Payout ratio of 30% or higher¥6(Commemorative
dividend)

5% or higher

6. Crude oil price assumption is per one barrel of Brent crude oil; the exchange rate
assumption is per U.S. dollar. Targets are on a financial accounting basis. Sensitivityof FY2022 net income attributable to owners of parent to the crude oil price andexchange rate is approximately +¥8.0 billion (–¥8.0 billion) from a US$1/bbl increase(decrease) in the Brent crude oil price and approximately +¥2.0 billion (–¥2.0 billion)
from a ¥1/US$1 depreciation (appreciation). See page 5 of the “Medium-term
Business Plan 2018 – 2022” presentation materials (https://www.inpex.co.jp/company/pdf/business_plan.pdf) for other notes20

3. Barrels of oil equivalent
4. Reserve Replacement Ratio = Proved reserves
increase including acquisition / Production
during the period
5. Excluding royalties

Major oil and natural gas
E&P activities¥24(Initial forecast)

¥18

¥18

(Ordinary dividend)

FY2017FY2018⁷

FY2019(9-month accounting period)

FY2020

FY2021

FY2022

Period of the Medium-term Business Plan
7. In fiscal 2018, the year-end dividend payment per share was as follows: ¥9ordinary dividend payment with an added ¥6 dividend payment to commemorate the start-up and shipment of the Ichthys LNG Project for a total of ¥15.
Combined with a mid-term dividend payment of ¥9 per share, the total
dividend payment for the year was ¥24 per share.

INPEX Snapshot

Vision 2040: Delivering Tomorrow’s Energy Solutions

Vision 2040

10

A

A top
international oil company

key player

Reinforcement ofRenewable Energy
Initiatives

10

in

%
of project portfolio

natural gas development
and supply in Asia & Oceania

Growth of volume and value

Volume:Aspire to achieve production
volume of 1 million BOED
Value:
Significantly increase net income
and cash flow from operations,improve capital efficiency●

Expand domestic gas yearly supply
volume to more than 3 billion m●Proactively address climatechange●Develop gas demand in Asia andother growing markets●●

Maintain and strengthen supply
and demand management andtrading functions

Expand its participation in wind
power generation and other areas
in addition to the geothermal
power generation business, whichdraws on synergies with our oiland natural gas E&P activities●

Maximize value for upstream
natural gas interests●

Promote technological researchand development related togreenhouse gas reduction

Project Overview●

Development of a
Global Gas Value
Chain

Results and New Strategies

Sustainable Growth of
Oil and Natural Gas
E&P Activities

INPEX’s Strengths
Technical
capabilities tocarry out
projects

A highlycompetitive
project
portfolio

Partnerships
withoil-producing
countries

Diversehuman
resources

Sustainability and Governance

Steadygrowth in cash
flow and a solidand stablefinancial baseSupportfrom thegovernmentof Japan

Reduce carbon footprint
Financial and Corporate Information

Continuously and sustainably
increase corporate value
For more details about “Vision 2040: Delivering Tomorrow’s
Energy Solutions” and “Medium-term Business Plan 2018 –
2022: Growth & Value Creation,” see the Company website.

▶https://www.inpex.co.jp/english/ir/strategy.html

INPEX CORPORATION Annual Report 201921

Financial and Operating Highlights (Five-Year Comparative Graphs)
As of or years ended March 31. Please refer to p. 55 for notes of major indices.

Profitability Indices
Net Sales (by product)

Net Income Attributable to Owners of Parent, EBIDAX (Earnings before
interest, depreciation and amortization, and exploration)■ Crude oil ■ Natural gas ■ Other (¥ billion)■ Net income attributable to owners of parent ■ EBIDAX (¥ billion)

1,334.6

1,171.2

1,009.6

874.4

971.4

183.7
402.2

20.4
455.4

18.9
421.9

13,6
316.8

730.4

2015

679.2

2016

15.3
208.1

14.6
242.6

858.8

2014

933.7

710.3

617.2

2017

2018

77.8
303.1

16.8
217.9

96.1

40.4

46.2
229.3

285.4

227.2

18.0
170.7
782.7

2019

2014

2015

2016

2017

2018

2019

Efficiency IndicesStability Indices

Return on Equity (ROE)

Net Assets Excluding Non-Controlling Interests, Equity Ratio,
Net Debt, Net Debt/Net Total Capital Employed● ROE (%)■ Net assets excluding non-controlling interests ■ Net debt (¥ billion)● Equity ratio ● Net debt/Net total capital employed (%)

2,791.1
69.1

7.0

3,066.7

1.6
0.6

2015

68.3

68.6

-472.2-239.3

29.6

422.5

1.4

2017

2018

2019

62.7
21.7

11.8

0.9
-16.8

2016

3,006.5

2,916.7

67.1

3.2

2.7

2,943.2

68.2-725.3

2014

2,932.9

901.5

-8.1

-31.9
2014

2015

2016

2017

2018

2019

Performance Indices
Cash Dividend per Share, Payout Ratio

Price Earnings Ratio (PER), Price Book-Value Ratio (PBR)■ Cash dividend per share (2nd quarter end)
■ Cash dividend per share (Fiscal year-end) (Yen) ● Payout ratio (%)● PER ● PBR (Times)

18.00

18.00

18.00

18.00

18.00

74.3

24.00

47.6

15.00
9.00

9.00

9.00
156.7

9.00

9.00

9.00

9.00

9.00

9.00

9.00
65.1

14.3
2014

56.9

33.8
2015

2016

2017

9.00
36.5

2018

2019

Note: Cash dividend per share is retroactively adjusted for a stock split at a ratio of 1:400
of common stock on October 1, 2013. Cash dividend per share data for each fiscal
year is after retroactively adjusting to account for the impact of the stock split.

22

INPEX CORPORATION Annual Report 2019

34.6

24.9

10.6

16.0

0.7

0.6

0.4

0.5

0.7

0.5

2014

2015

2016

2017

2018

2019

INPEX Snapshot

Reserve/Production Indices
Net Proved Reserves (by product), Reserve Replacement Ratio (3-year average)

Net Proved and Probable Reserves, Reserves-to-Production Ratio■ Crude oil ■ Natural gas (Million boe)
● Reserve replacement ratio (3-year average) (%)■ Proved reserves ■ Probable reserves (Million boe)
● Reserves (proved + probable) – to – production ratio● Proved reserves-to-production ratio (Years)

2,532

2,434

3,264

370

3,304

3,857
1,110
362

1,094

1,221

2,864

246
2,210

2,143

30.2

1,610
27.2

246

100

2015

2016

2017

2018

2019

2,532

2,434

17.1

16.4

2014

2015

408

164

245

7.6

5.9

9.5
2015

2016

2017

23.5

17.4

2017

2018

2019

514

521

450

424

173
121

165
348

329

121
303

243

9.2

7.7

5.7

5.9

2014

4,010
25.9

Sustainability and Governance

15.7

3,857
3,304
24.7

17.4

339
16.9

32.3

5,212
1,202
33.7

■ Crude oil ■ Natural gas (Thousand boed)

409

10.9

1,389

3,264

175

11.7

1,443

26.4

2016

5,300

Net Production (by product, barrels of oil equivalents)● Average production cost per boe produced (Excluding royalty)● Exploration and development cost per boe (3-year average) (US$/boe)

58.2

4,693

Project Overview

Average Expenses per BOE Produced, Exploration and Development Cost per
BOE (3-year average)

4,970
1,705

1,213

1,278

2014

4,044

1,945
2,747

1,254

4,477

Results and New Strategies

1,121
321

4,010
1,146

2018

2019

2014

2015

2016

2017

2018

2019

Environment Indices
Exploration and Appraisal Success Ratio (3-year average), Number ofExploratory and Appraisal Wells

Volume of Water Sources Used, Total GHG Emissions● Volume of water sources used (Thousand m)● Total GHG emissions (Thousand t-CO)● Exploration success ratio (3-year average) (%)■ Number of exploratory and appraisal wells (Number)

59.5

60.7

15
52.9

13
45.3

43.8

650

10

9

2016

2017

2018

791
377

2019

2014

2015

584

1,994

1,373

21.0

2015

605
2,006

7

2014

Financial and Corporate Information

15

5,051

2016

1,184

1,202

1,138

2017

2018

2019

Note: While figures up to the fiscal year ended March 31, 2016 includes contractor data,
data from the fiscal year ended March 31, 2017 is for the Company only.

INPEX CORPORATION Annual Report 201923

The Structure and Mechanism of
Oil and Natural Gas Exploration and Development

Acquisition of Blocks
We collect extensive information on legal
system and country risks related to areasin which oil and natural gas are expected
to exist. We then apply and bid for mining
rights and/or exploration and development rights and enter into a contract for
exploration and development.

Signing ceremony of a contract

Marketing
There are many methods for Marketing
crude oil linked to spot prices (market prices established one time per transaction),
the spot prices themselves being mainly
decided based on crude oil, which has
become the transaction benchmark. Representative crude oil spot prices are thosequoted for Middle East Dubai crude, North
Sea Brent crude and West Texas Intermediate (WTI) from the United States, to namebut a few.
In contrast, because projects characteristically require large-scale investment,
in many cases sales of liquefied naturalgas (LNG) result from long-term sale andpurchase contracts concluded from bothproducers and buyers.

The business activities of the oil and gas industry can be envisioned as
the flow of a river. The upstream consists of development and production of oil and natural gas. The midstream is where products are transported. The downstream refers to refining and sales. Our mainstay
business is to handle operations in the upstream including the exploration, production and Marketing of crude oil and natural gas. As shownin the business flow on this page, upstream business activities can befurther classified into the acquisition of blocks, exploration, appraisal,development, production and sales.

Where do crude oil and natural gas come from?
Crude oil and natural gas are thought to originate from organic
matter, such as the remains of once-living organisms that accumulated at the bottom of seas and lakes, that was then subjected to
extreme heat and pressure underground. Crude oil and natural
gas that have formed deep underground are lighter than the waterin the earth, allowing them to gradually rise to the surface overa long period of time. If the crude oil and natural gas encounterhighly dense geological formations on the way to the surface,
however, deposits form that become oil and gas fields.

Production
The extracted oil and natural gas are refined and processed. After separating oil
and removing impurities (e.g., carbon gas,hydrogen), we ship natural gas that canbe used as a product.

LNG tanker

24

INPEX CORPORATION Annual Report 2019

GeophysicalsurveysINPEX Snapshot

Exploration
Results and New Strategies

In addition to geological surveys, we utilize
geophysical surveys conducted throughsatellite images and seismic waves toassess the potential subsurface accumulations of oil and natural gas. Furthermore,
we drill exploratory wells to confirm thepresence of oil and gas. The bit, a special
drill attached to the tip of the pipe, drills
through hard rock while digging into theground.

Major oil and natural gas producing regions
Project Overview

Drilling of appraisal wells

Appraisal

Sustainability and GovernanceOnce the presence of oil and natural gas
has been confirmed, we drill appraisal wells
to assess the extent of the oil and gas fields
and to evaluate the amount of reserves.
In addition, we make comprehensive judgments regarding the commercial viabilityof the fields.

Development

LNG plant

Financial and Corporate Information

After a final investment decision (FID) has
been made, steps are taken to construct
the necessary facilities to engage in crude
oil and natural gas production and shipment. This includes facilities that separate
resources into their liquid and gaseousstates to remove impurities and pipelines
to facilitate transportation. In addition, thedrilling of production wells is undertaken
to extract crude oil and natural gas.
Drilling ofproduction wells

INPEX CORPORATION Annual Report 201925

Segment Overview

Eurasia

Fiscal year ended March 31, 2019
Net sales(¥ million)
Operatingincome(¥ million)

For more details see P. 34

116,719
31,406328
51

Proved reserves(million BOE)
Net production(thousand BOE)

Oslo Office(Norway)

London Office

Nur-Sultan Office(U.K.)(Kazakhstan)Tokyo Head Office

Abu Dhabi Office(United Arab Emirates)

Asia &
Oceania

Singapore Office(Singapore)

For more details see P. 28

Jakarta Office(Indonesia)

MiddleEast &
AfricaFor more details see P. 36

Darwin Office(Australia)

Fiscal year ended March 31, 2019
Net sales(¥ million)
Operatingincome(¥ million)

614,420
412,064
2,349
231

Proved reserves(million BOE)
Net production(thousand BOE)

26

INPEX CORPORATION Annual Report 2019

Perth Office(Australia)

INPEX Snapshot

Fiscal year ended March 31, 2019
Net sales(¥ million)

Results and New Strategies

Operatingincome(¥ million)

140,311
29,210155
28

Proved reserves(million BOE)

Japan

Net production(thousand BOE)

For more details see P. 40

Net sales(¥ million)
Operatingincome(¥ million)

Net production(thousand BOE)

96,441
27,336
1,174
94(U.S.A.)

Caracas Office(Venezuela)

Sustainability and Governance

Proved reserves(million BOE)

Fiscal year ended March 31, 2019
Net sales(¥ million)

Proved reserves(million BOE)
Net production(thousand BOE)

8,308
8,751
5
20

Rio de Janeiro Office(Brazil)Financial and Corporate Information

Operating loss(¥ million)

Americas

Project Overview

Houston Office

Fiscal year ended March 31, 2019For more details see P. 38

INPEX CORPORATION Annual Report 201927

Project Overview by Region

Asia & Oceania
In the Asia and Oceania region, INPEX not only holds participating interests inthe large-scale Ichthys and Abadi LNG projects but also is actively advancing
about 20 exploration projects with growth potential.
THAILANDVIETNAMPHILIPPINESCAMBODIA

05-1b / 05-1c

MALAYSIA
PALAU

SK-10

Tangguh LNG Project (Berau Block)5

Singapore Office

P.32

SINGAPORE
4

Sebuku Block Ruby Gas Field

P.32

West Sebuku Block
1

Jakarta OfficeAbadi LNG Project OP

P.29

INDONESIA
Babar Selaru Block OP

Darwin Office

EP(A)318 OP
6

Van Gogh Oil Field, Ravensworth Oil Field
and Coniston Oil Field P.33

AUSTRALIA

WA-35-L & WA-55-L (Coniston Oil Field)
WA-35-L (Van Gogh Oil Field)
WA-43-L (Ravensworth Oil Field)
7

Bayu-Undan Project (JPDA03-12)

P.33

Kitan Oil Field (JPDA06-105)
WA-85-R
WA-58-R
WA-57-R

JPDA11-106
WA-74-R
AC/P36 OP

Perth Office

In production
Under development
Preparation for development
Under exploration
OP Operator project

28

INPEX CORPORATION Annual Report 2019WA-274-P

WA-343-P OP

WA-81-R

WA-56-R OP

WA-79-R
WA-84-R
WA-80-R
WA-86-R
WA-533-P
WA-281-P

3 Prelude FLNG Project

P.31(WA-44-L)

WA-285-P OP
WA-494-P OP
2 Ichthys LNG Project(WA-50-L/WA-51-L)

WA-532-P

OP

P.30

INPEX Snapshot

1 Abadi LNG Project
regard to securing economic efficiencies,and conducted Pre-FEED work based on
an onshore LNG development scheme
assuming annual LNG production capacityof 9.5 million tons from March to October
2018. INPEX submitted a revised Plan ofDevelopment and received the approval
from the Indonesian authorities in July
2019. INPEX will undertake FEED (Front End
Engineering Design) work, aiming for the
project’s production startup in the latter
half of the 2020s.

INDONESIA
Arafura Sea

Abadi Gas Field

Timor Sea

Project Overview

of 2.5 million tons, and from November
2012 to November 2014, INPEX undertook
SURF (subsea, umbilical, riser and flowline)
and FLNG FEED work.
INPEX drilled three more appraisal
wells in 2013 and 2014 with the aim of
expanding the volume of recoverable
reserves, confirming a greater volume ofnatural gas reserves that were certified
by the authorities.
Having revised its concept selection
studies to factor in this increased volumeof reserves, INPEX decided it would be
optimal to center development on alarge-scale FLNG. The Company submitted
a revised plan for the development basedon an FLNG plant with an annual LNG
processing capacity of 7.5 million tons to
the authorities in September 2015. In April
2016, however, the Company received
a notification from the authorities instructing it to re-propose a plan of development
based on onshore LNG. The Company subsequently entered into constructive discussions with the authorities, including inResults and New Strategies

The Abadi LNG Project is an LNG projectbased on an onshore LNG development
scheme that INPEX as Operator is preparing for development alongside Shell in
Masela Block offshore Indonesia. The project plans to produce approximately 9.5
million tons of LNG per year and a local
gas supply via pipeline, as well as up to
approximately 35,000 barrels of condensate per day. INPEX acquired a 100% interest in the Masela Block in November 1998
through an open bid conducted by theIndonesian authorities and subsequently
conducted exploration activities as theoperator, discovering the Abadi Gas Field
through the first exploratory well drilledin 2000. The Company subsequently
drilled two appraisal wells in 2002 andfour in 2007–2008, all of which confirmed
the presence of gas and condensate reservoirs.
In December 2010, the authorities
approved the initial plan of development(POD-1) deploying a floating LNG (FLNG)
plant with an annual processing capacity

AUSTRALIA

DarwinContract area
Masela(block)Project status

Venture company

Interest owned

Preparation fordevelopment

INPEX Masela, Ltd.
(December 2, 1998)

INPEX Masela* 65%,
Shell 35%

(established)(*Operator)

Gas field

Sustainability and Governance
Financial and Corporate Information

Drillship for the Abadi LNG Project

INPEX CORPORATION Annual Report 201929

Project Overview by Region
2 The Ichthys LNG Project and Surrounding Blocks
Ichthys LNG ProjectIn 1998, INPEX acquired an exploration
permit in the block where the project islocated, and following development studies including exploration, evaluation and
FEED work, the company announced its
final investment decision (FID) in January
2012. Following the completion and commissioning of the facilities for production,
the company commenced gas production
from the wellhead in July 2018. In Octoberof the same year, the project commenced
condensate shipments from the Floating
Production, Storage and Offloading(FPSO) facility and shipments of LNG fromthe onshore gas liquefaction plant. The
project also commenced LPG shipments
in November 2018 and plant condensate
shipments from December.
With production ramp ups proceedingin line with expectations, INPEX expects
to reach LNG plateau production in 2–3
years from LNG production start-up. As
of June 2019, the Project had shipped 55
LNG cargoes.

Surrounding Blocks
INPEX holds 18 exploration blocks in thevicinity of the Ichthys gas condensate field
and is currently engaging in exploration
Contract area (block)WA-50-L
WA-51-L

activities. Of this total, exploration work
has led to the discovery of gas at 11 blocks(WA-281P, WA-56-R, WA-57-R, WA-58-R,
WA-74-R, WA-79-R, WA-80-R, WA-81-R,
WA-84-R, WA-85-R, WA-86-R). Evaluation
work is now being performed on these
discoveries. In the event that substantial

amounts of crude oil and natural gas are
confirmed as a result of this explorationand evaluation activity, synergies andother effects with the Ichthys LNG Project
are expected to further expand business.

Timor Sea
WA-85-R

AC/P36

WA-79-R

WA-343-P

WA-58-R
WA-57-R

WA-74-R
WA-56-R

WA-274-P

WA-285-P

WA-81-R

WA-494-P

WA-84-R
WA-532-P

WA-80-R
WA-86-R
WA-281-P

IchthysWA-50-L
WA-51-L
WA-533-P

AUSTRALIA

Ichthys gas-condensate field

Project status

Venture company (established)

Interest owned (*Operator)

In production

INPEX Ichthys Pty Ltd(April 5, 2011)

INPEX Ichthys Pty* 66.245% TOTAL 26.000% CPC 2.625%
Tokyo Gas 1.575% Osaka Gas 1.200%
Kansai Electric Power 1.200% JERA 0.735% Toho Gas 0.420%

WA-84-R
WA-85-R

INPEX Browse E&P Pty 40% Santos* 60%

WA-86-R
WA-56-R
WA-80-R
WA-281-P
WA-57-R

INPEX Browse E&P Pty* 60% TOTAL 40%
Under exploration(blocks under appraisal on
the discovery of gas andcondensate)

INPEX Browse E&P Pty 20.0000% Santos* 47.8306%
Chevron 24.8300% Beach 7.3394%
INPEX Browse E&P Pty 29.5% Santos* 70.5%

WA-58-R
WA-74-R

INPEX Browse E&P Pty Ltd(October 21, 2013)

WA-79-R

INPEX Browse E&P Pty 20% Santos* 30% Chevron 50%

WA-81-R
WA-274-P
INPEX Browse E&P Pty* 62.245% TOTAL 30.000% CPC 2.625%
Tokyo Gas 1.575% Osaka Gas 1.200%
Kansai Electric Power 1.200% JERA 0.735% Toho Gas 0.420%

WA-285-P
WA-494-P

Under exploration

WA-532-P

INPEX Browse E&P Pty* 100%

WA-533-P

30

WA-343-P

INPEX Browse E&P Pty* 60% TOTAL 40%

AC/P36INPEX Browse E&P Pty* 50% Murphy 50%

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Onshore LNG plant
Results and New Strategies
Project Overview

FPSO Ichthys Venturer

CPF Ichthys Explorer

3 Prelude FLNG Project (WA-44-L)
LNG, 400 thousand tons per year of LPG
at peak and approximately 36,000bbl ofcondensate per day at peak.
Shell (the operator) made the FID on
the Prelude FLNG Project in May 2011.
The FLNG sailed away from its construction site in Geoje, South Korea, inJune 2017 and arrived in Australian waters
in July 2017. After mooring work and commissioning, the initial phase of productioncommenced in December 2018. The FLNG
facility shipped the project’s first condensate cargo in March 2019, and first LNG
cargo in June 2019.
Sustainability and Governance

INPEX in June 2012 acquired from Shella 17.5% interest in the Prelude FLNG
Project, which is located in WA-44-L,
approximately 475 km north-northeastof Broome, off the coast of Western
Australia. A production, liquefaction
and shipment using FLNG, the Prelude
FLNG Project consists of the Prelude andConcerto gas fields and will produce
approximately 3.6 million tons per year of

Timor Sea

Concerto Gas Field
Prelude Gas Field

WA-44-L
Financial and Corporate Information

Ichthys Gas-Condensate
Field
AUSTRALIA

Gas field
FLNG facility

Contract area (block)

Project status

Venture company (established)

Interest owned (*Operator)

WA-44-L

In production

INPEX Oil & Gas Australia Pty. Ltd.
(February 28, 2012)

INPEX Oil & Gas Australia 17.5%, Shell* 67.5%, KOGAS 10.0%,
OPIC 5.0%

INPEX CORPORATION Annual Report 201931

Project Overview by Region
4 Sebuku Block Ruby Gas Field
In September 2010, INPEX obtained a 15%
interest in the Sebuku Block off the shoreof South Makassar, Indonesia. Thereafter,
work began to develop the Ruby Gas Fieldin the block, and production of natural
gas followed in October 2013. The natural
gas produced here is transported from
offshore production facilities via an undersea pipeline to onshore process facilities
that receive products from the Offshore
Mahakam Block. The natural gas is thenmainly sent via an inland pipeline to a
fertilizer plant in East Kalimantan.

Offshore production facility
in the Ruby Gas Field

Contract area

Project status(block)(production on the basis of all
fields and average rate of FY2018)

SebukuIn production(Natural gas: 88 MMcf/d)

Kalimantan
Makassar Strait
INDONESIA

Sebuku Block

Sulaewesi

Ruby Gas Field

Gas field

Venture company

Interest owned

INPEX South Makassar,
Ltd. (May 17, 2010)

INPEX South Makassar 15%
Mubadala* 70%
TOTAL 15%

(established)(*Operator)

5 Tangguh LNG Project (Berau Block)
MI Berau B.V., jointly established by INPEX
and Mitsubishi Corporation, acquired
an interest in the Berau Block in October
2001. In October 2007, MI Berau Japan
Ltd., a joint venture with Mitsubishi Corporation, acquired a stake in KG Berau
Petroleum Ltd., effectively increasing theCompany's interest to around 7.79% in

the Tangguh LNG Project.
In March 2005, the Indonesian Government approved an extension of the production sharing contract (PSC) and project
development plans for the Tangguh LNG
Project through 2035. Development workcommenced thereafter, and the first shipments of LNG began in July 2009.

The FID for expanding the Tangguh
LNG Project was announced in July 2016.
The Tangguh Expansion Project whichadds a third LNG process train with 3.8 million tons per annum (mtpa) of production
capacity to the existing two trains with
7.6 mtpa of production capacity, and it iscurrently under construction.

Papua Province (Indonesia)

Berau BlockGas field
Shipping facility

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2018)

Venture company(established)Berau
In production
Tangguh Unit

32

Crude oil: 6 Mbbld
Natural gas: 1,077 MMcf/d

INPEX CORPORATION Annual Report 2019

MI Berau B.V.
(August 14, 2001)

Interest owned(*Operator)

Ml Berau 22.856% BP* 48.000%
Nippon Oil Exploration (Berau) 17.144% KG Berau 12.000%
MI Berau 16.30% BP* 40.22% CNOOC 13.90%
Nippon Oil Exploration (Berau) 12.23% KG Berau 8.56%
LNG Japan 7.35% KG Wiriagar 1.44%

INPEX Snapshot

6 Van Gogh Oil Field, Ravensworth Oil Field and Others

Results and New Strategies

INPEX acquired interests in offshore
Western Australia WA-155-P (Part I) in July
1999, after which the Van Gogh and Ravensworth oil fields were discovered. The
Australian Government granted production licenses for the above oil fields as the
WA-35-L and WA-43-L blocks, at which
oil production commenced in Februaryand August of 2010, respectively. The
development of the Coniston Oil Field,
which saddles WA-35-L and WA-55-L, wasstarted in December 2011, and crude oil
production commenced in May 2015.

Indian Ocean
Van Gogh FPSO vessel

Project status

Contract area (block)(production on the basis of all
fields and average rate of FY2018)

In production(Crude oil: 7 Mbbld)

WA-35-L & WA-55-L
Unitization area
WA-43-L(Ravensworth Oil Field)(established)

Interest owned

Van Gogh Oil Field(*Operator)

INPEX Alpha 47.499%
Santos* 52.501%
INPEX Alpha, Ltd.
(February 17, 1989)

Ravensworth
Oil Field

INPEX Alpha 47.499%
Santos* 52.501%

WA-43-L
ExmouthINPEX Alpha 28.500%
BHPBP* 39.999%
Santos 31.501%

In production(Crude oil: 4 Mbbld)

BarrowIslandProject Overview

WA-35-L(Van Gogh Oil Field)

Venture company

WA-35-L & WA-55-L

Onslow
AUSTRALIA

Oil field

7 Bayu-Undan Project (JPDA03-12)
covery of oil and gas fields. Of these, studies
revealed that the Undan structure and theBayu structure in the adjacent JPDA03-13
contract area were a single structure. Theinterest holders unitized both contract

areas in 1999, allowing joint developmentof the Bayu-Undan Gas-Condensate Field toproceed. The commercial production andshipment of condensate and LPG started in
2004 and LNG in February 2006.

Sustainability and Governance

In April 1993, INPEX acquired an interest in
JPDA03-12, a contract area located in the
Timor Sea JPDA, which is jointly managed
by Australia and East Timor. Exploration
within this contract area resulted in the dis-

INDONESIAEAST TIMOR

Abadi Gas Field
Timor Sea Joint Petroleum
Development Area

Darwin Gas Pipeline
Financial and Corporate Information

Bayu-Undan
Gas-Condensate Field

DarwinAUSTRALIA

Gas field

Oil field
Bayu-Undan offshore facility

Contract area
(block)Project status(production on the basis of all fields and average rate of FY2018)

JPDA03-12
In production
Bayu-Undan Unit

Crude oil: 11 Mbbld
Natural gas: 520 MMcf/d
LPG: 7 Mbbld

Venture company(established)

INPEX Sahul, Ltd.
(March 30, 1993)

Interest owned(*Operator)

INPEX Sahul 19.2458049% ConocoPhillips* 61.3114766%
Santos 19.4427185%
INPEX Sahul 11.378120% ConocoPhillips* 56.943372%
Eni 10.985973% Santos 11.494535%
Tokyo Timor Sea Resources (JERA/Tokyo Gas) 9.198000%
INPEX CORPORATION Annual Report 201933

Project Overview by Region
PL1027

Eurasia

PL767 / PL767B
PL950

In the Eurasia region, INPEX has largescale crude oil projects in Azerbaijan
PL1016(ACG Oil Fields) and Kazakhstan (Kashagan Oil Field and others). In addition to
the Sakhalin 1 Project, some of the fields
in the Company’s East Siberia Project in
SWEDEN
Russia have transitioned to the develop- NORWAY
ment and production stages. There also
Oslo Officeappears to be potential for growth in
Norway following the Company’s acquisition of exploration licenses in the western Barents Sea.
IRELANDRUSSIAESTONIALATVIA

LITHUANIAUNITED
KINGDOM
London Office

FINLANDPOLAND

BELARUSGERMANYUKRAINECZECH REP.

FRANCE

AUSTRIA

1

HUNGARY
ROMANIA(Kashagan Oil Field and others)
2

BULGARIA

ITALY
In production

PORTUGALSPAINGREECE

Under exploration
Other project3

KAZAKHSTAN

Oﬀshore North Caspian Sea
ACG Oil Fields

GEORGIAUZBEKISTANTURKMENISTANTURKEYAZERBAIJANBTC Pipeline Project

1 Oﬀshore North Caspian Sea Contract Area (Kashagan Oil Field and Others)
In September 1998, INPEX acquired an interest in the Offshore North Caspian Sea Contract Area in Kazakhstan’s territorial waters.
The Offshore North Caspian Sea Contract
Area consists of two blocks: the East Blockis about 4,300 km² and the West Block is
about 1,275 km² in area (for a total of about
5,575 km²). The Kashagan Oil Field, which isin the East Block, is located in the CaspianSea at depths of 3-5 m and is approximately
75 km southeast of Atyrau, Kazakhstan.
Since the first exploratory well was
drilled in September 1999, the Kashagan Oil
Field was confirmed in 2000 and commercial
discoveries were announced in 2002. Afterdevelopment work, the Kashagan Oil Field
began producing crude oil in September
2013. Production was temporarily halted
due to a pipeline gas leak, but production
Contract area

Project status

Offshore North
Caspian Sea

In production(block)34

resumed shortly thereafter. Shipments ofcrude oil commenced in October 2016.
Besides the Kashagan field, the presence ofhydrocarbon reserves was also confirmedin the surrounding Kalamkas, Aktote and(production on the basis of all fields and average rate of FY2018)

Crude oil: 303 Mbbld
Natural gas: 369 MMcf/d

INPEX CORPORATION Annual Report 2019

Kairan structures. Appraisal of these threestructures is continuing in parallel with thedevelopment of the main Kashagan fieldwith a view to expanding the total production of the contract area.

Offshore facility

Venture company(established)

Interest owned

INPEX North CaspianSea, Ltd.
(August 6, 1998)

INPEX North Caspian Sea 7.56% Eni 16.81%
ExxonMobil 16.81% KMG 16.87%
Shell 16.81% TOTAL 16.81% CNPC 8.33%

31, 2049 and the revised PSA came into force inJanuary, 2018. In April 2019, INPEX and partners
made the final investment decision on further
development of the Azeri-Chirag-Deepwater
Gunashli (ACG) oil fields through the commissioning and deployment of a new production platform. The new platform is expected to commence
production activities in 2023 and the projectwill continue to enhance project value including
maintaining its production and increasing proved
reserves from the ACG Oil Fields.

INPEX acquired an interest in the Azeri-ChiragDeepwater Gunashli (ACG) Oil Fields in a regionof the south Caspian Sea in Azerbaijan in April
2003. At the ACG Oil Fields, oil is being produced
at the Chirag, the Central Azeri, the West Azeri, theEast Azeri, the Deepwater Gunashli and the West
Chirag locations. In September 2017, INPEX and its
partners agreed with the State Oil Company of the
Azerbaijan Republic (SOCAR), to extend the duration of the Production Sharing Agreement (PSA)
for the ACG Oil Fields by 25 years until December

ACG

Offshore production facilities(production on the basis of all fields
and average rate of FY2018)

Venture company (established)

Interest owned (*Operator)

In production(Crude oil: 578 Mbbld)

INPEX Southwest Caspian Sea,
Ltd. (January 29, 1999)

INPEX Southwest Caspian Sea 9.31% BP* 30.37% Chevron 9.57%
SOCAR 25.00% Equinor 7.27% ExxonMobil 6.79% TPAO 5.73%
Itochu 3.65% ONGC 2.31%

Results and New Strategies

Project status

Contract area (block)

INPEX Snapshot

2 ACG Oil Fields

RUSSIA
Zapadna-Yaraktinsky Block
Bolshetirsky Block

Sakhalin 1 Project

Nur-Sultan Office

Project Overview

KAZAKHSTAN
AtyrauRUSSIA

Offshore
North Caspian Sea
Contract Area
Black Sea

Caspian Sea
GEORGIA

Tbilisi
Baku

ARMENIAAZERBAIJAN

TURKEY
Sustainability and Governance

BTC Pipeline

ACG Oil Fields

CeyhanMediterranean Sea SYRIA

IRAN

IRAQ

Oil field

The 1,770-km BTC pipeline stretches from
Baku in Azerbaijan on the coast of the
Caspian Sea to Ceyhan in Turkey. Full-scale
operation commenced in June 2006. Totaltransportation capacity stands at 1.2 million
Contract area
(block)BTC Pipeline

barrels per day, mainly for crude oil produced in the ACG Oil Fields in Azerbaijan.

Venture company

Interest owned

INPEX BTC Pipeline, Ltd.
(October 16, 2002)

INPEX BTC Pipeline 2.5% BP* 30.1%
Azerbaijan (BTC) Limited 25% Chevron 8.9%
Equinor 8.71% TPAO 6.53% Eni 5% TOTAL 5%
Itochu 3.4% ExxonMobil 2.5% ONGC 2.36%(established)

Financial and Corporate Information

3 BTC Pipeline Project(*Operator)

Shipping terminal

INPEX CORPORATION Annual Report 201935

Project Overview by Region

Middle East & Africa
In the Middle East, the Onshore Concession and Offshore Oil Fields locatednear Abu Dhabi in the United Arab Emirates are contributing substantially to
the Company’s oil production capacity. In Africa, oil production is ongoing at
various locations including the offshore Angola Block 14.
SYRIA

IRAQ

Block 10JORDANEl Ouar I / II Block

ALGERIA

LIBYA

IRAN

Abu Dhabi Offshore Oil Fields

2

KUWAIT

PAKISTAN

EGYPT
Onshore Block 4 OP

SAUDI
ARABIA
MALI

NIGER

SUDAN

CHAD

ERITREACAMEROON

Offshore D.R. Congo Block3

Angola Block 14

GABON

CENTRAL
AFRICAN REP.

SOUTH
SUDAN

Abu Dhabi Office

UNITED
ARAB OMANEMIRATESYEMEN1NIGERIA

AFGHANISTAN

Abu Dhabi Onshore Concession

ETHIOPIASOMALIAUGANDA

CONGO

DEM.REP.
OF CONGO

Angola Block 3/05・3/05A

KENYA
In production
Under development

TANZANIA

Under exploration

ANGOLA

1 Abu Dhabi Onshore Concession

Abu Dhabi

United Arab Emirates

36

Through its wholly owned subsidiary,
Japan Oil Development Co., Ltd. (JODCO),INPEX acquired a 5% interest in the ADCO
Onshore Concession in Abu Dhabi in April
2015 following its participation bid. The
Company also concluded a 40-year agreement with the Supreme Petroleum Council of the Emirate of Abu Dhabi and Abu
Dhabi National Oil Company (ADNOC) thatcame into effect on January 1, 2015. The
オマーン

concession is one of the world’s largest deposits of oil and is made up of 15 principal
onshore oil fields in Abu Dhabi of which
12 are currently in production and threeremain undeveloped. Development work
is currently under way to increase daily
production capacity to two million barrels
per day by the end of 2020.

Saudi Arabia

Contract area

Project status

Venture company

Interest owned

Oil fields in production
Undeveloped oil fields
Crude oil pipelines

Abu Dhabi
Onshore BlockIn production

JODCO Onshore Limited(April 15, 2015)

JODCO 5% ADNOC 60%
TOTAL 10% BP 10% CNPC 8%
NPIC 4% GS 3%

INPEX CORPORATION Annual Report 2019

(block)(established)INPEX Snapshot

2 Abu Dhabi Offshore Oil Fields
The Company acquired an interest in theLower Zakum Oil Field concession in February 2018, with Abu Dhabi National Oil(ADNOC) appointing INPEX as the asset
leader. The Company is playing a leadingrole in advancing development and working closely with ADNOC and its partners
to lift production capacity in the field to
450 thousand barrels per day.

Results and New Strategies

INPEX maintains rights and conducts
development and production operations
in four offshore oil fields near Abu Dhabi,
including the Upper Zakum Oil Field,
the largest Abu Dhabi offshore oil field.

Satah Field
Das Island
Upper Zakum Field
Lower Zakum Field
Zirku Island
Umm Al-Dalkh Field

Project Overview

Abu Dhabi
U.A.E.

Oil field

Zirku Island

Contract area (block)

Project status

Lower Zakum Oil Field
Upper Zakum Oil Field

In production

Venture company (established)

Interest owned

JODCO Lower Zakum Limited(January 25, 2018)

JODCO 10% ADNOC 60% Consortium of three Indian companies 10%
CNPC 10% TOTAL 5% ENI 5%

Japan Oil Development
Co., Ltd. (JODCO)(February 22, 1973)

JODCO 12% ADNOC 60% ExxonMobil 28%
Sustainability and GovernanceSatah Field/Umm Al-Dalkh
Oil Field

Subsea pipeline

JODCO 40% ADNOC 60%

3 Angola Block 14

Contract area

Project status(block)(production on the basis of all fields
and average rate of FY2018)

Angola Block 14

In production(Crude oil: 68 Mbbld)

CONGO
Atlantic Ocean

ANGOLA
Block 14The State ofCabinda

Democratic
Republic ofCongo

Financial and Corporate Information

Participating through a joint venture company with TOTAL S.A., INPEX acquired a
9.998% indirect interest in the oil-producing Angola Block 14 in February 2013.
Located approximately 100 km offshore
from Cabinda, Angola. Block 14 includes
discovered and undeveloped fields. Crude
oil is currently being produced from fourdevelopment areas, and steps are being
taken to pursue exploration potential
within the block.

ANGOLA
Offshore production facilities

Venture company(established)

Interest owned (*Operator)

Angola Block 14 B.V.
(April 19, 2012)

Angola Block 14 B.V. 20.00% (including 9.998% of INPEX’s interest)
Chevron* 31.00% Sonangol 20.00% Eni 20.00% Galp 9.00%

INPEX CORPORATION Annual Report 201937

Project Overview by Region

Americas
INPEX is engaged in the Lucius Deepwater project in the U.S. Gulf of Mexico
as well as various explorations projects in the Mexican sector of the Gulf of
Mexico. INPEX is also engaged in the tight oil project in the State of Texas, theUnited States, a gas project in Venezuela and an offshore exploration projectin Brazil.

Shale Gas Project in Canada

Hangingstone Block

CANADA

UNITED STATESOF AMERICA
1

Tight Oil Project in US (Eagle Ford shale play) OP
Houston Office2

Gulf of Mexico Projects and Others

MEXICO
R1.4 Block 3 (Perdido)

Keathley Canyon
Block 874/875/918/919 (Lucius)
R2.4 Block 22 (Salina)

In production
Preparation for development

Guarico Oriental Blocks
Caracas Office

VENEZUELA

Under exploration

Carabobo Block, Project 3

SURINAME

OP Operator project

Copa Macoya Block OP

BRAZILPERU
BM-ES-23

BOLIVIA

Frade Project
Rio de Janeiro Office

PARAGUAYURUGUAYCHILE

38

INPEX CORPORATION Annual Report 2019

ARGENTINAINPEX Snapshot

1 Tight Oil Project in US (Eagle Ford shale play)

DallasSan Antonio

HoustonSan Antonio

GonzalesWilsonAtascosa

Results and New Strategies

INPEX acquired multiple development
and production assets in the Eagle Ford
shale play in Texas, the United States, from
GulfTex Energy in April, 2019. The acquisition marks INPEX’s first entry into the U.S.
tight oil development and production
business. Most of the assets are locatedin Karnes County, Texas, considered to bea highly productive area within the Eagle
Ford shale play, which has long hosted aconcentration of tight oil and shale gas
development activity. INPEX is the operator of the project, with the exception of a
portion of the assets.

Karnes

La Salle

Shale oil project
Eagle Ford Shale play

Project status

Venture company

Interest owned (*Operator)

Eagle Ford shale play,southern Texas, US

In production

INPEX Eagle Ford LLC(2019)

With the exception of someareas, INPEX holds a 100%interest as the Operator(established)

Drilling operations site

Project Overview

Contract area (block)2 Gulf of Mexico Projects and Others

Project status

Keathley Canyon Blocks
874/875/918/919(Lucius Oil Field)

In production(production on the basis of all fields and average rate of FY2018)

Crude oil: 25 Mbbld
Natural gas: 18 MMcf/d

R1.4 Block 3 (Perdido)

Blocks 874/875/918/919(Lucius Oil Field)
MEXICO

R2.4 Block 22 (Salina)
R1.4 Block 3 (Perdido)

Lucius Project

Venture company (established)

Interest owned (*Operator)

INPEX Americas, Inc.
(May 30, 2003)

INPEX Americas, Inc. 7.75309%
Anadarko* 48.95179%
Other 43.29512%

INPEX E&P Mexico PB-03, S.A. de C.V.
(August 6, 2018)

INPEX E&P Mexico PB-03 33.3333%
Chevron* 33.3334%
Pemex 33.3333%

INPEX E&P Mexico, S.A. de C.V.
(January 25, 2017)

INPEX E&P Mexico 35%
Chevron* 37.5%
Pemex 37.5%

Under exploration
R2.4 Block 22 (Salina)

UNITED STATESFinancial and Corporate Information

Contract area (block)

Alongside Chevron and Pemex, theCompany made a successful bid for rights
to Block 22 in the Mexican sector of thesouthern Gulf of Mexico in January 2018.
The Company holds a 35% stake and is currently engaged in exploration activities.

Sustainability and GovernanceIn August 2012, INPEX joined the Lucius
Deepwater Project in the U.S. Gulf of
Mexico and acquired a 7.2% interest from
U.S.-based Anadarko Petroleum Corporation. Oil and gas production at the Lucius
Oil Field has proceeded steadily since its
commencement in January 2015.
In December 2016, INPEX, Chevron
Energia de Mexico, S de R.L. de C.V. (Chevron) and Pemex Exploraciony Produccion(Pemex) made a successful joint bid forthe first round of deepwater explorationof Block 3 located in the Perdido Fold Beltin the Mexican sector of the northern Gulf
of Mexico. INPEX holds a 33.3% participating interest and is conducting exploration
activities.

INPEX CORPORATION Annual Report 201939

Project Overview by Region

Japan

Yabase Oil Field

INPEX is active in the Minami-Nagaoka Gas Field in Niigata Prefecture, one of
the largest of its kind in Japan and operates a natural gas pipeline extending
approximately 1,500km and an LNG Receiving Terminal.

Naoetsu LNG Terminal

Akita Prefecture

East Japan Station

Sekihara Gas Field(underground storage)
Niigata City

Toyama Line

Minami-Aga Oil Field
Kashiwazaki
City

Itoigawa City

Toyama City

Minami-Kuwayama Oil Field
Nagaoka City

Minami-Nagaoka Gas Field

Joetsu City

ToyamaPrefecture

NiigataDomestic
Natural Gas Prefecture

Shin Oumi Line

Domestic Natural Gas/Regasified LNG(Regasified LNG)

Nagano City

Tokyo LineTomi BS*

Matsumoto City

Gunma
Prefecture

Shin Tokyo Line
Matsumoto Line

Karuizawa
Town

Nagano Prefecture
Kofu Line

Second Suruga Trunk Line
Sodeshi LNG Terminal[Shizuoka Gas]

Showa
City

Shizuoka City

Tochigi Prefecture

Chino
City Tomioka City

Ryomo Line

Honjo City
Yamanashi
Prefecture
Kofu City

Sano City

Iruma LineOme City

Shizuoka Line

Shizuoka Prefecture

Fujioka BS*

Konosu City

SaitamaPrefecture

Oil and gas fields

Head Office (Akasaka, Minato-ku)

Adachi-ku, Tokyo

Metropolitan
Tokyo

Gotemba City

Regasified LNG
Fuji City

Technical Research Center(Kitakarasuyama, Setagaya-ku)[INPEX, Shizuoka Gas, Tokyo Gas]

Natural gas
pipeline network

Chiba City

*BS…Booster station

Naruto Line

Sammu City

Minamifuji Line

Other project

Major officeNaruto Gas Field

Chiba Prefecture
0

100km

Natural Gas Business in Japan
In the natural gas business in Japan, thenatural gas produced from the Company-held Minami-Nagaoka Gas Field (Niigata Prefecture), as well as the LNG and otherproducts received at the Naoetsu LNG
Terminal (Niigata Prefecture), which commenced operations in December 2013, is40

INPEX CORPORATION Annual Report 2019transported through a trunk pipeline network of approximately 1,500 km stretchingacross the Kanto, Koshinetsu and Hokuriku
regions, and sold to customers including
city gas companies and large-scale plants
along the aforementioned network.
INPEX has experienced steady growthin sales of natural gas volume due toefforts to expand its supply infrastructure,
as well as the highly environmentallyfriendly attributes of natural gas. Natural
gas is expected to be used for a wide variety of applications, not only as a fuel forthermal energy but also as a fuel for onsite

(100 million Nm/year) Note: 41.86 MJ per 1 m17.2 17.6 17.5

18.0 17.9 17.5

19.1

21.2 21.7

Sekihara
Gas Field(underground storage)

MitsukeCity
Shinetsu
HonsenNagaoka City
JoetsuShinkansen
Line

Kashiwazaki
City

Minami-Nagaoka
Gas Field

Gas field

Ojiya City
Joetsu Line

Natural gas pipeline crossing a river(Shibumi River, Niigata Prefecture)

Project Overview

2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3

Echigo LineSea ofJapan

Results and New Strategies

Natural Gas Sales Volume in Japan

Company’s natural gas business, whichplays a key role in the global gas value
chains. INPEX began receiving LNG fromthe Ichthys LNG Project at the Naoetsu
LNG Terminal in October 2018.
Alongside the full deregulation of theelectric power market since April 2016,
INPEX has responded to growing demand
from gas-fired electric power plants and isengaged in the electric power wholesale
business with partner Chubu ElectricPower Co., Inc. Moreover, in light of thefull deregulation of the gas retail market
from April 2017, INPEX moved to bolster
its marketing abilities by way of reorganization focused on addressing changes
in the business environment, includingchanges in the competitive landscape inthe domestic gas market. At the Naruto
Gas Field in Chiba Prefecture, natural
gas is being produced from water-soluble gas fields. In addition, after extracting
the natural gas from underground water(brine water), the brine water is used to
produce iodine, which is exported to Europe, the United States and elsewhere.

INPEX Snapshot

power generation and co-generation,
as well as a fuel for natural gas electric
power plants and a raw material for chemical products. INPEX is targeting annual
natural gas sales of 2.5 billion m by fiscal
2022 and 3.0 billion m or more by 2040
as it uses existing infrastructure in tie-ups
with other companies to ensure stablesupply. INPEX remains focused on the sustainable improvement in the value of theRenewable Energy and Other Initiatives
Power Generation Business in Japan

Geothermal power is the generationof electricity with turbines powered bypate in the Sarulla Geothermal Independent Power Producer (IPP) Project in Indonesia from June 2015. The project involves
constructing a world-class geothermal
power plant in the Sarulla Geothermal
Field located in the province of North
Sumatra, and plans call for the selling ofgenerated power to Indonesia’s government owned electricity company over a
period of 30 years. Construction of thepower generation plant began in 2014.
Commercial operations were launched at
the first unit in March 2017, at the second
unit in October 2017, and at the third unit
in May 2018. On a combined basis, output
for the three units is 330 MW.

Financial and Corporate Information

Geothermal Development

steam produced from the thermal energyof magma underground.
With a view toward geothermal power
generation, INPEX and Idemitsu Kosan
Co., Ltd., have jointly conducted geothermal surveys in the Amemasudake regionof Hokkaido Prefecture and the Oyasu
region of Akita Prefecture since 2011.
From 2013 to 2018, the companies
undertook geothermal resource surveys
by drilling a total of seven survey wellsin the Amemasudake region, and in the
Oyasu region seven more survey wells,
two test production wells, and one test
reinjection well. We confirmed steam andhydrothermal production through fumarolic testing in both areas and commenced
environmental assessment in the Oyasu
region in 2018.
Also, as a member of the geothermal
resource survey group in Fukushima Prefecture, INPEX temporarily suspended thejoint land survey activities in 2018 in areas
surrounding Mt. Bandaisan that havebeen taking place since 2012, but continues to make preparations for surveys of
the Azuma-Adatara area.
Moreover, INPEX took steps to partici-

Sustainability and Governance

In March 2013, the Company began generating electricity at INPEX Mega Solar Joetsu, a solar power plant with a maximum
output of 2 MW, located on the formersite of an oil refinery that it shut down in
Joetsu City, Niigata Prefecture. In 2014,
through cooperation between Group
companies, a new 2-MW solar power
plant was built next to the original site.
Power generation began in July 2015. Itis estimated that these two solar power
plants will generate around 5,330,000
kWh annually, enough electricity topower 1,600 homes.
In addition, INPEX constructed a highefficiency gas turbine combined cycle
thermal power plant with an output of
about 55,000 kW next to its Koshijihara
plant in Niigata Prefecture and has been
supplying electricity on a wholesale basis
to power producers and suppliers (nowretail electricity providers) since May
2007.

Sarulla Geothermal IPP Project

INPEX CORPORATION Annual Report 201941

Sustainability
INPEX aims to further enhance its corporate value as a company essential to society by contributing to economic growth andsocial development through its business operations. Fulfilling our corporate social responsibility (CSR) is a vital plank in the platform that supports our growth. Each year, we take steps to evaluate the progress of our sustainability practices and to push forward all appropriate measures from a medium- to long-term perspective.

We have disclosed the executive management's approach of sustainability, and established the CSR Committee, chaired by the President to promote companywide and systematic sustainability practices. The CSR
Committee members include the Representative Directors, the headof the General Administration Division and the head of the Corporate
Strategy & Planning Division (Vice-Chair). The Chairs of the Compliance
Committee and the Corporate HSE Committee attend CSR Committee
meetings to facilitate collaboration with their respective committees.

Response to Climate Change
INPEX recognizes that climate change is a critical business issue. To
achieve the long-term goals of the Paris Agreement, an economy wide
transition to a low carbon society is under way. Global climate change
response requires action by all members of the international community; governments, businesses and civil society. Governmental policy
measures, technology development, industry response, and otherlong-term initiatives are particularly pertinent. We are committed to fulfilling our role in addressing climate change as a responsible memberof the oil and natural gas industry. Furthermore, we comply with national regulations of each country in which we operate business, including
those introduced to support the Paris Agreement. Our businesses will
work with governments and other stakeholders to address the two societal demands of meeting increasing energy needs and reducing greenhouse gas (GHG) emissions; to achieve a balance between the two. In
our actions towards achieving a low-carbon society, we will strengthen
initiatives on promoting natural gas development and renewable energy as a means to reduce the emissions associated with INPEX’s value
chain. In addition, we will properly manage GHG emissions from ouroperations and proceed with technology development for practicalapplication of Carbon dioxide Capture and Storage (CCS)*1 to captureand sequester GHG emissions. We shall also undertake analysis andinitiatives in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and seek to complete disclosure of
exposure to climate-related risks as well as information on climate related opportunities. INPEX has developed a position paper, “Corporate
Position on Climate Change,” (issued December 2015, last revised July2018) which is available on our website*2.
*1 CCS: Carbon dioxide Capture and Storage*2 Corporate Position on Climate Change
https://www.inpex.co.jp/csr/climatechange/pdf/20180723.pdf

Climate Change Milestones
2015

l Published a position paper, “Corporate Position on Climate Change”

2016

l Established a Climate Change Strategy Project Team led by the
Corporate Strategy and Planning Division2017

l Set internal carbon price ($35/tCO-e) for economical evaluationl Established scenarios for a low-carbon societyl Announced “Vision 2040” which targets renewable energy portfolio
up to 10% of our total business portfolio by 2040

2018

l Established Climate Change Strategy Group to promote actions
against climate change within the Corporate Strategy and Planning
Divisionl Established Renewable Energy & Power Business Divisionl Conduct financial assessment (underway during 2019)l Evaluate physical risks to our facilities (underway during 2019)42

INPEX CORPORATION Annual Report 2019

Identification of Material CSR issues
and Prioritization Process
As a global energy company, in 2012 INPEX identified the Material
CSR Issues that we must tackle as important issues on a priority basis
through our business activities based on the INPEX Group Business
Principles. This action has served as a means of achieving sustainablegrowth together with society throughout the future based on thetrust of all stakeholders. In 2015, we reviewed the overall initiatives
conducted over the three-year period for each of the five Material CSR
Issues identified three years earlier. At the same time, we reexamined
the Material CSR Issues in light of such factors as events that affect ourbusiness activities accompanying progress in our main projects andchanges in the concerns of shareholders. We reidentified our Material
CSR Issues and added “Governance” as a sixth area of concern.
In addition, INPEX has identified the Material Issues that we must
tackle on a priority basis for each theme through a four-step Key Task
identification process ([1] Issue identification, [2] stakeholder dialogue,[3] Issue prioritization, [4] management review) and is taking action
through a PDCA cycle so that improvements are made on an ongoingbasis. In fiscal 2017, we incorporated the perspectives from the Sustainable Development Goals (SDGs)* and are now conducting a review of
the important issues.
*Sustainable Development Goals (SDGs)
Seventeen goals and 169 targets adopted by the UN Sustainable Development Summit in September 2015 that describe the United Nations’ agenda for people, planet and prosperity.

Identification of Material Issues

GovernanceCompliance

HSE

Local Communities

Climate Change

Employees

INPEX Key Tasks
l Strengthen governance structurel Upgrade risk management systeml Respect for human rightsl Legal compliance, prevention ofbribery and corruptionl Conducting Environmental and Social
Impact Assessment (ESIA) in the
supply chainl Prevention of major incidentsl Securing occupational health andsafetyl Conservation of biodiversity,
appropriate water resource
management

Importance for our stakeholders

CSR Promotion Systeml Conducting assessments andmeasures to reduce the impact on
local and indigenous communitiesl Contribution to local economies
l Promotion of renewable energyl Development of natural gas as acleaner source of energyl Strengthen climate-change-related
risk managementl Development of personnel andincreasing the motivation of theworkforcel Promotion of diversity

Area of highest
priority

Importance for our business operations(necessity/urgency of strengthening initiatives)

INPEX Snapshot

INPEX Value Creation
Our goal is to become a leading energy company serving an essential role in society by fulfilling our mission to deliver energy
in a sustainable way. By achieving the three strategic targets described in the Vision 2040, we will strive for stable supply of energy and other value creation.

Results and New Strategies

Becoming a leading energy company
Value Creation
Environmental Value

Economic Valuel Stable supply of energyl Improving Japan’s self-development
ratio of oil and natural gas
l Improving access to reliable energyl Contribution to sustainable developmentof local communitiesl Creating stable job opportunitiesl Stable natural gas as a cleaner source ofenergyl Energy production with low
environmental footprintl Increasing the ratio of renewables in theenergy mix
l Appropriate GHG emission management
and low-carbon footprints of operationsl Accelerating investments in clean energy
technologies and related infrastructurel Sustainable growth of corporate valuel Maximizing shareholder valuel Business portfolio resilient to changing
business environmentl Expanding production volume andreserves
l Reinforced and diversified revenue base

Project Overview

Social Value

Vision 2040
Sustainable Growthof Oil and Natural
Gas E&P Activities

Development of
Global Gas Value
Chain Business

Reinforcement ofRenewable Energy
Initiatives

Sustainability and Governance

SDGs integrated into
our strategic objectives

Social responsibility andsustainability into practice

INPEX’s Strengths
Partnerships
withoil-producing
countries

Financial and Corporate Information

Technical
capabilities
to carry out
projects

A highlycompetitive
project
portfolio

Diversehuman
resources

Priorities for INPEX

Supportfrom thegovernmentof Japanl Meet growing global energy demandl Help increase Japan’s self-development ratio of oil andnatural gas
l Accelerate response to climate change and promote
low-carbon footprint in operations

INPEX CORPORATION Annual Report 201943

Targets and Results of Material Issues
Material Issues

GovernanceCompliance

Key tasks

FY2018 Results

Strengthen
governance structurel Held several meetings with participation of outside directors, and held discussions on improving corporate
governance at INPEX l As part of the PDCA cycle of evaluation of effectiveness of the Board of Directors, conducted interim reviews of progress made on matters requiring improvement, as identified during last fiscal year’s
evaluations, at meetings that included outside directors. In light of these reviews, finally conducted the evaluationof effectiveness of the Board of Directors during fiscal 2018 l Held meetings of the Nomination and Compensation Advisory Committee (six times) and discussed support for the Corporate Governance Code (director compensation system, selection and removal of senior management, plans for succession, etc.) Started implementing
Stock-Based Remuneration System for directors with appropriate oversight of this committee l Formulated aTax Policy

Upgrade the risk
management systeml Promoted Business Continuity Management (BCM)❶ for earthquake scenarios activities and conducted training
and education at corporate headquarters

Respect for human rightsl Published the UK Modern Slavery Act Statement FY2017 l Conducted human rights training for new recruits
l Continuous participation in the IPIECA human rights working group

Legal compliance,
prevention of bribery andcorruptionl Conducted a compliance awareness survey l Conducted compliance training by theme and level l Continued ABC risk assessments at overseas offices l Continuous education and strengthened implementation of ABC
regulations (formulated the INPEX Group Global ABC Policy and conducted training, etc.) l Implemented initiatives to enhance global compliance systems l Continued participation in the anti-corruption working group of
the Global Compact Network Japan

Conducting Environmental
and Social Impact
Assessment (ESIA) in supply
chain

l Continued participation in the supply chain working group of the Global Compact Network Japan l Administered a supplier self-evaluation questionnaire including human rights and anti-bribery and corruption to majordomestic suppliers and contractors l Continued risk assessment including human rights, anti-bribery and corruption of major domestic suppliers and contractors

Prevention of major
incidentsl Enhanced the Corporate HSEMS (Revised the Corporate HSEMS Manual and 8 of related Corporate HSE Standards, and expanded the HSE management scope to cover non-operated projects) l Improved HSE assurance
and governance (Participated in 14 HSE reviews and conducted 3 risk-based audits at domestic and overseas sites)l Strengthened HSE risk management process to prevent major incidents and the associated risks (Conducted
HSE risk management activities and quarterly reviews for all Operational Organizations throughout the year andreported the result to Executive Committee; conducted 3 AIPS❸ Assurance Review at 3 organizations; assisted
preparation of Safety Case for Tokyo line and Oyazawa plant; started to apply Process Safety KPI and issued PS KPI
Implementation Report; conducted INPEX Barrier Management (IBM) Training for domestic operations) l Reinforced emergency and crisis response capability (Operational Organizations and the corporate headquarters
cooperatively conducted 3 of level 3 exercises: earthquake exercise at the Naoetsu LNG Terminal, Ichthys LNG
offshore facility gas leak exercise, and Tokyo inland earthquake exercise)

HSE

Securing occupational healthand safetyl Provided HSE technical support and strengthened HSE management at worksites (Conducted 5 HSE Management Site Visit at domestic and overseas operator project sites, non-operated project sites and domestic subsidiaries; conducted 3 site visits exchanges by site representatives; HSE Award conferment) l Incident reduction(LTIF❹: 0.23/TRIR❺: 1.85, PS KPI Tier 1: 1/Tier 2: 6)l Developed Corporate Environmental Management Plan including initiatives for biodiversity conservation andwater management

Conservation of biodiversity,
appropriate water resource
management

Local
Communities

Conducting assessments andmeasures to reduce impact
on local and indigenous
communities

Conservationof biodiversity

l In Japan: conducted marine researchl In Japan: participated in forestation and biodiversity conservation activities
l Overseas: conducted biodiversity monitoring

Water
managementl Conducted water stress assessment in our project areal Collected and analyzed water consumption in our businessJapan

l Provided information on operational status and safety initiatives through community briefings
and issuance of newsletters at Naoetsu LNG terminal

Australial Held more than 430 stakeholder engagement activitiesl Received more than 1,500 local inquiries (of which 50% related to employment opportunities)

Globall Social investment results: Approx. ¥1.6 billion

Australial Finalized the Larrakia Benefits Package l Commenced the Solid Pathways program creating
10 additional roles for Aboriginal and/or Torres Strait Islander people l Engaged 1,471 Aboriginal and Torres Strait peoples through contractors during the Ichthys LNG construction phasebetween April 2012 and March 2018 l Contracted 62 Aboriginal and Torres Strait Islander
owned businesses to a value over A$175 million during the Ichthys LNG construction phase from2012 to mid 2018

Contribution to local
economies

Promotion of renewableenergyl Ensured stable operation of solar power generation l Started commercial operation of Unit 3 of the Sarulla
Geothermal IPP Project in Indonesia, achieved stable operations of the power plant as a whole l Moved thegeothermal plant in the Oyasu region in Akita Prefecture to the next-period survey phase and started an environmental assessment. Continued drilling surveys and short-term fumarolic testing etc., in Amemasudake, Hokkaido.
l Set a clear path to the start-up of a domestic wind power business l Continued research and development oftechnologies that contribute to building an electricity-hydrogen-methane value chain

Development of natural gas
as a cleaner source of energyl Commenced the Ichthys LNG Project production and shipping l Continued a stable supply of natural gas andincreased supply volume through safe operation of domestic gas fields, the Naoetsu LNG Terminal, and the approximately 1,500km high-pressure gas pipeline network l Engaged in activities to promote natural gas use

Strengthen climate-changerelated risk managementl Established the Climate Change Strategy Group in the Corporate Strategy & Planning Unit of the Corporate
Strategy & Planning Division l Applied oil prices and carbon prices according to the IEA WEO 2°C scenario to the
INPEX portfolio, and conducted a trial financial assessment using a method that calculates the NPV rate of change
from a base NPV l Constructed a process for estimating the level of methane fugacity and published the resultsfor FY2018

Climate Change

Employees

GlobalDevelopment of personnel
and increasing the
motivation of the workforcel Continued promotion of INPEX Values (Value Awards, expansion of program to Group companies, etc.)
l Formulated the INPEX Group Health StatementJapanl Continued the internal recruiting system and career consultations for corporate employeesl Reduced overtime hours and continued promotion of the taking of paid leavel Introduced a year-round “business casual” work wear policy

Globall Published a message from the president on diversity and inclusion

Promotion of diversity

Japanl Conducted training for managers of people with parental responsibilities, and increased information available to male employees regarding the Parental Leave Systeml Conducted LGBT Training❶ Business Continuity Management
The activities undertaken by a company to develop and maintain a business continuity frameworkand ensure overall preparedness by the company through education and training initiatives

44

INPEX CORPORATION Annual Report 2019

❷ Business Continuity Plan
A proactive plan outlining the priority operations and steps to be taken in the event of a disasterto avoid or mitigate the risk of interruption to business activities

INPEX Snapshot

Medium- to Long-Term
Initiatives and Directions

FY2019 Targets
l Monitor status of Medium-term Business plan 2018-2022
l Conduct the evaluation of effectiveness of the Board of Directors for FY 2019 and ensure the continuous efforts to enhance
the Board of Director's effectiveness (PDCA cycle)l Continue taking some measures to improve governance, including in response to the revised disclosure ordinances of
the Financial Services Agency (director compensation and nomination, etc., with appropriate oversight of the Nomination
and Compensation Advisory Committee)
l Strengthen tax governancel Promote Tokyo Office-based BCM activities for earthquake scenarios provide BCM education and training for employees,
and review Tokyo office BCP❷ for highly virulent infectious disease scenarios.

l Continuous education information on compliance and conduct education and training programsl Continue ABC risk assessments at overseas offices
l Widely disseminate and strengthen the implementation of ABC regulations (conduct training, etc.)
l Implement initiatives to enhance global compliance systemsl Administer a supplier self-evaluation questionnaire including human rights and anti-bribery and corruption to major
suppliers and contractors l Continue risk assessment including human rights, anti-bribery and corruption of major domestic suppliers and contractorsl Continuous improvement of the Corporate HSE Management System (Revise Corporate Standards; facilitate HSE management of HQ Organization including non-operated projects) l Improve HSE assurance and governance (Improve theconsistency and effectiveness of HSEMS through HSE reviews and risk management-based audits) l Provide HSE technicalsupport (to operator project and HQ organization including non-operated project) l Strengthen HSE risk management
process to prevent major incidents (Preparation of Safety Case for major facilities; barrier management promotion; implementation of PS leading KPI) l Reinforce emergency and crisis response capability (Comprehensive exercise involving
Corporate Crisis Management Team assuming major incidents at Domestic E&P Project and the Ichthys LNG Project; emergency response exercise based on the function and phase of relevant divisions)l Implement and revise Corporate Environmental Management Plan including actions for biodiversity conservation andwater management
Conservation l Create a protected areas database nearby our projects l In Japan: measures for specific invasive alienof biodiversity plant species l In Japan: marine research (continued) l In Japan: participate in forestation and biodiversity conservation activities l Overseas: biodiversity survey l Overseas: conduct biodiversity monitoring l Develop a report about our biodiversity conservation activityl Conduct water stress assessment in our project areal Understand water balance in our business and collect and analyze water consumptionJapan

l Maintain good relationships with stakeholders through continuous dialogue including community
briefings and issuance of newsletters

Australial Continue to manage the impact on and concerns of local communities and stakeholders as the Ichthys
LNG transitions to steady, safe and reliable operations

Globall Social investment plan: Approx. ¥1.3 billion

Australial Continue delivery of the Larrakia Benefits Package through ongoing engagement with the INPEX Larrakia Advisory Committee l Increase Aboriginal and/or Torres Strait Islander direct employees by 36 people
or 3% of our workforce by end of 2021 l Employ an average of 60 Aboriginal and Torres Strait Islander
peoples through Ichthys LNG operations subcontractors in each year from 2019 to 2021 l Increase Aboriginal and Torres Strait Islander business contracts by 50%, to a value more than A$1 million for the
Ichthys LNG operations phase from 2019 to 2021

l Strengthening of a global human rights management structurel Strengthening of supply chain risk assessment andcompliance

Under our commitment to the HSE Policy, top management, managers and workinglevel personnel earnestly implement the process defined in the HSE Management System
Think, act and promote safety culture as “Safety Number One” on INPEX Values and aim to achieve zero incidents and prevent major incidentsl Promote actions to achieve the Corporate HSE Third
Phase Mid-term Plan (2016-2020) as follows: Enhance the Corporate HSE Management System(HSEMS)
 Improve HSE assurance and governance by continuous implementation of the risk management-based audits and HSE reviews
 Fulfill HSE technical support by utilizing HSE humanresources Develop HSE activities that incorporated opinions
on the sites
 Thoroughly prevent major incidents by promoting
Process Safety management
 Continue to monitor and analyze LTIF/TRIR Reinforce emergency and crisis response capability
 Promote plans for reducing GHG emissions
Contributions to regional development and the resolution of social issues through projects, while respecting human rights and the cultures and customs of theareas in which we operate

Sustainability and Governance

Water
management

Appropriate responses to and full compliance with thelaws and regulations of the areas in which we operate,anti-bribery and anticorruption laws, judicial/administrative sanctions, international standards and ethics,
and respect for human rights

Project Overview

l Strengthen HSE management at worksites (Confirm measures to prevent recurrence of incidents through HSE Management Site Visits and site visit exchanges by site representatives; communicate and deepen mutual understanding with site
workers) l Incident reduction (LTIF: 0.12 / TRIR: 0.70 or less; prepare to adopt IOGP Life-Saving Rules; use the new event
reporting system) l Improve health promotion and maintenance program (Improve health promotion and maintenanceprograms in line with INPEX Group Health Statement)l Strengthening of the corporate governance structure, including strengthening of the supervisory roleof the Board of Directors
l Expansion of discussion on business strategies inlight of Vision 2040 and the Medium-term Business
Plan, and monitoring of plan progress

Results and New Strategiesl Publish the UK Modern Slavery Act Statement FY2018 l Continue human rights training for new recruits
l Strengthen human rights management

Improvement of the effectiveness of the Board of Directors, appropriate information disclosure including
dialogue with shareholders, cooperation with stakeholders, and continual strengthening of corporate
governancel Understanding community needs and implementing measures through engagement with stakeholders in the areas in which we operatel Ensure stable operation of solar power generation facilities l Ensure stable operation of the entire Sarulla Geothermal
IPP Project in Indonesia l Promote existing geothermal power generation business in Japan l Pursue new geothermal
and wind power business, etc. l Continue research and development of technologies that contribute to building anelectricity-hydrogen-methane value chain

Strengthening the governance structure, and implementation of initiatives in the areas of business strategy, risk and opportunity assessment and emissions
management, to actively support a low-carbon society
in line with the long-term goals of the Paris Agreementl Achieve stable and efficient production and operation at the Ichthys LNG Project l Continue a stable supply of natural
gas and increase supply volume through safe operation of domestic gas fields, the Naoetsu LNG Terminal, and the approximately 1,500km high-pressure gas pipeline network l Engage in activities to promote natural gas use

l Initiatives to create a low-carbon societyl Ongoing promotion of information disclosure in accordance with the TCFD recommendations

Financial and Corporate Informationl Continue improving the assessment process for climate change-related risks and opportunities l Develop a frameworkfor physical risk assessment l Continue improving methods of financial assessment of our ability to respond to climatechange-related risks l Strengthen emission controls at non-operator projects

Globall Continue promoting INPEX Values (Value Awards, inclusion of Group companies, etc.)
l Formulated the INPEX Group Health Statement

Japanl Implement additional effective measures for health and productivity management (introduction of ahealth and productivity app, increased participation in specific health checkups and health guidance, expansion of health education content, etc.) l Continue the internal recruiting system and career consultations for corporate employees l Reduce overtime work and continue measures to improve the proportion of paid leave taken l Introduce a companywide flexible work system for employees

Globall Facilitate employee transfers between global sites

Japanl Implement measures based on our General Employer Action Plan to promote active participation of
women (ongoing training for managers of people with parental responsibilities, career guidance for female
employees, etc.) l Improve the workplace environment for persons with disabilities❸ Asset Integrity Process Safety
Management of facility integrity/process safety❹ Lost Time Injury Frequency
Rate of injury resulting in fatalities or lost time per
million hours worked

Creation of a company where a diverse range of people are able to exercise autonomy and play an activerole with a high sense of values and purpose in accordance with the standards of the INPEX Valuesl Continue the promotion of INPEX Valuesl Development of environments where diverse HR
can be actively involved❺ Total Recordable Injury Rate
Rate of total fatalities, lost work day cases, restricted work day cases,
and medical treatment cases per million hours worked

INPEX CORPORATION Annual Report 201945

Corporate Governance(As of June 26, 2019)
To achieve sustainable growth and increase corporate value over the medium to long term, the Company fulfills its social responsibilities in cooperation with its shareholders and other stakeholders and works to enhance its corporate governance for the purpose of conducting transparent, fair, timely and decisive decision making.

Overview of the Corporate Governance Structure
INPEX has adopted an Audit & Supervisory Board Member organizational structure, under which Audit & Supervisory Board members audit theexecution of operations, which are in turn carried out by directors wellversed in their field. In addition, the Company has introduced an Executive Officer System to pursue management with agility and efficiency.
INPEX frequently engages in negotiations with the governments ofoil-producing countries and overseas oil companies. This necessarily
requires internal directors and executive officers who have knowledge,
expertise and international experience relating to the Company’s business and both a sound knowledge of the Company and their particularfield of expertise. Internal directors, in principle, hold the concurrent position of executive officers. By adopting this concurrent organizational
structure, the Company’s Board of Directors is better placed to execute
operations in an efficient manner. At the same time, this structure helps
to ensure effective operating oversight.
In addition to enhancing the transparency of management andbolstering the ability of the Board of Directors to carry out its supervisory function, INPEX has appointed five of its 13-member Board of Directors from outside the Company. Through this initiative, steps havebeen taken to ensure that management issues are considered and deliberated with a greater degree of objectivity from an independent
standpoint. Moreover, four of the Company's five Audit & Supervisory
Board members are also appointed from external sources. In addition
to putting in place an Audit & Supervisory Board, INPEX has set up the

Audit & Supervisory Board Members’ Office and deployed dedicatedstaff and is reinforcing collaboration between Audit & Supervisory
Board members and the Audit Unit, as well as independent auditors.

Overview of the Corporate Governance Structure
Organizational structure Company with Audit & Supervisory Board Members
Directors

Number of directors as stipulated by the Articles ofIncorporation ........................................................................... up to 16
Number of directors (number of outside directors) ....... 13 (5)Term of office ........................................................................... 1 year

Audit & Supervisory
Board members

Number of Audit & Supervisory Board members
as stipulated by the Articles of Incorporation ................. up to 5
Number of Audit & Supervisory Board members(number of outside Audit & Supervisory Board
members) .................................................................................. 5 (4)Term of office ........................................................................... 4 years

Number of independent
directors and auditors

9 (5 outside directors, 4 outside Audit & Supervisory Board
members)

Rights plan and othermeasures to protect
against a takeover

None

Other

Issuance of a Class A Stock to the Minister of Economy,
Trade and Industry

Corporate Governance Framework
General Meeting of Shareholders
ReportAppoint/Dismiss
Compensation limit setup

Appoint/Dismiss
Compensation limit setup

Audit

Appoint/
Dismiss

Nomination and Compensation
Advisory Committee
Proposal/Advice/
ReportCoordinate

Coordinate

Audit &
Supervisory
Board (Member)

Board of Directors
5 Outside Directors

Advisory Committee

ReportReportCoordinate

Audit &
Supervisory Board
Members’ Office

Audit

Compliance Committee

Business Operation
System

Accounting
audit

ReportCoordinate

Executive Committee
CSR Committee
Corporate HSE Committee
Information Security
Committee

Appoint/
Dismiss/
Supervise

Independent
Auditors

Appoint/
Dismiss/
Supervise

Accounting
audit

Audit Unit

President & CEO
ReportINPEX Value Assurance
System Committee

Coordinate

Executive Officers
Divisions and Subsidiaries

46

INPEX CORPORATION Annual Report 2019

Internal audit

Directors and the Board of Directors

2

Executive Committee and Executive
Officer System

3

Formulation of Corporate Governance
Guidelines

The Board of Directors decide on compensation for directors within
the limits and terms approved at the general meeting of shareholders
upon report by the Nomination and Compensation Advisory Committee.
The compensation for directors (with the exception of outside directors) consists of three types: basic compensation, bonuses (performance-based compensation), and stock-based remuneration. In addition, compensation for outside directors is limited to basic compensation only.
Basic compensation is paid based on the duties of each director, andbonuses are paid based on the Company’s performance from the medium-to long-term perspective and other factors. As to the Stock-based
remuneration, the Company’s shares, etc. will be delivered based on
the position, etc. of each director and executive officer, aiming to raise
the awareness of directors and executive officers towards increasing
corporate value of the Company and further increase their willingness
to contribute to maximizing shareholder value, by making clear linkage
between the remuneration of directors and executive officers and theCompany’s mid-to long-term stock price. In addition, based on a resolution passed on June 26, 2018 at the 12th Ordinary General Meeting of
Shareholders, a stock-based remuneration system has been introduced
for directors (excluding outside directors and non-residents of Japan)
and executive officers. Compensation for Audit & Supervisory Board
members consists solely of a basic compensation, which is determinedthrough consultation between the Audit & Supervisory Board members,
within the limits and terms approved at the general meeting of shareholders.

6

Accounting Audit and Auditor
Compensation

In accordance with the Companies Act and the Financial Instruments
and Exchange Act, we accept accounting audits from Ernst & Young
ShinNihon LLC. The amount of auditor compensation is determined in
total based on the audit plan and the number of auditing dates, after
obtaining approval from the Audit & Supervisory Board.

Compensation Paid to the CPAs and Related Parties(Fiscal year ended March 31, 2019)

Name of the CPA firm

Ernst & Young ShinNihon LLC

Names of the CPAs

Hiroaki Kosugi
Toru Kimura
Takeshi Yoshida

Accounting audit
members

19 CPAs, 21 personnel
who passed an accountant exam, etc.,
and 30 others

Compensation forauditing services¥282 million
INPEX: ¥202 million;
Consolidated subsidiaries: ¥80 million

Compensation for
non-auditing services¥19 million
INPEX: ¥ 1 million;
Consolidated subsidiaries: ¥18 million

Class A Stock

According to the stipulations of the Articles of Incorporation, INPEX issues a Class A Stock to the Minister of Economy, Trade and Industry. The
Class A Stock does not possess voting rights at shareholders’ meetings.
However, it is possible for the holder of the Class A Stock to exercise
veto rights for certain major corporate decisions. We think the holdingof Class A Stock by the Minister of Economy, Trade and Industry will
help prevent any incidence of unusual management, allow INPEX tostably supply energy as a core company for Japan’s oil & gas E&P and
ensure that the Company does not incur any negative impact from a

INPEX CORPORATION Annual Report 2019

Financial and Corporate Information4

Director Compensation

Sustainability and Governance

The mission of the Company is to contribute to the creation of a brighter
future for society through our efforts to develop, produce and deliver
energy in a sustainable way. Through our business, we aim to become
an integrated energy company that contributes to the community andmakes it more livable and prosperous. Based on this mission, to achievesustainable growth and increase corporate value over the medium tolong term, the Company fulfills its social responsibilities in cooperation
with its shareholders and other stakeholders, and works to enhance its
corporate governance for the purpose of conducting transparent, fair,timely and decisive decision making.
In November 2015, the INPEX Group made clear its basic views andpolicies on corporate governance and, with the aim of ensuring transparency and fairness in the Company’s decision making, as well as realizing effective corporate governance by carrying out the proactive
dissemination of information, formulated its Corporate Governance
Guidelines. Please refer to our Web site for details.
▶www.inpex.co.jp/english/company/governance.html

5Project Overview

From the perspective of increasing the speed of decision making related to the execution of business, we have established an Executive
Committee. Meetings are held weekly and as necessary. At the Executive Committee, flexible decision making is conducted for resolutions
not affiliated with the Board of Directors, and deliberation is held tocontribute to decision making by the Board of Directors.
We implemented an Executive Officer System to respond accurately
and quickly to a rapidly changing management environment and the
expansion of our business activities. The term of office for executive
officers is set to one year, the same as for directors.

speculative acquisition or an attempt at management control throughforeign capital. On this basis, INPEX’s role is assured. Furthermore, we
expect positive results in terms of external negotiation and credits as anational flagship company efficiently contributing to the stable supplyof energy in Japan.
▶See p. 92-93 for Business Risks (8. Class A Stock)

Results and New Strategies

The responsibilities of the Board of Directors shall be to fully exercise its
supervisory function, secure fairness and transparency in management,
and ensure sustainable growth and increase corporate value over the
medium to long term through implementation of effective corporate
governance, with recognition of its fiduciary responsibility to shareholders.
The Company’s Board of Directors comprises 13 members, fiveof whom are outside directors. In addition to a monthly meeting,the Board of Directors meets as necessary to discuss and determine
matters concerning management strategy and important businessexecution, and to supervise the execution of duties by directors. The
term of office for directors is set at one year. In addition to enhancing
the ability of directors to respond to changes in the Company’s global
operating environment in a timely manner, this initiative helps tofurther clarify management responsibilities.

INPEX Snapshot

1

47

Monitoring of Management by Outside Directors
and Audit & Supervisory Board Members
1

Outside Directors

3Regarding the appointment of outside directors, we believe that it
is important to comprehensively consider a variety of factors. These
factors include the validity of business decisions and considerationof their efficacy, professionalism and objectiveness in the oversightfunction in addition to the perspective of independence.
As corporate managers, academics or other specialists, our Company’s five outside directors possess broad knowledge and many yearsof experience as managers in such fields as the resource/energy industry, finance and legal matters. Also, three of the outside directors areshareholders of the Company and serve as advisors of companies that
conduct business in the same field. Therefore, we recognize the importance of paying special attention to the possibility of competition andother conflicts of interest. In response, we collect written pledges fromoutside directors to ensure conformance with the Companies Act when
taking a proper response toward noncompetition, the prevention of
information leakage and the implementation of appropriate measures
toward transactions with a conflict of interest. These written pledges
are the same as those submitted by internal appointees.

2

Outside Audit & Supervisory Board
Members

When appointing outside Audit & Supervisory Board members, we
believe that it is important to comprehensively consider factors such as
independence, efficacy in the oversight function and professionalism.
Four of the Company’s five Audit & Supervisory Board members areappointed from external sources. Audit & Supervisory Board members
possess a rich knowledge and experience in the Company’s business aswell as in such fields as finance and accounting, which they use when
performing auditing activities for the Company.

Independence of Outside Directors andOutside Audit & Supervisory Board Members

The Company has reported all outside directors and outside Audit &Supervisory Board members as independent directors as defined by
Tokyo Stock Exchange, Inc.
As a part of efforts to comply with the Corporate Governance
Code, INPEX has formulated independence standards for outside
directors and outside Audit & Supervisory Board members taking
into consideration the independence standards and qualification for
independent directors issued by the Tokyo Stock Exchange. The Company determines the independence of outside directors, including
major shareholders and business partners that do not fall within thescope of these standards.

4

Audit & Supervisory Board andAudit & Supervisory Board Members

The Audit & Supervisory Board is composed of five Audit & Supervisory
Board members, four of which come from outside.
In addition to attending meetings of the Board of Directors andthe Executive Committee, the Audit & Supervisory Board members
review the execution of business duties by directors and executive officers through reports given by and hearings for related departments.
Furthermore, the Audit & Supervisory Board members meet on regular and as needed bases with the Independent Auditors, and receive
reports from the Independent Auditors regarding audits. They also
conduct regular meetings with the internal audit department (Audit
Unit) to receive reports regarding internal audits and the evaluationof internal controls.
To strengthen the auditing function and ensure viable corporate
governance, steps have been taken to set up the Audit & Supervisory
Board Members’ Office and to deploy dedicated staff. In this manner,
efforts are being made to promote collaboration along the aforementioned terms between Audit & Supervisory Board members, the Audit
Unit and the Independent Auditors. Moreover, we have constructeda system to strengthen the monitoring function through periodic
meetings with representative directors and directors.

Outside Directors/Outside Audit & Supervisory Board Members: Concurrently Held Positions and Reason for Appointment
Name
Jun Yanai

Outside Audit & Supervisory Board
members

Outside directors

Norinao Iio

48

Independent
director/auditorüüSignificant concurrently held
positionsReason for appointment

Attendance at board meetings
for the fiscal year ended March 31, 2019

Advisor of Mitsubishi
Corporation

To utilize his rich experience and broad knowledge in the
resources/energy industry in our company’s management.

Board of Directors meetings 17/17

To utilize his rich experience and broad knowledge in the
resources/energy industry in our company’s management.

Board of Directors meetings 16/17

Board of Directors meetings 17/17

Atsuko NishimuraüIn addition to a broad base of knowledge related tointernational conditions built up through her years working as
a diplomat, she is also well-versed in the fields of resourcesand energy. Also nominated because we are confident she canprovide suggestions on a diverse array of topics.

Yasushi KimuraüSenior Corporate Adviser of
JXTG Holdings, Inc.

To utilize his rich experience and broad knowledge as amanager in the resources/energy industry in our company’s
management.

Kiyoshi Ogino

ü

Advisor of Japan Petroleum
Exploration Co., Ltd. (JAPEX)

To utilize his rich experience and broad knowledge in the oiland gas development industry in our company’s management.



Hideyuki Toyamaü

Possesses extensive experience and knowledge in finance, as
well as professional knowledge and experience as an attorney.

Board of Directors meetings 17/17
Audit & Supervisory Board meetings 15/15

Shinya MiyakeüPossesses abundant experience and wide-ranging knowledge
in fields such as international finance and financial affairs.



Mitsuru Akiyoshiü

Representative Director andPresident of MG Leasing
Corporation

Possesses abundant experience and wide-ranging knowledge
in fields such as financial affairs and management.



Hiroko Kiba

ü

Possesses abundant experience as a freelance newscaster,
university lecturer, and holder of public offices such as seatson the Advisory Committee for Natural Resources and Energy
and Industrial Structure Council, as well as her wide-ranging
knowledge on a diverse variety of topics.



INPEX CORPORATION Annual Report 2019

❶ Nomination and Compensation

Board of Directors

Executive Committee❻ Information Security Committee

In April 2012, the INPEX Group established
the CSR Committee with the aims of better
fulfilling its corporate social responsibility
and promoting activities that contributeto the sustainable development of society.
The committee puts in place fundamental
policies and formulates important measures designed to promote CSR.

The Information Security Committee wasestablished in November 2007 to consider
and determine all appropriate measuresnecessary to maintain, manage andstrengthen information security. The committee also takes steps to address any incident relating to information security and to
put in place preventive measures.

❺ Corporate HSE Committee❼ INPEX Value Assurance System

In accordance with the HSE Management
System, the Corporate HSE Committee wasestablished in October 2007 to promotehealth, safety and environment initiatives.
In addition to formulating corporate HSE
policies and priority targets for each period, the committee advances HSE activities
across the organization.

Committee
The INPEX Value Assurance System Committee was established in May 2014 to contribute to the Company’s decision-making
process with respect to confirmation of thestatus of preparations in connection with
important milestones of those oil and natural gas upstream business projects in which
INPEX participates, and the improvement
and promotion of project value.

❷ Advisory Committee
The Advisory Committee was establishedin October 2012 with the aim of enhancing
corporate value and the corporate governance function. Comprising external
experts in a broad spectrum of fields, thecommittee provides the Board of Directors
with multifaceted and objective advice
and recommendations across a wide rangeof areas. Areas of discussion and advice
include international political and economic conditions, an outlook of energy conditions and ways in which to bolster corporate governance.

Project Overview❹ CSR Committee

Advisory Committee
The Nomination and Compensation Advisory Committee was established in January
2017 with the aim of strengthening thefunctional independence and objectivity as
well as accountability of the Board of Directors in connection with the nomination ofand compensation paid to directors.
Results and New Strategies

To further enhance the efficacy of the corporate governance function, INPEX has set up❶ the Nomination and Compensation Advisory Committee, ❷ the Advisory Committee,❸ the Compliance Committee and ❹ the
CSR Committee. In addition, the Company
maintains ❺ the Corporate HSE Committee,❻ the Information Security Committee and ❼the INPEX Value Assurance System Committee
to appropriately manage risks associated withbusiness operations.

INPEX Snapshot

Internal Committees❸ Compliance Committee
The Compliance Committee was established in April 2006 with the aim of promoting compliance initiatives across the entire
Group. The committee formulates fundamental compliance policies applicable to
the Group, deliberates on important matters and manages the manner in which
compliance is practiced.

held each year. Video archives of certain meetings are also made available on the Company’s
Web site. INPEX holds biannual meetings on
its financial results for analysts and institutional investors. Video archives of these financial
results presentations are provided on the
Company’s IR Web site together with a simultaneous interpretation in English. In general,
INPEX undertakes overseas IR road shows covering such regions as Europe, North Americaand Asia. Furthermore, INPEX strives to participate in conferences attended by domestic
and overseas investors while engaging in
one-on-one meetings.
The Company’s Web site (IR section:www.inpex.co.jp/english/ir/) features a hostof IR tools including financial reports, financial
results presentations and annual reports.
Together with recent news releases, every
effort is made to disclose pertinent information on the Company’s performance andfinancial position, as well as trends in crude
oil prices, foreign currency exchange rates,
the Company’s share price and stock information.

IR fair in February 2019
Financial and Corporate Information

INPEX undertakes the early delivery of convocation notices for its general meeting of shareholders to ensure that shareholders have sufficient time to consider agenda items at each
Ordinary General Meeting of Shareholders.
The Convocation Notice for INPEX’s 13th Ordinary General Meeting of Shareholders heldin June 2019 was posted on the Company’s
Web site more than three weeks prior to themeeting on May 27, 2019. The Convocation
Notice itself was dispatched on June 3, 2019.
To facilitate the exercise of voting rights,
INPEX implemented the exercise of voting
rights via the Internet. The Company also
adopted a platform for the electronic use of
voting rights while posting copies of the convocation notice and other related documents,
both in Japanese and English, on its Web site
and TDnet (Timely Disclosure network).
Turning to the Company’s IR activities,
INPEX participates in events such as IR fairs
for individual investors and meetings in avariety of venues including the branch officesof securities firms. More than 10 information
meetings for individual investors are generally

Sustainability and Governance

Information Disclosure and Activities for the Benefit ofShareholders and Investors

IR page on INPEX’s Web site

INPEX CORPORATION Annual Report 201949

Directors, Audit Supervisory Board Members and Executive Officers(As of June 26, 2019)

Toshiaki Kitamura

Takayuki Ueda

Representative Director,
Chairman

Representative Director,
President & CEO

Years of service as Director: 9 years,
Number of shares owned: 39,800 shares

Years of service as Director: 1 year,
Number of shares owned: 6,000 shares

Masahiro Murayama

Seiya Ito

Director, Senior Executive
Vice President

Director, Senior Executive
Vice President

Years of service as Director: 10 years,
Number of shares owned: 29,200 shares

Years of service as Director: 13 years,
Number of shares owned: 24,100 shares

Takahiko Ikeda

Shigeharu Yajima

Director, Senior Managing
Executive Officer

Director, Senior Managing
Executive Officer

Years of service as Director: 10 years,
Number of shares owned: 31,000 shares

Years of service as Director: - year,
Number of shares owned: 13,000 shares

Kimihisa Kittaka

Nobuharu Sase

Director, Managing Executive
Officer

Director, Managing Executive
OfficerYears of service as Director: 3 years,
Number of shares owned: 10,300 shares

Years of service as Director: 3 years,
Number of shares owned: 29,800 shares

Directors and Audit & Supervisory Board Members
Representative Director, Chairman

Toshiaki Kitamura

Director (Outside)

Jun Yanai(2)(4)

Representative Director, President & CEO

Takayuki Ueda

(1)

Director (Outside)

Norinao Iio(2)(4)

Director

Masahiro Murayama(1)

Director (Outside)

Atsuko Nishimura(2)(4)

Director

Seiya Ito(1)

Director (Outside)

Yasushi Kimura*(2)(4)

Director

Takahiko Ikeda(1)

Director (Outside)

Kiyoshi Ogino*(2)(4)

Director

Shigeharu Yajima*(1)

Audit & Supervisory Board Member

Noboru Himata*Director

Kimihisa Kittaka(1)

Audit & Supervisory Board Member (Outside)

Hideyuki Toyama(3)(4)

Director

Nobuharu Sase

(1)

Audit & Supervisory Board Member (Outside)

Shinya Miyake*(3)(4)

Audit & Supervisory Board Member (Outside)

Mitsuru Akiyoshi*(3)(4)

Audit & Supervisory Board Member (Outside)

Hiroko Kiba*(3)(4)*Newly appointed Directors and Audit & Supervisory Board Members(1) Concurrently holds the position of executive officer (2) Outside directors as defined in Article 2, Item 15, of the Companies Act (3) Outside Audit & Supervisory Board members as defined in Article 2, Item 16, of the Companies Act(4) Independent directors/auditors as defined in Article 436, Item 2, Sub-Item 1, of the Securities Listings Regulations for the Tokyo Stock Exchange

50

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Jun Yanai

Norinao Iio

Atsuko Nishimura

Director (Outside)

Director (Outside)

Director (Outside)

Years of service as Director: 3 years,
Number of shares owned: - share

Years of service as Director: 2 years,
Number of shares owned: - share

Years of service as Director: 2 years,
Number of shares owned: - share

Kiyoshi Ogino

Director (Outside)

Director (Outside)

Years of service as Director: - year,
Number of shares owned: - share

Results and New Strategies

Yasushi Kimura

Years of service as Director: - year,
Number of shares owned: - share

Hideyuki Toyama

Shinya Miyake

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member (Outside)

Audit & Supervisory
Board Member (Outside)

Years of service as Audit &Supervisory Board Member:- year, Number of shares
owned: 17,100 shares

Years of service as Audit &Supervisory Board Member:
4 years, Number of shares
owned: - share

Years of service as Audit &Supervisory Board Member:- year, Number of shares
owned: - share

Hiroko Kiba

Audit & Supervisory
Board Member (Outside)

Audit & Supervisory
Board Member (Outside)

Years of service as Audit &Supervisory Board Member:- year, Number of shares
owned: - share

Years of service as Audit &Supervisory Board Member:- year, Number of shares
owned: - share

Sustainability and Governance

Mitsuru Akiyoshi

Project Overview

Noboru Himata

Executive Officers
Takayuki Ueda

Executive Officer

Hajime Kawai

Vice President, Asia Projects

Senior Executive Vice President

Masahiro Murayama

Senior Vice President, Finance & Accounting

Executive Officer

Hideki Iwashita

Vice President, Oceania Projects
Vice President, Commercial Coordination, Perth OfficeSenior Executive Vice President

Seiya Ito

Senior Vice President, Oceania Projects
Head of Overseas Projects

Executive Officer

Tetsuo Yonezawa

General Manager, HSE Unit

Senior Managing Executive Officer

Takahiko Ikeda

Senior Vice President, Technical Headquarters
HSE and Compliance

Executive Officer

Hiroshi Nakamura

Senior Managing Executive Officer

Shigeharu Yajima

Vice President, General Administration
General Manager, Human Resources Unit
General Administration Division

Senior Vice President, Global Energy Marketing

Tsuyoshi Watanabe

Vice President, General Administration

Kimihisa Kittaka

Senior Vice President, Corporate Strategy & Planning
Legal Affairs

Executive Officer

Managing Executive Officer

Executive Officer

Kazuyoshi Miura

Vice President, Domestic Energy Supply & Marketing
General Manager, Gas Marketing Unit Domestic Energy
Supply & Marketing Division

Executive Officer

Hideki Kurimura

Vice President, Asia Projects
Vice President, Technical Headquarters

Executive Officer

Yuzo Sengoku

Senior Vice President, Eurasia, Middle East & Africa
Projects

Executive Officer

Yosuke Happo

Vice President, Finance & Accounting
General Manager, Accounting Unit 2 Finance &Accounting Division

Executive Officer

Yoichi Iwata

Executive Officer Vice President, Oceania Projects

Executive Officer

Koichi Ogino

Vice President, Domestic Exploration & Production
General Manager, Production Unit East Japan Regional
Office Domestic Exploration & Production Division

Executive Officer

Akihiro Watanabe

Vice President, Asia Projects
General Manager, Jakarta Office
President Director Indonesia

Executive Officer

Mitsuo Tamura

Vice President, Abu Dhabi Projects
General Manager, Planning & Coordination Unit Abu
Dhabi Projects Division

Managing Executive Officer

Nobuharu Sase

Senior Vice President, General Administration

Managing Executive Officer

Kenji Kawano

Senior Vice President, Asia Projects

Managing Executive Officer

Hiroshi Fujii

Senior Vice President, Abu Dhabi Projects

Managing Executive Officer

Yoshinori Yamamoto

Senior Vice President, Domestic Energy Supply andMarketingManaging Executive Officer

Kimiya Hirayama

Senior Vice President, Domestic Exploration & Production

Managing Executive Officer

Takashi Kubo

Senior Vice President, Logistics & IMTManaging Executive Officer

Atsushi Sakamoto

Strategic Projects Office

Managing Executive Officer

Yoshiro Ishii

Senior Vice President, Renewable Energy & PowerBusiness

Managing Executive Officer

Toshiaki Takimoto

Senior Vice President, New Ventures & Global Exploration

Managing Executive Officer

Nobusuke Shimada

Senior Vice President, Americas Projects

Managing Executive Officer

Daisuke Yamada

Vice President, Finance & Accounting
General Manager, Finance Unit Finance & Accounting
DivisionManaging Executive Officer

Hitoshi Okawa

Vice President, Oceania Projects
General Manager, Perth Office
President Director, Australia

INPEX CORPORATION Annual Report 2019

Financial and Corporate Information

President & CEO

51

Directors, Auditors and Executive Officers

Toshiaki Kitamura

Kimihisa Kittaka

Kiyoshi Ogino

April 1972

April 1981

April 1977
June 2009

July 2002
July 2003
June 2004
July 2006
November 2007
August 2009
June 2010
June 2018

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
Director-General for Trade and Economic Cooperation
Bureau, METI
Director-General for Manufacturing Industries Bureau, METI
Director-General, Trade Policy Bureau, METI
Vice-Minister for International Affairs, METI
Advisor to Tokio Marine & Nichido Fire Insurance Co., Ltd.
Senior Executive Vice President of the Company
Representative Director, President & CEO of the Company
Representative Director, Chairman of the Company(incumbent)

October 2007
July 2008
November 2010
June 2012

June 2016
June 2019

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
Director-General for Consumer Policy, METI
Director-General, Kyushu Bureau, METI
Joined the Company
Executive Officer, Vice President of Corporate Strategy &Planning Division, General Manager of Corporate Strategy& Planning Unit, and Corporate Communication Unit of theCompany
Director, Managing Executive Officer, Senior Vice President,
Corporate Strategy & Planning of the Company
Director, Managing Executive Officer, Senior Vice Presidentof Corporate Strategy & Planning, Legal Affairs of theCompany (incumbent)

Takayuki Ueda
Nobuharu Sase

Masahiro Murayama

Jun Yanai

April 1976

April 1973
April 2004

April 2004
October 2004
April 2005
April 2008
May 2009
June 2009
June 2016
June 2019

Joined The Industrial Bank of Japan, Ltd. (currently Mizuho
Bank, Ltd.)
Executive Officer, General Manager of Syndicated FinanceDistribution Division No. 1, Mizuho Corporate Bank, Ltd.
Executive Officer, General Manager of Loan Trading
Division, Mizuho Corporate Bank, Ltd.
Managing Executive Officer, in charge of corporatebanking, Mizuho Corporate Bank, Ltd.
Director, Deputy President of Mizuho Securities Co., Ltd.
Advisor to the Company
Director, Managing Executive Officer, Senior Vice Presidentof Finance & Accounting of the Company
Director, Senior Managing Executive Officer, Senior Vice
President, Finance & Accounting of the Company
Director, Senior Executive Vice President, Senior Vice
President, Finance & Accounting of the Company(incumbent)

Seiya Ito
April 1977
June 2003

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
Director, General Manager of Corporate Planning &Management Department of INPEX Corporation
November 2004 Director, General Manager of Corporate Planning &Management Department and Public Affairs Department of
INPEX Corporation
September 2005 Director, Assistant Senior General Manager of Corporate
Strategy & Administration Division, General Manager ofCorporate Strategy & Planning Unit and Public Affairs Unitof INPEX Corporation
April 2006
Director, Assistant Senior General Manager of Corporate
Strategy & Administration Division, General Manager ofCorporate Strategy & Planning Unit of INPEX Corporation(currently the Company)
October 2008
Director, Managing Executive Officer, Senior Vice Presidentof Ichthys Project of the Company
June 2016
Director, Senior Managing Executive Officer, Senior Vice
President of Ichthys Project of the Company
June 2019
Director, Senior Executive Vice President, Senior Vice
President of Oceania Projects, Head of Overseas Projects of
the Company (incumbent)

April 1981
October 2008
June 2010

June 2016

April 2005
April 2008
April 2011
April 2013
June 2013
April 2014

June 2016
June 2016

Joined Indonesia Petroleum, Ltd. (INPEX Corporation)
Vice President of General Administration Division, General
Manager of Secretary Unit of the Company
Executive Officer, Vice President of Oil & Gas Business
Division No.1, General Manager, Oil Marketing Unit of theCompany
Director, Managing Executive Officer, Senior Vice President,
General Administration Division of the Company(incumbent)

April 1978
March 2005
June 2007

October 2008
June 2014
April 2017
June 2018

Joined Teikoku Oil Co., Ltd.
Director and General Manager, Production, Domestic
Headquarters of Teikoku Oil Co., Ltd.
Managing Director, President of Domestic Operation
Division and General Manager of Niigata District
Department of Teikoku Oil Co., Ltd.
Director, Managing Executive Officer, Senior Vice Presidentof Domestic Projects of the Company
Director, Managing Executive Officer, Senior Vice Presidentof Gas Supply & Infrastructure Division of the Company
Director, Managing Executive Officer, Senior Vice Presidentof Technical Headquarters of the Company
Director, Senior Managing Executive Officer Senior Vice
President, Technical Headquarters In charge of HSE andCompliance of the Company (incumbent)

Shigeharu Yajima
April 1979
February 2005
October 2008
June 2010

June 2014
April 2017
June 2019

52

Joined Tomen Corporation (currently Toyota Tsusho
Corporation)
Joined INPEX Corporation
General Manager of Gas Business Unit, Oil & Gas Business
Division No. 1 of the Company
Executive Officer, Vice President of Oil & Gas Business
Division No. 1, General Manager of Gas Business Unit of theCompany
Managing Executive Officer, Senior Vice President of Oil &Gas Business Division No.1 of the Company
Managing Executive officer, Senior Vice President of Global
Energy Marketing Division of the Company
Director, Senior Managing Executive Officer, Senior Vice
President of Global Energy Marketing of the Company(incumbent)

INPEX CORPORATION Annual Report 2019

Noboru Himata

Norinao Iio
June 1973
April 2005
April 2008
October 2008
June 2009
August 2009
April 2010
April 2011
June 2011
June 2017

June 2003
June 2007
October 2008
June 2018

June 2019

Joined Mitsui & Co., Ltd.
Managing Officer, Chief Operating Officer, Energy Business
Unit, Mitsui & Co., Ltd.
Executive Managing Officer, Chief Operating Officer, Europe
Middle East and Africa Unit, Mitsui & Co., Ltd.
Senior Executive Managing Officer, Chief Operating Officer,
Europe Middle East and Africa Unit, Mitsui & Co., Ltd.
Representative Director, Senior Executive Managing Officer,
Mitsui & Co., Ltd.
Representative Director, Senior Executive Managing Officer,
Chief Compliance Officer, Mitsui & Co., Ltd.
Representative Director, Senior Executive Managing Officer,
Mitsui & Co., Ltd.
Director, Mitsui & Co., Ltd.
Counselor, Mitsui & Co., Ltd.
Director (Outside) of the Company (incumbent)

April 1975
July 2001
July 2003
July 2005
October 2006
November 2012
January 2013
June 2015

Atsuko Nishimura
Joined Ministry of Foreign Affairs
Director, First Africa Division, Middle Eastern and African
Affairs Bureau
August 1999
Counselor/Minister, Permanent Mission of Japan to theUnited Nations
June 2001
Minister, Embassy of Japan in Belgium
September 2004 Professor, School of Law, Tohoku University
June 2008
Administrative Vice President, Japan Foundation
April 2012
Senior Councilor, Japan Oil, Gas and Metals National
Corporation
April 2014
Ambassador Extraordinary and Plenipotentiary to theGrand Duchy of Luxembourg
July 2016
Ambassador Extraordinary and Plenipotentiary in charge of
Women, Human Rights and Humanitarian Affairs
June 2017
Director (Outside) of the Company (incumbent)

April 1987

Joined Export-Import Bank of Japan (currently Japan Bankfor International Cooperation)
Senior Advisor for Global Environmental Affairs, Corporate
Group of Japan Bank for International Cooperation (incharge of global environmental issues)
November 2013 Director General, Nuclear & Renewable Energy Finance
Department, Energy, Natural Resources and Environment
Finance Group of Japan Bank for International Cooperation
July 2014
Earned a Doctor of Social Science
July 2015
Director General, New Energy & Power Finance Department
I, Infrastructure and Environment Finance Group of Japan
Bank for International Cooperation
September 2016 Executive Managing Director, Japan Institute for Overseas
Investment
June 2017
Regional Executive Officer, Regional Head for the Americas
of Japan Bank for International Cooperation (stationed in
New York)
June 2019
Audit & Supervisory Board Member (full-time) of theCompany (incumbent)
October 2012

Mitsuru Akiyoshi

April 2009
June 2010
April 2012
April 2014
April 2018
April 2019
June 2019

April 2010
July 2010
June 2012
June 2012
April 2017
June 2018
June 2019
June 2019

Joined Nippon Oil Company, Ltd.
Director, Nippon Mitsubishi Oil Corporation
Managing Director & Executive Officer, Nippon Oil
Corporation
Member of the Board of JX Holdings, Inc. (part-time)
Representative Director, President, President and Chief
Executive Officer, JX Nippon Oil & Energy Corporation
Representative Director, Chairman of the Board, JX
Holdings, Inc.
Representative Director, Chairman of the Board, JX Nippon
Oil & Energy Corporation
Representative Director, Chairman of the Board, JXTG
Holdings, Inc.
Adviser, JXTG Holdings, Inc.
Senior Corporate Advisor, JXTG Holdings, Inc. (incumbent)
Director (Outside) of the Company (incumbent)

Joined Marubeni Corporation
Executive Officer, General Manager of Finance Departmentof Marubeni Corporation
Managing Executive Officer of Marubeni Corporation
Representative Director, Managing Executive Officer ofMarubeni Corporation
Representative Director, Senior Managing Executive Officer
of Marubeni Corporation
Representative Director, Senior Executive Vice President ofMarubeni Corporation
Senior Consultant of Marubeni Corporation
Representative Director and President of MG Leasing
Corporation (incumbent)
Audit & Supervisory Board Member of the Company(incumbent)

Hiroko Kiba (Hiroko Yoda)
April 1987

Yasushi Kimura

Joined Ministry of FinanceDirector-General of Sapporo Regional Taxation Bureau,
National Tax Agency (NTA)
Executive Secretary of the Administration Office of the
Director-General, Cabinet Legislation Bureau (CLB)
Director-General of the Fourth Department, CLB
Director-General of the Third Department, CLB
Advisor, Aioi Nissay Dowa Insurance Co., Ltd.
Registered as attorney-at-law (incumbent)
Audit & Supervisory Board Member (full-time) of theCompany (incumbent)

Shinya Miyake (Shinya Inoue)

April 1978
April 2007

April 1970
June 2002
June 2007

Joined The Industrial Bank of Japan, Ltd. (currently Mizuho
Bank, Ltd.)
Joined INPEX Corporation
Executive Officer, in charge of accounting of INPEXCorporation
Executive Officer, Vice President of Finance & Accounting,General Manager of Finance Unit of the Company
Managing Executive Officer, Vice President, Finance &Accounting, General Manager of Finance Unit of theCompany
Audit & Supervisory Board Member (full-time) of theCompany (incumbent)

Hideyuki Toyama
Joined Mitsubishi Corporation
Senior Vice President, Senior Assistant to Group CEO,
Energy Business Group of Mitsubishi Corporation
Senior Vice President, Division COO, Petroleum Business
Division of Mitsubishi Corporation
Executive Vice President, Group COO, Energy BusinessGroup of Mitsubishi Corporation
Executive Vice President, Group CEO, Energy BusinessGroup of Mitsubishi Corporation
Senior Executive Vice President, Group CEO, Energy
Business Group of Mitsubishi Corporation
Senior Executive Vice President, Group CEO, Energy
Business Group of Mitsubishi Corporation
Member of the Board, Senior Executive Vice President,Group CEO and CCO, Energy Business Group of Mitsubishi
Corporation
Corporate Advisor of Mitsubishi Corporation (incumbent)
Director (Outside) of the Company (incumbent)

April 1979
June 1997

Takahiko Ikeda

June 2010
June 2011
June 2014
June 2015
June 2017
June 2019

April 1980

Joined Ministry of International Trade and Industry(currently Ministry of Economy, Trade and Industry)
July 2010
Director-General, Minister’s Secretariat
August 2011
Director-General, Manufacturing Industries Bureau, METI
September 2012 Director-General, Trade Policy Bureau, METI
June 2013
Commissioner, Agency for Natural Resources and Energy
July 2015
Vice-Minister for International Affairs, METI
April 2017
Special Councilor of the Company
August 2017
Senior Executive Vice President of the Company
June 2018
Representative Director, President & CEO of the Company(incumbent)

April 1980

April 2010

Joined Japan Petroleum Exploration Co., Ltd. (JAPEX)
Executive Officer, Deputy Senior Vice President ofDevelopment Division, JAPEX
Executive Officer, Senior Vice President of Development
Division, JAPEXManaging Executive Officer, JAPEXManaging Director & Executive Officer, JAPEX
Senior Managing Director & Executive Officer, JAPEX
Executive Vice President and Executive Officer, JAPEX
Advisor, JAPEX (incumbent)
Director (Outside) of the Company (incumbent)

April 2001
November 2001
April 2006
April 2013
June 2019

Joined Tokyo Broadcasting System, Inc. (currently Tokyo
Broadcasting System Television, Inc.)
Part-time Lecturer, Faculty of Education, Chiba University
Member of Board of Education of Urayasu City, Chiba
Specially Appointed Professor, Faculty of Education, Chiba
University
Visiting Professor, Chiba University (incumbent)
Audit & Supervisory Board Member of the Company(incumbent)Financial and Corporate Information
54 11-Year Financial Information
56 Background Information: Oil and Gas Accounting Policies
and Treatment
58 Management’s Discussion and Analysis of Financial
Condition and Results of Operations
64 Consolidated Financial Statements/
Notes to Consolidated Financial Statements
83 Independent Auditor’s Report
84 Subsidiaries and Affiliates
86 Business Risks
94 Oil and Gas Reserves and Production Volume
97 Corporate Information

11-Year Financial Information
INPEX CORPORATION and Consolidated Subsidiaries
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic
computation only, at ¥111.01=US$1.00, the approximate exchange rate in effect as of March 31, 2019.
Millions of yen(Results ofoperations)

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/3

Net sales¥1,076,165¥  840,427¥  943,080¥1,186,732¥1,216,533¥1,334,626¥1,171,227¥1,009,564

Cost of sales    319,038     298,168     334,833     395,443     426,326     490,417     525,444

526,758

Gross profit    757,127     542,259     608,247     791,289     790,207     844,209     645,783

482,806

Operating income    663,267     461,668     529,743     709,358     693,448     733,610     534,886

390,139

Income before income    616,167     442,027     508,587     767,039     718,146     750,078     540,023
taxes
Net income attributable¥  145,063 ¥  107,210 ¥  128,699 ¥  194,001 ¥  182,962 ¥  183,691 ¥   77,820
to owners of parent

328,887¥   16,777(Financial position)
Current assets¥  411,110¥1,342,410¥  984,345

Tangible fixed assets    297,636     358,094     379,862     383,698     584,541     951,779   1,497,622

1,752,615

Intangible assets    253,681     239,205     249,111     233,318     380,156     439,179     458,770

541,471

Investments and other    805,618     923,624   1,558,475   1,540,680   1,544,958   1,506,977   1,200,352
assets

1,091,411

Total assets  1,768,045   2,013,778   2,680,380   3,066,398   3,616,159   4,038,139   4,499,154

4,369,842

Current liabilities    206,059     227,905     254,729     367,844     414,977     375,670     365,212

319,128

Long-term liabilities    199,925     295,270     328,268     384,361     530,198     666,432     845,238

871,911

Net assets¥1,362,061¥  492,855¥1,490,603¥  492,932¥2,097,383¥  908,702¥2,314,193¥1,106,504¥2,670,984¥1,140,204¥2,996,037¥3,288,704¥3,178,803(Cash flows)
Cash flows from¥  230,352 ¥  241,373 ¥  274,094 ¥  320,692 ¥  252,347 ¥  213,514 ¥  216,749 ¥  183,708
operating activities
Cash flows from
(240,168)(251,812)(844,511)(280,864)(489,870)(395,555)(81,087)(543,534)
investing activities
Cash flows from
(46,090)
68,937     548,057      29,294     137,069      48,961(4,178)
156,726
financing activities
Cash and cash equivalents¥  162,845 ¥  216,395 ¥  182,025 ¥  249,233 ¥  199,859 ¥  117,531 ¥  260,978 ¥   53,813
at end of the period(Per share data)
Net assets per share(Yen)
Cash dividends per
share (Yen)
Earnings per share(EPS) (Yen)¥1,350.25*¥1,473.87*¥1,367.40*¥1,492.27*¥1,699.10*¥1,911.25* ¥ 2,099.95¥ 2,008.34

20.00*    13.75*    15.00*    17.50*    17.50*    18.00*       18.00

18.00¥  154.00*¥  113.88*¥  102.08*¥  132.84*¥  125.29*¥  125.78* ¥    53.29¥    11.49* Retrospectively adjusted for a stock split at a ratio of 1:400 of common stock on October 1, 2013.

(Financial indicators)

54

Net debt / Net total
capital employed (%)(31.2)%(30.6)%(48.9)%(60.7)%(43.9)%(31.9)%(16.8)%(8.1)%

Equity ratio (%)

71.9

68.9

74.5

71.1

68.6

69.1

68.2

67.1

D/E ratio (%)

12.9%

17.3%

13.7%

14.6%

19.2%

20.9%

22.1%

25.3%

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Thousands of
U.S. dollars

Millions of yen¥  874,423¥  933,702¥  971,389$ 8,750,464

453,847

498,039

413,300

3,723,088

420,576435,663

558,089

5,027,376

336,453

357,363474,282

4,272,426

327,525

307,300

494,043

4,450,437¥   46,168¥   40,363¥   96,106$   865,742¥  942,960¥  466,351¥  457,712$ 4,123,160

1,928,598

2,044,620

2,278,995

20,529,637

521,253

541,503

520,213

4,686,182

919,363

1,199,913

1,536,626

13,842,230

4,312,174

4,252,387

4,793,546

43,181,209

297,465

305,439

372,001

3,351,058

807,166

788,079

1,163,961

10,485,191¥3,207,543¥3,158,869¥3,257,584$29,344,960¥  275,810¥  278,539¥  238,566$ 2,149,050

53,484(351,908)(682,006)(6,143,645)(65,428)

34,742405,1853,649,986¥  316,791¥  276,080¥  239,653$ 2,158,842¥ 2,015.38¥ 1,997.24¥ 2,058.95$     18.55

18.00

18.00

24.00

0.22

¥    31.61¥     27.64¥    65.81$      0.59

0.9%

11.8%

21.7%

21.7%

68.3

68.6

62.7

62.7

23.4%

24.0%

38.0%

38.0%

Notes
*	
EBIDAX = Net income (including non-controlling interests) +Deferred tax + (1 – Tax rate) × (Interest expense – Interest income)+ Foreign exchange gain and loss + Depreciation and amortization+ Amortization of goodwill + Recovery of recoverable accounts
under production sharing (capital expenditures) + Exploration
expenses + Provision for exploration projects + Provision for allowance for recoverable accounts under production sharing – Gain on
reversal of allowance for recoverable accounts under production
sharing + Impairment loss*	Net assets excluding non-controlling interests = Net assets – Noncontrolling interests*	Equity ratio = Net assets excluding non-controlling interests / Total
assets*	Net debt = Interest-bearing debt – Cash and cash equivalents –Time deposits – Certificate of deposits – Public bonds and cor­porate bonds and other debt securities with determinable value –Long-term time deposits*	Net debt / Net total capital employed = Net debt / (Net assets +Net debt)*	D/E ratio = Interest-bearing debt / (Net assets – Non-controllinginterests)*	ROE = Net income attributable to owners of parent / Average ofnet assets excluding non-controlling interests at the beginning andend of the year*	The reserves cover most of INPEX group projects including theequity-method affiliates. The reserves of projects which are expected to be invested a large amount and affect the Group’s future
result materially are evaluated by DeGolyer & MacNaughton, andthe others are done internally.
	The proved reserves are evaluated in accordance with SEC regulations.
	The probable reserves are sum of proved reserves and probable reserves evaluated in accordance with Petroleum Resources
Management System (PRMS) of SPE etc. after deduction of proved
reserves evalu­ated in accordance with SEC regulations.
*	Production volumes are calculated in accordance with SEC regu­
lations and include the equity-method affiliates. The production
volume of crude oil and natural gas under the production sharing
contracts entered into by the Group corresponds to the net eco­nomic take of the Group.

Financial and Corporate Information

2019/3

Sustainability and Governance2019/3

Project Overview

2018/3Results and New Strategies

2017/3

Notes: In consolidated financial statements, amounts are basicallyrounded to the nearest million.

INPEX CORPORATION Annual Report 201955

Background Information

Oil and Gas Accounting Policies and Treatment

ACCOUNTING METHODS FOR TYPES OF AGREEMENTS
The oil and gas business generates the bulk of consolidated net sales
revenues for INPEX CORPORATION and its consolidated subsidiaries (the“Group”). Two types of agreements govern the Group’s oil and gas operations. One is production sharing contracts (the “PSCs”) and the other isconcession agreements. The latter category also includes domestic mining
rights, as well as overseas permits, licenses and lease agreements.

1. Production sharing contracts
Production sharing contract is an agreement by which one or several oil andgas development companies serve as contractors that undertake at their own
expense exploration and development work on behalf of the governmentsof oil-producing countries or national oil companies and receive production
from the projects as cost recovery and compensation.

Cost recovery and production sharing
The PSCs determine the allocation of oil and gas production among thehost country’s government (or related entity) and the contractors such as theGroup. The allocation formula generally differs according to the terms of theindividual PSC. In the case of PSC for major projects currently in production,
total production volume is allocated quarterly between two portions.
(1) “Cost recovery portion”: This is the oil and gas equivalent of costs
incurred at the quarterly period under the PSCs with the governments ofoil-producing countries. The equivalents are determined based on thecurrent unit prices of crude oil and natural gas and allocated between
the contractors alone. The quantity of oil and gas in the “cost recovery
portion” decreases as unit prices increase, whereas that of the “equity
portion” (explained below) rises.
		 If the actual production for the quarterly period is insufficient tocover the quantity of oil and gas equivalent calculated for the cost recovery portion, the latter is capped at actual production and any surplus
amount is carried forward to the following quarterly period, as stipulated
in the PSC.
(2) “Equity portion”: This is any residual production after the cost recovery
portion has been allocated. It is allocated between the host country’s
government and the contractors based on agreed percentages.
The calculation of items in the income statement based on the above
PSC-related considerations is as follows:•		 The Group records as net sales its share of total sales relating to the oiland gas production that is allocated to contractors under the PSCs.
•		 The Group books as cost of sales the portion of “Recoverable accounts
under production sharing” that is recovered through the allocation ofits share of the “cost recovery portion.”

Recoverable costs under the PSCs
Exploration costs
The share of recoverable exploration costs incurred by the Group under theterms of the relevant PSC is capitalized within “Recoverable accounts under
production sharing.”
Development costs
The share of all development costs incurred by the Group that is recover-

Production sharing contracts
Costs
Exploration
costs
Development
costs
Production costs(Operating costs)
Acquisition
costs

56

able under the terms of the relevant PSC is recorded within “Recoverable
accounts under production sharing.”
Production costs
Any operating costs incurred during the production phase that are recoverable under the relevant PSC are initially recorded within “Recoverable
accounts under production sharing.”
Administrative expenses
Any administrative expenses that are recoverable under the relevant PSC arerecorded within “Recoverable accounts under production sharing.”
As noted, in “Cost recovery and production sharing,” these costs are recovered either as capital or operating expenditures.

Non-recoverable costs under the PSCs
Acquisition costs
Costs relating to the acquisition of rights (recorded as intangible assets
under “Exploration and development rights”) for any projects governed by
the PSCs that are entirely in the exploration phase are expensed as incurredand amortized. Expenditures or costs relating to the acquisition of rights
to projects already in the development or production phase are capitalized
within “Exploration and development rights” and amortized based on theunit-of-production method. These amortization costs are recorded within“Depreciation and amortization.” Cost recovery provisions in the PSCs do
not generally cover these expenditures.

2. Concession agreements
Concession agreement is an agreement or authorization (including mining
rights awarded in Japan, as well as overseas permits, licenses and leaseagreements) by which a government entity or a national oil company of thecountry directly awards mining rights to an oil company. The oil company
makes its own investment in exploration and development and has the rightof disposition of the oil and gas it extracts. Revenues are returned to the hostcountry in the form of royalties, taxes, etc., on sales.
Acquisition costs
Costs relating to the acquisition of rights (recorded as intangible assets under“Mining rights”) for projects governed by concession agreements are treatedin the same way as projects governed by the PSCs, as described above.
Exploration costs
The Group’s share of exploration costs is expensed as incurred.
Development costs
The Group’s share of any development costs related to mining facilities iscapitalized within tangible fixed assets. The depreciation of tangible fixed
assets that are governed by concession agreements is computed primarily
using the unit-of-production method for mining assets located outside Japanand the straight-line method for domestic facilities. These depreciation
expenses are recorded within the cost of sales.
Production costs
The Group’s share of operating costs that are incurred during the production
phase is recorded within the cost of sales.
Administrative expenses
The Group’s share of administrative expenses is expensed as incurred.

Concession agreements

Assets on
Balance Sheet

Statement of
IncomeCosts

Assets on
Balance Sheet

Statement of
IncomeProject under
exploration phase

Provision for allowance
for recoverable
accounts under
production sharing

Explorationcosts

All exploration costs
are expensed
as incurred

Exploration
expenses

Development
costs

Tangible fixed
assetsCost of sales(Depreciation andamortization)

Production costs(Operating costs)

All production costs
are expensed
as incurred

Cost of sales(Operating expenses)

Acquisition
costs

Mining rights

Cost of sales(Depreciation andamortization)

Recoverable
accounts under
production sharing
Project underdevelopment andproduction phase
Recoverable
accounts under
production sharing
Project underdevelopment andproduction phase
Exploration anddevelopment
rightsINPEX CORPORATION Annual Report 2019

Cost of sales(Recovery of recoverable
accounts under
production sharing(capital expenditures))

Cost of sales(Recovery of recoverable
accounts under
production sharing(operating expenditures))

Selling, general andadministrative expenses(Depreciation andamortization)

INPEX Snapshot

CRITICAL ACCOUNTING POLICIES AND ESTIMATES— Unit-of-production method
Overseas mining facilities, mining rights and exploration and development
rights that are acquired during the development and production phase aremainly depreciated or amortized based on the unit-of-production method.
This approach requires the estimation of reserves. Although the Group
believes that the assessment of reserves is done in an appropriate manner,
any changes in these estimates could significantly affect future operating
results.

— Provision for loss on businessA provision for loss on business is provided for future potential loss on crude
oil and natural gas development, production and sales business individuallyestimated for each project. Although assessments and accounting estimates
are made on a reasonable basis, actual operating results can change depending on the business status.
— Deferred tax assets
Deferred tax assets reflect temporary differences (including net operating
loss carry-forwards) arising mainly from the write-down of exploration expenditures, foreign taxes payable and excess of tax allowable depreciation.
Valuation allowances are provided once it is judged that the non-realizationof deferred tax assets has become the more probable outcome. The effectof foreign tax credits is taken into account in the calculation of such valuation
allowances. The realization of deferred tax assets is principally dependent on
the generation of sufficient taxable income, based on the available information. Adjustments to deferred tax assets could be required if future taxable
income was lower than expected due to market conditions, foreign exchange
rate fluctuations or poor operating performance.
— Retirement benefits to employees
Retirement benefit obligation to employees are recognized at the net present value of future obligations as of the end of the accounting period, taking
into account any periodic benefit costs that have arisen during the period.
The calculation of retirement benefit obligations and retirement benefit
expenses is based on various actuarial assumptions, including the discountrate, employee turnover and retirement rates, remuneration growth rates,
and the long-term expected return on plan assets. Future operating results
could be significantly affected by deviation between the base assumptions
and actual results or the revision of such assumptions which were to generate
actuarial gains or losses.

Sustainability and Governance— Asset retirement obligations
Asset retirement obligations are recorded by a reasonable estimate of thepresent value of retirement costs incurred upon termination of the operationand production with respect to oil and gas production facilities, based on theoil and gas contracts or laws and regulations within the countries in which
the Group operates or has working interests. Although the Group believes
that such estimates of the present value of retirement costs are reasonable,changes to estimates of the present value of retirement costs which arecaused by the factors such as changes to retirement plans, escalating prices
of drilling equipment and materials and others could significantly affect future
operating results.

— Provision for exploration projects
A provision for exploration projects is provided for future expenditures of
consolidated subsidiaries at the exploration stage based on a schedule ofinvestments in exploration. Although the Group believes that assessments
relating to the schedule of investments are reasonable, changes to theschedule could significantly affect future operating results.

Project Overview— Allowance for recoverable accounts under production sharing
Any expenditures made during the exploration, development and production
phases of projects governed by the PSCs are capitalized within “Recoverable
accounts under production sharing” if they are recoverable under the
relevant PSC. An allowance equal to exploration costs is recorded within“Allowance for recoverable accounts under production sharing” to provide
for potential losses from unsuccessful exploration. This allowance typicallyremains unchanged on the balance sheet until it exceeds the residual balanceof exploration costs that previously had been capitalized within “Recoverable
accounts under production sharing” during the exploration phase. Reflecting
the uncertainty associated with oil and gas projects, an allowance is recorded
within “Allowance for recoverable accounts under production sharing” toprovide for probable losses on development activities, as individually estimated for each project. Although assessments and accounting estimates are
made on a reasonable basis, actual operating results can change dependingon the project status.

— Allowance for investments in exploration companies
An allowance is recorded to provide for probable losses on investments
made by the Group in entities engaged in oil and gas activities, as estimatedbased on the net assets of such entities. Although the Group believes thatthe assessments and estimates relating to such investments are reasonable,changes in actual production volumes, prices or foreign exchange rates could
significantly affect future operating results.

Results and New Strategies

The Group’s consolidated financial statements are prepared in conformity
with Japanese GAAP. The preparation of these financial statements requires
the application of estimates, judgments and assumptions that affect thereported values of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses for thereporting period. Actual results may differ from the previously estimated orassumed values.
Accounting estimates pursuant to the preparation of the consolidated
financial statements are deemed critical if the degree of uncertainty associated with such estimates is high, or if rational changes to such estimates
could exert a material impact on the financial condition or operating results.
Critical accounting policies and estimates relating to the financial presentation are outlined below.

— Goodwill
The excess cost over underlying net assets excluding non-controlling interests as fair value as of their dates of acquisition is accounted for as goodwill
and amortized over 20 years on a straight-line method.

Financial and Corporate Information

INPEX CORPORATION Annual Report 201957

Management’s Discussion and Analysis of Financial
Condition and Results of Operations
BUSINESS ENVIRONMENT
During the year ended March 31, 2019, the outlook of the global
economy remained uncertain despite the steady nature of the U.S.
economy, owing to U.S.-China trade disputes and the decelerationof the Chinese economy. The Japanese economy continued on
its trajectory of moderate recovery as consumption per capita andcapital expenditures showed signs of growth as corporate earnings
and employment rates continued to improve.
Of the international crude oil price indices, which significantly
influence the financial performance of the INPEX Group, Brent
crude, commonly considered a benchmark index, started at
US$67.64 per barrel on April 1, 2018 and jumped to US$79.80 per
barrel in May on the back of concerns over tightened supply anddemand due to a decrease in Iranian crude oil exports following
the announcement of the reinstatement of U.S. sanctions against
Iran.
Thereafter, the price of Brent crude oil fell to US$70.76 perbarrel in August reflecting concerns of growing U.S. crude oil
production and inventory, but rebounded to US$84.98 per barrelin October, buoyed by spreading concerns over supply shortages
driven by a decrease in Iranian oil exports in light of pending U.S.
sanctions, suspicions that OPEC’s production hike to offset thiswould be proven insufficient, and weakening growth in U.S. shale
oil production.
In January 2019, however, the price of Brent crude oil fell
dramatically to US$54.91 per barrel reflecting rising concerns of a
global economic slowdown, in addition to the announcement thatthe sanctions against Iran would be temporarily relaxed allowing
some countries to import oil from the country, and skepticism over
OPEC’s willingness to comply with production cutbacks following
its meeting in December, which led to the relaxation of tightened
supply and demand. The Brent crude price ultimately closed out
at US$68.39 per barrel on March 31, 2019, lifted by expectationsof a resolution to U.S.-China trade disputes and concerns over thetightening of supply and demand as a result of continuous coordinated production cutbacks by oil-producing countries. Meanwhile,
in Japan, the price of crude oil and petroleum products shifted incorrelation with international oil prices. The INPEX Group’s average
crude oil sales price for the year ended March 31, 2019 reflected
this shift and rose to US$70.30 per barrel, up US$14.00 from theyear ended March 31, 2018.
The foreign exchange market, another important factor that
affects the business of our Group, began to trade at ¥106 level
against the U.S. dollar. After that, the U.S. dollar climbed to ¥114
level because of steady U.S. economic indicators, U.S. corporate
results and the stability of the international affairs which was led by
the realization of the summit between U.S. and North Korea, andso forth.
In October onward, escalation of U.S.-China trade disputes
led to the fall in the U.S. treasury bill interest rate and stock price.
In December, Federal Open Market Committee (FOMC) revised
the forecast of the number of rate hikes during 2019 and U.S.based IT companies downgraded their corporate outlooks. Under
those circumstances, at the beginning of 2019, Japanese Yenplummeted.
After that slump, however, Japanese Yen rebounded becauseof the expectation of easing U.S.-China trade disputes and steady
U.S. economic indicators.
Finally, on March 31, 2019, TTM closed at ¥111.01 against the
U.S. dollar which turned out to be ¥4.74 lower than that on March
31, 2018.
Reflecting these situations, the average exchange rate applied
for sales transactions for our Group for the year ended March 31,
2019, was ¥110.70 against the U.S. dollar, which is ¥0.57 higher
than that for the year ended March 31, 2018.

PERFORMANCE OVERVIEW
Net sales
Consolidated net sales for the year ended March 31, 2019,
increased by ¥37.7 billion, or 4.0%, to ¥971.4 billion from ¥933.7
billion for the year ended March 31, 2018, due to an increase in
crude oil price.
Compared with the year ended March 31, 2018, net sales ofcrude oil increased by ¥72.4 billion, or 10.2%, to ¥782.7 billion
from ¥710.3 billion, and net sales of natural gas decreased by¥37.4 billion, or 18.0%, to ¥170.7 billion from ¥208.1 billion.
The sales volume of crude oil decreased by 12,379 thousandbarrels, or 11.0%, to 100,503 thousand barrels compared withthe year ended March 31, 2018. The sales volume of natural gas
decreased by 32 billion cubic feet (Bcf), or 12.1%, to 233 Bcf
compared with the year ended March 31, 2018. Of this, the sales
volume of overseas natural gas decreased by 34 Bcf, or 18.1%, to152 Bcf compared with the year ended March 31, 2018. The sales
volume of domestic natural gas increased by 45 million m3, or
2.1%, to 2,169 million m3 (equivalent to 81 Bcf) compared with theyear ended March 31, 2018. The average sales price of overseas
crude oil was US$70.30 per barrel, an increase of US$14.00, or
24.9%, compared with the year ended March 31, 2018. The average sales price of overseas natural gas was US$3.18 per thousand
cubic feet (Mcf), a decrease of US$1.86, or 36.9%, compared with58

INPEX CORPORATION Annual Report 2019the year ended March 31, 2018. The average sales price of domestic natural gas was ¥53.46 per m3, an increase of ¥7.10 per m3, or
15.3%, compared with the year ended March 31, 2018.
The increase of ¥37.7 billion in net sales was mainly derived
from the following factors: a decrease in sales volume pushingsales down of ¥99.4 billion, an increase in unit sales price contributing ¥139.1 billion to the increase, the appreciation of theJapanese yen against the U.S. dollar pushing sales down of ¥4.7
billion, and an increase in net sales excluding crude oil and natural
gas of ¥2.7 billion.

Cost of sales
Cost of sales for the year ended March 31, 2019, decreased by¥84.7 billion, or 17.0%, to ¥4,133 billion from ¥4,980 billion for theyear ended March 31, 2018. This was mainly due to the absence of
cost of sales in the offshore Mahakam Block.

Exploration expenses
Exploration expenses for the year ended March 31, 2019,
increased by ¥10.4 billion, or 779.8%, to ¥11.7 billion from ¥1.3
billion for the year ended March 31, 2018. This was mainly due toan increase in exploration activities in the Eurasia region and theAsia & Oceania region.

INPEX Snapshot(Millions of yen, %)Years ended March 31,

2019

ChangeRatio¥971,389
782,695
170,710
17,984413,300
558,089
11,67957,65914,469474,282
70,925
7,645
6,761
28,364
8,357
—
7,499
1,941
10,35851,164
17,333
1,468
203—
25,236
6,924
494,043
397,259
96,784678¥ 96,106¥ 37,687
72,417(37,392)
2,662(84,739)
122,426
10,351(706)(4,138)116,919
15,658
1,167
1,983
24,172
8,160(17,528)(5,127)1,941
890(54,166)
10,257
1,468
203(10,472)(54,734)(888)
186,743
87,85998,884
43,141¥ 55,743

4.0%
10.2(18.0)
17.4(17.0)
28.1
779.8
(1.2)
(22.2)
32.7
28.3
18.0
41.5
576.6
—
(100.0)(40.6)—
9.4(51.4)
145.0——(100.0)(68.4)(11.4)
60.8
28.4
—
—
138.1%

Other expenses

Selling, general and administrative expenses for the year ended
March 31, 2019, decreased by ¥0.7 billion, or 1.2%, to ¥57.7 billion from ¥58.4 billion for the year ended March 31, 2018.

Other expenses for the year ended March 31, 2019, decreased by¥54.2 billion, or 51.4%, to ¥51.2 billion from ¥105.3 billion for theyear ended March 31, 2018. This was mainly due to a decrease inimpairment loss.

Sustainability and Governance

Selling, general and administrative expenses

Project Overview

2018¥933,702
710,278
208,102
15,322
498,039435,663
1,328
58,365
18,607357,363
55,267
6,478
4,778
4,192
197
17,528
12,626—
9,468
105,330
7,076——
10,472
79,970
7,812
307,300
309,400(2,100)(42,463)¥ 40,363

Results and New Strategies

Net sales
Crude oil
Natural gas
Other
Cost of sales
Gross profit
Exploration expenses
Selling, general and administrative expenses
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Equity in earnings of affiliates
Reversal of allowance for doubtful accounts
Gain on reversal of allowance for recoverable accounts under production sharing
Compensation income
Foreign exchange gain
Other
Other expenses
Interest expense
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Impairment loss
Other
Income before income taxes
Income taxes
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income attributable to owners of parent

Depreciation and amortization
Depreciation and amortization for the year ended March 31, 2019,
decreased by ¥4.1 billion, or 22.2%, to ¥14.5 billion from ¥18.6
billion for the year ended March 31, 2018. The Group records
depreciation expenses for production facilities that are coveredby concession agreements as cost of sales. In addition, under
its accounting treatment of the PSCs, the Group records capital
expenditures as “Recoverable accounts under production sharing”
instead of capitalizing these costs within tangible fixed assets anddepreciating them. Costs that are recovered in any given year
based on the terms of the PSCs are included in the cost of sales.

Income taxes

Operating income

Net income (loss) attributable to non-controllinginterests

Other income
Other income for the year ended March 31, 2019, increased by¥15.7 billion, or 28.3%, to ¥70.9 billion from ¥55.3 billion for theyear ended March 31, 2018. This was mainly due to an increase inequity in earnings of affiliates.

Financial and Corporate Information

As a result of the above, operating income for the year ended
March 31, 2019, increased by ¥116.9 billion, or 32.7%, to ¥474.3
billion from ¥357.4 billion for the year ended March 31, 2018.

Total current income taxes and deferred income taxes for the year
ended March 31, 2019, increased by ¥87.9 billion, or 28.4%, to¥397.3 billion from ¥309.4 billion for the year ended March 31,
2018. The Group pays the majority of its taxes outside Japan.
In addition to the high corporate tax rates imposed in a numberof regions, the Group is generally unable to deduct expenses
incurred in Japan for such taxes. Despite the positive effects
attributable to the application of the foreign tax credit system, thissituation resulted in a high effective income tax rate.

Net income attributable to non-controlling interests for the year
ended March 31, 2019, was ¥0.7 billion. Meanwhile, net loss
attributable to non-controlling interests for the year ended March
31, 2018, was ¥42.5 billion.

Net income attributable to owners of parent
As a result of the above, net income attributable to owners of parent for the year ended March 31, 2019, increased by ¥55.7 billion,or 138.1%, to ¥96.1 billion from ¥40.4 billion for the year ended
March 31, 2018.

INPEX CORPORATION Annual Report 201959

FINANCIAL POSITION
Total assets as of March 31, 2019, increased by ¥541.2 billion, or
12.7%, to ¥4,793.5 billion from ¥4,252.4 billion as of March 31,
2018. Current assets decreased by ¥8.7 billion, or 1.9%, to ¥457.7
billion from ¥466.4 billion due to a decrease in cash and cash
equivalents and others. Fixed assets increased by ¥549.8 billion,or 14.5%, to ¥4,335.8 billion from ¥3,786.0 billion as of March 31,
2018, due to increases in tangible fixed assets, investments andother assets and others.
Meanwhile, total liabilities increased by ¥442.4 billion, or
40.5%, to ¥1,536.0 billion from ¥1,093.5 billion as of March 31,
2018. Current liabilities increased by ¥66.6 billion, or 21.8%, to¥372.0 billion from ¥305.4 billion as of March 31, 2018. Long-term
liabilities increased by ¥375.9 billion, or 47.7%, to ¥1,164.0 billion
from ¥788.1 billion as of March 31, 2018.
Net assets increased by ¥98.7 billion, or 3.1%, to ¥3,257.6 billion from ¥3,158.9 billion as of March 31, 2018. Total shareholders’equity increased by ¥69.6 billion, or 2.7%, to ¥2,637.9 billion from
¥2,568.2 billion as of March 31, 2018. Total accumulated othercomprehensive income increased by ¥20.2 billion, or 5.8%, to¥368.6 billion from ¥348.5 billion as of March 31, 2018, and noncontrolling interests increased by ¥8.9 billion, or 3.7%, to ¥251.1
billion from ¥242.2 billion as of March 31, 2018.

INVESTMENT AND FUNDING— Investments in upstream oil and gas projects
Continuous exploration for new reserves of crude oil and natural
gas is essential for stable earnings of the Group. The informationin this section on upstream oil and gas investments is based on
the data reported by project operators relating to exploration
expenditures, development expenditures and operating expenses.
The Group’s expenditure categories are defined as follows:• Exploration expenditures include the costs of exploratory
drilling and any geological or geophysical studies. The costsof local personnel and office operations and related administrative expenses are also included in this category if a project(or contract area) is in the exploration phase.
• Development expenditures include the costs of development
drilling, any production facilities and acquisition of participating interests.
• Operating expenses include the costs of well operations,maintenance and the supervision of production activities. This
category also includes the administrative expenses for the
project (or contract area) if it contains a field in active production.

• Discrepancies exist between the standards stipulated in
U.S. FASB Accounting Standards Codification Topic 932,
“Extractive Industries Oil and Gas (Topic 932),” and boththe Group’s definitions of exploration and development
expenditures and the standards used in preparing the following tables. The following is a partial list of the discrepancies
between the Group’s accounting policies and Topic 932.
- Group expenditures relating to the PSC-governed joint ventures where the Group is not the operator are disclosed on a
cash basis rather than an accrual basis as required by Topic
932.
- The tables below have been prepared based on the cost definitions used by operators in their reporting, which may not be
consistent with Topic 932.
- Topic 932 requires that administrative costs not directly related to exploration and development activities be excluded
from exploration and development expenditures, whereas
such administrative costs are not necessarily excluded fromthose expenditures under the Group’s accounting policies.

The table below shows the Group’s exploration and development costs and other expenditures (excluding capitalized interest costs andasset retirement costs corresponding to asset retirement obligations capitalized under fixed assets) by segment for the years ended March
31, 2018 and 2019. The investments for the year ended March 31, 2018 are retrospectively adjusted to include payments for acquisitionsof participating interests.
(Millions of yen)

Year ended March 31, 2018

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥   99Development
978
Subtotal*1
1,077
Equity-method Affiliates
Exploration—
Development—
Subtotal—
Other capital expenditures*2
3,319
Total
¥4,396

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &Africa¥  1,905
215,963
217,868¥  (244)
22,801
22,557¥  1,644
185,321
186,965¥1,561
1,958
3,519¥  4,965
427,021431,986

—
2,094
2,094
275,831¥495,793

210
1,708
1,918
—
¥24,475

5
610
615
—
¥187,580

—
1,091
1,091
—
¥4,610

215
5,503
5,718
279,150¥716,854

AmericasTotal*1 Figures include an equity-method affiliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic gas infrastructure, the Group’s share of investment in the Ichthys downstream entity (Ichthys LNG Pty Ltd,an equity-method affiliate) and others.

60

INPEX CORPORATION Annual Report 2019

INPEX Snapshot(Millions of yen)

Year ended March 31, 2019Japan

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥  1,631
254,586
256,217¥ 4,556
19,071
23,627¥ 4,61058,29362,903¥ 2,881
6,844
9,725

¥ 13,753
339,813353,566

—
2,970
2,970
131,659¥390,846

35
2,518
2,553
—
¥26,180

1
421
422
—
¥63,325

—
434
434
—
¥10,159

36
6,343
6,379
134,956¥494,901

Results and New Strategies

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥   75Development
1,019
Subtotal
1,094
Equity-method Affiliates
Exploration—
Development—
Subtotal—
Other capital expenditures*
3,297
Total
¥4,391

Asia & Oceania*	Other capital expenditures include the construction costs of domestic gas infrastructure, the Group’s share of investment in the Ichthys downstream entity (Ichthys LNG Pty Ltd, an
equity-method affiliate) and others.

Project Overview

Total investments for the year ended March 31, 2019, decreased by ¥222.0 billion, or 31.0%, to ¥494.9 billion (including ¥6.4 billion for
exploration and development by equity-method affiliates) from ¥716.9 billion for the year ended March 31, 2018. This was mainly due to adecrease in expenditures in the Middle East & Africa region and the Asia & Oceania region.
The table below shows the Group’s operating expenses by segment for the years ended March 31, 2018 and 2019.
(Millions of yen, %)¥ 12,024
30,834
14,567
43,117
2,348
102,890

11.6%
30.0
14.2
41.9
2.3
100.0

¥ 11,969
20,272
15,59142,368
1,553
91,753

13.0%
22.1
17.0
46.2
1.7
100.0

792
412
3,918
4,685
9,807
¥112,697

8.1
4.2
40.0
47.7
100.0
—%

1,210
519
4,505
4,886
11,120¥102,873

10.9
4.7
40.5
43.9
100.0
—%

Sustainability and Governance

INPEX CORPORATION and Consolidated Subsidiaries
Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Equity-method Affiliates
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Total

2019

2018

Years ended March 31,

Financial and Corporate Information

INPEX CORPORATION Annual Report 201961

— Analysis of recoverable accounts under production sharing
For upstream projects governed by the PSCs, the Group’s share of costs arising during the exploration, development and production
phases is capitalized under “Recoverable accounts under production sharing.” The following table shows the changes in the balance of“Recoverable accounts under production sharing” during the years ended March 31, 2018 and 2019.
(Millions of yen)

Years ended March 31,

Balance at beginning of the year
Add: Exploration costs
			Development costs
			Operating expenses
			OtherLess: Cost recovery – capital expenditures
			 Cost recovery – operating expenditures
			Other
Balance at end of the year
Allowance for recoverable accounts under production sharing at end of the year

The amount posted as “Cost recovery – operating expenditures”
in recoverable accounts under production sharing is greater thanthat posted as operating expenses. Along with operating expenses, this is because a portion of the exploration and development
costs, which are incurred and recoverable within the year, is
included in the “Cost recovery – operating expenditures” account.
Exploration costs for the year ended March 31, 2019, increased
compared with the year ended March 31, 2018. This was mainly
due to an increase in exploration expenditures in the Middle East
& Africa region.
Development costs for the year ended March 31, 2019,
increased compared with the year ended March 31, 2018. This was
mainly due to an increase in development expenditures in the Asia
& Oceania region.

2018¥659,202
3,832
16,87037,396
8,551(53,466)(52,019)(31,268)
589,098¥ (81,625)

2019¥589,098
4,033
22,612
15,666
11,737(33,127)(26,203)(15,757)
568,059¥ (70,017)

Operating expenses for the year ended March 31, 2019,
decreased compared with the year ended March 31, 2018. Thiswas mainly due to a decrease in operating expenses in the Asia &Oceania region.
Cost recovery for the year ended March 31, 2019, decreased
compared with the year ended March 31, 2018. This was mainly
due to a decrease in cost recovery in the Asia & Oceania region.
In addition, other deduction was mainly due to the decrease
in recoverable accounts under production sharing related to thebusiness withdrawal from certain exploration blocks.
The allowance for recoverable accounts under production
sharing as of March 31, 2019, decreased compared with March 31,
2018. This was mainly due to the business withdrawal from certain
exploration blocks.

— Funding sources and liquidity
Oil and gas exploration and development projects, as well as theconstruction of gas infrastructure, require significant funding. The
Group relies on cash flow derived from internal reserves, together
with external sources, to procure funds. The Group’s basic policy
is to utilize internal cash flow and external equity financing to fundexploration projects and to utilize internal cash flow and externalloans to fund development projects and the construction of gas
infrastructure. The Group currently receives loans from the Japan
Bank for International Cooperation, Japanese commercial banks
and others. The Japan Oil, Gas and Metals National Corporation(JOGMEC) guarantee system covers these loans. In addition, theDevelopment Bank of Japan and various Japanese commercial
banks provide loans for the construction of domestic gas infrastructure.

62

INPEX CORPORATION Annual Report 2019

The Ichthys downstream entity (Ichthys LNG Pty Ltd, an equitymethod affiliate), as the borrower, has utilized external loans fromexport credit agencies and commercial banks for project financing
and others throughout the year ended March 31, 2019.
The Group’s basic liquidity policy is to maintain sufficient cashon hand at all times to fund expenditures for existing and new oil
and gas projects in a timely manner, while also keeping a cushionof liquidity to provide for steep falls in oil and gas prices. In linewith this policy, excess cash reserves are invested in low-risk, highly
liquid financial instruments. The Group’s strategy is to improve
capital efficiency over the long term through business expansion
while continuing to maintain a sound financial position with sufficient liquidity.

INPEX Snapshot— Maturities of long-term debt
The aggregate annual maturities of long-term debt subsequent to March 31, 2019, are summarized as follows:(Millions of U.S. dollars and Millions of yen)
Long-term debt denominated in
U.S. dollars

Yen

2020
2021
2022
2023
2024
2025 and thereafter
Total$  713.4
1,240.1
339.0
1,183.9719.3
4,503.0$8,698.7¥ 43,365
26,232
24,265
21,97020,162
34,932¥170,926

Total yen equivalent

Results and New Strategies

Years ending March 31,¥  122,561
163,894
61,897
153,397
100,015534,810¥1,136,574— Cash flows
Cash flows for the years ended March 31, 2018 and 2019, are summarized as follows:

Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Cash and cash equivalents at end of the period

2018¥278,539(351,908)
34,742¥276,080

Project Overview(Millions of yen)

Years ended March 31,

2019¥238,566(682,006)
405,185¥239,653

Net cash provided by (used in) operating activities

Net cash provided by (used in) financing activities

Net cash provided by operating activities for the year ended
March 31, 2019, was ¥238.6 billion, a decrease of ¥40.0 billion
from ¥278.5 billion for the year ended March 31, 2018. This was
mainly due to an increase in income taxes paid.

Net cash provided by financing activities for the year ended March
31, 2019, was ¥405.2 billion, an increase of ¥370.4 billion from
¥34.7 billion for the year ended March 31, 2018. This was mainly
due to an increase in proceeds from long-term debt.
Sustainability and GovernanceNet cash provided by (used in) investing activities
Net cash used in investing activities for the year ended March 31,
2019, was ¥682.0 billion, an increase of ¥330.1 billion from ¥351.9
billion for the year ended March 31, 2018. This was mainly due
to a decrease in proceeds from time deposits, and an increase inlong-term loans made.

Financial and Corporate Information

INPEX CORPORATION Annual Report 201963

Consolidated Balance Sheet
INPEX CORPORATION and Consolidated Subsidiaries
March 31, 2019

Thousands of
U.S. dollars(Note 3)

Millions of yen

ASSETS

2018

2019

2019

¥  276,080¥  239,653$ 2,158,842

Current assets
Cash and cash equivalents (Note 6)
Time deposits

23

23

207

Accounts receivable — trade (Notes 4 and 6)

66,90092,218

830,718

Inventories (Note 6)

32,322

40,101

361,238

Accounts receivable — other (Note 4)

71,014

68,331

615,539

Other (Note 6)

40,99730,644

276,047

Less allowance for doubtful accounts(20,985)(13,258)(119,431)

466,351

457,712

4,123,160

Buildings and structures

405,045

401,3223,615,188

Wells (Note 6)

337,459

560,569

5,049,716

Machinery, equipment and vehicles (Note 6)

408,291

1,627,942

14,664,823

Total current assets

Tangible fixed assets

Land (Note 6)
Construction in progress (Note 6)
OtherLess accumulated depreciation and amortization
Total tangible fixed assets

19,09918,930170,525

1,678,743

506,400

4,561,751

21,29418,183

163,796

2,869,931

3,133,346

28,225,799(825,311)(854,351)(7,696,162)

2,044,620

2,278,995

20,529,637

Intangible assets
Goodwill (Note 17)

54,03647,275425,863

Exploration and development rights

153,169

152,977

1,378,047

Mining rights

328,087314,760

2,835,420

6,211

5,201

46,852541,503

520,213

4,686,182

Recoverable accounts under production sharing

589,098

568,059

5,117,188

Less allowance for recoverable accounts
under production sharing(81,625)(70,017)(630,727)

Other
Total intangible assets

Investments and other assets

507,473

498,0424,486,461

Investment securities (Notes 4, 5 and 6)

367,417419,064

3,775,011

Long-term loans receivable (Note 6)

295,861

592,786

5,339,933

Deferred tax assets (Note 7)

20,317

13,747

123,836

Other (Note 6)

11,35917,258155,463

(849)

(789)

(7,107)Less allowance for doubtful accounts
Less allowance for investments in exploration
Total investments and other assets(3,482)(31,367)

1,536,626

13,842,230

Total fixed assets

3,786,036

4,335,834

39,058,049

Total assets¥4,252,387¥4,793,546$43,181,209

See accompanying notes to consolidated financial statements.

64(1,665)
1,199,913

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Thousands of
U.S. dollars(Note 3)

Millions of yen

2018

2019

2019

¥   45,676¥   32,205$   290,109

71,250127,184

1,145,699

17,235

19,282

173,696

Accounts payable — other

94,360113,180

1,019,547

Provision for loss on business

9,887

9,972

89,830

Provision for exploration projects

65,786

LIABILITIES AND NET ASSETS
Current liabilities

4,006

7,303

Accrued bonuses to officers

62

96

865

Asset retirement obligations (Note 16)

408

3,309

29,808Other (Note 7)

59,470535,718

372,001

3,351,058

Long-term debt (Notes 4, 6, 11 and 12)

627,327

1,014,013

9,134,429

Deferred tax liabilities (Note 7)

36,19625,130226,376

Provision for stocks payment

—

22

198

Accrued special repair and maintenance

380

479

4,315

Project Overview

62,555
305,439

Total current liabilities

Results and New Strategies

Accounts payable — trade
Short-term borrowings and current portion of long-term
debt (Notes 4, 6 and 12)
Income taxes payable (Note 7)Long-term liabilities

Liability for retirement benefits (Note 15)

5,938

6,266

56,445

Asset retirement obligations (Note 16)

111,128

110,107991,866

Other

7,944

71,562

1,163,961

10,485,191

1,093,518

1,535,962

13,836,249

Common stock
Authorized: 2018 — 3,600,000,001 shares2019 — 3,600,000,001 shares
Issued:2018 — 1,462,323,601 shares2019 — 1,462,323,601 shares
Capital surplus

290,810

290,8102,619,674

673,574

673,574

6,067,688

Retained earnings
Less: Treasury stock 2018 — 1,966,500 shares2019 — 2,123,800 shares
Total shareholders’ equity

1,609,094

1,678,914

15,123,989(5,248)(5,434)(48,951)

2,568,230

2,637,864

23,762,400

Unrealized holding gain (loss) on securities

10,2182,832

25,511

Unrealized gain (loss) from hedging instruments

25,725

6,359

57,284

Translation adjustments

312,507359,426

3,237,780

Total accumulated other comprehensive income

348,450

368,617

3,320,575

Non-controlling interests

242,189

251,1032,261,985

3,158,869

3,257,584

29,344,960¥4,252,387¥4,793,546$43,181,209

Total liabilities

Sustainability and Governance

7,110
788,079

Total long-term liabilities

Net assets (Note 9)

Financial and Corporate Information

Total net assets
Contingent liabilities (Note 19)
Total liabilities and net assets

INPEX CORPORATION Annual Report 201965

Consolidated Statement of Income andConsolidated Statement of Comprehensive Income
Consolidated Statement of Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2019
Thousands of
U.S. dollars(Note 3)

Millions of yen

Net sales
Cost of sales (Note 13)
Gross profit
Exploration expenses
Selling, general and administrative expenses (Notes 13, 15 and 17)
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Equity in earnings of affiliates
Reversal of allowance for doubtful accounts
Gain on reversal of allowance for recoverable accounts
under production sharing
Compensation income
Foreign exchange gain
Other
Total other income
Other expenses
Interest expense
Provision for allowance for recoverable accounts
under production sharing
Provision for exploration projects
Foreign exchange loss
Impairment loss (Note 14)
Other
Total other expenses
Income before income taxes
Income taxes (Note 7)
Current
Deferred
Total income taxes
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income attributable to owners of parent

2018

2019

2019

¥933,702
498,039435,663
1,328
58,365
18,607357,363¥971,389
413,300
558,089
11,67957,65914,469474,282$8,750,464
3,723,088
5,027,376
105,206
519,404
130,340
4,272,426

6,478
4,778
4,192
197

7,645
6,761
28,364
8,357

68,86860,904
255,50975,282

17,528——

12,626—
9,468
55,267

7,499
1,941
10,35870,92567,552
17,48593,306
638,906

7,076

17,333

156,139—

1,468

13,224—
10,472
79,970
7,812
105,330
307,300

203—
25,236
6,924
51,164
494,043

1,829—
227,33162,372
460,895
4,450,437

308,352
1,048
309,400(2,100)(42,463)¥ 40,363

399,920(2,661)
397,259
96,784678¥ 96,1063,602,558(23,970)
3,578,588
871,849
6,107$  865,742

Consolidated Statement of Comprehensive Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2019
Thousands of
U.S. dollars(Note 3)

Millions of yen

Net income (loss)
Other comprehensive income
Unrealized holding gain (loss) on securities
Translation adjustments
Share of other comprehensive income of affiliates accounted forby the equity-method
Total other comprehensive income (Note 8)
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See accompanying notes to consolidated financial statements.

66

INPEX CORPORATION Annual Report 2019

2018

2019

2019

¥ (2,100)¥ 96,784$  871,849

3,711(68,317)(7,388)46,095(66,553)415,233

24,439(19,429)(175,020)(40,167)(42,267)

19,278116,062

173,660
1,045,509

2,496¥(44,763)

116,273¥   (211)

1,047,410$   (1,901)

INPEX Snapshot

Consolidated Statement of Changes in Net Assets
INPEX CORPORATION and Consolidated Subsidiaries

Millions of yen
Shareholders’ equity

For the year ended March 31, 2018
Balance as of April 1, 2017
Change in ownership interest of parent arisingfrom transactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those in shareholders’ equity
Total changes during the period
Balance as of March 31, 2018

Common stock

Capital surplus

Retained earnings¥290,810¥676,273¥1,595,018

Treasury stock¥(5,248)(2,699)(2,699)(26,287)
40,363—¥290,810

Total shareholders’equity¥2,556,853(2,699)¥673,574(26,287)
40,363—

14,076¥1,609,094

Millions of yen
Accumulated other comprehensive income
Unrealized holding Unrealized gain
Total accumulated
Translation
gain (loss) on (loss) from hedging
other comprehenadjustments
securities
instruments
sive income¥ 6,480¥   717¥379,120¥386,317—¥(5,248)

11,377¥2,568,230

Non-controllinginterests

Total net assets¥264,373¥3,207,543(22,184)(22,184)¥242,189(26,287)
40,363—(60,051)(48,674)¥3,158,869

Results and New Strategies

For the year ended March 31, 2018
Balance as of April 1, 2017
Change in ownership interest of parent arisingfrom transactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those in shareholders’ equity
Total changes during the period
Balance as of March 31, 2018

(2,699)

3,738
3,738
¥10,218

25,00825,008¥25,725(66,613)(66,613)¥312,507(37,867)(37,867)¥348,450

For the year ended March 31, 2019
Balance as of April 1, 2018
Change in ownership interest of parent arisingfrom transactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those in shareholders’ equity
Total changes during the period
Balance as of March 31, 2019

Capital surplus

Retained earnings¥290,810¥673,574¥1,609,094¥(5,248)

Total shareholders’equity¥2,568,230(186)(26,286)
96,106(186)(186)¥(5,434)

69,634¥2,637,864

Non-controllinginterests

Total net assets¥242,189¥3,158,869

8,914
8,914
¥251,103(26,286)
96,106(186)
29,081
98,715¥3,257,584

Treasury stock—(26,286)
96,106—¥290,810—¥673,574

69,820¥1,678,914

Millions of yen
Accumulated other comprehensive income
Unrealized holding Unrealized gain
Total accumulated
Translation
gain (loss) on (loss) from hedging
other comprehenadjustments
securities
instruments
sive income¥10,218¥25,725¥312,507¥348,450—(7,386)(7,386)¥ 2,832(19,366)(19,366)¥ 6,359

46,91946,919¥359,426

20,167
20,167¥368,617

Sustainability and GovernanceFor the year ended March 31, 2019
Balance as of April 1, 2018
Change in ownership interest of parent arisingfrom transactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those in shareholders’ equity
Total changes during the period
Balance as of March 31, 2019

Common stock

Project Overview

Millions of yen
Shareholders’ equity

Thousands of U.S. dollars (Note 3)
Shareholders’ equity

For the year ended March 31, 2019
Balance as of April 1, 2018
Change in ownership interest of parent arisingfrom transactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those in shareholders’ equity
Total changes during the period
Balance as of March 31, 2019

Common stock

Capital surplus

Retained earnings$2,619,674$6,067,688$14,495,036$(47,275)

Total shareholders’equity$23,135,123(1,676)(236,789)
865,742(1,676)(1,676)$(48,951)

627,277$23,762,400

Non-controllinginterests

Total net assets$2,181,686$28,455,716

80,29980,299$2,261,985(236,789)
865,742(1,676)
261,967
889,244$29,344,960

Treasury stock—(236,789)
865,742—$2,619,674—$6,067,688

628,953$15,123,989

Thousands of U.S. dollars (Note 3)
Accumulated other comprehensive income
Unrealized holding Unrealized gain
Total accumulated
Translation
gain (loss) on (loss) from hedging
other comprehenadjustments
securities
instruments
sive income$ 92,046$ 231,736$2,815,125$3,138,907

Financial and Corporate Information

For the year ended March 31, 2019
Balance as of April 1, 2018
Change in ownership interest of parent arisingfrom transactions with non-controlling shareholders
Cash dividends paid
Net income attributable to owners of parent
Purchase of treasury stock
Net changes in items other than those in shareholders’ equity
Total changes during the period
Balance as of March 31, 2019—(66,535)(66,535)$ 25,511(174,452)(174,452)$  57,284

422,655
422,655$3,237,780

181,668
181,668$3,320,575

See accompanying notes to consolidated financial statements.

INPEX CORPORATION Annual Report 201967

Consolidated Statement of Cash Flows
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2019

Millions of yen

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Provision for allowance for recoverable accounts
under production sharing
Provision for exploration projects
Other provisions
Liability for retirement benefits
Interest and dividend income
Interest expense
Foreign exchange loss (gain)
Equity in losses (earnings) of affiliates
Recovery of recoverable accounts under production sharing(capital expenditures)
Recoverable accounts under production sharing(operating expenditures)
Accounts receivable—trade
Inventories
Accounts payable—trade
Accounts receivable—otherAccounts payable—other
Advances received
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments for time deposits
Proceeds from time deposits
Payments for purchases of tangible fixed assets
Proceeds from sales of tangible fixed assets
Payments for purchases of intangible assets
Payments for purchases of investment securities
Investment in recoverable accounts under production sharing(capital expenditures)
Decrease (increase) in short-term loans receivable
Long-term loans madeCollection of long-term loans receivable
Payments for acquisitions of participating interests
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from non-controlling interests for additional shares
Cash dividends paid
Cash dividends paid to non-controlling interests
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
See accompanying notes to consolidated financial statements.

68

INPEX CORPORATION Annual Report 2019

Thousands of
U.S. dollars(Note 3)

2018

2019

2019

¥ 307,300
92,806
79,9706,761¥ 494,043
106,900
25,236
6,761$ 4,450,437
962,976
227,33160,904(21,190)

1,241

11,179

(459)
6,811
19
(11,256)
7,076
11,048(4,192)

3,661(5,782)384(14,406)
17,333(1,047)(28,364)

32,979(52,085)3,459(129,772)
156,139(9,432)(255,509)

53,46633,127

298,415

9,632

4,639

41,7892,846(2,098)20,605(287)
12,221
4,848
12,468588,395
24,460(5,078)(329,238)
278,539(25,372)(11,359)(13,428)(11,667)
14,4084,443
17,018617,769
21,120(12,242)(388,081)
238,566(228,555)(102,324)(120,962)(105,099)
129,790
40,023
153,3025,564,985
190,253(110,278)(3,495,910)
2,149,050(259,990)
593,900(271,324)
236(1,365)(127,785)(249,615)
249,616(210,732)
210(810)(104,766)(2,248,581)
2,248,589(1,898,315)
1,892(7,297)(943,753)(24,135)(31,631)(284,938)

51(172,534)
274(100,907)
11,671(351,908)

814(262,671)
264(107,863)
35,178(682,006)

7,333(2,366,192)
2,378(971,651)
316,890(6,143,645)

392
77,612(39,251)
27,570(26,291)(2,523)(2,767)34,742(2,084)(40,711)
316,791¥ 276,080

1,840
497,778(76,186)
14,118(26,291)(5,832)(242)
405,185
1,828(36,427)
276,080¥ 239,653

16,575
4,484,083(686,299)
127,178(236,835)(52,536)(2,180)3,649,986
16,467(328,142)
2,486,984$ 2,158,842

INPEX Snapshot

Notes to Consolidated Financial Statements
INPEX CORPORATION and Consolidated Subsidiaries

1. BASIS OF PRESENTATION
the United States, or U.S. GAAP as adjusted for certain items.
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in Japan, which may differ in certain material respects from IFRS
or U.S. GAAP, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
The Company has made certain reclassifications of the previous
years’ consolidated financial statements to conform to the presentation used for the year ended March 31, 2019.

Results and New Strategies

INPEX CORPORATION (the “Company”) is primarily engaged in the
research, exploration, development and production of crude oil andnatural gas.
The Company and its domestic subsidiaries maintain their accounting records and prepare their financial statements in accordance withaccounting principles generally accepted in Japan.
The accompanying consolidated financial statements have been
prepared by using the accounts of foreign consolidated subsidiaries prepared in accordance with International Financial ReportingStandards, or IFRS or the accounting principles generally accepted in

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of consolidation and accounting forinvestments in affiliates

All highly liquid investments with a maturity of three months or lesswhen purchased are considered cash equivalents, including shortterm time deposits with original maturities of three months or less.

(c) Foreign currency translation(d) Securities

In general, securities are classified into three categories: trading,held-to-maturity or other securities. Securities held by the Company
and its subsidiaries are all classified as other securities. Other securi-(f) Inventories

Overseas inventories are carried mainly at cost, determined by theaverage cost method (balance sheet value is carried at the lowerof cost or market). Domestic inventories are carried mainly at cost,
determined by the moving-average method (balance sheet value iscarried at the lower of cost or market).

(g) Allowance for doubtful accounts

Allowance for doubtful accounts is provided at an amount determined based on the historical experience of bad debt with respect toordinary receivables, plus an estimate of uncollectible amounts determined by reference to specific doubtful receivables from customers
experiencing financial difficulties.

(h) ‌Recoverable accounts under production sharing and related allowance

Cash investments made by the Company during exploration, development and production phases under a production sharing contract
are recorded as “Recoverable accounts under production sharing” solong as they are recoverable under the terms of the relevant contract.
When the Company receives crude oil and natural gas in accordancewith the relevant contract, an amount corresponding to the purchasecosts of the products (i.e., a cost recovery portion of the investments)
is released from this account.
Because these investments are recoverable only where commercial
oil or gas is discovered, an allowance for recoverable accounts under
production sharing is provided for probable losses on investments
made during the exploration stage under production sharing contracts arising from the failure to discover commercial oil and gas. In
light of this uncertainty, an allowance for recoverable accounts under
production sharing is provided for probable losses on development
investment individually estimated for each project.

Financial and Corporate Information

Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the exchange rates prevailing at the balance
sheet date. All revenues and expenses associated with foreign
currencies are translated at the rates of exchange prevailing whensuch transactions were made. The resulting exchange gain or loss iscredited or charged to income.
The assets and liability accounts of overseas subsidiaries are translated into yen at the exchange rates prevailing at the balance sheet
date. The revenue and expense accounts of the overseas subsidiaries
are translated into yen at the average rates of exchange during theperiod. The components of net assets excluding non-controlling interests are translated at their historical exchange rates. The differences
arising from the translation are presented as translation adjustments
and non-controlling interests in the accompanying consolidated
financial statements.

Derivatives are stated at fair value.

Sustainability and Governance(b) Cash equivalents(e) Derivatives

Project Overview

The accompanying consolidated financial statements include theaccounts of the Company and companies controlled directly or
indirectly by the Company. Companies over which the Company
exercises significant influence in terms of their operating and financial
policies are included in the consolidated financial statements on an
equity basis. All significant intercompany balances and transactions
are eliminated in consolidation. Further, certain companies that do
not have significant impact on the consolidated financial statements,
are not consolidated or accounted for by the equity-method.
For the 49 companies for which the closing date differed from theconsolidated closing date, including but not limited to, INPEX Sahul,Ltd. and INPEX Masela, Ltd., the financial statements for the year
ended December 31 were used. However, the necessary adjustments
have been made to the financial statements of those companies toreflect any significant transactions made between the Company’s
closing date and that of the consolidated subsidiaries. For the 11
companies, including but not limited to, Japan Oil Development,
Co., Ltd., INPEX Southwest Caspian Sea, Ltd., INPEX North CaspianSea, Ltd., INPEX Holdings Australia Pty Ltd and INPEX Ichthys Pty
Ltd, the financial statements for the year ended on the consolidated
closing date were used, even though their closing date is December
31.
The excess of cost over underlying net assets excluding non-controlling interests at fair value as of the date of acquisition is accounted for as goodwill and amortized over 20 years on a straight-line
method.

ties with a determinable market value are mainly stated at fair value
with any changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in net assets. Other securities
without a determinable market value are stated at cost determinedby the moving-average method. Cost of securities sold is determinedby the moving average method.

(i) Allowance for investments in exploration

Allowance for investments in exploration is provided for future potential losses on investments in exploration companies at an estimatedamount based on the net assets of the investees.

(j) Tangible fixed assets (except leased assets)

Depreciation of overseas mining facilities is mainly computed by theunit-of-production method.
For other tangible fixed assets, the straight-line method of depreciation is applied. The useful lives of fixed assets are based on theestimated useful lives of the respective assets.

INPEX CORPORATION Annual Report 201969

(k) Intangible assets (except leased assets)

Exploration and development rights at the exploration stage are
fully amortized in the year such rights are acquired, and those at the
production stage are amortized by the unit-of-production method.
Mining rights are amortized mainly by the unit-of-production
method.
Other intangible assets are amortized mainly by the straight-line
method.
Capitalized computer software costs are amortized by the straightline method over a period of 5 years.

(l) Leased assets

Leased assets are amortized by the straight-line method over thelease period assuming no residual value.

(m) Provision for loss on business

Provision for loss on business is provided for future potential losses
on crude oil and natural gas development, production and sales
business individually estimated for each project.

(n) Provision for exploration projects

Provision for exploration projects is provided for future expendituresof consolidated subsidiaries at the exploration stage based on aschedule of investments in exploration.

(o) Accrued bonuses to officers

Accrued bonuses to officers are provided at the expected payment
amount for the fiscal year.

(p) Provision for stocks payment

Provision for stocks payment is provided to prepare for payments ofstock benefits to directors and other under the share delivery rule.
The amount is based on the expected stock benefit payable for the
fiscal year.

(q) Accrued special repair and maintenanceAccrued special repair and maintenance are provided for planned
major repair and maintenance activities on tanks in certain subsidiaries at amounts accumulated through the next activity.

(r) Accounting for retirement benefits(Method of attributing expected retirement benefits to proper
periods)
When calculating retirement benefit obligations, the benefit formula
method is used for attributing expected retirement benefits toperiods through March 31, 2019. Because certain subsidiaries areclassified as small enterprises, a simplified method (the amountwhich would be required to be paid if all active employees voluntarily
terminated their employment as of the balance sheet date) is applied
for the calculation of the retirement benefit obligation for those subsidiaries.
(Method of recognizing for actuarial differences)
Actuarial gains and losses are charged or credited to income as

incurred.

(s) Asset retirement obligations

Asset retirement obligations are recorded by a reasonable estimateof the present value of retirement costs incurred upon termination of
the operation and production with respect to oil and gas production
facilities, based on the oil and gas contracts or laws and regulations
within the countries in which the Company operates or has working
interests.

(t) Hedge accounting

The special treatment is applied to the interest rate swaps that meetcertain criteria. For certain equity-method affiliates, the deferredhedge accounting method is adopted.
In addition, derivative transactions are limited to the scope of
actual demand, and the Company does not engage in speculative
derivative transactions.

(u) Research and development expenses

Research and development expenses are charged to income as
incurred.

(v) Income taxes

Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets
and liabilities and are measured using the enacted tax rates and laws
which will be in effect when the differences are expected to reverse.

(w) Standards issued but not effective•	‌“Accounting Standard for Revenue Recognition” (AccountingStandards Board of Japan Statement No.29, issued on March 30,
2018)•	“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No.30, issued on March 30, 2018)(Overview)
These are comprehensive accounting standard and guidance about
revenue recognition. Revenue is recognized using the following five
steps.
1. Identify the contracts with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4.	Allocate the transaction price to the performance obligations in
the contract
5.	
Recognize revenue when (or as) the entity satisfies a performance obligation(Scheduled effective date)
The accounting standard and guidance are scheduled to take effectfrom the beginning of the year ending December 31, 2022.
(The impact of the adoption of the new accounting standard andguidance)
The impact of the adoption of new accounting standard and guidance on consolidated financial statements is now under evaluation.

3. U.S. DOLLAR AMOUNTS
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at¥111.01=US$1.00, the approximate exchange rate in effect as of March 31, 2019. This translation should not be construed as a representationthat yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

70

INPEX CORPORATION Annual Report 2019

(a) Policy regarding financial instruments(b) Details of financial instruments, associatedrisks and risk management(Credit risk related to trade receivables)(Market price fluctuation risk related to securities)

For marketable securities and investment securities exposed to market price fluctuation risk, analysis of market values is regularly reported to the Executive Committee. For shares of stock, the Company
mainly holds shares of trading partners and others to establish closeand smooth relationships for the purpose of maintaining a medium-(Interest rate fluctuation risk related to short-term loans andlong-term debt)

Loans are mainly used to fund oil and natural gas development projects and construction or expansion of domestic gas infrastructure andothers. The borrowing period is determined considering the financial
prospects of the project and useful lives of the facilities. Loans withvariable interest rates are exposed to interest rate fluctuation risk,
however, the Company analyzes the impact of interest rate fluctuation
at the time of borrowing and on an annual basis, and leverages fixedrate-loans or interest rate swaps as necessary.

(Exchange rates fluctuation risk related to assets and liabilities
in foreign currencies)

As most of the Company’s business is conducted overseas, theCompany is exposed to exchange rate fluctuation risk due to a large
portion of monetary assets and liabilities held in foreign currencies
such as cash and deposits, accounts receivables and loans required inoverseas projects. For this reason, the Company endeavors to reduce
exchange rate fluctuation risk by maintaining the position between
assets and liabilities in foreign currencies. In addition to planned
expenditures in foreign currencies, the Company manages exchange
rate fluctuation risk through derivative transactions such as foreignexchange forwards and others as necessary.

(Management of derivative transactions)

For the above derivative transactions, the Company follows its internal rules. Market values of these derivatives are regularly reported
to the Executive Committee, and the Company only transacts withfinancial institutions with high credit ratings to reduce counterparty
risks for the use of derivatives.

Project Overview

Trade receivables such as accounts receivable-trade and accounts
receivable-other are comprised mainly from sales of crude oil andnatural gas. Main trading partners are national oil companies, major
oil companies and others. In line with the criteria for trading andcredit exposure management, the Company properly analyzes thestatus of trading partners for early detection and reduction of default
risks.

to long-term stable business. A part of these shares are held for the
purpose of investment.

Results and New Strategies

The Company raises funds for oil and gas development and production, construction or expansion of gas infrastructure primarily fromcash flow on hand and from bank loans. Oil and gas development
projects are primarily funded from long-term loans that the Company
has secured from the Japan Bank for International Cooperation,
Japanese commercial banks and others. Japan Oil, Gas and Metals
National Corporation has provided guarantees for the principal on
certain outstanding amounts of the Company’s long-term loans. The
Development Bank of Japan and Japanese commercial banks andothers have provided long-term loans for the construction or expansion of domestic gas infrastructure. The Company generally borrows
loans with variable interest rates, while some loans are with a fixedinterest rate depending on the nature of each project.
Regarding the financing policy, the Company manages funds
mainly from deposits and government bonds, which are considered
to be of low-risk and high-liquidity. The Company limits the use ofderivative transactions for managing risks of forecasted transactions
and portfolio assets, and does not engage in speculative derivativetransactions.

INPEX Snapshot

4. STATUS OF FINANCIAL INSTRUMENTS(Management of liquidity risk related to financing)

The finance and accounting division controls cash management
based on a monthly financing plan prepared by each project divisionand secures sufficient liquidity on hand to prepare for liquidity risk.

5. SECURITIES(a) Information regarding other securities as of March 31, 2018 and 2019 is as follows:

March 31, 2018

Acquisition cost

Carrying value

Securities with carrying values exceeding their acquisition costs¥26,711¥37,238
Stock
2,179
5,642
Other
28,89042,880Subtotal
Securities with acquisition costs exceeding their carrying values
15,911
15,373
Stock
15,911
15,373
Subtotal¥44,801¥58,253
Total

Sustainability and GovernanceMillions of yen
Unrealized gain
(loss)¥10,527
3,463
13,990(538)(538)¥13,452

Financial and Corporate Information

INPEX CORPORATION Annual Report 201971

Millions of yen
March 31, 2019

Acquisition costThousands of U.S. dollars

Carrying value

Unrealized gain
(loss)

Acquisition cost

Carrying value

Unrealized gain
(loss)¥2,8183,417
6,235$ 59,787
19,62979,416$ 85,172
50,410135,582$ 25,385
30,781
56,166(2,791)(2,791)¥3,444

324,160
324,160$403,576

299,018
299,018$434,600(25,142)(25,142)$ 31,024

Securities with carrying values exceeding their acquisition costs
Stock¥ 6,637¥ 9,455
Other
2,179
5,596
Subtotal
8,816
15,051
Securities with acquisition costs exceeding their carrying values
Stock35,98533,194
Subtotal
35,98533,194
Total¥44,801¥48,245(b) Information regarding sales of securities classified as other securities for the years ended March 31, 2018 and 2019 is as follows:
Millions of yen
Year ended March 31, 2018

Proceeds
from sales

Stock
Bonds
Corporate bonds
Total

Gain onsales

Loss onsales¥    0

¥—

¥—

5,500
¥5,500—¥——¥—Year ended March 31, 2019
None(c) Components of securities for which it is extremely difficult to determine fair value as of March 31, 2018 and 2019 are summarized as follows:
Millions of yen
March 31,

Unlisted securities
Stocks of subsidiaries and affiliates
Total

Thousands of U.S. dollars

2018

2019

2019

¥ 26,732
282,432¥309,164¥ 25,268
345,551¥370,819$  227,619
3,112,792$3,340,411

These securities are not included in (a) as they have no quoted market prices and it is extremely difficult to determine their fair value. For sharesof exploration companies, an allowance for investments in exploration is provided at an estimated amount based on the financial position of theinvestees.

72

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT,ASSETS PLEDGED(a) Short-term borrowings as of March 31, 2018 and 2019 are as follows:
Millions of yen
March 31,

Short-term borrowings from banks and others(Interest rates is 3.696% and 4.498%
at March 31, 2018 and 2019)

Thousands of U.S. dollars

2018

2019

2019

¥5,109¥4,623$41,645(b) Long-term debt as of March 31, 2018 and 2019 are as follows:
Millions of yen
March 31,

2019

2019

¥693,468¥1,136,574$10,238,483

66,141¥627,327

122,561¥1,014,013

1,104,054$ 9,134,429

Results and New Strategies

Loans from banks and others, due through 2034
(Interest rates ranging from 0.050% to 3.530% and from
0.028% to 4.092% at March 31, 2018 and 2019)
Less: Current portion
Amounts on the consolidated balance sheet

Thousands of U.S. dollars

2018(c) Assets pledged as of March 31, 2018 and 2019 are as follows:
Millions of yen
March 31,2019¥    3,763
—
7,911
—
—
142
1,245,156
182,050
293,789
4,101¥1,736,912¥   18,150
9,490
12,957
227,482
1,223,591
148
19,531
252,521586,823
4,477¥2,355,170

2019$   163,499
85,488116,7192,049,203
11,022,349
1,333
175,9392,274,759
5,286,217
40,330$21,215,836

Project Overview

Cash and cash equivalents
Accounts receivable — trade
Inventories
Wells
Machinery, equipment and vehicles
Land
Construction in progress
Investment securities
Long-term loans receivable
Other
Total

Thousands of U.S. dollars

2018

The above is mainly related to Ichthys LNG Project Finance, and includes others that are pledged as collateral for liabilities of affiliates.
(d) The aggregate annual maturities of long-term debt subsequent to March 31, 2019 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

2020
2021
2022
2023
2024
2025 and thereafter
Total¥  122,561
163,894
61,897
153,397
100,015534,810¥1,136,574$ 1,104,054
1,476,390
557,580
1,381,830
900,955
4,817,674$10,238,483

Sustainability and GovernanceYears ending March 31,

Financial and Corporate Information

INPEX CORPORATION Annual Report 201973

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to income taxes which, in the aggregate, resulted in a statutory tax rate of
approximately 28.2% and 28.0% for the years ended March 31, 2018 and 2019, respectively.
(a) The effective tax rates reflected in the consolidated statement of income for the years ended March 31, 2018 and 2019 differ from thestatutory tax rate for the following reasons:Years ended March 31,

Statutory tax rate
Effect of:Permanently non-taxable expenses such as entertainment expenses
Permanently non-taxable income such as dividends income
Valuation allowance
Foreign taxes
Foreign tax credits
Adjustment of deducted amounts of foreign taxes
Amortization of goodwill
Differences of effective tax rates applied to tax effect accounting (domestic subsidiaries)
Differences of effective tax rates applied to tax effect accounting (overseas subsidiaries)
Other
Effective tax rates

2018
28.2%

2019
28.0%

0.6
(1.0)
7.4
65.6
(6.2)
(16.0)
0.6
(3.6)
21.0
4.1
100.7%

0.4
(1.7)
(1.4)
36.3
(3.9)
(8.7)
0.4
0.9
24.4
5.7
80.4%

(b) The significant components of deferred tax assets and liabilities as of March 31, 2018 and 2019 are described below. Certain information
for the year ended March 31, 2018 is not presented in accordance with the transitional treatment prescribed in Paragraph 7 of the “Partial
Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, revised on February 16, 2018).
Millions of yen
March 31,

Deferred tax assets
Exploration expenditures
Loss on valuation of investment securities
Recoverable accounts under production sharing (foreign taxes)
Allowance for investments in exploration
Foreign taxes payable
Net operating loss carry-forwards *2
Accumulated depreciation
Liability for retirement benefits
Provision for loss on businessTranslation differences of assets and liabilities denominated in foreign currencies
Asset retirement obligations
Allowance for doubtful accounts
Impairment loss
Other
Total gross deferred tax assets
Valuation allowance for net operating loss carry-forwards *2
Valuation allowance for total amount of deductible temporary difference and others
Total valuation allowance *1
Total deferred tax assets
Deferred tax liabilities
Foreign taxes
Translation differences of assets and liabilities denominated in foreign currencies
Translation differences due to an application of purchase accounting method
Reserve for exploration
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

Thousands of
U.S. dollars

2018

2019

2019

¥  51,583
2,267
4,515
466
29,644
257,674
34,262
1,980
2,769
10,546
13,172
6,262
36,89543,439495,474——(411,033)
84,441¥  51,701
2,415
1,268
975
27,889285,375
30,1482,077
2,792
13,09814,474
3,947
38,29533,972
508,426(222,707)(171,134)(393,841)
114,585$  465,733
21,755
11,422
8,783
251,230
2,570,714
271,579
18,71025,151
117,989
130,385
35,555344,969
306,027
4,580,002(2,006,189)(1,541,609)(3,547,798)
1,032,204(79,460)(178)(7,022)(7,300)(3,264)(3,096)(100,320)¥ (15,879)(104,735)(5)(7,021)(5,564)(644)(7,999)(125,968)¥ (11,383)(943,474)(45)(63,247)(50,121)(5,801)(72,056)(1,134,744)$  (102,540)*1 ‌Total valuation allowance as of March 31, 2019 decreased by ¥17,193 million ($154,878 thousand) compared with the amount as of March 31, 2018.
This was mainly due to a decrease in valuation allowance for deductible temporary difference in accordance with the start of production at certain
subsidiaries.
*2 Net operating loss carry-forwards and relevant deferred tax assets by expiration dates are as follows:
Millions of yen
March 31, 2019

Net operating loss carry-forwards *a
Valuation allowance
Deferred tax assets

1 year or lessMore than 1 year
and up to 5 years¥ 2,257(2,257)¥    —¥ 22,622(22,243)¥   379

1 year or lessMore than 1 year
and up to 5 years$ 20,332(20,332)$     —

$ 203,783(200,369)$   3,414

More than 5 years
and up to 10 years

More than
10 years *b

Total¥ 228,024(166,955)¥   61,069¥ 285,375(222,707)¥   62,668

More than 5 years
and up to 10 years

More than
10 years *b

Total$ 292,514(281,524)$   10,990$ 2,054,085(1,503,964)$  550,121$ 2,570,714(2,006,189)$  564,525¥ 32,472(31,252)¥   1,220
Thousands of U.S. dollars

March 31, 2019

Net operating loss carry-forwards *a
Valuation allowance
Deferred tax assets*a Net operating loss carry-forwards is multiplied by statutory tax rate.
*b Including amounts with no expiration date under applicable laws and regulations.

74

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

8. COMPREHENSIVE INCOME
Amount of reclassification adjustments and income tax effects allocated to each component of other comprehensive income for the years ended
March 31, 2018 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

Unrealized holding gain (loss) on securities
Amount recognized during the period
Amount of reclassification adjustments
Before income tax effectAmount of income tax effect

Share of other comprehensive income of affiliates accounted for by the equity-method
Amount recognized during the period
Amount of reclassification adjustments
Adjustment for acquisition cost of assets
Total other comprehensive income

2019

2019

¥  4,952(0)
4,952(1,241)
3,711¥(10,008)—(10,008)
2,620(7,388)$ (90,154)—(90,154)
23,601(66,553)(68,262)(55)(68,317)44,4601,635
46,095400,504
14,729415,233

23,907391
141
24,439¥(40,167)(21,235)
224
1,582(19,429)¥ 19,278(191,289)
2,018
14,251(175,020)$ 173,660

Results and New Strategies

Translation adjustments
Amount recognized during the period
Amount of reclassification adjustment

2018

9. NET ASSETS
by a resolution of the meeting of the Board of Directors in case where
Class A stock is transferred to a non-public entity.
The Company conducted a stock split at a ratio of 1:400 of common stock with October 1, 2013 as the effective date, but for ClassA stock, no stock split was conducted. The Articles of Incorporation
specifies that dividends of Class A stock are equivalent to dividends
of a common stock prior to the stock split. The cash dividends ofClass A stock for the year ended March 31, 2019 amounted to¥9,600.
Under the Companies Act of Japan, 10% of the amount to be distributed as dividends from capital surplus (other than capital reserve)
and retained earnings (other than legal reserve) should be transferred
to capital reserve and legal reserve, respectively, up to the point
where total amount of capital reserve and legal reserve equals 25%of the common stock account.
Distributions can be made at any time by a resolution of the meeting of shareholders, or the Board of Directors if certain conditions
are met, but neither capital reserve nor legal reserve is available for
distributions.

Project Overview
Sustainability and Governance

The total number of the Company’s shares issued consisted of
1,462,323,600 shares of common stock and 1 Class A stock as ofMarch 31, 2019.
Class A stock has no voting rights at the common shareholders’meeting, but the ownership of Class A stock gives its holder a rightof veto over certain important matters described below. However,requirements stipulated in the Articles of Incorporation need to be
met in cases involving the exercise of the veto over the appointment
or removal of directors, the disposition of all or a portion of material
assets, and business integration;• Appointment or removal of Directors• Disposition of all or a portion of material assets• Amendments to the Articles of Incorporation relating to theCompany’s business objectives and granting voting rights to any
shares other than the common shares of the Company• Business integration• Capital reduction• Company dissolution
Class A stock shareholder may request the Company to acquireClass A stock. Besides, the Company may also acquire Class A stock

10. AMOUNTS PER SHARE
Amounts per share as of March 31, 2018 and 2019 are as follows:
Years ended March 31,

Net assets excluding non-controlling interests per share
Cash dividends per share
Net income per share

Yen

2018
¥1,997.24
18.00¥   27.64

U.S. dollars

2019¥2,058.95
24.00¥   65.81

2019$18.550.22$ 0.59Financial and Corporate Information

Diluted net income per share is not presented because there are no dilutive potential of shares of common stock.
Net assets excluding non-controlling interests per share are computed based on the net assets excluding non-controlling interests and thenumber of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposed by the Board of Directors together with the interim cash dividends paid.
Net income per share is computed based on the net income available for distribution to shareholders of common stock and the average
number of shares of common stock outstanding during the year.
For the purpose of computing net assets excluding non-controlling interests per share, the Company’s shares held by “the Board Incentive
Plan Trust”* recorded as treasury stock under shareholders’ equity are included in the treasury stock to be deducted from the number ofcommon stock outstanding at the year end. Additionally, in computing net income per share, above shares of the Company are included in thetreasury stock to be deducted from the average number of shares of common stock outstanding during the year. For the year ended March 31,
2019, the number of shares of treasury stock deducted from the number of common stock outstanding at the year end in computing net assets
excluding non-controlling interests per share was 157,300 shares, and the number of shares of treasury stock deducted from the average number of shares of common stock during the year in computing net income per share was 96,800 shares.
* “The Board Incentive Plan Trust” is a share-based remuneration system under which a predetermined number of shares of the Company or the amountof money equivalent to the proceeds from the disposal of those shares are delivered or provided to the eligible Directors and Executive Officers of theCompany according to their positions and other factors, covering the five calendar years from 2018 to 2023.

INPEX CORPORATION Annual Report 201975

11. DERIVATIVE TRANSACTIONS(a) Derivatives not subject to hedge accounting

Contract amounts, fair value and valuation gain (loss) regarding derivatives not subject to hedge accounting as of March 31, 2018 and 2019 are
as follows:
Millions of yen
March 31, 2018

Contract amounts

Foreign exchange forwards*
Sell (CAD) Buy (USD)

Due after one year

¥42,494

Fair value¥—

Valuation gain (loss)

¥51

¥51

Millions of yen
March 31, 2019

Contract amounts

Foreign exchange forwards*
Sell (CAD) Buy (USD)

Due after one year

¥44,254

Fair value¥—

Valuation gain (loss)

¥57

¥57

Thousands of U.S. dollars
March 31, 2019

Contract amounts

Foreign exchange forwards*
Sell (CAD) Buy (USD)

Due after one year

$398,649

Fair value$—

Valuation gain (loss)

$513

$513

* Fair value is the price obtained from the counterparty financial institutions.

(b) Derivatives subject to hedge accounting

Contract amounts, fair value and valuation gain (loss) regarding derivatives subject to hedge accounting as of March 31, 2018 and 2019 are as
follows:
Millions of yen
March 31, 2018

Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

Principal items hedged

Contract amounts

Long-term debt

Due after one year

¥4,760¥4,760Fair value*

Millions of yen
March 31, 2019

Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

Principal items hedged

Contract amounts

Due after one year

¥4,760Long-term debt¥—

Fair value*

Thousands of U.S. dollars
March 31, 2019

Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

Principal items hedged

Contract amounts

Long-term debt

$42,879

Due after one year$—

Fair value** ‌Fair value of derivatives for which special treatment of interest rate swaps is applied is included in the estimated fair value of the long-term debt as
disclosed in Note 12. (a) since the interest rate swap is treated together with long-term debt subject to hedging.

12. OTHER FINANCIAL INSTRUMENTS(a) The carrying value and estimated fair value of financial instruments excluding marketable securities and investment securities which aredisclosed in Note 5.(a) and derivatives which are disclosed in Note 11 as of March 31, 2018 and 2019 are as shown below. The following
summary also excludes cash and cash equivalents, time deposits, accounts receivable — trade and long-term loans receivable for which fairvalues approximate their carrying amounts.
Millions of yen
March 31, 2018

Short-term borrowings and current portion of long-term debt
Long-term debt

Carrying value

Estimated fair value¥ 71,250¥627,327¥ 69,588¥600,955

Millions of yen

Thousands of U.S. dollars

March 31, 2019

Carrying value

Short-term borrowings andcurrent portion of long-term debt
Long-term debt¥  127,184¥  126,524$1,145,699$1,139,753¥1,014,013¥1,000,539$9,134,429$9,013,053

Estimated fair value

Carrying value

Estimated fair value(b) For other financial instruments, computation methods of estimated fair value are as shown below.

(Short-term borrowings and current portion of long-term debt)

The estimated fair value of current portion of long-term debt is calculated by the same method as long-term debt. For short-termborrowings, the relevant carrying value is used since the item is settled in a short periods of time and its fair value is almost the same as the
carrying value.

(Long-term debt)

The estimated fair value of long-term debt is calculated by applying a discount rate to the total of principal and interest. The discount rate isbased on the assumed interest rate if a similar new loan is entered into.

76

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

13. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in general and administrative expenses and cost of sales amounted to ¥978 million and ¥579
million ($5,216 thousand) for the years ended March 31, 2018 and 2019, respectively.

14. IMPAIRMENT LOSS
For the year ended March 31, 2018
The Company groups mining area and other assets as a basic unit that generates cash inflows independently of other groups of assets.
In light of the decline in forecasted natural gas prices in the Americas, the recoverble amount of these groups of assets expected to decrease,
the Company reduced the respective carrying amounts of the assets listed below to recoverable amounts, posting the reductions as impairment
loss.

Assets related tothe shale gas projectin Canada

Location

British Columbia, Canada

Classification

Buildings and structures
Wells
Machinery, equipment and vehicles
Mining rights
Other
Subtotal

Other
Total

Impairment loss
Millions of yen

Results and New StrategiesUse¥ 2,678
4,021
11,391
48,428
9,725
76,243
3,727¥79,970

The recoverable amount of the assets related to the shale gas project in Canada (Horn River, Cordova and Liard areas) is reasonably estimatedby discounting the future cash flows at rates ranging from 9.9% to 16.2%.
Project Overview

For the year ended March 31, 2019
The Company groups mining area and other assets as a basic unit that generates cash inflows independently of other groups of assets.
In light of the decline in forecasted production volume and the decline in forecasted natural gas prices in the Americas, the recoverble
amount of these groups of assets expected to decrease, the Company reduced the respective carrying amounts of the assets listed below torecoverable amounts, posting the reductions as impairment loss.
Use

Assets related to
Van Gogh Oil Field /Coniston Oil Field

Other
Total

Commonwealth of Australia

British Columbia, Canada

Classification

Wells
Machinery, equipment and vehicles
Construction in progress
Other
Subtotal
Buildings and structures
Wells
Other
Subtotal

Impairment loss
Thousands ofMillions of yen
U.S. dollars¥   449
6,503
3,117
16
10,085$  4,045
58,58028,079144
90,848

24
4,580
5,000
9,604

216
41,25845,041
86,515

5,547¥25,236

49,968$227,331

Sustainability and Governance

Assets related tothe shale gas projectin Canada

Location

The recoverable amount of the assets related to Van Gogh Oil Field and Coniston Oil Field is reasonably estimated by discounting the future
cash flows at a rate of 9.1%. The recoverable amount of the assets related to the shale gas project in Canada is estimated at zero.

Financial and Corporate Information

INPEX CORPORATION Annual Report 201977

15. RETIREMENT BENEFITS
Retirement benefits for the years ended March 31, 2018 and 2019 are as follows:(a) Defined benefit plans(1) Reconciliation of beginning and ending balances of the retirement benefit obligations (excluding plans included in (3))
Thousands of
U.S. dollars

Millions of yen

Balance at beginning of the period
Service cost
Interest cost
Actuarial loss (gain)
Retirement benefits paid
Balance at end of the period

2018

2019

2019

¥21,067
1,057
215
66
(895)
¥21,510¥21,510
1,056
220
(185)
(990)
¥21,611$193,766
9,513
1,982
(1,667)(8,918)$194,676(2) Reconciliation of beginning and ending balances of plan assets at fair value (excluding plans included in (3))
Thousands of
U.S. dollars

Millions of yen

Balance at beginning of the period
Expected return on plan assets
Actuarial gain (loss)
Contributions to the plans
Retirement benefits paid
Balance at end of the period

2018

2019

2019

¥15,596
261
100
573
(469)
¥16,061¥16,061
268
(218)
574
(638)
¥16,047$144,681
2,414(1,964)5,171(5,747)$144,555(3) Reconciliation of beginning and ending balances of liability for retirement benefits applying simplified methods
Thousands of
U.S. dollars

Millions of yen

2019

2018
Balance at beginning of the period
Retirement benefit expenses
Retirement benefits paid
Contributions to the plans
Other
Balance at end of the period

¥482
124
(33)
(13)
(72)
¥488

¥ 488
463
(148)
(17)
(84)
¥ 702

2019
$ 4,396
4,171(1,333)(153)(757)$ 6,324(4) Reconciliation between retirement benefit obligations and plan assets at fair value and liability for retirement benefits and asset for retirement
benefits on the consolidated balance sheet
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Retirement benefit obligations (unfunded plans)
Net liability (asset) on consolidated balance sheet¥ 21,760(16,263)
5,497
441
5,938

¥ 21,860(16,251)
5,609
657
6,266

$ 196,919(146,392)
50,527
5,918
56,445

Liability for retirement benefits
Net liability (asset) on consolidated balance sheet

5,938¥  5,938

6,266¥  6,266

56,445$  56,445

Retirement benefit obligations (funded plans)
Plan assets at fair value* Including plans applying simplified methods.

(5) Details of retirement benefit expenses
Thousands of
U.S. dollars

Millions of yen

2018
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss (gain)
Retirement benefit expenses under simplified methods
Retirement benefit expenses for defined benefit plans

78

INPEX CORPORATION Annual Report 2019

¥1,057
215
(261)
(33)
124
¥1,1022019¥1,056
220
(268)
33
463
¥1,5042019$ 9,513
1,982(2,414)297
4,170$13,548

INPEX Snapshot(6) Plan assets (excluding plans applying simplified methods)
Components of plan assets

2018

2019

Stock
General accounts
Bonds
Other
Total

21%
45
13
21
100%

13%
45
13
29
100%

(7) Basis of measurement for long-term expected return rate on plan assets
The expected long-term return rate on plan assets is determined based on the current and expected future distribution of plan assets and thecurrent and expected future long-term return rate on various assets of which plan assets are composed.
(8) Basis of the actuarial assumptions

2018

2019

1.0%
1.8%

1.0%
1.8%

Results and New Strategies

Discount rateLong-term expected return rate on plan assets(b) Defined contribution plans

The Group’s contributions for defined contribution plans amounted to ¥2,413 million and ¥2,363 million ($21,286 thousand) for the years ended
March 31, 2018 and 2019, respectively.

16. ASSET RETIREMENT OBLIGATIONS(a) Asset retirement obligations recognized in the consolidated balance sheet
The changes in asset retirement obligations for the years ended March 31, 2018 and 2019 are as follows:
Years ended March 31,

2018

2019

2019

Balance at beginning of the period
New obligations
Accretion expenses
Obligations settled
Change in estimates *1
Other *2
Balance at end of the period¥109,146
3,707
2,641
(3,394)
2,929(3,493)¥111,536¥111,536
2,621
2,824
(296)
(5,113)
1,844¥113,416$1,004,738
23,61025,439(2,665)(46,059)
16,611$1,021,674

Project Overview

Thousands of
U.S. dollars

Millions of yen*1 ‌“Change in estimates” for the years ended March 31, 2018 and 2019 mainly reflects the revised discount rate of certain subsidiaries.
*2 “Other” mainly includes the change due to foreign exchange rates fluctuation.

(b) Asset retirement obligations other than those recognized in the consolidated balance sheet

Sustainability and GovernanceRegarding domestic oil and gas production facilities and gas supply and marketing facilities, the Group has obligations to prevent mine
pollution at abandoned well sites after the completion of the production under Mine Safety Act and restore sites to their original condition at
the time of business termination in accordance with lease contracts.
Among these facilities, certain domestic oil and gas production facilities are operated complementarily and holistically in connection with the
LNG terminal and it is impossible to determine the timing of decommission since it is difficult to formulate reasonable long-term production
plan considering the balance between the production and the inflow of LNG at this time. The Group plans to operate domestic gas supply andmarketing facilities permanently as highly public infrastructures for energy supply.
The Group also has obligations to decommission mines with respect to certain overseas oil production facilities. However, it is difficult toestimate retirement costs since the information about decommissioning work including the assets subject to the work based on the approval by
the government of oil-producing country has not been specified yet.
Therefore, it is impossible to estimate the relevant asset retirement obligations reasonably and the Group does not recognize them in the
consolidated balance sheet.

Financial and Corporate Information

INPEX CORPORATION Annual Report 201979

17. GOODWILL
The changes in the carrying amount of goodwill for the years ended March 31, 2018 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2018

2019

2019

Balance at beginning of the period
Goodwill acquired during the period
Amortization of goodwill
Balance at end of the period¥60,797—(6,761)¥54,036¥54,036—(6,761)¥47,275$486,767—(60,904)$425,863

18. LEASES
Future minimum lease payments subsequent to March 31, 2019 for operating lease transactions are summarized as follows:

As Lessee

Millions of yen

Thousands of U.S. dollars¥ 3,515
13,350¥16,865$ 31,664
120,259$151,923

2020
2021 and thereafter
Total

19. CONTINGENT LIABILITIESAs of March 31, 2019, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of affiliates in theaggregate amount of ¥535,159 million ($4,820,818 thousand).
In connection with the Ichthys LNG Project Finance, the Company and other project participants provide lenders with a guarantee of liabilities
during the construction phase based on each participating interest. The portion guaranteed by the Company as of March 31, 2019, was¥846,000 million ($7,620,935 thousand).

20. SEGMENT INFORMATION
Segment information for the years ended March 31, 2018 and 2019(a) Overview of reportable segments

The reportable segments for the Group’s oil and natural gas development activities are composed of individual mining area and others for which
separate financial information is available in order for the Board of Directors to make Group management decisions. Since the Group operates
oil and natural gas businesses globally, the Group’s reportable segments are the mining areas and others by geographical region, categorized in“Japan”, “Asia & Oceania” (mainly Indonesia, Australia and East Timor), “Eurasia (Europe & NIS)” (mainly Azerbaijan and Kazakhstan), “Middle
East & Africa” (mainly United Arab Emirates) and “Americas.”
The Company produces oil and natural gas in each segment. In addition, the Company conducts purchasing and marketing activities fornatural gas and petroleum products and others in “Japan” segment.

(b) Basis of measurement for sales, income (loss), assets and other items by reportable segment

Accounting policies for the reportable segments are substantially the same as those described in “Note 2. SUMMARY OF SIGNIFICANTACCOUNTING POLICIES”. Internal sales between segments are based on prices for third-party transactions.

(c) Information on sales, income (loss), assets and other items by reportable segment
Millions of yen
Year ended March 31, 2018

Japan

Asia & Oceania

Sales to third parties
Intercompany sales andtransfers between segments
Total sales¥120,060¥  148,837

Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assets80

Eurasia
Middle East &(Europe & NIS)
Africa¥ 88,597¥565,244

Americas

Total

Adjustments*1 Consolidated*2¥ 10,964¥  933,702¥     —¥  933,702

—

—

—

—

—

—

—

—

120,060
25,256303,133

148,837
28,4052,342,417

88,597
21,396
619,795

565,244305,056
511,037

10,964(10,656)
57,187

933,702369,457
3,833,569—(12,094)
418,818

933,702357,363
4,252,387

17,942

14,054

9,691

36,892

12,901

91,4801,326

92,806

—

—

—

—

(192)

(192)

6,953

6,761

1,980

237,959916

31,712—

272,567299

272,866¥  2,975¥  228,824¥  7,040¥149,217¥  1,786¥  389,842¥  1,065¥  390,907

INPEX CORPORATION Annual Report 2019

INPEX Snapshot

Millions of yen
Year ended March 31, 2019Japan

Asia & Oceania

Sales to third parties
Intercompany sales andtransfers between segments
Total sales¥140,311¥   91,631

Segment income (loss)
Segment assets¥116,719¥614,420

Americas¥ 8,308

Total¥  971,389

Adjustments*1 Consolidated*2¥     —¥  971,389

—

4,810

—

—

—

4,810

(4,810)—140,311
29,210291,284

96,441
27,336
2,971,495

116,719
31,406600,988614,420
412,064
530,432

8,308(8,751)
42,317976,199491,265
4,436,516(4,810)(16,983)
357,030

971,389474,282
4,793,546

17,562

34,135

7,092

38,769

7,957

105,515

1,385

106,900

—

—

—

—

(192)

(192)

6,953

6,761

1,922

301,700

8,118

22,771—

334,511

1,473

335,984¥  3,866¥  241,755¥  6,388¥ 61,438¥ 3,477¥  316,924¥    777¥  317,701

Results and New Strategies

Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assetsEurasia
Middle East &(Europe & NIS)
AfricaThousands of U.S. dollars
Year ended March 31, 2019

Japan

Sales to third parties
Intercompany sales andtransfers between segments
Total sales$1,263,949

Segment income (loss)
Segment assets

Americas$   825,431$ 74,839$1,051,428$5,534,817

Total$ 8,750,464

Adjustments*1 Consolidated*2$      —

$ 8,750,464—

43,329———43,329(43,329)—

1,263,949
263,1292,623,944

868,760
246,248
26,767,814

1,051,428
282,911
5,413,819

5,534,817
3,711,954
4,778,236

74,839(78,830)
381,199

8,793,793
4,425,412
39,965,012(43,329)(152,986)
3,216,197

8,750,464
4,272,426
43,181,209

158,202

307,495

63,886349,239

71,678

950,500

12,476

962,976

—

—

—

—

(1,730)(1,730)62,63460,904

17,314

2,717,773

73,129205,125—

3,013,341

13,2693,026,610$   34,826$ 2,177,777$   57,544$  553,446$ 31,321$ 2,854,914$    6,999$ 2,861,913

Project Overview

Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assetsEurasia
Middle East &Asia & Oceania(Europe & NIS)
Africa*1 Adjustments include elimination of inter-segment transactions and corporate incomes, expenses and assets that are not allocated to areportable segment.
*2 Segment income is reconciled with operating income on the consolidated statement of income.

(d) Products and service information(Sales to third parties)

Millions of yen

Thousands of U.S. dollars

2018

2019

Crude oil
Natural gas (excluding LPG)
LPG
Other
Total

¥710,278
202,054
6,048
15,322¥933,702¥782,695
169,206
1,504
17,984¥971,389

2019

Sustainability and GovernanceYears ended March 31,$7,050,671
1,524,241
13,548162,004$8,750,464(e) Geographical information(Sales)Millions of yen

Thousands of U.S. dollars

2018

2019

Japan
Asia & Oceania
Other
Total

¥428,653
405,422
99,627¥933,702¥423,090
378,956
169,343¥971,389(Tangible fixed assets)
March 31,

Japan
Australia
United Arab Emirates
Other
Total

Millions of yen

2019$3,811,278
3,413,710
1,525,476$8,750,464

Financial and Corporate Information

Years ended March 31,

Thousands of U.S. dollars

2018

2019

2019

¥  264,549
1,537,733
202,177
40,161¥2,044,620¥  245,338
1,774,224
228,92130,512¥2,278,995$ 2,210,053
15,982,560
2,062,166
274,858$20,529,637

INPEX CORPORATION Annual Report 201981

(f) Information by major customer(Sales to major customer)

Year ended March 31, 2018

Millions of yen

Segment¥107,654

Middle East & Africa

Shell International Eastern Trading Company
Year ended March 31, 2019

Millions of yen

Thousands of U.S. dollars

Segment$896,811

Middle East & Africa¥99,555JXTG Nippon Oil & Energy Corporation(g) Information on impairment loss from fixed assets
Millions of yen

Thousands of U.S. dollars

Years ended March 31,

2018

2019

2019

Japan
Asia & Oceania
Middle East & Africa
Americas¥ 3,631—
96
76,243¥79,970¥ 5,547
10,085—
9,604¥25,236$ 49,968
90,848—86,515$227,331

Total

21. RELATED PARTY TRANSACTIONSThere are the following related party transactions for the years ended March 31, 2018 and 2019.

(a) Affiliated company
Year ended March 31, 2018
Name ofrelatedparty

Location

Ichthys
LNG Pty
Ltd

Transportation,liquefaction andServe theWesternsales of oil andofficer$3,398,480
Indirectly
Australia,
natural gas throughconcurrently,
thousand62.25%
Australia
pipeline in WA-50-L
capitalblock in offshore
subscription
Western Australia

Capitalinvestment

Nature ofoperations

Votinginterest

Description of
the business
relationshipAmounts

Transaction
detailMillions of yen

Amounts

Title ofaccount

Millions of yen¥  172,469

Long-term loans
receivable

Subscription for
new shares

122,889——

Guarantee of
liabilities*2¥1,390,772—¥     —

Loans offunds*1¥293,789

Year ended March 31, 2019
Name ofCapitalrelated Location
investment
party

Nature ofoperations

Votinginterest

Descriptionof thebusinessrelationshipTransportation,liquefaction
and sales of oil
Ichthys Western$4,506,860 and natural gas Indirectly Capital
LNG Pty Australia,
thousand through pipeline 66.25% subscription
Ltd
Australia
in WA-50-L
block in offshore
Western Australia

Transaction
detailLoans offunds*1

Amounts
Millionsof yen¥  257,956

Thousands of
U.S. dollars

Title ofaccount

Amounts
Millions Thousands ofof yenU.S. dollars

Long$ 2,323,719 term loans ¥586,823
receivable$5,286,217

Subscription
for new shares

103,283

930,394———

Guarantee of
liabilities*2¥1,354,276$12,199,586—¥     —

$      —

*1 The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.
*2 Guarantee of liabilities are for securing loans from financial institutions and for providing lender with a guarantee of liabilities during the construction
phase based on each participating interest. In addition, “Amounts” are guaranteed balance by the Company.

(b) Note related to the parent company or significant affiliated companies

The significant affiliated company for the years ended March 31, 2018 and 2019 is Ichthys LNG Pty Ltd. The summary of its financial information
is as follows:
Millions of yen

82

Thousands of U.S. dollars

2018

2019

2019

Total current assets
Total fixed assets
Total current liabilities
Total long-term liabilities
Total net assets¥   42,704
3,479,768
357,2702,788,362
376,840¥  140,150
3,789,678
321,795
3,106,463
501,570$ 1,262,499
34,138,168
2,898,793
27,983,632
4,518,242

Net sales
Net income (loss) before income taxes
Net income (loss)—(3,032)¥   (2,688)

178,670
13,061¥    8,710

1,609,495
117,656$    78,461

Years ended March 31,

INPEX CORPORATION Annual Report 2019

Tel: +81 3 3503 1100
Fax: +81 3 3503 1197
www.eyjapan.jp

Results and New Strategies

Ernst & Young ShinNihon LLC
Hibiya Mitsui Tower, Tokyo Midtown Hibiya
1-1-2 Yurakucho, Chiyoda-ku
Tokyo 100-0006, JapanINPEX Snapshot

Independent Auditor’s Report

Independent Auditor’s Report
The Board of Directors
INPEX CORPORATION

Project Overview

We have audited the accompanying consolidated financial statements of INPEX CORPORATION and its
consolidated subsidiaries, which comprise the consolidated balance sheet as at March 31, 2019, and theconsolidated statements of income, comprehensive income, changes in net assets, and cash flows for the year
then ended and a summary of significant accounting policies and other explanatory information, all expressedin Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statementsin accordance with accounting principles generally accepted in Japan, and for designing and operating suchinternal control as management determines is necessary to enable the preparation and fair presentation of theconsolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.

Sustainability and Governance

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionFinancial and Corporate Information

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of INPEX CORPORATION and its consolidated subsidiaries as at March
31, 2019, and their consolidated financial performance and cash flows for the year then ended in conformity
with accounting principles generally accepted in Japan.
Convenience Translation
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented for theconvenience of readers, and, in our opinion, the accompanying consolidated financial statements have been
properly translated on the basis described in Note 3.

June 25, 2019
Tokyo, JapanINPEX CORPORATION Annual Report 201983

Subsidiaries and Affiliates
As of March 31, 2019

Consolidated Subsidiaries
Company name

Voting rights
held by us (%)

INPEX Sahul, Ltd.

4,600

100.00%INPEX Alpha, Ltd.

8,014

100.00%INPEX Browse, Ltd.

423,790

100.00%9,681,023

INPEX Holdings Australia Pty Ltd(Thousands of
U.S. dollars)

INPEX Ichthys Pty Ltd(Thousands of
U.S. dollars)

INPEX Browse E&P Pty Ltd(Thousands of
U.S. dollars)

100.00%INPEX Masela, Ltd.

61,32651.93%INPEX South Makassar, Ltd.

1,097

100.00%INPEX Oil & Gas Australia Pty Ltd

804,456
373,150

1,011,000

100.00%100.00%(Thousands of
U.S. dollars)

100.00%1,426

51.01%

10

100.00%INPEX Southwest Caspian Sea, Ltd.

53,59451.00%INPEX North Caspian Sea, Ltd.

88,62051.00%

Japan Oil Development Co., Ltd.

32,067100.00%INPEX Babar Selaru, Ltd.
Teikoku Oil (Con Son) Co., Ltd.

600,000

JODCO Lower Zakum Limited(Thousands of
U.S. dollars)

JODCO Onshore Limited(Thousands of
U.S. dollars)

JODCO Exploration Limited(Thousands of
U.S. dollars)

Teikoku Oil (D.R. Congo) Co., Ltd.
INPEX Angola Block 14 Ltd.
Teikoku Oil & Gas Venezuela, C.A.
INPEX Americas, Inc.
INPEX Gas British Columbia Ltd.
Teiseki Pipeline Co., Ltd.

84

Issued capital*(Millions of yen)

INPEX CORPORATION Annual Report 2019

111
50

10
475,600(Thousands of
U.S. dollars)

16.2(Bolivars)

19,793(Thousands of
U.S. dollars)

1,043,488(Thousands ofCanadian dollars)

100

100.00%Main business

Exploration, development, production and sales of oil andnatural gas in the JPDA03-12 Block and Bayu-Undan GasCondensate Field in the Timor Sea JPDA, Australia and East
Timor
Exploration, development, production and sales of oil andnatural gas in the WA-35-L Block and others, Australia
Financing for oil and natural gas exploration, development,
production and sales in the WA-285-P Block and others,
Australia
Financing for oil and natural gas exploration, development,
production and sales and construction and operation of the
LNG plant for the Ichthys LNG project, Australia
Exploration, development, production and sales of oil andnatural gas in the Ichthys Gas-Condensate Field (WA-50-L/
WA-51-L), Australia
Exploration of oil and natural gas in the WA-285-P Blockand others, Australia
Exploration and development of oil and natural gas in the
Masela Block in the Arafura Sea, Indonesia
Exploration, development, production and sales of oil andnatural gas in the Sebuku Block in the Makassar Strait,
Indonesia
Exploration and development, production and sales of oil
and natural gas in the Prelude Gas Field (WA-44-L) andothers, Australia
Exploration of oil and natural gas in the Babar Selaru Blockin the eastern sea area, Indonesia
Exploration and development of oil and gas in Blocks 05-1b
and 1c in offshore southern Vietnam
Exploration, development, production and sales of oil in the
ACG Oil Fields, Azerbaijan
Exploration, development, production and sales of oil in the
Offshore North Caspian Sea Block, Kazakhstan
Exploration, development, production and sales of oil in theUpper Zakum, Satah and Umm Al Dalkh oil fields, Offshore
Abu Dhabi, United Arab Emirates
Exploration, development, production and sales of oil in theLower Zakum Oil Field Offshore Abu Dhabi, United ArabEmirates

65.76%

Exploration, development, production and sales of oil in
ADCO Block in onshore Abu Dhabi, United Arab Emirates

100.00%Exploration of oil in onshore Block 4 in Abu Dhabi, United
Arab Emirates

100.00%Exploration, development, production and sales of oil in the
Offshore D.R. Congo Block100.00%Investment in oil exploration, development, production andsales in Block 14, Offshore Angola

100.00%100.00%45.09%
100.00%Investment in exploration, development, production andsale of natural gas in the Copa Macoya Block and exploration, development, production and sale of oil in the Guarico
Oriental Block, Bolivarian Republic of Venezuela
Exploration, development, production and sales of oil andnatural gas in the Lucius Oil Field and others, in the U.S.
Gulf of Mexico
Exploration, development, production and sales of natural
gas in the shale gas blocks of the Horn River, Cordova andLiard basins in British Columbia, Canada
Natural gas transportation, pipeline operation, maintenanceand managementINPEX Snapshot

Company name

Issued capital*(Millions of yen)

42,001(Thousands of
U.S. dollars)

INPEX BTC Pipeline, Ltd.

(Thousands of
U.S. dollars)

63,800100.00%100.00%INPEX Trading, Ltd.

50

100.00%Saitama Gas Co., Ltd.

60

62.67%INPEX Geothermal Sarulla, Ltd.

10100.00%INPEX FINANCIAL SERVICESSINGAPORE PTE. LTD.

2,341,000(Thousands of
U.S. dollars)

100.00%Main business

Investment in Darwin LNG Pty Ltd, which constructs andoperates the undersea pipeline and LNG plant connecting the Bayu Undan Gas-Condensate Field and Darwin(Australia)
Investment in the pipeline construction and management business that connects Baku (Azerbaijan), Tbilisi(Georgia) and Ceyhan (Turkey)
Sales, agency and brokerage of crude oil and market
research and sales planning in connection with oil andnatural gas sales
City gas sales
Supply of business capital, etc. to geothermal power
project in Sarulla Geothermal Field, Indonesia

Results and New Strategies

INPEX DLNGPL PTY Ltd

Voting rights
held by us (%)

The Group’s intercompany finance operations and support for financial administration of projects

36 other subsidiaries
Project Overview

Equity-Method Affiliates
Company name

Issued capital*(Millions of yen)

338,601(Thousands of
U.S. dollars)

PT Medco Geopower Sarulla(Thousands of
U.S. dollars)

Ichthys LNG Pty Ltd(Thousands of
U.S. dollars)

Japan South Sakha Oil Co., Ltd.
Angola Japan Oil Co., Ltd.
Angola Block 14 B.V.
INPEX Offshore North Campos, Ltd.

143,023

4,506,860

Main business44.00%

Exploration, development, production and sales ofnatural gas in the Berau Block and the Tangguh LNG
Project, West Papua province, Indonesia

49.00%

Supply of business capital, etc. to geothermal power
project in Sarulla Geothermal Field, Indonesia

66.25%

025.16%

8,000

19.60%

18

Laying and maintenance of undersea pipeline from theIchthys Gas-Condensate Field to the Darwin Onshore
LNG Plant in Australia, construction and operation of
the LNG plant and sales of LNG, LPG and condensate.
Supply of business capital for exploration, development,
production and sales of oil in Zapadno-Yaraktinsky and
Bolshetirsky blocks, Russia
Exploration, development, production and sales of oilin the Offshore 3/05 Block and 3/05A Block, Angola(Thousands ofeuros)

49.99%

Exploration, development, production and sales of oilin Block 14, Offshore Angola

6,852

37.50%

Financing for oil and natural gas exploration, development, production and sales in the Frade Block in
Offshore North Campos, Brazil

Sustainability and Governance

MI Berau B.V.

Voting rights
held by us (%)

14 other equity-method affiliates
Financial and Corporate Information

Subsidiaries of Equity-Method Affiliates
Company name

Issued capital*

Frade Japão Petróleo Limitada(Thousands ofreais)

103,051

Voting rights
held by us (%)

Main business

0.00%

Exploration, development, production and sales of oil
and natural gas in the Frade Block in Offshore North
Campos, Brazil

2 other subsidiaries of equity-method affiliates*Rounding off fractions less than the unit.

INPEX CORPORATION Annual Report 201985

Business Risks

The following is a discussion on key items that can be considered potential risk factors relating to the business of INPEX CORPORATION,
its subsidiaries and affiliates (the “Group”). From the standpoint of information disclosure to investors and shareholders, we proactively
disclose matters that are not necessarily the business risks but that can be considered to have important effects on the investment
decisions of investors. The following discussion does not completely cover all business risks relating to the Group’s businesses.
Unless stated otherwise, forward-looking statements in the discussion are the judgment of the Group as of June 26, 2019 and are
subject to change after such date due to various factors, including changes in social and economic circumstances.

1. CHARACTERISTICS OF AND RISKS ASSOCIATED WITH THE OIL
AND NATURAL GAS DEVELOPMENT BUSINESS(1) Risk of failure in exploration, development or
production
Payment of compensation is ordinarily necessary to acquireparticipating interests. Also, surveying and exploratory drilling
expenses (exploration expenses) become necessary at the timeof exploration activities for the purpose of discovering resources.
When resources are discovered, it is necessary to further invest in
substantial development expenses according to various conditions,
including the size of the recoverable reserves, development costs
and details of agreements with oil-producing countries (including
gas-producing countries; hereinafter the same shall apply).
There is, however, no guarantee of discovering resources
on a scale that makes development and production feasible. The
probability of such discoveries is considerably low despite various
technological advances in recent years, and even when resources
are discovered the scale of the reserves does not necessarily makecommercial production feasible. For this reason, the Group conservatively recognizes expenses related to exploration investment
in our consolidated financial statements. The Group maintains
financial soundness by booking 100% as expenses in the case ofconcession agreements (including mining rights awarded in Japan
as well as permits, licenses and leases awarded overseas) and bybooking 100% of exploration project investment as allowances in
the case of production sharing agreements. In addition, if there areimpossibilities of recovery of investment in a development project,
we also book the corresponding amount of investment in thedevelopment project as allowances while considering the recovery
possibility of each project.
To increase recoverable reserve and production volumes, theGroup plans to always take an interest in promising properties andplans to continue exploration investment. At the same time, weplan to invest in development projects, including the acquisitionof interests in discovered undeveloped fields and producing fields,
so as to maintain an overall balance between assets at the exploration, development, and production stages.
Although exploration and development (including the acquisition of interests) are necessary to secure the reserves essential to
the Group’s future sustainable business development, each type ofinvestment involves technological and economic risks, and failed
exploration or development could have an adverse effect on the
results of the Group’s operations.

(2) Crude oil, condensate, LPG and natural gas reserves
1) Proved reserves
INPEX CORPORATION (the “Company”) commissioned DeGolyer
and MacNaughton, an independent petroleum engineering consultant in the United States, to assess the main proved reserves

86

INPEX CORPORATION Annual Report 2019of the Group of which projects with a significant amount of future
development investment might materially affect future performance. An assessment of other projects was undertaken by theCompany. The definition of proved reserves is based on the U.S.
Securities and Exchange Commission’s (SEC) Regulation S-X, Rule4-10(a), which is widely known among U.S. investors. Regardlessof whether the deterministic approach or probabilistic approachis used in evaluation, proved oil and gas reserves are estimatedquantities that geological and engineering data demonstrate withreasonable certainty to be recoverable from known reservoirs
under existing economic and operating conditions, from the dateof evaluation through to the expiration date of the agreement
granting operating rights (or in the event of evidence with a reasonable certainty of agreement, extension through to the expiration of the projected extension period). For definition as “proved
reserves,” operators must have a reasonable degree of certainty
that the recovery of hydrocarbons has commenced or that the
project will commence within an acceptable period of time. Thisdefinition is widely regarded as being conservative. Nevertheless,the strictness of the definition does not imply any guarantee ofthe production of total reserves during a future production period.
In this context, when probabilistic methods are employed, there
should be at least a 90% probability that the quantities actually
recovered will equal or exceed the sum of estimated proved
reserves.
For further details on proved reserves of crude oil, condensate, LPG and natural gas held by the Group, including equitymethod, affiliates accounted please see the section “Oil and Gas
Reserves and Production Volume” on P. 94.
2) Probable reserves
In addition to the assessment of proved reserves based on the
SEC standards, the Company commissioned DeGolyer and
MacNaughton to assess its probable reserves of which projects
with a significant amount of future development investment mightmaterially affect the future performance, similar to proved reserves.
An assessment of other projects was undertaken by the Company,
based on the Petroleum Resources Management System (PRMS)
published by organizations including the Society of Petroleum
Engineers (SPE). Probable reserves are defined by PRMS guidelines. In this context, when probabilistic methods are employed,
there should be at least a 50% probability that the quantities actually recovered will equal or exceed the sum of estimated proved
and probable reserves. Probable reserves can be upgraded toproved reserves after the addition of new technical data or when
uncertainty has been reduced due to clarification of economic conditions or operational conditions. Nevertheless, probable reserves

INPEX Snapshot

In the oil and natural gas development business, companies frequently form business partnerships for the purpose of the dispersion of risk and financial burden. In such partnerships, one of thecompanies becomes the operator, which performs the actual work

(5) Project partners
In the oil and natural gas development business, as previously
mentioned, several companies often engage in joint business forthe purpose of dispersion of risk and financial burden. In such cases, the partners generally enter into a joint operating agreement
among themselves to decide on the decision-making procedure
for execution of the joint business, or to decide on an operator
that conducts business on their behalf. A company that is a partner
in one property in which the Group is engaged in joint businessmay become a competitor in the acquisition of other participatinginterests, even though the relationship with the partner may be
good.
In undertaking the joint business, participants in principle
bear a financial burden in proportion to their interest share. Any
inability by a joint business partner to fulfill this financial burden
may adversely affect the project.

Financial and Corporate Information(4) Operatorship

Sustainability and GovernanceConsiderable time and expense is required for exploration activities. Even when promising resources are discovered throughexploration, substantial expenses including production facility
construction costs, and an extended period of time, are necessary at the development stage leading up to production. For thisreason, a long period of 10 years or more is required from the timeof exploration and development investment until the recovery offunds through production and sales. In particular, the large-scale
LNG projects require a very large amount of investment, and thefinancing of these projects could be impacted by changes in theeconomic and financial environment. Following the discovery of
resources, a delay in the development schedule or the loss ofthe economic viability of the properties during the development
process leading up to production and the commencement of sales
could have an adverse effect on the Group’s operational results.
Such delays or losses may occur due to changes in the businessenvironment including a delay in the acquisition or modification of
government approvals, the occurrence of unanticipated problems
related to geological conditions, fluctuations in the price of oil orgas, fluctuations in foreign exchange rates, or escalating prices
of equipment and materials. In the case of LNG projects, suchdelays or losses may occur due to an inability to complete suchprocedural requirements as FID owing to the lack of any long-term
contractual agreement with prospective purchasers with respect toproduction.

Project Overview(3) In the oil and natural gas development business theperiod from exploration to sales is highly capital intensive
and funds cannot be recovered for a long timeand bears the responsibility for operations on behalf of the partners. The companies other than the operator, as non-operators,
participate in the business by providing a predetermined amountof funds and either carefully examining the exploration anddevelopment plan devised and implemented by the operator, or
participating in some operations.
The integration of INPEX CORPORATION and Teikoku OilCo., Ltd., was completed on October 1, 2008. The resultant
company possesses abundant operational capabilities thanks to
the integration of the former two companies’ know-how based on
extensive operation experience in exploration, development andproduction both within Japan and overseas as well as their highlevel proprietary technologies.
The Group intends to actively pursue operator projects,
focusing on the large-scale Ichthys LNG and other projects taking
into consideration the effective application of business resources
as well as the balance between operator and non-operator projects, based on the Group’s technical capability, which has been
considerably enhanced by the above-stated business integration.
The Company has significant expertise as an operator in the development and production of crude oil and natural gas both in Japanand overseas as well as a wealth of know-how and knowledge
accumulated over many years as a participant in LNG and otherprojects in such countries as Indonesia and Australia. In addition,
we believe that by utilizing the services of specialized subcontractors and highly experienced external consultants, a practice similar
to foreign oil companies including the majors, it will be possible
to execute business appropriately as an operator including LNG
projects.
Engaging in project coordination as an operator will contribute to the expansion of opportunities of block and acreage acquisition through enhancement of technical capabilities and greater
presence in oil-producing countries and the industry. At the sametime, there exist risks such as constraints on the recruitment of personnel who have specialized operational skills and an increase infinancial burden. Inability to adequately cope with such risks could
have an adverse effect on the Group’s results of operations.

Results and New Strategies

do not offer a guarantee of the production of total reserves during
a future production period with the same certainty as proved
reserves.
For further details on probable reserves of crude oil, condensate, LPG and natural gas held by the Group, including affiliates
accounted for under the equity method, please see the section“Oil and Gas Reserves and Production Volume” on P. 94.
3) Possibility of changes in reserves
A reserve evaluation depends on the available geological andengineering data from oil and gas reservoirs, the maturity of development plans and a considerable number of assumptions, factors
and variables including economic conditions as of the date suchan estimate is made. Reserves may be revised in the future on thebasis of geological and engineering data as well as development
plans and information relating to changes in economic and otherconditions made newly available through progress in production
and operations. As a result, there is a possibility that reserves will
be restated upwards or downwards. As to the reserves under a
PSC, not only production, but also oil and gas prices, investments,
recovery of investments due to contractual conditions and remuneration fees may affect the economic entitlement. This may cause
reserves to increase or decrease. In this way, the assessed value ofreserves could fluctuate because of various data, assumptions andchanges of definition.

(6) Disaster and accident risks
Oil and natural gas development entails the risk that operational
accidents and disasters may occur in the process of exploration,
development, production and transportation. Should such an

INPEX CORPORATION Annual Report 201987

accident, disaster or other such incident occur, there is the riskthat costs will be incurred, excluding compensation covered byinsurance, due to facility damage, as well as the risk of a major
accident or disaster involving loss of life. In addition, a costburden for recovery or opportunity loss from the interruption ofoperations could occur. For the domestic natural gas business,
the Company has continued to procure as source gas natural gas
regasified from imported LNG since January 2010. Furthermore,
the Company has procured imported LNG as source gas in connection with its Naoetsu LNG Terminal from August 2013. An
inability to procure natural gas regasified from imported LNG andother imported gas as source gas due to troubles concerning suppliers or the Company’s Naoetsu LNG Terminal may interfere with
the Company’s ability to supply to its customers. This could in turnhave an adverse effect on the Company’s domestic natural gas
business.
With regard to environmental problems, there is a possibility of soil contamination, air pollution, and freshwater andseawater pollution. The Group has established a “Health, Safety
and Environment Policy,” and as a matter of course abides by theenvironmental laws, regulations, and standards of the countries inwhich we operate and give due consideration to the environment
in the conduct of business, based on our independent guidelines.
In the event of an operating accident or disaster which impacts theenvironment, there is the possibility of incurring a response or costburden for recovery from that incident, of incurring obligation of
payment for procedural costs, compensation or other cost related
to the start of civil, criminal or government procedures, or of incurring loss from the interruption of operations. Furthermore, in theevent of changes to or the strengthening of the environmental
laws, regulations, and standards (including support measures forthe promotion of new, renewable energies) of the countries inwhich we operate, it may be necessary for the Group to devise
additional measures with an associated cost burden and it could
affect on the financial results of the Group.
Although the Group maintains accident insurance in the natural conduct of its operations, should such an accident or disasterbe attributable to willful misconduct or negligence on the part of

the Group, the occurrence of a cost burden could have an adverse
effect on financial results. Also, such accident or trouble would
result in receiving administrative punishment or result in damage
to the Group’s credibility and reputation as an oil and natural gas
development company, and could therefore have an adverse effecton future business activities.

(7) Climate Change Risk
In order to achieve the goals of the Paris Agreement, and amid
growing interest in addressing global-scale climate change, efforts
are being made to reduce greenhouse gas (GHG) emissions, which
are recognized as the cause of climate change and global warming
worldwide.
Pursuant to our position paper, Corporate Position on Climate
Change, the INPEX Group is undertaking measures in specificareas such as corporate governance, business strategies, risk andopportunity assessments, the management of emissions, and information disclosure in order to proactively reduce GHG emissions
and participate in the transition to low carbon society to achieve
the long-term goals of the Paris Agreement.
In the event that individual countries strengthen national
climate change policies to help achieve the goals of the Paris
Agreement and/or there are changes or additions to environmental laws, regulations, and standards, the INPEX Group would be
required to implement additional countermeasures and, in turn,incur cost burdens that could impact the Group’s performance.

(8) Risk in Relation to Mine Abandonment
The Group books in its accounts, as an asset retirement obligation,
the estimated present value of costs related to mine abandonmentthat will become necessary after finishing operation and production in oil and gas production facilities and the like in accordancewith agreements with the authorities of oil-producing countries,
applicable laws and regulations and the like. If it is later foundthat the estimated present value of those costs falls short due toa change in the procedures used for mine abandonment, a rise in
expenses for procuring drilling materials and equipment or any
other reason, the Group will be required to increase the amount ofthat asset retirement obligation, which could adversely affect thefinancial condition and results of operations of the Group.

2. EFFECTS OF FLUCTUATIONS IN CRUDE OIL PRICES, NATURALGAS PRICES, FOREIGN EXCHANGE AND INTEREST RATES ON
FINANCIAL RESULTS(1) Effects of fluctuations in crude oil prices and natural
gas prices on financial results
A large percentage of crude oil prices and natural gas prices inoverseas businesses are determined by international market conditions. In addition, those prices fluctuate significantly in responseto the influence of a variety of factors including global or local
supply and demand as well as trends and conditions in the global
economy and financial markets. The vast majority of these factors
are beyond the control of the Company. In this regard, INPEX is
not in a position to accurately predict movements in future crude
oil and natural gas prices. The Group’s sales and profits are subject
to the effects of such price fluctuations. Such effects are highly

88

INPEX CORPORATION Annual Report 2019

complex and are caused by the following factors.
1) Although a majority of natural gas selling prices in overseas
businesses are linked to crude oil prices, they are not in direct
proportion to crude oil prices.
2) Because sales and profits are determined on the basis of crude
oil prices and natural gas prices at the time sales are booked,
actual crude oil transaction prices and the average oil price during the accounting period do not necessarily correspond.
Since the natural gas business in Japan uses domestically
produced natural gas and imported LNG as feedstock, changes
in the market price for LNG have an effect on feedstock prices
and sales prices. There is also the possibility that changes in the

INPEX Snapshot(2) The effect of fluctuations in exchange rates on
financial results(3) The effect of fluctuations in interest rates on
financial results

As most of the Group’s business consists of E&P conducted
overseas, associated revenues (sales) and expenditures (costs) aredenominated in foreign currencies (primarily in U.S. dollars), andprofit and loss is subject to the effects of the foreign exchange
market. In the event of appreciation in the value of the yen, yendenominated sales and profits decrease. Conversely, in the eventof depreciation in the value of the yen, yen-denominated sales andprofits increase.
On the other hand, when borrowing necessary funds, theCompany borrows in foreign currencies. In the event of apprecia-

The Group raises some of the funds necessary for exploration anddevelopment operations through borrowing. Much of these borrowings are with variable-rates, long term borrowings based on
the U.S. dollar six-month LIBOR rate. Accordingly, the Company’s
profits are subject to the influence of fluctuations in U.S. dollar
interest rates. Furthermore, although the Group has devised methods to reduce a portion of interest rate risk, these methods do notcover all risks of interest rate fluctuation incurred by our Group anddo not entirely remove the effect of fluctuations in interest rates.

Project Overview

tion in the value of the yen, a foreign exchange gain on foreigncurrency denominated borrowings is recorded as a result of fiscal
year-end conversion; in the event of depreciation in the value ofthe yen, a foreign exchange loss is incurred. For this reason, theexchange risk associated with the above business is diminishedand the impact of fluctuations in exchange rates on profit andloss tends to be mitigated. Moreover, although the Company istaking measures to reduce a portion of the risks associated withmovements in foreign currency exchange rates, these measures by
no means cover all possible risks. As a result, the impact of fluctuations in foreign currency exchange rates cannot be completely
eliminated.

Results and New Strategies

competitive environment associated with electric power and gas
system reforms will have an effect on natural gas sales prices andsales volumes.
Also, should the recovery of an amount invested in a business asset held by the Group be no longer expected—due to adecrease in profitability associated with changes in the businessenvironment on the basis of changes in future market conditions—since the Group would reduce that business asset’s book value toreflect the level of recoverability and the amount of that reduction
would be deemed impairment loss, there is the possibility that
there could be an adverse effect on the Group’s results of operations.

3. OVERSEAS BUSINESS ACTIVITIES AND COUNTRY RISK
cation of OPEC production ceilings in OPEC member countries
and changes in the legal system and taxation system of thosecountries (including the establishment or abolition of laws or regulations and changes in their interpretation or enforcement) as wellas lawsuits could have a significant impact on the Group’s businessor results unless the impact is compensated by insurance.
Additionally, against the background of rising development
costs and other changes in the business environment, the progressof oil and gas projects, and the need to address environmental
issues, the governments of oil-producing countries may seek torenegotiate the fiscal conditions including conditions of existing
oil contracts related to participating interests. In the event that the
fiscal conditions of contracts were to be renegotiated, this could
have an adverse effect on the Group’s business performance.

Sustainability and Governance

The Group engages in a large number of oil and natural gas development projects overseas. Because the Group’s business activities,
including the acquisition of participating interests, are conductedon the basis of contracts with the governments of oil-producing
countries and other entities, steps taken by oil-producing countries to further tighten controls applicable to home country natural
resources, suspension of operation due to conflicts and otherfactors, and other such changes in the political, economic, andsocial circumstances in such oil-producing countries or neighboring countries (including government involvement, stage of economic development, economic growth rate, capital reinvestment,
resource allocation, restriction of economic activities by global
community, government control of foreign exchange or foreign
remittances, and the balance of international payments), the appli-(1) Production volume
The Group engages in stable production of crude oil and natural
gas in the on shore and offshore Abu Dhabi oil fields (United
Arab Emirates), the Minami Nagaoka Gas Field (Japan) and soon. Through a process of business integration, the Group had
established a wide ranging, diversified yet balanced portfoliothat encompassed the Asia-Oceania regions (particularly Japan,
Indonesia, and Australia), the Middle East and Africa, Eurasia
including Caspian Sea area and the Americas. For the year ended
March 31, 2019 however, the Middle East and Africa regions

Financial and Corporate Information

4. DEPENDENCE ON SPECIFIC GEOGRAPHICAL AREAS OR
PROPERTIES
accounted for about 54% and the Asia and Oceania regions
accounted for about 22% of the Group’s production volume, making up the vast majority of the Group’s operations.
Looking ahead, the Group will endeavor to further enhance
the balance of its asset portfolio on a regional basis. However, theGroup currently relies heavily on specific geographical areas andproperties for its production volume, and the occurrence in theseproperties of an operational problem or difficulty could have an
adverse effect on the Group’s operational results.

INPEX CORPORATION Annual Report 201989

(2) Contract expiration dates in principal business areas
Expiration dates are customarily stipulated in the agreements
related to participating interests, which are prerequisites for theGroup’s overseas business activities. Should an agreement in which
an expiration date is stipulated not be extended, re-extended or
renewed, or should the terms and conditions be less favorable(including a reduction in the proportion of the Group’s interest)
than those existing at the time of extension, re- extension or
renewal, there could be an adverse effect on the Group’s results.
INPEX Group policy to work with our business partners toward theextension, re-extension or renewal of these agreements, should
an existing agreement not be extended, re-extended or renewed
as a result of agreement negotiations with the national petroleum
company of an oil-producing country, or in the event of agreement
terms and conditions (including a reduction in the Group’s participating interest) that are more disadvantageous than the situation
at the time of the extension, re-extension or renewal, this could
have an adverse effect on the Group’s business or results. Even
should the agreements stipulating expiration dates be extended,
re-extended or renewed, we anticipate that the remaining recoverable reserves at that time will have decreased due to production
developments. Although the Group is striving to acquire intereststhat can substitute these properties, failure to acquire participatinginterests in oil and gas fields to fully substitute for these properties
could have an adverse effect on the Group’s results. In addition,
the period for exploration in oil and gas fields currently under
exploration is fixed by contracts, and in the case of fields where oil

and/or gas reserves are found that are deemed to be commercialized, and the Company is unable to decide on the transition to
the development stage by the expiration of the current contract,efforts will be made through negotiations with the governmentof the oil- or gas-producing country in question to have the periods extended. However, there remains the possibility that suchnegotiations may not be successfully concluded, in which event
the Company would be forced to withdraw from operations in theoil or gas field concerned. Also, as a rule, when there has beena major breach of contract on the part of one party, it is customary for the other party to have the right to cancel the agreement
before the expiration date. The agreements for properties in theseprincipal geographical business areas contain similar provisions.
The Group has never experienced early cancellation of an agreement due to breach of contract, and we do not anticipate such an
occurrence in the future. Nevertheless, a major breach of contract
on the part of a party to an agreement could result in cancellationof an agreement before the expiration date.
And in the overseas natural gas development and production
activities, in many cases we are selling and supplying gas basedon long-term sales and supply contracts in which expiration dates
are stipulated. We plan to make efforts with partners to extend
or re-extend the expiration date before the deadline stipulated inthese contracts. Nevertheless, inability to extend the contracts, orthe occurrence of cases in which extension is made but sales andsupply volumes are reduced, could have an adverse effect on theGroup’s business or results.

5. PRODUCTION SHARING CONTRACTS(1) Details of production sharing contracts
The Group has entered into production sharing contracts withcountries including Indonesia and Caspian Sea area, and therefore
holds numerous participating interests in those regions.
Production sharing contracts are agreements by which one orseveral oil companies serve as contractors that undertake at theirown expense exploration and development work on behalf of thegovernments of oil-producing countries or national oil companies
and receive production from the projects as cost recovery andcompensation. That is to say, when exploration and development
work results in the production of oil or natural gas, the contractors
recover the exploration and development costs they incurred bymeans of a share in the production. The remaining production(crude oil and gas) is shared among the oil-producing country
or national oil company and the contractors according to fixedallocation ratios. (The contactors’ share of production after cost
recovery is called “profit oil and gas.” On the other hand, in cases
when exploration fails and expected production is not realized, thecontractors are not to recover their invested funds.

(2) Accounting treatment of production sharing
contracts
When a company in the Group owns participating interests under90

INPEX CORPORATION Annual Report 2019

production sharing contracts, as mentioned above, in the role ofcontractor it invests technology and funds in the exploration anddevelopment of the property, recovers the invested costs fromthe production produced, and receives a share of the remaining
production after recovery of invested costs as compensation.
Costs invested on the basis of production sharing contracts
are recorded on the balance sheet as assets for which future recovery is anticipated under the item “Recoverable accounts under
production sharing.” After the start of production, recovered costson the basis of those agreements are deducted from this balance
sheet item.
As production received under production sharing contracts
is divided into the cost recovery portion and the compensation
portion, the method of calculating cost of sales is also distinctive.
That is to say, the full amount of production received is temporarily
charged to cost of sales as the cost of received production, andsubsequently the amount of the compensation portion is calculated and this amount is booked as an adjustment item to cost of
sales (“Free of charge production allocated”). Consequently, only
the cost recovery portion of production after deduction of thecompensation portion is booked as cost of sales.

INPEX Snapshot

6. RELATIONSHIP WITH THE JAPANESE GOVERNMENT(1) The Company’s relationship with the Japanese
government(2) Ownership and sale of the Company’s shares by theJapanese government (the Minister of Economy, Tradeand Industry)

Project Overview

The Ministry of Economy, Trade and Industry (METI) holds 18.96%
of the Company’s common shares issued (excluding treasury
shares). METI succeeded to the shares that had been held byJapan National Oil Corporation (JNOC) following the dissolutionof JNOC on April 1, 2005. With regard to the liquidation anddisposition of the oil and gas upstream assets owned by JNOC,
the Policy Regarding the Disposal of Oil and Gas Development-

Results and New Strategies

Although the government of Japan (the Minister of Economy,
Trade and Industry) holds 18.96 of the Company’s commonshares issued (excluding treasury shares) and a Class A Stock asof June 26, 2019, the Company autonomously exercises businessjudgment as a private corporation. There is no relationship ofcontrol, such as through the dispatch of officers or other means
between the Company and the Japanese government. Moreover,
we believe that no such relationship will develop in the future.
Furthermore, there is no concurrent posting or secondment to theCompany of officers or employees from the Japanese government.

Related Assets Held by Japan National Oil Corporation (hereinafter, the “Report”) was announced on March 18, 2003 by theJapan National Oil Corporation Asset Evaluation and Liquidation
Deliberation Subcommittee of the Advisory Committee on
Energy and Natural Resources, an advisory body of the Ministry of
Economy, Trade and Industry. The Report describes the importanceof appropriate timing in selling the shares on the market, taking
into consideration enterprise value growth. In addition, METI may,in accordance with the Supplementary Provision Article 13 (1) 2of the “Special Measures Act for Reconstruction Finance Keeping
After the Great East Japan Earthquake” (“the Reconstruction
Finance Keeping Act“ (provisional translation, the same shall apply
hereinafter)) enacted December 2, 2011, sell off the Company’s
shares in Japan or overseas after examining the possibility ofdisposal of the said shares based on a review of the holdings fromthe perspective of energy policy. This could have an impact on themarket price of the Company’s shares.
METI also holds one share of the Company’s Class A Stock.
As the holder of a Class A Stock, METI possesses veto rights overcertain resolutions of the Company’s general shareholders’ meetings and meetings of the Board of Directors. For details on theClass A Stock, please refer to “8. CLASS A STOCK” on P. 92.

7. TREATMENT OF SHARES OF THE GROUP’S PROJECT COMPANYOWNED BY JAPANESE GOVERNMENT AND JOGMEC(1) Treatment of shares of the Group’s project company
previously owned by Japan National Oil Corporation(JNOC)

Financial and Corporate Information

INPEX CORPORATION Annual Report 2019

Sustainability and GovernanceIn the aforementioned Report, INPEX CORPORATION (prior to
the integration with Teikoku Oil; reorganized on October 1, 2008)
was identified as a company that should comprise part of a corecompany, and is expected to play a role in efficient realizationof a stable supply of energy for Japan through the involvement
by a national flagship company. In response to the Report, theCompany (also, the Group since our acquirement of Teikoku Oil
on October 1, 2008) has sought to promote efficient realizationof a stable supply of energy for Japan while taking advantage ofsynergy with the efforts of active resource diplomacy on the part of
the Japanese government, and has aimed to maximize shareholder
value by engaging in highly transparent and efficient business
operations.
As a result, with regard to the integration by means oftransfer of shares held by JNOC proposed in the Report, INPEXCORPORATION and JNOC concluded the Basic Agreement
Concerning the Integration of Assets Held by JNOC into INPEXCORPORATION of February 5, 2004 (hereinafter the “Basic
Agreement”) and a memorandum of understanding related to
Basic Agreement (hereinafter “MOU”). On March 29, 2004, INPEXCORPORATION and JNOC entered into related contracts including the Basic Contract Concerning the Integration of Assets Heldby JNOC into INPEX CORPORATION (hereinafter the “BasicContract”), achieving the agreement on the details including thetreatment of the project companies subject to the integration andshareholding ratios.
In 2004 INPEX CORPORATION accomplished the integra-

tion of Japan Oil Development Co., Ltd. (JODCO), INPEX Java
Ltd. (disposal was completed on September 30, 2010) and INPEXABK, Ltd. which are three of four companies covered by the Basic
Agreement. Although INPEX Southwest Caspian Sea Ltd. (hereinafter “INPEX Southwest Caspian”) would become a wholly owned
subsidiary of INPEX CORPORATION by means of a share exchange
and the procedures were undertaken, the share exchange contract
was invalidated owing to failure to accomplish the terms andconditions of the share exchange contract and the planned shareexchange was cancelled. Following the dissolution of JNOC on
April 1, 2005, the Minister of Economy, Trade and Industry succeeded to the INPEX Southwest Caspian shares held by JNOC.
The Company continues to study the possibility to acquire theshares. However, the METI’s future treatment of these shares isundecided and, depending on the result of review in accordancewith the Reconstruction Finance Keeping Act, acquisition of INPEXSouthwest Caspian shares could be unavailable.
The treatment of Sakhalin Oil and Gas Development Co., Ltd.
(hereinafter “SODECO”), INPEX Offshore North Campos, Ltd.,INPEX North Makassar, Ltd. (liquidation proceedings completed
on December 19, 2008), INPEX Masela, Ltd., and INPEX North
Caspian Sea, Ltd. was agreed between INPEX CORPORATION and
JNOC in the MOU of February 5, 2004. Regarding the treatmentof shares of SODECO, refer to the section “(2) Treatment of theshares of Sakhalin Oil and Gas Development (SODECO) owned by
the Japanese government” on P. 91. With regard to the transfer
to INPEX CORPORATION of the shares in the above projectcompanies other than SODECO, it was decided that the shares areto be transferred for cash compensation as soon as prerequisites
such as the consent of the oil-producing country and joint venture

91

partners and the possibility of appropriate asset evaluations are inplace. However, the transfer of shares held by JNOC in the above
companies has not been decided and the shares in the above
project companies were succeeded to by the Japan Oil Gas andMetals National Corporation (hereinafter “JOGMEC”) on the dissolution of JNOC on April 1, 2005, except shares related to INPEX
North Makassar, Ltd., to which the Minister of Economy, Trade andIndustry succeeded. JOGMEC states in its “medium-term objective” and “medium-term plan” that the shares succeeded to from
JNOC will be disposed of at an appropriate time and in an appropriate manner, but the timing and manner of the disposal for theshares held by JOGMEC have not been decided, and it is possiblethat the Company will be unable to acquire the shares.

(2) Treatment of the shares of Sakhalin Oil and Gas
Development (SODECO) owned by the Japanese
government
The Japanese government (the Minister of Economy, Trade andIndustry) owns 50% of the shares of SODECO. SODECO wasestablished in 1995 to engage in an oil and natural gas explorationand development project located on the northeast continental
shelf off Sakhalin Island. SODECO owns a 30.0% interest in the
Sakhalin-1 Project, of which ExxonMobil of the United States is theoperator. In October 2005, Phase 1 of this project started with thegoal of advanced production of oil and natural gas. Furthermore,
there is a plan for additional development operations (Phase 2)
for the purpose of the full-scale production of natural gas. The
Company holds 6.08% of SODECO shares issued and outstanding.
In the previously mentioned Report, SODECO, along withINPEX CORPORATION and JODCO, has been identified as acompany that should comprise part of a core company in Japan’s
oil and natural gas upstream industry in the future.
In accordance with the Report, it is assumed that privatesector shareholders, including INPEX CORPORATION, will acquire
shares of SODECO issued and outstanding to which the Minister of
Economy, Trade and Industry succeeded and that were previously
held by JNOC (50.0%). The Company plans to hold a maximumof 33% of the SODECO shares to become its largest shareholder.
In the event that the consent of SODECO’s joint-venture partners,
the relevant Russian government entity, or other parties is necessary for the acquisition of the shares, obtaining the consent is aprerequisite for acquisition. In addition, it will be necessary toreach agreement on the shareholder composition for SODECO,
the share transfer price, and other matters.
In the event that the additional acquisition of the SODECO
shares is realized, the Group will hold a substantial ownershipinterest in oil and natural gas assets in Russia, as well as in Asia andOceania, the Middle East, Caspian Sea area, and other regions,and we expect the acquisition to contribute to the achievement ofa more balanced overseas asset portfolio for the Group.
However, at this time it is undecided whether agreement
concerning acquisition of the shares with the Minister of Economy,
Trade and Industry will be reached as anticipated and will be realized. Also, even in the event that the acquisition is realized, theconditions and time of acquisition are undecided and, dependingon the result of review in accordance with the Reconstruction
Finance Keeping Act, the acquisition by the Company could be
unavailable.

8. CLASS A STOCK(1) Overview of the classified share

1) Reason for the introduction
The Company was established as the holding company througha stock transfer between INPEX CORPORATION and Teikoku
Oil Co., Ltd. on April 3, 2006. Along with this, a classified shareoriginally issued by INPEX CORPORATION (prior to the merger)
was transferred and at the same time the Company issued aclassified share with the same effect (hereinafter the “Class A
Stock”) to the Minister of Economy, Trade and Industry. The classified share originally issued by INPEX CORPORATION was theminimally required and a highly transparent measure to eliminate
the possibility of management control by foreign capital while notunreasonably impeding the efficiency and flexibility of management based on the concept in the Report discussed in the above
section 7. “TREATMENT OF SHARES OF THE GROUP’S PROJECTCOMPANY OWNED BY JAPANESE GOVERNMENT AND
JOGMEC.” INPEX CORPORATION is identified as a company thatshould comprise part of a core company for Japan’s oil and gas
upstream industry and is expected to play a role in efficient realization of a stable supply of energy for Japan as a national flagshipcompany. On the basis of the concept of the Report, following a
speculative acquisition or an attempt at management controlled
by foreign capital, Class A Stock is designed and issued to behighly transparent while not unreasonably impeding the efficiency
and flexibility of management and to keep the effects of any such
speculative acquisition to the necessary minimum. At the sametime, Class A Stock maintains the Company’s role in the efficient92

INPEX CORPORATION Annual Report 2019

implementation of a stable supply of energy for Japan as a corebusiness, so that management is not conducted in a way contradictory to that role and no negative impact is felt.
2) Shareholders’ meeting resolutions, dividends, distributionof residual assets, and redemption
Unless otherwise provided by laws or ordinances, the Class A
Stock does not have any voting rights at the Company’s generalshareholders’ meetings. With regard to cash dividends paid andthe distribution of residual assets, the Company concluded a stock
split at a ratio of 1:400 of common stock with October 1, 2013, as
the effective date. For Class A Stock (unlisted) no stock split was
conducted. The Articles of Incorporation specify that dividendsof Class A Stock are equivalent to dividends of a common stockprior to the stock split. The Class A Stock will be redeemed byresolution of the Board of Directors of the Company if the holderof the Class A Stock requests redemption or if the Class A Stockis transferred to a party other than the government of Japan or
an independent administrative body that is fully funded by thegovernment of Japan.
3) Veto rights in the Articles of Incorporation
The Articles of Incorporation of the Company provide that an
approval resolution of the meeting of the holder of the Class A
Stock is necessary in addition to resolutions of the Company’s
general shareholders’ meetings and resolutions of meetings of theBoard of Directors for the decisions on certain important matterssuch as the appointment or removal of Directors, disposition ofmaterial assets, changes to the Articles of Incorporation, businessINPEX Snapshot(2) Risk in connection with the Class A Stock
Following a speculative acquisition or an attempt at management
controlled by foreign capital, Class A Stock is designed and issued
to be highly transparent while not unreasonably impeding theefficiency and flexibility of management and to keep the effects ofany such speculative acquisition to the necessary minimum. At thesame time, Class A Stock maintains the Company’s role in the efficient implementation of a stable supply of energy for Japan as acore business, so that management is not conducted in a way contradictory to that role and no negative impact is felt. Nevertheless,the anticipated risks in connection with the Class A Stock include
the following.
1) Possibility of conflict of interest between national policy
and the Company and its common shareholders
It is conceivable that the Minister of Economy, Trade and Industry
could exercise the veto rights in accordance with the above criteria
provided in the Notice. As the said criteria have been provided
from the standpoint of efficient realization of a stable supply ofenergy to Japan, it is possible that the exercise of the veto rights
by the Minister of Economy, Trade and Industry could conflictwith the interest of other shareholders who hold the Company’scommon shares. Also, it is possible that the said criteria could bechanged in the light of energy policy.
2) Impact of the exercise of veto rights on the price of sharesof common stock
As mentioned above, as the holder of the Class A Stock has theveto rights over certain important matters in connection with thebusiness of the Company, the actual exercise of the veto rights
over a certain matter could have an impact on the price of theCompany’s shares of common stock.
3) Impact on the Company’s degree of freedom in businessand business judgment
As the Minister of Economy, Trade and Industry holds the Class
A Stock with the previously mentioned veto rights, the Company
needs a resolution of the meeting of the holder of the Class
A Stock concerning the above matters. For this reason, theCompany’s degree of freedom in management in those matters
could be restricted by the judgment of the Minister of Economy,
Trade and Industry. Also, attendant on the need for a resolutionof the meeting of the holder of the Class A Stock concerning theabove matters, a certain period of time is required for procedures
such as the convening and holding of meetings and resolutions
and for the processing of formal objections, if necessary.

Results and New Strategies
Project Overview
Sustainability and Governanceintegration, capital reduction or company dissolution in connection
with the business of the Company. Accordingly, the Minister of
Economy, Trade and Industry, as the holder of the Class A Stock,has veto rights over these important matters. With regard to thecases in which the Class A Stock veto rights are exercisable, pleaserefer to “4) Criteria for the exercise of veto rights provided in thecriteria for the exercise of the Class A Stock holder’s voting rights”,
below.
4) Criteria for the exercise of veto rights provided in the criteria
for the exercise of the Class A Stock holder’s voting rights
Criteria concerning the exercise of the veto rights have been
established in a Ministry of Economy, Trade and Industry Notice(No. 37, 2019) (hereinafter the “Notice”). The criteria stipulate theexercise of veto rights only in the following specific cases.
• When resolutions pertaining to appointment or removal of
Directors and integration are not voted down and it is judgedthat the probability is high that the Company will engage inmanagement inconsistent with the role that a core company
should perform for efficient realization of a stable supply ofenergy to Japan.
• With regard to decisions related to the disposal of all or part ofsignificant assets, when resolutions pertaining to disposition ofmaterial assets are not voted down and the objects of disposition are oil and natural gas exploration or production rights
or rights similar thereto or shares or ownership interest in the
Company’s subsidiary whose principal assets are said rights andit is judged that the probability is high that the Company will
engage in management inconsistent with the role that a corecompany should perform for efficient realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Company’s
Articles of Incorporation relating to changes in the Company’sbusiness objectives, reduction in the amount of capital, or dissolution are not voted down and it is judged that the probability ishigh that the Company will engage in management inconsistent
with the role that a core company should perform for efficient
realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Articles ofIncorporation granting voting rights to any shares other than thecommon shares of the Company are not voted down and could
have an effect on the exercise of the voting rights of the Class A
Stock.
It is provided that the above criteria shall not be limited in the eventthat the Notice is changed in the light of energy policy.

Financial and Corporate Information

9. CONCURRENTLY SERVING OUTSIDE DIRECTORSThe Board of Directors of the Company is currently composed of
13 members, five of whom are outside directors.
Four of the five outside directors have many years’ experience and knowledge of the Company’s business and are able
to offer objective, professional advice regarding operations. For
this reason, they were asked to join the Board of Directors tocontribute to the development of the Company’s business. Threeof the directors concurrently serve as director or advisors of Japan
Petroleum Exploration Co., Ltd., Mitsubishi Corporation, Mitsui Oil
Exploration Co., Ltd. and JXTG Holdings, Inc. (hereinafter “shareholder corporations”), respectively.
At the same time, however, the shareholder corporations are

involved in businesses that overlap with those of the Company.
The Company therefore recognizes that it must pay particularattention to corporate governance to avoid conflicts of interest inconnection with competition and other matters.
To this end, all Company directors, including the three outside
directors described above, are required to sign a written undertaking to carry out their duties as officers of the Company appropriately
and with the highest regard for the importance of such matters as
their obligations in connection with noncompetitive practices under
the Japanese Companies Act, the proper manner for dealing withconflict of interest, and confidentiality.

INPEX CORPORATION Annual Report 201993

Oil and Gas Reserves and Production Volume

1. OIL AND GAS RESERVES
Proved reserves
The following tables list the proved reserves of crude oil, condensate, LPG and natural gas of INPEX CORPORATION, its consolidated subsidiaries and equity-method affiliates (the “Group”) on main
projects. Disclosure contents for proved reserves are determinedin accordance with the rules and regulations of the U.S. Financial
Accounting Standards Board (the “FASB”), and are presented inJapan
Crude oil(MMbbl)Gas(Bcf)

Proved developed and undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201717659
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates
4171Interim production(1)(51)
As of March 31, 201820
778
Equity-method affiliates
As of March 31, 2017——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2018——
Proved developed and undeveloped reserves
As of March 31, 2018
20
778
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201820
778
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates(0)(3)
Interim production(1)(48)
As of March 31, 201918
727
Equity-method affiliates
As of March 31, 2018——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2019——
Proved developed and undeveloped reserves
As of March 31, 201918
727
Proved developed reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201918
727
Equity-method affiliates——
As of March 31, 2019
Proved undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2019——
Equity-method affiliates
As of March 31, 2019——

Asia & Oceania

accordance with the Accounting Standards Codification Topic 932“Extractive Activities —Oil and Gas” (“Topic 932”). The Group’s
proved reserves as of March 31, 2019, were 2,864 million barrels
for crude oil, condensate and LPG, and 6,179 billion cubic feet for
natural gas, for a total of 4,010 million boe.
Eurasia(Europe & NIS)

Middle East &AfricaAmericas

Total

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)

Gas
(Bcf)

184
—
(7)
12
(6)
183

4,624
—
(53)
202
(141)
4,632

217
—
—
32
(14)
236

125
—
—
36
(8)
153

1,746
—
313
292
(63)
2,288

—
—
—
—
—
—

10
—
—
(3)
(1)
6

99
—
—
(38)
(41)
19

2,173
—
307
338
(85)
2,732

5,506
—
(53)
371
(242)
5,583

2
—
—
0
(0)
2

385
—
—
26
(18)
394

2
—
2
5
(1)
8

—
—
—
—
—
—

32
—
—
2
(29)
5

—
—
—
—
—
—

—
—
—
0
0
—

—
—
—
0
0
—

36
—
2
8
(31)
15

385
—
—
26
(18)
394

186

5,026

244

153

2,293

—

6

19

2,747

5,976

183
—
10
4
(7)
190

4,632
—
281
181
(126)
4,968

236
—
—
68
(15)
289

153
—
—
5
(10)
148

2,288
—
—
138
(82)
2,343

—
—
—
—
—
—

6
—
—
(1)
(1)
4

19
—
—
19
(33)
6

2,732
—
10
209
(106)
2,845

5,583
—
281
203
(217)
5,849

2
—
—
(0)
(0)
2

394
—
—
(44)
(20)
330

8
—
—
7
(2)
12

—
—
—
—
—
—

5
—
—
2
(2)
5

—
—
—
—
—
—

—
—
—
0
(0)
—

—
—
—
0
(0)
—

15
—
—
9
(5)
20

394
—
—
(44)
(20)
330

192

5,298

301

148

2,349

—

4

6

2,864

6,179

153

3,586

244

148

1,500

—

1

1

1,916

4,462

1

202

11

—

3

—

—

—

15

202

37

1,382

45

—

843

—

3

5

929

1,387

1

128

2

—

3

—

—

—

5

128

Notes: 1. Based on SEC disclosure standards, the Group discloses proved reserves in each country containing 15% or more of its proved reserves. As of March 31, 2019, the Group held proved reserves in Australia ofapproximately 182 million barrels for crude oil and approximately 4,753 billion cubic feet for natural gas, for a total of approximately 1,069 million boe.
2. Proved reserves (as of March 31, 2019) of the following blocks and fields include the portion attributable to non-controlling interests.
		 Eurasia: ACG (49%), Kashagan (49%)
3. MMbbl: Million barrels
4. Bcf: Billion cubic feet
5. Crude oil includes condensate and LPG

Standardized measure of discounted future net cash flows and their changes relating to proved oil and gas
reserves for the year ended March 31, 2019
Disclosure contents for the standardized measure of discounted
future net cash flows and their changes relating to proved reserves
for the year ended March 31, 2019 are determined in accordancewith the rules and regulations of the FASB, and are presented inaccordance with Topic 932.
In calculating the standardized measure of discounted future
cash inflows, the arithmetic average of oil and gas prices at the firstday of each month during the current fiscal year is applied to the94

INPEX CORPORATION Annual Report 2019

estimated annual future production from proved reserves. Future
development and production costs are estimated based upon theassumptions of constant oil and gas prices and the continuationof existing economic, operating and regulatory conditions. Future
income tax expenses are calculated by applying the year-end
statutory tax rates to estimated future pretax cash flows less thetax basis of the properties involved based upon laws and regulations already legislated at year-end. The discount is computed by

INPEX Snapshot

March 31, 2018
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows

Total consolidated and equity-method affiliates in standardized
measure of discounted future net cash flows

Total

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
AfricaJapan¥20,320,892(7,498,996)(8,673,758)
4,148,139(2,262,996)
1,885,143¥ 956,171 ¥ 4,159,906(240,311)(1,283,385)(231,110)(645,491)
484,749
2,231,030(270,112)(1,087,087)
214,637
1,143,943

Americas¥1,288,985(555,837)(125,913)
607,235(336,086)
271,149¥13,878,650(5,392,276)(7,671,244)
815,130(567,643)
247,487¥ 37,181(27,186)—
9,995(2,068)7,926

322,705(179,806)(68,556)
74,343(40,500)

—
—
—
—
—

252,543(134,182)(51,100)
67,260(38,494)

39,268(13,809)(14,590)
10,869(3,720)30,894(28,863)(2,866)
(834)
1,576

—
(2,952)—(2,952)
137

33,842—

28,766

7,149

742(2,815)¥ 1,918,985¥ 214,637¥ 1,172,709¥  278,298¥   248,229¥  5,112

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
AfricaAmericas

Project Overview

Equity-method affiliates
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Share of equity-method investees’ standardized measure of
discounted future net cash flows

not represent the fair market value nor the Group’s estimation forthe present value of the cash flows of reserves of crude oil, condensate, LPG and natural gas.
• No economic value is attributed to potential reserves.
• A prescribed discount rate of 10% is applied.
• Oil and gas prices are subject to constant fluctuations despite
the assumptions of constant oil and gas prices of Topic 932.

Results and New Strategies

applying a prescribed discount rate of 10% to the estimated future
net cash flows.
The translation of U.S. dollar amounts into yen amounts iscomputed by applying the year-end exchange rates (TTM) of¥106.27 and ¥111.01 to the U.S. dollar as of March 31, 2018 and2019, respectively.
Since these figures are calculated in accordance with the rules
set forth by the FASB, which have the following aspects, they doNote: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)

March 31, 2019
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows

Total consolidated and equity-method affiliates in standardized
measure of discounted future net cash flows¥ 25,922,462(8,885,792)(12,045,321)
4,991,349(2,632,985)
2,358,365Japan¥1,105,257 ¥ 4,242,598 ¥2,065,747(278,440) (1,465,150)(800,391)(261,294)(424,802)(254,837)
565,524
2,352,646
1,010,519(313,789) (1,072,561)(540,909)
251,735
1,280,085
469,609¥ 18,476,549(6,324,795)(11,104,387)
1,047,366(703,838)
343,528¥ 32,311(17,016)—
15,294(1,887)
13,407444,793(189,571)(119,084)
136,137(64,481)

—
—
—
—
—

306,909(117,769)(81,958)
107,182(57,147)

97,347(38,812)(33,354)
25,181(6,909)40,537(32,990)(3,772)
3,775
(426)

—
—
—
—
—

71,657—50,035

18,272

3,349—¥   2,430,021¥   251,735¥ 1,330,120¥   487,882¥   346,878¥ 13,407

Sustainability and Governance

Equity-method affiliates
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Share of equity-method investees’ standardized measure of
discounted future net cash flows

Total

Note: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (50%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)

Total

Japan

Americas

Equity-method
affiliates¥1,918,985¥214,637¥1,143,943¥271,149¥247,487¥ 7,926¥33,842(504,942)(50,441)(62,551)(49,274)(323,245)(3,390)(16,042)

1,211,922

60,828

178,909(139,471)
591,441
175,756(890,833)
100,072(211,817)

228
(912)
(619)
18,962
(522)
—
9,574

177,547

135,938

786,349

5,977

45,283

93,130(42,727)
42,462
102,883(28,287)
100,072(246,387)

9,385(86,402)
199,267
24,698(47,246)—
12,09469,088(4,653)
323,480
25,330(791,346)—
11,0393,189(142)(2,022)
923
591
—
354

3,890
(4,635)28,872
2,959(24,022)—
1,509¥2,430,021¥251,735¥1,280,085¥469,609¥343,528¥13,407¥71,657

Financial and Corporate Information

INPEX CORPORATION and Consolidated
Subsidiaries
Standardized measure at beginning of the period
As of April 1, 2018
Changes resulting from:
Sales and transfers of oil and gas produced, netof production costs
Net changes in oil and gas prices and production
costs
Development costs incurred
Changes in estimated future development costs
Revisions of previous quantity estimates
Accretion of discountNet change in income taxes
Extensions, discoveries and improved recoveries
OtherStandardized measure at end of the period
As of March 31, 2019

Millions of yen
Eurasia
Middle East &(Europe & NIS)
AfricaAsia &
Oceania

Note: Reserves of the following blocks and fields include the portion attributable to non-controlling interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (49%)

INPEX CORPORATION Annual Report 201995

Probable reserves as of March 31, 2019
The following table lists the probable reserves of crude oil, condensate, LPG and natural gas of the Group on main projects. Our probablereserves as of March 31, 2019, were 314 million barrels for crude oil, condensate and LPG, and 4,948 billion cubic feet for natural gas, fora total of 1,202 million boe.

March 31, 2019
Probable reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericasInterest inreserves heldby equitymethod
affiliates

Subtotal

Total

1

123

26

162

2

313

1

314

44

4,808

—

—

1

4,854

94

4,948

Notes: 1. MMbbl: Million barrels

2. Bcf: Billion cubic feet
3. Oil and gas reserves are rounded to the nearest whole number.

2. OIL AND GAS PRODUCTION
The following tables list average daily production for crude oil, natural gas, and the total of crude oil and natural gas by region. The proportional interests in production by the equity-method affiliates are not broken down by geographical regions.
The Group’s production for the year ended March 31, 2019, was 303.3 thousand barrels per day for crude oil, condensate and LPG, and
649.0 million cubic feet per day for natural gas, for a total of 424.3 thousand boed.

96

Years ended March 31,

2014

2015

2016

2017

2018

2019

Crude oil, condensate and LPG (Mbbld):Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interests in production by equity-method affiliates
Total
Annual production (MMbbl)

3.6
45.8
26.1
84.4
0.1
160.0
84.9
244.9
89.4

3.2
40.6
27.0
84.8
0.5
156.1
86.6
242.7
88.6

3.2
47.8
31.6
161.1
5.5
249.2
90.0
339.2
124.2

3.5
35.8
29.6
176.3
5.6
250.7
97.6
348.3
127.1

3.7
21.2
37.5
176.2
3.9
242.6
86.5
329.1
120.1

3.5
18.7
40.7
225.6
1.8
290.3
13.0
303.3
110.7

Natural gas (MMcf/d):
Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interests in production by equity-method affiliates
Total
Annual production (Billions of cubic feet)

125.5
602.8
—
—
107.4
835.7
40.7
876.4
319.9

113.9
596.5
—
—
103.2
813.7
66.4
880.0
321.2

119.7
666.8
—
—
87.3
873.8
59.1
932.9
341.4

132.0
614.8
5.3
—
116.5
868.6
54.1
922.7
336.8

145.6
326.9
21.4
—
107.7
601.6
48.1
649.7
237.1

131.6
346.5
27.4
—
89.8
595.3
53.8
649.0
236.9

Crude oil and natural gas (Mboed):Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interests in production by equity-method affiliates
Total
Annual production (MMboe)

27.2
159.9
26.1
84.4
19.0
316.7
92.1
408.8
149.2

24.6
154.3
27.0
84.8
19.0
309.7
98.4
408.1
148.9

25.7
174.0
31.6
161.1
21.0
413.4
100.5
513.8
188.1

28.3
152.5
30.6
176.3
26.5
414.1
107.2
521.3
190.3

31.1
82.7
41.4
176.2
23.5
354.9
95.0
449.9
164.2

28.2
84.4
45.6
225.6
18.1
401.8
22.5
424.3
154.9

INPEX CORPORATION Annual Report 2019

Corporate Information(As of March 31, 2019)

Corporate Data
Company Name

INPEX CORPORATION

Number of Employees (Consolidated) 3,118

Established

April 3, 2006

Capital¥290,809,835,000

Company Headquarters

Akasaka Biz Tower, 5-3-1 Akasaka,
Minato-ku, Tokyo 107-6332, Japan

Main BusinessResearch, exploration, development, production and sales of oil,natural gas and other mineral resources, other related businesses
and investment and lending to the companies engaged in these
activities, etc.

Organization Chart (As of June 25, 2019)
General Meeting of
Shareholders

Board of Directors

Audit & Supervisory
Board (members)

Nomination and Compensation
Advisory Committee

Audit Unit

Finance & Accounting Division

Asia Projects Division

Audit & Supervisory
Board Members’ Office

INPEX Advisory Committee

HSE Unitッ
監査ユニトLogistics & IMT Division

Oceania Projects Division

President

Compliance Committee

Legal Unit

Technical Division

America Projects Division

CSR Committee

Strategic Projects Office

Global Energy Marketing Division

Eurasia, Middle East &Africa Projects DivisionCorporate HSE Committee

General Administration
Division

Domestic Energy Supply &Marketing Division

Abu Dhabi Projects Division

Information Security Committee

Corporate Strategy &Planning Division

New Ventures &Global Exploration Division

Domestic Exploration &Production Division

Executive Committee

INPEX Value Assurance
System Committee

Renewable Energy &Power Business Division

Stock Data
Authorized Shares

Total Number of Shareholders and Issued Shares

3,600,000,000 common stocks
1 Class A Stock

Common Stock

33,727/1,462,323,600 sharesClass A Stock*

1 shareholder (Minister of Economy,
Trade and Industry)/1 share*The Company’s Articles of Incorporation stipulate that certain major corporate decisions requirea resolution by the holder of the Class A Stock in addition to the approval of the shareholders’meetings or the Board of Directors.

Major Shareholders (Common Stock)
Name

Number ofsharesPercentage of
total commonshares* (%)

Shareholding by Shareholder Type
Shareholder type

Number ofshareholders

Number ofsharesPercentage of
total commonshares¹ (%)

20.36

Minister of Economy, Trade and Industry

276,922,800

18.96

Financial Institutions (Including Trust Accounts)

78

297,710,997

Japan Petroleum Exploration Co., Ltd.

106,893,200

7.32

Securities Companies

55

20,807,478

1.42

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

74,165,700

5.08

Other Domestic Corporations

302

215,259,973

14.72

Japan Trustee Services Bank, Ltd. (Trust Account)

62,176,097

4.26

Minister of Economy, Trade and Industry

276,922,800

18.94

JXTG Holdings, Inc.

43,810,800

3.00

Foreign Corporations and Other

42.16

Mitsui Oil Exploration Co., Ltd

30,924,000

2.12

Individuals and OtherJapan Trustee Services Bank, Ltd. (Trust Account 9)22,985,700

1.57

Treasury Shares

SSBTC CLIENT OMNIBUS ACCOUNT

22,664,524

1.55Japan Trustee Services Bank, Ltd. (Trust Account 5)

21,379,700

1.46

1. The percentages of total common shares are for the total number of issued common shares.
The shareholder ratio is rounded off to the nearest whole number.
2. Excludes one Class A Stock

The Bank of New York Mellon 140051

19,440,200

1.33

851

616,555,747

32,43933,100,105

2.26

1

1,966,500

0.13*The shareholder ratio is calculated after subtracting treasury shares (1,966,500 shares).
The shareholder ratio is rounded off to the nearest whole number.

Web Site

Inquiries

The Company’s Web site provides investors with the most up-todate IR information, including financial statements.
▶ www.inpex.co.jp/english

For IR inquiries, as well as to offer comments and opinions about thisreport, please contact below.
Corporate Strategy & Planning DivisionCorporate Communications Unit
Investor Relations Group
Phone: +81-3-5572-0234, Fax: +81-3-5572-0235
Web site: www.inpex.co.jp/english/ir/inquiries.html*This Report was printed using environmentally conscious methods and vegetable oil-based ink.

Akasaka Biz Tower
5-3-1 Akasaka, Minato-ku, Tokyo 107-6332, Japan
Phone: +81-3-5572-0200

https://www.inpex.co.jp/english