Part

III Future outlook
1. Interview with Takayuki Ueda, President & CEO
achieve exceptional performance in our Ichthys LNG Projectand other large-scale operatorships while making steady progress in our projects.
Within a period of stagnating oil prices from the latter
half of 2014, we had the backup of our domestic gas business,
which is hardly impacted at all by oil prices, our Abu Dhabi
projects and other businesses, so from the asset portfolio perspective as well, the merger had a great impact.
Going forward, this merger will bring benefits to Abadi,
Abu Dhabi and other large-scale projects, which I am certain
will enable our company to grow even more.

Vision 2040, the future of INPEXQ Vision 2040, which you announced in May 2018,details this, but with great changes expected to occur
across INPEX and the energy sector out to 2040, whatsort of company do you want INPEX to become?
Synergies of the merger lead to large-scale projects
and a quality asset portfolio
Q Ten years after the merger, how would you evaluate its

impact (outcomes)?
October 2018 marked the 10th year since our merger between the former INPEX and former Teikoku Oil. The combination of Teikoku Oil’s strengths in domestic projects inparticular and its abundant experience in operations, together
with INPEX’s quality overseas assets in Indonesia, Australia,
Abu Dhabi (JODCO) and other countries, produced many
synergies that contributed to tremendous growth for our company over the past 10 years.
One specific impact of the merger was our ability to leverage the combined technical capabilities and human resourcesof the two companies in large-scale operatorships. Advanced
technical capabilities, experienced personnel and the leveraging
of both are extremely important when working as an operator of large-scale projects. The merger brought us the technicalcapabilities and the human resources, and we developed theinfrastructure for making full use of each, so we were able to58

Part III Future outlook

Both INPEX and the international energy market are experiencing great change right now. Over the medium to longterm, the global middle-class population will grow and economic growth in emerging countries in the Asia region andelsewhere will continue, so demand for primary energy willcontinue to increase. As those emerging countries transition
away from coal as a fuel source, demand for oil is expected toremain strong into the future. However, even greater growth indemand is expected for natural gas, which results in fewer CO2
emissions than other fossil fuels, and renewable energies, whichhave a minimal impact on the environment.
Adopted in 2015, the Paris Agreement set a target of limiting the increase in the average global temperature to less than
two degrees Celsius above pre-industrial levels as a long-term,
globally shared goal. The agreement also requires proactive
measures by the entire international community toward elimination of greenhouse gases and the establishment of a low-carbon society. As a result, the roles that natural gas and renewableenergies play will become considerably more important. Stableenergy supplies and an improved self-development rate remainchallenges for Japan. While the Japanese government set a targetof 40% or higher for self-development rate by fiscal 2030, theactual rate as of 2017 was less than 30%, which was below thetarget level, so the need for INPEX initiatives will continue.
Partly due to an awareness of this business situation, weestablished “VISION 2040, Delivering tomorrow’s energy
solutions” in May 2018.
In Vision 2040, we established three business targets: (1)Sustainable growth of oil and natural gas E&P activities, (2)Development of global gas value chain, and (3) Reinforcementof renewable energy initiatives.
As the first of our business targets, in our core businessarea of oil and natural gas E&P activities, we aim to achieve a
net production volume of one million barrels of oil equivalent
per day over the long term while continuously expanding reserves, and to significantly increase net income and cash flowfrom operations while improving capital efficiency, to become a
top 10 international oil company (IOC) in terms of production
volume, reserves, profitability, technical capabilities and othercriteria.
As the second of our targets, in development and supplyof natural gas, we aim to further expand our gas supply chain,
which has been developed so far mainly in Japan, and build aglobal gas supply chain. We also aim to maximize the value of
our natural gas projects, including Ichthys and Abadi, as we
become a major player in the development and supply of gas
in Asia, Oceania.
And as the third target, in the area of renewable energies,
we aim to continue driving our geothermal power business,with its strong synergies with our E&P activities, and to enterand expand our participation in wind power generation. Whilealso maintaining a focus on the contribution of these renewableenergies to our bottom line, we aim to bring them to 10% of
our portfolio in the long term.
In all of our activities related to these targets, we will reduce our carbon footprint and, through an asset portfolio thatallows us to respond flexibly to the changing business environment out to 2040, we aim to continuously increase our corporate value.

Aiming to become a top 10 IOC through qualitative
growth (technical and management capabilities, etc.)
and a market perspective
Q Vision 2040 details your aim to become a top 10

international oil company, but what points do allmembers of staff need to focus on for INPEX to
become one of those top 10?
As we just discussed, one business target that we established in Vision 2040 is to become a top 10 IOC.
However, the international energy market that we are apart of is approaching a major turning point. While increasing production of shale oil and shale gas in North America is
dramatically changing the structure of the international energy
market, the LNG market is also undergoing deregulation. Withderegulation of the electricity and gas markets in Japan, existingenergy providers are expanding into each other’s territories andnew providers are entering the markets, while the compositionof the global energy industry is also changing dramatically.
As deregulation is taking many forms in the domestic andinternational electricity, gas and LNG markets, having a market
perspective is more important than ever for us if we are to succeed in becoming a top 10 IOC. In the past, we thought of theoil and natural gas we produced as commodities for sale. Froma market perspective though, we will supply markets with what
they need at the appropriate prices and times they want. This
will enable us to operate as a business with high market value.
The next thing we need to become a top 10 IOC is
growth in total capabilities, including qualitative growth areas
such as technical capabilities, financial strength, profitability
and management in addition to quantitative growth in production volume and reserves. And to achieve growth in our
total capabilities, it is important to always be willing to take onchallenges.
Finally, perhaps we are not as recognize in society as wemight wish. To improve awareness of INPEX in the global
community, we have to improve our ability to actively communicate our message both internally and externally in order tobecome a more visible company.

1. Interview with Takayuki Ueda, President & CEO

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Connecting Ichthys operator experience and knowhow to Abadi and beyond

Developing renewable energy businesses with a focus
on geothermal and wind power generation

Q INPEX started gas production operations as part of

Q In light of a diversification of demand for energy overits operatorship of the Ichthys LNG Project. What
are your future plans for the knowledge and humanresources you built up through that project?

the medium- to long-term, Vision 2040 has a businesstarget of enhancing its renewable energy initiatives.
Specifically, what renewable energies, under whatorganizational structures, are you thinking of whentalking about developing the business?

The Ichthys LNG Project is not just the first large-scale
LNG project that INPEX has worked on as operator, but itis the first one for any Japanese company. In addition to the
upstream exploration process that led to discovery of the Ichthys Gas-condensate Field, we worked on operation processes
including construction and commissioning of large offshore
structures and an onshore plant. The valuable technical experience and know-how we acquired through these processes will
be great strengths for our future growth. In addition to thistechnical experience, we also acquired the wealth of experience,and the people with that experience, needed for working onlarge-scale projects as the operator. That experience included
contract negotiation strategies acquired when entering LNG
sales contracts with buyers and EPC contracts with engineering companies to construct the plant, and the know-how for
procuring materials, obtaining finance, and developing global
human resources. The knowledge and people we acquired as
operator of the Ichthys LNG Project can be put to use immediately in development of our Abadi LNG Project. Not only
are annual LNG production volumes at Ichthys and Abadi
similar, producing about 8.9 million tons and 9.5 million tons
respectively, but the development concepts are also practicallythe same, from developing offshore gas fields to constructing
and installing offshore facilities, laying subsea gas pipelines,
and constructing onshore LNG plants. Therefore, the experience and know-how we built up at Ichthys will be very usefulat Abadi. A number of our divisions are already transferring
this experience and know-how from Ichthys to Abadi, which
includes personnel transfers as well.
As we work toward becoming a top 10 IOC, we willleverage this experience and these people not only in the Abadi
LNG Project, but in the various projects we participate in as
both operator and non-operator.
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Part III Future outlook

INPEX regards efforts by the international community
to achieve the long-term targets of the Paris Agreement as aperiod of transition toward a low-carbon society, and as such
we consider our response to climate change to be an important business challenge. As a responsible member of the oil andnatural gas industry therefore, we are taking steps to meet thisimportant challenge.
To communicate INPEX’s renewable energy initiatives
both internally and externally, including active “reinforcementof our renewable energy initiatives” and efforts to enhance ourrenewable energy business and power business in fiscal 2017, weestablished the new independent Renewable Energy & PowerBusiness Unit from what was the New Business Planning Unit
previously attached to the Corporate Strategy & Planning Division. Then in May 2018, we changed the status of this unit tocreate the Renewable Energy & Power Business Division. Ourbasic policy now is to make renewable energies a core businessfor INPEX built around this new division. As detailed in Vision
2040, we will also do our best to increase renewable energies to
10% of our project portfolio.
We can expect synergies with the geothermal power generation business because of the many technical commonalities
between our core E&P business and drilling wells to uncoverunderground resources, so we are continuing to implement
initiatives in this area. Overseas, we began commercial production in 2017 out of our Sarulla Geothermal IPP Project in
the Sarulla Concession on Sumatra Island, Indonesia. Domestically as well, we are in the process of conducting geothermal
resource surveys with a view to commercializing geothermal
power generation in Hokkaido and Akita prefectures. We havealready drilled structure test wells in the Amemasu-dake regionof Hokkaido and the Oyasu region of Akita, and have confirmed production of both steam and hot water through provisional fumarolic testing. After the US and Indonesia, Japan
has the world’s third largest amount of geothermal resources, so
geothermal power generation holds considerable promise fromthe perspective of a clean, home-grown, baseload power supply. Going forward, we plan to extend our existing geothermalbusiness and pursue new projects in Japan and overseas with aview to becoming a domestic geothermal development operator in the future.
We are actively working on our wind power generation
business as well. In 2015, the annual volume of electricity generated from renewable energies exceeded that which was generated from fossil fuels and nuclear power throughout the world.
The wind power generation business is also becoming the lowest cost choice for many regions adopting new power sources
over recent years, largely due to the increased size and efficiencyof wind generators. Despite the Japanese wind power generation market facing many challenges, including site restrictions,wind power generation is being promoted through fixed pricepurchasing schemes with conditions that are competitive byinternational standards. We plan to start with a focus on new
development of onshore wind power, together with partners
who have development know-how in the area of wind power
generation, to build up our own level of technical knowledge
and development know-how. Then, using our entry into thedomestic onshore wind power generation business as a steppingstone, we will actively consider entry into the offshore wind
power generation business in the future through participationin existing domestic and overseas wind farms and mergers andacquisitions of operating companies.
Apart from geothermal and wind power, we also plan to
conduct development into carbon dioxide capture and storage
technologies to capture CO2 emissions from the atmosphereand store them in geological formations in order to reduce
the CO2 emissions causing global warming. In this way, andthrough enhancement of initiatives in areas such as storage batteries and new technology research and development, we hopeto build our competitive edge in the renewable energy sector
as well.

Enabling personal growth and active participation
Q The Medium-term Business Plan you announced at thesame time as Vision 2040 touches on various initiatives,
including work style reform, creating workplaces thatoffer job satisfaction, and developing global humanresources. From perspectives like these, what message
do you have for INPEX’s employees within Japan andaround the world?
Full employee participation is essential to achieve ourtargets in Vision 2040. I want to increase energy levels acrossthe whole company by creating workplace environments where
every employee can be creative and fully demonstrate their individual abilities in line with the INPEX Values, and where thecompany can continue to grow together with society. Looking
ahead to 2040 in the midst of a continually changing businessenvironment, in addition to sustainable growth in our oil andnatural gas E&P activities, INPEX will need new knowledge
more than ever as it takes on challenges in the renewable energy sector of Japan including commercialization of geothermal
power generation and entry into the wind power generation
business, and new challenges overseas including entry into
midstream and downstream businesses in the supply of naturalgas. I also want to provide our employees with the necessary
support and work environments that enable them to take on
the challenges of these new sectors.
In any case, we will always recognize the hard work of all
our employees as the most important factor in the growth of
INPEX. I want our company to be a place that considers diversity and work-life balance, where everyone can demonstrate
their autonomy and participate with a strong sense of mission,
and where they can grow and prosper together with us.
1. Interview with Takayuki Ueda, President & CEO

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2. Vision 2040 and
the Medium-term Business Plan 2018–2022●Vision 2040

In 2012, INPEX formulated its “INPEX Medium- to
Long-term Vision—Ichthys and the Next 10 Years” with concrete initiatives for the five years till start of production on the
Ichthys LNG Project, and with a focus on growth thereafter.
Despite dramatic changes in the business environment after
that, including drops in the price of oil and the shale revolution in North America, the company has continued to steadily
implement initiatives to achieve this medium- to long-term
vision.
INPEX achieved the significant milestone of starting production at Ichthys in 2018, but looking at the entire energy sector again, energy companies are expected to meet global energy
demand, which will continue to grow. On the other hand, thelong-term business environment is undergoing major changes,
with greater emphasis on addressing climate change and transitioning to a low-carbon society. In light of this changing business environment, INPEX decided in May 2018 to present its
long-term vision for the period until 2040 in the form of “Vision 2040, Delivering tomorrow’s energy solutions.” The subheading “Delivering tomorrow’s energy solutions” encompasses
INPEX’s desire to deliver a stable supply of energy as required
while actively addressing climate change.
INPEX’s mission as stated in Vision 2040 is “contributing to the creation of a brighter future for society through ourefforts to develop, produce and deliver energy in a sustainable
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Part III Future outlookway,” while its goal is to “become a leading energy company
serving an essential role in global society by meeting the energy
needs of Japan and countries around the world.”
The business targets it set for itself to achieve this visionahead of 2040 were (1) to become a top 10 international oil
company through sustainable growth of oil and natural gas
E&P activities, (2) to become a key player in natural gas development and supply in Asia & Oceania through developmentof global gas value chain business, and (3) to make renewableenergy 10% of its project portfolio through reinforcement of
renewable energy initiatives. While oil and gas will continue
to be at the core of INPEX’s business operations, these targets
reflect the growing importance of renewable energy initiatives
and the diverse expectations placed on the company over the
long-term.
In its core business area of oil and natural gas E&P activities, INPEX aims to achieve volume (net production volume of one million barrels of oil equivalent per day over thelong term while maintaining and expanding reserves) and value(significantly increasing net income and cash flow from operations while improving capital efficiency) to become a top 10
international oil company in terms of total capability, including production volume, reserves, profitability, and technicalcapabilities.
INPEX is also developing a global gas value chain business to capitalize on the growing LNG market. Specifically,
INPEX will increase its supply of natural gas within Japan toover three billion cubic meters annually; develop gas demandin growth markets across Asia and beyond by participating in
gas infrastructure projects including IPP (independent power
producer), FSRU (floating storage and regasification unit) and
LNG bunkering initiatives; and strengthen its global trading
functions to maximize the value of its upstream assets, respondflexibly to market shifts and provide value across the entire supply chain. Through these initiatives, INPEX aims to become akey player in the development and supply of natural gas in Asia
& Oceania.
To proactively address climate change and meet long-term

demand for renewable energy, INPEX will also accelerate thedevelopment of new renewable energy projects. It will expand
its participation in wind power generation and other areas withconsiderable potential in addition to its geothermal power business, which draws on synergies with its oil and natural gas E&P
activities. The company will consider leading projects as operator and, while maintaining a focus on profitability, it aims forrenewable energy to account for 10% of its project portfolio in
the long term.

Going forward, INPEX also plans to help achieve theSDGs (Sustainable Development Goals) by strengthening its
ESG (environment, society and governance) initiatives through
CSR management.

Vision 2040, Delivering tomorrow’s energy solutions: Overview

2. Vision 2040 and the Medium-term Business Plan 2018–2022

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● “Medium-term Business Plan 2018–2022”
Business targets

Along with Vision 2040, INPEX established its “Medium-term Business Plan 2018–2022—Growth & Value Creation” as a set of concrete goals and initiatives from 2018 to2022 to achieve that vision. In addition to volume growth,“Growth & Value Creation” encompasses the pursuit of value
creation through improved profitability and efficiency and, as aresult, an increase in the company’s corporate value.

Basic policy on cash allocation
INPEX will prioritize allocation of its approximate ¥2.5
trillion cash flow from operations before exploration expenditure in the order of (1) debt reduction, (2) enhanced shareholder returns, and (3) investment for growth (about ¥1.7
trillion). It also aims to achieve the following financial targets
and business targets.
INPEX’s business targets in the area of shareholder returns, during this medium-term business plan, are to maintainstable dividends and enhance shareholder returns in stages inline with growth of company performance.

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Part III Future outlook(1) Oil and Natural Gas Upstream
INPEX aims to gradually deliver key project milestones,
including starting production and shipping LNG from theIchthys LNG Project, and quickly achieving and maintaining
stable production. Its quantitative targets are 700,000 barrelsof oil equivalent per day net production volume by fiscal 2022,
maintaining 100% or higher 3-year average reserve replacement
ratio (RRR) during the plan period, and reducing production
costs to US$5 per barrel.
(2) Global Gas Value Chain
In Japan, INPEX aims to achieve annual natural gas supply volume of 2.5 billion cubic meters. Overseas, it aims to
independently create natural gas demand in Asia and othergrowing markets, where increased natural gas demand is expected in the future, through participation in midstream anddownstream natural gas businesses.
(3) Renewable Energy
INPEX will promote the geothermal power generation
business in both Japan and overseas, while proactively entering
the wind power generation business in Japan. It will also workon research and development of renewable energy technologies.
Vision 2040 and the Medium-term Business Plan 2018–2022 clarify future directions for INPEX. Going forward, theentire INPEX Group must strive together to help bring themto fruition.

Medium-term Business Plan 2018–2022—Growth & Value Creation: Overview

2. Vision 2040 and the Medium-term Business Plan 2018–2022

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