Japan Petroleum Exploration Co., Ltd. CORPORATE GUIDE 2017

Transcription

1 Japan Petroleum Exploration Co., Ltd. CORPORATE GUIDE 2017

2 FUNDAMENTAL BUSINESS POLICIES Since its establishment, JAPEX has pursued its mission of contributing to Japan s energy supplies by securing reserves and expanding production through exploration, development, production, and sale of oil and natural gas. Guided by this mission, JAPEX has steadily discovered oil and natural gas reserves to result in the business base of today. As our supply volume increases, the social responsibility of the JAPEX Group for stable supply is growing. The JAPEX Group realizes that as well as increasing reserves, it is important to expand and utilize natural gas transportation systems. Through these efforts, the JAPEX Group aims to develop as a company with competitive capabilities. The corporate vision of the JAPEX Group is as follows: JAPEX MISSION CORPORATE VISION JAPEX is committed to contributing to local communities through a stable supply of energy. To this end, we will undertake the following activities: Explore, develop, produce and deliver oil and natural gas in Japan and overseas Further enhance the natural gas supply chain, supported by our own domestic infrastructures, through aggressive introduction of LNG business Leverage our existing technology and expertise to develop and commercialize new technology Make stakeholder trust our first priority while striving to achieve sustainable growth and maximize corporate value

3 Contents 1 JAPEX MISSION Long-Term Business Vision and Medium-Term Business Plan JAPEX MISSION LONG-TERM BUSINESS VISION AND MEDIUM-TERM BUSINESS PLAN Transformation to an Integrated Energy Company with a Focus on Oil and Gas E&P* In May 2015, JAPEX formulated the Long-Term Business Vision, which articulates a view ten years into the future, and the new Medium-Term Business Plan to achieve the vision covering next five years. As an E&P company, JAPEX Group is demanded to maintain and expand reserves, which will be depleted by pro duction and sales. It is also important to ensure the stable and long-term supply of crude oil and natural gas as an E&P company. We will continue to fulfill our mission of ensuring a stable energy supply for our domestic customers. Also, we will actively expand our business into areas related to oil and natural gas supply, including power generation. JAPEX will strive to develop corporate and shareholders value by aiming to expand our earnings beyond our existing E&P businesses. * E&P: Exploration and Production 2 STABLE SUPPLY Oil and Gas E&P in Japan and Overseas 4 ENERGY STREAM Value Chain of Oil and Gas E&P 6 OVERSEAS E&P Overseas E&P Business 12 DOMESTIC E&P Domestic E&P Business 14 GAS INTEGRATION Domestic Natural Gas Business 18 TECHNICAL INNOVATION Environment and Innovative Technology Business 21 CSR Corporate Social Responsibility (CSR) 26 FACTS & DATA Organization 27 Corporate History 28 Corporate Data CURRENT INITIATIVES BASED ON OUR THREE CORE BUSINESSES IN PURSUIT OF GROWTH AND OUR LONG-TERM BUSINESS VISION E&P Business Pursue ongoing projects and ensure revenue during production phase Pursue domestic potential and construct efficient operation framework Maintain RRR* (Reserves Replacement Ratio) >1 post fiscal 2020, when current ongoing projects will commence production Domestic Natural Gas Supply Business Diversify our gas supply sources and network, expand our supply scale Commence operation of Soma LNG Terminal and natural gas power generation project Handle 2.5 million tons of natural gas by 2025 (LNG equivalent) Environment and Innovative Technology Business Develop technologies for methane hydrate production Progress national CCS demonstration projects and preparation for practical realization in private sector Promote geothermal power generation project CSR Initiatives Implement core corporate social responsibility policies under our SHINE initiative to grow as a trusted global company by meeting the expectations and needs of all our stakeholders * RRR: Reserve Replacement Ratio = Increase in reserves (during a certain period) Production volume 1STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA

4 Main block / Oil and gas fields Overseas representative offices NORTH SEA U.K. North Sea Offshore Block London RUSSIA: SAKHALIN Sakhalin-1 Project MIDDLE EAST Iraq: Garraf Project Dubai Beijing Tokyo (Headquarters) JAPAN STABLE SUPPLY Contributing for a Stable Energy Supply OIL AND GAS E&P IN JAPAN AND OVERSEAS As a leading E&P company in Japan, JAPEX has been engaged in exploration and production of crude oil and natural gas for more than half a century. SOUTHEAST ASIA Jakarta Indonesia: Sanga Sanga Block Kangean Project Oil and Gas Existing Deep in the Earth Crude oil and natural gas exist in the pores of reservoir rocks. When crude oil and natural gas are formed underground, they will migrate upward by buoyancy since their specific gravity are lighter than water. If impermeable cap rocks that are shaped like upside down cups exist in their way, crude oil and natural gas will be trapped and accumulated over time, which form oil and gas fields. Schematic Image of an Oil and Gas Field : Sarukawa oil field in Oga City, Akita Prefecture 700m Water Cap rock Sand grains Sand grains Reservoir Formation Gas 10cm Oil Gas Oil Water Sand grains Sand grains 2 Subsurface structure Reservoir rocks (photograph) Reservoir rocks (microscopic image)

5 CANADA Oil Sands Project Shale Gas Project UNITED STATES Yufutsu oil and gas field Domestic Oil and Gas Fields STABLE SUPPLY Shale Oil Development Project Houston Sarukawa oil field Iwafune-oki oil and gas field Higashi-Niigata gas field Yoshii gas field Ayukawa oil and gas field Yurihara oil and gas field Amarume oil field Shiunji gas field Katakai gas field Proved Reserves* of Oil and Gas (boe: barrels of oil equivalent) (As of March 31, 2017) Production Volume of Oil and Gas (boe/d: barrels of oil equivalent per day) (Fiscal Year Ended March 31, 2017) Domestic 74 million boe (21%) Overseas 277 million boe (79%) Total 352 million boe Domestic 19,000 boe/d (27%) Overseas 52,000 boe/d (73%) Total 72,000 boe/d * Proved reserves represent estimated quantities of crude oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be commercially recoverable from crude oil and natural gas reservoirs that have already been discovered under defined economic and operating conditions. They do not include produced volume to date or undiscovered resources. Even for existing discoveries, oil and gas amounts that do not meet the above conditions are not included. 3JAPEX MISSIONENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA

6 ENERGY STREAM VALUE CHAIN OF OIL AND GAS E&P Production well JAPEX conducts oil and gas E&P business that consists of exploration, production, transportation, and supply of crude oil and natural gas in both Japan and overseas. LNG tanker Onshore drilling rig Crude oil tanker Onshore geophysical survey Offshore drilling rig Offshore geophysical survey Acquisition of interests Exploration Acquisition of Interests Gathering Information Preliminary Survey Acquisition of Interests 4 Gather various information by searching specialized databases and exchanging information with other companies. After the technical evaluation of interests, consider the strategy for acquisition including laws and regulations, regional risks, and selection of partners. Acquire the interests by winning a tender or bid for the mining license or exploration and devel opment rights, and by signing the contract. Geological Survey Geophysical Survey Exploration Wells Appraisal and Evaluation Assess the geological features and the existence of oil and gas through analysis and examina tion of exposed geological formations. Study the structure of geological features technically through measuring reflected waves from underground caused by artificial seismic vibrations. Drill wells at the location where oil and gas are expected to exist based on the results of geophysical surveys. Drill appraisal well(s) to confirm the size of reservoir and volume of reserves, and evaluate the result for comprehensive determination of whether or not to proceed to commercial production.

7 JAPEX MISSION Natural gas pipeline STABLE SUPPLY Crude oil lorry Sales Clients Development and Production Construction of Production Facilities Oil and Gas Production Drill production wells in accordance with optimal production plan. Construct facilities for treatment, storage, and transportation of crude oil and natural gas, and commence production. Produce, separate crude oil and natural gas, and remove impurities contained. TECHNICAL INNOVATION Drilling of Production Wells Natural Gas, LNG Natural gas is supplied via pipelines, and LNG is transported by LNG tankers, tank trucks, and LNG tank containers via railways to regions that are not served by gas pipeline networks. Supply LNG vaporized gas via pipelines and LNG by the satellite system using tank trucks and domestic vessels after receiving imported LNG in the terminals. GAS INTEGRATION FEED Formulate FEED, a front-end engineering and design, for development and production of the field if deemed that enough crude oil and gas exist for commercial production. Transport by oil tankers, pipelines, and tank trucks after production in oil and gas fields. DOMESTIC E&P Crude Oil OVERSEAS E&P Receiving and Transportation ENERGY STREAM Receiving terminal as-fired power G plants Local distribution companies (LDCs) Industrial users Refiners Others CSR FACTS & DATA In the E&P business as the upstream of oil and gas industry, comprehensive technical capabilities are required to integrate and utilize various technologies such as geological study, geophysical survey, drilling, reservoir evaluation, facility design and management, and production operation. As a leading Japanese E&P company, JAPEX has outstanding achievements both domestically and overseas and has been acquiring and accumulating extensive ranges of core E&P technologies since its establishment. While many oil and gas E&P companies outsource some parts of these technologies, the JAPEX Group has highly technical capabilities to complete oil and gas E&P projects ourselves. 5

8 OVERSEAS E&P Fundamental to Our Growth Strategy OVERSEAS E&P BUSINESS JAPEX has been investing in new prospects and developing ongoing projects in our overseas focus areas: Southeast Asia, Canada, the Middle East, the North Sea, and Russia (Sakhalin). Also, in order to secure stability in production, reserves, and revenue, JAPEX aims to optimize our investment portfolio through acquisitions of various assets including in the phases of production, undeveloped discoveries, and exploration. Currently, we steadily execute large-scale projects overseas with the aim to increase the volume of production and reserves, and enhance our business for the achievement of our target* 1 to maintain RRR* 2 greater than 1 in the long term by establishing the reinvestment cycle including new projects as well as recovering investment and securing profits in the future. *1. Referred to in the Long-Term Business Vision and Medium-Term Business Plan (formulated on May 12, 2015) *2. RRR: Reserve Replacement Ratio = Increase in reserves (during a certain period) Production volume Toward the Leap to 2025 Vision for Achieving Our Medium-Term Targets Target of Long-Term Business Vision Proved reserve (million boe) Production (10 thousand boe/d) RRR>1 [Add to high-profitable reserve] 2017/3 2020/3 (Estimate) 2017/3 2020/3 (Estimate) 6

9 01 PROJECT Canada Shale Gas Project Shale Gas Project Mineral License Operator North Montney Area, British Columbia, Canada PETRONAS (including subsidiaries) OVERSEAS E&P Implementing Appropriate Development and Production Plan JAPEX participates in a shale gas project in British Columbia, Canada through JAPEX Montney Ltd., which is our consolidated subsidiary from April 2013, and has been developing and producing shale gas together with partners including a subsidiary of PETRONAS, which is the Malaysian state-owned company as the operator of the project. Significant volumes of shale gas assets have been confirmed in the area. The average daily production rate of shale gas for 2016 was 577 million cubic feet per day, and produced gas has been sold in the market of western Canada. JAPEX with the operator and other partners will continue to optimize the development and production plan accordingly to monetize these assets effectively. Applying Safe and Proven Development Technologies Shale gas is a type of natural gas trapped within tiny pore spaces in shale formations. For the development and production of shale gas in this project, safe and proven technologies are applied, such as horizontal drilling of wells inside the shale gas formations, and hydraulic fracturing technologies to crack shale rocks for enhancement of shale gas productivity. The operations of this project are conducted in compliance with standards stipulated by laws and regulations and environmental prevention. Interest 10% Project Company Current Status * AECO market: Important gas market in western Canada Location Map YUKON TERRITORY North Montney area BRITISH COLUMBIA Vancouver JAPEX Montney Ltd. (based in Alberta, Canada) Gas production and sale to AECO market* NORTHWEST TERRITORIES ALBERTA Schematic of Shale Gas Development in the Project 2,000 3,000m NUNAVUT CANADA Shale gas mineral license area Calgary Horizontal Drilling SASKATCHEWAN Hydraulic Fracturing MANITOBA 1,500m 7JAPEX MISSION STABLE SUPPLY ENERGY STREAMDOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA

10 02 PROJECT Canada Oil Sands Project Pioneers in the SAGD Method Japan Canada Oil Sands Limited (JACOS), a consolidated subsidiary of JAPEX, has been developing oil sands in Alberta, Canada over 30 years since its establishment in At the time of participation, open-pit mining was the only method for oil sands development, but JACOS struggled to adopt the SAGD (Steam Assisted Gravity Drainage) method as a more economic and efficient method, and finally started production operation of bitumen (ultra heavy crude oil extracted from oil sands) using SAGD method at the 3.75 section area (DEMO Area) of the Hangingstone leases in 1999, ahead of other companies. Currently, JACOS is conducting production operation of bitumen using the SAGD method at the Expansion Area of the Hangingstone leases. Commercial production operation in the Expansion Area was started in August 2017, and its production volume is expected to reach 20,000 barrels per day by the second half of Block Project Company Interest Current Status Hangingstone (Expansion Area) Canada Oil Sands Co., Ltd. (local subsidiary: Japan Canada Oil Sands Ltd. (JACOS)) JACOS 75% Producing from Nexen Energy 25% August 2017 Notes: 1. Production operation of bitumen using the SAGD method in the 3.75 section (DEMO Area) of the Hangingstone leases was decided not to re-start in August 2017, but the leases of the DEMO area are owned by JACOS. 2. JACOS has partnered with Suncor, Nexen Energy, and Imperial Oil with respect to parts of the yet-to-bedeveloped areas, such as Corner, Chard, and Thornbury. Participating interests differ for each respective block. Location Map YUKON TERRITORY BRITISH COLUMBIA NORTHWEST TERRITORIES ALBERTA Calgary NUNAVUT CANADA Fort McMurray SASKATCHEWAN Thornbury Hangingstone Fort McMurray Corner MANITOBA ONTARIO QUEBEC Chard Oil Sands Development Utilizing SAGD Method JACOS significantly contributed to practical utilization of SAGD as a method of oil sands development. In SAGD, two wells with horizontal sections of between 500 meters and 1,000 meters in length are drilled with a spacing of approximately 5 meters between the upper and lower wells in the oil sands layer. The extraction process involves heating the oil sands layer by continuously injecting high-temperature, high-pressure steam into the upper well to provide liquidity to the bitumen, which in turn flows down to the lower well and is recovered along with hot water. Schematic of the SAGD Process Horizontal well producer Horizontal well injector 5m 300m 500 1,000m Oil sands layer 8

11 03 PROJECT Indonesia Kangean Project Block Project Company Interest Current Status Kangean Block (offshore East Java) Energi Mega Pratama Inc. Kangean Energy Indonesia Ltd. (Operator) 60% Producing gas EMP Exploration (Kangean) Ltd. 40% and oil Note: Kangean Energy Indonesia Ltd. and EMP Exploration (Kangean) Ltd. are subsidiaries of Energi Mega Pratama Inc. JAPEX owns 25% stock of Energi Mega Pratama Inc. OVERSEAS E&P Terang Gas Field Producing 38,000 Barrels of Oil Equivalent per Day JAPEX has a 25% interest of the Kangean Block offshore of East Java, Indonesia. The commercial production of natural gas from the Terang gas field which is a part of the Block commenced in May The Terang gas field is located 90km north of Bali Island at a water depth of 90m, which is a part of the TSB (Terang, Sirasun and Batur) gas field complex. Average gas production from five horizontal production wells in the Terang gas field is steadily 220 million cubic feet per day approximately 38 thousand barrels of oil equivalent per day), and cumulative production from the field has achieved 70 million barrels of oil equivalent in January Natural gas produced in the Terang gas field is supplied to the government-operated electric power company and fertilizer factories in the suburbs of Surabaya, East Java, via the East Java Gas Pipeline after being processed at subsea production facilities and a floating production unit (FPU). Supplying natural gas from the field contributes to stable energy supply and economic growth in Indonesia where demand for natural gas is significantly increasing. Location Map Jakarta INDEX MAP To Surabaya Java West Kangean gas field Karang Takat Terang Batur Surabaya East Java gas pipeline Sirasun South Celukan Bali Kangean Island TSB gas field South Saubi Schematic of the Terang Gas Field Subsea Production System FPU (Floating Production Unit) Pagerungan gas field Sepanjang oil field Pagerungan Utara offshore oil field Block Pipeline Targeting Development of Sirasun and Batur Further development of the TSB gas field complex has been proceeding including the phase 2 development work in the Sirasun and Batur gas fields. TSB Phase 1 (Terang Development) TEO-1 5 Wells 9JAPEX MISSION STABLE SUPPLY ENERGY STREAMDOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA

12 04 PROJECT Iraq Garraf Project Field Participating Interest Current Status Garraf PETRONAS Carigali Iraq Holding B.V. (Operator) 45% Japex Garraf Ltd. 30% North Oil Company 25% Producing crude oil Producing Approximately 100,000 Barrels per Day In December 2009, the Iraqi Ministry of Oil held the second international petroleum licensing round for oil fields that had been discovered but left undeveloped. JAPEX and PETRONAS, a Malaysian state-owned oil company, acquired the Development and Production Service Contract of the Garraf Oil Field, located in southern Iraq. In March 2010, JAPEX established Japex Garraf Ltd. as the project company to conduct the development of the Garraf Oil Field, and we have been working diligently with the operator, PETRONAS. Oil production has commenced in August 2013, and the Iraqi Ministry of Oil officially certified the achievement of commercial production at the Garraf Oil Field in November In September 2016, total production volume of the Garraf Oil Field has exceeded 100 million barrel. Average production of crude oil from the field since the commencement of the production is approximately 100 thousand barrels per day. The first crude oil shipment of Japex Garraf s share was made in February 2014, and 19 times of shipments with 27 million barrels in total had been made up to August Quarterly shipments of crude oil are expected in future. Location Map SYRIA TURKEY SAUDI ARABIA IRAQ IRAN Baghdad Garraf oil field Samawah Nasiriyah Basrah KUWAIT Targeting Plateau Production Rate of 230,000 Barrels Per Day Preparations for further development of the Garraf Oil Field are currently underway aiming achieving a plateau production of 230,000 barrels per day. JAPEX will be contributing to stable operations and constant shipment of crude oil as well as expansion of its production volume. 10

13 GLOBAL RESOURCES: PROJECTS AROUND THE WORLD Russia Sakhalin-1 Project United States Shale Oil Development Project U.K. North Sea Offshore Block Block: Sakhalin-1 (development of Chayvo, Odoptu and Arkutun-Dagi fields; offshore Sakhalin Island) Project Company: Sakhalin Oil and Gas Development Co., Ltd. JAPEX participates in the Sakhalin-1 Project operated by ExxonMobil through investment in Sakhalin Oil and Gas Development Co., Ltd. (SODECO) which is the consortium participated in by several Japanese companies and others including JAPEX. Production operation was commenced at the Chayvo gas field in 2005, the Odoptu oil and gas field in 2010, and the Arkutun-Dagi oil and gas field in In 2015, the Sakhalin-1 project succeeded in extended reach drilling with a measured depth of 13,500 meters at the Chayvo field, which was recorded as the longest in the world. Block: Middle McCowen (Southern Texas) Project Company: Japex (U.S.) Corp. JAPEX has been participating in shale oil development at the South Texas Eagle Ford, through its subsidiary, Japex (U.S.) Corp since August The operator, Marathon Oil Corporation, has vast experience in shale oil development. Through its participation in these production efforts, JAPEX is accumulating advanced technical knowledge that can be applied in current and future domestic and international E&P projects. Indonesia Sanga Sanga Block JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA Block: Seagull discovery Project Company: JAPEX UK E&P Ltd. Block: Sanga Sanga Block (onshore East Kalimantan) Project Company: Universe Gas & Oil Company, Inc. In the Seagull discovery located approximately 300km offshore of Aberdeen in the United Kingdom, the production test from an appraisal well was conducted and succeeded in producing oil and natural gas in Currently, evaluation of the production test results is being executed. Production operation of natural gas is conducted in Badak, Nilam, Mutiara and Semberah fields, most of which is supplied to the Bontang LNG terminal. 11

14 DOMESTIC E&P Foundation of Stable Supply DOMESTIC E&P BUSINESS JAPEX currently operates oil and gas production at ten domestic fields in Hokkaido, Akita, Yamagata and Niigata prefectures. To maintain and expand our domestic oil and gas reserves, JAPEX has been conducting E&P activities strategically and proactively to combine efficiently with explorations for the addition of new large-scale reserves and pursuing growth of reserves in the vicinity of existing fields. Hokkaido 01 Yufutsu oil and gas field 02 Sarukawa oil field Akita 03 Ayukawa oil and gas field 04 Yurihara oil and gas field Oil and gas field Oil field Gas field 07 Katakai gas field Yamagata Niigata 09 Amarume oil field 10 Shiunji gas field 09 Amarume oil field (Shonai Town, Yamagata Prefecture) 10 Shiunji gas field (Shibata City, Niigata Prefecture) Discovered: 1960 Commenced production: 1960 Discovered: 1962 Commenced production:

15 01 Yufutsu oil and gas field (Tomakomai City, Hokkaido) 02 Sarukawa oil field (Oga City, Akita Prefecture) The Yufutsu oil and gas field is located in the eastern area of Tomakomai City, Hokkaido and spreads between the Tomakomai West Port to the west of Lake Utonai at the Ishikari Plain. After the success of exploration at the Minami Yufutsu SK-1 well in 1988, further drilling of prospecting wells in the areas of Minami Yufutsu, Numanohata and Akebono was conducted and succeeded in each area. As a result, the Yufutsu oil and gas field was discovered, and has unique oil and gas reservoir in worldwide which contains oil and gas in natural fractures. Discovered: 1989 Commenced production: 1996 Discovered: 1958 Commenced production: 1959 The Ayukawa oil and gas field is located in the north of the Yurihara oil and gas field, between the northern edge of the Yurihara plateau to further north in the Koyoshi River basin. This field was discovered by the success of exploration at the Higashi Ayukawa AK-1 well in 1989, and produced oil and natural gas in the Ayukawa area is transported via flowline to the Yurihara central base. Moreover, JAPEX succeeded at the commercial production of tight oil (shale oil) in this field, which is attracted lots of attention in worldwide as one of the unconventional resources. The Sarukawa oil field is located between the northern coast of the Oga Peninsula in Akita Prefecture to its offshore, which was discovered by the success of exploration at the Sarukawa SK-2 well in More than 100 wells including injections for water flood method were drilled over 50 years since the commencement of production. Discovery of this field was a great significance, and contributed additional discoveries of oil and gas field in the Kosei area including Fukumezawa, Fukukawa, Nishi-Ohgata, and others. 03 Ayukawa oil and gas field (Yurihonjo City, Akita Prefecture) 04 Yurihara oil and gas field (Yurihonjo City, Akita Prefecture) Discovered: 1989 Commenced production: 1995 Discovered: 1976 Commenced production: Iwafune-oki oil and gas field (Approximately 4 km offshore from the mouth of the Tainai River in Tainai City, Niigata Prefecture) The Iwafune-oki oil and gas field is currently the only offshore field in Japan, which is located offshore near the mouth of the Tainai River in Tainai City. At first, exploration test at Iwafune-oki SIM-1 well in 1983 was greatly succeeded, and, in next year, drilling three further appraisal wells for the confirmation of oil and gas extension in the reservoir was provided good result. Going to development phase of this reservoir was officially decided in 1989, and the Iwafune-oki platform which is in a depth of 36 meters and submarine pipelines which has a total length of 21km was constructed in At the same time of these construction, drilling of development wells were proceeded. The Katakai gas field, which is one of the largest field of JAPEX, is located in the hill at 150 to 200 meters high extending in two cities from Nagaoka to Ojiya. As a result of the success at exploration wells of the Ojiya SK-1 and Katakai SK-1 in 1960, the Katakai gas field was discovered. After developing of the shallow reservoir at a depth of 1,000 meters at first, we succeeded to explore gas in deep layer of the deep green tuff formation at the Katakai SK-8 well in 1978 and several exploration wells were drilled to confirm the spread of the green tuff formation. The Yurihara oil and gas field spreads around the Yurihara plateau where is located on the northern slopes of Mt. Chokai at the Yuri-honjo City, Akita Prefecture. Exploration of oil and gas in the shallow reservoir at the Yurihara SK-1 well was succeeded in 1976, and exploration in the green tuff layer of the deep reservoir was continued and succeeded. This success led to discover the Yurihara oil and gas field. 06 Higashi-Niigata gas field (Niigata City, Niigata Prefecture) Discovered: 1983 Commenced production: 1990 Discovered: 1959 Commenced production: 1959 The Higashi-Niigata gas field spreads in the sand dune at eastern of the mouth of Agano River and around its area in Niigata City. In the exploration at the Higashi-Niigata SK-1 well discovered in 1959, good indications of existing gas in a shallow reservoir of the Nishiyama Formation. Through further explorations after the first one, we succeeded to produce large amounts of natural gas from new reservoirs including those in the lower layer of the Nishiyama Formation, upper and lower layer of the Shiiya Formation, and the Teradomari Formation. The Higashi-Niigata gas field is one of the Japan s largest size of structure and number of gas reservoirs. 07 Katakai gas field (Ojiya City, Niigata Prefecture) 08 Yoshii gas field (Kashiwazaki City, Niigata Prefecture) The Yoshii gas field is located at the Chuo Oil Belt that spreads from the Nagaoka Oh-kozu Waterway to the Yasuda area in the Kashiwazaki City. This gas field was discovered by the success of exploration at the Yoshii SK-1D well with producing gas from the green tuff formation in After that, many exploration wells were drilled additionally to confirm the spread of green tuff formation in the areas of Yoshii, Myohoji and Yasuda. JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA Discovered: 1960 Commenced production: 1960 Discovered: 1968 Commenced production:

16 GAS INTEGRATION For Further Stable Supply DOMESTIC NATURAL GAS BUSINESS The domestic natural gas business is one of our core businesses in JAPEX. We are developing an integrated natural gas supply system under the Gas Integration initiative, which is composed of upstream (gas field exploration and development), midstream (transportation methods such as pipelines, tank containers via railways, tank trucks, and coastal vessels) and downstream (sales to clients including the Local Distribution Companies (LDCs), electric power companies, and industrial users). Based on this initiative, we aim to further enhance our capability to provide a long-term stable supply of natural gas, with competitive prices and security. We believe that expansion of our infrastructure and business scale is necessary to compensate for the decline of production in domestic gas fields and maintain our stable supply. By diversifying both our supply methods and procurement sources of natural gas, JAPEX aims to increase our handling volume of natural gas in stages we will strive to become a 1.5 million ton natural gas supplier (in LNG equivalent) in 2019 and a 2.5 million ton supplier by Domestic shipping route LNG Natural Gas Pipeline Network JAPEX owns and operates a domestic natural gas pipeline network with a total length of more than 800km as our core strategic asset to further expand sales. The pipelines start from our gas fields and LNG terminals, and reach our clients (including LDCs, industrial facilities, gas-fired power plants and others) to supply them with natural gas. Utilizing Underground Natural Gas Storage JAPEX utilizes the Shiunji gas field in Niigata Prefecture for underground storage of natural gas. This effort enables us to flexibly respond to clients demands for natural gas to deal with seasonal fluctuations. We are also considering the utilization of underground storage for vaporized LNG. Sakata Yurihonjo Nikaho Sarukawa oil field Oga Amarume oil field Amarume Akita Ayukawa oil and gas field Yurihara oil and gas field Tsuruoka LNG LNG from overseas Iwafune-oki oil and gas field Shiunji gas field Murakami LNG Satellite System (currently being planned) Yamagata natural gas pipeline Yamagata (Tohoku natural gas) Sendai Yoshii gas field Higashi-Niigata gas field LNG receiving terminal (Nihonkai LNG) Fukushima Shiroishi Soma-Iwanuma gas pipeline Komatsu Kanazawa Katakai gas field Kawaguchi Aizuwakamatsu Koriyama Koriyama North gas pipeline Soma LNG terminal (scheduled to commence operation in March 2018) P.16 14

17 LNG receiving terminal (Hokkaido LNG) Sapporo Kitahiroshima Chitose Tomakomai Iwamizawa Asahikawa Muroran Yufutsu LNG receiving terminal / Yufutsu LNG plant LNG from overseas Domestic Shipping Route (planned) LNG LNG Yufutsu oil and gas field Obihiro LNG Satellite Supply Yufutsu LNG Receiving Terminal / Yufutsu LNG Plant Kushiro Transportation via Tank Trucks and Railways JAPEX has been operating an LNG Satellite System in order to meet natural gas demand in regions that are not served by gas pipelines. Since 1984, JAPEX has been delivering LNG to our clients via tank trucks. Since 2000, we have been supplying LNG to clients in wider areas using LNG tank containers via railway- a method developed by JAPEX. Transportation by railways using LNG tank containers is an environmentally friendly method of transportation with lower CO2 emissions compared to tank trucks. Transportation via Tank Trucks LNG plant Transportation via Railways LNG plant LNG Containertrucks Containertrucks JR rail freight terminal LNG LNG LNG Tank trucks Railway container JR rail freight terminal Oil and / or gas field LNG terminal Pipeline LNG rail LNG tank truck Domestic vessel LNG LNG satellite receiving terminal for LDCs LNG satellite receiving terminal for LDCs JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA Image of Soma LNG Terminal 15

18 GAS INTEGRATION: VALUE CHAIN Strengthening Our Natural Gas Supply System LNG Terminals, Underground Storage of Natural Gas JAPEX has been strengthening our natural gas supply system by utilizing LNG terminals and underground storages of natural gas in our network for the stable supply of natural gas all over Japan. Soma LNG Terminal At the Soma port in Shinchi Town of Fukushima Prefecture, JAPEX has been constructing the Soma LNG Terminal and aiming to commence commercial operation in March It is composed of a ground-type LNG storage tank with Japan s largest class capacity of 230,000 kiloliters, and has LNG vaporization equipment, loading facilities for tank trucks, and two berths for ocean-going and domestic vessels. This LNG terminal is planned to receive and reserve LNG from overseas for providing vaporized gas to our gas pipeline network via the Soma-Iwanuma Gas Pipeline also under construction, and to supply LNG by satellite system such as domestic vessels to the Yufutsu LNG Receiving Terminal and LNG tank trucks in regions not served by gas pipeline networks. As the first LNG terminal in Fukushima, this terminal is expected to contribute to the revitalization of neighborhood regions through developing new regional economics and clusters of industries, creating job opportunities, and activating local communities, led by supplying natural gas and other energy sources. This terminal is also planned to supply LNG vaporized gas to the Fukushima Natural Gas Power Plant which is under construction adjacent to the terminal. JAPEX is conducting construction management of the additional 230,000 kiloliter LNG storage tank and vaporization equipment in the terminal to strengthen capacity of LNG storage of LNG and natural gas supply according to the commencement of the power plant. Fukushima Natural Gas Power Plant JAPEX has been jointly promoting the Natural Gas-fired Power Generation Project at the Soma port in Shinchi Town, Fukushima Prefecture through Fukushima Gas Power Co., Ltd. (FGP), which was established as a special purpose vehicle by the five business partner companies including JAPEX. FGP has been conducting the construction of the Fukushima Natural Gas Power Plant which is the base of this project. For the commencement in 2020, the ground improving work was started in August 2017, and the construction work of the power plant will be started in October This project aims to contribute to the stable supply of electric power with a low environmental burden in expectation of increasing demands particularly in widely metropolitan regions and the development of economy and industry in surrounding communities near the power plant. Image of Soma LNG Terminal including 2nd Phase, and Fukushima Natural Gas Power Plant Yufutsu LNG Receiving Terminal The Yufutsu LNG receiving terminal commenced operation in This terminal enables our natural gas supply system in Hokkaido stronger by optimizing a mixture of natural gas (produced in the Yufutsu oil and gas field) and imported LNG (transported by coastal vessels and received at the terminal). Utilizing Underground Natural Gas Storage Reservoirs which stored natural gas can be utilized as gas storage tanks that do not require repair and maintenance work. JAPEX operates an underground natural gas storage at the Shiunji gas field in Shibata City, Niigata Prefecture, which is connected to our natural gas pipeline network. This operation enables us to flexibly respond to clients needs for seasonal fluctuations. There are many candidate gas fields that can be utilized for underground gas storage in Niigata Prefecture including JAPEX s gas fields. Utilizing underground natural gas storage balances various fluctuations in supply demands and can also function as emergency stock for contribution to the stable supply of natural gas. JAPEX Domestic Vessel Akebono Maru Yufutsu LNG Plant JAPEX has been operating a natural gas liquefaction plant at the Yufutsu oil and gas field since October 2003 for meeting demands for natural gas in regions not served by gas pipelines. Moreover, we produce LNG from natural gas produced in the field, and utilize the LNG satellite system to supply LNG by tank trucks and tank containers via railways to LDCs in the Hokkaido region, which is a breakthrough method for LNG supply in Hokkaido. Gas Compressor Used in Underground Natural Gas Storage at the Shiunji Gas Field 16

19 Securing Stable Energy Supply Natural Gas Pipeline Maintenance and Management As an environmentally friendly energy source, natural gas is widely used as feedstocks and fuels by clients including LDCs, electric power companies, and industrial users. It is transported and supplied safely and stably over the long-term via pipeline networks. Our pipeline network ensures the secure supply of natural gas by routine patrols and SCADA (Supervisory Control And Data Acquisition) system which is a 24-hour remote monitoring system. Steel Pipes Offering High-Tensile Strength Our pipeline network uses high-tensile steel pipes which have resistance to pressure both internal and external and resilience against distortion and shock. Also, our pipeline structure is designed to withstand earthquakes, and its ability was made notable during such events as the Miyagi Prefecture Offshore Earthquake and the Niigata Prefecture Chuetsu earthquake. At the time of the Great East Japan Earthquake in March 2011, a part of our ground facilities related to the natural gas pipeline between Niigata to Sendai was damaged by the earthquake and tsunami. JAPEX struggled to complete provisional repairs within 12 days after the earthquake and recommenced the delivery of natural gas to Sendai City and surrounding areas as a feedstock for town gas. Anti-Corrosion Technologies for Protection of Pipes Pipes our pipeline network are covered in an anti-corrosion coating on the surface for protection from corrosion. In addition, a corrosion protection method is applied to the pipes by supplying electric power for anticorrosion from undergrounded electrodes, which is a suitable method for long and large-scale pipelines to ensure high reliability and easy maintenance. This method enables pipelines to be protected from spontaneous corrosion and extends its service life semi-permanently. Monitoring System The flow rate and pressure of natural gas via our pipelines to clients is monitored on a 24-hour basis using satellite channels and other service lines. Each monitoring center and supply station has remote monitoring equipment for central control and this system enables us to shut off natural gas supply by remote operation in cases of emergency. Emergency shutdown valves (ESDVs) are installed at valve stations and transfer points to clients for remote shutting off of natural gas supply in emergencies. Also, gas diffusion towers are installed at main valve stations for safe atmospheric diffusion of natural gas in the pipelines to secure safety in cases of emergency. Patrols along the pipelines and facility maintenance and inspections are conducted in order to ensure the stable supply of natural gas to our clients. In addition to alerts at the time of disaster such as earthquake or heavy rain, we always pay attention to secure safety of the pipelines by setting up security signs and mileposts. Structure of Steel Pipe Schematic of the Impressed Current Protection Method Anode Steel pipe Polyethylene coating Adhesive + Terminal Steel pipe DC power source JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA Nagaoka Pipeline Monitoring Center 17

20 TECHNICAL INNOVATION For a Harmonious Coexistence with Nature ENVIRONMENT and INNOVATIVE TECHNOLOGY BUSINESS JAPEX regards the commercialization of methane hydrate, CCS (Carbon dioxide Capture and Storage), and geothermal power as a mid-to-long term priority agenda. We are pursuing accumulation of new technologies and knowledge regarding these areas. By establishing our business model from these technologies and knowledge, we are aiming to establish new earnings foundations. CHIKYU, the Scientific Drilling Vessel Using in the Offshore Methane Hydrate Production Tests Methane Hydrate Methane Hydrate as an Energy Resource Methane hydrate is an ice-like crystalline solid formed by methane and water that exists in highly pressurized and low-temperature environments, such as below the seabed in deep waters or permafrost layers in the polar regions. Due to this reason, advanced technical capabilities are required to produce methane hydrate. In order to extract methane gas from the methane hydrate layer, depressurization method is confirmed to be the most efficient method. In Japan, two types of methane hydrate has been confirmed: pore-filling sand-layer type (sand-layer type) and shallow-type. It is estimated that approximately 1.1 trillion m 3 * 1 of original methane hydrate resources exist in the eastern area of the Nankai Trough, offshore from Shizuoka to Wakayama Prefecture. Shallow type methane hydrate is also known to exist under the Sea of Japan. A three-year study of the resources since Fiscal 2013 has confirmed 1,742 gas chimney structures where methane hydrate could exist* 2. R&D activities for Methane Hydrate In March 2013, the world s first offshore production test of methane hydrate was conducted by the government using a deep-sea drilling vessel, CHIKYU, targeting sand-layer type methane hydrate at the Daini Atsumi Knoll, located between Atsumi Peninsula and Shima Peninsula off the coast of Japan. It was confirmed that methane gas continuously produced from an undersea methane hydrate layer by applying the depressurization method (period of six days with an average production volume of 20,000 m 3 per day, and cumulative production of approximately 120,000 m 3 * 3 ). Based on these results, the government is proceeding with R&D activities related to methane hydrate while looking at the international situation, to have the private-sector-led commercialization project be initiated after 2023 as for sand-layer type* 4. 18

21 JAPEX s Contributions JAPEX recognized the potential of methane hydrate earlier and has been providing our technologies, experiences and knowledge which were cultivated in oil and gas development to the research and development of methane hydrate in Japan. We also made a contribution by engaging in the operator work for the first offshore production test. In October 2014, Japan Methane Hydrate Operating Co., Ltd. (JMH) comprised of 11 private companies with capabilities of oil and gas E&P and plant engineering including JAPEX as the largest shareholder was established, aiming to conduct offshore production tests of sand-layer type methane hydrate efficiently, effectively, and smoothly under the nation-wide organizations in Japan and share the knowledge obtained through the tests with the wide-range private companies. JMH engaged in the operator work concerning the methane hydrate second offshore production test on commission from Japan Oil, Gas and Metals National Corporation (JOGMEC) in April From May 2016, upfront works to drill five wells for evaluation, observation, and production were carried out at the Daini Atsumi Knoll, located between Atsumi Peninsula and Shima Peninsula. After that, production tests were undertaken from April to July in Also, JAPEX will pursue the possibility for joining research and development activities of the shallow-type methane hydrate which is under the resources evaluation phase. We will have been contributing to conduct offshore production tests through JMH, and will actively proceed with our research and development of methane hydrate for practical use of methane hydrate as a clean energy resource in Japan. *1. Reprinted from the flyer of MH21 Research Consortium published in March *2. Referred to the news release by Ministry of Economy, Trade and Industry on December 25, 2014 and January 22, *3. Referred to the news release by JOGMEC on March 19, *4. Referred to the Offshore Energy and Mineral Resource Development Plan formulated by the Ministry of Economy (METI), Trade and Industry on December 24, Schematic of Depressurized Production Method Based on a Diagram from MH21 Research Consortium Carbon Dioxide Capture and Storage (CCS) Among many ideas being suggested for reducing CO2 emission, carbon dioxide capture and storage is one of the most practical, reliable and safe method that injects and stores CO2 directly into depleted oil and gas reservoirs, coal reservoirs, or aquifers. According to an investigative study, the estimated capacity of CO2 storage in Japan is considered to be up to approximately 146 billion tons, and further studies have been ongoing since Applying Core E&P Technologies JAPEX possesses cutting-edge technologies cultivated over half a century of experience in petroleum development, such as those used for investigating underground structures, estimating petrophysical properties and conducting drilling, production and fluid migration simulation, as well as underground monitoring centered on seismic surveys. Our E&P technologies constitute an indispensable core technology for CCS. Toward Commercialization of CCS Technology In May 2008, Japan CCS Co., Ltd. (JCCS) was established by several private companies including JAPEX, aiming for the commercialization of CCS. The Japanese government stated its aim for commercialization of CCS technology by 2020 in the Strategic Energy Plan formulated in JCCS has been conducting the CCS demonstration project by the consignment of METI (Ministry of Economy, Trade, and Industry of Japan) since April 2012, and JAPEX undertook a part of the preparation work in this project. In April 2016, JCCS commenced CO2 injection as a phase of the demonstration project. JAPEX will be making efforts to prevent global warming through contributing to the establishment of CCS technologies. Seawater surface Seabed Strata Production well Sand control device Methane hydrate deposit Strata Gas Gas Gas Water Gas Water Water depth of 500m or deeper 1 Pump up water from the well 2 Pressure inside the well decreases 3 Pressure within the strata decreases 4 Dissolution of methane hydrate 5 Gas and water flow into the well production Gas Water Methane hydrate is dissolved JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA CCS Demonstration Droject at Tomakomai: Surface Facilities (Copyright: Japan CCS Co., Ltd.) 19

22 TECHNICAL INNOVATION: ENERGY AND THE EARTH Geothermal Power Domestically Produced Energy Geothermal power generation utilizes steam and hot water extracted from deep underground to generate electric power. In Japan, over 40 geothermal power plants are currently in operation including smaller ones. Geothermal power is a domestic energy source, and Japan is the third richest country of geothermal power in the world since there are many volcanoes. Also, geothermal power has advantages regarding stable power generation not affected by time or weather as well as lower CO2 emission than other resources to generate electric power. Geothermal development in Japan is being watched with interest as a valuable resource and is expected to be promoted for development by of support systems such as deregulation for development in national parks and the FIT system (feed-in tariffs with fixed prices), which offers long-term contracts to renewable energy producers. Toward New Geothermal Development JAPEX is running several studies regarding the commercialization of geothermal power generation using our E&P technologies and experiences. At the Musadake area (Shibetsu Town, Hokkaido), we conducted verification tests including drilling of three geothermal exploratory wells and short-term flow tests from 2013, and its results are currently under analysis and evaluation. Also, the Fukushima Project Team, joining ten companies including JAPEX, drilled two geothermal exploratory wells at the Bandai area of Fukushima Prefecture in 2016 and the results are also under evaluation. In addition, JAPEX is pursuing the possibility of new geothermal power development in other areas in Japan. Structure of Geothermal Power Generation Silencer Steam and hot water Separator Steam Turbine Generator Transmission line Transformer Water Production well Hot water Warm water Geothermal reservoir Injection well Condenser Cooling water Air Air Cooling tower Effluent To injection well Drilling Operation at the Musadake Area Solar Power Solar power facilities that can generate more than 1,000kW of electricity are called mega solar power plants. JAPEX has begun commercial operation of two mega solar facilities in Tomakomai City, Hokkaido, in fiscal With long daylight hours, few snowfalls and low temperatures compared with other locations, Tomakomai is considered an ideal location in Japan for solar power generation and is expected to produce stable supplies of solar power. Installed Capacity Site Area Within the Hokkaido District Office site 1,800kW 39,000m 2 Solar Power Tomakomai Co., Ltd.* 13,000kW 300,000m 2 * Joint undertaking with the Sumitomo Corporation Group and others. The Mega Solar Power Plant Located within the Hokkaido District Office Site 20

23 CSR Corporate Social Responsibility (CSR) Pursue efforts to realize our priority agenda SHINE in order to respond to expectations and requests from all stakeholders and grow as a trusted global company Stable Supply of Energy At JAPEX, we consider our business activities themselves to be an important CSR priority. We engage in three core businesses to realize a stable supply of energy: the E&P business ( P.6, P.12), the domestic natural gas supply business ( P.14), and the environment and innovative technology business ( P.18). HSE as a Corporate Culture Since January 1, 2014, JAPEX has been implementing integrated HSE activities (under an HSE management system) by adding health activities to the existing safety and environmental protection activities. The HSE Policy, revised on January 1, 2014, sets forth our Corporate HSE policies and objectives, and every year each business unit autonomously decides its action items and implements its HSE activities. HSE activities are reviewed and evaluated each fiscal year, and the results are reflected in the following year s activities. By continually making improvements in this manner, we raise the level of HSE activities, which in turn feeds through to the prevention of occupational accidents, the fostering of safe and pleasant workplaces, and the protection of the environment. S H I N E Stable & Sustainable Energy Supply HSE* as Our Culture Integrity & Governance Being a Good Neighbor The Employer of Choice * HSE: Health, Safety, and the Environment Niigata Sendai Gas Pipeline JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA HSE Seminar for Employees 21

24 CSR: HSE HSE Policy JAPEX is committed to conducting its business in a manner that protects occupational health, safety and the environment. Our HSE standards will not be compromised by other business priorities. To accomplish this, JAPEX will: Fully comply with all applicable laws and regulations. Provide and maintain safe and healthy working conditions to create an incident-free workplace. Ensure that adequate medical support is provided to our employees. Identify and assess the hazards arising from activities and control any associated risks. Provide training to enable employees to work in a healthy and safe manner and foster awareness of protecting the environment. Regularly review HSE performance in order to demonstrate continuous improvement of our HSE practices. Strive to reduce waste and the consumption of materials, fuels and energy. Minimize adverse environmental effects associated with our activities. Require contractors to manage HSE in line with this policy. The policy is implemented through the application of the HSE management system, which is an integral part of JAPEX s overall management approach. JAPEX s Afforestation Initiatives JAPEX Yuri Forest Location Yurihonjo City, Akita Prefecture Area 4.50 hectares Afforestation period 3 years, from 2005 to 2007 JAPEX Morappu Forest Location Tomakomai City, Hokkaido Area 7.60 hectares Afforestation period 3 years, from 2006 to 2008 Environmental Protection Activities JAPEX strives toward the reduction of greenhouse gases, an important challenge for Japan, and the prevention of air pollution by reducing emissions of substances specified under Japan s Pollutant Release and Transfer Register Law (PRTR Law) and volatile organic compounds (VOCs). We are also pursuing research and development initiatives instrumental in protecting and improving the global environment, including Carbon dioxide Capture and Storage (CCS), recognized as a measure to help prevent global warming. JAPEX Sennenmatsu Forest Location Seiro Town, Kitakanbara County, Niigata Prefecture Area 6.4 hectares Afforestation period 3 years, from 2007 to 2009 Afforestation Activities To help protect the global environment and contribute to local communities, JAPEX has been carrying out afforestation programs since Our efforts so far have focused on helping to reduce CO2 emissions through tree planting activities in Akita Prefecture, Hokkaido, and Niigata Prefecture. JAPEX Jomon Forest Location Nagaoka City, Niigata Prefecture Area 11.9 hectares ( 4.9 hectares by afforestation, 7.0 hectares existing forest) Afforestation period First implementation: 2007 Second implementation: 2010 Third implementation:

25 Overseas HSE Management System In the late 1950s, JAPEX commenced overseas oil and natural gas development business in various countries, including Indonesia, Canada and Australia. A very high standard of HSE activities is required of companies engaging in this business overseas, as in Japan. Accordingly, we decided in October 2009 to introduce a corporate HSE management system and began implementation the following January. Subsequently, JAPEX has conducted regular HSE audits of the projects that it operates, such as the Canada Oil Sands project and E&P projects in Indonesia. Environmental Activities in Canada ( P.8 Oil Sands Project) JACOS is conserving water resources by recovering and reusing more than 90% of the steam injected underground in the bitumen production process. JACOS is also endeavoring to reduce greenhouse gas emissions by minimizing the volume of natural gas consumption necessary for steam generation and participates in environmental protection activities. In its business activities, JACOS conducts its works with full attention to preservation of the environment and biodiversity by obtaining appropriate regulatory approvals following environmental impact studies and intimately communicating with potentially impacted indigenous peoples on various matters including land restoration, the monitoring of wild animals and ground/surface water, etc., through the advisory group specially established with them. Other than environmental activities, JACOS is also actively contributing to society by, for example, providing scholarship support and accepting trainees. Activities for Environmental Prevention in Indonesia ( P.9 Kangean Project) In the Kangean Block located offshore of East Java, Kangean Energy Indonesia Ltd. (KEI), which is the operator, conducts production operations at the Pagerungan Gas Field and the Terang Gas Field which is part of the TSB Gas Field currently under development. Production operation of the Terang Gas Field is conducted offshore using a floating production unit (FPU). Under the supervision of appropriate authorities, KEI conducts operations based on our prepared environmental assessment to minimize the environmental impacts, and received an evaluation of Rating (BLUE) by the Ministry of Environment and Forestry in Indonesia, which means successful compliance of relevant laws. In addition, KEI achieved 30 million hours of continuous operation without accident in February 2016, and received the ZERO INCIDENT AWARD from the East Java State Government in February 2017 for recognition of our accident-free operation and appropriate HSE implementation. Environmental Protection in Iraq ( P.10 Garraf Project) The Garraf oil field is surrounded by extensive plains where sheep and cattle graze. Although the region is basically arid, there are rivers and lakes within the block as well as wildlife, and we are taking particular care to protect the natural environment. Several base camps have been set up within the block with around 2,000 staff engaging in operations and construction work on a daily basis. The operator, PETRONAS, is adopting a variety of initiatives to minimize the burden of its activities on local communities and the environment. These initiatives include the introduction of concentrated wastewater treatment equipment and waste collection vehicles. Furthermore, we regularly monitor emissions, such as flare gas, and report appropriately on the impact of our operations on the natural environment to the Iraqi government. We are gradually shifting the operating base of our activities overseas and will be engaged in ventures with various companies in an increasing number of countries. Against this backdrop, we will continue to improve our HSE standards through the efficient use of the PDCA (Plan-Do- Check-Act) cycle. Joint Field Study with Local Indigenous People on the Development Site ZERO INCIDENT AWARD Certificate Garraf Crude Oil Treatment Plant JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA 23

26 CSR: SUSTAINED GROWTH Integrity and Governance JAPEX has established a governance structure to ensure highly efficient and transparent management. We are developing and enhancing compliance and governance systems with the aim of complying with laws and regulations in Japan and abroad, observing international norms, as well as respecting human rights, and acting in accordance with the highest ethical standards. Building a Good Relationship with Society Establishment of Good Relationships with Society As a member of local communities, JAPEX interacts with local stakeholders nearby our district offices and production sites and makes communications to promote their understanding of our business. For instance, we provide facility tours of our sites to local authorities and companies, workplace tours and work experience programs at our sites as special classes for elementary school students, and workplace tours and lectures for students of senior high schools and colleges/universities for reference for their future job search. We also get actively involved in local events. In Akita Prefecture, we have been taking part in the Akita Kanto Matsuri (Festival) in Akita City with original lanterns marked with our company logo. In Niigata Prefecture, we have been providing large-scale skyrockets in the Nagaoka Matsuri in Nagaoka City and the Katakai Matsuri in Katakai Town Ojiya City. Kanto Festival in Akita City, Akita Prefecture The Nagaoka Matsuri Fireworks Festival Organized by Nagaoka City, Niigata Prefecture Photo: The Nagaoka Matsuri Council Volunteer Activities in Fukushima Prefecture Our personnel took part in the voluntary tree-planting event related to Donguri (acorn) Project 2016, held in October 2016 in Shinchi Town, the location site of Soma LNG Terminal. In Rachihama area, which is a coastal area of Shinchi Town, open space with green trees for tsunami disaster prevention is being prepared, and it is also expected to be a communication space for residents. This event gathered about 300 volunteers comprised mainly of local residents, and they worked together to plant approximately 5,000 young trees in the open space along the coastline, grown from acorns collected from disaster areas of the Great East Japan Earthquake. Volunteer Activity to Plant Trees in Shinchi, Fukushima Traffic Safety Guard Volunteer Activities in Nagaoka City Nagaoka District Office has been providing volunteers three times a week for traffic safety guarding of elementary and junior high school students at crosswalks of school roads with safety flags during hours that students walk from home to school. This activity was begun by volunteers of our Nagaoka District Office in January 2011, and has been continued until today, expanded as a CSR activity of the JAPEX Group for local communities, in cooperation with Geophysical Surveying Co., Ltd., which is a subsidiary of JAPEX. Over the six years since the beginning, the number of participants of this activity from JAPEX Group total approximately 3,800 personnel, and we have received a thank you letter for our activities from a neighboring elementary school in 2015, and were invited to an appreciation gathering held by the school in Also, we have received much recognition, such as Recognition of Traffic Accidents Prevention Activity by the chief of the Nagaoka Police Department and the chairman of the Traffic Safety Managers Association in March Traffic Safety Guard Volunteer Activities for Children Walking to School 24

27 Contributions to the Local Community in Garraf (Iraq) JAPEX and PETRONAS engage in a variety of activities as part of efforts to contribute to local communities under the Garraf contract in Iraq. These activities include the repair of elementary schools, the distribution of stationery and goods to school children, the establishment of mobile clinics and the supply of drinking water, and the construction of access roads to neighboring villages. The companies have also opened the Garraf Vocational Training Center (GVTC) within the Garraf contract area with the Japanese government s Grant Assistance for Grassroots Projects. The center provides training opportunities for local residents with a view to stimulating employment in the area. The center offers electrical wiring, English, IT, sewing, and other courses for unemployed young men and women from the area. Since its opening in July 2017, more than 1,000 people have completed courses at the center. Together with GVTC, we have also built a football field adjacent to the center. Football is regarded as a national sport in Iraq and attracts an enthusiastic following. The ground is used for football competitions between teams from local mining areas and has become a place to relax and enjoy for local residents. The Employer of Choice Diversity Promotion To increase our corporate value through business activities and strengthen our management and organization as our base value, JAPEX established the Diversity Promotion Group in March 2015 and formulated the JAPEX Diversity Policy in January We are aggressively promoting diversity to create an environment where all our employees can work actively regardless of differences in gender, age, nationality, career, and working style, and assist developing their careers to work as professionals. In April 2017, we officially introduced the flextime working system to promote flexible working styles and to reduce overtime working hours through improving productivity. Furthermore, we increased a variety of career assistance programs, such as financial support for babysitter costs during business trips or when children become sick as well as housekeeping costs to employees whose spouse is transferred overseas so that that employee is able to manage work and childcare at the same time. We also reduced working hours for employees studying in university and postgraduate courses. We also continue to hold training and lectures for female employees career development, time management, and others. In 2015 and 2016, JAPEX was awarded the Nadeshiko Brand by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange (TSE) for two consecutive years. Companies are selected annually as excellent companies in TSE listed enterprises in view of promoting female employees to play active roles in the workplace. Class at the Training Center at Garraf Football Competition Event at Garraf A Women@J Career Women Session 2016 Nadeshiko Brand Presentation Ceremony JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA 25

28 FACTS & DATA: ORGANIZATION (As of June 28, 2017) Board of Directors President Board of Corporate Auditors Executive Committee Secretary Office Auditing Dept. Commercial Office for Overseas Projects Gas Pipeline Transportation Dept. Corporate Strategy Dept. Administration Dept. Human Resources Dept. Finance & Accounting Dept. Procurement Dept. Information Technology Dept. Media & Investor Relations Dept. HSE Dept. Technical Division Technical Planning & Coordination Dept. Technical Solution Dept. Subsurface Evaluation Dept. Development Engineering Dept. Research Center Marketing & Sales Division Marketing & Sales Planning Dept. Marketing & Sales Dept. I Marketing & Sales Dept. II Marketing & Sales Dept. III Marketing & Sales Dept. IV Hokkaido Marketing & Sales Dept. Domestic E&P Project Division Project Planning & Coordination Dept. Exploration & Development Dept. Operations Dept. Production Operator Training Center Inter-regional Gas Supply Division Business planning & Coordination Dept. Supply planning & Coordination Dept. Americas & Russia Project Division Canada LNG Project Dept. North America Shale Project Dept. Business Development Dept. Asia & Oceania Project Division Kangean Project Dept. Business Development Dept. Middle East, Africa & Europe Project Division Iraq Project Dept. Business Development Dept. Canada Oil Sands Project Dept. Environment & Innovative Technology Projects Division Project Implementation Strategies Dept. Technology Research & Development Dept. Geothermal Dept. Soma Project Division Project Planning & Coordination Dept. Power Generation Business Promotion Dept. LNG Associated Business Promotion Dept. LNG Terminal Construction Dept. I LNG Terminal Construction Dept. II Pipeline Construction Dept. Hokkaido District Office Akita District Office Nagaoka District Office Soma District Office Houston Representative Office Beijing Representative Office Jakarta Representative Office London Representative Office Dubai Representative Office 26

29 FACTS & DATA: CORPORATE HISTORY 1955 Dec. Japan Petroleum Exploration Co., Ltd. was established as a government-owned company to improve national petroleum self-sufficiency 1980 Oct. Subsidiary Japex (U.S.) Corp. was established 1983 Apr. Subsidiary JGI, Inc. was established Jun. Iwafune-oki oil and gas field (Niigata) was discovered 1985 Jan. Beijing Representative Office was opened 1989 Mar. Yufutsu oil and gas field (Hokkaido) was discovered Nov. Ayukawa oil and gas field (Akita) was discovered 1990 May London Representative Office was opened 1991 Mar. Jakarta Representative Office was opened 1995 Mar. Subsidiary Japex Pipeline Ltd. was established 1997 Feb. Houston Representative Office was opened 2003 Oct. Subsidiary Shirone Gas Co., Ltd. was established Dec. JAPEX was listed on the First Section of the Tokyo Stock Exchange 2005 Mar. Dubai Representative Office was opened 1958 Mar. Mitsuke oil field (Niigata) was discovered Jul. Sarukawa oil field (Akita) was discovered 1959 Jun. Higashi-Niigata gas field (Niigata) was discovered 1960 Mar. Amarume oil field (Yamagata) was discovered Dec. Katakai gas field (Niigata) was discovered 1962 Mar. Kumoide gas field (Niigata) was discovered Jun. Subsidiary JAPEX SKS Corporation was established Aug. Shiunji gas field (Niigata) was discovered 1964 Nov. Fujikawa gas field (Niigata) was discovered 1965 May Operation range expanded to overseas by revision of the articles of association 1966 Feb. Subsidiary North Sumatra Offshore Petroleum Exploration Co., Ltd. (NOSOPEX), the company presently known as INPEX Corporation, was established 1967 Oct. With the establishment of the governmental Japan Petroleum Development Corporation (JPDC), JAPEX was incorporated into JPDC as the E&P operating body 1968 Apr. Yoshii gas field (Niigata) was discovered 1970 Apr. Reorganized as a private E&P company, Japan Petroleum Exploration Co., Ltd. was separated from JPDC 1972 Mar. Discovered the Aga-oki oil and gas field (Niigata Prefecture) 1971 May Subsidiary Japex Offshore Ltd. was established Oct. Subsidiary SK Engineering Co., Ltd. was established 1976 Jun. Yurihara oil and gas field (Akita) was discovered 1978 Dec. Subsidiary Canada Oil Sands Co., Ltd. (CANOS) was established JAPEX MISSION STABLE SUPPLY ENERGY STREAM OVERSEAS E&P DOMESTIC E&P GAS INTEGRATION TECHNICAL INNOVATION CSR FACTS & DATA 2007 May JAPEX acquired stock in Energi Mega Pratama Inc Nov. JAPEX acquired stock in Japex Energy Co., Ltd Mar. Subsidiary Japex Garraf Ltd. was established 2013 Mar. Subsidiary JAPEX Montney Ltd. was established 2014 Mar. Subsidiary JAPEX UK E&P Ltd. was established Sep. Subsidiary JAPEX UK E&P CENTRAL Ltd. was established 2015 Apr. Fukushima Gas Power Co., Ltd. was established 27

30 FACTS & DATA: CORPORATE DATA Corporate Profile (As of March 31, 2017) Company Name Japan Petroleum Exploration Co., Ltd. Established April 1, 1970 Paid-in Capital 14,288,694,000 Number of Employees 1,825 (Consolidated basis) Main Businesses Exploration, development and sales of oil, natural gas and other resources and contract service-related operations, such as drilling Main Offices Headquarters: SAPIA Tower, Marunouchi, Chiyoda-ku, Tokyo , Japan TEL: Hokkaido District Office: , Numanohata, Tomakomai, Hokkaido , Japan TEL: JAPEX Research Center: 1-2-1, Hamada, Mihama-ku, Chiba City, Chiba , Japan TEL: Houston Representative Office: 5051, Westheimer, Suite 425 Houston TX 77056, U.S.A. TEL: Headquarters Akita District Office: 85-2, Hirune, Terauchi, Akita City, Akita , Japan TEL: Nagaoka District Office: Higashi-Zao, Nagaoka, Niigata , Japan TEL: Soma District Office: 159-2, Imagami, Komagamine, Shinchi Town, Soma County, Fukushima Japan Tel London Representative Office: 2nd Floor, Cheapside House, 138 Cheapside, London EC2V 6BJ, U.K. TEL: Dubai Representative Office: 203 Spectrum Building, Al Qutaeyat Road, Oud Metha, P.O. Box , Dubai, U.A.E. TEL: Beijing Representative Office: Room 2311, Tengda Plaza, No.168 Xizhimenwai Street, Haidian District Beijing, China TEL: Jakarta Representative Office: Menara Cakrawala 9th Floor, JL.M.H. Thamrin, No. 9 Jakarta 10340, Indonesia TEL: *Established April 1, Directors, Auditors and Officers (As of June 28, 2017) Chairman Osamu Watanabe President Chief Hideichi Okada Executive Vice President Shoichi Ishii Senior Managing Director Hikaru Fukasawa Senior Managing Director Yosuke Higai Managing Director Yasuhiro Masui Managing Director Kazuhiko Ozeki Managing Director Takahisa Inoue Managing Director Hajime Ito Managing Director Hirotaka Tanaka Managing Director Toshiyuki Hirata Outside Director Yoriko Kawaguchi Outside Director Akira Kojima Outside Director Tetsuo Ito Audit & Supervisory Board Member Morio Ishizeki Audit & Supervisory Board Member Kenji Uchida Outside Audit & Supervisory Board Member Hiroyasu Watanabe Outside Audit & Supervisory Board Member Norio Nakajima Special Advisor Ajay Singh Managing Executive Officer Michiro Yamashita Managing Executive Officer Kunio Suga Managing Executive Officer Yoshitaka Ishii Yasushi Hamada Akihisa Takahashi Tamio Wachi Ryuhei Murayama Senichiro Kaku Minoru Kuniyasu Yasuo Takehana Junichiro Ando Mitsugu Takemura Tadashi Matsunaga Tsuyoshi Suga Fellow* Satoru Yokoi Fellow* Amane Waseda * Fellows support Directors and Management through their high degree of expertise in the specialized fields. 28