The INPEX Group urges all of its Operational Organizations to build an HSE management system and practice the A-PDCA cycle. This applies to environmental management as well. We require each Operational Organization to establish annual objectives and plans, the results of which are assessed in an unbiased manner by our auditing system.

We adopt standards from the International Finance Corporation (IFC) when implementing environmental management. The IFC’s EHS Guidelines are global standards both in name and substance, covering not only environmental impact (e.g., air emissions and wastewater effluent), but also social responsibility (e.g., occupational and community health and safety, biodiversity).

Development of overseas projects is carried out with an awareness of IFC standards from early on in each project’s lifecycle, including front-end engineering design. In the future, we aim to apply the IFC’s standards to our operations in Japan as well. We have begun research to determine how much improvement our operations in Japan, which currently comply with national and local laws, will require to comply with the global standards.

With natural gas being the core product of our operations in Japan, we strive to reduce our greenhouse gas (GHG) emissions in Japan by using the natural gas we make ourselves and also by installing energy-efficient systems powered by natural gas at our processing plants and field offices.

Some operations in our oil and natural gas business, such as routine equipment inspections and pipeline relocation, leave us no choice but to temporarily discharge a small amount of natural gas into the air. Since methane, the primary component of natural gas, has a global warming potential 21 times greater than that of CO₂, we do everything we can to disperse as little natural gas as possible, such as by lowering pressure in pipelines prior to relocating them or installing a ground flare to burn the waste gas into heat, water, and CO₂.

Our total GHG emissions rose in the period from fiscal 2004 to 2007 as a result of increased production of natural gas at our Minami Nagaoka Gas Field (Nagaoka, Niigata Prefecture), our largest gas production base in Japan. CO₂ separated from the natural gas accounted for most of the increase.

Emissions leveled out at around 400,000 tons from fiscal 2007 through 2009, and then declined to 360,000 in fiscal 2010 as a result of declining natural gas production and a corresponding drop in separated CO₂ from 200,000 tons to 163,000 tons. CO₂, which makes up approximately 6% of raw natural gas, is separated using CO₂ separation and removal systems and released into the atmosphere. Although the CO₂ that is separated and removed in industrial processes adds up to a considerable amount of GHG emissions and various solutions are currently being tested, at this point in time there is no other effective solution but to vent it into the atmosphere. The oil and natural gas industry, including the INPEX Group, is studying the possibilities of effectively using this separated CO₂ or storing it underground.

Among GHG emissions, CO₂ emissions from energy use and natural gas venting are the primary target of reduction efforts in our oil and natural gas business. These emissions peaked at 161,000 tons in fiscal 2007 and decreased to 113,000 tons in fiscal 2010.

Greenhouse gas emissions in Japan are regulated by two national laws: the Energy Conservation Law (Law Concerning the Rational Use of Energy) and the Global Warming Law (Law Concerning the Promotion of Measures to Cope with Global Warming). The Energy Conservation Law and the Global Warming Law require businesses to report to the government their annual energy use and annual emissions of separated CO₂ and other GHGs, respectively. The Energy Conservation Law, taking a medium- to long-term perspective, also imposes a target on businesses of reducing energy use per unit of production by at least 1% annually.

Our operations in Japan used 83,253 kiloliters (crude oil equivalent) of energy in fiscal 2010, an increase of 4.6% from the previous year. This increase was due to a rise in electricity generated to meet increased demand. Energy use in our oil and natural gas business, not including electricity generation, declined as a result of a large decrease in natural gas production. When natural gas production decreases, so does the operating efficiency of our processing plants, which in turn increases the per-unit energy use of each plant. As a result, we did not achieve the Energy Conservation Law’s 1% annual target. Our reduction efforts will continue.

At the same time, CO₂ emissions reported under the Global Warming Law dropped by some 50,000 tons. This was due to a decline in CO₂ emitted in the natural gas production process as a result of decreased production.

Under the provisions of Japan’s amended Energy Conservation Law, enacted in April 2006, shippers of cargo transported in volumes exceeding 30 million ton-kilometers per year are required to report the volume of their transported cargo, develop energy conservation plans, and report quantities of consumed energy. The INPEX Group’s Domestic Project Division, which transports cargo in volumes exceeding 200 million ton-kilometers per year, has been measuring and reporting quantities of consumed energy and its transportation-related energy-saving plans since fiscal 2006.

Since natural gas production decreased in fiscal 2010, production of natural gas condensate also decreased. As a result, land and marine transport volumes also shrank, reducing CO₂ emissions by 580 tons from 6,140 tons in fiscal 2009 to 5,560 tons.

Because the majority of our cargo as a designated shipper is oil and condensate, we are faced with a more difficult challenge of cutting energy consumption than other companies, who can realize reductions through cargo consolidation and other measures.

The INPEX Group participates in the Nippon Keidanren Voluntary Action Plan on the Environment through the Japan Petroleum Development Association (JPDA), a trade group of which we are a member. The plan aims to reduce average GHG emission volumes or emissions per unit of production below the fiscal 1990 level in the period from 2008 through 2012, the first commitment period of the Kyoto Protocol. At present, 61 companies are involved in this project.

The JPDA sets a target in the plan of reducing the average GHG emissions per unit of production at oil and gas development facilities in Japan from fiscal 2008 through 2012 by 20% below the fiscal 1990 level. However, the INPEX Group* has voluntarily committed itself to a 30% reduction, and is currently on track to reach this target.

In 2008, the Japanese government began a pilot project for a voluntary emissions trading scheme in Japan, and the INPEX Group has been participating in this framework since December of that year. However, because we have far exceeded our reduction goals, we currently do not participate in pilot trading.

The Nippon Keidanren (Japan Business Federation), recognizing the need to continue voluntary business initiatives beyond 2012 when the current Voluntary Action Plan on the Environment will end, has stated that, under its Commitment to a Low-Carbon Society, it will urge companies to submit through their respective trade organizations their 2020 reduction targets for CO₂ emissions and CO₂ emissions per unit of production. The JPDA has declared its participation in the Commitment, and the INPEX Group has submitted its own targets.

* The Company’s Domestic Project Division and Offshore Iwaki Petroleum Co., Ltd. (does not include greenhouse gases emitted during the decarbonation process at the Minami Nagaoka Gas Field)