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Message from the President & CEO

Representative Director, President & CEO INPEX CORPORATION Toshiaki Kitamura

The Business Climate Surrounding the Energy and INPEX’s Corporate Mission

INPEX aspires to become an integrated energy company that contributes to building a better society by providing a stable and efficient supply of energy.
In light of the sharp decline in crude oil prices since the year before last and subsequent oil price stagnation, the energy industry is expected to continue facing an unpredictable business environment as a result of uncertainty in global energy supply and demand. We are implementing initiatives, such as rigorous short-term cost reduction measures, to build a resilient corporate structure so that it may continue to engage in business activities even in a prolonged low oil price environment. At the same time, energy demand is expected to steadily increase over the medium- to long-term as a result of economic development spurred by a population increase mainly in developing countries.
Despite the cyclical fluctuations in supply and demand, energy resources, which are inherently finite, will continue to be indispensable to the economy and society. Through proactive dialogue with stakeholders, we seek to accurately identify the expectations of society and diligently engage in the long-term stable development and supply of energy to fulfill our corporate mission of helping build a better society.

Recent Developments in Sustainability

In 2015, the international community took a major step forward in its commitment to sustainability. The 2030 Agenda for Sustainable Development was adopted at the United Nations in September, and the Paris Agreement, which stipulates that all nations, including developing nations, cooperate in reducing greenhouse gas emissions, was adopted at the COP21*1 conference held in December. The setting of a global target to achieve the sustainable development of society has made it even more important that all stakeholders including governments, businesses and the public are involved.
We engage in business operations around the world where business environments as well as stakeholder interests and expectations differ from region to region. Given that our core business lies in energy development, it is essential to address the issue of climate change and any challenges specific to the communities where we operate. As a global corporate citizen, we fully recognize the international community’s objectives related to sustainability and the diversity of individual regions. In this regard, we have identified six Material Issues particularly related to our business (Governance, Compliance, HSE*2, Local Communities, Climate Change and Employees), and are promoting CSR through our business activities.

*1 COP21 : 21st Conference of Parties to the United Nations Framework Convention on Climate Change

*2 HSE : Health, Safety and Environment

Key Initiatives in Fiscal 2015
1) Ichthys LNG Project, Abadi LNG Project, and Business Activities in Japan

The Ichthys LNG Project, currently under development in Australia, has steadily achieved important milestones under a new schedule announced in September 2015, including floating its central processing facility (CPF) in September 2015 and completing the offshore pipelay of the 890-kilometer gas export pipeline that links the Ichthys Gas-condensate Field to the onshore LNG plant under construction in Darwin in November 2015. The project has reached an overall completion rate of approximately 87% as of June 2016. We will proceed with development work, placing the highest priority on safety in preparation for production that is expected to start in the third quarter of 2017.
As for the Abadi LNG Project in Indonesia, while our original development plan envisioned the adoption of a floating LNG (FLNG) plant, we received a notification on April 1, 2016 from Indonesian government authorities instructing to re-propose a plan of development based on onshore LNG. We will aim for the early start-up of development in close consultation with the Indonesian government authorities.
In Japan, a new oil column was discovered in the Minami-Kuwayama Oil Field in Niigata Prefecture, preparetions were made for exploratory drilling campaigns scheduled in fiscal 2016 at the North Area of Yabase Oil Field in Akita Prefecture and a location offshore Shimane and Yamaguchi Prefectures*3. Additionally, as part of our efforts to strengthen our gas supply chain in Japan, we proceeded with the construction of a low-temperature LPG tank at the Naoetsu LNG Terminal and the Toyama Line extension to our natural gas trunk pipeline, both of which are completed in June 2016 and further strengthen our capability to provide a stable supply of gas in Japan.

*3 : The drilling operations are part of a project commissioned by the Agency of Natural Resources and Energy of the Ministry of Economy, Trade and Industry (METI) of Japan for the agency’s “Heisei 26~28 (2014–2016) Domestic Offshore Drilling Program in Japan,” and will involve exploratory drilling to determine the presence of hydrocarbon deposits and conduct geological studies

2) Initiatives to Strengthen Corporate Governance

The Corporate Governance Code was introduced in Japan in June 2015 as a guideline for listed companies to realize effective corporate governance. We position corporate governance as an extremely important factor in enhancing its corporate value over the medium- to long-term. Accordingly, we added “Corporate Governance” as a Material Issue in May 2015 and instituted the Corporate Governance Guidelines in November. Pursuant to the guidelines, senior management and the Board of Directors will spearhead proactive efforts to further reinforce the corporate governance system.

3) Addressing Climate Change

To communicate our position on the issue of climate change to stakeholders and further promote climate change initiatives within the Group, we have developed a Position Paper*4 that summarizes our stance on climate change and consequent concrete initiatives.
We will engage in priority initiatives organized around five key pillars articulated in the Position Paper. In particular, we will respond to energy demand by strengthening our initiatives related to natural gas, fossil fuel with the least environmental impact, and renewable energy with a focus on our geothermal power generation business. In fiscal 2015, we conducted geothermal energy development studies in Hokkaido, Akita and Fukushima Prefectures in Japan. In June 2015, we also announced our participation in the Sarulla Geothermal Independent Power Producer (IPP) Project in Indonesia, the world’s largest single-contract geothermal power project.

*4 Position Paper : The Position Paper, which summarizes our stance on climate change and concrete initiatives, is based on The Paris Puzzle, an opinion statement issued by the International Petroleum Industry Environmental Conservation Association (IPIECA) that indicates the industry’s recognition of climate change risk and response policy

Our Promise to Stakeholders

We signed the United Nations Global Compact in December 2011 and declared to endorse the Ten Principles in the areas of human rights, labor, the environment and anti-corruption.
All INPEX Group executives and employees adhere to the INPEX Values including Safety, Integrity, Diversity, Ingenuity and Collaboration that represent our shared understanding of the behavior we strive to demonstrate in the way we work, transcending nationality, culture and custom. This behavior enhances individual and, by extension, organizational performance and further strengthens relationships of trust with the local communities where we operate and our many other stakeholders. To fulfill our mission as a supplier of energy, we will continue to base our activities on the six Material Issues as we work diligently to remain a company that plays a vital and essential role in society.

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