We would like to express our deepest sympathy and condolences to those affected by the recent devastating earthquake in Japan, and our sincere wish for a safe and smooth recovery for all families.

Since the earthquake, the INPEX Group has provided emergency relief supplies to disaster victims, including such petroleum products as gasoline and kerosene manufactured by INPEX, as well as supported local electrical utilities by providing them with additional supplies of crude oil and liquified natural gas (LNG) produced overseas. We intend to continue supporting the reconstruction effort as best we can.

While we were fortunate that the earthquake’s impact on our facilities was very minimal, it motivated us to reaffirm our commitment to achieving higher safety and disaster preparedness.

Three events happened from 2010 to 2011 that shook the energy industry.

The first event was the Deepwater Horizon oil spill off the Gulf Coast of the United States in April 2010. This event—a serious incident for deepwater development, a field that is gathering attention as a promising frontier for oil and natural gas—spurred oil majors and other companies involved in oil development to reaffirm their commitment to strengthening safety and environmental management.

The second event was political unrest in the Middle East and Northern Africa, which began with the Jasmine Revolution in Tunisia in December 2010. Despite the fact that there were no major disruptions to actual oil supplies, oil prices continue to remain high and show increased volatility due to supply concerns. For Japan, which relies on the Middle East for 90% of its oil imports, high oil prices are a threat to our economic and energy security.

The third event was the Great East Japan Earthquake in March 2011 and the ensuing accident at the Fukushima Daiichi Nuclear Power Plant. The disaster and this nuclear accident have sparked a major debate over the future direction of energy policy not only in Japan but around the world. Countries like Germany and Switzerland have already announced revisions to their nuclear energy policies, and the debates centered on energy policy in various countries have the potential to affect future energy supply and demand and the manner in which climate change is addressed. Amidst all this, in June 2011 the International Energy Agency (IEA) released a special report stating that, with the combined effects of the Fukushima incident, growing demand for natural gas in China and other emerging economies, and a rapid increase in the supply of natural gas resulting from increased development of unconventional sources such as shale gas, natural gas could occupy a more prominent role in world primary energy demand.

As the debate over the best mix of global energy sources intensifies, the INPEX Group understands that implementing the three strategies outlined below, including realizing our goals for natural gas development, an undertaking we have been steadily pursuing for some time, is becoming increasingly necessary.

The INPEX Group is steadily promoting three medium- to long-term strategies that we previously set forth: (1) to continue to expand our oil and gas upstream business; (2) to establish a natural gas supply chain and diversify our gas business; and (3) to become a company that offers a broader range of energy. In addition, we are carrying out a thorough revision of our overall operational safety systems based on the latest developments and strengthening our risk management systems and business continuity plan (BCP). With 2011 being an important milestone particularly in our promotion of natural gas development, we hope to contribute to the development of a sustainable economy by fulfilling our social mission to provide an efficient and stable supply of energy while adapting to changes in the global business environment.

To start, with regard to our first strategy to expand our oil and gas upstream business, we will seek to further expand our reserves and production of natural gas, the development of which has long been a priority for us and is increasingly anticipated as an energy source with a smaller environmental impact compared with other fossil fuels. To do so we will carry out plans to develop the Ichthys (Australia) and Abadi (Indonesia) projects, two projects we are undertaking overseas that rank among the largest LNG projects in the world. For the Ichthys Project, the first large-scale LNG project to be operated by a Japanese company covering everything from exploration through production, we will make our final investment decision in the fourth quarter of 2011.

To establish a natural gas supply chain and diversify our gas business, we will fortify our natural gas supply system to be more stable and flexible by organically linking overseas sources of LNG that we hold an interest in with natural gas supply infrastructure in Japan, thereby contributing to a greater use of environmentally friendly natural gas. As part of this effort, in May 2011 we made our final investment decision on the extension of our natural gas pipeline network, and started full-scale construction of a new line (the Toyama Line).

As initiatives to become a company that offers a broader range of energy, we will pursue activities in and opportunities to enter the field of diversified energy use in ways that utilize electricity storage technologies as well as geothermal and other renewable energies with future business potential. From an ultra long-term perspective, we will also steadily develop “dream technologies” of the future such as using photocatalysts to produce hydrogen and methane.

By steadily promoting these medium- to long-term basic strategies, the INPEX Group aims to grow into a top-level and specialized upstream company with global operations, second only to the oil majors. At the same time, we will carry out activities to supply diverse forms of energy and deploy technologies that are more environmentally friendly. We believe that to achieve this we must develop an ambitious, skilled, and experienced workforce and also be keenly aware of our role in society. For example, in the process of implementing the Ichthys Project we have made repeated efforts to improve communication with local community members and actively carried out other activities such as establishing a vocational training school for local youth, including those for indigenous peoples. As we communicate closely with local communities and residents of the oil and gas producing countries where we operate, we will continually make better efforts to contribute to the growth and earn the trust of local communities by conducting safe operations, taking precautions to protect the environment, creating jobs, respecting human rights, and improving the quality of living environments.

The CSR Report 2011 and its online version highlight certain aspects of these activities at the INPEX Group. We hope to gain your understanding, your support, and look forward to receiving any feedback you may have regarding our CSR activities.