I would like to express our deep appreciation to you, our shareholders and investors, for your continued support and understanding for our company.
I, Toshiaki Kitamura, was appointed and became President and Representative Director at the ordinary general meeting of shareholders held on June 23, 2010. I will strive to advance the development of the INPEX Group. Thank you very much for your continued support..
Vital to the Japanese economy and quality of life, oil and natural gas account for approximately 60 percent of the country’s primary energy demand. Japan has few natural resources and very little domestic energy production, and relies almost entirely on imports to meet domestic energy demand. Nearly 90 percent of Japan’s imported oil comes from the Middle East. Most of the world’s oil and natural gas reserves are now controlled by the governments or state energy companies in those countries where these reserves exist. This is part of a growing trend toward nationalization of energy resources. Competition among the major overseas oil companies is intensifying, as the broader global competition for resources intensifies, driven by sustained efforts by countries like China and India to secure access to resources in the Middle East, Africa, Latin America and other regions around the world. Moreover, costs for raw materials for steel products, and engineering costs are rising, and drilling rig rates also soaring due to the tight rig market. In addition, industry-wide there have been more project delays caused by a backlog of projects for engineering companies and increasingly stringent rules on environmental management. These conditions have made it increasingly important for us to base our operations on appropriate management of costs and risks and on prudent investment decisions.
In order to achieve sustainable growth under these challenging conditions, the INPEX Group continues to improve the competitiveness with its vast reserves and well balanced asset portfolio and to further strengthen its capabilities in areas including finance, technology, information, new development and operations in the global competitive oil and gas industry.
In particular, I will pursue three key strategies. These include: 1) Exploration and development for maintaining and expanding reserves; 2) Materializing large-scale overseas LNG projects and aggressively developing the natural gas business by constructing a gas supply chain through organic links with domestic infrastructure; 3) Development of unconventional oil resources and next-generation renewable energies.
The scale of production of the two large-scale LNG projects in Australia and Indonesia that are pillars of our medium- to long-term growth strategies amounts to 20% of Japan’s total imported LNG volume. We will do our utmost to ensure the successful development of these projects, which are indispensible to securing Japan’s stable LNG supply and to bolstering our corporate value.
By achieving production at these large-scale overseas LNG and other projects and pursuing our three key strategies, we aim to transform ourselves into a leading mid-sized international oil company. In the second half of 2010, we intend to expand production volume at our oil and natural gas projects from 410,000 barrels/day as of fiscal 2009 to 800,000-1,000,000 barrels/day.
In order to achieve this growth, we plan to invest around Y4 trillion in exploration and development over the next seven years. In particular, we aim to continuously enhance our corporate value by maintaining and expanding our reserves and production of oil and natural gas, through development of large-scale overseas LNG projects. We intend to balance this investment with direct return of profits to our shareholders and investors through dividends.
I would again like to thank our shareholders and investors for their continued understanding and support.
*Production and reserve units are barrels of oil equivalent calculated on assumption of converting natural gas to crude oil.
June 2010
Toshiaki Kitamura
President & CEO
