I would like to express our deep appreciation to you, our shareholders and investors, for your continued support and understanding for our company.
Upon completion of full business integration with INPEX CORPORATION and Teikoku Oil Co., Ltd., a process that began two and a half years ago, INPEX Holdings Inc. marks a new beginning by changing its name to INPEX CORPORATION on October 1, 2008. The consolidation of headquarter functions and comprehensive organizational integration will allow us to make our operations more efficient and our management structure more agile. As a Japan’s leading worldwide oil and gas exploration and production company, we conduct proactive exploration, development and production activities in order to fulfill our social duty of contributing to a stable and efficient supply of energy. We at the INPEX Group will continue to work to enhance our corporate value in a sustainable manner through medium- to- long-term maintenance and expansion of our reserves and production.
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 portofolio and to further strengthen its capabilities in areas including finance, technology, information, new development and operations in the global competitive oil and gas industry.
As a pillar of our medium- to- long-term growth strategy, we are pursuing two large-scale LNG projects in Australia and Indonesia. The combined production scale of these LNG projects is equivalent to approximately 20 percent of Japan’s current total LNG imports. We are fully committed to these crucial projects, as they will enable us to make even greater contributions to a stable LNG supply for Japan and to further enhance our corporate value. We expect that the overall production from our oil and natural gas projects, including estimated production from these large-scale overseas LNG projects, will increase from 405 thousand barrels a day* (level of production in FY2008 ) to approximately 700 thousand barrels a day between 2015 and 2020. Achieving this first horizon in our growth stage is the important immediate management goal. In our next horizon of growth, we will continue to make efficient use of management resources and pursue more proactively and efficiently exploration and development to attain our target of increasing daily production from 800 thousand barrels to 1 million barrels.
We have budgeted approximately ¥1,400 billion for exploration and development for the next three years. We continue to enhance our corporate value in a sustainable manner through maintenance and expansion of our oil and natural gas reserves and production volumes, paying special attention to development of the two large-scale overseas LNG projects. We aim to make a good balance between direct return to shareholders and enhancement of shareholder value.
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 2009
