The global economy experienced an unprecedented downturn in the aftermath of the Lehman Brothers shock in autumn 2008. While conditions improved rapidly from the latter half of 2009, the pace of growth has again recently stalled placing downward pressure on worldwide economic activity including Japan. If we accept the general consensus that recovery will require a period of between three to four years, we are indeed at the mid-point of a full-fledged turnaround. In reality, specific countermeasures over the past two years, and particularly initiatives implemented under the accord concluded by the G-20 group of countries, have had a profound and greater than expected positive effect. As we work our way through to a genuine recovery over the next 12 to 18 months, however, we must brace ourselves for the task ahead with a renewed resolve.

Against this backdrop, JAPEX is committed to carrying out its three key management tasks of sustaining and increasing reserves through exploration and development, strengthening its natural gas integrated operation system and pursuing technological R&D activities and initiatives to address global environmental challenges. At the same time, the Company is dedicated to securing production and transportation safety and adopting a proactive stance toward efficient E&P, both in Japan and overseas, to ensure the stable and long-term supply of energy essential for daily life.

As of March 31, 2010, the proved reserves owned by the JAPEX Group reached 254 million barrels of oil equivalent (boe). Taking into consideration steady progress in each of our ongoing ventures including the oil sands expansion project in Canada, we are confident of lifting the volume of proved reserves owned to the established March 31, 2013 target of 350 million boe.

In our core natural gas business, we will secure stable supply by boosting domestic gas reserves and production capacity while stepping up LNG procurement activities overseas. Complementing these endeavors, we will also promote the increased use of natural gas by fortifying our natural gas pipeline network and LNG Satellite System.

As we work toward achieving our goals, we humbly ask for the continued support and understanding of all stakeholders.

Osamu Watanabe
President and Chief Executive Officer
February 2011