Start of Commissioning on the Soma LNG Terminal

Japan Petroleum Exploration Co., Ltd. (JAPEX) announced that the Soma LNG Terminal located at the No.4 wharf of Soma Port, Shinchi Town, Fukushima prefecture has started commissioning on December 1, 2017 aiming commencement of commercial operation in March 2018 following the mechanical completion of the facilities in the terminal (hereinafter "the Facilities") on November 30, 2017, in which the final investment decision was made in November 2013(*1) and started its construction in November 2014(*2).

The Soma LNG Terminal is a large-scale LNG terminal composed of a ground-type LNG storage tank with a capacity of 230,000 kiloliters which is one of the largest in Japan, two berths for large ocean-going ship of receiving and domestic vessel of receiving and shipping, LNG vaporization equipment, and LNG shipping facility. This terminal will receive LNG from overseas and will supply LNG vaporized gas to the Niigata-Sendai Gas Pipeline (from Seiro Town, Niigata prefecture to Sendai City, Miyagi prefecture) via the Soma-Iwanuma Gas Pipeline (hereinafter "the Soma-Iwanuma Line") which commenced operation on November 1, 2017(*3). Furthermore, this terminal will supply LNG as a liquid based on LNG satellite system using tank trucks and domestic vessel. The terminal will enable us to enhance our natural gas supply in point of security along our pipeline network connecting between the Japan Sea side and the Pacific Ocean side, and in point of amount along our pipeline network and in regions surrounding the terminal after commencement of commercial operation.

During commissioning period, test operations for commercial operation commencement is being conducted with linkage between the Facilities, the Soma-Iwanuma Line, and tank trucks and domestic vessels for LNG satellite supply. And the legal procedures and preparation works for commercial operation have been proceeding. Also the first LNG ship will arrive to the Soma Port on December 6, 2017 and will provide the first receiving LNG to the terminal(*4).

In addition, JAPEX has been entrusted from Fukushima Gas Power Co., Ltd. (FGP), which is funded by private companies including us, with the management and operation of the second phase to construct the additional LNG storage tank with a capacity of 230,000 kiloliters (hereinafter "No.2 tank" and additional vaporization equipment in the terminal that made the final investment decision by FGP in October, 2016 (*5). Construction works of No.2 tank was commenced in April 2017, and additional LNG vaporization equipment will commence construction in spring 2018. The facilities constructing in the second phase are planned to commence commercial operation in spring 2020 at the same time of commercial operation commencement of Fukushima Natural Gas Power Plant which commenced construction by FGP in October 2017 at the adjacent to the terminal.

Please refer to the appendix (in PDF version) for the outline of the Soma LNG Terminal.

The Soma LNG Terminal has certified as one of the Reconstruction Promotion Plan based on the Act on Special Zones for Reconstruction in Response to the Great East Japan Earthquake, and has been supported for the development of the port area applied the Harbor System for the energy sector by the Japanese government and Fukushima prefecture. Furthermore, the terminal has been regarded as one of the main project of "the Fukushima Innovation Coast Framework", promoted by the government and Fukushima prefecture for developing new regional economics and clusters of industries and activating local community in the coastal region of Fukushima.

Through the enhancement of our natural gas supply network starting from the Soma LNG Terminal and participation in the natural gas power generation project at the Soma Port conducted by FGP, JAPEX is aiming to contribute for the revitalization of the surrounding region of the terminal. And we are pursuing for the transformation to "an Integrated Energy Company with a Focus on the Oil and Natural Gas E&P" by business expansion to the related fields of natural gas as well as strengthen our natural gas supply business as the base of our revenue .

The effect of this matter to the consolidated financial forecasts for the fiscal year ending March 31, 2018 is negligible and the effect to the consolidated financial forecasts of the following fiscal years will be disclosed properly if necessary.

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