Long-term Vision and Mid-term Business Plan of JAPEX

Japan Petroleum Exploration Co., Ltd. (JAPEX) hereby released "Long-term Vision 2030" (hereinafter "Long-vision") as our growth strategy toward 2030 and "Mid-term Business Plan" (hereinafter "Mid-plan") to determine our management direction and business priority for coming five years from fiscal 2018.

JAPEX formulated Long-term Business Vision and Medium-term Business Plan in the first five years (hereinafter "former-plan") in May 2015, which is aiming for "Transformation to the Integrated Energy Company with a focus on Oil and Gas E&P Business." Based on the former-plan, the JAPEX group had struggled to strengthen our business basement with a large amount of investment including the development for full-scale commercial production of Canada Oil Sands Project in the Hangingstone leases and the completion of Soma LNG Terminal at Soma port in Fukushima prefecture and to expand our business into related fields which have affinity to our fundamental business such as joining natural gas-fired power generation project at Soma port, making contributions in national verification projects for next-gen resource development, and others.

However, after formulation of the former-plan, our business profit in E&P business declined by downfall in crude oil and natural gas prices, and the Pacific NorthWest LNG project which was planned to produce LNG from its upstream shale gas reserves in British Columbia of Canada was decided not to proceed. Mainly by these changes in our business condition, our mid-range targets were required to be revised. Furthermore, in response to the situation change of energy sector by international climate protection agreements and carbon emissions as well as the growing interest for companies' effort to ESG (Environment, Social, Governance) from stakeholders, we decided that reconsideration of our business vision was needed in the long-term view with our recognition for making contributions to sustainable society and stable energy supply as our mission.

The summary of new Long-vision and Mid-plan is as follows:

1. Long-term Vision 2030

1) Aspiration toward 2030

"Growth to the Integrated Energy Company Utilizing our Oil and Gas E&P and its Supply Basis"

2) Long-term Strategy

• Under the recognition that oil and gas will play the key role as global primary-energy in mid-to-long term, the JAPEX group continuously undertakes stable energy supply in response to the changes of needs in the market and clients.
• Playing active role for the resolution of global-scale issues particularly in low-carbon/decarbonization listed in "Sustainable Development Goals (SDGs)" adopted by the United Nation, the JAPEX group makes effort to CO₂ reduction in our business and is aiming to generate and expand new businesses of environmentally-friendly in non-E&P field including realization of carbon offset technologies and renewable energies.

3) Long-term Targets

• Aim to achieve "RRR(*2) > 1" by new opportunities and projects of oil and gas E&P
• Play the leading role for the realization of CCS(*3) technology by utilizing our E&P capabilities which will contribute to carbon offset
• Transform our business structure so that the business profit ratio will be "6:4 of E&P to non-E&P" by ensuring new investment funds under financial discipline of "Debt/EBITDA < 2" and allocate half of the new funds to non-E&P business

2. Mid-term Business Plan 2018-2022

1) Mid-term Strategy

• Pursuing to be the aspiration toward 2030, we will be aiming to improve our profitability to achieve "ROE => 5%" level in fiscal 2022 under market circumstance with crude oil prices of 60USD/bbl
• In fiscal 2018 to 2019 as the first half of mid-term, we are focusing on the optimization of our business portfolio and financial soundness as the immediate priorities
• After fiscal 2020 as the second half, we will drive concrete initiatives for sustainable growth including new investment in E&P field as well as business generation in non-E&P field, using new investment funds generated in the first half

2) Mid-term Tactics and Targets

1. E&P Business: Proceed to improve operation efficiency of domestic oil and gas fields and additional development in its around areas, to conduct offshore exploration mainly as national researches, and to optimize our owned portfolio and discover new investment opportunities in overseas
2. Infrastructure & Utility Business: Ensure stable energy supply and promote natural gas use by domestic-produced gas and various LNG sources for the targets of domestic gas sales amount of 1.6 million tons natural gas (equivalent LNG) per year and sales amount of 2.8 billion kWh electric power per year, execute stable operation and improve utilization of Fukushima Natural Gas Power Plant(*4), and pursue business development of renewable energies
3. New Business Development: Establish a dedicated team to strengthen the organization structure for discovering new business opportunities with the utilization of our competitive and advance resources including E&P technologies and knowledge of domestic natural gas supply network which have developed, and accelerate to develop business models and profitable projects

Please refer the appendix for details of Long-term Vision 2030 and Mid-term Business Plan 2018-2022.

The JAPEX group will endeavor to increase its corporate value through improvement to more profitable business structure for sustainable growth under market circumstance of lower crude oil prices, and transformation of our business structure being able to respond changes in society.