:fbsfoefe.bsdi oovbm3fqpsu · in light of the marketing test conducted by the national government...

Year ended March 31

Annual Report2018

ANNUAL REPORT

Japan Oil, Gas and Metals National Corporation

INDEX■Message from the Chairman & CEO ･････････････････ 2■JOGMEC's Activities ･････････････････････････････････ 4■Oil and Gas Upstream Investment　　　　　　　　and Research & Development ･･･････････････････････ 6■Coal Resource Development ････････････････････････ 12■Geothermal Resource Development ････････････････ 16■Metals Strategy, Exploration, and Technology　　　　Development ････････････････････････････････････････ 20■Stockpiling ･･････････････････････････････････････････ 26■Mine Pollution Control ･･･････････････････････････････ 30■Financial Review　　　　　　　　　　　　　　　General Overview ･････････････････････････････････ 34　　Balance Sheet ････････････････････････････････････ 36　　Statement of Operations ･･････････････････････････ 38　　Statement of Cash Flows ･････････････････････････ 39　　Notes to Financial Statements ･･･････････････････････ 40　　Independent Auditor's Report ･････････････････････ 44■Overview of JOGMEC ･･･････････････････････････････ 45■Officers ･････････････････････････････････････････････ 46■Organization Structure ･･････････････････････････････ 47■Worldwide Network ･････････････････････････････････ 48■Domestic Network ･･････････････････････････････････ 49

Copper100%

Imports Domestic production Domestic production

Natural Gas97.56%

Zinc100%

Crude Oil99.68%

2.22%

Geothermal97.78%

Coal99.35%

Imports Undeveloped Developed

Imports

0.32% 2.44% 0.65%

　Japan consumes considerably more oil, natural gas, and mineral resources than can be domestically produced.

To redress this imbalance, Japan depends mostly on importing these resources. Japan Oil, Gas and Metals

National Corporation (JOGMEC), an incorporated administrative agency established by the Japanese government,

plays a key role in ensuring a constant and stable supply of oil, natural gas, coal, geothermal energy and mineral

resources to support industries and citizens in Japan through a wide range of activities relating these resources.

Securing a Stable Source of Oil, Gas, and Mineral Resources

Message from the Chairman & CEO

3Annual Report 20182 Annual Report 2018

Message from the Chairman & CEOI was appointed as Chairman & CEO of JOGMEC in

April of this year. In commemoration of the issue of the "Annual Report 2018" summarizing the achievements JOGMEC made during fiscal 2017, I would like to extend my deep gratitude for your understanding and support for JOGMEC.

Resource prices have been rising recently, reflecting the stable global economy. However, if we focus on some individual cases, it becomes apparent that not all resource prices are increasing. This is due to multiple factors, including an increase in the production of shale oil and other unconventional resources in North America, changes in the political situation in Iran and other parts of the Middle East, and the growing use of electric vehicles. The extent and rapidity of change in the global resources and energy sector have been further exacerbated by uncertainties associated with geopolitical risks, the rising tide of resource nationalism and the inflow of speculative funds. This underlines the ongoing need for a comprehensive and multi-faceted strategy for resources and energy, including coal and geothermal energy.

To respond appropriately to the changing situation with respect to resources and energy and achieve our mission of steadily supplying them to Japan, JOGMEC conducted the following activities to mark the end of its third mid-term plan in fiscal 2017.

Oil and Gas Upstream Investment and Research & Development: JOGMEC decided to provide equity financing for three E&P projects, including exploration in the UK North Sea, asset acquisition for an onshore oil field in the southeast of Iraq, and further development of an oil field in Kazakhstan. The Kazakhstan project is the first investment in a development project since the revised JOGMEC Act was enacted in fiscal 2016. These projects helped to promote the exploration and development activities of Japanese companies. In addition, production commenced for multiple projects supported by JOGMEC, including an LNG project in Australia and an onshore oil sand project in Canada, thereby contributing to the diversification of supply sources and enhancement of energy security. For the overseas geological and geophysical surveys that precede the exploration and development stages, JOGMEC completed surveys in Kenya and Uzbekistan and acquired the rights for Japanese companies to preferentially participate in the exploration and development. JOGMEC also started conducting a joint exploration project in the Krasnoyarsk region of Russia based on an agreement reached in December 2016 with Irkutsk Oil Company, a local Russian private company. For methane hydrate development, JOGMEC conducted a second offshore production test in an area stretching from off the coast of the Atsumi Peninsula to off the coast of the Shima Peninsula (the Daini Atsumi Knoll) and confirmed the production of gas there. In the field of resource diplomacy, JOGMEC signed or renewed five memorandums of understanding (MOU) or cooperation (MOC) with four countries. Under the MOC signed with the United Arab Emirates (UAE), Abu Dhabi National Oil Company (ADNOC) and Ministry of Economy, Trade and Industry, an agreement was reached to strengthen the comprehensive cooperative structure for strategic business development, technological cooperation, personnel training and other

activities in the upstream, midstream and downstream sectors of the oil and natural gas industry. Therefore, JOGMEC is expected to further develop its relationship with the UAE in the energy field.

Coal Resource Development: Large-scale coal deposits were found in the BOSS-PB area of Indonesia and the Isaac Plains East area of Australia as a result of JV surveys supported by JOGMEC. This led to a decision being taken to invest in the development of these coal resources and contributed to a stable supply of coal. JOGMEC has continued to work on these projects with the aim of handing them over to Japanese companies. JOGMEC conducted a joint geological survey and other activities with the Vietnamese government. We also made steady progress with our coal personnel training, having trained 158 coal engineers from Mozambique, Vietnam, Indonesia, and China. In a training project conducted for Vietnam, JOGMEC delivered concrete results that have contributed to a stable coal supply, including one that has led to a long-term continuous supply of anthracite.

Geothermal Resource Development: JOGMEC adopted a record-high 27 subsidy projects, including nine new ones, for high-risk initial surveys. In particular, JOGMEC made progress toward implementing the first large-scale subsidy project in the Oyasu region. The project underway in the Minamikayabe region is also expected to enter the development phase. In addition, JOGMEC conducted airborne geophysical exploration surveys by helicopter in a total of eight regions, including three new ones (Jyoetsu, the northern part of Tochigi, and Aso) to identify promising new regions. We also started conducting heat flow drilling surveys at three locations in Hokkaido and Tohoku in fiscal 2017 to ascertain the underground temperature structure and geological structure in the airborne geophysical exploration areas. In terms of technological developments, JOGMEC helped to improve exploration precision by establishing visualization techniques for fracture systems and the like using 3D seismic prospecting and reduced exploration costs by applying the new Superconductive Quantum Interference Transient ElectroMagnetics (SQUITEM) system to geothermal heat. In addition, JOGMEC organized the “Geothermal Symposium in Hakodate” jointly with related institutions. The aim of this symposium was to share challenges and prospects related to using geothermal power with the cooperation of local communities. We also held a workshop in New Zealand, which is an advanced country in the field of geothermal energy, to discuss issues that both Japan and New Zealand are facing under the theme of sustainably developing geothermal resources.

Mineral Strategy, Exploration, and Technology Development: JOGMEC provided more than 14 billion yen for the Samancor (South Africa), Palmer (U.S.) and Hishikari (Japan) projects to support Japanese companies in acquiring interests and conducting exploration activities. In addition, the role that the Olaroz project (Argentina), which was granted liability guarantees by JOGMEC, plays in the supply of lithium is becoming increasingly important as the construction work was completed and the project has entered the stable operation phase. As part of the activities conducted prior to the corporate exploration and development stage, we conducted JV surveys for 25 projects in 16 countries (with new projects being

Message from the Chairman & CEO


started in three regions in three countries) with the public sector, foreign companies and other related parties. One of these JVs, the Waterberg JV project (platinum group metals) that JOGMEC conducted in South Africa, was recognized and a Japanese company successfully bid for some interests in a JV that JOGMEC held for future commercialization. With regard to a marine resource survey, we achieved a world first by using a newly developed submersible pump to perform continuous ore-lifting from the seafloor polymetallic sulfide deposits located in a 1,600-meter-deep seabed off Okinawa. This achievement received global attention and was mentioned in a lecture given by the National Academy of Sciences. As projects that contribute to stronger relationships with the governments of resource-producing countries, JOGMEC held seminars on policies and investment opportunities in the mining industry at Mining INDABA 2018, Africa's largest mining exhibition, and invited ministers in charge of mining and other related parties from African countries to provide opportunities for Japanese companies to network with them. We also provided training to 239 trainees from 15 countries to develop mineral resource exploration engineers in resource-producing countries. In the technological development field, we continued to support multiple technical projects in light of needs at the operation sites. In particular, we completed the establishment of an open laboratory framework to open the Metals Technology Center to private companies, universities, and other parties for the collaborative resolution of problems. We also started a project intended to establish technologies for separating and treating impurities in copper ore, which is the most challenging issue facing the nonferrous industry, at mine sites.

Stockpil ing of Resources: With regard to the operation of national petroleum and LP gas stockpiling bases, JOGMEC completed a series of earthquake and tsunami countermeasures at 15 bases based on the local disaster management plan created in the wake of the Great East Japan Earthquake. In addition, we accepted bids for the consignment of base operations in light of the marketing test conducted by the national government to improve the cost efficiency of the operations and ensure safety. We also achieved the national LP gas stockpiling target for the volume of imports required for about 50 days, which corresponds to 1.4 million tons, and established a national LP gas stockpiling framework at five bases throughout Japan. For the international expansion of stockpiling, we have continued conducting joint petroleum stockpiling programs with the United Arab Emirates and Saudi Arabia in order to strengthen our relationships with these leading suppliers of crude oil to Japan. We have also continued cooperating with and making approaches to ASEAN countries with the aim of establishing stockpiling systems, including training programs. For the stockpiling of rare metals, we purchased some rare metals when the opportunity arose based on information collected on supply and demand trends, supply risks, and stockpiling needs while taking into consideration the market conditions. We also sold some rare metals to change the composition of the materials.

Mine Pollution Control: With regard to mine pollution control activities conducted by local governments, JOGMEC gave gu idance in the fo rm of bas ic

countermeasure policies in two surveys conducted at two mines and supported four construction projects by giving advice at the sites of mine pollution control construction work at eight mines. In addition, at the Matsuo New Neutralization Plant in Iwate Prefecture, JOGMEC conducted large-scale disaster training based on a scenario involving a large earthquake, revised the Disaster and Accident Response Manual, and extended the zero accident period to 36 years. For the development of technologies for the passive treatment of mine drainage, we have continued conducting the demonstration test that we started last fiscal year and steadily accumulated some achievements. For example, the practical application study that we jointly conducted with Japanese companies received the Japan Mining Industry Award. In our cooperation with resource countries, we have helped Peru resolve some of the issues it faces and improve their technological capabilities by, for example, continuing to dispatch experts to the Ministry of Energy and Mines in Peru and conducting OJT for government personnel from last fiscal year. We also strengthened our relationships with Mozambique, Papua New Guinea, Indonesia, the Philippines, and Serbia by providing information on environmental measures in the mining industry.

A stable supply of resources and energy forms the basis for industry and people's lives throughout Japan. I am keenly aware that JOGMEC's mission has become much more important given the increasingly diversified and complicated situations that are arising around the world. With its fourth mid-term plan starting in fiscal 2018, JOGMEC sees its responsibilities in a fresh light and will continue its efforts to ensure a stable supply of resources and energy. Your continued understanding and support will be greatly appreciated.

JOGMEC's Activities


Oil and Gas Upstream Investment and Research & Development

●Multi-faceted approaches to oil and gas producing countries　Conducting joint operations with oil and gas producing countries and training overseas for technical experts●Provision of financial assistance　Providing equity capital and liability guarantees for exploration and development of oil and gas by Japanese companies●Geological surveys　Conducting geological surveys as a basis for exploration and production projects; also conducting marine resource surveys●Collecting, analyzing, and providing information　Collecting, analyzing, and providing information related to oil and gas●Technological developments　Developing of technologies related to exploration, development, production, environment, methane hydrate, etc.●Dissemination of achievements and reinforcement of training of engineers　Demonstrating the results of JOGMEC's activities at international exhibitions and implementing collaborative projects with universities

Coal Resource Development

●Multi-faceted approach to coal-producing countries　Conducting joint operations, information exchanges and training programs with coal-producing countries●Provision of financial assistance　Providing equity capital and liability guarantees to coal exploration and development by Japanese companies●Geological surveys　Conducting geological surveys as a basis for exploration and development projects●Collecting, analyzing, and providing information　Collecting, analyzing, and providing information related to coal resources●Technology transfer　Transferring coal mining technologies of production and safety and so forth●Technological development and support　Developing production technologies and improving low grade coal utilization

Geothermal Resource Development

●Promotion and support for geological surveys　Providing subsidies for geothermal resource development surveys by Japanese companies, conducting geological surveys, etc.●Provision of financial assistance to Japanese companies　Providing equity capital and liability guarantees for exploration and development of geothermal　resource by Japanese companies●Collecting and providing information　Collecting and providing information related to geothermal resources●Technological developments　Developing of technologies related to the exploration, drilling, evaluation and management of geothermal reservoirs

Metals Strategy, Exploration, and Technology Development

●Multi-faceted approach to resource-producing countries　 Cooperating on projects and exchanging information with resource-producing countries●Provision of financial support　Providing equity capital, loans and liability guarantees for mineral exploration and development by Japanese companies●Geological surveys　Conducting geological surveys as a basis for exploration and production projects; also conducting deep-sea mineral resource surveys●Collecting, analyzing, and providing information　Collecting, analyzing and providing information related to metal mining●Developing human resources　Developing human resources in metal resource development●Technological development　Developing exploration, mining, metallurgy and recycling technologies

Stockpiling of Resources ●Safe and efficient operation of national petroleum stockpiling　Overall management of national petroleum stockpiles and stockpiling facilities under integrated management, providing support to private-sector stockpiling, and engaging in international cooperation●Steady development of LP gas stockpiling　Overall management of national LP gas stockpiles including stockpiling facilities under integrated management, and business related to technologies of LP gas stockpiles●Stockpiling and trend surveys of rare metals　Flexible purchasing, safe storage, and timely sales and releasing of stockpiled materials

Mine Pollution Control ● Providing technical support to entities implementing mine pollution control projects, conducting technology development, and providing information and extending financial support to private companies

●Sharing technologies, know-how, and information related to mine pollution control●Technical support for governments of resource-rich countries


Oil and Gas Upstream Investment and Research & Development

●Contributed to the diversification of supply sources and enhancement of energy security as a result of commencing production for multiple projects supported by JOGMEC, including an LNG project in Australia and an onshore oil sand project in Canada.

●Started conducting a joint exploration project in five blocks located in the Krasnoyarsk region of Russia with a local Russian private company based on an agreement reached in December 2016. We also obtained preferential rights for Japanese companies through the completion of geological and geophysical surveys conducted in Kenya and Uzbekistan.

●Conducted the second methane hydrate offshore production test in an area stretching from off the coast of the Atsumi Peninsula to off the coast of the Shima Peninsula (Daini Atsumi Knoll) and confirmed the continuous production of gas there.

●Established and renewed five cooperation frameworks, including an MOU, for purposes such as implementing joint projects and strengthening relationships. When Japanese Minister of Economy, Trade and Industry Hiroshige Seko visited Abu Dhabi, JOGMEC, Abu Dhabi National Oil Company (ADNOC) and Ministry of Economy, Trade and Industry signed an MOC mainly intended to strengthen the comprehensive cooperative structure.

●Provided training programs for a total of 133 geoscientists and engineers from 23 oil and gas producing countries. JOGMEC has received high evaluations for having the addition of new courses based on the needs of each country etc., and promoted strengthening human networks.

●Provided technical support for a shale oil project in North America, developed a technology for reducing crude oil sludge, and developed a reservoir monitoring technology for Enhanced Oil Recovery in response to requests from Japanese companies and oil and gas producing countries.


●Conducted JV surveys that revealed the presence of sufficient coal reserves for commercialization and entered the development phase in the BOSS-PB area in Indonesia and the Isaac Plains East area in Australia.

●Followed up on coal development feasibility studies conducted overseas in Australia, Colombia, and Indonesia. In the Minerva-South area of Australia, production of one million tons/year started in July 2017.

●Adopted a brown coal co-production reforming project and conducted joint studies to provide technical support for finding solutions to issues related to production technologies and other matters at the operation sites and feasibility studies on coal mine development and other projects being considered.

●Established a cooperation framework with the State Government of New South Wales in Australia with the aim of building a comprehensive and strategic partnership and promoting JV surveys for coal development projects in the area.

●Signed a cooperation framework (MOU) for the conducting of joint surveys with the Mozambican government to identify potential new coal regions and assess the extent of coal deposits there. We gained exclusive negotiating rights in the Tete area, which is just one frontier region that has room for the new large-scale development of high-quality coal.


●In subsidy programs, JOGMEC adopted total of 27 projects, including 9 new projects, helping new geothermal energy development companies enter the field.

●Started conducting heat flow drilling surveys in geothermal resource potential surveys at three locations in Hokkaido and Tohoku to ascertain the underground temperature structure and geological structure in the airborne geophysical exploration areas.

●Contributed to improved exploration precision by establishing visualization techniques for identifying fractures in geological layers and the like by using 3D seismic prospecting. We also reduced exploration costs by applying the Superconductive Quantum Interference Transient ElectroMagnetics (SQUITEM) system.

●Organized the “Geothermal Symposium in Hakodate” and additional “Geothermal Power and Community Development” classes for elementary, junior high and high schools. We also hosted family tours of four geothermal power plants located nationwide. These activities are related to the “Geothermal Power Day” events held on October 8th every year.

●Contributed to human resource development by providing Training Courses for Comprehensive Geothermal Development, Drilling Engineers, and Drilling Supervisors.

Metal Strategy, Exploration and Technology Development

●Some of our interests in the Waterberg JV project (South Africa) and the market rights for the entire production were transferred to a Japanese company through a bidding process and contributed significantly to a diversification of the supply sources for platinum group metals to Japan.

●Conducted excavating and ore-lifting pilot tests and achieved a world first by performing continuous ore-lifting from the seafloor polymetallic sulfide deposits located in a 1,600-meter-deep seabed together with seawater.

●Provided more than 14 billion yen to support projects such as the Samancor project targeting chromium (South Africa) and the Palmer Property project targeting zinc (Alaska, U.S.).

●Organized side events at Mining INDABA 2018 and invited ministers in charge of mining and other related parties from five African countries to give lectures on their mining policies and investment environments with the aim of encouraging Japanese companies to expand into Africa. We also had a meeting with ministerial-level officers from seven countries to strengthen our relationships with these resource-producing countries.

Stockpiling ●Completed the implementation of a series of earthquake and tsunami countermeasures based on the local disaster management plan created in the wake of the Great East Japan Earthquake at 15 national petroleum and LP gas stockpiling bases.

●Achieved the national LP gas stockpiling target of about 1.4 million tons and established a national LP gas stockpiling framework at five bases throughout Japan.

●Accepted bids for the consignment of operations at national petroleum stockpiling bases in light of the marketing test conducted by the national government to improve the cost efficiency of the operations and ensure safety.

●Flexibly purchased rare metals in exchange for existing stockpiled ones as long as the following conditions were met: they are important to Japanese industry; demand for them is expected to remain strong in the future; and there is a supply risk.

Mine Pollution Control

●JOGMEC consistently conducted mine pollution control projects in response to requests from local governments and other such organizations. At the Matsuo New Neutralization Plant, we made efforts to maintain and improve our ability to handle emergencies through such steps as major disaster training, and extended the period of having no accidents to 36 years.

●Improved our passive treatment method and continued the pilot-scale test at a scale of 1:100 for treating mine drainage, which involves the use of sulfate reducing bacteria, to reduce costs related to mine drainage treatment. We have accumulated insights into its practical application by ascertaining the treatment performance and clarifying engineering issues and confirmed that iron removal can be reliably conducted over the long term.

●Supported resource-producing countries through the offering of policy advice for mine pollution control, such as the dispatching of experts to Peru, as well as technological cooperation and personnel training.

Highlights of the Fiscal Year ended 31 March 2018 (April 2017 to March 2018)

JOGMECの業務と活動


CHAPTER

1

Natural gas liquefaction trains and LNG storage tanks at the Tangguh LNG Project, in which Japanese partners own participating interests Source: BP

In order to promote development of oil and gas resources by Japanese companies, JOGMEC supports the Japanese government to strengthen the relationships with oil and gas producing countries and Japanese companies to conduct oil and gas exploration and development by making the most of our own functions.

Oil and Gas UpstreamInvestment and Research & Development


Business OverviewOil and Gas

Upstream Investment and Research & Development

Coal R

esource D

evelopment

Geotherm

al Resource Developm

entStockpiling


Financial Review

Metals Strategy,

Exploration, and Technology Developm

ent

Building and strengthening the relationships with oil and gas producing countries

　The mission of JOGMEC is to secure stable and consistent energy supplies for Japan. To this end, JOGMEC utilizes its technical expertise as a government agency to pursue joint technical studies and technical development projects, to provide practical training programs in exploration, resource development and production systems, and to promote strong partnerships with oil and gas producing countries through ongoing bilateral and multilateral relationships. JOGMEC also plays an active role in international conferences and exhibitions with the aim of highlighting the presence of Japanese oil and gas companies and JOGMEC itself.

Providing financial assistance for exploration and development activities by Japanese companies

It is significant for energy security in Japan to increase the share of the offtake amount of oil and natural gas that is under control of Japanese companies. Since oil and gas exploration and development activities require large-scale investments over the long term and involve extremely high risks, it is necessary to diversify investments in various projects, in geographical location, with foreign business partners and of progress status of the project. It is true that investments in such high risk operations could impose a significant burden on companies, thus, JOGMEC provides Japanese companies with financial assistance through providing equity capital and/or liability guarantees.

Collecting, analyzing, and providing information

　As a specialist organization that supplies data on upstream oil and gas operations, JOGMEC surveys, analyzes, and shares information on matters such as trends in the global oil and natural gas markets, national trends that are expected to have a significant effect on both domestic and overseas demand, supply and price for energy, and the courses of action being taken by international oil companies. JOGMEC has also been expanding its human network of researchers and research institutions in Japan and overseas, so as to supply timely information to a wide range of parties, including Japanese companies, the government, and other relevant institutions.

Contributions in the field of technology

　JOGMEC provides various technical supports for the activities of oil and gas exploration and production companies in Japan. We conduct a broad range of activities, including the following: overseas geological and geophysical surveys for exploration and development projects; technology development based on the needs of Japanese companies and the governments of oil and gas producing countries to strengthen their relationships; collection of technical information; provision of training for both domestic and overseas technical staff; analysis of data on domestic oil and natural gas resources; and joint research with oil and gas producing countries.

■Training workshop for engineers in oil-producing countries

Preparatory stage Exploration stage Development stage Production stage

Areastrategy

Preliminarystudies Negotiation

Geological surveyGeophysical survey

Prospecting・Evaluation

well drilling

Feasibilitystudy

Production well drilling

Facilityconstruction

Productionoperation

Negotiation for extending petroleum

rights

Technical Assistance

Intelligence Assistance

Financial Assistance

支　援詳　細

Subsidies for AcquiringPetroleum RightsEquity Capital

for Exploration

Liability Guarantee

Equity Capital for natural gas liquefaction

and Asset Acquisition

Overseas Geological Surveys

Technical Development /Technical Support

LNG Vessel

Collection, Analysis andOffering of Information

Geophysical survey

Assisting Exploration, Development and Production of Oil and Natural Gas

JOGMEC’s Oil and Gas Development Support

JOGMECの業務と活動Oil and Gas Upstream Investment and Research & Development


Overseas geological and geophysical surveysJOGMEC conducts Overseas Geological and Geophysical survey for

the early stage of oil and gas exploration to secure future opportunities for Japanese companies.

[Russia (East Siberia)]In September 2017, JOGMEC started conducting a joint exploration

project in five blocks located in the Krasnoyarsk region of Russia based on an agreement reached in December 2016 and an agreement with Irkutsk Oil Company, a local Russian private company.

Following a project undertaken in East Siberia in 2007, this is the second joint project that JOGMEC has conducted with this company.

[Kenya]JOGMEC began a joint geological and geophysical survey in onshore

Kenya in 2012. In 2017, having completed the seismic survey and shallow well drilling, JOGMEC obtained preferential rights for Japanese companies to enter the survey area. JOGMEC has been evaluating the exploration potential based on the acquired data and held a technical briefing for Japanese companies in March 2018. We will continue evaluating the potential of the area with the aim of handing the project over to Japanese companies.

[Uzbekistan]JOGMEC completed the field surveys and integrated data

interpretation for 2 blocks in Uzbekistan that had been initiated in December 2015. As a result, JOGMEC obtained preferential rights for Japanese companies at the end of August 2017.

[Other projects]JOGMEC has continued to hold consultations with Japanese

companies on finding new projects and to conduct negotiations for new geological and geophysical survey projects. We aim to develop projects by identifying areas of potential in Southeast Asia, Europe, Africa, Latin America and other regions.

Financial assistance for exploration and development activities of Japanese companies

In fiscal 2017, production started in Australia's Wheatstone LNG project, which JOGMEC has supported by providing equity capital for asset acquisition and liability guarantees. This project will have the capacity to produce 8.9 million tons of LNG per annum, approximately 80% of which is to be supplied to Japan.

Production has also commenced for other projects that JOGMEC has supported by providing liability guarantees, including an oil sand development project in Canada. In addition, we decided to assist a Japanese company in acquiring the assets of the West Qurna 1 Oil Field in Iraq through equity financing. We have also provided equity capital to the project for the further development of the Kashagan Oil Field in Kazakhstan. This is the first project to be conducted since the 2016 enactment of the revised JOGMEC Act, which allows us to

provide additional equity capital to projects that have shifted from the exploration stage to the development stage.

As a result, the amount of our total equity capital was 588.8 billion yen with an outstanding liability guarantee balance of 823.6 billion yen as of the end of March 2018. In fiscal 2017, JOGMEC earned the following self-generated income: dividend income of 3.1 billion yen from five companies and guarantee fees of 7 billion yen from 11 companies. In addition, we sold our shares in KG Wiriagar Petroleum Ltd., a company involved in Indonesia's Tangguh LNG project that steadily led to production through our support.

■The total equity capital and the number of companies at the end of each fiscal year

511 638 840 942 1,213

1,594 2,454

3,600 3,985

5,118 5,464

10 14

20 23

30

37 40

45

50 53 53

0

10

20

30

40

50

60

0

1,000

2,000

3,000

4,000

5,000

6,000

Fy06 Fy07 Fy08 Fy09 Fy10 Fy11 Fy12 Fy13 Fy14 Fy15 Fy16

55

Fy17hu

ndre

d m

illio

n ye

n

the

num

ber o

f com

pani

es

5,888

■The outstanding balance of liability guarantees and the number of companies at the end of each fiscal year

3,504 2,650

2,3702,4452,4402,509

5,254

6,879

8,2348,298

1415

hund

red

mill

ion

yen

the

num

ber o

f com

pani

es

9 9 9 10

13 13 13 13

0

20

40

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Fy06 Fy07 Fy08 Fy09 Fy10 Fy11 Fy12 Fy13 Fy15

8,185

11

Fy16

8,236

Fy17Fy14

11

Oil and gas exploration in offshore Japan

[Exploration activities]As part of the National Program for Oil and Gas Prospecting, which is

aimed at promoting the development of oil and natural gas resources in Japan, JOGMEC has conducted a geophysical exploration project to investigate whether such potential is present in the seas around Japan. For this project, we conducted surveys using the state-owned 3D seismic vessel "Shigen" under contract with the Japanese government. The collected data is processed using large-scale computers at our Technology & Research Center and then interpreted and assessed from a petroleum geology perspective. In fiscal 2017, JOGMEC acquired 3D seismic data for a total area of about 6,185 km2 in the following five offshore areas: offshore northern Nishitsugaru; offshore northern Joban; offshore northern Sotobo; offshore Tottori and Hyogo; and offshore northwest Fukue. We then processed, interpreted, and assessed this data and found multiple geological structures that may hold oil and/or natural gas. The Japanese government disclosed the survey results (in the form of survey reports and data) mainly to Japanese oil and gas development companies.

In addition, JOGMEC has coordinated project proposals from Japanese companies for a future exploratory drilling program by the Japanese Government (fiscal 2017 to 2019) and provided support to the Japanese government for the site selection process. After the site selection, JOGMEC provided advice to the government and the

Fiscal 2017 Achievements

■2D seismic survey in onshore Kenya

Business Overview


Oil and Gas Upstream Investment

and Research & Development C

oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM

ine Pollution ControlFinancial R

eviewM

etals Strategy, Exploration, and

Technology Development

operator in its capacity as a project manager for exploratory drilling operations from the perspective of a specialist agency on the drilling preparation work. The selected exploratory drilling site, the “Hidaka Trough,” was delineated based on the 3D seismic data acquired by “Shigen.”

[Methane hydrate survey and technological development]Methane hydrate is thought to be a potential future energy resource.

However, we are yet to find a safe and economically viable technique and secure stable supplies over the long term for extracting methane gas from methane hydrate deposits in unconsolidated formations located beneath deep-water seabeds. Japan currently leads the world in research and development efforts to commercialize this process. The research program in our nation is directed by the objectives of "Japan's Methane Hydrate R&D Program" released in 2001 by the Ministry of Economy, Trade and Industry. JOGMEC has made a number of important achievements in this regard. For example, we achieved a world first by using a depressurization method to produce gas onshore in Phase 1 of the Program (fiscal 2001–2008) and succeeded in producing gas in the world's first offshore production test in Phase 2 (fiscal 2009–2015). Now in Phase 3 (fiscal 2016 onwards), JOGMEC is working as a member of the Research Consortium for Methane Hydrate Resources in Japan (MH21), an industry-academia-government collaboration research group.

In fiscal 2017, JOGMEC conducted a second offshore production test, producing a total of about 263,000 m3 natural gas from two production wells in about 36 days. We also obtained various types of monitoring data and other relevant information and identified other technical issues preventing commercialization.

In accordance with the memorandum of understanding (MOU) signed in fiscal 2014 with the US-based National Energy Technology Laboratory (NETL) regarding joint operations aimed at conducting long-term onshore production trials, JOGMEC has signed a confidentiality agreement on matters such as the operation unit areas at candidate sites for the onshore production trials, begun selecting candidate sites, and started drafting a trial implementation plan.

JOGMEC has also continued mapping out the technical and other requirements involved in the commercialization of methane hydrate, conducting research on the distribution of methane hydrate concentrated zones in the seas around Japan, monitoring environmental changes associated with gas production, and other such activities.

Multi-faceted approaches to oil and gas producing countries

[Implementation of joint projects and signing of basic agreements]Establishment of joint projects and cooperative frameworks with

oil and gas producing countries is an effective measure for building relationships with those countries, supporting the government's diplomatic efforts and raising the profile of Japan's technological strength.

In fiscal 2017, JOGMEC signed and renewed five agreements, including an MOU, with four countries. When Japanese Prime Minister Shinzo Abe visited Russia in April and September 2017, JOGMEC signed an MOU for a joint exploration project with Russia's Irkutsk Oil Company. When Japanese Minister of Economy, Trade and Industry Hiroshige Seko visited Abu Dhabi in October 2017, JOGMEC, Abu

Dhabi National Oil Company (ADNOC) and Ministry of Economy, Trade and Industry signed a memorandum of cooperation (MOC) mainly intended to strengthen relationships in fields such as strategic business development, technological cooperation, and personnel training in the upstream, midstream and downstream sectors of the oil and natural gas industry.

[Provision and collection of information at international exhibitions, conferences and meetings]

In fiscal 2017, JOGMEC collected information through direct dialogue, actively promoted Japan's technical capabilities, and maintained and strengthened our close relationships with oil and gas producing countries by participating as an exhibitor in events in Japan such as Gastech 2017 and international exhibitions in Mexico, Turkey, and Abu Dhabi.

In addition, during the visit to Russia by Japanese Prime Minister Abe, the visit to the UAE by Japanese Minister of Economy, Trade and Industry Seko, and other such opportunities, JOGMEC's chairman & CEO met with the top leaders and ministers of resource-producing countries and the managers of oil development companies to strengthen our relationship with them.

[JOGMEC-TRC Overseas Training Program]The JOGMEC-TRC Overseas Training Program comprises both regular

and custom courses. The regular courses are aimed, from a long-term perspective, at cultivating trust in Japan's petroleum development and an affinity for Japan in each country as well as promoting Japanese companies' technical expertise in petroleum development by teaching attendees about technologies that can be used in oil and gas producing countries. The custom courses are aimed at achieving alignment with trends in Japan's resource diplomacy policies and meeting the extensive needs of the invited countries. Both of these training courses seek to contribute to the formation of overseas projects to be carried out by JOGMEC and Japanese companies in the future. In fiscal 2017, JOGMEC conducted the Exploration Geology Course (25 attendees from 21 countries) and the Geophysics Course (23 attendees from 20 countries) as regular courses. JOGMEC also conducted custom courses for countries that are important in terms of Japanese resource diplomacy. More specifically, we conducted a Japanese Management “KAIZEN” course (14 attendees) for Mexico, a local workshop (31 attendees) and an LNG course (14 attendees) for Mozambique, and a Japanese Management “KAIZEN” course (13 attendees) and an Instrumentation and Control for Oil and Gas Plants course (13 attendees) for the UAE. JOGMEC has provided training for 3,587 participants from 48 countries since we launched the program in 1989 by the end of fiscal 2017.

[Technical Solutions Project/Technical Development] JOGMEC launched the Technical Solutions Project in fiscal 2013.

Under this project, JOGMEC, Japanese companies and other related parties work as a team to propose technical solutions designed to address technical challenges faced by oil and gas producing countries by applying cutting-edge Japanese technologies to oil and natural gas development. The aim of this project is to strengthen our relationship with oil and gas producing countries, encourage Japanese companies in different industries and fields to enter the oil development field, and secure the interests of Japanese oil development companies.

[Technological development in the Technical Solutions Project]To further advance its achievements in using Japanese state-

of-the-art technologies to help oil and gas producing countries overcome technical challenges in the field, JOGMEC promoted a stronger relationship with these countries by conducting two field demonstrations for the Technical Solutions Project in fiscal 2017 (Phase 3 preparations). We also conducted the first overseas field demonstration of the Technical Solutions Project (Phase 3) using a small-scale testing device at an onshore oil field in the Middle East. We also continued with the preparations that we had begun in the last fiscal year for field demonstrations of the Technical Solutions Project (Phase 2).

■3D seismic vessel Shigen

JOGMECの業務と活動Oil and Gas Upstream Investment and Research & Development


[Needs-Seeds Matching]JOGMEC held 110 meetings with Japanese companies on about

70 specific issues to gather Japanese cutting-edge technologies for future technological development. We have also dispatched technical missions to government agencies, state-owned oil companies, oil development companies and other related parties in 10 countries to provide briefings on these Japanese cutting-edge technologies and investigate their technical needs.

JOGMEC, Ministry of Economy, Trade and Industry, and the Agency for Natural Resources and Energy jointly organized JOGMEC Techno Forum 2017 to provide an opportunity for oil and gas producing countries to match their needs with suitable Japanese cutting-edge technologies. The event attracted a total of 1,800 attendees from Japan and overseas. Special guests introduced technologies and strategies that are expected to prove useful in the oil and gas field in the future. These guests included top officials from oil and gas producing countries, including a board member of the ADNOC Technology Center established by Abu Dhabi National Oil Company (UAE), the general manager of Migas (Indonesia), a board member of PEP (Mexico), a board member of Petronas Research (Malaysia), a senior manager of Total, the vice president of GE Oil & Gas, and top executives from Japanese companies.

In particular, JOGMEC held individual meetings with ADNOC and Total to build and further strengthen the framework for technological cooperation initiatives. As exemplified by the proactive efforts of Japanese companies to hold meetings, participants and companies make effective use of this forum as a platform for creating business opportunities. This in turn helped to strengthen the cooperative relationships between Japan and oil and gas producing countries.

[Technical Solutions Training Program]At events such as training classes, workshops and facility tours, JOGMEC

introduces cutting-edge technologies of interest to oil and gas producing countries with the aim of collecting and analyzing needs and seeds and providing technology transfer training to oil and gas producing countries. In fiscal 2017, we consistently followed up on multiple technological issues that were raised at a local workshop held in Abu Dhabi in the last fiscal year and organized a workshop for Oman based on the MOU signed in 2014.

Technology developmentIn addition to technological developments that contribute to the

acquisition and renewal of interests held by Japanese companies and an increase in the resources, JOGMEC is working on studies that form the basis for these developments from the mid- to long-term perspective. With Enhanced Oil Recovery (CO2EOR), unconventional oil and gas field development technologies, offshore oil and gas development technologies for arctic and deep-water areas, and environmental technologies as its top priority technology fields, JOGMEC is providing support to meet the needs of governments from oil and gas producing countries and Japanese companies.

[Enhanced Oil Recovery]CO₂ Enhanced Oil Recovery (CO₂EOR), a technology for increasing

crude oil recovery by CO₂ injection into oil reservoirs, is one of the

JOGMEC's priority technologies highly acclaimed by oil-producing countries, with a wide range of achievements ranging from basic studies to field applications.

JOGMEC has been involved in a joint research project on CO2EOR with Abu Dhabi National Oil Company (ADNOC) since 2003. In April 2015, an agreement was reached to continue a joint research project aimed at conducting a local demonstration test and applying CO2EOR in relation to the acquisition of interests in large onshore oil fields. JOGMEC played a central role by combining the expertise of Japanese companies to conduct the front-end engineering design (FEED) for CO₂ capture and injection facilities, plants, and other equipment that ADNOC requested, and it also organized local events, such as a workshop requested by ADNOC. In doing so, JOGMEC helped to renew the interests of Japanese companies in the Lower Zakum Field of the Abu Dhabi sea area in fiscal 2017.

In a new project, JOGMEC has begun investigating potential technologies for validating a new recovery method (SA-SAGD) to be used in the Canadian oil sand project, which involves the participation of Japanese companies.

JOGMEC is also developing a reservoir monitoring technology, which is a key technological component for the stable and efficient operation of CO2EOR.

The above-mentioned technologies include cutting-edge seismic imaging technologies (such as Full Waveform Inversion) and a permanent seismic source system.

* Technology for increasing crude oil production and recovery by CO₂ injection into oil reservoirs.

[Unconventional Oil and Gas Field Development Technology]In North America, where there is extensive shale gas resources,

the shale development is impeded by a combination of low gas prices in North American market and difficulties with production forecasting. JOGMEC is working on advanced technology such as core analysis, sweet spot evaluation and hydrofracturing optimization that will improve productivity and reduce costs in shale gas and oil development. These technologies are applied to four projects which Japanese companies have joined and additional aim is to extend it to other oil producing countries as well. JOGMEC is contributing to the smooth implementation of these projects by providing technical support that meets the requests and needs of the Japanese companies conducting the studies.

As a new fiscal 2017 project, JOGMEC has signed a new joint research project agreement with Japan Petroleum Exploration Co., Ltd. for the development and production of shale oil gas in the North Montney mining area located in British Columbia, Canada. We have also started a joint research project aimed at optimizing well designs by assessing natural cracks using information such as microseismic data on retreatment wells. To develop domestic resources, we have started working with Japan Petroleum Exploration Co., Ltd on a joint research project intended to clarify the oil increase mechanism for tight oil in Japan.

JOGMEC is conducting all of these activities at the request of Japanese companies, and the research results are contributing to the smooth implementation of the projects.

[Offshore Development Technology]In the exploration and development of offshore oil and natural gas,

the development of relatively large reserves in deep-water areas and oil and gas wells that have been found but not developed as well as the overcoming of challenges such as the development of small-scale fields or fields with a high CO2 concentration have become priority issues in recent years. JOGMEC aims to promote the acquisition of field interests and the smooth implementation of projects by developing related technologies and providing the outcomes to Japanese companies. In fiscal 2017, JOGMEC continued investigating the safety and operability of floaters for projects in offshore Southeast Asia and joint research projects conducted with Japanese companies on topics such as a conceptual study during the application of subsea production technologies, including immature element technologies from the previous year. We have also conducted a survey of needs related to technological development in offshore

■Panel discussion on technological innovation at JOGMEC Techno Forum 2017

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewM



Southeast Asia, including shallow areas.

[Environmental technologies]With environmental regulations becoming increasingly stringent

every year, an important index in relation to gaining or maintaining interests is whether the oil development company possesses any environmental technologies. JOGMEC is working with Cosmo Oil Co., Ltd. to jointly develop a crude oil sludge reduction technology with the aim of reducing the amount of crude oil sludge that accumulates at the bottom of crude oil tanks and is then disposed of as industrial waste in ongoing overseas projects. In fiscal 2017, a crude oil sludge separation test that we conducted using a small centrifuge helped to reduce crude oil sludge by more than 50% and successfully recycled the recovered oil into crude oil. This takes us a significant step closer to being able to conduct a full-scale demonstration test. The outcome is expected to make a major contribution to reducing operational costs and the environmental loads incurred by Japanese companies.

[Technical support for resource development efforts of Japanese companies]

JOGMEC is providing technical support for on-site operations as part of a joint study aimed at resolving the technical problems experienced by Japanese companies directly involved in exploration or development projects. In fiscal 2017, we continued work on two projects that we adopted in the last fiscal year. In addition, we adopted a new project and conducted various studies. The purpose of the new project is to conduct a cutting-edge surface geoscience exploration of the Amarume and Fukukawa oil fields operated by Japan Petroleum Exploration Co., Ltd. and to optimize the exploration method. By providing technical support for these projects, JOGMEC is contributing to the development and increased production of domestic resources as well as providing support to Japanese companies in their efforts to reduce their operational costs.

[Other]JOGMEC held technical sessions for 25 Japanese companies,

including 13 oil E&P companies and 12 engineering service companies. In these sessions, JOGMEC clarified the technical difficulties facing these companies and investigated solutions to these problems (needs). The JOGMEC Technology & Research Center (TRC) is also using its resources and laboratory to support the resolution of technical challenges faced by Japanese companies.

Technology transfer and trainingJOGMEC, as part of technology transfer, conducts various activities

to train oil development engineers in Japan and to promote intercommunication among engineers, as well as utilizing its intellectual properties. Some of the achievements we made for fiscal 2017 are as shown below.

・ JOGMEC's training programs for engineers in Japan are designed to provide greater expertise to oil development engineers and others in Japan and to enhance the base for extensive development of oil-related development projects. The program offered Basic Lectures I and II for office personnel and ordinary technicians (92 participants in total). Thirty-two of them, who work at operating sites and offices in Japan, subsequently participated in on-site training in Niigata Prefecture to increase and complement what they had learned in the classroom. The program also offered 11 specialty-specific lectures for technicians at different levels of expertise, with a total of 161 attending. In addition, the program offered 10 well control seminars (advanced level) certified by the International Association of Drilling Contractors (IADC), with a total of 27 participants. WellSharp certificates of completion were issued to those who passed the seminar test. JOGMEC held the DS600 drilling crew course and the drilling engineer course (14 attendees in total) three times using a drilling simulator. We also held the following three seminars with the aim of improving assessment capabilities for well-logging analysis (37 attendees in total): "Volcanic Rock Reservoir Analysis";

"Interpretation and Application of Image Logs"; and "Reservoir Assessment Practice Course."

・ JOGMEC organized JOGMEC-TRC Week 2017 to provide a forum for presenting the achievements made in research and studies conducted by the Oil and Gas Upstream Technology Unit, holding discussions with experts, and creating an engineer network. During this event, we shared technical information and developed an engineer network by providing a summary of our third mid-term targets and planning period, reporting on the activities undertaken by our Technology Unit in fiscal 2016, providing individual forums for the discussion of cost reduction initiatives, geological assessment technologies, EOR technologies, and unconventional development technologies, and conducting poster sessions.

・ In fiscal 2017 JOGMEC earned three million yen in patent fees from intellectual property associated with TRC research outcomes. JOGMEC also filed five new patent applications during this period.

・ We gave lectures on oil development-related technology at Chiba University, Kyoto University and Kyushu University, and contributed to human resource development in the field of domestic resource development. In addition, the JOGMEC seminar entitled "Cutting-Edge Oil and Natural Gas Development Technologies" (14 classes and a field tour) that we held at Waseda University received a favorable reception.

Collecting, analyzing, and providing information[Dissemination of information through briefings and printed publications]

JOGMEC regularly provides information for relevant industries, energy policy agencies, etc., by holding a monthly briefing session, and issuing the journal "Oil and Natural Gas Review" bimonthly. While offering information on a regular basis as described above, we are holding seminars to provide information for many participants. The following list gives selected examples of analytical reports and TV interviews aired during the fiscal 2017.

<Analytical reports>・Overview of recent trends in oil market・Latest trend of natural gas and LNG・Majors breaking away from fierce oil price-cutting competition

<Topics covered in TV broadcasts>・Background to skyrocketing gasoline prices・Gas demand in ChinaIn addition to these regular information releases, we hold seminars and

provide timely information to our many participants.* We post updated briefing materials and reports at JOGMEC's website "Oil and Gas Resource Information http://oilgas-info.jogmec.go.jp/".

[Priority Area Committee]We organized special committees consisting of experts and business

persons who have experience in local business with a focus on the priority areas of oil and natural gas exploration development. Through these committees, we conducted area analysis and contributed to the establishment of networks among area experts. In fiscal 2017, we held meetings for the following committees.

・The Middle East Committee・The Russia and Central Asia Committee

[Holding seminars]With regard to the topics in which Japanese companies are supposed

to be interested, we are holding seminars by inviting globally renowned, knowledgeable experts. Some of the topics we handled in seminars for fiscal 2017 are as shown below.

・ Development of a new relationship between Saudi Arabia and Russia that goes beyond oil

・ Prospects for U.S. policies in the Middle East: Iraq and Iran・ Venezuela and North America: An account of the two largest oil

producing regions in the Americas


CHAPTER

2 JOGMEC's activities include conducting overseas geological surveys, strengthening relationships with coal-producing countries, gathering and providing information, providing technical support in areas such as coal mining, and offering financial assistance with equity capital and liability guarantees. Activities such as these enable JOGMEC to contribute to the stable supply of coal resources to Japan.


Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewM



Conducting and supporting geological surveys

　JOGMEC conducts joint geological surveys with the government organizations of coal-producing countries and overseas companies to promote coal development by Japanese companies abroad. We also contribute to securing a stable supply of coal for Japan by providing technical support that can help resolve technical challenges and improve productivity in the coal operation sites and development projects.

Providing financial assistance

　To secure a stable supply of coal, JOGMEC supplies equity capital during the high-risk exploration phase to provide financial assistance for the exploration activities of Japanese companies.We also provide liability guarantees for debts acquired from financial institutions to help finance these companies since large-scale investment is required in the development phase.

Strengthening relationships with resource-producing countries

　Based on agreements with governments and other such bodies, JOGMEC demonstrates, disseminates and provides information on Japanese coal-related technologies in an effort to strengthen relationships with coal-producing countries. As well as helping to maintain stable coal production, and alleviate the balance of supply and demand, by transferring coal mining and safety technologies to coal-producing countries, particularly in Asia, JOGMEC is also committed to building cooperative relationships with such companies in order to contribute to stable coal supplies.

Collecting and providing information

The global energy situation is constantly changing and evolving. As such, ensuring quick access to accurate information about energy policies and markets is vital to ensuring success in the development of high-volatility resources.

JOGMEC supports Japanese companies which are engaged in coal development by comprehensively gathering, analyzing, and providing information on the coal policies of coal-producing countries and the trends in resource developing countries, as well as the supply and demand for coal.

Preparatory stage & Basic exploration stage Exploration stage Development stage Production stage

Investment environmental

evaluation

Geologicalpotential

evaluation


DrillingDrilling

TunnelingFeasibility

studyUnderground mining

Open pit miningProducing plant

construction Production



Financial AssistanceEquity Capital

Liability Guarantee


Overseas Geological Survey

Joint Venture Exploration

Technical SupportDrillng survey

Airborne geophysical surveys

Geological survey

Assisting Exploration, Development and Production of Coal

■A geological survey in progress (Joint Survey with Mozambique)

JOGMEC’s Coal Resource Development Support



Overseas geological surveys, assistance for surveys and technical support

[Overseas Geological Surveys]In order to encourage coal development by Japanese companies

operating overseas, JOGMEC conducts geological surveys overseas in the form of joint surveys with government agencies in coal-producing countries, overseas companies and other organizations as appropriate.

During fiscal 2017, JOGMEC conducted joint surveys based on MOUs signed with government agencies from coal-producing countries. We also conducted joint venture (JV) surveys for the purpose of conducting surveys based on joint exploration contracts signed with overseas corporations or Japanese companies and transferring to Japanese companies the option rights (rights and interests, marketing rights, or offtake rights) that were obtained.

Through joint surveys with the Vietnamese state-owned company VINACOMIN, JOGMEC conducted a geophysical survey to identify the geological structure of the area as well as a drilling survey and coal quality analysis to ascertain the continuity of coal seams and assess coal quality with the aim of evaluating the potential for coal in the target region of Quang Ninh, Vietnam. Vietnam produces urgently needed high-quality anthracite, a type of coal that is rare and occurs in limited areas, and this joint survey is intended to help reduce the risk of a disruption to its stable supply. We also continued carrying out seven JV survey projects in Australia, Indonesia, and Canada. In the Clifford area (Australia), we confirmed the presence of more than 600 million tons of coal. This region will be a promising alternative supply source if the demand-supply balance for coal becomes tight due to, for example, coal depletion in existing coal-producing regions. As we conducted a drilling survey and a 3D seismic exploration in the Isaac Plains East area (Australia) and confirmed reserves of 11 million tons (mine life: seven years), a decision was taken to invest in its development and the project entered the development phase in January 2018. Commercial production is expected to start in September 2018. JOGMEC aims to hand over the offtake and option rights for the product to Japanese companies after the coal output starts. In the Nikkei JV survey conducted in the Eastern Coal area (Australia), we confirmed the potential for open-cut mining operations and gained earn-in interest options in the project as a result of a drilling survey and a scoping study. In the Dingo West area (Australia), we analyzed and assessed the results of drilling and other surveys and then terminated them. In the BOSS-PB area in Indonesia, which is the second largest supplier of coal to Japan after Australia, we conducted drilling and other surveys in two mining areas. The survey results confirmed the total resources to be 17.3 million

tons (including reserves of 10.4 million tons) and we gained the marketing rights for 2 million tons. For one of these mining areas, a decision was taken to invest in a new development and development work aimed at starting the operation has been scheduled. In the Palisades area (Canada), we conducted drilling and other surveys to update our information on the coal resources there. In the Panorama North area (Canada), we confirmed the presence of high-quality anthracite seams through drilling and other surveys and gained earn-in interest options in them.

[Assistance with surveys]To confirm the potential for development by checking the size of

overseas coal reserves and clarifying the geological structure there, JOGMEC followed up on three feasibility studies for overseas coal development projects in fiscal 2017. In one of these projects, production of one million tons a year started in July 2017 in the Minerva-South area of Australia, which is Japan's largest coal supplier, in a project supported by JOGMEC. In addition, JOGMEC is conducting a feasibility survey in the Drummond Coal Mine Project (Colombia) and steadily making development preparations by adopting underground mechanized coal mining for the first time in Indonesia in the GDM coal mine area. These projects are likely to enter the production phase within a few years, and they are expected to contribute to a stable coal supply and a diversification in the supply sources.

[Technical support]To contribute to a stable coal supply, JOGMEC has provided technical

support since fiscal 2015 to resolve production technology issues at the operational sites of Japanese companies and conduct feasibility studies for coal mine development projects conducted before the involvement of Japanese companies. In fiscal 2017, we adopted a brown coal co-production reforming project and provided technical support through joint studies conducted with Japanese companies.


A system for investment in coal exploration and assistance in the form of liability guarantees for development was set up by JOGMEC in fiscal 2012. This support system allows JOGMEC to provide companies with support from the initial exploration phase through to the development and production phases.

Coal prices peaked in 2011 and then declined steadily until they rose sharply in the middle of 2016. Since then coal prices have been fluctuating violently.

With private companies continuing to show a reluctance to invest in new exploration projects under these circumstances, JOGMEC has continued to explain and exchange opinions about the system with coal development companies, steel companies, trading firms, power generation companies and the like. We have also conducted data reviews, local surveys, risk analysis and other such activities for individual projects.

Furthermore, we periodically exchanged opinions with financial institutions, resource companies and other related parties in Australia, which is the main coal supplier to Japan.

Strengthening relationships with coal-producing countries

As an institution responsible for implementing national energy policies, JOGMEC promotes stronger relationships with key institutions in coal-producing countries based on Japan's national strategies for securing resources. In fiscal 2017, we moved forward with nine cooperative frameworks with various countries and regions, including Vietnam, Mozambique, Queensland (Australia), Indonesia, Colombia, and the Primorsky region (Russia). In addition, we signed a new MOU on a


■Outline of JOGMEC’s Geological Survey

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewM



cooperative framework with the State Government of New South Wales in Australia. This MOU is intended to build a comprehensive and strategic partnership for coal development projects in the area and promote the establishment of JV surveys and other activities there. In June 2017, we held a seminar on Elga coal in Tokyo based on a memorandum of cooperation (MOC) signed by Japan's Ministry of Economy, Trade and Industry and Russia's Ministry of Energy, thereby contributing to improved resource diplomacy between Japan and Russia.

JOGMEC invited engineers from Colombia's Ministry of Mines and Energy to exchange opinions on an underground mining field based on a cooperative framework established with the ministry in November 2017. In March 2018, we hosted a joint seminar with the ministry in Bogota, Colombia, on a coal mine closing plan, thereby helping to establish a closer relationship with them.

[Harnessing technical capabilities to strengthen relationships with coal-producing countries]

JOGMEC has continued to carry out coal mining technology transfer projects to encourage coal mining engineers and safety administrators in Asian coal-producing countries (China, Vietnam and Indonesia) to improve production volumes and efficiency, and to reduce accidents through safety measures designed to harness Japanese companies' accumulated expertise in underground coal mining technology. In fiscal 2017, we held five training courses in Japan for Vietnamese trainees, three for Chinese trainees, and two for Indonesian trainees. In addition, we provided overseas training on technical issues and constructive thinking to a total of 8,422 attendees. Specifically, we provided technical guidance and held training sessions at mining technology schools and other institutions in Vietnam, technical guidance and training sessions at universities and mining bureaus in Indonesia, and training seminars in China.

Meanwhile in Mozambique, in January 2018 JOGMEC signed off on an annual program based on a memorandum on personnel training and development in the coal industry with the Ministry of Minerals, Resources and Energy (MIREME), and provided joint training courses in conjunction with MIREME. JOGMEC also provided a training course in Japan for twelve engineers and technicians from Mozambique, and sent Japanese instructors to Mozambique to train 26 local engineers and technicians thus boosting skill levels while at the same time contributing to stronger bilateral relations.


As a center of public knowledge and information on coal, JOGMEC provides information about exploration, development and technological developments of particular interest to Japanese companies as well as information that the Japanese government requires to examine and plan its resource diplomacy strategies. In fiscal 2017, JOGMEC conducted the following surveys to find new coal sources, reflecting companies' needs.

In March 2018, JOGMEC held a preliminary results debriefing session to present all of the collected information and survey findings. We also monitored the progress made in coal exploration and development projects and the coal investment environment in coal-producing countries by leveraging the information gathering abilities of our overseas offices. We provide related information via e-mail newsletters and our website. JOGMEC also hosted seminars featuring leading experts and industry figures as a means of providing insights into coal markets and promoting investment in key coal-producing countries such as Australia and Russia.

Coal Resource Information Website: http://coal.jogmec.go.jp/

(1) Survey of trends related to environmental issues, including global warming, and their effects on coal projects(2) Survey of trends related to coal-fired plants in India and fuel coal imports(3) Survey of the progress made in long-term electric power planning and trends related to coal exports in Indonesia(4) Survey of the export potential, competitiveness, and other aspects related to coal in Colombia(5) Survey to determine the effects that policies for eliminating excessive production capabilities in China's coal and steel industry have on the demand-supply balance for coking coal and so on(6) Survey of the coal investment environment in Russian maritime regions(7) Survey of the coal investment environment in Victoria, Australia(8) Global coal survey

■Reporting meeting

■Offering placements for trainees from Mozambique and sending over experts


CHAPTER

3 Geothermal Resource Development JOGMEC conducts geological surveys, grants subsidies, provides financial assistance, develops technologies, and gathers, analyzes and provides information on geothermal resource development.

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewM



Support for geological surveys

The Great East Japan Earthquake brought to light major challenges with respect to the stability of Japan's energy supplies and the fragility of the energy supply-demand structure, prompting a shift in policy toward greater reliance on renewable energy. Geothermal energy in particular is regarded as a baseload power source due to its abundance in Japan, which has the third largest reserves in the world, and its capability to ensure stable generation throughout the year. JOGMEC provides support in the form of subsidies for geological surveys carried out by companies and other organizations for the purpose of generating power. The aim is to ensure that Japan's geothermal resources are used effectively and to encourage further efforts to develop geothermal resources.

In terms of surveys to assess the potential of geothermal resources, JOGMEC carries out wide-area studies, including airborne geophysical surveys, and publishes and provides the resulting data in order to help companies and other organizations carrying out geothermal resource development surveys.


The exploration stage of geothermal resource development projects requires large-scale investments in well drilling and other processes. Even if promising reserves of geothermal resources are found in the exploration phase, such projects still involve high risks since it takes a long time to reach the operational phase after the construction of the power plant. To reduce the risks that Japanese companies face, JOGMEC utilizes its ability to assess projects correctly based on its knowledge of technologies and insights related to geothermal resource developments to determine whether to provide equity capital for projects that would struggle to secure funds and loans from private financial institutions. Furthermore, JOGMEC provides liability guarantees for the development loans provided to the projects in the construction phase. Through these schemes, JOGMEC provides financial assistance in order to contribute to a smooth financial supply while mitigating the risks for operators and financial institutions.

Technology development

The fact that geothermal reservoirs are located deep underground gives rise to uncertainties associated with the difficulty involved in identifying their precise location and quality. Another issue is the long lead time from conducting the survey to starting power generation. JOGMEC promotes the development of new technologies related to the exploration, evaluation, management and drilling of geothermal reservoirs to overcome these issues.


JOGMEC collects the related data and provides comprehensive technical reports and general updates on the latest developments in the geothermal sector in Japan and around the world, along with the findings of previous surveys of geothermal resources in Japan. In addition, we provide support to Japanese companies, local governments and other parties engaged in conducting geothermal resource development surveys through public relations activities intended to promote public understanding.

Country Store of geothermal energy resources（million KW）

America 30Indonesia 27.79Japan 23.47Kenya 7Philippine 6Mexico 6Iceland 5.8New Zealand 3.65Italy 3.27Peru 3

（Store of geothermal energy resources of countries around the world）Source: Agency for Natural Resources and Energy “Annual Report on

Energy 2018”

Preparatory stage & Basic exploration stage Exploration stage Development stage Operation stage

Land surface survey

Stracture survey drilling

Environmental surveyMonitoring

Survey drillingFumarolic test

Reservoirevaluation

Production wellFeedback well

Power stationconstruction Operation




Subsidies for Geothermal Energy Development Survey

Equity Capital

Liability Guarantee


Geological Survey

Technical Development/Technical Support

Assisting Exploration, Developmentof Geothermal Energy

Drilling survey

Geological survey

Geothermal power station

JOGMEC’s Geothermal Resource Development Support



Support for geological surveys[Support for surveys]

JOGMEC operates a subsidy program for the development of geothermal resources, in order to grant subsidies for high risk initial studies, lower the barriers to commencing geothermal resource development studies, and help to expand geothermal resource development activities.

Our subsidy program supports not only geothermal resource developers, but also geothermal energy projects conducted by local governments, local geothermal companies and other such organizations. In fiscal 2017, we conducted a number of explanatory meetings throughout Japan to explain our subsidy program and held various consultations on project setups with the aim of publicizing the program. As a result, we adopted a total of 27 subsidy programs, including 9 new projects. The new projects were conducted in the Kyogoku-hokubu region, the Yamashiraike-nanbu region, and the Waitasan-tobu region from among the various regions where airborne geophysical surveys had been conducted by helicopter under the geothermal resource potential study project. In addition, the project that we are supporting in the Oyasu region has entered the exploration phase, which takes us a large step closer to the establishment of the first large-scale subsidy project. Other projects have also steadily advanced. Specifically, the construction of a power plant has begun in the Matsuohachimantai region and the construction of binary power plants has been completed in the Okushiri region and at the Farm Ishimatsu (Ogunimachi) region.[Geothermal resource potential study project]

To evaluate the potential of geothermal resources, JOGMEC conducted airborne geophysical surveys (gravity deviation and electromagnetic) by helicopter over the following places for the first time in fiscal 2017: Jyoetsu, the northern part of Tochigi, and Aso. We also conducted these surveys at Toyoha, Noboribetsu, Nigorikawa, and Kuju, where surveys had already been conducted in the previous fiscal year. In all cases, the surveys were fully coordinated with local relevant individuals.

These surveys have enabled JOGMEC to ascertain the underground structure of mountainous regions and other areas that are of particular interest to Japanese companies, including national and quasi-national parks, and make underground data accessible with minimal impact on the surface. JOGMEC has established survey techniques that yield more detailed and homogenous geological data over a wider area than conventional techniques, in an effort to help promote geothermal development.

To allow us to identify new projects more quickly, we also started conducting heat flow drilling surveys in fiscal 2017 at three locations in areas subjected to airborne geophysical exploration in Hokkaido and Tohoku to ascertain the underground temperature structure and geological structure there.

Providing financial assistanceIn fiscal 2017, with the aim of promoting a scheme for the use of

equity capital and liability guarantees, JOGMEC held four explanatory meetings throughout Japan and conducted 41 consultations for companies regarding the use of its financial assistance scheme.

We have continued to support ongoing projects through progress management and assessments. The Sugawara binary geothermal power station, for which JOGMEC provided liability guarantees, has continued to operate stably. In addition, steady progress has been made toward starting operations in the Matsuohachimantai and Wasabizawa-Akinomiya power stations. The liability guarantee for the Tsuchiyu Onsen (Tsuchiyu Onsen wellhead binary power plant No. 16) binary power station has been released because all of its debts have been cleared.

In adopting the equity capital and liability guarantee scheme, JOGMEC conducts cross-organizational technical evaluations from various perspectives, such as reserve evaluations, by taking advantage of its internal synergies. In fiscal 2017, to promote greater use of its equity capital and liability guarantee scheme, JOGMEC started holding explanatory meetings for regional banks in addition to conventional explanatory meetings.


■Subsidies, equity capital and liability guarantees provided in fiscal 2017

■Airborne geophysical exploration by helicopter

■Heat flow drilling surveys

Amemasudake AreaRusutsu Area

Rausu Area

Yunuma-Atosanupuri Area

Minamikayabe Area

Hakkouda-hokusei Area

Kuroishishi-Okiura・Aonigawa Area

Matsuo Hachimantai Exploration Project

Matsuo Hachimantai Exploration Project

Oomatsukurayama-nanbu Area

Oyasu Area

Tsuchiyu-onsen Binary Geothermal Power Project

Kawamata Area

Tateyama-onsen AreaSugawara Binary Geothermal Power

Project

Yamashitaike-nanbu Area

Waitasan-tobu Area

Obeno Area

Yunotani Area

Asosan-seibu Area

Ogunimachi-Nishizato・Kitazato Area

Hakusanroku Area

Fusuburiyama Area

Shigakogen AreaWasabizawa Geothermal

Power Project

Kijiyama・Shitanotai Area

Iwakisandake Area

Shikabe Area

Yakumocho-Namarikawa Area

Yakumocho-Kumaishi Area

Kyogoku-hokubu Area

Niseko Area

24

3

1

4

Subsidized Geothermal Energy Development Project(Geothermal Resource Development Operator)

Subsidized Geothermal Energy Development Project(Local Geothermal-related Corporation etc.)

Funding for Exploration Project

Liability Guarantees Project Operator

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewM



Technology development JOGMEC is conducting three technical development projects for:

(1) improvements in geothermal exploration technologies (using geothermal reservoir exploration technologies); (2) greater stability in the output of existing geothermal power plants (using technologies to evaluate and manage geothermal reservoirs); and (3) improvements in drilling technologies (using geothermal reservoir drilling technologies).

With regard to geothermal reservoir exploration technologies, JOGMEC conducted a 3D seismic prospecting demonstration survey in the Onikobe area, which is located in the mountainous areas of Tohoku. As a result, we were able to verify the effectiveness of these technologies in mountainous areas and pave the way to their practical application by extracting a surface structure that suggests a fracture system that is harmonious with the existing fracture system model. This groundbreaking technology is a world first in the geothermal field, and it is expected to significantly improve exploration precision at a low cost. In addition, to apply the Superconductive Quantum Interference Transient ElectroMagnetics (SQUITEM) system developed by our Metals Division in geothermal exploration, JOGMEC has developed a transceiver system designed to increase the searchable depth and has used the system to conduct demonstration tests in the Yamagawa district. Since the results confirmed that the SQUITEM system can gain depth information at a low cost, this technology has been put into practical use in some subsidized projects.

For the technologies used to evaluate and manage geothermal reservoirs, we summarized the results of an artificial recharge test conducted in fiscal 2015 and created and then published a technical manual that systemizes the recharge technology.

For the geothermal reservoir drilling technology, JOGMEC is promoting technological developments aimed at reducing drilling costs by shortening the drilling period. In fiscal 2017, we designed and manufactured a polycrystalline diamond compact (PDC) bit specifically for geothermal well that is made solely in Japan and then conducted a demonstration test. The results confirmed that this PDC bit delivers a much higher quality, offering more than double the wear resistance provided by conventional bits.

In addition to developing these technologies, JOGMEC has addressed the human resource shortage in the geothermal resource development field by providing Training Courses for Comprehensive Geothermal Development, Drilling Engineers, and Drilling Supervisors. Providing these training opportunities has led to a number of achievements, such as gaining the practical knowledge required for geothermal development and transferring technologies from seasoned engineers to younger engineers, thereby contributing to the development of human resources in this field.


[Latest overseas technological trends]Based on the MOU signed with GNS Science (the governmental

research agency of New Zealand), JOGMEC held a workshop on the theme of geothermal resource development with local communities in New Zealand. We also participated in the International Energy Agency Geothermal Implementing Agreement (IEA-GIA), the Decennial Mineral Exploration Conferences, the NZ Geothermal Association, and a geothermal workshop organized by the International Renewable Energy Agency (IRENA). As part of its activities, JOGMEC worked on collecting and sharing technical information as well as expanding its international human resource network.

[Publicity activities]JOGMEC provides information to a wide range of stakeholders

through activities such as organizing seminars aimed at promoting public understanding of geothermal resource surveys and development, placing advertisements in various types of media, and providing information to specialists and operators.

In fiscal 2017, JOGMEC organized the “Geothermal Symposium in Hakodate” with the participation of some congressional representatives and 19 local governments from Hokkaido or other parts of Japan. Furthermore, we provided additional “Geothermal Power and Community Development” classes to elementary, junior high and high schools. We also hosted family tours of four geothermal power plants located nationwide. These activities are related to the “Geothermal Power Day” events held October 8th every year, and they are supported by the Japan Geothermal Association and municipal governments.

In addition, we participated in “Grand Renewable Energy 2017” and “EcoPro 2017” as an exhibitor promoting learning and understanding of geothermal energy among the public, including the younger generation.

[Support for local government]While the role of local governments as

appropriate coordinators for geothermal r e s o u r c e m a n a g e m e n t i s b e c o m i n g increasingly important, there is also an urgent need to address problems such as the shortage of specialist expertise. To overcome such problems, JOGMEC founded the Geothermal Resource Development Advisory Committee to provide accurate information on geothermal resource development from a third-party perspective in fiscal 2016. The committee also provides support for local governments working on appropriate geothermal resource management by assessing the appropriateness of information on technical and other matters and offering advice about the issues and other challenges faced by the local governments. In fiscal 2017, the committee met four times and provided advice on eight cases.

■Geothermal energy development project in the Wasabizawa-Akinomiya region of Japan

■Geothermal energy development project in the Matsuohachimantai

region of Japan

■PDC bit specifically for geothermal well

■JAPAN NEW ZEALAND GEOTHERMAL WORKSHOP

■Geothermal Symposium in Hakodate

■Additional "Geothermal Power and Community Development" class being conducted at Oguni Junior High School in Kumamoto Prefecture

■Poster publicizing Geothermal Power Day

■Integrated display for the polymerization records of 3D seismic prospecting data and surface structure analysis results. The yellow frame corresponds to the

target area.


CHAPTER

4 Metals Strategy, Exploration and Technology DevelopmentJOGMEC provides various and respective stages of support in the formation of exploration projects, development and production in order for Japanese companies to secure the interests of resources and to expand their own development projects in mineral resource-rich countries.

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewM



Supporting private-sector exploration activities through the promotion of early-stage exploration

JOGMEC conducts JV surveys with public mining companies in resource-producing countries as well as with overseas companies, and evaluates resource reserves using analysis of satellite images, geophysical exploration, geological surveying and drilling surveys. Projects deemed to have the most potential are then transferred over to Japanese companies.

As well as conducting overseas geological surveys with Japanese companies, JOGMEC also provides support through its subsidy program in an effort to minimize risks during the early stages and promote overseas mining and development.

Meanwhile, JOGMEC estimates mineral resources—such as seafloor polymetallic sulfide deposits and cobalt-rich ferromanganese crusts—in the sea areas around Japan and develops production technologies by utilizing the marine resource research vessel "Hakurei." These activities are conducted based on the government's "Basic Plan on Ocean Policy" and the "Plan for the Development of Marine Energy and Mineral Resources."

Providing financial support for exploration and development projects conducted by Japanese companies

JOGMEC provides financial support in the form of equity capital and loans for exploration activities, asset acquisition investment, and liability guarantees for development funds. Financial support from JOGMEC is designed to assist Japanese companies in acquiring rights and interests in mineral resources while also developing their own mines.

Building and strengthening relationships with resource-rich countries

JOGMEC supports the government's diplomacy with resource-rich countries, while actively making its own efforts to build and strengthen relationships with these countries. Moreover, JOGMEC strives to strengthen its presence by participating in international conferences and exhibitions.

Supporting the technological development most needed by the mining industry and policy

JOGMEC conducts technological developments, selecting subjects of study from among the various production technologies used in developing mineral resources, in order to meet the needs of Japanese companies and the governmental policy. Specifically, we are developing technologies for mineral processing and metal extraction with respect to low-grade or complex ores and recycling metals from used products as well as conducting research and development to improve operations at domestic and international sites.

JOGMEC also supports basic research into metal production technologies to accumulate expertise and make continued progress in studies that will help ensure that Japan will have a stable supply of metallic mineral resources in the future.

Collecting, analyzing, and providing information

JOGMEC collects useful and up-to-date information for the benefit of Japanese companies that have mining operations in other countries engaged in areas such as the following: geology and mineral deposits; exploration, development and production levels; mining policies, laws and regulations in foreign countries; supply and demand trends for key metals; updates on international mining companies; and environmental issues associated with mining operations. We release a variety of reports on the JOGMEC Mineral Resource Information website, provide seminars, and publish email magazines and periodicals. JOGMEC operates the Mineral Resources Information Center, the only library in Japan dedicated to mineral resources, with some 50,000 geologic maps and publications. The Center is open to the public.

Developing human resources

JOGMEC sends staff as lecturers to universities or other organizations in order to encourage university students to acquire knowledge, which is for dealing with the recent labor shortages in the resource development sector.

Preparatory stage & Basic exploration stage Explorat ion stage Development stage Production stage

Investment environmental evaluation

Geologicalpotentialevaluation


Drilling

DrillingTunneling

Feasibilitystudy

Underground miningOpen pit mining

Producing plantconstruction Production




Assisting Exploration, Development and Production of Non-ferrous Metals and Minerals

Satellite image analysis

Geological survey Drilling survey

Equity Capital and Loans for Exploration

Equity Capital Contributionfor Asset Acquisitions

Liability Guarantee

Subsidies forOverseas Field Surveys


Overseas Geological Survey

Joint Basic Exploration Scheme

Technical Development/Technical Support

Satellite image analysis

s

Drilling surveyyGeological survey/

ey

n

JOGMEC’s Metals Resources Development Support



Geological surveys

[Support for securing interests through joint surveys]

JOGMEC conducts JV surveys with public mining companies in resource-producing countries and other overseas private companies and then transfers promising projects to Japanese companies, to help them secure interests. In fiscal 2017, JOGMEC conducted 25 JV or generative surveys, including three new ones. Serving as an operator for a new rare earth resource project in Brazil, JOGMEC leveraged its expertise to efficiently identify promising sites and select regions that will help to diversify the supply sources for rare earth resources, which are essential in the production of electric vehicles (EVs).

The Waterberg JV project in South Africa has entered the development feasibility study phase. JOGMEC established a partnership with Impala, a world-class South African producer of platinum group metals, and then transferred some of its interests and the marketing rights to handle the entire production volume to a Japanese company through a bidding process. The preliminary feasibility study for this project (in conformance with NI43-101)

shows that the maximum annual production volume for platinum, palladium and other noble metals is about 23 tons (equivalent to about 20% of demand in Japan) and that the life of a mine is 19 years. As the demand for platinum group metals among automobile manufacturers is expected to increase in line with the global trend toward stricter environmental regulations, this project has had a substantial quantitative and qualitative impact by, for example, contributing considerably to a diversification of the supply sources for platinum group metals to Japan.

Providing financial support for exploration and development by Japanese companies

JOGMEC carries out initiatives to promote independent mining development by Japanese companies in accordance with Japan's strategy for acquiring mineral resources*.

*Japan's strategy for acquiring mineral resources- Strategy for securing natural resources (published by Ministry of Economy, Trade and Industry in July 2012), and financial assistance from JOGMEC is mentioned under "strengthening of financing functions for the acquisition of resource rights," one of five "pillars" underpinning the strategy.

[Equity and loans for exploration operations, asset acquisition equity capital, and liability guarantees for development funds]

In fiscal 2017, JOGMEC provided financial assistance worth more than 14 billion yen in total for three projects to help Japanese companies gain interests and conduct exploration activities. One of these projects was the Palmer Property project (Alaska, U.S.), for which we provide equity capital and loans for exploration operations. This project is expected to help secure and diversify the supply sources for zinc due to the tightening of the demand-supply balance for this metal that followed the recent closure of large mines. In the Samancor project (South Africa), we have provided equity capital to one of the world's leading chromium manufacturers, thereby contributing to a stable supply of chromium, which is an essential resource for Japanese manufacturers.

We have also provided support for the Olaroz project using several schemes from the exploration phase. In the Olaroz project


■Drilling in Waterberg, South Africa

■Full view of the Olaroz project

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewM




(Argentina; lithium), which is a project that was granted liability guarantees in fiscal 2012, construction work was completed in February 2018 and the project has since entered the stable operation phase. As lithium carbonate, which accounts for about 30% of Japan's total demand for lithium, was produced from this mine in fiscal 2017, the mine's role in building a supply chain for the lithium ion batteries that are essential to the production of EVs is becoming increasingly important.

Deep-sea mineral resource exploration and development of production technologies

The marine resources research vessel “Hakurei” was used for deep-sea mineral explorations during the following 10 cruises: 3 cruises for conducting a drilling survey of seafloor polymetallic sulfides; 3 cruises for conducting a pilot test for the excavating and ore-lifting of seafloor polymetallic sulfides by test machines; 1 cruise for conducting a sampling survey of seafloor polymetallic sulfide ores; 2 cruises for exploring the deep-sea rare-earth mud and cobalt-rich crust near Minamitori-shima Island; and 1 cruise requested by a government agency for a marine geological research survey.

JOGMEC conducted drilling surveys to search for seafloor polymetallic sulfide deposits at 10 locations within the Gondo and Dana sites in the Okinawa trough with the aim of increasing the mineral resources. The results of the drilling surveys conducted on the southern ore body of the Gondo site confirmed the presence of a high-grade copper sulfide ore body continuing for about 800 m from the main mound to the southern ore body. This deposit is expected to produce world-class seafloor polymetallic sulfide deposits mainly consisting of copper.

In the mining technology field, JOGMEC conducted excavating and ore-lifting pilot tests and achieved a world first by performing continuous ore-lifting from the seafloor polymetallic sulfide deposits located in a 1,600-meter-deep seabed together with seawater in fiscal 2017. The success of this pilot test was widely covered by the overseas media, resulting in significant progress toward establishing the underlying technology of excavating and ore-lifting, which is required for the future of commercial seabed mining, while also increasing JOGMEC's profile.

In addition, we took the research vessel "Hakurei" on two expeditions to conduct a survey in exploration contract areas that have cobalt-rich crusts and in deep seabeds beyond the limits of the national jurisdiction to reliably assess the resource volume under an exploration contract with the International Seabed Authority (ISA). We conducted a sampling survey at 18 locations using the Benthic Multi-coring System (BMS) to determine the distribution of the cobalt-rich crusts, and the collected samples were assayed to identify their grade.

We assessed the environmental impact, excavation and smelting technologies, and economic efficiency for manganese nodules based on the exploration contract with the ISA that was renewed in July 2016.

JOGMEC sampled rare-earth rich mud in a highly-concentrated distribution area for rare earth resources based on sample data collected in the previous fiscal year. In fiscal 2017, we conducted a water lifting test, confirmed that water was being lifted efficiently due to the air-lift effect, and obtained data that will be useful in the 200-meter scale mud-water lifting experiment that is scheduled for subsequent fiscal years.

■Conceptual diagram of the excavation and lifting pilot test

Conceptual diagram

Remotely operated vehicle (ROV)

Ore-lifting riser pipe

Submersible pump

Ore-collecting test machine

Actual ratios



Multi-faceted approach to resource-producing countries

[Joint ventures, partnerships and collaborations with resource-producing countries]

In f iscal 2017, JOGMEC conducted 11 projects that will contribute to the establishment of cooperative frameworks and a strengthening of i ts re lat ionships with resource-producing countries. At Mining INDABA 2018, the world-class mining event held in South Africa every year, we conducted JOGMEC seminars as side events for the first time and invited ministers in charge of mining and other related parties from five African countries to give lectures on their mining policies and investment environments with the aim of encouraging Japanese companies to expand into Africa. In addition, we met ministerial-level officers from seven countries through this event and strengthened our relationships with resource-producing countries such as Zambia and the Democratic Republic of the Congo, which are the main producers of cobalt, a metal that is becoming increasingly important as a result of the growing popularity of EVs.

[Projects in Botswana Geologic Remote Sensing Centre]

At the Botswana Geologic Remote Sensing Centre, JOGMEC introduced an instructor accreditation system intended to promote autonomous and sustained technology transfers within the Southern African Development Community (SADC) in fiscal 2015. In fiscal 2017, trainees from four countries completed their instructor training courses, with seven of them passing the technical examination and review and receiving accreditation as Remote Sensing Instructors. As the center was celebrating its 10th anniversary, we also held a seminar to summarize its

activities over the last 10 years. About 50 participants from 11 SADC countries discussed the direction that should be taken for the next project period.

Technological development

JOGMEC sorts and prioritizes technologies issues by identifying corporate needs, and develops technologies aimed at helping Japan secure resources interests and boost its self-sufficiency rate.

[Developing exploratory techniques]In the remote sensing field, JOGMEC conducted five analysis

and on-site survey projects in Peru, Iran, Namibia, Australia, and Brazil using high spatial resolution satellite data to ascertain the geological structure there and identify promising sites. We also apply our high spatial resolution satellite data analysis technology not only in explorations, but also at mine operation sites to help promote operational optimization by identifying the distribution of altered minerals.

JOGMEC also helped to identify targets and ascertain the underground structure by using the SQUITEM-3 magnetometer system* for both metal and geothermal explorations. We also applied this system to monitor oil reservoirs at EOR, gaining successful results in the oil field.

Furthermore, the Japanese company that developed the necessary technologies jointly with JOGMEC launched a portable mineral identification device (POSAM-VS).

* SQUITEM3 uses superconductor elements (magnetic sensors) to generate highly accurate readings of electrical conduction properties in deep regions.

[Mining and metallurgy technology development]The Metals Technology Center, which develops mineral

processing technologies for low-grade or refractory ores, addresses the following four themes: (1) hydrometallurgical extraction; (2) basic flotation tests for separating copper and zinc; (3) technical support for dephosphorization from iron ore; and (4) basic research and development into mineral processing technologies for deep-sea polymetallic sulfide deposits. With regard to hydromerallurgy technologies, we discovered a technology that is expected to improve the leaching speed and rate. In addition, we completed the establishment of an open laboratory framework for the collaborative resolution of problems by opening laboratories to private companies, universities and other institutions and conducted some industry-academia-government studies.

■One of our JOGMEC seminar side events at Mining INDABA

■On-site use of the SQUITEM-3 magnetometer system

■A Remote Sensing Instructor providing guidance

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewM




We also started a project intended to establish a process at mine sites for separating and treating impurities in copper ore, which is the most challenging problem facing the nonferrous industry. JOGMEC played a central role in removing barriers to building an all-Japan research and development framework for sharing insights among the private companies, universities and other institutions involved in the project.

Human resources development

As human resource development projects in the area of mineral resources, JOGMEC is providing on-site training and lectures on mineral resource development for university students and working professionals. Some of the lectures and training sessions we offered during fiscal 2017 are shown below.

• Presenting special lectures at the University of Tokyo, Waseda University, Kochi University, Akita University and Kyushu University based on comprehensive partnership agreements

• Dispatch of Lecturers to training course in resources development offered by International Institute for Mining Technology, Japan Mining Engineering & training Center

Collecting, Analyzing and Providing Information

[Collecting information on strategic mineral resources]

In fiscal 2017, JOGMEC conducted a survey on the mineral resource material f low for 33 types of strategic mineral resources and other minerals, including one new type (gold). We collected data and information based on interviews with related companies and industry groups, summarized the material flow issues, and then reported these issues to Ministry of Economy, Trade and Industry for it to use as an information resource in formulating the government's strategies for mineral resources. We have also released this data on the JOGMEC website not only in a PDF format and as an e-book, but also in an html format that can be easily displayed on tablet.

[Providing mining-related information]We proactively release information on the mining industry*

based on which companies make investment decisions by producing news reports and e-mail newsletters such as "News Flash," "Current Topics," the "Metal Resources Report," and "Trends in the Market and Supply and Demand for Nonferrous Metals."

In fiscal 2017, JOGMEC held a total of 11 seminars and briefing sessions on topics such as general trends in base metals and rare metals, the latest news on overseas resource development and operating reports from various divisions of JOGMEC. These were well attended by corporate personnel and university students.

In addition, JOGMEC held a seminar on the latest trends in South Africa's mining industry with parties such as Impala, which is our new partner in the Waterberg JV project in South Africa. At this seminar, we provided information that would enable participants to confirm the stability and reliability of their production frameworks as well as information that would help give them a better understanding of the current situation, such as an overview and the prospects for mining restrictions in South Africa and opportunities to deepen their understanding of this project.

We are also working to improve the quality of information that we provide by continuously asking a committee of experts from Japanese companies and other organizations to assess our printed publications, providing more timely information, improving reports, and giving feedback to the staff in charge of documentation.

A selection of the reports published during fiscal 2017 is presented below.

・ Global Mining Trends by country・ Trends in the Metals Sector of Resource Majors, 2017・ Metal Mining Data Book 2017・ Mineral Resource Material Flows 2017・ Copper Business Trends since 2000* The JOGMEC Mineral Resource Information website (http://mric.jogmec.go.jp/) is constantly being updated with new material on metal resources such as periodicals and survey reports (note: these are normally only available in Japanese).

■Symposium promoting open laboratories that was held at the Metals Technology Center


CHAPTER

5 StockpilingJOGMEC is responsible for the safe and efficient operation on petroleum, LP gas and rare metals stockpiling programs.In ordinary times, JOGMEC stockpiles resources safely and efficiently. In the event of an emergency, JOGMEC would release the reserves expeditiously. In this way, JOGMEC contributes to the stability of citizens' lives as the last stronghold of Japan's energy security.

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

Stockpiling


Financial Review

Metals Strategy,


ent

Integrated management of national petroleum stockpiling and support for private-sector stockpiling

In 1972, Japan started its private-sector petroleum stockpiling program (in accordance with the Oil Stockpiling Act enacted in 1975) and in 1978, the national petroleum stockpiling program commenced. As of the end of March 2018, the strategic government reserves consist of 131 days' worth of crude oil and petroleum products stored in 10 national petroleum stockpiling bases and in the tanks leased from the private sectors. Meanwhile, private-sector reserves comprise 79 days' worth of crude oil and petroleum products in their tanks. In addition, there are stockpiles of 5 days’ worth of crude oil held jointly in collaboration with oil-producing nations (the United Arab Emirates and Kingdom of Saudi Arabia).

In relation to the national stockpiling, JOGMEC has safely and effectively conducted the integrated management of national stockpiled petroleum and stockpiling bases under the contract with the government. JOGMEC also conducts research, technological development, and international cooperation in the area of stockpiling issues. Furthermore, JOGMEC contributes to the reliability of private-sector stockpiling by providing loans to private enterprises that are required to hold compulsory stockpiles for the purchase of petroleum and LP gas.

Establishing a national stockpiling framework for LP gas

As with petroleum, Japan's strategic stockpiling of LP gas has been implemented through a two-pronged program consisting of national stockpiling and private-sector stockpiling.

In the national stockpiling project, JOGMEC manages the operation of five national LP gas stockpiling bases at Nanao

(Ishikawa Prefecture), Fukushima (Nagasaki Prefecture), and Kamisu (Ibaraki Prefecture) as well as the bases for which construction was completed in March 2013 at Kurashiki (Okayama Prefecture) and Namikata (Ehime Prefecture). We have received LP gas at these stockpiling bases sequentially since fiscal 2005, and we achieved the government's stockpiling target of an amount equivalent to the volume of imports for about 50 days (about 1.4 million tons) by completing the accumulation of LP gas at the Kurashiki base in November 2017. In doing so, we established a national LP gas stockpiling framework, thereby making a large contribution to Japan's energy security and helping to reduce the mandatory stockpiling level for the private sector stipulated by the government from 50 days to 40 days. As of March 2018, the private-sector stockpiles LP gas, including commercial stock, for 54 days rather than the mandatory stockpiling level.

Stockpiling of rare metals essential to industry

Many of rare metals, which are essential to steel materials, electronic parts, and the manufacturing of the increasingly popular electric vehicles (EVs), are supplied from a small number of countries. Their supply is constantly unstable due to recent demand increases and the protectionist policies of resource-producing countries (i.e., resource nationalism).

To address this, the Japanese government is conducting exploration and development activities, securing its interests, promoting the development of recycled or alternative materials as mid- to long-term supply stabilization measures, and stockpiling rare metals to address short-term supply problems. Having taken on this national stockpiling project, JOGMEC is purchasing rare metals that are high priority for Japanese industry, steadily storing and managing the stockpiled materials in national stockpiling warehouses, and selling them as needed.

Oil Stockpiling

National Stockpiling

46.83 million KL（product equivalent）

Private Stockpiling28.25 million KL

(product equivalent)

131 days 79 daysAs of March 31, 2018 Domestic consumption level

LP gas Stockpiling

National Stockpiling

1.4 million tons

Private Stockpiling1.5 million tons

50 days 54 daysAs of March 31, 2018 Import level

Rare Metals Stockpiling

National Stockpiling Target

Private Stockpiling Target

42 days 18 daysDomestic consumption level

Stockpiling


Ensuring risk management capabilityIn Japan's national petroleum stockpiling bases, JOGMEC

conducted eight projects for the design and construction of facilities that can withstand seismic activity and tsunamis based on a roadmap for measures against earthquake and tsunami. We also completed the implementation of earthquake and tsunami countermeasures according to the local disaster management plan created in the wake of the Great East Japan Earthquake, thereby helping to strengthen the national stockpiling bases.　

Safe and efficient management of national petroleum and LP gas stockpiles

There are 15 national petroleum and LP gas stockpiling bases across the nation, and these are in place for emergencies. JOGMEC has been working to improve safety and efficiency through cost-reduction activities as well as safely storing petroleum and LP gas, which is a hazardous substance.

[Safe management of petroleum and LP gas stockpiling bases]

To ensure the safe operation of stockpiling bases, JOGMEC keeps in close contact with relevant local organizations, conducts a wide range of disaster response drills, and performs safety inspections.

Listed below are major achievements in fiscal 2017.・ Referenced the results of safety evaluation reports and safety

reports while conducting safety environment inspections at 4 petroleum stockpiling bases (at Mutsu-Ogawara, Kuji, Shirashima, and Kushikino), and at 1 LP gas stockpiling bases (at Namikata), making the improvements called for after the last inspection, and enhanced and improved safety promotion activities.

・ Held Safety Environment Committee meetings (joint meetings for petroleum and LP gas stockpiling) four times, ensured the communication of incident reports to safety managers at consigned operational facilities, and exchanged information regarding safety and the environment.

・ Performed comprehensive disaster drills at petrochemical complexes and similar facilities, improved disaster preparedness, and maintained and strengthened ties with local communities.

・ Safely and effectively performed statutory non-destructive inspections of 10 piping shafts (length: 150–200m) at two underground LP gas stockpiling bases in Namikata and Kurashiki by using a world-class extremely high-precision automatic ultrasonic testing device suspended by a cable.

Through these activities, JOGMEC is working to boost safety awareness from the management level down to the factory

floor, while also ensuring that concrete strategies are properly implemented.

[Effective management of national stockpiling systems]

To further increase the efficiency of management at the stockpiling bases, we are continuing to work on cost reductions through the introduction of general competitive bidding, the rationalization of construction work, energy conservation and other such measures. We are also continuing to improve our operational efficiency by utilizing computer systems.

Listed below are major achievements in fiscal 2017.・ JOGMEC used general competitive bidding for the majority of

construction work commissioned by operational service providers and continued to pursue cost-cutting measures such as reviewing construction maintenance cycles. In addition, we steadily collected public comments as part of the marketing process of the Ministry of Internal Affairs and Communications, submitted them to the supervisory committee on bidding and other activities, improved the bidding conditions, held several explanatory meetings, and consequently gained new bidders. After an examination of the opened bids, new bidders were awarded contracts for four bases, thereby helping to reduce operation costs.

・ By receiving 50,000 tons of LP gas at the Kurashiki base, JOGMEC has achieved the national LP gas stockpiling target of an amount equivalent to the volume of imports for about 50 days (about 1.4 million tons) and completed the accumulation of LP gas for national stockpiling, which was started in 2005. As a result, the mandatory stockpiling level for the private sector has been eased. Since private importers could make effective use of the tank space arising from this reduction, the operational environment was relaxed and the financial status improved.

Enhancing emergency response capabilitiesJOGMEC conducted emergency drills at six petroleum stockpiling

bases (Shirashima, Tomakomai-Tobu, Hokkaido [joint stockpiling], Kamigotou, Kushikino, and Shibushi) and five LP gas stockpiling bases (Nanao, Kamisu, Kurashiki, Namikata, and Fukushima).

Additionally, approximately 560,000 kl of the national crude oil stockpiles was successfully transferred between bases, indicating a satisfactory level of release preparedness in the event of an emergency.


■2nd vessel carrying LP gas at the Kurashiki Base in fiscal 2017 (Kurashiki national LP gas

stockpiling base)

■Comprehensive disaster response training at petrochemical complexes and similar facilities

(Fukui Petroleum Stockpiling Base)

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

Stockpiling


Financial Review

Metals Strategy,


ent

International cooperation in petroleum stockpiling

In the event of a supply shortage, cooperative arrangements with neighboring countries are important in ensuring stable energy supplies.

JOGMEC proactively exchanges information on oil stockpiling with Asian countries, the U.S. and other foreign countries and has established cooperative relationships with them.

Listed below are major achievements in fiscal 2017.・ Held workshops for establishing and strengthening the oil

stockpiling frameworks of ASEAN countries in May 2017 in Manila (Philippines) and March 2018 in Bangkok (Thailand) to check the progress that had been made in establishing an oil stockpiling system in each country and report on the latest JOGMEC activities, thereby making a significant contribution to the establishment of such a system in ASEAN countries. In addition, held the Energy Security on Oil Capacity Building Program twice for ASEAN government officials who have been in charge of energy security policies (Director General or Director level). This program was well received by participants and endorsed in the ASEAN+3 Joint Ministerial Statement issued after the Ministers of Energy Meeting.

・ Provided support toward concluding the Terms of Reference (TOR) with Indonesia as part of our bilateral cooperation with ASEAN countries, held workshops to help Indonesia create an oil stockpiling system, and contributed to strengthening our bilateral relationships and networks.

・ In response to a request from China's National Oil Reserve Center (NORC), held a training program on the administration and management of petroleum stockpiling bases since fiscal 2016. As this program will enhance ties and expand cooperation with NORC, it will be an excellent example for the promotion of Japan-China government-level dialogue on energy, and JOGMEC will make a large contribution to strengthening energy security in Asia and the rest of the world.

・ Held regular bilateral meetings with the Department of Energy (DOE/SPR) of the United States and the Korea National Oil Corporation (KNOC) of South Korea, and enhanced ties by exchanging information and opinions.

Providing financial support for petroleum and LP gas stockpiling by private companies

・For private stockpiling, JOGMEC provided loans to 12 companies under its loan program, including oil refining companies and petroleum and LP gas importers. We took advantage of competitive interest rate bidding when procuring the capital (about 335.2 billion yen, one of the largest syndicate loans taken out in Japan in fiscal 2017) and then provided low-interest loans from that fund, thereby helping the private sector to meet their mandatory stockpiling periods.

・JOGMEC provided low-interest loans to Niigata Joint Oil Stockpiling Co. Ltd., which leveraged the government loans to conduct projects such as the construction of seismic-resistant floating roofs for the petroleum stockpiling tanks in line with the Ministerial Ordinance to Amend the Hazardous Materials Control Rules and other relevant regulations. We provided loans from fiscal 2009 as planned, and all of the 13 target petroleum stockpiling tanks had been overhauled by the end of fiscal 2017. By providing loans for the maintenance of the base facilities, we help improve the flexibility of the bases so that they can release the stockpiled crude oil efficiently when it is urgently needed.

Promoting the stockpiling of rare metalsTo promote flexible and effective stockpiling, JOGMEC interviewed

companies engaged in business related to rare metals and commissioned a survey on future forecasts. We also purchased two rare metals when such purchases were thought to be appropriate, and sold two rare metals to replace them and adjust the stockpiled amount.

Major achievements in fiscal 2017 are as follows.・ JOGMEC purchased two rare metals and sold two others in

exchange, thereby steadily advancing toward the national stockpiling target to meet the needs of Japanese industry. We submitted bids for their sale and purchase several times to avoid affecting the market and market conditions, and purchased the rare metals when the prices were low. For the first time in seven years since March 2010, we sold two metals in exchange since their sales were thought to be appropriate based on recent market conditions and supply and demand trends and achieved the sales target for one of them.

・ To prepare for sales, releases, and purchases, JOGMEC publicly sought, reviewed, registered, and managed companies that we could deal with in regard to all of the ores to be stockpiled. We registered 248 companies, significantly more than planned, and established a framework for the precise and rapid sale, release, and purchase of rare metals.

・ JOGMEC exchanged information on various topics—including risk assessments and a system for the effective use of stockpiled materials—with stockpiling organizations in the U.S. and Korea, both of which stockpile rare metals in the same way as Japan does. The aim of this exchange of information is to better understand the current situation and use the collected information to improve our own activities. We also held meetings of the Rare Metal Stockpiling Review Committee twice, which consists of representatives from companies engaged in business related to rare metals and academic experts, to create and maintain a network. At the same time, we held intensive meetings with a total of 106 companies to ascertain the supply and demand trends and stockpiling needs for each ore type.

Safe and effective management of rare metal　stockpiles

To maintain the equipment, facilities, and stockpiling framework at the national stockpiling warehouses in case of an emergency, JOGMEC revised its long-term (10-year) maintenance plan and conducted construction work to maintain and strengthen the warehouse functions so that stockpiled materials can be reliably stored for a long time. We also built three new warehouses to reach the upper limit for building coverage through self-financing authorized by the government, thereby establishing a framework for the flexible and safe storage of stockpiled materials in the future. In addition, we steadily moved ahead with establishing a safe and efficient management framework by conducting emergency drills twice, including a crime prevention training session supervised and directed by local police officers.

■An LP gas emergency release drill at the Fukushima national LP gas stockpiling base in

fiscal 2017


CHAPTER

6 Mine Pollution Control JOGMEC provides technical and financial support to mine pollution controlling entities so that they can appropriately and effectively carry out mine pollution control.

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM


eviewMetals Strategy, Exploration, and


Technical support to ensure the implementation of mine pollution control measures

JOGMEC is engaged in activities to provide technical support to local governments and entities that are obligated to implement mine pollution control measures (referred to as "mine pollution controlling entities," below).

At the request of mine pollution controlling entities, JOGMEC provides consult ing services and information related to construction work for mine pollution control and the formulation of mine pollution control policy. Additionally, JOGMEC provides technical assistance related to surveys for and the design and construction of mine pollution control work on commission from local governments and has also undertaken the operation and management of a new neutralization plant at the abandoned Matsuo mine (Iwate Prefecture).

Additionally, JOGMEC collects and organizes data on abandoned mines, offers technical training and holds information exchange meetings for mine pollution controlling entities and other parties, and provides technical support for mine pollution control measures taken by the government. To reduce the cost of mine pollution control measures, JOGMEC conducts surveys on technologies related to effective measures against sources of mine pollution and mine drainage treatment, and develops such technologies in light of the needs of relevant parties.

Financial support to ensure the implementation of mine pollution control activities

JOGMEC provides loans to private companies conducting mine pollution control activities and loans for the costs incurred in pollution control projects conducted by local governments as determined by the Environmental Pollution Control Expense Sharing Law.

We also turn over and manage mine pollution control reserve funds set aside by private companies for construction work related to mine pollution controls and mine pollution control project funds set aside for continuing the treatment of mine drainage.

Technical support for governments of resource-rich developing countries

Japan has world-leading technologies and systems for mine pollution control which have been developed through many years of efforts to control mine pollution. JOGMEC contributes to the promotion of environment-friendly mine development by sharing information and knowhow related to mine pollution control to resource-rich countries.

Project flow of support for Mine Pollution Control

Government

JOGMEC

Local Governments (1/4)

Abandoned Mines

without owners

Operating mines Suspended or Abandoned Mines

with owners

Technical & Intelligence Support

Deposits

FundsFinancial ＆TechnicalSupport

Implementation of Mine Pollution Control

Subsidies (3/4)

Technical Support

Grants for Administrative Services Subsidies Interest Subsidy



Technical support for mine pollution control[Technical support for mine pollution controlling entities]

Primarily, entities which have exploitation rights have the obligation to implement mine pollution control programs in accordance with the Principle of Polluter Pays. However, local governments have implemented such programs at abandoned mines when there is no business operator with the obligation to do so. The central government provides subsidies to local governments, while JOGMEC provides technical support.

The following is a list of major achievements.・ Mine A in Iwate Prefecture: Bedrock heaving in the drainage tunnel

created concerns that a collapse could cause an influx of highly acidic mine drainage. JOGMEC conducted a site survey to consider various safety measures for the drainage tunnel and submitted a report on them to the local government. Iwate Prefecture plans to implement countermeasure construction designs in fiscal 2018 based on this report with the aim of adopting safety measures for the Mine A drainage tunnel, which has been a long-term concern. In this way, JOGMEC has contributed to advancing the mine pollution control project in Iwate Prefecture.

・ Mine B in Kyoto Prefecture: To improve the treatment of mine drainage, JOGMEC conducted watershed surveys around an abandoned mine site several times and column tests on a treatment method for Mine B drainage at the Metals Technology Center.

・ Mine C in Miyazaki Prefecture: After sediment runoff from the gallery roof was suddenly observed during the tunnel maintenance work conducted by the local governments, JOGMEC gave appropriate advice about matters such as taking safety-conscious actions and how to safely discharge the mine drainage that had been dammed due to the sediment runoff.

・ Three mines in Hokkaido Prefecture, one mine in Iwate Prefecture, three mines in Yamagata Prefecture, and one mine in Miyazaki Prefecture: JOGMEC contributed to the smooth implementation of mine pollution control projects by providing technical support, such as giving advice on the mine pollution control construction work conducted by local governments and surveying the water quantity and quality around the mines.

[Operating and managing the Matsuo New Neutralization Plant]

The Matsuo New Neutralization Plant has treated more mine drainage than any other mine in Japan that lacks a responsible owner. Since 1982, JOGMEC has been administering and managing the plant there, upon the request of the Iwate prefectural government. The plant treats approximately 9 million cubic meters of mine wastewater each year, maintaining safe and reliable quality levels within standards determined for released water. It has also been achieving an "incident free years" every year.

To prepare for emergency situations, such as a disaster or accident, JOGMEC conducted training on responding to a large disaster based on a scenario in which power had been lost due to an earthquake with an intensity of 6 lower that has forced the facility to stop operations. The disaster and accident response manual was then revised to reflect the improvement points that were identified. In addition, JOGMEC has inspected, repaired, and renewed aging facilities since the start of operations in accordance

with the plan so as to reduce the risk of operational failure. As a result, no incidents have occurred in any of the 36 years to date. Amelioration efforts have greatly contributed to cleaner river water and environmental protection in the downstream section of the Kitakami River.

[Mine pollution control technology development]Mine wastewater at abandoned mines has to be treated on a

semi-permanent ongoing basis. This is a major burden for a mine pollution control entity. JOGMEC is developing technologies designed to reduce mine wastewater treatment costs by enabling more efficient and effective treatment of mine wastewater. Passive mine water treatment is one of the cost reducing technologies.

The following is a list of major achievements.・ Passive treatment: JOGMEC has improved its passive treatment

methods (which include using the reaction of sulfate-reducing bacteria using organic matter, such as rice bran). We have also continued the pilot-scale test at a scale of 1:100 at Mine D in Akita Prefecture with the aim of ascertaining the treatment performance and accumulating expertise to facilitate its practical application by, for example, clarifying engineering issues. In particular, we have optimized the treatment conditions for the iron removal process so that the removal of iron can be reliably conducted over the long term.

・ JOGMEC provided support for two companies that were interested in adopting a passive treatment process (those conducting mine pollution control projects) by implementing the technology through a joint study. We conducted a continuous test for the passive treatment method at Mine E with a high concentration of zinc and cadmium and a column test at Mine F with a high concentration of copper to individually verify the applicability of the method.

・ New cutting-edge technological developments that contribute to reduced mine drainage treatment costs: JOGMEC conducted joint research projects to develop a water quality forecast model for the original mine drainage and the mine drainage produced after it was mixed with river water, unravel the mechanism that enables vegetable organisms to remove metals from mine drainage, and develop technologies for reducing the use of neutral precipitates or using them more effectively. We also adopted the development of technologies for green closed mines using metal-resistant plants and soil microbes as an additional theme.

・ JOGMEC participated in six conferences in Japan and abroad, including one in the U.S. on environmental reclamation and one in Finland on the treatment of mine drainage. At these conferences, we published the results of our efforts to prevent mine pollution, obtained the latest information on the subject, and expanded our knowledge of new mine pollution prevention methods.


■Watershed survey around the mine site

■The Matsuo New Neutralization Plant

■Pilot-scale test

Business Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM




[Providing training and developing human resources for mine pollution control]

To secure the human resources necessary for taking mine pollution control measures and to enhance the understanding of the importance of both resource development and environmental protect ion, JOGMEC has taken init iat ives related to the development of human resources and awareness building activities.

The following is a list of major achievements.・ JOGMEC held a seminar concerning mine pollution prevention on

the theme of efforts to treat sources of mine drainage, delivered a lecture on groundwater flow analysis, and conducted a tour of a mine drainage treatment plant, all of which were well received by the participants. We also held a local government personnel meeting on the theme of efforts to implement the passive treatment method, a seminar for local governments to promote a basic understanding of mine pollution control technologies, and other such events to share useful information with those involved in mine pollution control projects.

・ To address the shortage and aging of personnel working for mine pollution controlling entities, JOGMEC held basic training on mine pollution control technologies in collaboration with the Japan Mining Industry Association for support personnel in charge of on-site mine pollution prevention in order to enhance their skills.

・ JOGMEC organized an eco-tour to mine drainage treatment locations and mines for nearby students, thereby spreading knowledge of the importance of both resource development and environmental protection.

・ At the Matsuo New Neutralization Plant, JOGMEC provided opportunit ies for many attendees f rom government agencies, schools, companies and other organizations from Iwate Prefecture and elsewhere in Japan to learn about the importance of the mine pollution control project. We have also presented overseas mine pollution control engineers and government visitors to the plant with insights on the administration of the plant facilities for more than 36 years.

Financial support for mine pollution control activities and so on

[Providing loans for mine pollution control]In fiscal 2017, JOGMEC provided loans for eight mines belonging

to three companies engaged in conducting mine pollution control activities to financially support the restoration of abandoned mine facilities and wastewater treatment for mine drainage.

We also provided a loan to one company in one region to cover the costs incurred in pollution control projects conducted by local governments as determined by the Environmental Pollution Control Expense Sharing Law.

The total amount of loans provided by JOGMEC in this category was 807 million yen in fiscal 2017.

[Managing mine pollution control reserve funds and project funds]

JOGMEC contributes to ensuring the implementation of sustainable mine pollution control projects by appropriately managing reserve funds*1 and project funds*2 accepted from private companies that undertake mine pollution control based on the Act on Special Measures for Pollution Caused by the Metal Mining Industry, etc.

*1 A system of setting aside reserve funds to ensure that construction work for mine pollution control is implemented

for mining facilities that have been shut down.*2 A system in which private mining companies that implement

mine drainage treatment contribute money to an investment fund and the investment gains are used to cover the cost of the treatment.

The outstanding balance of the mine pollution control reserve funds stood at 1.52 billion yen in fiscal 2017, with fund contributions of 6.53 million yen from 10 mines. The balance of the mine pollution control project funds stood at 5.1 billion yen, with no fund contributions having been made in fiscal 2017.

Technical support for governments of metal resource-rich countries

JOGMEC uses Japan's experience in preventing mine pollution when organizing seminars and training sessions on the subject. These efforts enable JOGMEC to support the eco-sensitive efforts of resource-rich countries, thereby helping it to establish and enhance its relationships with them.

The following is a list of major achievements.・ Dispatched mine pollution policy advisors to Peru as resident

advisors to ascertain the current situation of mine pollution and conduct monitoring surveys as well as giving technical advice mainly in the field. In addition, organized OJT for Peruvian government personnel in the field of mine pollution control to transfer the technologies required to plan, assess, and implement mine pollution control countermeasures.

・ At the Philippines investment promotion seminar to which high-ranking government officers were invited, JOGMEC presented information on Japanese mine pollution control technologies and systems and provided information that can help resolve issues faced by the Philippines in the mine environment field.

・ Using this seminar as an opportunity, held bilateral meetings between JOGMEC board members and high-ranking government officers from the Philippines, such as the director of the mine and the earth science bureau, thereby helping to strengthen our relationships with this resource-rich country with the aim of realizing sustained mining.

・ Provided government personnel and other parties from other resource-rich countries (Mozambique, Papua New Guinea, Indonesia, and Serbia) with information on mine pollution control countermeasure technologies that contribute to sustainable resource development.

・ Accepted 3 trainees from Peru to study Japan's mine pollution prevention measures and to undergo training at mines where operations have been suspended or abandoned.

■Eco-tour in progress

■On-the-job technical training in Peru

Financial Review


Approval, Audit, and Disclosure of Financial Statements

The management of JOGMEC is carried out in accordance with the Act on General Rules for Incorporated Administrative Agency ("General Rules"), enacted in 1999, and the Japan Oil, Gas and Metals National Corporation Act ("Specific Act"), enacted in 2002.

JOGMEC's accounts are settled in accordance with the requirements of the General Rules. JOGMEC's accounts are settled for each fiscal year and JOGMEC's financial statements are submitted for approval by the Minister of Economy, Trade and Industry by June 30 every year, after being audited by internal and independent auditors.

JOGMEC's financial statements are disclosed promptly after approval. Methods of disclosure include the JOGMEC corporate website and official gazettes, as well as a disclosure room set up within JOGMEC to allow members of the public to view the statements.

Capital Structure

For JOGMEC, funds equivalent to the accounting term "capital" for private-sector companies are provided by the Japanese government. These national government investments, which constitute JOGMEC's financial base and were provided to the amount of 92.2 billion yen at the time of JOGMEC's establishment, are supplied in an expeditious manner based on the corporation's requirements for each business, as detailed in the medium-term management plan, and amounted to 878.6 billion yen at the end of fiscal 2017.

In addition to national government investment, which was 74.7 billion yen in fiscal 2017, JOGMEC procures funds from a number of external sources, including revenues from grants for administrative services (23.9 billion yen), subsidies (14.5 billion yen), revenues from entrusted activities (100.1 billion yen), and loans from financial institutions (425.2 billion yen). The procurement methods of these funds have been determined by the use of funds.

Earnings Structure

The operation of JOGMEC is basically dictated by the amount of grants for administrative services that is received from the Japanese government to cover operating expenses.

We temporarily record grants for administrative services as a liability at the time of their receipt and monetize the achievements as operations progress (basis of the achievement of the operations).

Regarding activities of the administrative unit, the revenues from grants for administrative services are recognized in accordance with the passage of term, except for activities for which the relationships between the achievement of the operations and the grants for administrative services are clear.

Revenues from other grants represent the amount that JOGMEC receives from the government for providing support for some state-sponsored surveys and development projects conducted by

Financial Review

General Overview




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM




private companies in a specific sector (through subvention or other financial aid). Revenues from entrusted activities represent the amount paid by the government to cover the costs of other specific activities (management of national petroleum stockpiles, basic surveys on oil and natural gas, etc.) requested by the state.

In fiscal 2017, the total loss for the year was recorded as 73.1 billion yen for the term. The main factors contributing to this loss were the fact that JOGMEC posted 72.4 billion yen in losses on write-offs for investments in subsidiaries and affiliates for the current fiscal year in relation to investments in oil and other natural resource exploration projects, which exceeds our own self-generated income, such as our dividend income and liability guarantee fee income.

In addition, JOGMEC also posted 20.7 billion yen in provisional reserves for losses incurred from liabilities for guarantees pertaining to funds for the development of oil and natural gas projects.

It is difficult to objectively judge the collectability of stock for investment in the exploration stage. Therefore, JOGMEC posts half of the investment balance that is assessed as the fair value of exploration stage projects based on JOGMEC's bylaws in accordance with "the practical guidelines for financial instrument accounting standards" established by the Japanese Institute of Certified Public Accountants and other organizations. This is because there are any concerned item in "the Accounting Standards for Incorporated Administrative Agency."

In general, oil and other exploration development projects tend to be long-term ventures, making it difficult to assess their success. Therefore, JOGMEC follows accounting procedures that reflect the characteristics of the projects by conservatively evaluating investments made in companies engaged in exploration stage projects.

Finance and Liability Guarantees

JOGMEC, together with private-sector companies, provides equity capital for oil and gas E&P projects, and also provides liability guarantees for oil and natural gas E&P projects.

In fiscal 2017, we provided 42.4 billion yen as equity capital for various projects, including some new exploration projects. Equity finance is recorded as investment in stocks of affiliates and investment securities (outstanding balance of 263.1 billion yen at the end of fiscal 2017) in the fixed investment column. Currently, none of these subsidiaries and affiliates is publicly listed. JOGMEC provided a liability guarantee for 11 companies (outstanding balance of 823.6 billion at the end of fiscal 2017).

In oil and LP gas stockpiling-related activities, JOGMEC invested 19.5 billion yen at the end of fiscal 2017 in joint-venture stockpiling firms that will be operated jointly by oil companies to construct and manage stockpiling bases. JOGMEC also provides funds required for the construction of joint stockpiling sites, amounting to 2.9 billion yen at the end of fiscal 2017. In addition, JOGMEC provides loan to private-sector companies, which are required to meet certain stockpiling obligations by law, to help them purchase the necessary petroleum and LP gas for stockpiling. The amount of these finances was 335.2 billion yen at the end of fiscal 2017. The resources for

these loans were raised by syndicated loans from private financial institutions, booked as loans payable for funding private-sector stockpiling activities, and amounted to 335.2 billion yen at the end of fiscal 2017.

Regarding development of metal resources, JOGMEC provides equity capital for exploration and asset acquisition as well as loans and liability guarantees as the risk money financing necessary for overseas exploration projects. In addition to providing equity capital, including asset acquisition, to seven companies (outstanding balance of 54.9 billion yen at the end of fiscal 2017), JOGMEC also provided loans totaling 1.1 billion yen to two companies for domestic and overseas exploration projects (outstanding balance of 14.4 billion yen at the end of fiscal 2017). In addition, JOGMEC provided a liability guarantee for five companies (outstanding balance of 57.1 billion yen at the end of fiscal 2017). JOGMEC also provides loans for mine pollution control (outstanding balance of 2.7 billion yen at the end of fiscal 2017).

For geothermal development, JOGMEC provided equity capital for exploration to one company (outstanding balance of 0.5 billion yen at the end of fiscal 2017) and liability guarantees to three companies (outstanding balance of 12.3 billion yen at the end of fiscal 2017).

Stockpiling

JOGMEC is responsible for operating petroleum and LP gas stockpiling bases. Certain equipment and materials associated with these sites are owned by JOGMEC and recorded on its financial statements under assets as part of machinery and equipment, etc.

JOGMEC also stockpiles rare metals. These rare metals and mineral stockpiles, which were included in the assets (47.6 billion yen at the end of fiscal 2017).

Mine pollution control

As part of its mine pollution control activities, JOGMEC is responsible for managing two funds for mining rights holders.

(1) Mine Pollution Prevention FundThis was created to meet mine remediation costs after mines

have been suspended or abandoned. The interest earned on funds paid into the reserves by mining rights holders and other funds are returned when costs are incurred for remediation work.

(2) Drainage Treatment FundIncome from the management of this fund is exclusively used

to maintain mine drainage treatment facilities at suspended or abandoned mine sites. Expenses incurred for this work are recorded as mine pollution control costs, and these were 40 million yen in fiscal 2017.


Balance Sheet (March 31, 2018)

(Yen) (U.S. dollars)(Note 1)

Assets　I Current assets　　　Cash on hand and in banks 56,226,463,165 529,190,242 　　　Marketable securities 142,733,089,413 1,343,370,253 　　　Trade accounts receivable 14,957,017,119 140,771,926 　　　Inventories 19,051,856,488 179,311,590 　　　Advance payments 942,551,960 8,871,077 　　　Prepaid expenses 36,075,416 339,533 　　　Accrued income 256,200,229 2,411,296 　　　Short-term loans receivable 4,058,341,000 38,196,151 　　　Loans receivable for subsidiaries and affiliates 301,592,000 2,838,513 　　　Loans receivable for funding private-sector stockpiling activities 335,219,400,000 3,155,006,118 　　　Accounts receivable 6,569,543,190 61,830,995 　　Total current assets 580,352,129,980 5,462,137,694

　II Fixed assets　　1. Tangible fixed assets　　　　Buildings 8,110,963,237 76,338,478 　　　　　Less : accumulated depreciation (3,614,398,626) (34,017,869)　　　　Structures 1,320,554,894 12,428,752 　　　　　Less : accumulated depreciation (639,587,822) (6,019,650)　　　　Machinery and equipment 10,933,893,766 102,907,235 　　　　　Less : accumulated depreciation (10,026,703,610) (94,368,975)　　　　Vessels 19,312,310,249 181,762,920 　　　　　Less : accumulated depreciation (8,086,672,264) (76,109,857)　　　　Vehicles 503,289,520 4,736,843 　　　　　Less : accumulated depreciation (490,968,093) (4,620,876)　　　　Tools, furniture and fixtures 3,548,761,982 33,400,113 　　　　　Less : accumulated depreciation (2,865,111,823) (26,965,758)　　　　Land 3,789,176,435 35,662,837 　　　　Construction in progress 4,497,389 42,328 　　　　Rare metals 47,634,365,508 448,323,440 　　　Tangible fixed assets, net 69,434,370,742 653,499,960 　　2. Intangible fixed assets　　　　Patents 587,194,386 5,526,535 　　　　Trademark right 1,221,059 11,492 　　　　Mining rights 5,381,574 50,650 　　　　Software 1,503,483 14,150 　　　　Telephone rights 2,836,500 26,696 　　　　Mining right in progress 55,653,400 523,797 　　　Total intangible fixed assets 653,790,402 6,153,321 　　3. Investments and other assets　　　　Long-term deposit 57,843,458,807 544,409,024 　　　　Investments in securities 93,797,075,307 882,796,003 　　　　Investments in subsidiaries and affiliates 337,963,918,784 3,180,836,883 　　　　Long-term loans receivable 12,983,325,000 122,196,000 　　　　Long-term loans receivable from subsidiaries and affiliates 2,570,604,000 24,193,920 　　　　Claims provable in rehabilitation from bankruptcy 6,639,819,640 62,492,420 　　　　　Less : allowance for doubtful receivables (2,755,559,000) (25,934,673)　　　　Security deposits 20,120,607 189,370 　　　Total investments and other assets 509,062,763,145 4,791,178,947 　　Total fixed assets 579,150,924,289 5,450,832,229 　Total assets ¥1,159,503,054,269 $10,912,969,923




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM





Liabilities and Net assetsLiabilities　I Current liabilities　　　Current portion of long-term borrowings 89,690,663,944 844,147,425 　　　Loans payable for funding private-sector stockpiling activities 335,219,400,000 3,155,006,118 　　　Trade accounts payable 13,998,574,315 131,751,288 　　　Accounts payable-other 4,367,788,769 41,108,600 　　　Accrued expenses 31,605,486 297,463 　　　Consumption taxes payable 220,832,101 2,078,420 　　　Advances received 12,679,408,923 119,335,613 　　　Deposits received 56,873,421 535,279 　　　Allowance　　　　Accrued bonuses 40,040,377 376,851 　　Total current liabilities 456,305,187,336 4,294,637,057

　II Long-term liabilities　　　Contra accounts for services and assets　　　　Contra account for assets funded by grants for administrative services 3,823,850,119 35,989,178 　　　　Contra account for assets purchased with other grants 231,792,459 2,181,576 　　　　Contra account for construction in progress funded by grants for administrative services 4,497,389 42,328 　　　Long-term borrowings 4,893,255,000 46,054,165 　　　Allowance　　　　Allowance for retirement benefits 480,468,134 4,522,053 　　　　Allowance for loss on guarantees 20,729,772,014 195,103,737 　　　Long-term accounts payable 334,852,329 3,151,551 　　　Reserve for prevention of mine pollution 1,558,828,000 14,671,322 　　　Security deposit for coal mine damage compensation 1,671,904,757 15,735,574 　　Total long-term liabilities 33,729,220,201 317,451,484 　Total liabilities 490,034,407,537 4,612,088,542

Net assets　I Capital　　　National government investments 878,559,909,567 8,268,799,149 　　Total capital 878,559,909,567 8,268,799,149

　II Capital surplus　　　Capital surplus 29,757,366,232 280,069,329 　　　Accumulated depreciation charged to capital surplus (19,635,159,152) (184,801,498)　　　Accumulated impairment loss charged to capital surplus (2,964,000) (27,896)　　　Fund for prevention of mine pollution 5,117,410,831 48,163,867 　　Total capital surplus 15,236,653,911 143,403,802

　III Accumulated deficits　　　Accumulated reserve carried over from the previous mid-term target period 2,116,915,061 19,923,906 　　　Reserve (or accumulated deficits) 3,636,834,575 34,229,031 　　　Undisposed accumulated deficits (230,046,883,898) (2,165,147,143)　　　　（Total loss for the year ￥73,136,163,906)　　Total accumulated deficits (224,293,134,262) (2,110,994,205)

　IV Unrealized holding loss on securities (34,782,484) (327,365)

　Total net assets 669,468,646,732 6,300,881,381 　Total liabilities and net assets ¥1,159,503,054,269 $10,912,969,923



Ordinary expenses　　Operating expenses:　　　Operating expenses 33,357,412,520 313,952,118 　　　Operating and administrative expenses 6,693,983,900 63,002,201 　　　Depreciation 836,943,427 7,877,115 　　　Accrual for bonuses 30,753,732 289,447 　　　Provision for loss on guarantees 20,729,772,014 195,103,737 　　　Cost for purchases for oil 2,725,474,886 25,651,528 　　　Loss on write-offs of investments in subsidiaries and affiliates 72,380,063,999 681,224,132 　　　Loss on liquidation of subsidiaries and affiliates 62,941,336 592,389 　　Expenses for entrusted activities 104,672,479,878 985,152,752 　　General and administrative expenses:　　　Payroll expenses 1,231,405,431 11,589,698 　　　Depreciation 22,875,944 215,303 　　　Accrual for bonuses 9,286,645 87,404 　　　Administrative expenses 310,816,255 2,925,329 　　Finance costs:　　　Interest expense 31,289,836 294,493 　　　Other finance cost 61,649,843 580,234 　　Interest on reserve for prevention of mine pollution 7,946,205 74,788 　　Operating expenses relating to mine pollution prevention activities 44,352,777 417,438 　　Interest on security deposit for coal mine damage compensation 3,823,525 35,986 　　Miscellaneous losses 2,199,548,997 20,701,638 　Total ordinary expenses 245,412,821,150 2,309,767,728

Ordinary revenues　　Revenue from grants for administrative services 28,377,047,768 267,078,097 　　Operating revenues:　　　Interest on loans receivable 191,142,256 1,798,986 　　　Revenue from sales of oil 2,725,474,886 25,651,528 　　　Gain on sales of rare metals 108,326,240 1,019,541 　　　Guarantee fee income received 7,331,442,678 69,001,813 　　　Dividends received 3,932,746,898 37,014,088 　　　Gain on sales of shares of subsidiaries and affiliates 5,928,204,274 55,794,864 　　　Gain on liquidation of subsidiaries and affiliates 39,696,308 373,612 　　Revenues from other grants received:　　　State subsidies 14,913,693,734 140,364,176 　　Revenues from entrusted activities:　　　Revenue from activities entrusted by national government 103,720,063,896 976,188,837 　　　Revenue from activities entrusted by local governments 517,244,385 4,868,182 　　　Revenue from activities entrusted by others 118,021,589 1,110,791 　　Financial revenues:　　　Interest income 53,590,658 504,383 　　　Interest income on securities 339,130,773 3,191,819 　　Reversal of contra account for assets funded by grants for administrative services 771,591,924 7,262,042 　　Reversal of contra account for assets purchased with other grants 13,661,922 128,583 　　Miscellaneous income 2,734,392,386 25,735,458 　Total ordinary revenues 171,815,472,575 1,617,086,801

Ordinary loss 73,597,348,575 692,680,928

Extraordinary loss　　Loss on disposal of fixed assets 216,924,339 2,041,641 　Total extraordinary loss 216,924,339 2,041,641

Extraordinary income　　Settlement revenues from grants for administrative services 459,057,599 4,320,542 　　Gain on sales of fixed assets 2,127,062 20,019 　　Reversal of contra account for assets funded by grants for administrative services 216,924,334 2,041,641 　　Reversal of contra account for assets purchased with grants 13 0 　Total extraordinary income 678,109,008 6,382,202

Net loss for the year 73,136,163,906 688,340,366 Total loss for the year ¥73,136,163,906 $688,340,366

Financial ReviewStatement of Operations (For the year ended March 31, 2018)




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM





I Cash flows from operating activities　　　Payments for raw materials, goods and services purchased (128,432,530,256) (1,208,776,755)　　　Payroll expenses (5,273,150,051) (49,629,648)　　　Loans receivable made (337,277,400,000) (3,174,375,529)　　　Refund of reserve for prevention mine pollution (2,963,000) (27,887)　　　Expenses related to mine pollution prevention activities (48,960,569) (460,805)　　　Purchases of investments (55,798,923,499) (525,166,339)　　　Purchases of oil (2,725,474,886) (25,651,528)　　　Consumption tax paid (261,393,718) (2,460,176)　　　Other operating expenses paid (2,908,367,414) (27,372,870)　　　Guarantee fees received 3,925,385,102 36,944,801 　　　Reserve for prevention of mine pollution received 6,530,000 61,459 　　　Grants received for administrative services 23,920,485,000 225,133,976 　　　Revenues received from entrusted activities 94,055,570,942 885,228,903 　　　Other grants received 14,498,551,588 136,456,956 　　　Collection of loans receivable 520,669,103,790 4,900,415,094 　　　Revenues from sales of shares of subsidiaries and affiliates 8,831,283,814 83,117,965 　　　Proceeds from liquidation of subsidiaries and affiliates 153,606,613 1,445,709 　　　Revenue from sales of oil 2,725,474,886 25,651,528 　　　Consumption taxes refunded 198,751,117 1,870,599 　　　Other operating revenues received 4,211,808,141 39,640,547 　　Subtotal 140,467,387,600 1,322,046,001 　　　Interest and dividends received 5,223,643,358 49,163,702 　　　Interest paid (42,797,169) (402,797)　Cash flows from operating activities 145,648,233,789 1,370,806,906

II Cash flows from investing activities　　　Purchases of time deposits (84,200,038,505) (792,470,951)　　　Proceeds from refund of time deposits 96,012,834,830 903,650,210 　　　Purchases of securities (300,987,486,756) (2,832,823,405)　　　Proceeds from securities upon maturity 280,476,200,000 2,639,776,000 　　　Purchases of tangible fixed assets (3,910,373,660) (36,803,517)　　　Proceeds from sales of tangible fixed assets 614,470,702 5,783,254 　　　Purchases of intangible fixed assets (72,120,398) (678,780)　Cash flows from investing activities (12,066,513,787) (113,567,189)

III Cash flows from financing activities　　　Proceeds from long-term borrowings 89,976,722,944 846,839,745 　　　Repayments of long-term borrowings (93,251,028,363) (877,656,738)　　　Proceeds from loans payable for funding private-sector stockpiling activities 335,219,400,000 3,155,006,118 　　　Repayments of loans payable for funding private-sector stockpiling activities (517,886,500,000) (4,874,225,882)　　　Proceeds from national government investments 74,697,732,574 703,037,483 　　　Payments for transferring of unnecessary properties to government (20,000,000,000) (188,235,294)　　　Repayments of lease obligations (163,571,075) (1,539,492)　Cash flows from financing activities (131,407,243,920) (1,236,774,060)

IV Effect of exchange rate changes on cash and cash equivalents 13,598,254 127,984 V Net increase in cash and cash equivalents 2,188,074,336 20,593,641 VI Cash and cash equivalents at beginning of year 12,788,338,813 120,360,836 VII Cash and cash equivalents at end of year ¥14,976,413,149 $140,954,477

Financial ReviewStatement of Cash Flows (For the year ended March 31, 2018)


Ⅰ.Significant Accounting Policies

Japan Oil, Gas and Metals National Corporation (“JOGMEC”), an Incorporated Administrative Agency, adopted the “Accounting Standards for Incorporated Administrative Agency”, “Notes to Accounting Standards for Incorporated Administrative Agency” (revised on January 27, 2015) and “Q&A on Accounting Standards for Incorporated Administrative Agency and Notes to Accounting Standards for Incorporated Administrative Agency” (revised in February 2016). (Hereinafter referred to as “Accounting Standards for Incorporated Administrative Agency, etc.”)

However, in regard to the provision of No. 43 (Note 39) of “Accounting Standards for Incorporated Administrative Agency”, as transitional measures have been applied under Article 8 of the Supplementary Provisions of “Act for partial amendment of the Act on General Rules for Incorporated Administrative Agency”, segment information that is based on the current segments is disclosed until cease of the transitional measures.

1.Basis of PreparationThe accompanying financial statements of JOGMEC consisting of

the balance sheet, and the statement of operations and cash flows have been prepared in accordance with “Accounting Standards for Incorporated Administrative Agency” and accounting principles generally accepted in Japan. These are a portion of the financial statements prepared by JOGMEC as required by Article 38 of “Act on General Rules for Incorporated Administrative Agency”.

The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at ¥106.25 =US$1.00, the exchange rate prevailing on March 31, 2018. This translation should not be construed as a representation that yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

2.Revenues from Grants for Administrative ServicesRevenues from grants for administrative services are recognized on

the basis of the achievement of the operations.Regarding activities of the administrative unit, the revenues from

grants for administrative services are recognized in accordance with the passage of term, except for activities for which the relationships between the achievement of the operations and the grants for administrative services are clear.

3.Depreciation(1)Tangible fixed assets (except for leased assets)

Depreciation of tangible fixed assets is calculated by the straight-line method.

The estimated useful lives of the major fixed assets are summarized as follows:

Buildings: 2 to 50 yearsStructures: 2 to 43 yearsMachinery and equipment: 2 to 17 yearsVessels: 15 yearsVehicles: 2 to 6 yearsTools, furniture and fixtures: 2 to 25 years

(2)Intangible fixed assets (except for leased assets)Amortization of intangible fixed assets is calculated by the straight-

line method.Amortization of software for internal use is calculated based on an

estimated useful life of five years.(3)Leased assets

Depreciation of leased assets is calculated by the straight-line method over the lease term with zero residual value.

Depreciation of certain specific depreciable assets (as defined in “Accounting Standards for Incorporated Administrative Agency, No. 87”) is directly deducted from capital surplus and is presented as accumulated depreciation charged to capital surplus.

4.Allowance(1)Allowance for doubtful receivables

The allowance for doubtful receivables is provided at an amount determined based on the historical experience of bad debts with respect to ordinary receivables, plus an estimate of uncollectible amounts determined by reference to specific doubtful receivables from customers which are experiencing financial difficulties.(2)Accrued bonuses

An accrual for bonuses is provided for the payment of bonuses to directors and employees at the amount estimated to be incurred except for the portion to be covered by grants for administrative services.(3)Allowance for loss on guarantees

Allowance for loss on guarantees is provided for future losses on the execution of a guarantee given and is stated at the amount estimated based on the guarantee’s financial position and the fair value of the assets pledged as collateral, as well as other relevant factors.

5.Allowance for Retirement Benefits and Retirement Benefit CostAllowance for retirement benefits is provided at an amount

calculated based on the retirement benefit obligation and the fair value of the pension plan assets as of the balance sheet date except for those costs covered by grants for administrative services.

The method of attribution of projected benefit obligation by the end of the current fiscal year is straight-line method.

Prior service cost is being amortized by the straight-line method over eight years, a period which is shorter than the average remaining years of service of the employees.

Actuarial gain or loss is being amortized by the straight-line method over eight years, a period which is shorter than the average remaining years of service of the employees, from the year following the year in which the gain or loss is recognized.

Lump-sum retirement allowance is calculated based on the simplified method which records amount to be paid for voluntary termination at the end of the current fiscal year as retirement benefit obligation.

6.Valuation of Securities(1)Held-to-maturity securities

Held-to-maturity securities are stated at amortized cost calculated by the straight-line method.(2)Investments in subsidiaries and affiliates

Investments in subsidiaries and affiliates are stated at cost determined by the moving-average method. Where there has been a permanent decline in the value of such investments, JOGMEC has written them down.

For investments in subsidiaries and affiliates, if their business is exploration, it is difficult to judge the outcomes of such business. Therefore, until the outcomes become available, based on the internal notification, the fair values of the investments are computed as half of the amount invested by JOGMEC in each company.(3)Other securities

1) Marketable securities classified as other securities are carried at fair values with changes in an unrealized holding gain or loss, net of the applicable income taxes, included directly in net assets section. Cost of securities sold is determined by the moving average method.

2) Securities without fair market value are stated at cost determined by the moving average method.

Japan Oil, Gas and Metals National Corporation Notes to Financial Statements （March 31, 2017）




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM




7.Valuation of InventoriesInventories are stated at the lower of cost or market, cost being

determined by the specific identification method.

8.Foreign Currency TranslationAssets and liabilities denominated in foreign currencies are

translated into Japanese yen at the exchange rates prevailing at the balance sheet date. The resulting exchange gain or loss is credited or charged to income.

9. Consumption TaxesTransactions subject to consumption taxes are recorded at amounts

exclusive of consumption taxes.

Ⅱ.Notes to Financial Statements1.Balance Sheet

March 31, 2018(Yen) (U.S.dollars)

(1) Estimated amount of bonuses not recorded as accrued bonuses ¥306,383,499 US$2,883,609

(2) Estimated amount of retirement benefits to be covered by grants for administrative services

¥4,036,415,674 US$37,989,795

(3) Guarantees given for loans ¥893,012,637,191 US$8,404,824,821

2.Statement of OperationsYear ended March 31, 2018(Yen) (U.S.dollars)

(1) Loss on disposal of fixed assets:BuildingsMachinery and equipmentTools, furniture and fixturesPatents

¥33,094,009¥14¥13

¥213,614,903

US$311,473 US$0 US$0

US$2,010,493 (2) Gain on sales of fixed assets:

Machinery and equipmentVehiclesTools, furniture and fixtures

¥824,778¥981,663¥320,621

US$7,763 US$9,239 US$3,018

3.Statement of Cash Flows(1)Reconciliation between accounts reported in the balance sheet and cash and cash equivalents:

Year ended March 31, 2018(Yen) (U.S.dollars)

Cash on hand and in banks ¥56,226,463,165 US$529,190,242 Time deposits (¥41,250,050,016) (US$388,235,765)Cash and cash equivalents ¥14,976,413,149 US$140,954,477

(2)Significant non-cash transactionsYear ended March 31, 2018

(Yen) (U.S.dollars)Assets acquired through finance leases:Tools, furniture and fixtures ¥118,431,000 US$1,114,645

4.Leases(1)Future lease payments for finance lease transactions

March 31, 2018(Yen) (U.S.dollars)

Due within one year from the balance sheet date ¥147,018,034 US$1,383,699

Due after one year from the balance sheet date ¥187,834,295 US$1,767,852

Total ¥334,852,329 US$3,151,551

　The above lease obligations have not been classified by current or noncurrent portion in the balance sheet because of their immateriality.

5.Financial Instruments(1)Overview　1) Policy for approaching financial instruments

　JOGMEC is engaged in financing services, such as loan and investment business. To provide such services, JOGMEC raises funds from investments or loans by national government, or borrows funds from financial institutions.

　2) Type of financial instruments and related risk 　JOGMEC owns financial assets, mainly comprising loans to corporations inside and outside Japan. These loans are exposed to

credit risk that could accrue upon breach of contract by borrowers, etc. Its marketable securities and investments in securities, primarily consisting of debt securities and stocks, have been held until maturity and for implementing its policy. These securities and stocks are exposed to issuers' credit risk, and risks of interest rate and market price fluctuations. Borrowings are exposed to liquidity risk that could lead to failure on the due repayment date, including cases which would leave JOGMEC unable to use the market under certain circumstances.

　3) Risk management for financial instruments　　(i) Managing the credit risk

　　JOGMEC, via the respective departments in charge, manages risks pursuant to its internal policies concerning credit management and credit risks. For loans receivable, JOGMEC has developed and implemented a credit exposure management system that examines credits, sets credit limits, controls credit information, sets guarantees and collateral, and tackles bad debts on a per-project basis in deciding whether to approve projects and in carrying out regular valuations at the end of fiscal years. JOGMEC has also managed the credit risk of issuers’ marketable securities by regularly obtaining information concerning their credits and market values.

　　(ii) Managing market risks　　　i) Managing the interest risk

　　　Interest rates are determined pursuant to the methods predefined in the statement of operation procedures or other rules.

　　　ii) Managing the price fluctuation risk　　　Shares of projects are owned for political purposes. JOGMEC

monitors the market environments and financial conditions of the companies in which it has invested.

　　(iii) Managing liquidity risk relating to fundraising　　JOGMEC has raised funds pursuant to its borrowing plans

approved by the state minister in charge.(2)Estimated fair value of financial instruments

Book value of financial instruments in the balance sheet, their estimated fair value and difference as of March 31, 2018 are stated in the table below.

However, insignificant financial instruments and financial instruments for which it is extremely difficult to determine the fair value are not included in the table. (Refer to (Note 2).)

　 March 31, 2018

Book value Estimated fair value Difference

(Million yen)

(Million U.S.dollars)

(Million yen)


(Million yen)


(1)Cash on hand and in banks 56,226 529 56,226 529 - -

(2) Marketable securities and investments in securities1) Held-to-maturity securities 147,130 1,384 147,725 1,390 594 5

2) Other securities 89,392 841 89,392 841 - -

(3)Short-and long-term loans receivable 17,041 160 17,293 162 252 2

(4)Loans receivable for funding private-sector stockpiling activities

335,219 3,155 335,219 3,155 - -

(5)Long-term deposits 57,843 544 57,836 544 -7 -0 (6) Claims provable in

rehabilitation from bankruptcy

6,639 62 - - - -

Less : allowance for doubtful receivables (2,755) (25) - - - -

3,884 36 3,884 36 - - Total Assets 706,738 6,651 707,578 6,659 839 7 (1)Current portion of long-term borrowings and long-term borrowings

94,583 890 94,695 891 111 1

(2)Loans payable for funding private-sector stockpiling activities

335,219 3,155 335,219 3,155 - -

Total Liabilities 429,803 4,045 429,914 4,046 111 1

(Note) Amounts less than one million yen and one million U.S. dollars are rounded down.(Note1)Methods to determining the estimated fair value of financial instruments and other matters related securities transactions.

Japan Oil, Gas and Metals National Corporation Notes to Financial Statements （March 31, 2017）


Assets(1)Cash on hand and in banks

Since cash on hand and in banks is settled in the short-term at a value almost similar to the book value, it is posted at the book value.(2)Marketable securities and investments in securities

The market value of securities is the price presented by the stock exchanges or financial institutions concerned. Since negotiable certificate of deposits are settled in the short-term at a value almost similar to the book value, they are posted at the book value.(3)Short- and long-term loans receivable

The fair value of loans receivable is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new loans were entered into.(4)Loans receivable for funding private-sector stockpiling activities

Since these loans are settled in the short-term, the book value approximates fair value.(5)Long-term deposits

The fair value of these deposits is determined by striking deposit interest rates supposed on new similar deposits based on their classification of periods.(6)Claims provable in rehabilitation from bankruptcy

The Fair value is close to the amount calculated by deducting allowance for doubtful receivables from the book value, because allowance for doubtful receivables is based on the expected recoverable amount from guarantees and collateral.

Therefore, the fair value is calculated based on that expected recoverable amount.

Liabilities(1)Current portion of long-term borrowings and long-term borrowings

These borrowings have been obtained at fixed interest rates. Their market values are determined by striking interest rates supposed on new similar borrowings from the total of the principal and interest, based on the borrowing type.(2)Loans payable for funding private-sector stockpiling activities

Since these loans are settled in the short-term at values almost similar to their book values, they are posted at the book value.(Note 2) It is extremely difficult to determine the fair value of non-listed stocks of 337,971 million yen (3,180 million U.S. dollars) included in all of “Investments in subsidiaries and affiliates” and a part of “Investments in securities” in the balance sheet, because no quoted market price is available and it is difficult to estimate the future cash flows under contract. Therefore, they are not included in 2) Other securities of (2) Marketable securities and investments in securities in the table shown above.

Furthermore, the reserve for prevention of mine pollution (1,558 million yen (14 million U.S. dollars) in the balance sheet) and Security deposit for coal mine damage compensation (1,671 million yen (15 million U.S. dollars) in the balance sheet) are to be repaid upon demand in principle.

Therefore, the Corporation cannot specify the time for such repayment demand at its discretion.

Since it is recognized that it is extremely difficult to determine the fair value, the reserve is not included in the table shown above.

6.Impairment of Fixed AssetsFixed Assets with impairment lossesLand for National rare metals stockpiling warehouse

March 31, 2018

Type of asset LocationBook Value

(Yen) (U.S. dollars)

Telephone rights Land Ibaraki Prefecture ¥583,000,000 US$5,487,059

The market value of this land has significantly dropped down and its recovery is uncertain, therefore we consider the existence of an indication of impairment, and recognize and measure the impairment

loss.Regarding the method of the recoverable service amount, which

indicates the value in use of this asset, since determining the replacement value after depreciation is difficult, it is calculated by multiplying the book value of this asset by the percentage of the area excluding the area that is not supposed to be used. As a result, it is equal to the book value and therefore the impairment loss is not calculated.

7.Asset Retirement ObligationsAsset retirement obligations not included in the balance sheetObligations to restore the Metals Technology Center to its original

conditionJOGMEC is obliged to restore the land of the Metals Technology

Center to its original condition according to the land sublease contract with local governments.

The Metals Technology Center is, as a part of facilities operated by local governments, engaged in technological research and development activities in cooperation with other institutions. The determination of removal of the Metals Technology Center shall be made based on the opinions of the local governments, as well as that of JOGMEC, and the time of such removal is not yet determined.

As a result, it is difficult to reasonably estimate the amount of asset retirement obligations.

Therefore, the asset retirement obligations for the Metals Technology Center are not recorded on the balance sheet.

8. Payments for transferring of unnecessary properties to governmentDetails about payments for transferring of unnecessary properties

to government are as follows:

① Type of property, 　 name of property, 　 book value

Cash on hand and in banksInvestments in projects of oil and gas field exploration, asset acquisitions and others of the Account for Oil, Natural Gas and

Others (Yen) (U.S.dollars)

¥20,000,000,000 US$188,235,294

② Reasons for which property became unnecessary

There are no expectation of using investments in projects of oil and gas field exploration, asset acquisitions and others of the Account for Oil, Natural Gas and

Others

③ A method of payment to National Treasury

Payment in kind in accordance with paragraph (1) of article 46-2 Act

on General Rules for Incorporated Administrative Agency

④ Amount of capital gains from sale of property －

⑤ Cost of deduction －

⑥ Amount of payment to National Treasury

(Yen) (U.S.dollars)

¥20,000,000,000 US$188,235,294

⑦ Date of payment March 23, 2018

⑧ Amount of reduction of capital(Yen) (U.S.dollars)

¥20,000,000,000 US$188,235,294

9. Allowance for Retirement Benefits(1) Outline of retirement benefit plans

JOGMEC has adopted funded and unfunded defined benefit plans and defined contribution plans for employees’ retirement benefits.

Under a defined benefit corporate pension plan (funded plan), employees are entitled to lump-sum or annuity payments based on their respective salaries and service periods. Under a lump-sum pension plan (unfunded plan), employees are entitled to lump-sum payments based on their respective salaries and service periods as retirement benefits, and allowance for retirement benefits and retirement benefit expenses are calculated based on the simplified method.(2) Defined benefit plans

1) Change in benefit obligation, excluding 3) plans accounted for




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM




under the simplified method, for the year ended March 31, 2018(Yen) (U.S.dollars)

Benefit obligation at beginning of year　 ¥709,027,304 US$6,673,198 Service cost　 ¥10,662,905 US$100,357 Interest cost　 ¥1,418,053 US$13,346 Actuarial differences　 (¥150,135,874) (US$1,413,044) Benefits paid　 (¥12,978,791) (US$122,153) Prior service costs　 ¥0 US$0 Employee contribution　 ¥0 US$0 Decrease associated with the definition of the minimum

policy reserve of Employees' Pension Fund　 (¥219,498,500) (US$2,065,868)

Benefit obligation at end of year ¥338,495,097 US$3,185,836

　2) Change in plan assets for the year ended March 31, 2018(Yen) (U.S.dollars)

Fair value of plan assets at beginning of year ¥720,926,608 US$6,785,192 Expected return on plan assets ¥7,209,266 US$67,852 Actuarial differences (¥230,031,833) (US$2,165,005) Employer contribution ¥13,086,340 US$123,166 Benefits paid (¥12,978,791) (US$122,153) Employee contribution ¥2,284,567 US$21,502 Decrease associated with the definition of the

minimum policy reserve of Employees' Pension Fund (¥228,998,345) (US$2,155,279)

Fair value of plan assets at end of year ¥271,497,812 US$2,555,274

　3) Change in net defined benefit liability under the simplified method for the year ended March 31, 2018

(Yen) (U.S.dollars)Net defined benefit liability at beginning of year ¥554,848,441 US$5,222,103 Retirement benefit expenses (¥6,728,944) (US$63,331) Benefits paid (¥84,495,540) (US$795,252)Net defined benefit liability at end of year ¥463,623,957 US$4,363,520

4) Amount recognized in the balance sheets, including plans accounted for under the simplified method, at March 31, 2018

(Yen) (U.S.dollars)Benefit obligation for funded plan ¥338,495,097 US$3,185,836 Plan assets (¥271,497,812) (US$2,555,274)Net benefit obligation for funded plan ¥66,997,285 US$630,563 Benefit obligation for unfunded plan ¥463,623,957 US$4,363,520 Subtotal ¥530,621,242 US$4,994,082 Unrecognized actuarial differences (¥121,327,728) (US$1,141,908)Unrecognized prior service costs ¥71,174,620 US$669,879 Net amount recognized on the balance sheets ¥480,468,134 US$4,522,053 Allowance for retirement benefits ¥480,468,134 US$4,522,053 Prepaid pension cost ¥0 US$0 Net amount recognized on the balance sheets ¥480,468,134 US$4,522,053

5) Details of retirement benefit expenses for the year ended March 31, 2018

(Yen) (U.S.dollars)Service cost ¥10,662,905 US$100,357 Interest cost ¥1,418,053 US$13,346 Expected return on plan assets (¥7,209,266) (US$67,852)Actuarial differences recognized in earnings ¥6,878,030 US$64,734 Prior service costs recognized in earnings (¥14,234,924) (US$133,976)Retirement benefit expenses under simplified method (¥6,728,944) (US$63,331)Other (¥2,284,567) (US$21,502)Defined benefit expenses (¥11,498,713) (US$108,223)

6) The asset allocation for the plans, excluding plans accounted for under the simplified method, at March 31, 2018

Bonds 38%Stocks 35%Life insurance company general accounts 19%Other 8%Total 100%

7) Setting method of expected long-term rates of return on plan assets 　The expected long-term rates of return on plan assets is determined based on the actual return on the plan asset portfolios and the expected rate of return on those portfolios.8) Assumptions of actuarial calculation　Assumptions of actuarial calculation at March 31, 2018 are as follows:　Discount rates: 0.2%

　Expected long-term rates of return on plan assets: 1.0%

(3) Defined contribution plansContribution made to the defined contribution plans by JOGMEC

amounted to ¥1,449,705　(US$13,644).(4) Other

Regarding the substitutional portion of Employees’ Pension Fund, as the amount of the minimum policy reserve to be returned to the government was defined, Corporate Pension Fund paid an amount of \25,714,759,727 (US$242,021,268) to the government on February 16, 2018. And the resulting effect on profit and loss of this fiscal year is insignificant.

III. Actions Resulting in Significant Financial ObligationsNot applicable

IV. Definitions of Terminology“Loans receivable for funding private-sector stockpiling activities” and

“Loans payable for funding private-sector stockpiling activities” JOGMEC provides loans to crude oil refining companies and oil and

gas importers, which are required to maintain certain level of stockpiling to cover consumption for a certain number of days. The loans receivable are provided to finance the purchase of oil and gas stocks, while the loans payable represent borrowings of the same amount to source these loans. JOGMEC classifies both types of loans as current assets and current liabilities because all related loans receivable and payable are restructured at the end of April every year. Because these loans are material, they are presented separately in the balance sheet.

V.Material Subsequent EventsNot applicable


Business OverviewFinancial Review


Independent Auditor's Report Financial Review

Audit of Financial Statements

Pursuant to Article 39 of “Act on General Rules for Incorporated Administrative Agency,” we have audited the financial statements by account (except for the proposal for appropriation of retained earnings and disposal of accumulated deficits) consisting of the balance sheet by account, the statements of operations, cash flows and execution costs for administrative services by account, significant accounting policies, notes to financial statements and the related supplementary schedules by account of Japan Oil, Gas and Metals National Corporation （“JOGMEC”）for the 2017 fiscal year from April 1, 2017 to March 31, 2018. We have also audited the entity-wide financial statements consisting of the entity-wide balance sheet, the entity-wide statements of operations, cash flows and execution costs for administrative services, significant accounting policies, notes to financial statements and the related entity-wide supplementary schedules of JOGMEC.President’s Responsibility for the Financial Statements

President is responsible for the preparation and fair presentation of these financial statements (except for the proposal for appropriation of retained earnings and disposal of accumulated deficits) in accordance with “Accounting Standards for Incorporated Administrative Agency” generally accepted in Japan, and for designing and operating such internal control as president determines is necessary to enable the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to frauds, errors or illegal acts.Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with “Auditing Standards for Incorporated Administrative Agency” generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. We plan the audit considering the possibility that frauds, errors or illegal acts committed by president or other personnel within JOGMEC’s organization may result in material misstatements of the financial statements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to frauds, errors or illegal acts. The purpose of an audit of the financial statements is not to express an opinion on the effectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by president, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. This basis includes the fact that, during the course of our audit, we have not identified any frauds, errors or illegal acts committed by president or other personnel within JOGMEC’s organization which would result in material misstatements of the financial statements. However, our audit has not been designed for the purpose of expressing an opinion on whether or not there are any frauds, errors or illegal acts committed by president or other personnel within JOGMEC’s organization which would not result in material misstatements of the financial statements.Opinion

In our opinion, the financial statements by account of the Account for Oil, Natural Gas and Others, the Account for Metal Mining Stockpiling, Investments, Loans and Others, the General Account for Metal Mining, the Reserve for Prevention of Mine Pollution Account, the Fund for Prevention of Mine Pollution Account, and the Account for Transitional Functions related to the Coal Mining Industry as well as the entity-wide financial statements referred to above present fairly, in all material respects, the financial position by account and on an entity-wide basis of JOGMEC, and its results of operations, cash flows and execution costs for administrative services by account and on an entity-wide basis in conformity with “Accounting Standards for Incorporated Administrative Agency ” generally accepted in Japan.

　　Report on the Proposal for Appropriation of Retained Earnings and Disposal of Accumulated Deficits, the Accounting Matters Stated in the Business Report and the Financial Reports

Pursuant to Article 39 of “Act on General Rules for Incorporated Administrative Agency,” we have audited the proposal for appropriation of retained earnings and disposal of accumulated deficits for each account, the accounting matters stated in the business report as well as the financial reports for each account and on an entity-wide basis of JOGMEC for the 2017 fiscal year from April 1, 2017 to March 31, 2018. The accounting matters which we have audited in the business report are derived from the accounting books and records of JOGMEC.President’s Responsibility for the Proposal for Appropriation of Retained Earnings and Disposal of Accumulated Deficits, the Business Report and the Financial

ReportsPresident is responsible for the preparation of these proposals for appropriation of retained earnings and disposal of accumulated deficits in accordance with

the related regulations, the business report presenting properly the financial position and the results of operations, and the financial reports presenting properly the financial results by certain business group in accordance with the budget classification.Auditor’s Responsibility

Our responsibility is to report on whether the proposal for appropriation of retained earnings and disposal of accumulated deficits is prepared in accordance with the related regulations, whether the accounting matters stated in the business report present properly the financial position and the results of operations, and whether the financial reports present properly the financial results by certain business group in accordance with the budget classification.

Report on the Proposal for Appropriation of Retained Earnings and Disposal of Accumulated Deficits, the AccountingMatters Stated in the Business Report and the Financial Reports

Our report is as follows:(1)　 The proposal for appropriation of retained earnings and disposal of accumulated deficits for each account is　prepared in accordance with the related

regulations.(2)　 The accounting matters stated in the business report present properly the financial position and the results of operations of JOGMEC.(3)　 The financial reports for each account and on an entity-wide basis present properly the financial results of JOGMEC by certain business group in

accordance with the budget classification established by president.Convenience Translation

We have reviewed the translation of these financial statements into U.S. dollars, presented for the convenience of readers, and, in our opinion, the accompanying financial statements have been properly translated on the basis described in Note 1.

Conflicts of InterestWe have no interest in JOGMEC which should be disclosed in compliance with the Certified Public Accountants Act.

Ernst & Young ShinNihon LLCJune 15, 2018Tokyo, Japan

NoteThe following information, among the financial information for which the Independent Auditor’s Report is issued, are not presented in the accompanying

Financial Statements; the financial statements by account, the entity-wide statement of execution costs for administrative services (including related significant policies and notes), the related entity-wide supplementary schedules, the proposal for appropriation of retained earnings and disposal of accumulated deficits for each account, the accounting matters stated in the business report, and the financial reports for each account and on an entity-wide basis.

Mr. Tetsuhiro Hosono PresidentJapan Oil, Gas and Metals National Corporation

Independent Auditor's Report

45Annual Report 201844 Annual Report 2018 45Annual Report 201844 Annual Report 2018

Overview of JOGMEC Business Overview

What is an Incorporated Administrative Agency?

　An incorporated administrative agency is an agency that is responsible for a certain subset of administrative and business duties that are handled by the division charged with executing government policy. It has been separated from the administrative activities of the various ministries and awarded independent corporate status and constitutes a system designed to stimulate and improve the quality of services, enhance efficiency, provide for independent management, and promote greater transparency.　The competent authority governing the incorporated administrative agency conducts a thorough evaluation of all aspects of the agency’s business performance at the end of the period for the medium-term objectives, including a review of the necessity for continuing the services offered by the incorporated administrative agency in question, the state of the organization, and other organizational and business factors. The requisite steps are then taken based on those results.　The role or mission of JOGMEC as the primary institution for resource and energy development, as the institution bearing the responsibility for accumulating reserves as the last resort for security, and as the institution upholding one part of environmental conservation was clearly delineated in the fourth medium-term objective beginning in April 2018.

■Name　 Japan Oil, Gas and Metals National Corporation (JOGMEC）

■Chairman & CEO　 Tetsuhiro Hosono

■Capital　 878.5 billion yen (as of March 31, 2018)

■No. of employees 566 people (as of March 31, 2018)

■History Japan Oil, Gas and Metals National Corporation (JOGMEC) was established as an incorporated administrative agency on 29 February 2004, with the integration of the former Japan National Oil Corporation (JNOC) and Metal Mining Agency of Japan (MMAJ)

■Purposes The purposes of the JOGMEC are to supply the necessary funds for exploring for petroleum and combustible natural gas, coal, geothermal energy as well as metallic minerals or others and to conduct other operations necessary for promoting the development of petroleum, combustible natural gas resources, coal resources, geothermal resources and metallic mineral resources as well as operations necessary for stockpiling petroleum and metallic mineral products, thereby contributing to a stable and low-price supply of petroleum, etc., coal, geothermal energy and metallic mineral products, as well as to loan the necessary funds for controlling mine damages caused by metal mining, etc. and other operations, thereby contributing to the protection of the nation’s health, the preservation of the living environment and the sound development of metal mining, etc. (as of October 2012)*JOGMEC has started operations of coal and geothermal resource development in 2012 in accordance with a legal amendment in September 2012.

■Location　 Headquarters　Toranomon-twin-buildings, 2-10-1 Toranomon, Minato-ku, Tokyo 105-0001, Japan　Tel : +81-3-6758-8000 / Fax : +81-3-6758-8008 Technology & Research Center　1-2-2 Hamada, Mihama-ku, Chiba-city, Chiba 261-0025, Japan　Tel : +81-43-276-9212 / Fax : +81-43-276-4061


Officers

Position Name Term Previous History

Chairman & CEO Tetsuhiro Hosono

2018.4.1

～

2023.3.31

Commissioner, Japan Patent OfficeDirector-General, Agency for Natural Resources and EnergyPresident, JECC Corporation

President Tomonobu Uchida2018.4.1

～

2020.2.28

Director, Senior Vice President and Executive Director, Environment & Safety Department, QualityAssurance, JXTG Nippon Oil & Energy Corp. （formerly JX Nippon & Energy Corp. ）President, JX Nippon Oil & Energy Kiire Terminal Corp.

Executive Vice

President

Yuki SadamitsuMember of the Board, General Coordination,Financial Management & Accounting,Evaluation and Research & Analysis

2018.4.1～

2020.3.31

Director, Petroleum and Natural Gas Division,Natural Resources and Fuel Department, Agency for Natural Resources and EnergyDirector, Policy Planning Division, Natural Resources and Fuel Department, Agency for Natural Resources and Energy

Executive Vice

President

Kenichi YokoiOil & Gas Upstream Business Unit

2018.3.1

～

2020.2.29

Director General, Exploration DepartmentDirector General, Technology DepartmentCouncilor, Oil & Gas Upstream Business Unit

Executive Vice

President

Toshikazu EbatoOil & Gas Upstream Technology Unit

2018.3.1

～

2020.2.29

General Manager, London OfficeDirector General, Exploration DepartmentDirector General, Technology Department

Executive Vice

President

Mitsuya HirokawaMetals Strategy & Exploration Unit

2018.3.1

～

2020.2.29

Director, International Affairs Division, Metals Strategy DepartmentDeputy Director General, Metals Mining Technology DepartmentDirector General, Metals Mining Technology Department

Executive Vice

President

Tatsuya IwaharaStockpile Unit

2018.4.1

～

2020.3.31

General Manager, Kurashiki Project Management OfficeDeputy Director General, LPG Stockpile Management DepartmentDirector General, LPG Stockpile Management Department

Executive Vice

President

Hajime Ikeda Metals & Coal Finance and Environment Unit

2016.7.1

～

2020.6.30

Director, Planning Division, Mine Pollution Control DepartmentDirector General, Metals Environment Management DepartmentDirector General, Coal Development Department

Auditor Mikio Mine

2018.6.29

～

Approval of thefinancial

statements offiscal year

2022

Director of Accounting Division, Financial Management & Accounting DepartmentDeputy Director General, Financial Management & Accounting DepartmentDeputy Director General, General Coordination Department and Director, Internal Audit Office

Auditor Atsuko Takada

2016.4.1

～

Approval of thefinancial

statements offiscal year

2022

General Manager, Research & Planning, Compliance Department, NIPPONKOA Insurance Co., Ltd.General Manager, Sales System, Compliance Department, NIPPONKOA Insurance Co., Ltd.General Manager, Compliance Department, NIPPONKOA Insurance Co., Ltd

As of July, 2018


Organization Structure

Chairman & CEOPresident

Executive Vice President

Chief Geologist

Internal Audit Office

General Coordination Department

Human Resource Department

Financial Management & Accounting Department

Evaluation Department

Exploration Department

Research and Analysis Department

Administration and Training Department

Technology Department

Domestic Exploration Department

Metane Hydrate Research & Development Group

Stockpile Planning Department

Petroleum & LPG Stockpile Management Department

Safety, Environment & Engineering Department

Rare Metals Stockpile Department

Metals Environment Management Department

Metals Finance Department

Coal Development Department

Coal Asset Management Department

Kyushu Branch Office

Geothermal Resource Development Department

Russia Project Group

Business Strategy Department

Project Department

Metals Strategy Department

Metals Exploration Department

Metals Mining Technology Department

Oil & Gas Upstream Technology Unit

Metals Strategy & Exploration Unit

Stockpile Unit

Metals & Coal Finance and

Environment Unit

Oil & Gas Upstream Business Unit

Auditors

Auditors' Office

As of July 2018


Woldwide Network

Office Address TEL FAX

Beijing Office (China) 3005 Chang Fu Gong Office Building, Jia-26, Jian Guo Men Wai Street, Beijing CHINA 100022 +86-10-6590-9520 +86-10-6590-8366

Jakarta Office (Indonesia) 5th Floor, SUMMITMASⅡ, Jl.Jend.Sudirman Kav.61-62,Jakarta, 12190INDONESIA +62-21-522-6640 +62-21-522-6650

Sydney Office (Australia) Level 23, BT Tower, 1 Market Street, Sydney NSW 2000 AUSTRALIA

(Oil & Gas)+61-2-9264-9611(Metals)+61-2-9264-2493 +61-2-9264-4914

Washington Office (U.S.A.) 1233 20th Street, N.W. Suite 206 Washington,D.C. 20036 U.S.A. +1-202-775-0602 +1-202-775-0605

Houston Office (U.S.A.) One Riverway, Suite 450 Houston, Texas 77056, U.S.A. +1-713-622-0204 +1-713-622-1330

Vancouver Office (Canada) 1710-400 Burrard Street, Vancouver, B.C. V6C3A6 CANADA +1-604-685-1282 +1-604-685-4123

Mexico Office / Oficina en Mexico (Mexico)

Emerson #304, Int. 801, Col. Polanco IV seccion, Del. Miguel Hidalgo, C.P. 11550 CDMX, Mexico, +52-55-5280-1099 +52-55-5280-0214

Lima Office / Oficina en Lima(Peru)

Av. Camino Real 348, Torre El Pilar, Piso 7, Oficina 704, San Isidro Lima-27, PERU +51-1-221-5088 +51-1-221-1871

Santiago Office/ Oficina enSantiago (Chile)

World Trade Center, Torre Norte 1005, Av. Nueva Tajamar 481, Las Condes, Santiago, CHILE +56-2-2203-6130 +56-2-2203-6121

Moscow Office (Russia)R o o m 6 5 0 , H o t e l：M e z h d u n a r o d n a y a - 2 Krasnopresnenskaya Nab.12 Moscow 123610RUSSIAN FEDERATION

+7-495-967-0405 +7-495-967-0407

London Office (U.K.) Carrington House, 126-130 Regent Street, London W1B5SE U.K.

(Oil & Gas)+44-20-7287-7915(Metals)+44-20-7287-7916 +44-20-7287-7917

Middle East Office (U.A.E.)P.O.BOX 6270Al-Masaood Tower #904 , Sheikh Hamdan Street, Abu Dhabi, U.A.E.

+971-2-6330366+971-2-6217704 +971-2-6330280

Botswana Geologic RemoteSensing Centre (Botswana)

Plot 54353, 5th Floor Office B, Masa Centre,Gaborone, BOTSWANA +267-390-2878 +267-390-2879


Domestic Network

Office AddressMutsu-Ogawara Site Management Office 525-2 Aza-Futamata, Oaza-Obuchi, Rokkasho-mura Kamikita-gun, Aomori 039-3212 JapanTomakomai Site Management Office 308 Aza-Shizukawa, Tomakomai-shi, Hokkaido 059-1363 JapanAkita Site Management Office 219 Aza-Ashizawa, Funakawa, Funakawa Minato, Oga-shi, Akita 010-0511 JapanKuji Site Management Office 8-105-2 Heinokuchi, Natsui-cho, Kuji-shi, Iwate 028-0001 JapanFukui Site Management Office 1 Aza-Rinkai, 38 Ishishinbo-cho, Fukui-shi, Fukui 910-3133 JapanKikuma Site Management Office 4642-1 Tane, Kikuma-cho, Imabari-shi, Ehime 799-2302 JapanShirashima Site Management Office 1-108 Hibiki-machi, Wakamatsu-ku, Kitakyushu-shi, Fukuoka 808-0021 Japan

Kamigotou Site Management Office 818-411 Aza-Orishima, Tsuzukihamanouragou, Shinkamigoto-cho, Minamimatsuura-gun, Nagasaki 857-4415 Japan

Kushikino Site Management Office 1 Seisatsu-cho, Ichikikushikino-shi, Kagoshima 896-0046 Japan

Shibushi Site Management Office 5024-1 Aza-Shinsuzaki, Kawahigashi, Higashi-Kushira-cho, Kimotsuki-gun, Kagoshima 893-1615 Japan

Kamisu Site Management Office 6225-40 Okunoya, Kamisu-shi, Ibaraki 314-0116 JapanNanao Site Management Office 165-1 Mimuro-machi, Nanao-shi, Ishikawa 926-0007 JapanKurashiki Site Management Office 2-1-2 Shio-dori, Kurashiki-shi, Okayama 712-8054 JapanNamikata Site Management Office 600 Ko, Miyazaki, Namikata-cho, Imabari-shi, Ehime 799-2104 JapanFukushima Site Management Office 58-2 Shiohamamen, Fukushima-cho, Matsuura-shi, Nagasaki 848-0403 JapanHokkaido Metals Environment & Geo-thermal Resource Support Office 30-7 Moto-machi, Date-shi, Hokkaido 052-0022 Japan

Tohoku Metals Environment & Geother-mal Resource Support Office 2-5-17 Matsunami, Yamagata-shi, Yamagata 990-0023 Japan

Chugoku-Kinki Metals Environment & Geothermal Resource Support Office 2-10-1 Toranomon, Minato-ku, Tokyo 105-0001 Japan

Kyushu Metals Environment & Geother-mal Resource Support Office 1-5 Tashima Hon-machi, Hita-shi, Oita 877-0026 Japan

Kashiwazaki Test Field Office 690 Oaza-Hirai, Kashiwazaki-shi, Niigata 945-1353 JapanMatsuo Mine Pollution Control Project Support Office 1-3-1 Kashiwadai, Hachimantai-shi, Iwate 028-7303 Japan

Metals Technology Center 9-3 Furudate, Kosakakozan, Kosaka, Akita 017-0202 JapanKyushu Branch Office 2-19-24 Hakata-ekimae, Hakata-ku, Fukuoka-shi, Fukuoka 812-0011 Japan

★Head Office　★Technology & Research Center（TRC）●Petroleum Stockpile Site Management Office　　　LPG Stockpile Site Management Office●Kashiwazaki Test Field Office　■Metals Enviroment & Geothermal Resource Support Office,Kyushu Branch Office　■Metals Technology Center

Shirashima Site Management Office

Tomakomai Site Management Office

Kashiwazaki Test Field OfficeNanao Site Management Office

Fukui Site Management Office

Hokkaido Metals Environment & Geothermal Resource Support Office

Kurashiki Site Management Office

Kamisu Site Management Office

Mutsu-Ogawara Site Management OfficeMetals Technology CenterKuji Site Management OfficeMatsuo Mine Pollution Control Project Support OfficeAkita Site Management OfficeTohoku Metals Environment & Geothermal Resource Support Office

Technology & Research Center (TRC)

Head OfficeChugoku-Kinki Metals Environment & Geothermal Resource Support Office

Namikata Site Management OfficeKikuma Site Management Office

Kyushu Branch OfficeFukushima Site Management Office

Kamigotou Site Management Office

Kyushu Metals Environment &Geothermal Resource Support Office

Kushikino Site Management OfficeShibushi Site Management Office

http://www.jogmec.go.jp/

Head OfficeToranomon Twin Building

2-10-1 Toranomon, Minato-kuTokyo 105-0001 JAPAN

TEL : +81-3-6758-8000 FAX :+81-3-6758-8008

Technology & Research Center1-2-2, Hamada, Mihama-ku, Chiba-city,

Chiba 261-0025, JAPANTEL : +81-43-276-9212 FAX : +81-43-276-4061

:fbsfoefe.bsdi oovbm3fqpsu · in light of the marketing test conducted by the national government...

Documents