Sustainability Report 2024

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Sustainability Report 2024

Governance and Strategy

Governance

INPEX’s Board of Directors supervises issues relating to climate change. Regarding individual topics related to climate change, the Climate Change Strategy Working Group – an advisory body of the Sustainability Committee made up of around 30 members from organizations across the Company – assesses climate-related risks and opportunities once every year. INPEX's governance structure for climate change including compensation, is detailed in Sustainability Structure under the heading of Governance.

Strategy

We published our Corporate Position on Climate Change in December 2015. Subsequently, to support the respect countries’ efforts toward achieving the goals of the Paris Agreement, we established a target in January 2021 to achieve net zero emissions by 2050 (Scopes 1 and 2). With changes in the external environment as well as the updating of our Long-term Strategy and Mid-term Business Plan, we then reviewed our policies and targets for achieving net zero emissions by 2050. In February 2025, together with the announcement of INPEX Vision 2035, we revised our Corporate Position on Climate Change. We will continue our efforts to reform our energy structure toward achieving net zero by 2050, while still meeting the energy demands of Japan and the world.

In addition, our disclosures related to climate change response are in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We support the Japanese government’s laws and regulations (Act on Rationalization of Energy Use and Shift to Non-fossil Energy, Act on Promotion of Global Warming Countermeasures, etc.) and range of policies related to climate change, and incorporate them into our own policies and business strategies. In Japan, our primary base, we are active participants in the government-endorsed GX League. We engage in the emissions trading system (GX-ETS) and market-formation rule, demonstrating our leadership and commitment toward achieving net zero.

Corporate Position on Climate Change

  1. We will continue to meet the increasing energy demands of Japan and the world, fulfilling our responsibility for energy development and stable supply over the long term. At the same time, we will actively work towards transforming the energy structure to achieve a net zero by 2050.
  2. To contribute to the realization of the Paris Agreement goals on climate change, we will set climate change response targets challenging for net zero emissions by 2050.
  3. We will promote lower-carbon initiatives to meet societal needs toward net zero. Concrete measures include supplying natural gas as a “pragmatic transition fuel” in a cleaner manner. Additionally, we will provide lower-carbon solutions such as CCS and blue hydrogen/ammonia to third parties while strengthening new initiatives in power-related fields.

Climate-related Risks and Opportunities

We assess climate-related risks and opportunities every year. In FY2024, we conducted an assessment after the timeline was set to be in line with the period of the Mid-term Business Plan.

Status of Climate-related Risks at End of FY2024: Assessment Coverage, Expected Timing, and Action Plans

Status of Climate-related Risks

Transition Risks

 

Risk Category

Risk Description

Expected Timing of Risk Occurrence

Action Plan

Policies, laws, and regulations

Risk of direct costs for Scope 1 and Scope 2 emissions due to introduction and strengthening of carbon pricing systems, methane emission control regulations, environmental laws and regulations, and other such frameworks as the countries and regions where projects are located strengthen their climate change measures

Short-term

Mid-term
  • Promotion of efforts to reduce GHG emissions from projects
  • Monitoring of policies and trends in the countries and regions where projects are located
  • Implementation of financial impact and economic assessments
  • Introduction of clean energy in project operations
  • Achievement of zero routine flaring by 2030
  • Management to maintain methane emission intensity at 0.1%
  • Joining OGMP 2.0; enhancement of measurement, reporting, and verification (MRV) efforts, including at non-operator projects
  • Development and implementation of carbon credit strategy
  • Engagement with relevant stakeholders

Technologies and markets

Risk of lower demand for oil and gas due to a preference for low-carbon energy, such as renewable energy and electric vehicles

Long-term
  • Promotion of efforts to reduce GHG emissions from projects
  • Monitoring of policies and trends in the countries and regions where projects are located as well as technological progress
  • Acceleration of CCS and other low-carbon business efforts
  • Promotion of efforts to reduce costs

Reputation

Risk of requirement for absolute Scope 1 and Scope 2 emission reduction targets from 2035 toward net zero by 2050

Mid-term

Long-term
  • Promotion of efforts to reduce GHG emissions from projects
  • Monitoring of policies and trends in the countries and regions where projects are located
  • Establishment of targets of 60% reduction in net carbon intensity by 2035 and net zero by 2050
  • Acceleration of CCS and other low-carbon business efforts
  • Management to maintain methane emission intensity at 0.1%
  • Review of business portfolio
  • Development and implementation of carbon credit strategy
  • Assessment of new projects’ effects on GHG reduction targets

Risk of requirement for establishing Scope 3 emission reduction targets

Short-term

Mid-term
  • Engagement with suppliers; consideration of supplier diversification
  • Acceleration of CCS and other low-carbon business efforts
  • Disclosure of net zero strategy’s progress
  • Promotion of efforts to reduce GHG emissions at sales destinations through efforts such as sale of carbon offset products

Financing

Risk of adverse effects on funding as investors or financial institutions consider our business activities, efforts to reduce GHG emissions, or information disclosure to be inadequate

Short-term

Mid-term
  • Promotion of efforts to reduce GHG emissions from projects
  • Promotion of information disclosure in line with TCFD recommendations, etc.
  • Dialogue and engagement with investors and financial institutions
  • Engagement with funding providers and consideration of funding provider diversification

 

 

 

 

 

Physical Risks

 

Risk Category

Risk Description

Expected Timing of Risk Occurrence

Action Plan

Acute

Risk of adverse effects on operations due to extreme weather phenomena

Short-term
  • Implementation of regular assessment of acute physical risks
  • Incorporation of disaster countermeasures into designs, repairs and renovation of facilities
  • Development of manuals, implementation of drills and use of external information

Chronic

Risk of adverse effects on operational facilities due to the long-term average temperature increases, changes in rainfall patterns, and sea level rises

Mid-term

Long-term
  • Implementation of regular assessment of chronic physical risks
  • Incorporation of disaster countermeasures into designs, repairs and renovation of facilities
  • Development of manuals, implementation of drills and use of external information
  • Implementation of measures against sea level rises at coastal facilities

Short-termLess than one yearMid-termOne to less than three yearsLong-term Three years or more

Status of Climate-related Opportunities at End of FY2024: Assessment Coverage, Expected Timing, Strategies, and Progress

Status of Climate-related Opportunities

Opportunities Related to Resource Efficiency

Opportunity Assessment Target

Expected Timing of Opportunity Occurrence

Response Status

Improvements to energy efficiency in production processes

Short-term
  • Implement low-carbon operations through the fuel gas flaring reduction initiative, gas leak detection and repair (LDAR) program, and other initiatives at the Ichthys LNG Project in Australia

 

 

 

 

Opportunities Related to Energy Sources

Opportunity Assessment Target

Expected Timing of Opportunity Occurrence

Response Status

Use of renewable energy sources in production processes

Short-term

Mid-
term
  • Consider adopting a battery energy storage system (BESS) and small solar power generation system at the Ichthys LNG Project

Mid-
term

Long-term
  • Investigate switching from on-site combined-cycle power generation to renewable energy-derived grid power at the Ichthys LNG Project

Long-term
  • Evaluate the potential to introduce onshore hydropower in the Wisting Oil Field development plan

 

 

 

 

Opportunities Related to Products and Services

Opportunity Assessment Target

Expected Timing of Opportunity Occurrence

Response Status

Natural gas and LNG businesses

Mid-term
  • Conduct studies with the view to introducing CCS and increasing and expanding production capacity at the Ichthys LNG Project; promote lower-carbon operations by introducing measures to minimize flaring and fuel gas during production
  • Promote business activities, including the introduction of CCS, at the Abadi LNG Project
  • Pursue opportunities to join natural gas development projects where CCS introduction is expected

CCS business

Mid-term
  • Investigate a CCS project utilizing existing facilities and pipelines from the LNG site at Darwin in Australia and maritime Bayu-Undan gas-condensate field in Timor-Leste

Long-term
  • Conducting various studies after adoption of the Tokyo Metropolitan Area CCS Project and Tohoku Region West Coast CCS Initiative Project, in which we participate, under the 2024 Engineering Design Work for Advanced CCS Projects commissioned by Japan Organization for Metals and Energy Security (JOGMEC)
  • Conducting new 3D seismic survey and its processing work, and conduct assessment drilling at the Bonaparte Basin CCS block in Australia; commence joint study with JERA on establishing a value chain involving the separation and recovery of CO2 emitted in Japan and its transportation to Australia for storage
  • Investigate the feasibility of a future CCS project (accepting CO2 from third parties) at the Abadi LNG Project in Indonesia
  • Promote research and development related to technologies for efficient maritime transportation of CO2

Hydrogen business

Long-term
  • Completed feasibility study of large-scale blue hydrogen production project in Niigata Prefecture and undertaking study toward transition to FEED
  • Pursue opportunities to participate in clean ammonia business in Abu Dhabi
  • Completed pre-FEED work for a large-scale, low-carbon ammonia production project at the Port of Houston, Texas in the United States, through a collaboration with the Air Liquide Group, LSB Industries, and other companies; undertaking discussions toward transition to FEED
  • Signed a joint study agreement with Green Hydrogen International for a green hydrogen project in southern Texas of the United States and completed the feasibility study; undertaking discussions toward transition to next phase
  • Promote research and development related to technologies for efficient transportation of hydrogen

Power business

Short-term
  • Carry out additional development at Muara Laboh Geothermal Power Project in Indonesia for GHG reduction; commence trial drilling for Okuhida project; pursue new geothermal exploration projects in Japan
  • Continue to participate in bidding rounds for offshore wind power projects in Japan; pursue opportunities to participate in offshore wind power projects and power businesses in Europe
  • Commence study on implementing pilot project for solar thermal collection in Abu Dhabi
  • Promote solar power, storage battery, and onshore wind power projects through the Potentia Energy joint venture

Mid-term
  • Progress construction for Oyasu Geothermal Power Project in Akita Prefecture; promote geothermal exploration project in Fukushima; pursue new geothermal exploration projects in Japan (Hokkaido and the Tohoku region); expand existing projects and pursue opportunities to participate in new geothermal projects in Indonesia; commence preparation for trial drilling at Sempo area project
  • Progress construction of the floating offshore wind power project off Goto City in Nagasaki Prefecture
  • Study and pursue renewable energy generation and storage battery projects in Japan, as well as a power value chain that includes electricity trading

Long-term
  • Pursue projects combining geothermal energy with lithium batteries in the United States
  • Conduct and pursue various studies regarding floating offshore wind power projects in the EEZ

Underground resources other than oil and natural gas

Mid-term
  • Provide lateral support for the adoption of perovskite solar cells through supplying iodine, a by-product from Naruto water-soluble gas field

Long-term
  • Promote research and development related to technologies for efficient recovery of mineral resources from brine

Others

Short-term
  • Promote a carbon farming and potential future renewable biofuel project in Australia in conjunction with Australia and New Zealand Banking Group (ANZ) and Qantas Airways
  • Commence creation of J-Credits with Numata City in Gunma Prefecture
  • Pursue biomethane supply projects in Indonesia, etc.

Mid-term
  • Conduct studies regarding methane pyrolysis, etc.

Long-term
  • Conduct a joint feasibility study agreement with Masdar and Mitsubishi Chemical Group for a carbon recycle chemicals production project, including production of polypropylene derived from green hydrogen, in Abu Dhabi
  • Promote research and development of sustainable aviation fuel (SAF) using waste as well as artificial photosynthesis

 

 

 

 

Opportunities Related to Markets

Opportunity Assessment Target

Expected Timing of Opportunity Occurrence

Response Status

Access to new markets

Short-term
  • Sell carbon offset products
  • Discuss with relevant parties toward building of supply chain for low-carbon aviation fuel (LCAF)

Mid-term
  • Provide renewable diesel (RD), a low-carbon fuel derived from renewable resources, in Japan; conduct verification of RD40 (a fuel where diesel is mixed with 40% RD)

Short-termLess than one yearMid-termOne to less than three yearsLong-term Three years or more

Transition Risk Assessment

We use two methods to assess the potential financial effect of climate-related risks using scenarios in the International Energy Agency (IEA) World Energy Outlook (WEO) report. The first method is a valuation of our projects using our internal carbon price. We employ our internal carbon price on the base case of our valuation as well, because more than 150 countries and regions have already declared net zero targets by 2050, anticipating a growing number of countries to introduce carbon pricing as they bolster policies to tackle climate change. Through codifying application of the internal carbon price also on the base case, we have come to recognize the costs incurred for GHG emissions as an important factor in business investment. We also show our stakeholders that we are making management decisions after considering the transition risks.

Each year, we update our internal carbon price with reference to the carbon prices in the WEO. Starting in FY2023, we reflect on the IEA WEO carbon price forecast and, if there is a carbon price system in the country in which we operate, reference our quoted price based on factors such as estimates provided by external experts. If there is no carbon price system in the country in which we operate, we referenced variable prices linked to the 2023 version of the STEPS EU prices (2030: US$120/ton-CO2e; 2040: US$129/ton-CO2e; 2050: US$135/ton-CO2e).

However, the 2024 version of the STEPS EU prices on 2030 are at a higher level than the prices in the Announced Pledges Scenario (APS) by developed countries who have declared to achieve net zero emissions. Therefore, it is becoming less appropriate to use the STEPS EU prices as the base case for countries without a carbon price system. In addition, taking into consideration the system design overview of GX-ETS, Japan’s emissions trading system (ETS) which is currently being discussed, the concept such as free allocation of emission allowances is similar to the current ETS of South Korea among the countries listed in the WEO. As such, for FY2025 and onward, we use the predicted prices of South Korea in STEPS for countries without a carbon price system.

The second method is to assess the resilience of our business portfolio. This is an assessment of the effect on our portfolio from the oil and carbon prices in the STEPS, APS, and Net Zero Emissions by 2050 Scenario (NZE). We apply the oil and carbon prices under these three scenarios to the net present value (NPV) calculation for projects, and calculate the percentage of change from the NPV for the base case to assess the effect on our portfolio. We will continue to refine the implementation standards for this method to improve the competitiveness of our business portfolio as we factor in changes in the business environment.

Two Approaches to Financial Effect Assessment

 

Valuation of Projects

Assessment of Resilience of Portfolio

Assessment method

Assessment of the economic effect on projects using internal carbon prices

Assessment of the financial effect based on oil and carbon prices under the following scenarios:

  • Stated Policies Scenario (STEPS)
  • Announced Pledges Scenario (APS)
  • Net Zero Emissions by 2050 Scenario (NZE)

Metric

IRR based on internal carbon price (base case)

The percentage of change from NPV based on application of the relevant metric prices

Status

Adopted as base case since FY2021

Implemented since FY2018; NZE scenario added from FY2022

Physical Risk Assessment

We analyze physical risks to the Company as either acute risks or chronic risks, reviewing them as necessary. In FY2018, we reviewed the process for assessing physical risks, then developed a roadmap and started assessing physical risks at the Ichthys LNG and our domestic assets in Niigata Prefecture, as major operator projects. Together, they account for 100% of our insurance coverage of domestic and overseas operator projects in operation. Subsequently, we reassessed physical risks at the Naoetsu LNG Terminal, one of our major facilities, following a revision of a report that informs our assessments. This report provides observations and projections assessment, as issued by the Japan Meteorological Agency.

The Representative Concentration Pathways 8.5 (RCP 8.5) scenario, discussed in this report, predicts an average sea level rise of approximately 0.19 meters. Our assessment showed that this facility structure can withstand a sea level rise of that magnitude. We also hire an external assessment service to calculate the costs of direct and indirect damage to our domestic assets caused by potential riverine flooding and storm surges. As a result, we confirmed limited potential damage as of 2030 and 2050, to the top 10 sites in Japan (plants, gas pipelines, and major subsidiary offices) covered by our comprehensive corporate indemnity insurance. For all these physical risk assessments, we used the same metrics, such as mid-21st century average temperature rises and sea level rises, in the RCP 8.5 scenario outlined in the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5).

For chronic risks, the assessments indicate a low risk from floods at the Ichthys LNG Project and other major facilities located on the seaboard because they have been designed to withstand rising sea levels. Future temperature increases could conceivably impair operating efficiency, but because we conduct ongoing improvements and maintenance to the facilities as required, we have concluded that no major damage is likely to occur through 2030. For acute risks, we strive to ensure that our major operator projects are adequately prepared for typhoons, cyclones, and other extreme weather phenomena through appropriate planning, operational measures, training, and use of external information.

At the LNG receiving jetty at the Naoetsu LNG Terminal, we have installed an interconnection line linking to the neighboring power station. This setup ensures continuity in operations in the event of damage to our own facilities, enabling us to continue to receive LNG via the jetty at the power station. Insuring our major facilities against natural disaster is another way we strive to reduce financial losses associated with acute risks. We also assessed risks to our gas pipeline from natural disasters in Japan and considered countermeasures, from which we carried out replacement work on sections of the pipeline deemed to have a high natural disaster risk.

In the Hazard Identification (HAZID) guidelines, a HSE management system document, we have included a section on the impact of climate change in the introductory work for HAZID workshops. We are incorporating physical risk assessments into our risk management approach across all life cycles of business activities, including new projects. Cross-organizational teams will continue to conduct periodic physical risk assessments and make appropriate disclosures. Simultaneously, we aim to diversify our analysis methods to conduct more comprehensive assessments.

INPEX’s Low-carbon Society Scenarios

In considering the outlook for the business environment, including energy demand and supply to realize a low-carbon society by 20501, we refer to the STEPS, APS, and NZE of the IEA WEO as well as the Reference Scenario and Advanced Technologies Scenario of The Institute of Energy Economics, Japan (IEEJ).

INPEX Vision 2035, our Long-term Strategy and Mid-term Business Plan, was developed in February 2025 based on these scenarios. We will continue to grasp changes in the business environment through scenario review, and review management strategies and plans in line with social trends.

1The IEA WEO sets out an outlook on the global energy situation through 2050.

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