Climate Change Response Goals and Efforts to Achieve Them

We have set three goals to help realize a net zero carbon society in accordance with the objectives of the Paris Agreement.

The first goal is to achieve net zero emissions by 2050 pursuant to the Paris Agreement. The second is to achieve a reduction of at least 30% in net carbon intensity (compared to 2019) by 2030 in the process of fulfilling the first goal. Scope 1 and 2 emissions, which are emissions from our business processes, come under these goals. The third goal is to cooperate with all relevant stakeholders across the value chain to reduce the Scope 3 emissions from combustion of the oil and gas we sell.

In our 2022–2024 Medium-term Business Plan, we added one further goal to reduce our net carbon intensity by 10% (4.1 kg-CO₂-e/boe) over that three-year timeframe, in pursuit of our 2030 target. In FY2022, the first year of this plan, we managed to reduce our net carbon intensity to 28 kg-CO₂-e/boe.

In addition to promoting our five net zero businesses and moving towards cleaner upstream businesses, specific measures we plan to take to achieving our net zero goals include: maintaining methane emissions intensity (methane emissions/natural gas production) at its current low level (about 0.1%); and zero routine flaring.

Details of these initiatives are set out in our Long-term Strategy and Medium-term Business Plan (INPEX Vision @2022) and INPEX’s Current Initiatives based on the Corporate Position on Climate Change.

Climate Change Goals

INPEX has set its own goals to help achieve a net zero carbon society in accordance with the objectives of the Paris Agreement.

INPEX Emissions

	FY2020, Jan-Dec	FY2021, Jan-Dec	FY2022, Jan-Dec
Direct GHG Emissions (Scope 1)1 (thousand tons CO2e)	7,328	7,302	6,839
Indirect GHG Emissions (Scope 2)1 (thousand tons CO2e)	148	136	69
Net carbon intensity2 (kg CO2e/boe)	35	33	28
Methane emissions intensity3 (%)	0.07	0.04	0.05

INPEX's Net Carbon Intensity

Making Our Operations Cleaner

In FY2022, GHG emissions within our operational control¹ amounted to 6.38 million tons-CO₂-e, a decrease of approximately 0.32 million tons-CO₂-e on FY2021 levels. The main reason for the decrease was a reduction at Ichthys LNG of the low-pressure gas flaring² that occurs during the gas treatment process. The reduction was achieved due to the stabilization of operations at Ichthys LNG, which commenced year-round operations in FY2019.

¹ Operational control: This scope includes our head office and Technical Research Center (both in Tokyo), overseas offices, and operational organizations in Japan and overseas

² Flaring: The act of incinerating and detoxifying excess hydrocarbon gas produced by crude oil drilling facilities and gas processing facilities, instead of releasing it to the atmosphere

Annual GHG Emissions within INPEX’s Operational Control (Scope1+2)

Aggregation, Analysis, and Reporting of GHG Emissions

The GHG emissions from each office are regularly aggregated, analyzed, and reported in accordance with procedures based on host country systems as well as international guidelines. We also obtain third-party assurance of our environmental data to ensure the reliability of our GHG emissions reporting.

Efforts to Reduce GHG Emissions

In our operator projects in Japan and overseas, depending on the situation at each site, we carry out energy-saving activities to reduce GHG emissions, avoid continuous flaring and venting during routine operations, and reduce fugitive methane emissions.

In our domestic exploration and development operations, through our membership in the Japan Petroleum Development Association, we participate in the Keidanren Carbon Neutrality Action Plan, a voluntary emissions reduction initiative of the Japan Business Federation (Keidanren).

In FY2021, we reexamined our targets for reducing emissions by FY2030.

Efforts to Reduce Flaring

We have set a goal of zero routine flaring in our operator projects by 2030. To reach this goal, since FY2021 relevant departments across the Company have been working together to study measures to reduce flaring.

In Japan, as part of our research and development of flaring reduction measures, we are studying the introduction of initiatives to reduce atmospheric CO₂ emissions by fixing carbon in the flare gases through the use of methane pyrolysis technology

Zero Flare by Methane Pyrolysis

Efforts to Reduce Fugitive Methane Emissions

Our target is to maintain our methane emissions intensity at its current low level (about 0.1%).

In FY2022, our methane emissions intensity was 0.05, which is below our target level.

To manage and reduce methane emissions, we have been aggregating and reporting data on fugitive methane emissions based on international methods since FY2018. In FY2019, we conducted methane leak inspections at the applicable points of equipment and facilities at our projects in Japan. We also established a structure for data aggregation and reporting. In FY2020, we brought in a laser methane detector to conduct leak inspections at almost all applicable points and took measures for any points where fugitive emissions were detected.

For our overseas projects, in FY2022 we carried out methane leak inspections through the leak detection and repair (LDAR) program using infrared cameras at the Ichthys LNG central processing facility (CPF) and floating production, storage, and offloading (FPSO) facility.

We are considering implementing similar inspections at other overseas projects and will continue to take further action to reduce fugitive methane emissions.

We will also continue to enhance our methane emissions management in light of international initiatives and trends related to the Measurement, Reporting, and Verification (MRV) framework and methane emissions management.

CO₂ Absorption through Forest Conservation

Forest Conservation as One of the Five Net Zero Businesses

In our Long-term Strategy and Medium-term Business Plan (INPEX Vision @2022) published in February 2022, we identified forest conservation as one of the five net zero businesses we plan to promote in pursuit of a net zero carbon society by 2050.

Importance of Forest Conservation and Afforestation in Tackling Climate Change

There is now growing interest in nature-based solutions as a way to tackle climate change, and as a responsible company with worldwide operations, we are also eager to increase our involvement in this area.

Forest conservation and afforestation projects not only reduce CO₂ emissions by preventing deforestation and forest degradation and increase CO₂ absorption through afforestation, but also offer co-benefits by safeguarding critical biodiversity, conserving water sources, reducing soil erosion, and raising the living standards of local communities, thereby contributing to achieving the United Nations’ Sustainable Development Goals (SDGs).

INPEX’s Forest Conservation and Afforestation Initiatives

In accordance with the approach of a mitigation hierarchy,³ we are focusing on CO₂ absorption through forest conservation and afforestation as a complement to our initiatives to achieve our net zero goal through cleaner oil and gas businesses, a transition to natural gas, CCUS, and renewable energy.

As the operator of Ichthys LNG, INPEX has built experience in forestry projects to reduce CO₂ emission through its involvement in the planting and management of eucalyptus trees and in savannah fire management programs in Australia.

In March 2022, we entered a memorandum of understanding with the Australia and New Zealand Banking Group (ANZ) and Qantas Airways to progress the evaluation of a project that brings together carbon farming and renewable biofuels.

In addition, we are supporting the Rimba Raya Biodiversity Reserve REDD+ project in Indonesia run by InfiniteEARTH, through which we started acquiring long-term carbon credits in FY2021.

³ Mitigation hierarchy: The idea that after avoiding, minimizing, or taking steps to remedy negative impacts on the environment, the final measure should be an offset to compensate for any remaining impact

INPEX’s Approach to Procuring and Utilizing Carbon Credits

For our carbon offsets on GHG emissions, we use carbon credits certified under highly trusted domestic and international schemes, which we receive in return for support and participation in forest conservation projects. We also track the latest developments in the carbon credit market such as initiatives in Japan and overseas and assess the medium- and long-term performance of our projects. Through these efforts, we work to procure high-quality credits.

Credits Certified under Highly Trusted Domestic and International Schemes

We select and use carbon credits certified under the following schemes:

VCS (Verified Carbon Standard): Verification standard established by Verra, an international body for setting carbon offset standards

JCM (Joint Crediting Mechanism): Japanese Government-led bilateral credit program for reduction and removal of GHG emissions in cooperation with developing countries, with both sides sharing the benefits of reduction and removal

J-Credit: Scheme designed to certify the amount of GHG emissions reduced and removed in Japan, with credits certified by the Japanese Government

Efforts to Procure High-quality Credits

(1) Internal Project Assessments

To ensure acquisition of high-quality carbon credits from top-grade projects, we first assess projects before making a final selection and purchase. These assessments are designed to identify any permanence⁴ concerns or potential issues with local communities and other stakeholders, and also to verify that land ownership and usage rights are unambiguous and guaranteed to extend beyond the life of the crediting period. We make a comprehensive judgment on projects by considering the results of these internal assessments alongside the results of credit evaluations by external assessment companies such as Calyx Global.

(2) Priority on Projects with Co-benefits

In addition to the effectiveness of reducing CO₂ emissions and absorbing CO₂, we give preference to projects that deliver co-benefits by contributing to the United Nations’ SDGs.

⁴ Permanence: The concept that refers to the need to ensure that CO₂ reduction and absorption volumes are non-reversible, with no risk of release into the atmosphere

SD Vista: Sustainable Development Verified Impact Standard: This is a framework for certifying a project’s contribution to the SDGs. The Rimba Raya Biodiversity Reserve REDD+ project received certification for all 17 SDGs.

CCB (Climate, Community and Biodiversity Standards): This framework certifies projects that simultaneously address climate change, support communities and conserve biodiversity. The Rimba Raya Biodiversity Reserve REDD+ project was awarded Gold Level (projects providing exceptional benefits) on all three criteria.

Supply Chain Emission Reduction Initiatives—Towards Scope 3 Reduction

Promoting the Sale of Carbon-neutral Products

We promote the sale of carbon-neutral products to our customers and the total GHG emission reduction through the sales of such products so far is more than 2 million tons of CO₂ equivalent. Carbon-neutral products comprise LNG, natural gas, or LPG products sold by INPEX for which the GHG emissions produced across the life cycle—from extraction through transportation and combustion—are offset by the equivalent volume of carbon credits, resulting in net zero GHG emissions. By supplying these carbon-neutral products, we contribute to our customers’ efforts to reduce their supply chain carbon footprints.

Efforts to Reduce Contractor and Supplier Emissions

We encourage our contractors and suppliers to reduce their GHG emissions. Our Supplier Code of Conduct sets out specific expectations for these business partners to undertake voluntary environmental initiatives, such as improving energy efficiency and other measures to reduce GHG emissions.

The INPEX Health, Safety and Environmental (HSE) Policy also states that we will “pursue every effort to reduce Greenhouse Gas (GHG) emissions and adhere to the GHG emissions management process.” In line with our efforts to reduce emissions across the supply chain, our contractor and supplier agreements include a clause requiring compliance with our HSE Policy.

The INPEX Low-Carbon Society Scenarios

In considering the outlook for the business environment, including energy demand and supply toward a low-carbon society by 2050,⁵ we refer to the Stated Policies Scenario (STEPS), the Announced Pledges Scenario (APS), and the NZE Scenario of the IEA WEO as well as the Reference Scenario and Advanced Technologies Scenario of the IEEJ.

Our Long-term Strategy and Medium-term Business Plan (INPEX Vision @2022) was developed utilizing these scenarios, and going forward, we will continue to use scenario reviews to quickly identify changes in the business environment and review management strategies and plans in line with social trends.

⁵ The IEA WEO sets out a panoramic view of the international energy scene through 2050

Assessment of Financial Impact of Climate-related Risks

We use two methods to assess the potential financial impact of climate-related risks.

The first method is an economic assessment of projects using our internal carbon price. This assessment forms our base case. The reason we use this is because more than 130 countries have already declared net zero targets by 2050, and we expect a growing number of countries to introduce carbon pricing as they bolster efforts to tackle climate change.

We review our internal carbon price each year with reference to the carbon prices in the IEA WEO STEPS. Starting in FY2023, we reflect the IEA WEO carbon price forecast and reference relevant policy cost forecast if there is a carbon price system in the country in which we operate; and if not, we reference variable prices linked to the STEPS EU prices (2030: US$90/tCO₂e; 2040: US$98/tCO₂e; 2050: US$113/tCO₂e).

Our second method is to assess the financial impact on our business portfolio. This is an assessment of the financial impact of the market risks to our portfolio resulting from the oil and carbon prices in the IEA WEO APS and NZE. Changes in the oil and carbon prices shown in the IEA WEO APS and NZE are applied to the net present value (NPV) calculation for the project, and the percentage of change from the NPV for the base case is calculated as the impact on our portfolio.

Despite difficulties in formulating assumptions, we have adopted this as one of the methods to assess the financial impact on our portfolio. We will continue to refine the implementation standards for this method and to improve the competitiveness of our portfolio as we factor in changes in the business environment.