Deliver Sustainably Oil and Natural Gas Exploration Production E P Market Data Crude Oil Prices WTI barrel 150 100 50 0 Natural Gas Prices Henry Hub BOE 100 75 50 25 0

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Deliver Sustainably Oil and Natural Gas Exploration Production E P Market Data Crude Oil Prices WTI barrel 150 100 50 0 Natural Gas Prices Henry Hub BOE 100 75 50 25 0 Powered By Docstoc
					Deliver Sustainably

Oil and Natural Gas Exploration & Production (E&P)

Market Data Crude Oil Prices (WTI)
($/barrel)
150 100 50 0

Natural Gas Prices (Henry Hub)
($/BOE)
100 75 50 25 0

05CY

06CY

07CY

08CY

05CY

06CY

07CY

08CY

Nippon Oil Data

Production Volume
(Thousand BD)
200 150 100 50 0

Ordinary Income (Oil and Natural Gas E&P)
(Billions of yen)
150 120 90 60 30 0

05FY

06FY

07FY

08FY

05FY

06FY

07FY

08FY

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NIPPON OIL CORPORATION Annual Report 2009

The Oil and Natural Gas E&P business is an upstream division in the integrated operational framework of the Nippon Oil Group, and is positioned as one of the pillars in the Group’s growth strategy. We intend to make capital investments of ¥290.0 billion in this business over the period from fiscal 2008 to fiscal 2010, a lower figure than initially planned, reflecting changes in the business conditions. In fiscal 2008, our production volume for oil and natural gas from project companies we invest in was 126,000 BD. We will continue to work to expand production volume and supplement our reserves, while closely monitoring business conditions such as crude oil prices. In its upstream business, the Nippon Oil Group focuses its resources on four core areas; Southeast Asia, Oceania, the U.K. North Sea and the U.S. Gulf of Mexico. We will focus on activities in these four core areas to achieve growth in production volume. This strategy will efficiently amass the technological insight and experience that are essential for taking optimal advantage of our finite financial resources.

1.

Is the crude oil produced by the Group brought to Japan for refining?
Basically, crude oil produced overseas is not refined in Japan. This is a purely economic decision, based on the Company’s sales composition and its refining facilities, as well as the cost of transporting the crude oil to Japan.

2.

Is it true that the Nippon Oil Group only invests in projects, and has no actual track record as an operator?
In addition to the Rang Dong oil field in Vietnam and the offshore Sarawak gas field in Malaysia, we play a pivotal role in production activities as operator of 18 out of the 38 oil and gas fields in the U.S. Gulf of Mexico. The Group is an operator in exploration projects in the U.K. North Sea and in Libya as well.

3.

Is the scale of the Nippon Oil Group’s Oil and Natural Gas E&P business too small to compete with oil majors?
It is true that there is a substantial gap in strength, particularly in terms of financial capacity and workforce compared to the oil majors. We therefore consider the oil majors as parties to build partnerships with and not as competitors. While serving as a joint business partner in exploration blocks in the United States, Malaysia, Papua New Guinea and other locations, we independently pursue opportunities in areas where oil majors have little interest, providing that the areas have economic potential.

Annual Report 2009 NIPPON OIL CORPORATION

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