OOVBM3FQPSUprojects, technology development based on Japanese companies or resource diplomacy needs, oil & gas field evaluation studies, collection of technical information, provision

http://www.jogmec.go.jp/Japan Oil, Gas and Metals National Corporation

ANNUAL REPORT

Annual ReportYear ended March 312014

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

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INDEX■Message from the President ･････････････････････････ 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　　Report of Independent Auditors ･･･････････････････ 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%

Tin100%

Crude Oil99.68%

0.32% 2.44% 0.65%

2.22%

Geothermal97.78%

Coal99.35%

Imports Undeveloped Developed

Imports

　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

1Annual Report 2014

In commemoration of the issue of the “Annual Report 2014” summarizing the achievements JOGMEC made during fiscal 2013, I would like to extend my deep gratitude for your understanding and support for JOGMEC.

Following the revision of the Japan Oil, Gas and Metals National Corporation Act (JOGMEC Act) in September 2012, JOGMEC has steadily advanced its actions for the development of coal and geothermal resources that were added as new corporate operations. JOGMEC also produced results in a wide variety of areas with a focus on the stable supply of resources in the first fiscal year of the 3rd-term medium target period (from fiscal 2013 to fiscal 2017).

In recent years, the world resource markets have been affected by continued unstable conditions, such as increases in demand triggered by the growth of emerging economies, accelerating technological risks related to exploration and development, geopolitical factors, rising resource nationalism and soaring resource prices. In addition, Japan has suffered from large trade deficits due to the import of fossil fuels for thermal power generation since the Great East Japan Earthquake in 2011. In this situation, a comprehensive strategy on resources and energy, including coal and geothermal, is needed.

JOGMEC has taken the following actions in order to properly respond to the changing circumstances surrounding resources and energy and to fulfill its mission of providing a stable supply of resources and energy to Japan.

For Oil and Gas Upstream Investment and Research & Development, JOGMEC selected to provide equity capital for three exploration projects and one asset acquisition project including a Canadian shale project that is expected to become a new LNG supply source, a large LNG project and a project in frontier areas, a liability guarantee for oil sands development project, in an effort to contribute to the promotion of the exploration and development activities of Japanese companies. JOGMEC has conducted geological surveys prior to exploration and development in Cambodia, Vietnam, Iraq, Kenya and East Siberia. JOGMEC also launched new projects in the Gulf of Mexico and the western waters along the Republic of Seychelles in Africa. With regard to areas of research and development, JOGMEC completed all of the on-site operations of the world's first offshore methane hydrate production test in the waters around our country and embarked on examinations for the next production test. In addition, in international joint research with oil- and gas-producing countries, JOGMEC's cooperation in enhanced oil recovery technology with CO2 gas injections in Abu Dhabi and Vietnam was highly evaluated by both

countries and JOGMEC contributed to maintaining and securing the interests that Japanese companies have in both countries.

For Coal Resource Development, in addition to the conventional system of conducting joint surveys based on memorandum of understanding (MOU) with the government of coal producing countries, JOGMEC established a new joint venture (JV) survey system. It aims to transfer options rights which JOGMEC has acquired by sole exploration funding during farm-in period. JOGMEC conducted two joint surveys and one JV survey in fiscal 2013. Regarding to upgrading and slurrification technology for low rank coal utilization in Indonesia, JOGMEC succeeded in long-term testing and completed demonstration and disseminating projects. For its technological transfer project to strengthen relationships with coal producing countries, JOGMEC continuously worked to transfer coal mining and safety technologies by accepting trainees from Vietnam, China and Indonesia and sending trainers to those countries.

For Geothermal Resource Development, JOGMEC selected 20 projects (13 large-scale projects and 7 small community-oriented projects) including 10 new ones as subvention projects for high-risk initial surveys. Of these 20 projects, 8 developed into well drilling surveys and 6 of those 8 projects confirmed geothermal resources. JOGMEC hosted explanatory meetings and hearings about providing financial assistance (equity capital and liability guarantee system) to understand the needs of private companies and demands for capital. As a result, JOGMEC selected two liability guarantee projects including a small one by a hot springs association for the first time since the establishment of the system. In addition, JOGMEC conducted aerial geophysical surveys in two areas in Kyushu using the gravitational deflection method, Japan's first use of the survey method and which makes use of the latest exploration technology, to explore the possibility of developing geothermal resources.

For Metals Strategy, Exploration and Technology Development, JOGMEC selected one new project to provide equity capital for exploration as financial assistance provision and supported Japanese companies’ exploration and development activities by conducting three exploration funding projects. Prior to its activities, JOGMEC formed 10 new projects for joint surveys with the public mining corporations of resource-rich countries and foreign companies, a figure which hugely exceeds that of the previous fiscal year, and conducted 37 projects in 18 countries. Meanwhile, JOGMEC co-hosted the J-SUMIT in collaboration with the Ministry of Economy, Trade and Industry and proactively conducted resource diplomacy through meetings with the mining ministers

2 3Annual Report 2014Annual Report 2014

Message from the President

and heads of state of African countries in an effort to strengthen its relationships with resource-rich countries. In addition, for marine resource development, JOGMEC signed a 15-year contract with the International Seabed Authority (ISA) on cobalt-rich crust exploration in the high seas and pioneered the securing of exclusive interests. For its technological development, JOGMEC developed remote sensing data analysis technology to identify a particular rock in rare metal ore deposits and confirmed its effectiveness through field tests. JOGMEC completed the practical model of a portable spectrum meter that is superior to conventional models in portability and can be used with a wider wavelength range, and expanded the scope of measurable minerals.

For Stockpiling, JOGMEC managed national petroleum and gas stockpiling bases safely and efficiently and also conducted safety measures and drills in simulation of disasters. In addition, JOGMEC completed restoration work for the functions of the national petroleum stockpiling base in Kuji, which was damaged by the Great East Japan Earthquake in 2011. For its international stockpiling operations, JOGMEC strengthened Japan's relationships with primary crude oil suppliers by continuing to conduct joint oil stockpiling projects with the United Arab Emirates and Saudi Arabia, and also continued to contribute to establishing stockpiling systems in ASEAN countries. For rare metal stockpiling, JOGMEC purchased rare metals with much consideration given to the supply-demand and price trends.

For Mine Pollution Control, JOGMEC made an effort to maintain and improve its capability to cope with emergencies by conducting counter-disaster drills in simulation of thunder and lightning blackouts at the Matsuo Mine Pollution Control Project Support Office in Iwate Prefecture, providing technical assistance for the reinforcement of earthquake-proof structures in simulation of large-scale earthquakes and taking measures against the aging and degradation of facilities. In addition, for mine pollution control projects carried out by local governments, JOGMEC provided guidance for two surveys on the basic policy of measures and assistance for nine projects by giving on-site consultation services to mine pollution control work. For mine pollution control technological development, JOGMEC advanced surveys and research on the applicability of passive treatment technologies and technological development related to mine filling for the quality improvement of drainage, and also embarked on surveys and research on new mine drainage treatments using plants. In addition, for its activities providing technological information, JOGMEC continuously conducted human resources development and technological transfers focusing on resource-rich countries in an effort to strengthen its relationships

with those countries through cooperation with the governments of those countries by sending specialists to Peru and Cambodia and through mine pollution control seminars in Indochina and African regions, as well as hosting forums to exchange information about mine pollution environments with local governments and private companies.

JOGMEC was able to smoothly implement the transitional functions of coal mining that it had taken over from New Energy and Industrial Technology Development Organization (NEDO) in April 2013, including system development in the first fiscal year and operations related to asset succession.

Our lives directly depend on the securing of resources and energy. Thus, JOGMEC is keenly aware that our responsibility is increasing by watching the domestic and foreign situations. By reaffirming the significance of our responsibility, JOGMEC is determined to continuously make every effort to secure the stable supply of resources and energy for Japan. Your continuous support will be greatly appreciated.

Hirobumi KawanoPresident, JOGMEC


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 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●Research & development　Conducting R&D activities from the perspective of building and strengthening relations with oil and gas producing countries, satisfying Japanese companies’ needs, and securing resources●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 approaches to coal-producing countries　Conducting joint operations with coal-producing countries●Provision of finance assistance Providing equity capital and liability guarantees for 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　Demonstrating and disseminating low grade coal technologies

Geothermal Resource Development

●Geological surveys and grant subsidies　Conducting geological surveys to evaluate geothermal resource potential and granting subsidies to Japanese companies etc. for initial surveys of geothermal resource development●Provision of financial assistance　Providing equity capital and liability guarantee for exploration and production of geothermal resource by Japanese companies●Gathering and provision of information　Gathering and providing information related to geothermal resource development●Technological development　Conducting R&D projects relating to geothermal resource development

Metals Strategy, Exploration,and TechnologyDevelopment

●Multi-faceted approach to metal resource-rich countries　Conducting geological surveys to help Japanese companies secure mineral interests and to support their exploration projects ; and also conducting Deep-seafloor resource surveys●Provision of financial assistance　Providing equity capital, loans and liability guarantees for metal exploration and development by Japanese companies●Geological surveys　Conducting geological surveys to help Japanese companies secure mineral interests and to support their exploration projects:; and also conducting Deep-seafloor resource surveys●Collecting, analyzing, and providing information　Collecting, analyzing and providing information related to metal mining●Developing human resources　Developing human resource in metal resource development●Technological development　Developing exploration techniques and production 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, engaging in international cooperation, and operation on petroleum stockpiling technology●Steady promotion of LPG stockpiling　Overall management of national LPG stockpiles including stockpiling facilities under integrated management, operations related to cavern mining technology●Stockpiling and trend surveys of rare metals　Releasing and procuring materials, and research for rare metals markets and industry trends

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 developing countries　　


JOGMEC's Activities


●JOGMEC completed geological surveys in Cambodia and Vietnam, and Japanese companies acquired the exclusive negotiation

rights. Negotiations are now under way to acquire the interests of the exploration blocks.

●A Japanese company was successfully awarded two exploration areas in Greenland, which is one of the world’s leading frontier

regions.

●For its financial assistance projects, JOGMEC selected five new projects, including financial assistance for a Canadian shale gas

project that is expected to be a new LNG supply source. JOGMEC contributed to Japan's policy issue to secure stable energy

supplies and inexpensive resources.

●Two financial assistance projects came on stream. Of these projects, the Gharraf oil field in Iraq has been switched to commercial

production phase.

●In Abu Dhabi, where JOGMEC provided technological and human resources cooperation, the 15-year interests of the upper

Zakum oil field were extended.


●JOGMEC established a JV survey system with interest-transference options for Japanese companies by utilizing its experience in

metal resources development and formed the first project with the system in Australia.

●JOGMEC formed a cooperation framework (MOU) with governmental organizations from Australia (Queensland) and

Mozambique, which are both significant coal-producing countries.

●JOGMEC steadily strengthened its relationships with resource-rich countries through the use of its technologies, such as the

successful demonstration of its lignite hydrothermal upgrade slurrification technology


●JOGMEC selected 10 new projects for geothermal resource development surveys. JOGMEC has 20 surveys, including ongoing

projects, with confirmed geothermal resources in 6 of them.

●For its financial assistance, JOGMEC has selected to provide two liability guarantees for development projects.

●JOGMEC conducted aerial geophysical surveys using the gravitational deflection method in two areas in Kyushu. This was the first

time this method has been used in Japan.

Metal Strategy, Exploration, and Technology Development

●JOGMEC significantly expanded its resources by conducting further surveys in the South Africa Waterberg District JV Project

(platinum metals).

●JOGMEC selected a new financial assistance project for an exploration in Alaska for zinc, the supply and demand of which may

become tight due to the successive closures of large mines.

●JOGMEC pioneered the signing of the world's first cobalt-rich crust exploration area contract with the International Seabed

Authority (ISA) and secured exclusive interests.

●Regarding its cooperation framework (MOU) with resource-rich countries and their government organizations, in the first fiscal

year, JOGMEC established 11 of the 20 frameworks set by the mid-term plan.

Stockpiling ●JOGMEC has steadily proceeded with earthquake and tsunami measures, having nearly completed the restoration of the national

petroleum stockpiling base in Kuji.

●Regarding gas-in process for the national LPG stockpiling bases, JOGMEC procured LPG derived from U.S.-made shale gas and

reduced costs by not following the conventional pricing model.

●For its joint stockpiling projects with oil-producing countries, JOGMEC lent additional crude oil tanks to Saudi Aramco and

ADNOC according to the government's instruction.

●JOGMEC conducted increased stockpiling of rare metals, which were judged as being vital to our country's industry and whose

supplies were thought to be difficult to secure.

Mine Pollution Control

●JOGMEC consistently conducted mine pollution control projects in response to requests from local governments,

including the operation of the Matsuo Mine Pollution Control Project Support Office, which has had no accidents for 32

years.

●JOGMEC took proactive actions for the transference of mine pollution control technology by organizing mine pollution

control technology seminars in five countries, including South Africa, and sending specialists to Peru.

Highlights of the Fiscal Year ended 31 March 2014 (April 2013 to March 2014)


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.

CHAPTER

1Oil and Gas UpstreamInvestment and Research & Development

The gas field jointly owned by the partnership which is established by a subsidiary of Mitsubishi Corporation and Encana Corporation Source : Cutbank Ridge Partnership

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

Preparatory stage Exploration stage Development stage Production stage

Areastrategy

Preliminarystudies Negotiation

Geological surveyGeophysical survey 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 Rights

Equity Capitalfor Exploration

Liability Guarantee

Equity Capital for natural gas liquefactionand 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

Building and strengthening the relationships with oil and gas producing countries

　In order to contribute to ensuring a stable supply of energy resources to Japan, JOGMEC, taking advantage of its unique position as a government agency with high technical capabilities, has been working to build and strengthen the relationships with oil and gas producing countries through following activities: the implementation of joint projects on technical studies and technology development, the provision of hands-on training in exploration, development and production engineering, and bilateral and multilateral collaborations . Moreover, JOGMEC strives to strengthen the presence of Japanese oil and gas sectors as well as JOGMEC itself by actively participating in international conferences and international oil and gas exhibitions.

Providing financial assistance for exploration and development activities by Japanese companies

　It is significant for energy security in Japan to ensure Japanese companies to engage oil and gas exploration and production activities. 　Since oil and gas exploration and development activities are required large scale investments over extensive periods of time and involves extremely high risks, it should be 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 financial assistance to cover up

to 75% of total costs of project companies by providing equity capital and/or liability guarantees.

Collecting, analyzing, and providing information

　As a specialist organization supplying data on upstream oil and gas operations, JOGMEC surveys and analyzes a wide range of issues, including the global resource and energy situation, regulations and tax regimes in oil and gas producing countries, information on newly opened exploration areas, and the activities of international oil companies, and shares the results of its surveys and analyses with private companies and other relevant entities. 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 Japanese oil & gas exploration companies. A broad range of activities are conducted by JOGMEC including geological surveys for E&P projects, technology development based on Japanese companies or resource diplomacy needs, oil & gas field evaluation studies, collection of technical information, provision of training for both domestic and overseas technical staff, analysis of data on domestic oil & gas resources, and joint research with oil & gas producing countries.

■Workshop during overseas training program

JOGMEC’s Oil and Gas Development Support

7Annual Report 2014

Business Overview

Geological and geophysical surveys　With the aim of allowing Japanese companies to acquire interests, we are conducting geological and geophysical surveys as an initial stage of exploration for oil and natural gas.

【Southeast Asia (onshore Cambodia and offshore Southern Vietnam)】　In Northern Cambodia’s onshore area, we completed the 2D seismic survey which started in February 2012. Also, we completed a 2D seismic survey and surface geochemical survey in Southern Vietnam’s offshore area, Through these surveys, we have successfully obtained exclusive negotiation rights for Japanese companies with regard to the acquisition of blocks in Cambodia and Vietnam.　

【Africa and the Middle East (onshore Kenya, offshore Seychelles and onshore Iraq oil field)】　We conducted Full Tensor Gravity Gradiometry (FTG) and 2D seismic surveys, etc. in onshore Kenya on the basis of the Agreement we signed with the National Oil Corporation of Kenya (NOCK) concerning joint surveys in April 2012. We will be able to participate NOCK’s blocks after completing our comprehensive geological interpretation based on the acquired seismic data.　In addition, we signed a joint survey agreement for the western waters along Seychelles with the government of the Republic of Seychelles and PetroSeychelles in August 2013 and conducted a 2D seismic survey, etc. Upon completion of our comprehensive geological interpretation based on the acquired seismic data, Japanese companies that are interested in the target areas will have priority bids for the acquisition of blocks. We also completed surveys, including a seismic survey interpretation, in an onshore Iraq oil field and started negotiations for the acquisition of interests.

【Projects in other regions (Mexico, East Siberia and Greenland)】　In Mexico, which is introducing foreign capital for oil and natural gas resources development as a result of a constitutional revision, we started and conducted surveys in the deep waters in the northern area of offshore Mexico, which has high potential.　We are also continuing to advance our joint exploration survey projects with Russian companies in East Siberia. This region is geographically close to Japan and has potentially rich reserves of oil and natural gas. We expect that our joint projects will lead to the diversification of supply sources for Japan through the entry of Japanese companies into East Siberia.　In addition, the Greenland Petroleum Exploration Co., Ltd., to which JOGMEC has provided financial assistance, exercised the preferential position obtained through the geological surveys that JNOC and JOGMEC jointly conducted with the western oil majors in and after 1989 and won a bid for two exploration blocks with its partners in the Eastern waters of Greenland, which is the world’s leading frontier.

Financial assistance for exploration and development activities by Japanese companies

　In fiscal 2013, we selected a Canadian shale gas development project and other projects in frontier regions and promoted actions for the diversification of supply sources. In addition, for projects in which the import price of LNG whose demand is growing is expected to decrease, we introduced assistance enhancement measures by raising the upper limit of the liability guarantee rate and lowering the liability guarantee fee rate.　Specifically, in Canada, we selected to provide equity capital for asset acquisition to Shale Gas Investment Canada Ltd., which is conducting shale gas development projects in the Province of British Columbia, and also selected to support Japan Canada Oil Sands Ltd., which is conducting oil sand development projects in the Province of Alberta through liability guarantees. 　In addition, for our actions in frontier regions, we selected to provide equity capital for exploration for Japan South Sakha Oil Co., Ltd. (JASSOC), which is conducting projects in Irkutsk Oblast, Russia. This company was founded due to the transition of geological and geophysical surveys that JOGMEC jointly conducted with the Irkutsk Oil Company starting in fiscal 2008 to the commercial exploration stage.　As the above shows, we selected a total of five projects (one financial assistance project for asset acquisition, three financial assistance projects for exploration and one liability guarantee project) in fiscal 2013. As a result, the total equity capital was 360 billion yen and the outstanding balance of the liability guarantee was 687.9 billion yen at the end of March 2014. Six projects (eight companies) have reached the production stage since JOGMEC’s establishment and we have obtained dividend income from one of the projects.

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

hundred million yen

the number of companies

442 452 511 638 840 942 1,213

1,594

2,454

3,600

10 10 10

14

20 23

30

37 40

45

0

20

40

0

400

800

1200

1600

2000

2400

2800

3200

3600

4000

Fy04 Fy05 Fy06 Fy07 Fy08 Fy09 Fy10 Fy11 Fy12 Fy13

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

hundred million yen

27

2,866 3,504

2,650

2,370 2,445 2,440 2,509

5,254

6,879

1 11 14 15 9 9 9 10 the number of companies

13 13

0

20

40

0

1000

2000

3000

4000

5000

6000

7000

8000

Fy04 Fy05 Fy06 Fy07 Fy08 Fy09 Fy10 Fy11 Fy12 Fy13

Fiscal 2013 Achievements

■Machine tool used in a 2D seismic survey onshore in Kenya



Oil and gas exploration in offshore Japan

【Exploration activities】　We were entrusted by the government with the task of exploring the reserves of oil and natural gas resources in the waters surrounding Japan with the 3D seismic vessel Shigen. In fiscal 2013, we conducted surveys in offshore Hidaka, offshore Iwate, offshore Akita and offshore Okinawa-Miyako, and acquired 3D seismic exploration data for about 5,600 km2. We advanced resource exploration in the waters surrounding Japan by supporting the first prospecting survey (exploratory test well “Joetsu Seamount”) based on the 3D seismic exploration results as the administrator of the project, as well as processing and analyzing the acquired data on the waters.

【Methane hydrate survey and technological development】　In Japan, research and development of methane hydrate has been conducted in accordance with the “Japan’s Methane Hydrate R&D Program” drawn up by the Ministry of Economy, Trade and Industry in 2001. During Phase 1 which was completed at the end of fiscal 2008, we successfully obtained necessary outcomes by achieving the world’s first onshore production test using, “depressurization method.” In Phase 2, which began in fiscal 2009, we have been working on research and development of methane hydrate as a member of “Research Consortium for Methane Hydrate Resources in Japan. (MH21)” organized under industry-academia-government cooperation.　In fiscal 2013, we completed all our on-site operations of the first offshore production test of methane hydrate off the coasts of the Atsumi Peninsula and the Shima Peninsula. We publicly announced that we had demonstrated that gas production from marine methane hydrate deposits with the depressurization method was possible and that we had clarified future challenges for long-term stable production by evaluating and examining the results of the offshore production test. We will continue to design and prepare the next offshore production test and a long-term onshore production test. As a global pioneering project, we are determined to promote the development of technologies which will be continuously required.　In addition, we conducted an evaluation of seismic survey data in the Western Nankai Trough. We are continuing to conduct resource assessments off the coast of Japan and study processes for identifying a concentrated zone of methane hydrate.

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 2013, we constructed seven new cooperative frameworks with governments of Middle Eastern and African countries and their national petroleum corporations. We signed Memoranda of Understanding (MOU) on technological cooperation and enhanced human resources development with Qatar Petroleum and the Ministry of Oil and Gas of Oman. In Mozambique, which is expected to be a future LNG supply source due to the confirmation of a large amount of natural gas reserves, we signed a Memorandum of Understanding (MOU) on the technology for the effective use of natural gas with the National Oil Company of Mozambique (ENH). In addition, we also constructed further cooperation frameworks by signing a joint research contract on shale gas development technology with Canada’s Encana Corporation and a Japanese company and a Memorandum of Understanding (MOU) on technological cooperation and human resources development, including the JAPAN-GTL process technology, with the Turkmenistan government.

【Provision and collection of information at international exhibitions and conferences】　In fiscal 2013, we collected information through direct dialogue and made a proactive appeal for Japan’s technological prowess through our displays and lectures at major international exhibitions held in the United Arab Emirates (UAE), Mexico and Qatar. 　In addition, at the Fifth Tokyo International Conference　on African Development (TICAD V) hosted by the Japanese government, our president had meetings with the top leaders and ministers of resource-producing countries and the managers of oil development companies, and strengthened our relationships with African countries, which are expected to develop in the future.

【Overseas training program for technical experts 】　In fiscal 2013, 22 participants from 20 countries and 21 participants from 20 countries attended the “Exploration Geology Course” and the “Geophysics Course” training sessions, respectively. In addition, we held 5 courses under the agreement between the Japanese and Iraqi governments, which was valid for 5 years starting from 2009. A total of 100 Iraqi technical experts were invited in 2013. As a result, we have achieved our goal of training 500 technical experts from the year 2009. Furthermore, we accepted 10 technical experts for the “LNG course” based on the cooperation framework in the field of human resources development with Mozambique, 9 UAE technical experts for the “LNG course” and 11 technical experts for the “HSE Management Course,” under the scheme of the Technical Solution Training Program (For details see [Technical Solutions Training Program] described later). We invited a total of 173 technical experts from oil- and gas-producing countries in fiscal 2013. In addition, we also supported an invitational training session for 10 UAE technical experts and 1 Indonesian technical expert, which was organized by a private company. The purposes of these training programs are technological transfer. However, we also focused on the possibility of joint projects between Japan and oil- and gas-producing countries going smoothly in the future through the organizational and human connections developed through the training programs. We have accepted a total of 3,179 participants from 47 countries since we launched the program in 1989 and our program has been highly evaluated by training session participants and the governments of their countries.

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【Building multi-layered relationships with oil- and gas-producing countries】　We also promoted bilateral cooperation through the Abu Dhabi-Japan Economic Council as part of our industrial cooperation with oil- and gas-producing countries beyond the resource sector. In addition, we facilitated the investment of Japanese companies in our industrial cooperation projects with Saudi Arabia, and 2 companies (2 projects) decided to invest in the country.

【Technical Solutions Project】　The Technical Solutions Project was initiated with the aim of strengthening our relationships with oil and gas producing countries in collaboration between JOGMEC and a wide range of Japanese industries. Through this scheme, JOGMEC presents “Technical Solutions” to oil and gas producing countries to solve their technical challenges and problems (“needs”) in E&P projects by applying advanced and cutting-edge Japanese technologies (“seeds”) including those outside the oil & gas industry. In June 2013, the Technical Solutions Project Group was set up to drive this project forward.

【R&D in Technical Solutions Project】　To propose the above-described seeds to oil and gas producing countries as Technical Solutions for their technical challenges, JOGMEC adopted 12 projects in 2013 and proceeded with innovative technological developments jointly with Japanese companies and research institutes. In parallel with these R&D projects, JOGMEC conducted technical hearings with more than 90 Japanese companies to exchange opinions and discover brilliant technical seeds in Japan.

【Matching of Needs and Seeds】　As part of our efforts to create opportunities for matching the needs of oil and gas producing countries and the technical seeds in Japanese industries, we hosted “JOGMEC Techno Forum 2013”. Some of the technical challenges facing oil and gas producing countries were introduced to visitors through lectures given by the representatives of overseas oil and gas companies and governments and a panel discussion regarding water treatment technology. The forum attracted more than 650 participants, far more than the 500 initially expected, from inside and outside Japan. We received favorable comments from a large number of Japanese participants, who said that they were able to directly gather information about the specific technical challenges of oil and gas producing countries and get clues how to apply their technologies to their needs. On another front, JOGMEC visited government agencies and national oil companies in UAE, Oman, Vietnam and Canada to present information about the concept of Technical Solutions Project and the technical seeds developed in these adopted projects, and exchanged ideas to more deeply understand the technical challenges and needs of these countries.

【Technical Solutions Training Program】　The “HSE Management Course” was conducted as the first course under the Technical Solutions Training Program. This program is a brand-new addition to JOGMEC’s training scheme started in 1989 and also a pillar of the Technical Solutions Project. Eleven engineers from four countries, UAE, Qatar, Libya, and Turkmenistan, participated in this course, and the workshop-style program was highly appreciated. The target of this new training program is to share the idea of current technical challenges in oil and gas E&P fields and to learn applicable Technical Solutions including both international and Japanese best practices to solve the technical challanges.

Technology development

　JOGMEC decided particular emphasis on Enhanced Oil Recovery (CO₂EOR), unconventional oil and gas field development technology, marine development technology (icy water and deep water) and environmental measures technology as the highest-priority technical areas.　We are performing technical development that contributes to Japanese resource-development companies acquiring or extending interests of oil & gas fields, expanding the amount of resources, and performing mid and long term fundamental research for them.

【Enhanced Oil Recovery ：Joint research on CO₂EOR with oil producing countries】　CO₂ Enhanced Oil Recovery (CO₂EOR)*, one of the important technology for JOGMEC, is highly acclaimed by oil & gas producing countries with a wide range of achievements ranging from basic studies to field applications. In fiscal 2013, we conducted a wide variety of technical cooperation projects as a Pre-FEED, for the demonstrative test plan of CO₂EOR at the Lower Zakum Oil Field in Abu Dhabi. In addition, we drew up a plan to conduct a joint demonstration with Vietnam National oil Company (PVN) at an offshore CCS (CO₂) EOR oil field, which enable to coexist increase of oil production and underground storage of CO₂ that technical establishment is expected for global warming countermeasures. JOGMEC’s projects have been highly evaluated by the governments of oil & gas producing countries and contribute to the extension of interests of Japanese companies operating in those countries.* Technology for increasing crude oil production and recovery by CO₂ injection into oil reservoir.

【Unconventional Oil and Gas Field Development Technology, Shale Gas and Heavy Oil Development】　With regard to shale gas exploration, which is mainly conducted in North America, sluggish gas prices and difficult production predictions are major obstacles to business promotion. JOGMEC is developing optimized technology for shale gas development and are providing the technology for Japanese companies to facilitate smooth business promotion and acquisition of new interests in the future. In fiscal 2013, we started joint research projects with Japanese companies in Canada aim at development optimization and value maximization of projects, visualized the internal structures of rocks and conducted surveys for the optimization of hydraulic fracturing and the selection of optimal development areas. We proposed the results of these studies to gas producing countries, and JOGMEC’s technical standards were highly evaluated by those countries. Our technologies are due to be applied to the projects of other Japanese companies.　Heavy oil, have been confirmed large-scale reserves in the world, has problem to transport by pipeline for its high density, modification of adding heat is needed to solve. However, JOGMEC is developing heavy oil development technology with supercritical water, which is unique to Japan, need only small plant and place little stress on the environment. In fiscal 2013, we set up pilot test equipment, conducted a trial run in Canada and progressed toward the practical use of the technology.

【Marine Development Technology】　In recent years, oil & gas exploration and development targets have been shifted to deep and polar sea. We have constructed the core technology for observing ice conditions using electromagnetic induction as part of icy water development technology in order to improve JOGMEC’s technical examination and evaluation capabilities.



　In addition, we provided Japanese companies with the analysis results of ice conditions based on satellite data. For smooth acquisition of exploration block interests of projects, we conduct technical development related to exploration deep and polar sea by providing the results of such technical development to Japanese companies, so we contributed to the acquisition of exploration interest of Greenland KANUMAS project in 2013.

[Multiple Uses of elemental technologies – environmental conscious oil and gas exploitation】　We are pursuing treatment of oil polluted water, associated gas, and effluents from oil & gas fields as well as optimization (maximization) of the oil & gas production by packaging elemental technologies, which have been developed through basic studies conducted by Oil & Gas Upstream Technology Unit as well as joint studies with national oil companies of oil and gas-producing countries, with environment-related technologies (for environment, energy-saving, new energies, etc.) owned by Japanese companies. 　In our joint research project with National oil company of Mexico (Petroleos Mexicanos), we demonstrated the effectiveness of the small high-performance oil separator named FMS (Flocculation and Magnetic-Separation produced water treatment system) at offshore facility in Mexico and significantly progressed toward greater efficiency and commercialization. In addition, we also performed research for the practical use of the technology to remove aqueous organic matters and salt in polluted water.

【Assistance for Resource Development in Japan】　We conducted the Technical Study Concerning Onagawa Tight Oil stratum at the Fukumezawa oil field in Oga city in Akita Prefecture to support on-site operations for the development of Japan’s precious domestic resources. The study is planned to demonstrate as a first time to do horizontal drilling and hydraulic fracking in Japan which are the basics of shale development, using technologies that JOGMEC and other organizations developed, and expectations of this demonstration are high.

Technology transfer and training　JOGMEC, 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 2013 are as shown below.

・We gave lectures on oil development-related technology at Chiba University, Kyushu University, Shinshu University, Kochi University and Waseda University and contributed to nurturing human resources in the field of domestic resource development.

・For domestic oil engineers, we gave a public lecture to introduce the basic technology for oil development and a specialized public lecture for the acquisition of specialized expertise.

・We hosted JOGMEC-TRC Week 2013 (November 2013, 675 participants) for a report on the research and survey results from the Technology Department of our Oil & Gas Upstream Technology Unit, the exchange of opinions among specialists and the establishment of engineer networks. The event included forums titled “The Challenges of Using Methane Hydrate as a Resource,” “Laboratory Experiments for CO₂EOR Design: How to Utilize Measurement Results,” “Shale Gas Oil Development: Present and Research and Development” and “Technical Solutions: Technology Connected to the Resource Business.”

・In addition, we had technical meetings with 24 Japanese companies (12 oil development-related companies and 12 engineering service companies) to exchange opinions, gathered information about their technical conditions and proposed solutions to their technical issues.

・In fiscal 2013, we obtained an income of 540 million yen from patents by making use of intellectual property that resulted from TRC research*.

*Geo-pilot (a device to control the drilling direction of drill bits) and Eco-scope (a tool used in well-logging work, which involves measuring the characteristics of oil and gas layers), etc.

Collecting, analyzing, and providing information【Dissemination of information through briefings and printed

publications】　JOGMEC regularly provides information as follows for relevant industries, energy policy agencies, etc., by holding a monthly briefing session, and issuing the journal “Oil and Natural Gas Review” bimonthly.

・“What Did the Shale Gas Revolution Bring to the Global Natural Gas Market?”

・“The Age of Hydrocarbon Also Continues in the 21st Century: Acceleration of Unconventional Resource Development and the Disappearance of the Peak Oil Theory”

・“The Current Situation of East African Deep-Sea Exploration and Development (Mozambique, Tanzania and Kenya)”

・“The Prospect of Ukraine’s Entry into the EU and Its Relationship with Russia in Terms of Natural Gas”

・“Mexico’s Oil and Gas Policy Shift: Opening Its Oil and Gas Industry to Foreign Capital for the First Time in 76 Years”

　While offering information on a regular basis as described above, we are holding seminars to provide information for many participants.

【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 and development. Through these committees, we conducted area analyses and contributed to the establishment of networks among area experts. In fiscal 2013, we held meetings for the following committees.

・The Middle East Committee・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 2013 are as shown below.- “Impacts on the international natural gas market due to the LNG exported by the US, and the increase in the production of shale oil”- “The Future Outlook on LNG Export Permissions from the United States and the Impact of U.S. LNG Exports on Other LNG Supply Projects”- “The Decrease in U.S. Crude Oil Imports Due to Shale Oil Production Increases and the Effects on Global Oil Trade”

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JOGMEC conducts geological surveys, assistance for surveys, strengthens relationships with coal-producing countries, gathers and provides information, demonstrates technology for coal mining etc., provides technological demonstrations and technical assistance for coal mining etc., and provides financial assistance with equity capitals and liability guarantees. Through these activities, JOGMEC contributes to the stable supply of coal resource to Japan.

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2 Coal Resource Development

Conducting and supporting geological surveys

　In order to promote coal development of Japanese companies JOGMEC conducts joint geological surveys with the government agencies of coal producing countries or private companies and also support overseas exploration activities conducted by Japanese companies. These activities contribute to securing stable coal supply to our country.

Providing financial assistance

　To assure steady coal supply, JOGMEC exploration activities of Japanese companies through providing equity capital at the exploration stage which involves high risks.　Also, as a large amount of funds is required at the development stage, JOGMEC faci l i tates funding for the companies by guaranteeing liabilities for loans.

Technological demonstrations and technical assistance

　JOGMEC contributes to a relief of the balance for supply and demand, according to agreements with governments of coal-producing countries by demonstrating and disseminating excellent Japanese coal related technology such as low rank coal upgrading to them and by transferring coal mining and safety technologies to mainly Asian coal-producing countries. At the same time, JOGMEC contributes to steady coal production by establishing multi-layered cooperative relationships with coal-producing countries.

Gathering and providing information

　Obtaining information swiftly and accurately is one of the most critical factors to win the keen competition for natural resources in the ever-changing global energy circumstances.　JOGMEC supports Japanese companies which are engaged in coal development by comprehensively gathering, analyzing and, providing information on the coal development policies of coal-producing countries and the trends in resource developing countries, as well as coal supply and demand.

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

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■Drilling site of joint venture survey

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Conducting and supporting geological surveys

【Geological Surveys】　As for overseas geological surveys, JOGMEC conducts joint exploration projects with the government agencies of coal producing countries and foreign companies to promote overseas coal development of Japanese companies.

　In fiscal 2013, in addition to the conventional system (Joint Surveys) conducting surveys jointly based on a memorandum of understanding (MOU) with the governments of coal producing countries, JOGMEC established the joint venture (JV) survey system. It aims to transfer options rights which JOGMEC has acquired by sole exploration expenditure during farm-in period. JOGMEC has already signed a joint exploration agreement in Australia and started the first JV survey.

　　Regarding to joint surveys, JOGMEC continued the survey in Vietnam (Dong Ri area), and conducted boring survey and comprehensive coal potential analyses. It clarified the coal reserve conditions in the survey area. In Mozambique, JOGMEC signed a new MOU and started a detailed survey by conducting geological analysis using remote sensing analysis. In addition, as for the development possibility survey on overseas coal which aims to identify the potential of development by evaluating coal reserves and studying geological structures, JOGMEC supported 1 new project (Australia)in fiscal 2013.

【Providing financial assistance】　In fiscal 2012, JOGMEC established a financial assistance system by providing equity capital for exploration and liability guarantees for development activities. It assures a structure for providing proper and effective financial support for the exploration and development activities of Japanese companies. Through the financial assistance system, JOGMEC is able to provide consistent corporate assistance ranging from initial exploration to development and production. In fiscal 2013, although private companies were careful in investments for new projects owing to impact of low coal prices and other factors, JOGMEC continuously and proactively promote its financial assistance for exploration and development liability guarantee system to coal development companies, steel companies and trading firms, and also exchanged opinions with those companies. In this process, there were 9 exploration projects and 12 development/production projects as candidates. Of these, JOGMEC signed confidentiality agreements on 2 projects (1 exploration project and 1 development/production project) and conducted preliminary examinations for adoption.

Building relationships with major agencies of coal-producing countries and so forth

　Coal is the energy resources which has been supporting social development since the Industrial Revolution in the 18th century. In Japan, currently approx. one fourth of electricity is generated by coal. Also, steel industry which produces the world’s second largest volume of crude steel use coal as a raw material. Thus, coal is an indispensable resource for Japan. However, in recent years, the demand for this resource is increasing globally and in particular in emerging countries. 　As an organization implementing a national mining industry policy, JOGMEC promotes stronger relationships with the major agencies of coal-producing countries based on a national strategy for securing resources. In fiscal 2013, JOGMEC signed a comprehensive MOU (September) with the Queensland government, Australia, which is the largest coal exporter for Japan. Based on this MOU, JOGMEC organized 2 joint coal seminars with the Queensland government to provide information for the investments. In addition, JOGMEC co-organized the Japan-Mozambique Investment Forum in Mozambique in January with other government organizations. There were about 380 participants, including Japanese Prime Minister Shinzo Abe, Japanese companies and Mozambican political and business leaders. In line with this forum, JOGMEC signed an MOU concerning geological surveys to implement the “Japan-Mozambique Development Initiative based on natural gas and coal”, to which the top leaders of both countries agreed.　In addition, JOGMEC participated in a Japan-Mongolia Public-Private Joint Council meeting in May. Also at the J-SUMIT held in Tokyo in May, JOGMEC’s president met with ministers of Mozambique and South Africa who are responsible for mineral resources and JOGMEC’s vice president met with Vice-President of Vale. At the Fifth Tokyo International Conference on African Development (TICAD V) in June, JOGMEC’s president met with the vice-president of Kenya and exchanged opinions about coal utilization and development in Kenya. JOGMEC dispatched its staff to Kenya in September to consult the possibility of conducting geological surveys. In addition, JOGMEC co-organized a coal and metal joint saloon in January with the Canadian embassy, contributing to the establishment of business networks.

【Joint research projects in coal-producing countries】　In terms of issues concerning environmental measures and low rank coal reformulation and utilization which are the obstacles to coal development in coal-producing countries. JOGMEC studies some corrective measures and the applicability of Japanese technologies to them by conducting research projects in cooperation with the governments’ agencies of coal-producing countries. In fiscal 2013, in Vietnam, JOGMEC continued a joint research project for the afforestation of coal waste dump with


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①Conclusion of JV contract JOGMEC

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■The JV survey scheme

■First coal seminar



VINACOMIN, which provides Japan with anthracite coal. JOGMEC conducted Vietnam’s first greening test using the hydro seeding method at Nui Beo Coal Mine near Ha Long Bay, a UNESCO World Natural Heritage site. In addition, on joint research project to evaluate the applicability of low rank coal to coke in Indonesia, JOGMEC established a basic manufacturing process for the binders for formed coke and blast furnace coke using low rank coal, such as lignite.

【Coal industrial cooperation projects】　In accordance with the needs of coal-related industries in coal-producing countries, JOGMEC provides information in order to establish coal related industrial chains with optimized effectiveness from both points of view of material flows and energy flows considering the effective utilization of coal resources and the environmental burdens by organically combines the applicable technologies owned by Japanese companies in model coal mining areas. In fiscal 2013, in collaboration with the Mineral Resource Ministry of Mozambique, JOGMEC formulated a clean coal town plan that includes use of middling such as briquettes, the use of coal ashes for building materials, greening and acid water processing and the use of coal-gasified fertilizers mainly in coal mining areas in province of Tete, Mozambique. JOGMEC also conducted an investigation on the needs of coal-producing countries and the applicable technologies possessed by Japanese companies. In addition, JOGMEC has undertaken similar projects in Vietnam and Indonesia in response to the requests from the governments.

Technology demonstration and dissemination

　As it is important to reinforce multi-layered relationships with coal-producing countries to ensure steady coal supply, JOGMEC conducts projects which aim at demonstrating and disseminating coal-related technologies developed in Japan in accordance with issues and needs of coal producing countries. Specifically, responding to the request from the government of Indonesia who strives to utilize low rank coal, JOGMEC supports demonstration projects in Indonesia conducted by a Japanese company possessing upgrading and slurrification technology for low-rank coal. In fiscal 2013, JOGMEC completed the project and succeeded in demonstrating the upgrading and slurrification process and stable production technology by conducting long-term manufacturing tests, long-term burning tests (about two thousand hours, respectively) and full-year stationary and transit stability tests. Hereafter, Japanese companies will advance the commercialization of this technology in cooperation with Indonesian power company.In addition, JOGMEC has been conducting projects for coal mining

technology transfer to encourage coal mining engineers and safety administrators in Asian coal-producing countries to improve amount of production and production efficiency, and to decrease accidents using safety measures that utilize Japanese companies’ accumulated empirical knowledge about underground coal mining technology. In fiscal 2013, JOGMEC transferred mining and safety technologies to a total of about 12,000 trainees by accepting about 140 trainees from Vietnam and China to its coal mining technology training center in Kushiro City and dispatching Japanese coal mining experts to Indonesia, Vietnam and China.

Gathering and providing information

　As a public knowledge and information center, JOGMEC provides information about exploration, development and technological development in which Japanese companies have a keen interest, as well as information that is necessary for Japanese government to examine and formulate a national resource diplomacy strategy. In fiscal 2013, JOGMEC conducted the following surveys to find new coal supply sources. The themes were selected based on questionnaires obtained from Japanese companies.

　In June, JOGMEC held a conference to report the survey results. 　In addition, JOGMEC conducted surveys on coal exploration and development projects and coal mining conditions in coal-producing countries by utilizing overseas offices’ information-gathering capabilities. Moreover, JOGMEC organizes the coal development-related information gathered by overseas offices and provides the information on the JOGMEC website.Website: http://coal.jogmec.go.jp/

2013年 9月時点 2014年 4月時点

■The Greening of coal waste dump at Nui Beo coal mine in Vietnam

14. As of September 2013 15. As of April 2014

■Underground coal mining technology training (dispatching Japanese experts for training)

1. Research report on world coal information—FY 20132. A survey on global metallurgical coal supply sources and export capabilities to the Asia-Pacific region3. A survey on coal supply-and-demand trends in China, their outlooks and their impacts4. A survey on coal export potential of Russia, the Far East and Sakhalin5. A survey on Columbia’s coal exports potential to Japan and the Asian market6. A survey on coal reserves in Southeast Asian countries and coal export potential7. A survey on the conditions and trends of global coal washing technologies for securing a stable supply of coal

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

Geological surveys and grant subsidies

　Since the Great East Japan Earthquake in 2011, Japan has faced the urgent challenge of ensuring a steady supply of energy and of coping with the vulnerability of the energy supply and demand structure. The usage of renewable energy, particularly geothermal resources, is gaining momentum. Geothermal energy, which can generate a steady supply of electricity, has considerable promise as a base load electricity source. JOGMEC offers support by granting subsidies for initial surveys characterized by high risk, such as land surface surveys, well drilling surveys, etc., which are undertaken with the aim of confirming the potential of geothermal resources for power generation implemented by Japanese companies.　The aim is for Japan’s geothermal resources to be effectively used, and for further efforts to be invested in the development of geothermal resources. 　JOGMEC also contributes to Japanese company’s activity for geothermal resource development by conducting wide-area studies, such as airborne geophysical survey. We evaluate geothermal resource potential and identify areas where are expected to have high geothermal potential by the surveys.

Providing financial assistance

　Huge costs are incurred in the exploration part of geothermal resource development projects. Even if a promising reserve of geothermal resources is found at the exploration stage, major risks remain, such as the long period of time between completing the construction of a power station and its being brought on stream.　JOGMEC possesses technologies and knowledge related to underground projects, and to cope with risks such as these, offers

financial support for geothermal resource exploration projects for which funds may not be readily available from commercial banks. JOGMEC has also established a program that contributes to smooth funding of the development of geothermal resources by Japanese companies and complements the activities of Japanese banks by providing liability guarantees for the portion of funds dedicated to construction activities that are procured by Japanese companies from commercial banks.

Technology development

　Geothermal power generation promises to be one of the forms of stable power sources. It is a form of clean energy that generates less carbon dioxide emissions in generating power and is not affected by the weather. However, there are risks that it is quite difficult to find locations and characterize geothermal reservoirs since these reservoirs are formed in deep under the ground. JOGMEC gives a boost to the promotion of geothermal development through the development of new technologies associated with the exploration, evaluation and management of geothermal reservoirs.

Gathering, analysis and provision of information

　JOGMEC gathers and provides the results of past surveys of geothermal resources, information on the latest technical trends, and useful information for the development of geothermal resources. JOGMEC supports Japanese companies engaged in geothermal resource development by engaging in publicity activities that contribute to public understanding of geothermal resource development.

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

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Geological surveys and grant subsidies【Support for surveys】

　Through a new subsidy program for the development of geothermal resources, JOGMEC grants subsidies for initial studies that are accompanied by high risks and costs, lowers the barriers to starting geothermal resource development activities and helps to expedite geothermal resource development. As for projects granted subsidies, JOGMEC supports not only major-scale projects but also small-scale projects sponsored by local communities. In fiscal 2013, for small-and-medium-sized companies considering the possibility of starting small-scale projects, JOGMEC held a total of 16 presentation meetings at eight locations around Japan to explain our geothermal resource development support program. Support and technical advice was also provided to new entrants planning to submit an application for the first time. Consequently, successfully adopted ten new projects which, when combined with ongoing projects from fiscal 2012, brings the total number of projects adopted to 20. In addition, JOGMEC responded swiftly to the easing of regulations and proceeded with eight well drilling surveys including sites located inside natural parks, managing to confirm geothermal resources at six such sites including the Toyako-Onsen Area.

【The geothermal resource potential study project】　JOGMEC decided to undertake an extensive survey with airborne geophysical survey methods to evaluate the potential of geothermal resources.　We employed time-domain electromagnetic and gravity gradiometry surveys, which are initial application to Japan and may be out of the reach of private companies due to the scale of the operation. These surveys will reveal the geological structures of inaccessible mountain regions or special protection zones with minimal impact for the ground surface. In fiscal 2013, JOGMEC conducted airborne gravity gradiometry survey to measure spatial variance in gravity in two areas in Kyushu (Kuju and Kirishima areas). By employing these airborne survey methods with a proven record in the oil exploration field, JOGMEC established geothermal survey techniques that were able obtain more detailed and homogeneous data on geological structures over an extensive area compared with conventional techniques. Understanding detailed geological structures will help promote geothermal development.

Providing financial assistance　In fiscal 2013, JOGMEC exchanged opinions with 36 business companies and other organizations regarding liability guarantees, and through policies that will lead to improved program utilization while limiting risks such as the scope of guarantees through contracts, adopted two projects, including a small-scale project sponsored by a hot spring association. 　As part of the adoption process, several points of view were incorporated to conduct cross-sectional technical evaluations that would maximize JOGMEC’s synergy, and these efforts included making use of knowledge concerning resource volume assessments in the petroleum and metal sectors.

[Outline of Projects Adopted for Liability Guarantees](1) Tsuchiyu-Onsen Area in Fukushima-city, Fukushima Prefecture: Tsuchiyu-Onsen Energy (Power generation operating company of the Tsuchiyu-Onsen Association shareholding company) 　400kW binary power generation utilizing an existing hot spring well. Liabilities guaranteed for 445.6 million yen, scheduled to commence power generation in July 2015.(2) Sugawara area in Kokonoe, Kusu District, Oita Prefecture: Nishinippon Environmental Energy Company (currently: Kyuden Mirai Energy Co., Inc.)　5,000kW binary generation utilizing a research and development well drilled in the past by NEDO. Liabilities guaranteed for 3.2 billion yen, scheduled to commence power generation in March 2015.

Technology Development　In fiscal 2013, JOGMEC began two technological development projects (geothermal reservoir exploration technologies, geothermal reservoir evaluation and management technologies).


■Helicopter equipped with airborne geophysical surveying equipment

■Fiscal 2013 Map of Adopted Projects



The aims of these projects are to improve the geothermal exploration technology and to stabilize the geothermal power generation, respectively.　With regard to geothermal reservoir exploration technologies, JOGMEC has conducted research into the latest technologies using elastic waves, such as the elastic wave exploration and micro earthquake exploration techniques used in the oil and gas field. The methods can figure out geometry of geothermal reservoirs in greater detail. JOGMEC has worked to verify the effectiveness of the latest techniques while monitoring cases of their employment overseas Then we identify issues to solve, and convert these to future technological development plans. 　In terms of geothermal reservoir evaluation and management technologies, JOGMEC engaged in preparatory ground surface surveys for the demonstration of artificial recharging and activities such as monitoring prior to artificial recharging. The aim is for achieving the long-term stabilization of production at geothermal power stations which is suffering from output degradation. The obtained data will be reflected in artificial recharging demonstration test program to be conducted from fiscal 2014 onwards.

Gathering, analysis and provision of information【Conducting trend surveys of advanced technologies】

　JOGMEC carr ied out a survey of trends in geothermal development technology, especially EGS technology* that included site visits in the US and Australia, where we made efforts to identify the technological challenges faced by those engaged in the development of geothermal resources in Japan, and from fiscal 2013 projects to develop technology associated with geothermal resource development have also been launched.*EGS (Enhanced Geothermal Systems) technology refers to active geothermal resource development and comprises cutting-edge technologies including hot dry rock generation, artificial enlargement of natural reservoirs and artificial recharging.　In fiscal 2013, through a dialog on Japan-US clean energy policies with the US, which has advanced techniques in the field of geothermal resources, a joint research agreement was concluded with the US Electric Power Research Institute (ERPI) based on policies established between the Ministry of Economy, Trade and Industry (METI), JOGMEC and the US Department of Energy (DOE) to exchange data and information on EGS technologies. Over the next two years, the researchers will review data on US and Japanese EGS technology development projects and reflect their findings in future technological development while working to promote the widespread adoption of cutting-edge technologies.

【Publicity Activities】　With the aim of stimulating scientific discussion regarding geothermal resource development and generating momentum for promoting the use of geothermal energy from the viewpoint of residents, JOGMEC has engaged in wide-ranging activities directed at all age groups to promote usage, including exhibitions geared towards the general public, publicity activities conducted through various media channels and the provision of information by experts

and business operators.　In fiscal 2013, a close network was built through an information exchange session between the head of the Tokyo branch of a local newspaper and JOGMEC held for the first time, while in Morioka a seminar titled “Geothermal Power Generation and the Local Community: Thinking from a Local Perspective” was held. Through these activities, JOGMEC managed to promote understanding of geothermal energy in regional locations while creating opportunities for press coverage on geothermal energy in local newspapers and elsewhere. Moreover, in addition to the use of pamphlets and an informational video aimed at the general public titled “The Energy that Dwells in the Earth—Geothermal Power Generation” as PR tools, JOGMEC created new geothermal power generation models that offer hands-on experience with the mechanisms of geothermal power generation and geothermal resource surveying as well as a video explaining the steps involved in geothermal resource development. Activities such as events for children during the summer vacation period and exhibitions aimed at renewable energy companies were also utilized effectively.

　JOGMEC has also produced a guide book aimed at business operators and experts in a bid to promote the adoption of hot spring-based power generation and promoted early adoption of small-scale geothermal power generation. We also produced “Geothermal Resource Development and Technologies,” an educational video for geothermal engineers that was the first of its kind. In addition to these activities, JOGMEC also planned and implemented events on a joint basis with academic societies, among which were on-site sessions designed for participation by regular citizens at the Sapporo meeting of the Mining and Materials Processing Institute of Japan, and a jointly-hosted sess ion at the Makuhari meeting of the Geothermal Research Society of Japan. Through these efforts, we managed to advance scientific discussion on geothermal resource development with a great many participants.

Illustration of geothermal reservoir exploration technology development Illustration of geothermal reservoir evaluation and management technology development

Production Well

Geothermal

Power Station

Reinjection Well

Recharging Well

Production Well

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Reinjection Well

Stratum impermeable to fluid

Geothermal Reservoir

Magma Chamber

Pinpoint cracks

Geothermal Reservoir

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Ascertain the flow of steam and hot water　

■Illustrations of each technological development■Exhibiting at the Kasumigaseki Children’s Day

■JOGMEC planned and implemented an on-site session at the Sapporo meeting of the Mining and Materials Processing Institute of Japan

■JOGMEC produced an educational video for geothermal engineers

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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 developments in mineral resource-rich countries.

Support of exploration activities conducted by Japanese companies at the early stage

　JOGMEC actively carries out joint venture (JV) exploration activities with overseas national corporations and private metals companies, through satellite image analysis, geophysical exploration, geological and drilling survey. When obtaining promising results by those activities, JOGMEC’s position in the project may be transferred to Japanese companies.　In addition, JOGMEC jointly conducts those activities with Japanese companies in foreign countries through the JOGMEC’s JV exploration scheme ,“Overseas Geological Survey”, and also financially assists Japanese companies exploring uranium ores overseas using “Grant Delivery Program”, in order for them to reduce the risks which they may have to take in the early exploration stage and to promote their activities in multiple countries.　Meanwhile, JOGMEC evaluates resources of sea-floor massive sulphides and cobalt-rich ferro-manganese crusts, etc. distributed in the sea areas surrounding Japan based on the government’s “Basic Plan on Ocean Policy” and “Ocean Energy & Mineral Resources Development Plan,” by the utilization of marine resources research vessel “Hakurei”, etc. and executes the research and development of production technologies.

Providing financial assistance to support exploration and development for Japanese companies

　JOGMEC supports Japanese companies in the development of metallic mineral resources, by providing equity capital/loans for exploration, equity capital for asset acquisition, and liability guarantees for the development.

Building and strengthening relations with resource-rich countries

　JOGMEC supports the government’s diplomacy with metal resource-rich countries, while actively making its own efforts to build and strengthen relations with these countries. Moreover, JOGMEC strives to strengthen its presence by aggressively 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 metallic mineral resources, in order to meet the needs of Japanese companies and the governmental policy. Specifically, we are carrying out research and development projects on metallurgical technologies that use bacterial leaching, technologies for recovering rare metals from waste products and processing technologies for refractory ores at domestic nonferrous smelters.　JOGMEC also publicly invites proposals for the research and development projects that are required for Japanese companies to secure and procure new resources in Japan and overseas, and selects from among the proposed projects, considering whether their purposes are consistent with the government’s policy and whether they are expected to be technically feasible. JOGMEC provides financial and technical support for the implementation of the selected projects.

Collecting, analyzing, and providing information

　JOGMEC collects and analyzes information useful for overseas mining activities conducted by Japanese companies, such as the status of geology, ore deposits, exploration, development and production; individual countries’ mining policies and regulations; supply-and-demand trends of metals; activities of foreign mining companies; and environmental issues related to mining activities. We then provide such information widely and in a timely fashion by means of email newsletters, websites, seminars and periodicals.　JOGMEC owns the Mineral Resources Information Center, the only specialist library for mineral resources in Japan. The library holds a collection of approximately 50,000 books and geological maps, which are open to the public.

Developing human resource

　JOGMEC hosts seminars on resource development and sends staff as lecturers to universities or other organizations in order to encourage university students and workers 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

Geological surveyGeophysical survey

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


Satellite image analysis

s

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Support of exploration activities at the early exploration stage

【Support of Japanese companies to secure interests through JV exploration activities】　JOGMEC conducted JV exploration activities with overseas national corporations and private metals companies in 37 regions of 18 countries. (e.g.1) The Waterberg JV in South AfricaThe estimated mineral resources of platinum group metals have been updated, and the preliminary economic assessment was conducted.(e.g.2) The Pallas JV in CanadaThis was launched aiming at diversifying supply sources of platinum group metals, and the air bone magnetic survey was conducted.(e.g.3) The Jose Maria JV in ArgentinaAfter a northern extension of copper high-grade zone was found, the drilling survey was conducted to confirm further extension

【Support of exploration and development conducted by Japanese companies】　JOGMEC conducted “Overseas Geological Survey” with Japanese companies in 3 regions of 3 countries, including a newly adopted project in Peru. And also, JOGMEC conducted “Grant Delivery Program” for uranium exploration projects conducted by Japanese companies in 3 regions of 2 countries.　Further, we handled one case by offering technology support for resource development projects with the aim of helping Japanese companies promote overseas projects. Specifically, we supported technological research on tin recovery from the tailing of a tin mine being jointly pursued by a Japanese company and local company, and contributed to the consideration of effective recovery processes.

Providing financial assistance for exploration and development by Japanese companies

　In accordance with Japan’s strategy for acquiring mineral resources*, JOGMEC supports Japanese companies for their own metal mining development.*Japan’s strategy for acquiring mineral resources- The 2nd revision of the Energy Basic Plan (decided by the Cabinet

in June 2010)　Aiming to increase the self-sufficiency ratio of base metals (i.e., copper and zinc) to 80% or greater by 2030, and that of strategic rare metals to 50% or greater by 2030- The financial assistance offered by JOGMEC is mentioned in one of the five resource securing strategies, “Intensifying financial assistance aimed at acquiring resource interests” (Drawn up and announced by the Ministry of Economy, Trade and Industry in July 2012).

【Providing equity capital for exploration and asset acquisition】　In fiscal 2013, JOGMEC adopted a zinc and copper exploration project in the US as a project to provide equity capital for exploration. The supply of zinc is expected to tighten due to the factors such as the closure of large-scale mines that have supported supply up to now, and this project is promising as a new supply source of zinc.　Moreover, around 2.1 billion yen in income was generated from the niobium project in Brazil and rare earth project in Australia, in which JOGMEC made financial contributions in the past fiscal year. In both projects, Japanese companies have entered into long-term off-take agreements for the respective products, marking a significant contribution to the stable supply of Japanese metal resources.

【Providing liabil ity guarantees for overseas development】　Of the projects for which JOGMEC provided liability guarantees in the past fiscal year, two copper development projects in Chile, a lithium development project in Argentina have made steady progress in construction work. Each of them is scheduled to commence on operation during fiscal 2014.

【Providing loans for overseas exploration】　JOGMEC has provided loans to fund exploration projects that hold promise as future supply sources for metal resources. In fiscal 2013, JOGMEC adopted one rare metal project in the Solomon Islands and one iron ore project in Australia, providing loans valued at 133 million yen in total.


■Scene of the drilling survey underway of Waterberg JV in South Africa

■Copper development project in Chile

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■Loan balance for overseas exploration projects and number of projects implemented in each fiscal year

num

ber

of p

roje

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hund

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133

239

257 269

224 186

1

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9

8 7

6

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6

8

10

0

100

200

300

Fy05 Fy06 Fy07 Fy08 Fy09 Fy10 Fy11 Fy12 Fy13

【Providing loans for exploration in Japan】　JOGMEC provided a loan of 730 million yen for exploration at the Hishikari mine*.* The Hishikari mine is a gold mine discovered in 1981 by the Metal Mining Agency of Japan (MMAJ), the predecessor to JOGMEC. The total amount of mined gold exceeded 200 tons.

Sea-floor mineral resources survey, and research and development of production technologies

　With regard to sea-floor massive sulfides, JOGMEC utilized the marine resources research vessel “Hakurei” to conduct further drilling surveys for new deep ore bodies discovered in the Okinawa trough in fiscal 2012 to ascertain the thickness and size of the ore bodies. JOGMEC also executed survey in the Izu-Ogasawara sea area and confirmed the distribution of an ore body.　In the field of mining technologies, in addition to making improvements to small-scale mining testing tools, JOGMEC conducted sea-trials in the actual sea-floor sulphide mounds, which confirmed improvements in crawling performance, mining and ore collection functions. JOGMEC also conducted basic tests for ore lifting technologies to lift ore from the sea-floor to the ocean surface.　With regard to cobalt-rich ferromanganese crusts, JOGMEC submitted an application for exploration rights located in an area (3,000 km2) of the high seas extended over 600 km off the south-east coast of Minami-Tori-shima (Marcus Is.) to the International Seabed Authority (ISA) in July 2012. The application was subsequently approved in July 2013 and a 15-year exploration contract was signed with the ISA in January 2014 as the first case in the world. In the exclusive economic zone (EEZ) of Minami-tori-shima (Marcus Is.), seamount was surveyed by benthic multi-coring system (BMS) to accumulate data concerning crusts thickness, chemical components, distribution conditions, etc.　With regard to rare earth elements (REE) bearing sediments which also called “REY-rich mud”, JOGMEC executed the sampling survey by using a piston corer in the EEZ of Minami-tori-shima and identified the presence of resources. Also, JOGMEC organized workshops four times with experts to consider the potential of REE bearing sediments as future resources, and started the basic research on production technologies including exploration, lifting, ore dressing and refining.

Multi-faceted approach to resource-rich countries

【Joint projects and cooperation frameworks with resource-rich countries】　In fiscal 2013, JOGMEC successfully built 11 cooperation frameworks with resource-rich countries across Asia and Africa. These resource-rich countries have attracted attention as frontier regions for resource development and initiatives aimed at developing such relationships are a crucial part of securing future resources. In terms of specific activities, JOGMEC worked with Botswana and other southern African nations to formulate an implementation plan for human resource development and joint studies at the Geologic Remote Sensing Center in Botswana, and also concluded an MOU on the implementation of joint geological surveys with Cambodia.

【Providing information, exchanging information and strengthening relations with resource-rich countries】　JOGMEC is forging ties with resource-rich countries and supporting the activities of companies by providing information, holding seminars, etc. In fiscal 2013, to coincide with the timing of TICAD V and the Japan-Africa Ministerial Meeting for Resources Development, JOGMEC co-hosted J-SUMIT, Japan’s first international resources forum, together with the Ministry of Economy, Trade and Industry. The forum included information on mining policies and the state of mining from African resource ministers and other officials and introductions to advanced technologies from Japanese companies. The event helped to promote investment in Africa on the part of Japanese companies, and drew the attention of resource-rich countries to Japan’s technological prowess.

■Cobalt-rich ferromanganese crusts

■Signing ceremony for the cobalt-rich ferromanganese crusts exploration contract

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　In addition, with regard to the Metal Saloon forum which has to date been held to strengthen the relationships between Japan and resource-rich countries, in fiscal 2013 members of the coal industry were invited in addition to figures from the metal industry, and the event was held under the new name “Mining Saloon.” It was held jointly with the Embassy of Canada in Tokyo, and was attended by a number of members of foreign embassies in Japan, including those of the Embassy of Canada, as well as relevant parties of Japan’s mining industry. Moreover, in fiscal 2013, we gathered information and strengthened relationships with relevant parties of the resource and mining industries by holding the following seminars and through participation in international conferences and meetings.- Held an Exploration Environment Seminar of the themes of exploration, sustainable development and mine pollution control in Zambia, Myanmar and Southern Africa- Attended or presented in 80 international meetings and conferences- Exchanged opinions with important persons of resource-rich countries, executives of public mining corporations, etc.- Held a Mining Industry Investment Seminar in Tokyo to make presentations concerning opportunities for investment in Canada, Australia, Australia’s Northern Territory and Argentina

【Projects in the Geologic Remote Sensing Center in Botswana】　At the Geologic Remote Sensing Center in Botswana, collaborative activities including technology transfer associated with a five-year satellite image analysis project targeting Southern African countries have ended, but in response to strong and repeated requests from the target countries, a second phase of the project was started. Under the second phase, a priority will be placed on the leader development while jointly conducting analysis and surveying activities, and continuously attempting to identify promising mineral deposits.

【Strengthening relationships with resource-rich countries through technical support】　JOGMEC is also supporting resource-rich countries in terms of technological development in a bid to strengthen relationships. In fiscal 2013, three projects to support the development of rare metal recovery technologies were implemented.　In Bolivia, we built multiple processes for manufacturing lithium carbonate from brine water in the Uyuni salt lake, drawing attention to Japan’s high level of technological sophistication. Further, in Vietnam, we continued to provide support by running optimization tests for the transfer of technologies for the separation of rare earths from ores. Meanwhile in Brazil, we continued to make progress in research on technologies to recovery rare earths from the tailing of a niobium mine and after the installation of a local small-scale plant, began demonstration testing associated with separation and refining.　In other activities, JOGMEC has contributed to vastly improved economic efficiency at mines producing rare metals and other resources related to JOGMEC-based surveys or financial support projects, by offering technical support such as building processes for mineral processing that significantly boost metal recovery rates.

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.

【Development of exploratory techniques】1) Geophysical exploration　JOGMEC developed the TDEM data acquisition system by using the HT-SQUID (High Temperature Superconductive QUantum Interface Device). HT-SQUID is a very sensitive magnetometer that enables to improve the detectability of the deep underground structure. The new data acquisition system (SQUITEM 3) was completed in 2012 and successfully applied to the JV exploration project.

2) Remote sensing technology　JOGMEC developed the data analysis technology to identify the host rock with rare metal and earth in Africa, and utilized for evaluating the promising JV project and conducting the field analysis in the training program at Botswana Geologic Remote Sensing Center. Furthermore, JOGMEC developed analysis technology for the identification of promising areas (e.g.porphyry copper and heavy rare earth deposit) assuming to utilize for next-generation satellite sensor (hyperspectral sensor) data. In addition, JOGMEC acquired and analyzed air borne hyperspectral data in Peru to improve accuracy of alteration zones and minerals.

3) Development of support device　JOGMEC completed the portable spectrum meter and produced the prototype for a newly magnetic exploration equipment (SQUID gradiometer), which is regarded as the next-generation geophysical exploration equipment.

【Mining and metallurgy technology development】　With regard to the development of bioleaching technology which utilizes the power of microorganisms to extract copper from low-grade ores, in fiscal 2012, JOGMEC commenced demonstration testing at a mine in Chile. In fiscal 2013, JOGMEC learned that the internal temperature of ores piled up to leach out the copper rose to the temperature range suitable for microorganism activation by means of an exothermic reaction through the dispersal of sulfuric acid. As the next step, we began leaching tests where the

■Scene of Field survey by “SQUITEM 3

Metals Strategy, Exploration, and Technology Development


microorganisms were added, and have since made steady progress.　Further, with regard to the development of energy-saving refining processes, JOGMEC has embarked on technological development to reduce the electric power used in the copper electrolysis process, which requires a large amount of power.　In addit ion, we continue to perform studies and offer development support for rare metal recovery technologies. We invited companies and universities, etc. to submit proposals, and a total of 12 technological development projects were adopted for implementation.

【Recycling Technology Development】　The development of rare metal recovery technologies also applies to recycling raw materials such as waste small appliances and refining by-products. With regarded to waste small appliances, JOGMEC has conducted tests to identify the optimum leaching conditions for efficiently recovering the tantalum and cobalt contained in capacitors and lithium-ion batteries and acquired data ahead of demonstration plant testing. Further, from fiscal 2013 we began considering processes to increase the quantity of antimony recovered from smelting by-products and have made progress in the development of antimony enrichment techniques and extraction agents.　JOGMEC is working to develop these kinds of recycling technologies and establish schemes that are not overly dependent on the supply of rare metals from overseas.

Collecting, Analyzing and Providing Information

【Collecting information on strategic mineral resources】　With regard to the 32 mineral types including mineral resources whose stable supply is regarded as crucial for Japan’s economic development as well as the maintenance and strengthening of its industrial base (strategic mineral resources), to identify trends in the supply of such minerals, JOGMEC has summarized material flow based on statistical documents and interviews with private companies, reported its findings to the Ministry of Economy, Trade and Industry, and published the results to the general public. Further, with the aim of identifying issues in the stable supply of important mineral types, JOGMEC newly established a Strategic Metals Research Team made up of members from different operating departments. In fiscal 2013, we collected and analyzed information on platinum group metals, tungsten, zinc and titanium,

developed supply forecasts for each mineral type and identifying supply issues in the supply chain.

【Disseminating Mining-related Information】　JOGMEC is proactively supplying information* on the mining industry, based on which companies may make investment decisions, by regularly delivering and issuing reports such as “News Flash,” “Current Topics,” email newsletters, a bimonthly “Metal Resources Report,” etc. In addition, we hold 10 seminars and lecture meetings focusing on the latest supply and demand trends in metals and overseas resource development as well as the activity reports by each department of JOGMEC. Many representatives of private companies and students attend the seminars and meetings. While seeking evaluation for the committee consisting of experts of private companies and giving the feedback to our writers, we are continuously making efforts to improve the quality of our publications. Some of the reports we published during fiscal 2013 are shown below.

- Trends in the Global Mining Industry (basic country information: 54 countries)- Metal Mining Data Book 2013 (information on the latest mines, policies adopted by each country, supply trends in resource-rich countries, etc.)- Rare Metal Handbook 2013 (latest rare metal supply trends, etc.)- Mineral resource material flows (32 types of minerals) *Periodical publications and survey reports are listed on the website (http://mric.jogmec.go.jp/), which provides information on mineral resources (available only in Japanese).

Human resources development

　As human resource development projects in the area of mineral resources, JOGMEC is providing on-site training and lectures on resource development for university students and working population. Some of the lectures and training sessions we offered during fiscal 2013 are shown below.- Special lectures under a comprehensive cooperation agreement (at the University of Tokyo, Waseda University and Kochi University)- Sending of instructors to the “Training for Mining Development” offered by the International Institute for Mining Technology, sending of instructors to JICA group training

■Demonstration testing equipment installed at a mine in Chile

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5 StockpilingJOGMEC is responsible for the safe and efficient operation on petroleum, LP Gas and rare metals stockpiling programs.At ordinary times, JOGMEC maintains the system that enables to operate stockpiles safely and efficiently, and 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 stand of Japan’s energy security.

Overall management on 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 since 1975) and in 1978, national petroleum stockpiling program commenced. As of the end of March 2014, the strategic government reserves consist of 110 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 83 days’ worth of crude oil and petroleum products in their tanks.　In relation to the national stockpiling, JOGMEC has a contract with the government to manage national petroleum stockpiles and stockpiling bases. JOGMEC also conducts surveys, research and development and engages in international cooperation related to stockpiling issues. Furthermore JOGMEC contributes to the reliability of private-sector stockpiling by providing loans for the purchase of crude oil and LP Gas to private sectors that are required to hold obligatory stocks.

Increasing national LP Gas stockpiles to 1.5 million tons

　Japan’s strategic stockpiling of LP Gas has also been implemented through a two-pronged program consisting of national stockpiling and stockpiling by the private sector. As of the end of March 2014, private-sector stockpiles were equivalent to approximately 62 days’ imports of LP Gas, including the mandatory stockpile of 50 days’ imports. Regarding national LP Gas stockpiling, JOGMEC is

operating stockpiling bases on commission from the government in order to achieve the target stockpile of 1.5 million tons, which is equivalent to about 40 days’ imports. JOGMEC manages and operates 5 national LP Gas stockpiling bases located in Nanao (Ishikawa Prefecture), Fukushima (Nagasaki Prefecture), and Kamisu (Ibaraki Prefecture), including two bases in Kurashiki (Okayama Prefecture) and Namikata (Ehime Prefecture) whose construction was completed in March 2013, managing stockpiles equivalent to 27.9 days of LP Gas imports in stable and safety manner.

Stockpiling of rare metals essential to industry

　Rare metals are indispensable for manufacturing electronic components and alloy steels, and most of them are deposited in the limited countries. In recent years, concern about the instability of the rare metals markets is rising due to increasing demand protective to polices, particularly a resource nationalism-oriented policy, in some resource-producing countries.　Under these conditions, there has been an increasing focus on the importance of stockpiling rare metals as a short-term countermeasure against supply disruptions, as well as on the importance of emphasizing overseas exploration, promoting recycling, and developing substitute materials as medium to long-term measures to ensure stable supplies. JOGMEC stores and manages rare metals in the national stockpiling warehouse, and releases and purchases as needed.

Oil Stockpiling

National Stockpiling

47.96 million kl(product

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Private Stockpiling36.10 million kl

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110 days 83 daysAs of March 31, 2014 Domestic consumption level

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Fundamental strengthening of stockpiling bases

　As for the Kuji National Petroleum Stockpiling Base (Iwate Prefecture) which was hit during the Great East Japan Earthquake, we have completed work to set up and relocate major facilities at upland areas and improved our ability to response in the event of an emergency, while restoring crude oil receiving and shipping equipment and fully restoring base operations. For other petroleum stockpiling bases, JOGMEC has been strengthening measures against large-scale disasters, implementing studies of earthquake resistant design and construction as well as liquefaction inspection at nine bases based on a roadmap for measures against earthquakes and tsunamis. As for our LP Gas underground stockpiling bases (Namikata and Kurashiki stockpiling bases), we began the constructions for tsunami measures.

　

Safe and efficient operation on 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. We JOGMEC has been working to improve safety and efficiency through the activities on cost reduction as well as safely storing petroleum and LP Gas that are called hazardous, substance.

【Safe management on petroleum and LP Gas stockpiles】　To ensure a safe stockpiling bases’ operation, JOGMEC has been conducting disaster control trainings and safety inspections in cooperation with relevant local agencies, etc. Listed below are major exercises implemented in fiscal 2013.

- A safety evaluation was conducted by the head of representative office of JOGMEC in each base: The aims of evaluation is to identify the knowledge, techniques and operating performance of currently and to improve and strengthen the safety activities owned by all 15 petroleum and LP Gas stockpiling bases.　We also conducted safety inspections (in 4 petroleum stockpiling bases and 2 LP Gas stockpiling bases) by the headquarters, and upgrades safety activities and take corrective measures, if necessary.- JOGMEC organizes various training exercises and lectures attended by operational service company workers and others. At an external

training site, fire and marine pollution response drills were conducted four times, and at a facility in Texas in the United States, large-scale day-night practical firefighting training that cannot be experienced in Japan was conducted. In addition, we also held safety and disaster prevention lectures delivered by outside experts with the aim of improving knowledge of safety measures and deepening recognition of crisis management.- JOGMEC also enhanced its techniques and awareness for the safe operation of the bases by conducting comprehensive petrochemical complex disaster prevention drills (in four petroleum stockpiling bases and one LP Gas stockpiling base), spilled oil removal drills (in nine petroleum stockpiling bases), and practical large-capacity air foam system operation drills (in six petroleum stockpiling bases), etc., and tsunami evaluation drills (in nine petroleum stockpiling bases and two LP Gas stockpiling bases).

【Balancing safety management and increased management efficiency regarding the national stockpiling system】　In order to further increase the efficiency on the management of stockpiling bases, efficiency improvement plans formulated by operating companies themselves are being continuously implemented. The plans include the introduction of competitive bidding system, rationalization of construction work, cost reduction through energy conservation and improvement of operational efficiency utilizing computer systems. 　Listed below are major achievements in fiscal 2013.

- Related to the works conducted by the operation service companies, the number of competitive bidding cases increased significantly to 437 (fiscal 2013) from 276 (fiscal 2012). JOGMEC continuously promoted a series of measures such as revision of maintenance work frequency, etc. to reduce the costs.- By adopting electric propulsion systems in an update to disaster prevention vessels, we achieved efficiency that exceeds electrical conversion loss compared with conventional engine-powered vessels. In addition, by successfully improving efficiency of disaster prevention vessels from the previous three-ship fleet to a two-ship fleet in accordance with revisions to the Act on the Prevention of Disasters in Petroleum Industrial Complexes, and other Petroleum Facilities without compromising basic disaster prevention functions, we also helped reduce maintenance and management costs, etc.


■Upland facilities area at the Kuji Stockpiling Base

■Comprehensive petrochemical complex exercises (Akita Base)

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Underground LP Gas stockpiling bases have begun operation.

　In total of 160,000 tons of gas has been delivered to the Kurashiki National LP Gas Stockpiling Base and the Namikata National LP Gas Stockpiling Base (both completed in fiscal 2012), which use two of the world’s largest water seal underground rock cavern tank systems. Out of this, 70,000 tons were derived from US shale gas in an effort to diversify our supply sources. Further, breaking away from the conventional pricing system helped to procure the supplies at a lower cost.

Enhancing emergency response capabilities

　In petroleum and LP Gas stockpiling bases, JOGMEC has conducted emergency release practical drills or alternative drills. Also, crude oil transfers were carried out between national bases. Such transfers were performed as substitutes for on-the-job training (OJT) of emergency release practical drills as well. Listed below are the major achievements in fiscal 2013.- With regard to the crude oil type replacement project which promotes the adoption of light crude oil through the sale of heavy crude oil, under orders of the government, the discharge of approximately 700,000 kl of crude oil was completed. Further, with regard to crude oil transfers between bases, approximately 500,000 kl was carried out, in line with initial plans. In preparation for the emergency release, JOGMEC strive to adjust crude slate of national petroleum reserve close to that of recent import results.- To enhance the mobility of bases to ensure the efficient release of national petroleum reserve in the event of an emergency, JOGMEC implemented reconstruction of sea berth so as to VLCC can be done at Hokkaido Joint Oil Stockpiling Co., Ltd., and granted a loan of 200 million yen to Hokkaido Joint Oil Stockpiling Co., Ltd. to handle the construction work.

International cooperation in petroleum stockpiling

　In case of an emergency, it is important to cooperate with neighboring countries in order to ensure that energy is supplied steadily. Therefore, JOGMEC is building cooperative relationships with foreign countries such as Asian countries and the US by proactively exchanging information concerning strategic petroleum reserve with them. The achievements we made during fiscal 2013 are as shown below.

- JOGMEC has proactively cooperated and supported the holding of the workshop for developing and strengthening the petroleum stockpiling system in ASEAN countries, and summarized and prioritized the issues faced by each country in developing their respective petroleum stockpiling systems. In addition, we shared experience and expertise in petroleum stockpiling in Japan, China and South Korea as well as information on the progress of stockpiling program in each ASEAN country to develop and reinforce petroleum stockpiling systems.- JOGMEC and Korea National Oil Corporation are positively exchanging the information in regards to the state of petroleum stockpiling and technical problems faced in the course of operation by visiting stockpiling bases and headquarters in each country. -JOGMEC held the Technical Meeting with the Strategic Petroleum Reserve Office, US Department of Energy, which is the largest strategic petroleum reserve holder in the world, to confer over technical matters.- Under orders of the Agency for Natural Resources and Energy, JOGMEC has implemented a project to strengthen the foundations for the stable supply of petroleum from oil-producing nations.1) JOGMEC increased the oil tanks belonging to Okinawa CTS Corporation and currently being leased to Saudi Aramco (ARAMCO) from 800,000 kl to 1,000,000 kl and extended the lease period for three years.2) JOGMEC increased the oil tanks belonging to JX Nippon Oil & Energy Staging Terminal Corporation (Kiire) currently being leased to Abu Dhabi National Oil Company (ADNOC) from 600,000 kl to 700,000 kl (September). Thus, we are contributing on the enhancement of energy security by ensuring that crude oil is preferentially exported to Japan even in emergency cases, as well as the strengthening of relationships with oil-producing countries.

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

　As for loans for private stockpiling conducted by petroleum joint stockpiling companies, JOGMEC provided loans to 15 crude oil refining companies. Moreover, JOGMEC carried out the largest-scale Financing Arrangement (approx. 780 billion yen) for domestic syndicate loans for fiscal 2013 by interest rate competitive bidding. Thus, JOGMEC provided low-interest loans. Interest rates for successful bids have been falling each year, which has helped maintain the number of days stockpiling for the private sector.

Promoting the stockpiling of rare metals

　To agilely store and release the storage of rare metals, JOGMEC conducted interviews with as many as 54 domestic and international companies involved in rare metal businesses, and gathered and analyzed the information. Consequently, we further stockpiled rare metal as necessary. We also newly upgraded and expanded a rare metal stockpiling exploratory committee made up of user companies, etc. The committee convened five times in fiscal 2013, and was responsible for identifying and monitoring supply and demand trends through primary information and other sources utilizing the networks between private companies and other organizations. In addition, JOGMEC has developed a system that enables us to purchase rare metals agilely. Under the system, the companies capable of procuring all mineral types that may be subject to stockpiling are continuously publicly sought, reviewed, registered and managed. To date, 29 companies covering all mineral types subject to stockpiling have registered as bidders.

■The first gas delivery vessel arrives in port (Namikata National LP Gas Stockpiling Base)

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

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 offers consulting and provides information related to construction work for mine pollution control and the formulation of mine pollution control policy. JOGMEC also provides technical assistance related to designing construction work for mine pollution control on commission from local governments and has also undertaken the operation and management of New Neutralization Plant at the abandoned Matsuo Mine (located in Iwate province).　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 national government. To reduce the cost of mine pollution control measures, JOGMEC conducts studies 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 assistance to ensure the implementation of mine pollution control

　JOGMEC provides loans to private companies implementing mine pollution control projects, and also manages reserve funds set aside by private companies for construction work for mine pollution control and funds set aside for continuing drainage treatment.

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

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Deposits

FundsFinancial ＆TechnicalSupport

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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 Polluter Pays Principle. 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.　Listed below are the major activities conducted by JOGMEC.

- At the dam body at the site of Mine A in Aomori province in which depression took place, JOGMEC carried out boring surveys and other examinations following the receipt of a request for stability evaluation from the prefectural government. As a result, it was found that, based on the current groundwater level, there were no concerns of ground liquefaction caused by an earthquake, and JOGMEC accordingly reported its findings to the prefectural government.- Because a cadmium level that exceeded standard was registered downstream of Mine B (at an environmental monitoring point) in Yamagata province, JOGMEC carried out water quantity and quality surveys, following a request from the prefectural government. As a result, it was considered that seepage water at the mine site was possibly affecting downstream contamination, and JOGMEC accordingly reported its findings to the local government. - Following a request for nine mine sites, including Mine C, in Miyazaki province, JOGMEC provided advice that was necessary for local governments in implementing mine pollution control works, carried out monitoring surveys of water quantity and quality around the mines, and provided technical consulting.

【Operating and managing the New Neutralization Plant at the Abandoned Matsuo Mine】　Following a request from Iwate Prefecture, since 1982, JOGMEC has been managing and operating New Neutralization Plant at the abandoned Matsuo Mine that discharges the largest amount of drainage water among abandoned mines. Over 32 years, JOGMEC has contributed to the water quality improvement of Kitakami River by safely and consistently maintaining the quality of 9 million m3 of treated water per year, keeping it within standards. JOGMEC carries out disaster prevention trainings and other activities to deal with damage caused by lightning strikes which have recently become frequent, and it has reviewed the manual to respond to disasters, accidents and other events so that staff members on-site are able to promptly make decisions and take action to deal with disasters

and other events. In addition, in light of the increasing importance of measures to deal with obsolete facilities and equipment, as part of such measures, JOGMEC has produced replacement emergency electrical generators. JOGMEC has also complied “30 years History of Matsuo Mine Pollution Control Project Support Office” to share the initiatives the treatment facility has taken and all the know-how that it has obtained up to the present with related organizations.

【Developing mine pollution control technologies】　Drainage treatment at abandoned mines must be continued on a semi-permanent basis, and this imposes a considerable burden on mine pollution controlling entities. To achieve more effective and efficient mine drainage treatment, JOGMEC is developing passive treatment technology and technology to remove metals.Listed below are the major activities conducted by JOGMEC.- In passive treatment, in addition to an improvement in JOGMEC’s unique method (a method based on the reaction of Sulfate Reducing Bacteria using rice husks etc, as the organic source for bacteria), JOGMEC has started to carry out field tests on acid drain water and has confirmed the continuation of steady metal removal. Moreover, because the removal effects were maintained under a low temperature environment (approximate 5°C), JOGMEC has applied for a patent related to an improvement in low temperature resistance. - Jointly with the Geological Survey of Hokkaido, JOGMEC started to examine the possibility of the application of drain water treatment using artificial wetland at an abandoned mine. - Through joint research with universities and research institutions, JOGMEC started to examine new drain water treatment technologies that contribute to cost cutting using plants. - JOGMEC examined the simulation that forecasted the water quality downstream of pollution sources, which was developed by National Institute of Advanced Industrial Science and Technology, and the analysis method to improve the repeatability of forecasts of changes in water quality when mine water and river water mix by monitoring a coagulating sedimentation mechanism. - With respect to the development of a technology to fill in cavities in mines mainly to reduce mine drainage, improve the quality of mine drainage, reduce sludge disposal costs, and stabilize mine cavities, JOGMEC has established a method for mixing fillers that satisfies the basic functions jointly with Mitsubishi Materials Corporation and other two companies. JOGMEC has also proposed an efficient method to recognize space by comparing and examining a variety of geophysical exploration methods.

【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 conservation, JOGMEC has taken initiatives related to the development of human resources and awareness building activities.


■Boring survey

■Disaster prevention training



Listed below are major activities conducted by JOGMEC.- By holding two meetings (in July and November) to exchange information about mine pollution and the environment with the theme of efficient mine drainage water treatment, JOGMEC provided information that was useful for reducing treatment costs to 113 participants from local governments and parties who were engaged in mine pollution control.- Responding to requests from mine pollution controlling entities, JOGMEC provided a venue to share information about risk management, including emergency measures to deal with torrential rain and other events, by holding a new conference for the representatives of local governments (in February). - In face of the shortage and aging of personnel involved in mine water treatment management, the sector’s biggest issue, JOGMEC held basic training courses on mine pollution control technique in November and February in order to encourage 15 engineers to acquire basic knowledge on mine drainage treatment in cooperation with Japan Mining Industry Association.- JOGMEC produced a learning video titled “mine drainage treatment facilities management” , in which key points about the principles of mine drainage water treatment and the maintenance and management of treatment facilities are explained in an easy-to-understand way. - JOGMEC held “eco-tour” three times for the students of schools located near large-scale mine drainage treatment facilities and abandoned mines, etc., and provided lectures on the importance of both resource development and environmental conservation.- JOGMEC accepted 1,093 visitors to New Neutralization Plant at the abandoned Matsuo Mine in Iwate province, including officials of administrative organizations, students, company employees, etc., from within and outside the prefecture, in order to promote understanding of mine pollution control activities. (234 officials from administrative organizations, 307 university students, 193 students from elementary, junior high and high schools, and 359 people who lived around the mine). JOGMEC also accepted 161 people engaged in mine pollution control from overseas and provided training on expertise gained through over 30 years of operating and managing the plant.

Providing financial assistance for Japanese companies’ mine pollution control work

【Providing loans for mine pollution control】　JOGMEC provides stable financial support for mine pollution control. In fiscal 2013, JOGMEC provided a total of 140 million yen in loans to two private companies for mine pollution control work and drainage treatment at six mines. In addition, JOGMEC lent 20 million yen to one company to support the implementation of soil pollution control measures on agricultural land.

【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 Closure Fund stood at 1.8 billion yen in fiscal 2013 with fund contributions of 16 million yen from 15 mines. The outstanding of the Drainage Treatment Fund amounted to 5.5 billion yen in fiscal 2013 with no fund contributions.

Technical support for the governments of mineral resource-rich countries

　JOGMEC provides technical support for resource-rich countries by taking advantage of its experience in mine pollution control. It contributes to environmental protection in resource-rich countries by holding seminars, dispatching personnel, and providing training, and has been building friendly relationships with such countries.　Listed below are the major activities conducted by JOGMEC.- JOGMEC provided information related to mine pollution control to a total of 554 participants by holding seminars on mine pollution control and meetings in five countries (Zambia, Myanmar, Laos, South Africa and Peru). - JOGMEC carried out surveys for mine pollution prevention and provided related on-the-job training (OJT) in Peru and Laos. JOGMEC provided coaching on technologies including field surveys methods (i.e., water quantity and quality measurement, accurate positioning , size measurement, etc.), and analysis and evaluation methods on the data obtained from survey results to 14 staff members of the Ministry of Energy and Mines of Peru and 9 staff members of the Ministry of Energy and Mines of Laos. - JOGMEC continued the dispatch of a mining pollution policy advisor to Peru, and provided technical advice on site. It also presented specific countermeasures for mine sites where the implementation of mine pollution control work had been preferentially required. Moreover, JOGMEC offered support for understanding of mine safety laws, mine inspection coaching, the establishment of mine inspection manuals and other matters by sending mine safety specialists to Cambodia. - JOGMEC invited 3 trainees each from South Africa and Peru, and provided educations activities for mine pollution control and abandoned mine sites in Japan. I t a lso provided l e c t u r e s a b o u t m i n e pollution control measures to a total of 96 trainees invited by JICA and HIDA from 26 countries.

■Eco- tour

■On-the-job training (Laos)

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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. Accounts are settled for each fiscal year and JOGMEC’s financial statements are submitted to the Minister of Economy, Trade and Industry by June 30, after being audited by internal and independent auditors. The financial statements are then scrutinized by the Evaluation Committee for Incorporated Administrative Agencies within the Ministry of Economy, Trade and Industry (METI). Based on the advice of this committee, the METI minister approves JOGMEC’s financial statements.　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 640.5 billion yen at the end of fiscal 2013.　In addition to national government investment, which was 98.4 billion yen in fiscal 2013, JOGMEC procures funds from a number of external sources, including revenues from grants for administrative services (19.6 billion yen), subsidies (10.2 billion yen), revenues from entrusted activities (94.2 billion yen), and loans from financial institutions (839.6 billion yen).

Earnings Structure

　The operation of JOGMEC is basically dictated by the amount of grants for administrative services that is received from the government to cover operating expenses, which were 19.6 billion yen in fiscal 2013. JOGMEC adopts cost-based income realization criteria. Therefore, grants for administrative services are first regarded as liabilities, and then turned into revenues with expenditure limits along with the progress of projects. Revenues from other grants received are paid by subvention to support private companies. These grants represent the amount JOGMEC receives for providing support on behalf of the government for a portion of state-sponsored surveys and development projects (through subvention or other financial aid) in the specific sector


General Overview

Financial Review

that private companies handle. Revenues from entrusted activities represent the amount paid by the government to cover the cost of other specific activities (management of national petroleum stockpiles, domestic geological surveys of oil and gas, etc.) requested by the state.　In fiscal 2013, JOGMEC posted a current gross loss of 28.5 billion yen. The main factor in this loss was the fact that JOGMEC posted 24.8 billion yen in losses on write-offs of investment in subsidiaries for the current fiscal year which are related to investment in oil and natural gas exploration projects. This amount substantially exceeded earnings such as the dividend income and guarantee fee income received. Half of the investment balance is assessed as the fair value based on JOGMEC’s bylaws and in accordance with the practical guidelines for financial instrument accounting standards established by the Japanese Institute of Certified Public Accountants. This is because it is difficult to objectively judge the collectability of stock for investment in the exploratory stage, and because the Accounting Standards for Incorporated Administrative Agency are not applicable to such a case. In general, extended periods are required for oil exploration development projects, making it difficult to assess their success. Therefore, JOGMEC follows accounting procedures that reflect the characteristics of the projects, by conservatively evaluating the investments in companies prospecting for resources.

Finance and Liability Guarantees

　JOGMEC, together with private-sector companies, provides equity finance for operations related to oil and gas E&P, natural gas liquefaction, and other activities. It also grants liability guarantees for these same activities.　In fiscal 2013, JOGMEC provided a total of 114.6 billion yen in equity capital to 26 companies including two new exploration projects and two new asset acquisition projects. Equity finance is recorded as investment in stocks of affiliates and investment securities (outstanding balance of 262.5 billion yen at of the end of fiscal 2013) in the fixed investment column. Currently, none of these subsidiaries and affiliates is publically listed.　JOGMEC provided a liability guarantee for 13 companies including one new project (outstanding balance of 687.9 billion at the end of fiscal 2013).　In oil and LPG stockpiling-related activities, JOGMEC invested 19.5 billion yen at the end of fiscal 2013 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 1.1 billion yen at the end of fiscal 2013. In addition, the corporation supplies financing to private-sector companies, which are required to meet certain stockpiling obligations by law, to help them purchase the necessary petroleum and LPG for stockpiling. The amount of these finances was 784.2 billion yen at the end of fiscal 2013. 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 784.9 billion yen at the end of fiscal 2013.　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 five companies (outstanding balance of 41 .0 billion yen at the end of fiscal 2013), we also provided loans totaling 0.9 billion yen to three companies for domestic and overseas exploration projects (outstanding balance of 22.0 billion yen at the end of fiscal 2013). In addition, JOGMEC provided a liability guarantee for nine companies including one new project (outstanding balance of 102.5 billion yen at the end of fiscal 2013). JOGMEC also provide loans for mine pollution control (outstanding balance of 2.7 billion yen at the end of fiscal 2013).　In relation to geothermal development, JOGMEC provided a new liability guarantee for one company (outstanding balance of 1.0 billion yen at the end of fiscal 2013).

Stockpiling

　JOGMEC is responsible for operating petroleum and LPG 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 (39.8 billion yen at the end of fiscal 2013).


　As part of its mine pollution control activities, JOGMEC is responsible for managing two funds for mining rights holders.　One is the Reserve for Mine Pollution Control, which was created to meet mine remediation costs after mine closure. Interest earned on funds paid into the reserves by mining rights holders is returned when costs are incurred for remediation work.　The other is the Mine Pollution Control Fund. Income from the management of this fund is exclusively used to maintain mine drainage treatment facilities at abandoned mine sites. Expenses incurred for this work are recorded as mine pollution control costs, and these were 0.1 billion yen in fiscal 2013.

Others

　Based on Paragraph 1 of Article 6 of the supplementary provision of Act to Partially Amend the Oil Stockpiling Act and Other Related Legislation to Prepare for Oil Supply Shortages in the Event of Disaster (Act No. 76 of 2012), on April 1, 2013, JOGMEC succeeded in “the Account for Transitional Functions related to the Coal Mining Industry” to carry out loan redemption operations and old exploration area management operations from New Energy and Industrial Technology Development Organization (NEDO). JOGMEC introduced deferred and accrued accounts for the accounting of these operations.




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

AssetsI Current assets　　Cash on hand and in banks 116,790,423,761 1,135,210,184 　　Marketable securities 28,912,229,588 281,028,670 　　Trade accounts receivable 2,118,907,975 20,595,917 　　Inventories 77,303,700,805 751,396,781 　　Advance payments 859,229,600 8,351,765 　　Prepaid expenses 8,830,913 85,837 　　Accrued income 507,887,920 4,936,702 　　Short-term loans receivable 5,399,153,122 52,480,104 　　Loans receivable for subsidiaries and affiliates 99,014,000 962,422 　　Loans receivable for funding private-sector stockpiling activities 784,154,900,000 7,622,034,409 　　Accounts receivable 2,908,687,109 28,272,620 　　Advances 518,846 5,043 　Total current assets 1,019,063,483,639 9,905,360,455

II Fixed assets　1. Tangible fixed assets　　　Buildings 7,377,153,059 71,706,387 　　　　Less : accumulated depreciation (2,166,264,744) (21,056,228)　　　Structures 402,251,910 3,909,914 　　　　Less : accumulated depreciation (254,089,262) (2,469,763)　　　Machinery and equipment 10,674,260,441 103,754,476 　　　　Less : accumulated depreciation (4,526,604,333) (43,998,876)　　　Vessels 19,312,310,249 187,716,857 　　　　Less : accumulated depreciation (2,910,973,116) (28,294,840)　　　Vehicles 534,045,989 5,190,960 　　　　Less : accumulated depreciation (505,525,953) (4,913,744)　　　Tools, furniture and fixtures 3,789,224,006 36,831,493 　　　　Less : accumulated depreciation (2,651,048,611) (25,768,357)　　　Land 3,724,370,446 36,201,112 　　　Construction in progress 59,930,000 582,523 　　　Rare metals 39,809,212,508 386,948,022 　　Tangible fixed assets, net 72,668,252,589 706,339,936 　2. Intangible fixed assets　　　Patents 784,334,171 7,623,777 　　　Mining rights 38,423,750 373,481 　　　Software 30,838,417 299,751 　　　Telephone rights 3,431,000 33,350 　　　Mining right in progress 55,653,400 540,955 　　Total intangible fixed assets 912,680,738 8,871,314 　3. Investments and other assets　　　Long-term deposit 35,828,912,607 348,259,259 　　　Investments in securities 79,019,019,499 768,069,785 　　　Investments in subsidiaries and affiliates 321,602,708,266 3,125,998,331 　　　Long-term loans receivable 24,491,963,079 238,063,405 　　　Long-term loans receivable from subsidiaries and affiliates 1,003,646,000 9,755,502 　　　Claims provable in rehabilitation from bankruptcy 7,604,130,824 73,912,625 　　　　Less : allowance for doubtful receivables (2,755,559,000) (26,784,205)　　　Security deposits 21,305,578 207,092 　　Total investments and other assets 466,816,126,853 4,537,481,793 　Total fixed assets 540,397,060,180 5,252,693,042 Total assets ¥1,559,460,543,819 $15,158,053,497


Balance Sheet (March 31,2014)


Liabilities and Net assetsLiabilities　I Current liabilities　　　Grants received in advance for administrative services 4,501,331,104 43,753,218 　　　Grants received in advance 3,340,000,000 32,465,008 　　　Current portion of long-term borrowings 54,936,853,900 533,989,637 　　　Loans payable for funding private-sector stockpiling activities 784,855,900,000 7,628,848,173 　　　Trade accounts payable 8,781,691,560 85,358,588 　　　Accounts payable-other 1,960,988,033 19,060,926 　　　Accrued expenses 354,883,758 3,449,492 　　　Consumption taxes payable 113,441,000 1,102,654 　　　Advances received 73,373,476,511 713,194,756 　　　Deposits received 1,170,186,410 11,374,285 　　　Allowance　　　　Accrued bonuses 31,164,159 302,918 　　Total current liabilities 933,419,916,435 9,072,899,654

　II Long-term liabilities　　　Contra accounts for services and assets　　　　Contra account for assets funded by grants for administrative services 4,636,025,767 45,062,459 　　　　Contra account for assets purchased with other grants 238,603,997 2,319,246 　　　Long-term borrowings 3,164,955,000 30,763,559 　　　Allowances　　　　Allowance for retirement benefits 1,275,114,202 12,394,189 　　　Long-term accounts payable 407,386,735 3,959,824 　　　Reserve for prevention of mine pollution 1,825,021,000 17,739,318 　　　Security deposit for coal mine damage compensation 1,752,816,123 17,037,482 　　Total long-term liabilities 13,299,922,824 129,276,077 　Total liabilities 946,719,839,259 9,202,175,732

Net Assets　I Capital　　　National government investments 640,462,708,895 6,225,337,373 　　Total capital 640,462,708,895 6,225,337,373

　II Capital surplus　　　Capital surplus 30,273,493,694 294,260,242 　　　Accumulated depreciation charged to capital surplus (9,358,181,990) (90,962,111)　　　Accumulated impairment loss charged to capital surplus (2,412,000) (23,445)　　　Fund for prevention of mine pollution 5,117,410,831 49,741,552 　　Total capital surplus 26,030,310,535 253,016,238

　III Accumulated deficits　　　Accumulated reserve carried over from first mid-term target period 2,183,379,313 21,222,583 　　　Undisposed accumulated deficits (56,051,692,897) (544,825,942)　　　　（Total loss for the year ￥28,463,291,969)　　Total accumulated deficits (53,868,313,584) (523,603,359)

　IV Unrealized holding loss on securities 115,998,714 1,127,515

Total Net assets 612,740,704,560 5,955,877,766 Total liabilities and Net assets ¥1,559,460,543,819 $15,158,053,497




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Ordinary expenses　　Operating expenses:　　　Operating expenses 16,355,660,698 158,978,039 　　　Operating and administrative expenses 5,767,958,298 56,064,913 　　　Depreciation 1,041,082,094 10,119,383 　　　Accrual for bonuses 26,271,697 255,363 　　　Cost for purchases for oil 48,913,776,021 475,444,946 　　　Loss on write-offs of investments in subsidiaries and affiliates 24,751,269,655 240,583,881 　　　Loss on liquidation of affiliates 10,744,455 104,437 　　Expenses for entrusted activities 29,763,010,792 289,298,316 　　General and administrative expenses:　　　Payroll expenses 1,037,253,571 10,082,169 　　　Depreciation 28,210,252 274,205 　　　Accrual for retirement benefits 26,032,557 253,038 　　　Accrual for bonuses 4,892,462 47,555 　　　Administrative expenses 337,509,003 3,280,609 　　Finance costs:　　　Interest expense 881,728,150 8,570,452 　　　Other finance cost 60,024,886 583,446 　　Interest on reserve for prevention of mine pollution 18,474,553 179,574 　　Operating expenses relating to mine pollution prevention activities 119,101,073 1,157,670 　　Interest on security deposit for coal mine damage compensation 4,673,674 45,428 　　Miscellaneous losses 130,979,068 1,273,125 　Total ordinary expenses 129,278,652,959 1,256,596,549

Ordinary revenues　　Revenue from grants for administrative services 14,723,090,990 143,109,360 　　Operating revenues:　　　Interest on loans receivable 1,132,185,298 11,004,912 　　　Revenue from sales of oil 48,913,776,021 475,444,946 　　　Guarantee fee income received 6,106,069,550 59,351,376 　　　Dividends received 5,278,315,736 51,305,557 　　　Gain on sales of shares of subsidiaries and affiliates 12,999,900 126,360 　　　Gain on liquidation of shares of subsidiaries and affiliates 7,883,147 76,625 　　Revenues from other grants received:　　　State subsidies 7,367,861,642 71,616,074 　　Revenues from entrusted activities:　　　Revenue from activities entrusted by national government 29,184,296,461 283,673,177 　　　Revenue from activities entrusted by local governments 469,432,386 4,562,912 　　　Revenue from activities entrusted by others 109,281,945 1,062,227 　　Financial revenues:　　　Interest income 213,159,054 2,071,919 　　　Interest income on securities 554,687,832 5,391,600 　　Reversal of contra account for assets funded by grants for administrative services 786,140,230 7,641,332 　　Reversal of contra account for assets purchased with other grants 133,744,069 1,300,001 　　Miscellaneous income 685,414,224 6,662,269 　Total ordinary revenues 115,678,338,485 1,124,400,646

Ordinary loss 13,600,314,474 132,195,903

Extraordinary loss　　Loss on disposal of fixed assets 165,636,907 1,610,001 　　Loss on contribution 15,247,959,337 148,211,113 　Total extraordinary loss 15,413,596,244 149,821,114

Extraordinary income　　Gain on sales of fixed assets 21,415,152 208,157 　　Reversal of contra account for assets funded by grants for administrative services 164,932,465 1,603,154 　　Reversal of contra account for assets purchased with grants 364,271,132 3,540,738 　Total extraordinary income 550,618,749 5,352,048

Net loss for the year 28,463,291,969 276,664,969 Total loss for the year ¥28,463,291,969 $276,664,969


Financial ReviewStatement of Operations (For the year ended March 31, 2014)


Ordinary expenses　　Operating expenses:　　　Operating expenses 16,355,660,698 158,978,039 　　　Operating and administrative expenses 5,767,958,298 56,064,913 　　　Depreciation 1,041,082,094 10,119,383 　　　Accrual for bonuses 26,271,697 255,363 　　　Cost for purchases for oil 48,913,776,021 475,444,946 　　　Loss on write-offs of investments in subsidiaries and affiliates 24,751,269,655 240,583,881 　　　Loss on liquidation of affiliates 10,744,455 104,437 　　Expenses for entrusted activities 29,763,010,792 289,298,316 　　General and administrative expenses:　　　Payroll expenses 1,037,253,571 10,082,169 　　　Depreciation 28,210,252 274,205 　　　Accrual for retirement benefits 26,032,557 253,038 　　　Accrual for bonuses 4,892,462 47,555 　　　Administrative expenses 337,509,003 3,280,609 　　Finance costs:　　　Interest expense 881,728,150 8,570,452 　　　Other finance cost 60,024,886 583,446 　　Interest on reserve for prevention of mine pollution 18,474,553 179,574 　　Operating expenses relating to mine pollution prevention activities 119,101,073 1,157,670 　　Interest on security deposit for coal mine damage compensation 4,673,674 45,428 　　Miscellaneous losses 130,979,068 1,273,125 　Total ordinary expenses 129,278,652,959 1,256,596,549

Ordinary revenues　　Revenue from grants for administrative services 14,723,090,990 143,109,360 　　Operating revenues:　　　Interest on loans receivable 1,132,185,298 11,004,912 　　　Revenue from sales of oil 48,913,776,021 475,444,946 　　　Guarantee fee income received 6,106,069,550 59,351,376 　　　Dividends received 5,278,315,736 51,305,557 　　　Gain on sales of shares of subsidiaries and affiliates 12,999,900 126,360 　　　Gain on liquidation of shares of subsidiaries and affiliates 7,883,147 76,625 　　Revenues from other grants received:　　　State subsidies 7,367,861,642 71,616,074 　　Revenues from entrusted activities:　　　Revenue from activities entrusted by national government 29,184,296,461 283,673,177 　　　Revenue from activities entrusted by local governments 469,432,386 4,562,912 　　　Revenue from activities entrusted by others 109,281,945 1,062,227 　　Financial revenues:　　　Interest income 213,159,054 2,071,919 　　　Interest income on securities 554,687,832 5,391,600 　　Reversal of contra account for assets funded by grants for administrative services 786,140,230 7,641,332 　　Reversal of contra account for assets purchased with other grants 133,744,069 1,300,001 　　Miscellaneous income 685,414,224 6,662,269 　Total ordinary revenues 115,678,338,485 1,124,400,646

Ordinary loss 13,600,314,474 132,195,903

Extraordinary loss　　Loss on disposal of fixed assets 165,636,907 1,610,001 　　Loss on contribution 15,247,959,337 148,211,113 　Total extraordinary loss 15,413,596,244 149,821,114

Extraordinary income　　Gain on sales of fixed assets 21,415,152 208,157 　　Reversal of contra account for assets funded by grants for administrative services 164,932,465 1,603,154 　　Reversal of contra account for assets purchased with grants 364,271,132 3,540,738 　Total extraordinary income 550,618,749 5,352,048

Net loss for the year 28,463,291,969 276,664,969 Total loss for the year ¥28,463,291,969 $276,664,969


I Cash flows from operating activities　　　Payments for raw materials, goods and services purchased (116,146,328,472) (1,128,949,538)　　　Payroll expenses (5,122,828,129) (49,794,208)　　　Loans receivable made (786,178,900,000) (7,641,707,815)　　　Refund of reserve for prevention mine pollution (29,292,000) (284,720)　　　Expenses related to mine pollution prevention activities (63,248,831) (614,783)　　　Purchases of investments (114,600,910,980) (1,113,927,984)　　　Purchases of oil (48,913,776,021) (475,444,946)　　　Consumption tax paid (425,102,504) (4,132,023)　　　Other operating expenses paid (4,827,094,425) (46,919,658)　　　Guarantee fees received 7,958,492,815 77,357,045 　　　Reserve for prevention of mine pollution received 15,640,000 152,022 　　　Grants received for administrative services 19,579,622,000 190,315,144 　　　Revenues received from entrusted activities 103,921,269,445 1,010,121,204 　　　Other grants received 11,689,481,180 113,622,484 　　　Collection of loans receivable 724,967,650,065 7,046,730,658 　　　Revenues from sales of shares of subsidiaries and affiliates 17,249,900 167,670 　　　Proceeds from liquidation of affiliates 9,138,941 88,831 　　　Revenue from sales of oil 48,913,776,021 475,444,946 　　　Consumption taxes refunded 834,634,410 8,112,698 　　　Other operating revenues received 2,387,350,342 23,205,194 　　Subtotal (156,013,176,243) (1,516,457,778)　　　Interest and dividends received 7,767,392,037 75,499,534 　　　Interest paid (931,584,534) (9,055,060)　　　Payments to national treasury (4,030,689,644) (39,178,554)　Cash flows from operating activities (153,208,058,384) (1,489,191,858)

II Cash flows from investing activities　　　Purchases of time deposits (345,172,265,652) (3,355,095,895)　　　Proceeds from time deposits upon maturity 359,222,473,714 3,491,664,791 　　　Purchases of securities (349,602,436,086) (3,398,157,427)　　　Proceeds from securities upon maturity 363,151,800,000 3,529,858,087 　　　Purchases of tangible fixed assets (4,134,804,300) (40,190,555)　　　Proceeds from sales of tangible fixed assets 404,358,362 3,930,388 　　　Purchases of intangible fixed assets (270,720,337) (2,631,419)　Cash flows from investing activities 23,598,405,701 229,377,971

III Cash flows from financing activities　　　Proceeds from short-term borrowings 7,900,000,000 76,788,491 　　　Repayments of short-term borrowings (7,900,000,000) (76,788,491)　　　Proceeds from long-term borrowings 54,765,099,900 532,320,178 　　　Repayments of long-term borrowings (53,704,895,536) (522,014,926)　　　Proceeds from loans payable for funding private-sector stockpiling activities 784,855,900,000 7,628,848,173 　　　Repayments of loans payable for funding private-sector stockpiling activities (717,830,600,000) (6,977,358,087)　　　Proceeds from national government investments 98,400,000,000 956,454,121 　　　Payments for transferring of unnecessary properties to government (23,247,959,337) (225,971,611)　　　Repayments of lease obligations (226,012,753) (2,196,858)　Cash flows from financing activities 143,011,532,274 1,390,080,990

IV Effect of exchange rate changes on cash and cash equivalents (32,506,553) (315,966)V Net increase in cash and cash equivalents 13,369,373,038 129,951,138 VI Cash and cash equivalents at beginning of year 15,142,619,015 147,187,199 VII Cash and cash equivalents at end of year ¥28,511,992,053 $277,138,336




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Financial ReviewStatement of Cash Flows (For the year ended March 31, 2014)

Ⅰ.Significant Accounting Policies　JOGMEC adopted the “Accounting Standards for Incorporated Administrative Agency” (“Revision of Accounting Standards for Incorporated Administrative Agency”[Study Group of Accounting Standards for Incorporated Administrative Agency and Working Subcommittee of Legal and Public Accounting Systems, Fiscal System Subcommittee, Fiscal System Council, June 28, 2011]), and the “Q&A on Accounting Standards for Incorporated Administrative Agency and Notes to Accounting Standards for Incorporated Administrative Agency” (Administrative Management Bureau of the Ministry of Internal Affairs and Communications, Budget Bureau of the Ministry of Finance, and Japanese Institute of Certified Public Accountants, finally revised in March 2012).1.Basis of Preparation　The accompanying f inancial statements of Incorporated Administrative Agency Japan Oil, Gas and Metals National Corporation (“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 ¥102.88 =US$1.00, the exchange rate prevailing on March 31, 2014. 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 Services　Revenues from grants for administrative services are recognized as the related expenses are incurred.　This is because the relationship between the revenues from grants for administrative services and each project is not clear, or the revenues from grants for administrative services do not relate to the passage of time, which makes it difficult to adopt the completed-contract method or the percentage-of-completion method.3.Depreciation(1)Tangible fixed 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　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.　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 losses on guarantees　Allowance for losses 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　Allowance 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.　Past service liability 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.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. 7.Valuation of Inventories　Inventories are stated at the lower of cost or market, cost being determined by the specific identification method.8.Foreign Currency Translation　Assets 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.Leases　Noncancelable leases with aggregate lease payments of three million yen or more that transfer substantially all risks and rewards associated with the ownership of assets are accounted for as finance leases; however, the impact of the interest portion included in the lease payments has been omitted from this lease accounting because of its immateriality.　All other leases are accounted for as operating leases and related payments are charged to income as incurred.10.Consumption Taxes　Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. 11.Other Accounting Information for Proper Disclosure of the Situation of Incorporated Administrative Agency　As an account for accounting the work pertaining to the rights and obligations that was succeeded from the New Energy and Industrial Technology Development Organization on April 1, 2013 under the provisions of Act to Partially Amend the Oil Stockpiling Act and Other Related Legislation to Prepare for Oil Supply Shortages in the Event of Disaster (Act No. 76 of 2012), new account named “the Account for Transitional Functions related to the Coal Mining Industry” has been prepared.


Notes to Financial Statements （March 31, 2014）

Ⅱ.Notes to Financial Statements1.Balance Sheet

March 31, 2014(Yen) (U.S.dollars)

(1) Estimated amount of bonuses not recorded as accrued bonuses: ¥270,455,401 US$2,628,843

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

¥7,638,494,524 US$74,246,642

(3) Guarantees given for loans: ¥791,487,843,556 US$7,693,311,077

2.Statement of OperationsYear ended March 31, 2014(Yen) (U.S.dollars)

(1) Loss on disposal of fixed assetsBuildings:Machinery and equipment:Vehicles:Tools, furniture and fixtures:Patents:Software:

¥299,279¥2,515,763

¥34,241¥157,152

¥160,873,140¥1,757,332

US$2,909 US$24,453

US$333 US$1,528

US$1,563,697 US$17,081

(2) Gain on sales of fixed assetsBuildings:Machinery and equipment:Vehicles:Tools, furniture and fixtures:

¥1,288,283¥19,697,920

¥425,142¥3,807

US$12,522 US$191,465

US$4,132 US$37

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

Year ended March 31, 2014(Yen) (U.S.dollars)

Cash on hand and in banks: ¥116,790,423,761 US$1,135,210,184 Time deposits: (¥88,278,431,708) (US$858,071,848)Cash and cash equivalents: ¥28,511,992,053 US$277,138,336

(2)Significant non-cash transactionsYear ended March 31, 2014

(Yen) (U.S.dollars)Assets acquired through finance leases:Tools, furniture and fixtures: ¥243,579,784 US$2,367,611 4.Leases(1)Future lease payments for finance lease transactions

March 31, 2014(Yen) (U.S.dollars)

Due within one year from the balance sheet date: ¥214,365,983 US$2,083,651

Due after one year from the balance sheet date: ¥193,020,752 US$1,876,174

Total: ¥407,386,735 US$3,959,824

　The above lease obligations have not been classified and presented by current and noncurrent portion in the balance sheet because of their immateriality.5.Financial Instruments(1)Overview1) 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 risksi) 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 riskShares 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 fundraisingJOGMEC has raised funds pursuant to its borrowing plans approved by the state minister in charge.(2)Estimated fair value of financial instruments　Carrying value of financial instruments in the balance sheet, their estimated fair value and difference as of March 31, 2014 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, 2014

Carrying value Estimated fair value Difference

(Million yen)

(Million U.S.dollars)

(Million yen)


(Million yen)


(1)Cash on hand and in banks 116,790 1,135 116,790 1,135 - -

(2) Marketable securities and investments in securities1) Held-to-maturity securities 46,443 451 47,007 456 563 5

2) Other securities 60,084 584 60,084 584 - -

(3)Short-and long-term loans receivable 29,891 290 30,433 295 542 5

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

784,154 7,622 784,154 7,622 - -

(5)Long-term deposits 35,828 348 35,949 349 120 1 (6) Claims provable in

rehabilitation from bankruptcy

7,604 73

Less : allowance for doubtful receivable (2,755) (26)

4,848 47 4,848 47 - - Total Assets 1,078,042 10,478 1,079,269 10,490 1,226 11 (1)Current portion of long-term borrowings and long-term borrowings

58,101 564 58,190 565 88 0

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

784,855 7,628 784,855 7,628 - -

Total Liabilities 842,957 8,193 843,046 8,194 88 0

(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.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.(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 carrying 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




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Notes to Financial Statements （March 31, 2014）

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 nonlisted stocks of 323,005 million yen (3,139 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 (1,825 million yen (17 million U.S. dollars) in the balance sheet) and Security deposit for coal mine damage compensation (1,752 million yen (17 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 losses(1) Telephone rights

March 31, 2014Carrying Value Amount not charged to income

(Yen) (U.S dollars) (Yen) (U.S dollars)Telephone rights: ¥10,000 US$97 ¥46,000 US$447

　The impairment losses were measured at the excess of the book values over the net realizable values. The net realizable values were estimated as an assessed amount of inheritance tax for the telephone rights. The impairment losses were charged to capital surplus as accumulated impairment loss charged to capital surplus in the balance sheet.7.Asset Retirement Obligations　Asset retirement obligations not included in the balance sheet　Obligations to restore the Metals Technology Center to its original condition　JOGMEC 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.Transfer of Unnecessary Properties to Government　The description of the transfer of unnecessary properties to the government is as follows:

(1)

Outline of type, book value, etc. of assets transferred to government as unnecessary properties

Cash on hand and in banks Cash on hand and in banks Machinery and equipment (Revenues from Grants for Administrative Services as defined in “Accounting Standards for Incorporated Administrative Agencies, No. 81(3)”)

(Transfer amount of accumulated reserve carried over from first mid-term target period as defined in “Accounting Standards for Incorporated Administrative Agencies, No. 96”)

(Facility acquired through the project for R & D program for rare earth metals recovery technology)

Book value:6,576,698,850(yen)

63,925,922(U.S.dollars)


80,594,588(U.S.dollars)

Book value:64,276,646(yen)

624,773(U.S.dollars)

(2)Reasons for which assets became unnecessary

Due to added accumulated deficits up in “the Account for Oil, Natural Gas and Others” Revenues from Grants for Administrative Services as defined in “Accounting Standards for Incorporated Administrative Agencies, No. 81(3)” is not transfer to government based on “Act on the Japan Oil, Gas and Metals National Corporation, Independent Administrative Agency, Article 13”, considerable funds have been reserved for the corporate internal. It is not expected to be disbursed.

Due to added accumulated deficits up in “the Account for Oil, Natural Gas and Others” Transfer amount of accumulated reserve carried over from first mid-term target period as defined in

“Accounting Standards for Incorporated Administrative Agencies, No. 96” is not transfer to government based on “Act on the Japan Oil, Gas and Metals National Corporation, Independent Administrative Agency, Article 13”, considerable funds have been reserved for the corporate internal. It is not expected to be disbursed.

With the termination of the project for R & D program for rare earth metals recovery technology, the facilities acquired through this project became unnecessary.

(3) Method of transfer to government

Payment in kind in accordance with paragraph (1) of Article 46-2 of Act on General Rules for Incorporated Administrative Agency

Payment in cash in accordance with paragraph (2) of Article 46-2 of Act on General Rules for Incorporated Administrative Agency

(4)

Amount of capital gains from sale of assets in connection with which transfer was made by way of cash payment

- - 64,276,646(yen)624,773(U.S.dollars)

(5)

Amount of costs deducted from amount of capital gains to be transferred to government

- - -

(6) Amount of transfer to government

6,576,698,850(yen)63,925,922(U.S.dollars)

8,291,571,184(yen)80,594,588(U.S.dollars)

47,833,416(yen)*464,944(U.S.dollars)

(7) Date of transfer to government October 17, 2013 October 17, 2013 November 20, 2013

(8) Amount of reduction of capital - - -

(1)


Machinery and equipment


Cash on hand and in banks

(Facility acquired through the project for R & D program for innovative smelting process of low-grade and refractory ores [Technology development of roasting of fine-grained concentrates])

(Facility acquired through the project for R & D program for innovative smelting process of low-grade and refractory ores [Technology development of separation of copper and arsenic from smelting dusts and study of stable storage method of arsenic])

(Funds to be held due to the investment in the special account budget for reconstruction from the Great East Japan Earthquake for providing equity capital for asset acquisition on the General Account for Metal Mining)


2,906,825(U.S.dollars)




77,760,498(U.S.dollars)


With the termination of the project for R & D program for innovative smelting process of low-grade and refractory ores [Technology development of roasting of fine-grained concentrates], the facilities acquired through this project became unnecessary.

With the termination of the project for R & D program for innovative smelting process of low-grade and refractory ores [Technology development of separation of copper and arsenic from smelting dusts and study of stable storage method of arsenic], the facilities acquired through this project became unnecessary.

Funds to be held due to the investment in the special account budget for reconstruction from the Great East Japan Earthquake for providing equity capital for asset acquisition on the General Account for Metal Miningt is not expected to be disbursed.




(4)


299,054,201(yen)2,906,825(U.S.dollars)

16,358,456(yen)159,005(U.S.dollars) -

(5)


- - -


153,556,533(yen)*1,492,579(U.S.dollars)

16,358,456(yen)159,005(U.S.dollars)

8,000,000,000(yen)77,760,498(U.S.dollars)

(7) Date of transfer to government November 20, 2013 November 20, 2013 March 27, 2014

(8) Amount of reduction of capital - - 8,000,000,000(yen)

77,760,498(U.S.dollars)


(1)


Cash on hand and in banks Cash on hand and in banks Machinery and equipment (Revenues from Grants for Administrative Services as defined in “Accounting Standards for Incorporated Administrative Agencies, No. 81(3)”)

(Transfer amount of accumulated reserve carried over from first mid-term target period as defined in “Accounting Standards for Incorporated Administrative Agencies, No. 96”)

(Facility acquired through the project for R & D program for rare earth metals recovery technology)


63,925,922(U.S.dollars)


80,594,588(U.S.dollars)




Due to added accumulated deficits up in “the Account for Oil, Natural Gas and Others” Revenues from Grants for Administrative Services as defined in “Accounting Standards for Incorporated Administrative Agencies, No. 81(3)” is not transfer to government based on “Act on the Japan Oil, Gas and Metals National Corporation, Independent Administrative Agency, Article 13”, considerable funds have been reserved for the corporate internal. It is not expected to be disbursed.

Due to added accumulated deficits up in “the Account for Oil, Natural Gas and Others” Transfer amount of accumulated reserve carried over from first mid-term target period as defined in

“Accounting Standards for Incorporated Administrative Agencies, No. 96” is not transfer to government based on “Act on the Japan Oil, Gas and Metals National Corporation, Independent Administrative Agency, Article 13”, considerable funds have been reserved for the corporate internal. It is not expected to be disbursed.

With the termination of the project for R & D program for rare earth metals recovery technology, the facilities acquired through this project became unnecessary.




(4)


- - 64,276,646(yen)624,773(U.S.dollars)

(5)


- - -


6,576,698,850(yen)63,925,922(U.S.dollars)

8,291,571,184(yen)80,594,588(U.S.dollars)

47,833,416(yen)*464,944(U.S.dollars)

(7) Date of transfer to government October 17, 2013 October 17, 2013 November 20, 2013

(8) Amount of reduction of capital - - -

(1)




Cash on hand and in banks

(Facility acquired through the project for R & D program for innovative smelting process of low-grade and refractory ores [Technology development of roasting of fine-grained concentrates])

(Facility acquired through the project for R & D program for innovative smelting process of low-grade and refractory ores [Technology development of separation of copper and arsenic from smelting dusts and study of stable storage method of arsenic])

(Funds to be held due to the investment in the special account budget for reconstruction from the Great East Japan Earthquake for providing equity capital for asset acquisition on the General Account for Metal Mining)


2,906,825(U.S.dollars)




77,760,498(U.S.dollars)


With the termination of the project for R & D program for innovative smelting process of low-grade and refractory ores [Technology development of roasting of fine-grained concentrates], the facilities acquired through this project became unnecessary.

With the termination of the project for R & D program for innovative smelting process of low-grade and refractory ores [Technology development of separation of copper and arsenic from smelting dusts and study of stable storage method of arsenic], the facilities acquired through this project became unnecessary.

Funds to be held due to the investment in the special account budget for reconstruction from the Great East Japan Earthquake for providing equity capital for asset acquisition on the General Account for Metal Miningt is not expected to be disbursed.




(4)


299,054,201(yen)2,906,825(U.S.dollars)

16,358,456(yen)159,005(U.S.dollars) -

(5)


- - -


153,556,533(yen)*1,492,579(U.S.dollars)

16,358,456(yen)159,005(U.S.dollars)

8,000,000,000(yen)77,760,498(U.S.dollars)

(7) Date of transfer to government November 20, 2013 November 20, 2013 March 27, 2014

(8) Amount of reduction of capital - - 8,000,000,000(yen)

77,760,498(U.S.dollars)

(1)


Cash on hand and in banks(Funds to be held due to the gains from the investment in the special account budget for reconstruction from the Great East Japan Earthquake for providing equity capital for asset acquisition on the General Account for Metal Mining) Book value:7,101,369(yen)

69,026(U.S.dollars)


Funds to be held due to the gains from the investment in the special account budget for reconstruction from the Great East Japan Earthquake for providing equity capital for asset acquisition on the General Account for Metal Mining is not expected to be disbursed.



(4)


-

(5)


-


7,101,369(yen)69,026(U.S.dollars)

(7) Date of transfer to government May 29, 2014

(8) Amount of reduction of capital -

* Difference between the amount of capital gains and the amount transferred to the government is the amount transferred to the private bodies.9. Allowance for Retirement Benefits　The Employees Pension Fund for incorporated administrative agency of the Ministry of International Trade and Industry which JOGMEC belongs to obtained the approval of the exemption from the obligation to pay the future benefits of the substitutional portion of the Welfare Pension Fund by the Minister of Health, Labour and Welfare on March 1, 2014.　The amount to be returned (minimum reserve) under the substitutable portion of the Welfare Pension Fund is estimated to be 2,022 million yen (21 million U.S. dollars) as of March 31, 2014, and assuming payment of such amount to be returned (minimum reserve) would be conducted on March 31, 2014, the estimated gain by applying Article 44-2 of the Practical Guidelines for Retirement Benefits Accounting (Interim Report) (Japan Institute of Certified Public Accountants Report No. 13) is 348 million yen (3 million U.S. dollars).　The amount to be returned (minimum reserve) includes the amount received as grants for administrative services.I I I . Actions Resulting in Signif icant Financial Obligations　Not applicableⅣ．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 Events　Significant Events for Investments　The following exploration investments by the Corporation will be terminated for less productivity1.INPEX Mozambique, Ltd.:　INPEX Mozambique, Ltd. is an E&P company which operates at an offshore Mozambique, and JOGMEC provided equity financing to it from May 2013.　However, as it was unable to find out oil potential there, the related companies came to an agreement to withdraw this project on April 25, 2014, and JOGMEC approved the termination on May 30, 2014.　Therefore, it is expected that valuation loss for the book value of the stock(2,619 million yen (25 million U.S. dollars)) and burden of expense(2,312 million yen (22 million U.S. dollars)) will be incurred in the 2014 fiscal year.2.INPEX UK LIMITED:　INPEX UK LIMITED is a company which operates E&P projects at an offshore Shetland mining area and JOGMEC decided the investment for exploration and provided equity financing to it from February 2008.　However, it was estimated that there would be little potential according to the study based on the results of trial boring. Therefore the project continued by narrowing down the mining area.　As a result of completion of the collecting the devices used by the projects which is determined by Department of Energy and Climate Change in the United Kingdom on April 20, 2014, we determined to terminate the project and JOGMEC approved it’s termination on June 5, 2014.　Therefore, it is expected that valuation loss for book value of the stock (876 million yen (8 million U.S. dollars)) and burden of expense (44 million yen (0.4 million U.S. dollars)) will be incurred in the 2014 fiscal year.3.JAPAN ENERGY E&P AUSTRALIA PTY LTD:　JAPAN ENERGY E&P AUSTRALIA PTY LTD is an E&P company which operates oil exploration projects at the offshore Australia and JOGMEC has adopted it as an investment for exploration.　However, as a result of re-evaluation of the potential of oil, it is assessed as we cannot expect the commercial quantity of oil there, and determined termination of the projects on June11, 2014.　Therefore, it is expected that valuation loss for book value of the stock (1,582 million yen (15 million U.S. dollars)) will be incurred in the 2014 fiscal year.




oal Resource

Developm

entG

eothermal Resource

Development

StockpilingM




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 2013 fiscal year from April 1, 2013 to March 31, 2014. We have also audited the combined financial statements consisting of the combined balance sheet, the combined statements of operations, cash flows and the execution costs for administrative services, significant accounting policies, notes to financial statements and the related combined supplementary schedules.

President’s Responsibility for the Financial Statements and the Related Supplementary Schedules

　President is responsible for the preparation and fair presentation of these financial statements and the related supplementary schedules (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 and the related supplementary schedules 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 and the related supplementary schedules 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 and the related supplementary schedules 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 and the related supplementary schedules. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements and the related supplementary schedules, 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 and the related supplementary schedules.

　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 did not identify 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 and the related supplementary schedules. However, our audit was not designed for the purpose of expressing an opinion on whether or not there were any frauds, errors or illegal acts committed by president or other personnel within JOGMEC's organization which would not result in material misstatements of its financial statements.

Opinion

　In our opinion, the financial statements and the related supplementary schedules 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 combined financial statements referred to above present fairly, in all material respects, the financial position by account and on a combined basis of JOGMEC, and results of operations, its cash flows and its execution costs for administrative services by account and on a combined basis in conformity with "Accounting Standards for Incorporated Administrative Agency" generally accepted in Japan.

Opinion on the Proposal for Appropriation of Retained Earnings and Disposal of Accumulated Deficits 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 as well as the financial reports for each account and on a combined basis of JOGMEC for the 2013 fiscal year from April 1,2013 to March 31, 2014.

President's Responsibility for the proposal for appropriation of retained earnings and disposal of accumulated deficits and the financial reports

　President is responsible for the preparation and fair presentation of these proposals for appropriation of retained earnings and disposal of accumulated deficits in accordance with the related regulations and the financial reports in accordance with the budget classification.

Auditor's Responsibility

　Our responsibility is to express an opinion on whether the proposal for appropriation of retained earnings and disposal of accumulated deficits is presented in accordance with the related regulations and whether the financial reports present properly JOGMEC's financial affairs in accordance with the budget classification.　

Opinion on the proposal for appropriation of retained earnings and disposal of accumulated deficits and the financial reports

　Our opinion is as follows:(1)The proposal for appropriation of retained earnings and disposal of accumulated deficit for each account is presented in accordance with the related regulations.(2) The financial reports for each account and on a combined basis of JOGMEC present properly JOGMEC's financial affairs in accordance with the budget classification established by president.

Report on Business Report

　Pursuant to Article 39 of "Act on General Rules for Incorporated Administrative Agency," we have audited the accounting matters stated in the business report by account of JOGMEC for the 2013 fiscal year from April 1, 2013 to March 31, 2014. The accounting matters which we audited in the business report were derived from the accounting books and records of JOGMEC.

Report on Business Report

　In our opinion, the accounting matters stated in the business report present properly the financial position and the results of its operations of JOGMEC.

　The U.S. dollar amounts in the accompanying financial statements with respect to the year ended March 31, 2014 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion; such translation has been made on the basis described in Note 1.

Conflicts of Interest

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

Ernst & Young Shinnihon LLCJune 16, 2014Tokyo, Japan

Mr. Kawano HirobumiPresidentJapan Oil, Gas and Metals National Corporation

Independent Auditor's Report

44 45Annual Report 2014Annual Report 201444 45Annual Report 2014Annual Report 2014

Independent Auditor's Report Financial Review

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 third medium-term objective beginning in April 2013.

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

■President　 Hirobumi Kawano

■Capital　 690 billion yen (as of October, 2014)

■No. of employees 523 people (as of October, 2014)

■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. *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

44 45Annual Report 2014Annual Report 201444 45Annual Report 2014Annual Report 2014

Overview of JOGMEC General Overview

Position Name Term Previous History

President Hirobumi Kawano2008.4.1

～

2016.2.28

- Senior Vice President, JFE Steel Corporation- Commissioner, Agency for Natural Resources and Energy- Director General, Basic Industries Bureau, Ministry of Economy, Trade and Industry- Director General, Petroleum Department, Agency for Natural Resources and Energy

Executive Vice

PresidentKeisuke Kuroki

2013.6.10

～

2016.2.28

- Executive Director, Nippon Steel Corporation- Managing Executive Offier, Chief of Kimitsu Ironworks, Nippon Steel Corporation- Vice President & Executive Officer, Nippon Steel Corporation- Executive Vice President, Nippon Steel Corporation- Executive Corporate Adviser, Nippon Steel & Sumitomo Metal Corporation

Executive Director

Shinji FujinoInternal Audit Office, General Coordination,Financial Management & Accounting, Evaluation and Research & Analysis

2014.4.1

～

2016.3.31

- Director General, Business Strategy Department, Oil & Gas Upstream Business Unit, Japan Oil, Gas and Metals National Corporation- Head of Country Studies Division, International Energy Agency (IEA, Paris)- Director, Information Service Industry Division, Commerce and Information Policy Bureau, Ministry of Economy, Trade and Industry

Executive Director

Kenji AkiyoshiOil & Gas Upstream Business Unit

2013.5.1

～

2016.2.29

- Deputy Director, Middle East Office- Councilor, Technical Survey Department- Director, Technology Planning Department- Director, Project Promotion Department

Executive Director

Makoto IchikawaOil & Gas Upstream Technology Unit

2014.3.1

～

2016.2.29

- Director General, Project Department- General Manager, Houston Office- Deputy Director General, Project Department- Project Director, Survey and Technology Department

Executive Director

Takafumi TsujimotoMetals Strategy & Exploration Unit

2014.3.1

～

2016.2.29

- Senior Councilor, Metals Strategy & Exploration Unit- Councilor, Metals Strategy & Exploration Unit- Senior Advisor, Power & Mining Team, Structured and Trade Finance　Insurance Department, Nippon Export and Investment Insurance- Director General, Metals Mining Technology Department

Executive Director

Masatoshi WatanabeStockpile Unit

2014.4.1

～

2016.3.31

- Director General, Petroleum Stockpile Management Department- Deputy Director General, Stockpile Planning Department- Director, Planning Team, Petroleum Stockpile Management Group- Director, Operation Team, Petroleum Stockpile Operation Group

Executive Director

Naotaka Adachi Metals & Coal Finance andEnvironment Unit

2014.7.1

～

2016.6.30

- Senior Councilor, Metals & Coal Finance and Environment Unit- Director General, Rare Metals Stockpile Department- Deputy Director General, Business Development Department, Oil & Gas Upstream Business Unit- Deputy Director General, Metals Exploration Department

Auditor Haruki Higo2014.4.1

～

2016.3.31

- Executive Director, National Tax College- Director(Information System Research), Commissioner’s Secretariat, National Tax Agency- Director, Property Taxation Division, Taxation Department, National Tax Agency- Professor, Graduate School of Business Sciences, University of Tsukuba- Assistant Regional Commissioner(Management and Co-ordination), Kumamoto Regional Taxation Bureau

Auditor Hiroshi Kubota2011.7.1

～

2016.2.28

Deputy Director General, Project DepartmentDirector, Public Relations Team, Corporate Strategy & General Affairs GroupDirector, Accounting Division, General Administration Department, JNOCDirector, Project Evaluation Department, JNOCGeneral Manager, Paris Office, Japan National Oil Corporation (JNOC)

As of October, 2014


Officers

President

Executive Vice President

Executive Directors

Internal Audit Office

Genaral Coordination Department

Financial Management & Accounting Department

Evaluation Department

Research and Analysis Department

Administration and Training Department

Exploration Department

Seismic Vessel Project Group

Technical Department

Technical Solutions Project Group

Methane Hydrate Research & Development Group

Stockpile Planning Department

Petroleum Stockpile Management Department

LPG Stockpile Management 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

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

Chief Geologist

As of October 2014


Organization Structure

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, SUMMITMAS II,Jl Jend,Sudirman Kav,61-62,Jakarta 12190 INDONESIA +62-21-522-6640 +62-21-522-6650

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

+61-2-9264-9611 +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)

Goldsmith No. 37, Oficina 401, Col. Chapultepec Polanco, C.P.11560 MEXICO, D.F., 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 en Santiago (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 123610 RUSSIAN FEDERATION

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

London Office (U.K.) Carrington House, 126-130 Regent Street, London W1B 5SE U.K.

+44-20-7287-7915 +44-20-7287-7916 +44-20-7287-7917

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

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

Botswana Geologic Remote Sensing Centre (Botswana)

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


Woldwide Network

Office AddressTomakomai Site Management Office 308 Aza-Shizukawa, Tomakomai-shi, Hokkaido 059-1363 JapanMutsu-Ogawara Site Management Office 525-2 Aza-Futamata, Oaza-Obuchi, Rokkasho-mura Kamikita-gun, Aomori 039-3212 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 30-31 Umemoto-cho, 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 OfficeFukui 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


Domestic Network

http://www.jogmec.go.jp/Japan Oil, Gas and Metals National Corporation

ANNUAL REPORT

Annual ReportYear ended March 312014

JAPEX ResearchCenter

JOGMECTRC

Tokyo

Tokyo

Tokyo

ChibaJR Sobu Line

Keisei Chiba LineMakuhariHongoStation

Makuhari I.C.

Wangan I.C.

Makuhari CorpBus Stop

Wangan Avenue

DrivingLicence Center

MakuhariMesse

Keisei BusStation

KaihinMakuhariStation

Toranomon Twin Building

Ginza Line

Nan

boku

Lin

e

Toranomon sta.

Tameike Sanou sta.

Kamiya Cho sta.

Exit No.4

Exit No.3

Hotel Okura

METI

Toranomon Hospital

National Printing Bureau

Ministry of Education, Culture, Sports, Science & Technology

Embassy of the USA

Hotel Okura

Japan Post

TV Tokyo

Hib

iya

Line

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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

Documents

OOVBM3FQPSUprojects, technology development based on Japanese companies or resource diplomacy needs, oil & gas field evaluation studies, collection of technical information, provision