Daisuke Yamada Senior Managing Executive Officer, Head of Finance & Accounting Division and Director Takayuki Ueda CEO, President & Representative Director Yoshihiro Wakita - Corporate Communication

I'd like to start the earnings call of INPEX CORPORATION. Thank you, everyone, for coming despite your busy schedule today. My name is Yoshihiro Wakita, General Manager of the Corporate Communication Unit, and I'll serve as the emcee for the meeting today. Please allow me to introduce the attendees from INPEX Corporation. We have Mr. Takayuki Ueda, Representative Director, President, and CEO. We have Director, Senior Managing Executive Officer, and Senior Vice President, Mr. Daisuke Yamada. We have Director, Senior Managing Executive Officer, and Senior Vice President, Mr. Toshiaki Takimoto. For the program today, we'll spend about 35 minutes to give the presentation and spend about 25 minutes for Q&A, 60 minutes in total. Today's session will be held in a hybrid manner with online participants, with simultaneous interpretation provided for Japanese and English. For those people participating through Zoom, please select the language of your choice. Also, for the presentation material, please choose the language from the button at the top of the screen. Mr. Ueda will first give the business overview, and Mr. Yamada will then explain the consolidated financial results for the six months ending June 30, 2025, as well as the consolidated financial forecast for the year ending December 2025. Mr. Ueda, over to you.

This is Ueda, President and CEO. Thank you very much for coming despite your busy schedule, as well as in rainy weather for the first time in a while. Please allow me to report the business overview. Please look at the first page. The overview for H1. In regards to the detailed numbers, Mr. Yamada will explain later. We ended up with the JPY223.5 billion, improving by about JPY10 billion. Despite the volatile external environment, I think we have been able to realize the profit pickup. Above all, the stable operation of the Ichthys LNG is a big factor, and we were able to ship 12 cargo per month for three consecutive months this year. This is the first time that we have been able to ship at that rate on record. In H2, the oil price and the FX remains very volatile. There are uncertainties, but we are expecting stable operation. For the full year, we are expecting JPY370 billion of profit. This was the upward revision that we have made for the forecast. Ichthys LNG, we have a scheduled shutdown maintenance and a large milestone. We have started the FEED work for Abadi LNG. There are various risks, and you can see the numbers shown on the slide. What we are often asked about is the risk regarding the US and the Middle East. As you can see on the slide, we currently do not operate in the United States, and we don't export to the US, either. There is only a very limited impact directly. But based on the portfolio for us, which is centered on Oceania and Asia, we are likely to receive the impact. The Abu Dhabi project continued to perform quite stably and haven't experienced any major issues. As for the oil price, we are seeing volatility continue. If you look back over H1, despite it being unstable, it was still relatively stable. At the end of H1, the average was about [USD]70 on Brent. That was the average for H1. This was stably higher than what we had expected. Now, going forward, there are still a lot of uncertainties. What often is talked about is the impact of the Trump tariff from the state that will have impact on the global economy. That could potentially push down the oil price. Or, OPEC has announced that they are going to ease the reduced production that could potentially cause the price to come down in terms of oil. The Asian economic condition remains to be quite strong based on certain opinions and geopolitical risks like the Ukraine conflict. There are those uncertainty factors, and those are likely to continue. When you look at the futures market, it hasn't really come down very much. The assumption for the oil price going forward, despite the volatility, we will probably see a gradual decline towards the end of the year at USD67. We have been able to see quite a stable profit going forward. Now, one of the factors behind the stable profit. This is more medium- to long-term perspective, but our financial structure, there are a number of factors to change this in a number of ways. Please allow me to explain what they are. Now, on this occasion, the year-end, the profit, are we looking at this for the full year? On the left, you can see the final profit transition in the past. The highest level was JPY460 billion in 2022, JPY420 billion last year is the second highest, and JPY370 billion, we are assuming for this fiscal year, will be the third highest. The oil price has been higher, or the yen may have depreciated. There were various factors. What we are showing on the right here, we are expecting a USD69 average for the full year for oil price. USD70 in H1, and USD65 for H2. The average is USD69 on Brent. FX of JPY147 is what we are assuming for the full year. But what you can see on the right is that in the past years, if the oil price and exchange rate is what we're assuming for this year, USD69 and JPY147, then we looked at the sensitivity, and we have evaluated the past profit on those basis. Not a strict number. It's a rough number. But if we do that kind of calculation, as you can see, JPY370 billion this year would have been the highest profit level in comparison to the past. A couple of years ago, JPY260 billion or JPY220 billion, that was a prelude, the impairment, and so forth. Apart from that, it has been increasing gradually. When you actually adjust for the FX, as well as oil price, this year's final profit is at the highest level. One of the factors behind this is what we have named “Profit Booster 500,” which is essentially the enhancement of structural and medium-term profitability. This is what I wanted to kind of explain. We are expecting a profit contribution of about JPY50 billion per year. It's not just a one-off impact, but this is something that will continue structurally over the medium term. If we see this continue for 10 years, that's JPY500 billion of positive impact that we can expect from this reform. Now, what is this? There are a couple of reasons behind this. First is, as you can see on the slide, is a foreign exchange gain from Ichthys, paid in capital reduction. As you know, Ichthys is operating very stably right now. In the past, the investment we made was in an Australian company. But we are now in the stage to recover the profit. That's the judgment we made. In two years’ time, we started the feed. But towards Abadi, we are in a position to start building up some reserve. For that, part of the investment that we made in Australia, we are essentially undertaking the paid in capital reduction from Australia to Tokyo. There is no P&L impact because we're just transferring the money. Because of this, we end up registering the foreign currency gain, and this is about JPY20 billion. It does fluctuate from YoY based in comparison to the past exchange rate. We'll continue to engage in this paid in capital reduction. You can consider this has been a long-term factor. Another factor is the investment incentive effects in Europe and Middle East regions. I can't talk about the details because of the contract with other counterparties, but there is an incentive effect. Whether it be Middle East or whether it be in Europe, we're expecting an incentive effect of around JPY30 billion per year. In total, that's about JPY50 billion of impact we're expecting on an annual basis. The Ichthys paid in capital reduction with Ichthys is something that we have finally been able to agree to with the accounting auditor this year. It's not included in the medium-term plan. For the investment incentive effect, it does contain part of that. Put together, that's about JPY50 billion per year of the profit increase per year. This is what we are expecting, and we expect this to continue for around 10 years. For this year, as you can see at the top, JPY58 billion out of the JPY370 billion comes from these impacts of profit recognized on the P&L on that basis. I can explain this from a different perspective. It's the same thing, but the ability to generate profit in regards to the oil price or the exchange rate, we have been able to improve our resilience. You can see both the left and right. The left-hand side is the oil price. If we set the ForEx at a set number, and if you look at the oil price sensitivity, to gain JPY300 billion, how much oil price we can have is shown. Until last year, as you can see on the bottom graph, to gain JPY300 billion, the ForEx will be set at JPY147. In that assumption, the JPY300 billion profit will come from the USD68 of oil price. The USD69 was necessary with a USD13 decline, even though in that situation, we will still have JPY300 billion of profit. On the right-hand side, the same thing, is on the ForEx exchange rate sensitivity with assumed Brent oil price at the set number. The oil price, USD69 on assumption, and how much we can gain JPY300 billion with what kind of foreign exchange. We had had JPY147. But this time, if it's JPY122, we can gain JPY300 billion of profit. That is shown in this graph. Therefore, the profit capability of our company, comparing to the oil price or the ForEx, even though there's an oil price decline or the yen appreciation, we are able to have a more profit-generating capability as a company. This is not one-off, but we're able to have this over the long term, and that's what we want to mention in this slide. Going forward with the allocation, cash allocation. In the midterm plan, there are a couple of allocations we mentioned. Going forward, the return, as well as the growth investment, are the main areas. For this year, USD69 is the oil price and USD137, the ForEx and the oil price is set at USD147, USD69 with that assumption. Over the next three years, the kind of cash in and cash out will be seen in the Company is shown in this slide. Based on the current oil price assumption, you can see the cash allocation forecast. We have USD70 as assumption, and JPY135 of dollar, and that is converted. The cash flow before allocation exploration is about JPY2,500 billion. There is a debt of JPY400 billion. Over the next three years, the cash flow will be JPY2.9 trillion. How will we be using this? Out of that JPY2.9 trillion, the growth investment will be JPY1.9 trillion. It was JPY1.8 trillion during the midterm plan, and that was what we mentioned before. Today, we have JPY1.9 trillion as an assumption. For the shareholder return, we talked about JPY400 billion or more before. But now, we have JPY562.5 billion or more as shareholder returns. Then, the cash reserve for Abadi, which is important for the FEED work. Looking at the FID in the next several years, this year and next year, we want to trade JPY400 billion to JPY500 billion of cash reserves for the Abadi LNG development. So far this year, for the next year, for this year, we are planning to have JPY400 billion of the cash, and that is the current assumption today. The right-hand side, based on that assumption, our D/E ratio is 0.3, 0.4, or less, and that is how much DE ratio has declined. The next three years, that DE ratio will not deteriorate largely, and that's the assumption. Then, the cash reserve after Abadi FID starts, we can inject those cash reserves. How much we will do the borrowing, how much it takes for Abadi, is the question, and it's not so clear today at this moment. But a certain amount we'll be able to downsize the borrowing at that time. We have confidence that over the mid- to long term, our financial soundness is in place, and we can also achieve the growth in the future. That's what I'd like to mention. Next is the shareholder returns. As we had the press conference before, we have the progressive dividend, and the JPY19 in the midterm plan is now increased to JPY100. The share buyback is in the size of JPY80 billion. From our investors, especially for the dividend, there are a lot of expectations. This year, we have more weight on the dividend, and that's the shareholder return for this fiscal year. Then, talking about the business activities, as you may already know, for Ichthys, it's going very smoothly. The shutdown maintenance is from the middle of August, and for about 1.5 months, all of the equipment will be suspended or stopped, and then we will open and do the maintenance work. Then, for the surrounding blocks, Cash Maple and others will be continued. For Abadi, the biggest business activities topic at the interim is that we are able to reach the FEED phase. What is FEED? It's basically a basic design. It's a huge amount of work. For the entire FEED, you have various phases, and we have to spend about JPY1 billion in total. JPY140 billion, JPY150 billion. It's not just a design, but that's how much we have to spend. Mainly in four areas, we'll be doing the FEED work, four areas. One is the onshore LNG facility, and then the pipeline, the subsea pipeline, FPSO, and then the wells SURF. This FPSO and the onshore LNG is the dual FEED where in two consortiums, there are competition, and whichever is better FEED, we'll be continuing to do the EPC work, the construction. Two consortiums are competing with the FEED, and then whoever wins, we will continue the EPC. That is the assumption, that's called dual FEED. This dual FEED, with FPSO, and also for our LNG, we will have these structures. Our OLNG and the FPSO, the two FEEDs will be conducted, and the SURF and the pipeline will be FEED. In total, six FEEDs will be running simultaneously. As mentioned, the cost is quite a large amount, it's JPY100 billion just for our company alone. That's a huge amount of engineering or the design that is required. Along with this feed, there are also mainly two other activities. One is marketing, as mentioned. From various companies, we talked with our potential customers. For Abadi in Asia, we have the LNG in Asia. There are a lot of interest. On nonbinding manner, we already have a lot of expectation exceeding the past production level. Together with the FEED, we have this nonbinding LOIs, and turning that to the binding long-term contract is what we're doing in the marketing activities, along with the FEED work. The other is financing the necessary cash. We have this upstream, but basically, we will do the borrowing for the downstream. For the upstream, we will have utilized equity. That's the basic structure. But today, we have a lot of good progress. Last week, I went to Indonesia, and we talked with the minister to talk about the start of the FEED, and we talked about post recovery. We came to an agreement. We came to an agreement to proceed with the FEED work, and that's how we came to an agreement with the Indonesian government. Also, because of the energy scarcity in the future, they want us to do the FEED work early as we can, and that is the situation today. But in the next two years, we'll be doing a full-scale of design work. We'll think about the financial structure. If possible, two years later, we will go into the final investment decision, and that is the current schedule we have in mind. Then, for Abu Dhabi, UAE as a whole, 5 million barrels per day by 2027. We are aligned with this schedule. In the midterm, this increase in production will be made. Naturally, we have to make more investments. We'll also receive those proceeds from those investments. Over the midterm, we will be a large profit source. For the meantime, for Norway, we have acquired assets. For Indonesia, we also acquired block, and those developments are made in other projects as well. In short, while doing those things, we'd like to secure the business foundation of the midterm. Next is effort in the energy and resource fuels. There are a number of major movements in terms of CCS. First of all, in regards to the hydrogen in the Kashiwazaki City of Niigata Prefecture, we are working on the integrated blue hydrogen ammonia production utilization demonstration test project. We started the commissioning operation already. Also, in regards to CCS, there is a metropolitan CCS project. In this regard, too, this was identified as being one of the Metropolitan Area advanced CCS projects. We have established a company called Metropolitan CCS through which we are conducting this business. This is a project 100% funded by the national government. Over the next years, we are going to do pre-FEED and FEED, and we'll start drilling wells as well. Also, near Ichthys in Australia, we have a CCS project called Bonaparte, and this is for sequestrating CO2 from Ichthys. But based on the assessment, this could become one of the major world-class CCS projects going forward. Just recently, this has been awarded and has been a major project status by the Australian government. Australia considered this to be a very important project for the Australian economic development. This was what has been considered. There are about 140 licensing and approval processes that one needs to obtain in Australia just for CCS, but that type of work will become easier as a result of this project designation. Renewable, we are conducting business in Australia with Potentia Energy. We recently obtained a new asset. Right now, altogether, we currently have about 800 megawatts capacity in total. These are the major progresses. Just going back to what I said at the outset, so we have the ability to make money with our profitability base making significant improvement. A large milestone is the start of the Abadi FEED. The FEED will take two years. We are targeting for FID in two years' time. You may know about the Abadi, but how are we going to generate a profit increase in the meantime? One is the Profit Booster 500 that we referred to. The other is we are going to make an investment in Abu Dhabi in line with the production increase and the plan. The profit from Abu Dhabi will increase alongside Indonesia, Malaysia and Norway. A smaller production increase is what will continue. Because of this structure, even during the three years of midterm management plan, we will continue to expand our profitability. Once the body starts production, that will become the large boost for us to achieve further growth. That is the growth strategy for us right now, and that is something that I wanted to communicate to you for your understanding today. That completes my explanation. Thank you.

As the CEO has explained, we have a high confidence over the medium to the long term. We have been able to strengthen our profit base. But today, I would like to talk more about the near term. I'd like to talk about H1 results. The result is, as you can see, for the oil price, the oil price came down USD12 YoY. Despite the stronger yen, net profit up at JPY220 billion or so. 2022 was the highest number. As H1, this year was the second highest. It was a pretty good result that we have been able to achieve. Here, you can see revenue. The revenue did come down. If you look at the crude oil, it had come down at JPY892 to JPY780, and natural gas at JPY281 to JPY251. If you look at the details, the sales were good, but the oil price and the gas price came down. That certainly had an impact, and the yen also appreciated. The revenue itself came down as a consequence of those. This is the waterfall chart. JPY212.5 billion last year, the same year, and JPY2 billion to JPY3.5 billion. For the revenue, as I said, there was some reduction in royalty as well, but the exploration expenses was quite significant. That came down and also the share of profit in investment accounted for using the equity method. This was slight negative because of the drop in the unit price. There is also the income tax benefit. About JPY70 billion is related to profit, the other nonprofit. The taxation or utilizing the external tax exemption and so forth, we had about JPY93 billion returning as a consequence. But the revenue coming down in a country with a large high tax rate certainly had a large impact. The forecast for this fiscal year. As the President has explained, we're expecting USD69 and JPY147 for FX. As for revenue, we're expecting around JPY2 trillion. For operating profit, more than JPY1 trillion. The net profit is JPY370 billion. JPY370 billion against the JPY300 billion that we have expected in May is an increase of JPY70 billion, an increase of 23%. As I've explained in the previous slides, after adjusting for oil price and FX, this is the highest level on record. ROIC at 7.1%. This is higher than WACC. ROE, this will be higher than the shareholders' equity cost. 8.2% in the first year. This is higher than the cost of the shareholders’ equity. The waterfall chart again. There is about a [JPY200 billion] benefit from market factors, an increase in the sales volume. This was the strong performance of Ichthys. Also, the foreign exchange gain from Ichthys paid in capital reduction is included here, at about JPY30 billion. This is looking vis-a-vis May. JPY23 billion became JPY30 billion, essentially. R&D expenditure, this has come down slightly. As you can see on the right, the taxes related to optimization, organizational structure is included. The Australian exploration company, this has been divested, and we just made a single company for doing the exploration. The Japanese entity is 100% investor. If we disband this Company, then we can get a tax benefit in Japan. Last year, because exploration didn't go well, we had the tax benefit. This time, we want to capture the benefit in Tokyo, and that is included in this JPY24.3 billion. Next is the cash flow. JPY175 billion. As you can see, as a CFFO, the operating cash flow before exploration, the cash flow from investment is JPY703 billion, and JPY467 billion is included as the growth strategy and the remainder. This is more than three months of securities, with reserve for Abadi going forward. Abadi cash flow is included within this JPY703 billion. We have financing, cash flow of JPY277 billion, which includes dividend and the share buyback to make up the number. I said that the growth, the investment, is JPY467 billion. You can see the breakdown. Pillar for growth is oil and natural gas, and JPY56 billion for the exploration in Norway, the [thing] that we have obtained. Ichthys is the largest, which is for maintaining the existing facilities. Second pillar for growth, CCS, about JPY40 billion. Renewable and electricity is about JPY25 billion or so. This is a breakdown of the growth for investment. As we have indicated in the midterm management plan, we will maintain the investment discipline, but we'll make the investment in a selective way, oil and gas, equity IRR of the mid-10% range or the mid-teen level. That's what you're looking at for CCS and renewable energy area, around 10%. That is the investment criteria. If we have project less than these levels, we will not engage in it. That's the kind of judgment that we have made. Regarding ROIC, 7.1%, we have a 1% increase, and we have 8.2%, 8.1%. This is Ichthys, mostly decided by Ichthys. That's why for ROIC, we have disclosed these numbers.

Now, I'd like to move on to the Q&A session. First, we'd like to entertain questions from the room, and then we like to ask people online.

I'd like to ask two questions. Before I go into the question, just to explain about my impression, do you have the midterm plan and vision? It's been six months, and we have further initiative, as you mentioned today, and also, the feedback from the investors, and I think you came up with these initiatives to respond. I think it was a good outcome. After that, I'd like to talk about Abadi in my question. First question is for the Abadi project. As Ueda-san mentioned earlier, there was an explanation about the progress today. The FEED is going to start. Alongside with that, we have the finance and marketing activities. One of the important point is, I'm sure it's concern about the investors, the communication with the Indonesian government. To consider Abadi, these are the major points, the key points. Within that, my question for the next two years, you'll be focusing on FID, you're working towards FID. But based on what you mentioned today, marketing, finance, and also, with the government to gain return, the communication in those, including the tax systems, if you look at these three, from your viewpoint, Ueda-san, what is the biggest hurdle to achieve? Or what is the toughest negotiation among these three? At this point, can you please evaluate and explain your view at this moment as number one? Then, number two question, you have the booster, and the cash flow allocation on page eight was explained today, and I'd like to ask questions. For the use, on the right-hand side, you have investment return and the Abadi cash reserves. It was really clear in the explanation. I think it was really good. Among these three, the way of thinking about the cash allocation is the question. First, you have the JPY400 billion to JPY600 billion of cash reserves for Abadi. For this year, it's about JPY400 billion as a visibility. But this level that you set these numbers at, is there anything that you have in mind? Whatever you can disclose today, why you have this range of JPY400 billion to JPY600 billion for the cash reserves for Abadi? If I can ask for your thoughts around that. Along with this question, the gross investment is JPY140 billion, and we have the shareholder return from JPY562.5 billion or more. To take this positively, you will have the growth investment within this range and the shareholder return, depending on the profit, you will try to achieve these numbers or higher. That is my interpretation, but is that correct? That's another thing I'd like to clarify. Those are the two questions.

I'd like to talk about the Abadi question. Regarding Abadi, what is the toughest initiative going forward? Honestly, all of the activities are tough, but the toughest is the Indonesian government and the central government to maintain that relationship and communication. As mentioned before, for Abadi, this is a remote area in the Greenfield project and a high-risk project as well to some extent. With a high IRR, the mid-10% range of IRR is something that we are seeking for. Going forward, the biggest challenge is looking at the recent market, the Abadi cost may escalate. How much escalation we will have is something we don't really know, honestly. However, most probably, it will be increasing for sure. In that case, IRR may go down. With the Indonesian government, whether we have to talk about the economics again. If necessary, we will receive incentives. Those are the processes that we have committed today. But in substance, how much incentive we will have in addition, these are up to discussions in the future. That's something we have to decide. Those are things that we have to work with the Indonesian government with the economics, how we're going to adjust the project is the question. Honestly, that will be a tough negotiation as a possibility. On the other hand, with the Indonesian government, we have received their request of working on Abadi early or fast. There's an increasing demand and there's a [inaudible] gas decline. Abadi natural gas is necessary. In this kind of difficulty, basically, I am taking this optimistically because Abadi gas, those people who want to have Abadi gas are really a huge amount of buyers. The Asian gas compared to Middle East, there are less geopolitical risks, and it is closer in distance. The Abadi attractiveness is very high. That is also necessary for Indonesia. There are so many buyers who want to buy, and there's a project. From my standpoint, ultimately, we think we can proceed with this, and that's the current view we have. Then, for Abadi's cash or the fund, we have a cash reserve of JPY400 billion to JPY600 billion. How much it takes for Abadi project is the question. 2018, we talked about JPY20 billion of cash necessary for Abadi, but that's basically based on the 2018 figure. After that, additional CCS and cost increase may lead to several tens of percentage of increase. Abadi finance is split between upstream and downstream. For upstream, the so-called capital will be used. It's about half upstream and downstream. The downstream is the LNG facility, liquefaction facilities, and that's about half. For downstream cash, we'll be doing borrowings, trustee borrowing. That's the structure we'll be using. For the upstream, we'll be using our own funds, and those are the current assumption. It's about less than half of the entire amount of investment, and we have about 65% share. But most probably, for the Indonesian government, 10% will be given to the Indonesian local party. Ultimately, we will have 50% in the end, and that's the current assumption. From that total perspective, our company, necessary cash will be limited. To some extent, some part of that cash is between that JPY400 billion to JPY600 billion. There are a lot of detailed calculations, and how much it requires is not so clear. It's hard to say in detail. But in terms of how we are working in our minds, that's how we came up with this number, JPY400 billion to JPY600.

The profit boost of JPY500 billion, which is a new thing that came up on this occasion. Now, you talked about the foreign exchange gain from Ichthys paid in capital reduction of JPY25 billion. This will change from YoY, but you said JPY500 billion for 10 years cumulatively. You expect this to do this over 10 years? When you do actually paid in capital reduction, it will run out in the end. But is this something that will continue for 10 years or more than 10 years? Also, you've also said JPY30 billion for the investment incentive effect, and this is quite a large amount. Could you give more detail? Of course, there are confidential information that you can't talk about, and that's okay. But if you could give a little more explanation about the investment incentive effect. The second question is that for now, the naphtha production volume, I understand that this is increasing. What are the reasons behind this pickup in the net production? Is it based on your own effort? Or is it that the crude oil price has come down? The amount of the oil handed over has increased. I wanted to understand whether the production increase is purely due to the increase in production itself.

Please allow me to talk about profit booster. We wanted to give a catchy name so that you can remember this. Now, in regards to the paid-in capital reduction, this is something that we are referring to from last year. We have been discussing with our accounting auditor, and we have been able to do accounting treatment, we are able to do this. As a consequence, we have been able to include this in our plan. Last year it was zero. This year onwards, this will be included. This is essentially as we have explained previously, there are two factors as to why we are able to do this from an accounting perspective. First is that Ichthys is now in a stage of recovering investment. This has been recognized in discussion with the accounting auditor. We are now able to recoup the capital back to Tokyo. Second is Abadi. Abadi, the FEED has started. This means that we have made an official start in regards to the Abadi project. For us to invest in Abadi, from Australia to Japan, there is now the requirement for us to move money. From Australia to Japan, we have been able to do the capital reduction, essentially transfer. Putting aside whether this is by chance or not, there is now a foreign exchange gain. When we invested in Ichthys, it was JPY85. We have been able to recycle this on a P&L for FX. This year was about JPY31.1 billion or so. It’s not the case that it’s perpetual because it’s important that the oil price and the FX to be at this level. The FX is very important, but oil price is also important because we have upstream and the downstream company, and there are free cash flows. That is actually moved to the interim holding company, and then we will do capital reduction from there. The free cash flow amount is the upper limit. If you want to do JPY300 billion, you can’t do that. We can only do this within the scope of free cash flow when it comes to the capital reduction. We are able to get the foreign exchange gain associated with that. When you look at the current the translation adjustment, we are able to do this for 10 years. In the meantime, what will happen to the FX and what will happen to the oil price and free cash flow, this will be determining factor. But it may continue for more than 10 years, but on a rough basis, we should be able to enjoy the foreign currency gains for around 10 years. We said about JPY500 billion for the 10 years. We feel that, that’s the kind of the profit base enhancement over the medium term. In regards to the investment effect, this is mainly for Europe and the Middle East, by us investing. Of course, there are investment provided in various countries, but the incentive effect, this was something that we were able to generate in the past as well. There will be incentive benefit. There is an increase in delta, I the previous midterm management plan. We are expecting this to be about JPY30 billion per year. Now, it’s difficult for me to talk about the details. If I actually try to break this down further, it would be a little bit of problematic. Please understand based on what I’m saying. This is based on the actual cash flow, the actual investment plan, and the actual incentive. We need to actually multiply those factors. When we look at it, we expect this to continue for around 10 years, the incentives continue for around 10 years. That is JPY30 billion per year, JPY300 billion over the 10 years. I apologize for not being very succinct in my response, but that is all I can say. In terms of production volume, please allow me to explain. The production volume in Q2 was the 673,000 barrels per day of oil equivalent. H2 is 690,000. That’s 842,000 for the year. That’s about a 10,000 increase in terms of production volume. This is not due to offtake increasing, but it’s very strong performance from Ichthys to Q2. As the CEO explained, Abu Dhabi as a nation is increasing production volume, and that benefit is also shown here. That’s about 10,000 barrels per year. We are seeing the production volume, the core ability improving. If you could understand it in that way.

Next question.

Regarding the paid in capital decrease, I think it's good to have an increase in profit from our standpoint. But this means you will have a profit increase, and that means you will have more tax payment. Regarding the tax, what kind of discussions were made internally upon making this paid in capital reduction decision?

First, like you mentioned, this is where we have FX gain. With the FX gain, that means there will be tax payment. Our tax structure is very complicated, and there is the deduction. How much loss we will have is really hard to forecast. The FX gain [plus], this is exactly where we have to do the tax management. However, based on the tax system, there are a couple of areas where we can book a loss. Because of the general deduction, if you miss the timing, it's not really so effective. From that standpoint, there are a lot of loss on a tax perspective, and using that loss, we would like to maximize the FX gain as much as possible. Depending on the environment, this largely changed. From the initial, that cannot be planned, and it's like we have to really see how it goes. How much gain we can achieve is something we have to manage well. As much as possible, we'd like to lower the tax rate as much as possible, and that's how we like to bring the situation going forward.

This is regarding Profit Booster 500. Because you have named it Profit Booster 500, I would assume that you are thinking of JPY500 billion. Of course, it does depend on the crude oil price and FX rate. It's not the case that you've committed to JPY500 billion, but we are mindful of this JPY500 billion in given this name. I think the incentive portion, I think, is quite strong. When you think about foreign exchange gain from the paid in capital reduction, depending on the FX rate or how much you reduce, do you try to realize JPY20 billion every year based on that? Or will you do a kind of dollar-based operation with JPY20 billion like this year. Depending on how much you register on the P&L in Japanese yen are different. What will be your focus in this regard going forward? That's the first question. The second question is the JPY100 of dividend. What are your thoughts behind this? The CEO said that the investor tended to prefer a dividend. You said that you were mindful of the dividend level based on this. But were you mindful of the profit boost of JPY500 billion? Was that JPY370 billion? Or is that total returns ratio? You probably will say that you thought of all of these factors, but you have declared a progressive dividend payment. To go up to JPY100 of dividend needed quite a courage. Your thoughts behind this JPY100. What is the kind of dividend level that we should expect going forward? These are my two questions.

Please allow me to respond to the first part. Profit Booster 500. The booster is like a rocket engine. We will be firing the rocket boosters one by one going forward. The 500 is mindful of the JPY500 billion or JPY50 billion this year. When we look over the next 10 years, if FX and the oil price remains at the current level, then we are quite confident of being able to do JPY50 billion, particularly the paid in capital reduction. As you know, bringing money from Australia to Japan, there are three ways to do this. First is we can use this to pay down debt, which is secured through Singapore. That's using free cash flow. Other is the dividend payment or the capital reduction. Depending on the combination of this, the amount will change. We may be able to lower our dividend, lower the loan payment, and to increase the paid capital reduction or vice versa. But it is depending on how much free cash flow generated, what's the FX environment, what's the oil price, how much money is needed in Tokyo. We need to look at all these factors in making the decision. All these combinations will be possible from a theoretical perspective, and we said JPY50 billion per year from the profit level, that is what we will kind of keep in mind as we manage this. To an extent, it is variable. But the upper limit is determined by oil price and the FX. If we stop the free cash flow from Ichthys, then we can transfer the money. These are determining factors in terms of the ceilings, but we do have a level of freedom in regards to the combination. How much are we going to do this year or next year, we do have a certain level of freedom in that regard. In regards to your second question, your thoughts in making a decision about JPY100 dividend. In the end, it was as a result of considering various factors. We have done share buybacks and dividend so far. Some people really like share buybacks, but the share buyback benefit is relatively limited in my view. We have quite a large number of individual shareholders, and the individual shareholders prefer a stable dividend, and we have promised a progressive dividend payment. They are quite interested in seeing the dividend level increase going forward. We want to expand that the base of the [inaudible] shareholders in that regard. Some people prefer a share buyback because they don't have to pay tax, but there are still a lot of people who prefer a dividend. When we take that into consideration, we had the option of going from JPY90 to JPY95. In regards to dividend, in order to communicate various messages, we decided to increase this by JPY10 to JPY100, and we are saying that we're going to pay the dividend in a progressive way. Over the medium-term period, we will not be able to lower the dividend level. If we think about the profit structure of the Company, we felt that we are still able to accommodate this type of progressive dividend going forward. That was taken into consideration where we have prioritized the dividend somewhat. Of course, we are going to do JPY80 billion of share buybacks. We are going to do share buyback as well. From an overall balance perspective, we have tried to communicate the message by increasing the dividend to JPY100 on this occasion. Thank you very much.

It is progressive. Are you feeling the pressure that you can lower the dividend or the share buyback and dividend? Is it that you want to do the dividend more preferably?

Well, we had the dividend payout has been the basis of return in the past. But dividend is difficult to lower. It's difficult to lower the dividend once you actually pay a certain level. We wanted to use the dividend as the fundamental approach and to use a share buyback in a supplementary way. We will continue to, I suppose, stick to this type of the returns policy. Participant Major question. First, I'd like to talk about my impression today. Ichthys is coming to one kind of milestone or goal. Since the listing, I've been covering your Company. It's been quite impressive. For Abadi, now we have this progress again. I'm also happy to hear this well analyst. Also, you talked about the disclosure, and you want to make this really clear, and that's the stance we understand. Also, after the midterm plan announcement in this short period of time, I think Abadi was the major reason, but you have disclosed this information again. We really appreciate that. ROE, you talked about your concern about your interest or focus on ROE as well. We really appreciate. But first, regarding Ichthys going to FEED and doing equity finance before FID. After FID, we have the production start. I was just remembering all this history. As mentioned before, we have the cost escalation, we have some delay, and these things happen. I'd like to ask the management to work hard going forward. One question is regarding Abadi, the amount of participating interest of Abadi. If you recollect Ichthys, you had to keep the majority, wanted to keep the majority, but still want to have other participants paying interest as well. You want to expand to [inaudible] and other companies. You had lowered your participating interest of Ichthys in the history. For Abadi, you talk about the 10% of the local participant. Outside of that, the thinking about the participating interest, can you share about that? If you can make comments like the old days of the Ichthys, I think that would be grateful. Or if you are still in the consideration today, that's fine. But can you please give some comment around the participating interest for Abadi?

Regarding the interest, Abadi, until recently, our company [inaudible] was a 50-50 split between the two until recently. Going forward, we'll be spending a lot of money for the FEED and FID. How are we going to change this participating interest is the major challenge. We are still under negotiations today. It's hard to talk about details today. After FID, we'll get close to production. As a company, there is less risk. We would like to take the risk for exploration or the risk of exploration will go down. We'd like to take the risk. From that 50, we think you'll be largely increasing the interest or participating interest as number one. Number two, we have 65%, and PETRONAS is 35%. But based on the Indonesian law, 10% is going to be given to Indonesian participants. The local designated company by the government will be holding, and that's already decided. That 10% is ourselves, PETRONAS, it will be pro rata based of sale of the interest. Just like Ichthys, the buyer or potential buyer, let's say, there are some people who want to participate like the case of Ichthys. From a few percentage of our request may come. In that case, we will also sell the participating interest of the upstream as a possibility. With the [inaudible] and with the Indonesian participants and the buyers thinking about all these people, we would like to decide at the end, how many percentage we will hold. Ultimately, we think half or so will be the end participating interest for this project.

Just one question. I want to follow up explanation about the growth investment and the three-year forecast, this was increased from JPY1.8 trillion to JPY1.9 trillion. But this fiscal year, when you look at the cash flow, for growth investment, it has come down by about JPY100 billion. In the three-year, the investment for growth has been increased. There are, I suppose, an increase in projects that meet your financial or the investment discipline. There is a bit of the time slippage. The percentage or likelihood in regards to the investment growth, if you could give some commentary on that, please.

Please allow me to give some explanation in that regard. When we announced the midterm management plan, it was between JPY8.9 trillion and this was increased to JPY1.9 trillion. FX has been changed from JPY135 to JPY147. Even at the same investment amount, if you convert to Japanese yen, the amount will increase. That's one factor that was reflected into the numbers. As to whether there is a timing of the slippage, well, the investment for growth, something that we intended to do this year, and something that will slip to the next fiscal year. That's about JPY100 billion in total. In total, we probably will do about JPY600 billion of investment for growth per year. Acquiring new gas, the interest, this has been delayed somewhat, that will slip to next year. Over the three years, we want to spend somewhere between JPY1.8 billion to JPY1.9 billion of the three-year midterm management plan. This year is slightly lower, but that does include the timing of the slippage.

Thank you very much. Now, we are at the hour. We would like to end today's meeting. If you have any further questions, please come to the IR group, contact the IR group today going forward. Thank you so much for all your participation today. Thank you very much.