I'd like to start the FY 2026 first half of the financial results investor meeting. Thank you very much for gathering despite your busy schedule today. My name is Shohei Yoshida, General Manager of the Corporate Communication Unit, and I'll be serving as the moderator for this session. Please allow me to introduce the attendees from INPEX. We have Takayuki Ueda, Representative Director, President, and CEO, Toshiaki Takimoto, Director and Senior Executive Vice President, and Daisuke Yamada, a Director and Executive Vice President. For the program today, we'll spend about 35 minutes for the explanation and about 25 minutes for Q&A, a total of 60 minutes. Today's session will be a hybrid session with online participation as well, and the session will be interpreted simultaneously. For those people participating through Zoom, please choose the language of your choice.
For the presentation material, please select your language using the button at the top of the page. Ueda will first explain the business overview, and Yamada then will talk about the consolidated financial results for the six months ended June 30, 2026, and then talk about the consolidated financial forecast for the full year. Ueda, please.
This is Ueda. Nice to see you. Thank you very much for coming despite your busy schedule and also despite the very hot weather. I would like to explain the overview in regards to the business situation as well as the first half of the year. Please refer to the document. To begin with, the impact of the Middle East conflict, what type of impact does this have on our company? What is our view? What is our expectation going forward?
Please allow me to explain about that. The closure of the Strait of Hormuz has continued for some time. Our sales volume from Abu Dhabi has been constrained to a certain extent. But we feel that there is a significant positioning in regards to our Middle East business, and we'll continue to undertake our business there. Abu Dhabi business, what's the current situation, as I described here. The production volume has not fallen very much in Abu Dhabi, but the sales volume, in comparison to the same period last year, our sales volume has come down by around 30%. Why? Abu Dhabi has a port called Fujairah, which is outside the Strait of Hormuz. The majority of the oil has been exported from Fujairah for onshore production.
But for the offshore, we need to go through the Strait of Hormuz. We are impacted to an extent. But with the effort of ADNOC, they have been preparing the ships. So we have been able to maintain production volume, but the sales volume has come down by around 30%, particularly for Asia. If we look at this from a long-term perspective, then from May last year, we have expected around a 30% reduction. The assumption is that the Strait of Hormuz will actually normalize around October, and that was the basis upon which we have made the assumption of a 30% reduction in sales volume for the full year. From the revenue, we have been able to generate the revenue to offset the reduction from Abu Dhabi. I call this the victory of our portfolio.
Our portfolio, certainly Abu Dhabi accounts for a large portion, but we also have Australia, Asia, Europe, and also domestic. Because of the diversified portfolio, the impact of the closure of the Strait of Hormuz has not been all that significant. In fact, Ichthys project is operating very well, and the oil price has been at a higher level on a relative basis due to the Middle East situation right now. Overall, the loss from Abu Dhabi has been made up for elsewhere. The profit for the first half of the year highest on record, and we are expecting also to achieve the record profit for the full year. What will be the situation with the world going forward due to the Middle East? Previously, energy system has focused on efficiency.
Efficiency will remain to be very important, but energy security or resilience, those will be emphasized more. The system is going to shift a little bit with a greater focus on them. As you can see on the right, the dependence on the Strait of Hormuz now has been considered more highly. Amongst the Middle East countries, U.A.E . Has the Fujairah port where they have one pipeline, but they intend to increase that to three pipelines to Fujairah in several years. If they achieve that, they are able to export the majority of their oil from outside the Strait of Hormuz. Dependence on the Strait of Hormuz will be reduced. Saudi Arabia, they have Yanbu, which is a port that they have on the Red Sea side. That is one movement. The other is diversification of procurement.
The crude oil from the U.S., the crude oil from Mexico. Many entities are trying to import from those areas and exporting from those countries. Of course, the costs will increase, and the oil from crude oil, they can use the VLCC, very large ship, and it can actually reach Japan in 20 days. From Africa, they might have to go around the Cape of Good Hope, which will require a much longer period. EV is attracting attention again, so not just gasoline. Whether it be EVs or whether it be non-gasoline. The ammonia or something like that, but non-heavy oil fuel for the vessel and renewable energy as well, but a clean energy. Has received a renewed attention from the perspective of security. In totality, for energy overall, we are moving slightly towards more emphasis on security.
At the same time, there are also challenges as well. Say, for example, if a pipeline to be installed or elsewhere, they will all increase cost. Security doesn't come for free. To achieve security and resilience, some costs will be required. Over a medium to long term, overall energy costs could potentially increase. Users, they want energy with high security, but they want the price to remain at the current level. Many people are still saying that, but that would be the challenge overall for the medium to long term perspective in regards to energy. How is INPEX responding? For crude oil, the competitiveness of Abu Dhabi will remain, and Abu Dhabi's competitiveness will remain, so we will continue to invest proactively in Abu Dhabi. Gas, we have already achieved diversification in Ichthys, and we are now working on Abadi.
We are now going through a choke point, the Strait of Hormuz. Our gas won't go through the other choke point. We want to expand our portfolio with high security. That's the direction that we want to proceed towards. That's the recent overall situation. These are the highlights from the first half of the year. Mr. Yamada will talk about the detailed numbers. For the first half of the year, highest profit on record at around JPY 63.1 billion for full year. We didn't use a range, and we have come up with a number. For the net profit, we are expecting JPY 510 billion of profit on record level. Operating cash flow, about JPY 1 trillion. Abadi, we want to reach FID next year. We have been building up on the cash reserve for the development.
We expect to accumulate about JPY 770 billion by the end of this full year. Investment cash flow for the whole year, we are expecting JPY 859 billion. There are various, the investment for growth. Abadi and Ichthys, I'll talk about that later on. Even prior to Abadi, the production, there are other things that will contribute to production. The interest acquisition in Malaysia. [AG&P]. This is the Caspian or Indonesia. We have been working to acquire the interest. Those that are already producing or about to start producing as soon. We intend to pick up on those assets. For these assets, we are expecting several billion yen of profit contribution per annum. Through these, even prior to Abadi and even after Abadi, we intend to continue to realize the growth.
Shareholder return, I will come back to this later on. We are going to be paying JPY 112 per share for the full year, which is JPY 12 higher than last year, and about JPY 140 billion of share buyback. Total payout ratio is expected to be about 53%. On next page. I wanted to describe INPEX as a company. What we have worked on for the past 10 years have been described in this graph on the left. These are the operating cash flow and the net production volume, CAGR. They're converted into USD. These are the numbers from 2015 to 2025. Operating cash flow on the vertical axis and the production volume on the horizontal axis. The major and the independent E&Ps. You can see INPEX is located here.
Operating cash flow, the average, and the growth rate over the last 10 years higher than the majors independent E&Ps. The horizontal axis production volume, we're not at the top, but we're in the middle, but we are at quite a high level in terms of growth rate against the majors as well. Last 10 years, INPEX has continued to achieve a steady growth. Going forward, is shown on the right, and this is showing the production volume and 330,000 BOED, and after Abadi production start, we expect to reach 800,000 BOED and operating cash flow will grow from JPY 1 trillion into JPY 1.5 trillion. Last 10 years until 2035, we intend to continue to achieve a steady growth. This is the assumption that we have made.
Next page, please. The progress of each project, Abadi, Ichthys, I would like to explain more in detail. First, regarding Abadi. We have a steady progress, a very steady progress today. The FEED, F-E-E-D, has been continued from last year, and we have seen a steady progress, and mostly 80% of progress is what we have achieved. In fall, we will be completing. In fact, already, simultaneously, we have the OTC, which is the actual tender of the construction, which is starting from July this year. The tendering in the end will go. As you know, for the FEED, there is a dual FEED, where the two consortiums are competing, and we are doing the FEED together. From these two consortiums, in the end, we will have one consortium that will be selected, and that consortium will be in charge of the construction.
That selection is the EPC FEED. After the EPC, we will have the tender, and that has already started. For the marketing, we also are seeing good progress. As we announced at the end of May this year, for the Abadi project, the total production of LNG is 9.5 million tons of expectation. Out of that, we would like to have buffer. It is not based on long-term contract, but out of that, long-term contract is around 8 million tons or so. Out of that 8 million tons of long-term contract, we already have a certain amount, which is where we have signed the key term sheet agreement, which is where we sign the price and the volume, as a basic contract. This is what we have signed with the buyers in May. In particular, BP, Shell, the supermajor, and also the Indonesian national gas company.
We have had this basic key term sheet agreement, which is the base of the long-term contract. For the Japanese, it is going to happen going forward and also others. Because of the Middle East conflict, there is a lot of free interest in the Asian market, and that is where there is a high interest and there is a good reputation today. For the marketing, we think it will go well. In fact, for the actual work, we have to start the actual work from this year. For the case of Indonesia, the Abadi LNG is on the Saumlaki , a very rural area. That is where the LNG facility will be constructed. The LNG plant in the surrounding area, we have the fencing and also divergent road, which is, you need to have the road to diverge.
Those construction have to start, and then we need to have the local agreement. We have contacted Indonesian government, and we had the groundbreaking ceremony to have the local corporations. About one month ago on the Yamdena Island, we visited. It is actually with a charter. It is a four-hour flight one way and eight hours round ways. This is a picture taken at that time. It was a really wonderful ceremony. From Indonesia, we have the energy minister and three, four other ministers visited as well. President Prabowo also wanted to participate. In the end, as shown on the right, it was very far. In an online manner, he participated in the ceremony. From the start to the end, President Prabowo also participated. This is where he was doing a speech, and that was the picture.
But there was a huge interest and also support from the Indonesian government. Today we are in the FEED work, and marketing is going well. Also the strong interest and also support from the Indonesian government. After the FEED, what happens with the economics? That is still the question. However, from my perspective, Abadi, from sometime in the middle of next year, we will come to FID, the final investment decision, and we think that is quite higher possibility at this moment. Perhaps that is also the market recognition. That is for one. Next is Ichthys. For the cargoes, for this year, we have seen a very steady progress. Operation is doing very well. We had a strike, and a lot of concerns were around the strike, but this actually happens once every four years.
We have the enterprise agreement where we have a review of the labor contract. Based on the labor party, we had a lot of strong labor parties positioned in the past, and we had this revision under that environment. So it's been a very strong environment. We had some strikes, but it was not really big impact. It was a minimal impact to the cargo arrangement. So that was the case, and that is where we signed a four-year contract with the labor union. With this, so far, the operation is doing relatively well at this moment. For Ichthys, one of the big thing is in this year, in spring, the Beetaloo Sub-basin is where a huge shale gas reserve is expected. That interest we bought in three blocks from Daly Waters Energy.
As you can see in the picture, this is a huge area in a jungle and there's a pilot production which is underway today. From June, we have the pilot project which commenced, and we would like to partly sell to the Northern Territory. How much reserve are there is something we like to understand. So the exploration work is continuing at this moment. But there is a huge expectation from the Australian government as well. It's a huge expectation as a project, and going forward, this will be a base for the new train three gas for Ichthys. So that is also doing very well at this moment. Outside of that, we have Abu Dhabi. We have a good production, but the sales are not going well.
However, Abu Dhabi is a still important country, so the Upper Zakum investment is what we would like to continue. The other day, the onshore Bab Gas Cap development where the gas layer, which is on the top, which is called a gas cap. So those development is what we have come to an agreement just the other day. Also we have Azerbaijan's ACG oil fields, which are part of the interest we bought from the government. In Malaysia, we have the Sarawak Block 2E interest that we bought, and also Indonesia. So, before and after Abadi, we also have these projects. We would like to conduct these projects, which will lead to profits. Next, we have the CCS, blue hydrogen, and power resources. For CCS, the CCS plant has started operation last year. In a full scale, we are going into the execution.
The methanation plant has already started, and the clean methane has already been serving the pipeline. The metropolitan area CCS is to be done in Chiba to bring the CO2 in the Tokyo area and to have that captured storage. We have this exit. On the right-hand side, you can see the drilling rig, a picture taken as a picture from the onshore. All the people on the beach might have a look at this and then wonder what this is. It is about 2,000 m of rig being explored and we have the CCS project ability, which is confirmed through these projects. As we do not have time, we also have power resources, but I would like to go on to the next page. Next is the shareholder returns.
Of course, the way of thinking about the return, I would like to mention one thing. As mentioned, we have the JPY 112 of DPS, which is record high, and the share buyback of JPY 140 billion, and approximately 53% of total payout ratio. For 24 years, 5x or less is how much we have increased the dividend. For the dividend, there are times when it is high or low, but this is an all-time high record today. When we discuss internally, when we look at the stock price today, there are a lot of discussions. As a result, I would like to explain, but today we believe that our growth potential is not evaluated. We have some discounted value. For this fiscal year, we would like to have a share buyback.
Of course, there are people who expect dividend, but for the dividend, JPY 112 is the dividend. For this time, considering the stock price today, we have decided to focus more on the share buyback. That is the shareholder return policy. As you can see, why in this graph, at the bottom, this is the oil price. The top is the stock price. As you can see, until the Iranian war, our price used to be told it is linked to oil, but before the Iranian war, it was because of the growth strategy. So there were higher stock price than the oil price. After the Iranian war started, it was getting close to the oil price and with the stock price increase, or if the oil price increased, there was increase in stock price and also vice versa. There was a lot of volatility.
What happened in the end is when the oil price and share price were about the same, or before the war, end of February, the oil price was $73 and the stock price was JPY 3,800. At the end of June, with the same oil price, with $73, it was JPY 3,265 per share. If you look at today, it is slightly above. So $83 is the oil price, and so compared to $73, today $83 per barrel, and there is a $10 of increase. But JPY 3,500 is today's stock price. So we wonder why. In the meantime, our company's growth strategy, if that did not work well, then we understand. However, as mentioned, we have steadily executed the growth strategy, and Abadi is one example, but also for Ichthys. We have been doing steady progress against the growth.
The oil price increased by $10 per barrel, but the stock price maybe is JPY 3,500 today, so it's a drop, and it's not really a welcoming situation. There's nothing we can say for what happens in the market. But for our company, although we're not trying to give dreams, we are doing this business steadily and returning to our shareholders steadily as well. That is the policy. So the JPY 3,500 and $83 per barrel of oil is something that we think is a kind of a mismatch or there's a discount. Therefore, as we are going to execute the growth strategy, even compared with the pre-war, we think the price should be higher. From that standpoint, we think internally, we think we are undervalued, and that is, as a company, the understanding we have today. Therefore, when the stock price is low, we should do a buyback.
That's why we have focused a lot on the share buyback this time for the shareholder return, and that's the policy. That was a long explanation. That's all for me. Thank you very much.
Mr. Yamada will continue.
Please allow me to explain about the results of the first half of the year and the forecast for the whole year. As our CEO, Mr. Ueda, has explained, we ended up with JPY 226.3 billion for the half-year period, highest. For the full year, JPY 510 billion is the forecast we have, which is highest on record. With shareholder returns highest on the level. So, the triple increase, if you like. That's the kind of numbers that we're referring to. The highlight for the first half of the year, oil price, was between $70-$87. The FX, the yen has weakened. As a consequence, our revenue has gone down slightly. But the net profit or profit attributable to our own parent reached the highest level of JPY 263.1 billion. The impact of the Middle East was quite evident.
As you can see, the sales volume did come down significantly, but the oil price has come up. The FX, the yen has weakened due to the Middle East situation. When the oil price goes up, the LNG price also increased. Towards the end of the year, particularly with the strong performance of the Ichthys production. The production volume and cash flow of the Ichthys has increased, and so the recycling revenue also increased. That's Abu Dhabi. Taxable income come down. We also see significant decrease in the income tax. Because of that, there were both negative and positive from the Middle East factor, but a stronger impact to the positive factor. When we talked about May, with the full year forecast in May, we said that the Middle East is likely to act positive for us.
That was reflected in the numbers on this occasion. This is revenue by major product. Crude oil on top and natural gas on the bottom. The crude oil revenue, JPY 780 billion, last fiscal year, it came down to JPY 694.9 billion, came down by about JPY 85 billion. This is Abu Dhabi reduction because we were not able to sell all of the Murban crude, so there was this decrease. But in terms of the average unit price, it came up, and the FX, the weaker yen. For the natural gas, JPY 251.4 billion to JPY 271.9 billion, increasing by about JPY 20.5 billion. The sales volume equals a strong performance Ichthys. It increased by about JPY 8.5 billion. For the unit price, it has come down, but it is essentially flat. So average unit price of the overseas, like this, but domestic come down, and the FX impact.
We ended up with JPY 271.9 billion. This is the waterfall chart. On the left is JPY 223.5 billion. This is the second quarter of FY 2025. On the right here is our first half for 2026, an increase of about JPY 40 billion. The revenue. Because of the significant decrease in the crude oil, we ended up with JPY 48.3 billion negative. The share of profit and investment accounted for using equity method and the other income, these are essentially INPEX-related, which have performed well. Towards the end of the year, the oil price will also increase. So by JPY 10 billion pick-up in downstream and also TA recycling. The cash flow of INPEX has increased, so we were able to achieve significant, the pay-down in capital reduction of INPEX.
On the right, we have the income tax, the benefit because of lower tax. The revenue came down by about JPY 50 billion, but JPY 50 billion are positive from mixes, and the tax JPY 50 billion and hence JPY 40 billion. Abu Dhabi with the Middle East situation, had both positive and negative, but the positive factor were larger. That was essentially the result. The full year, the Brent oil price, and about $80 for quarter three and about $70 for quarter four. That is the assumption. We expect the oil price to come down slightly, $2 or so of a decrease for FX. For quarter three and quarter four, we are expecting JPY 160 and so slight decrease in yen. Similar type of trend to the first half of the year. The revenue came down, but the profit came up.
That is JPY 510 billion. JPY 500 billion is like a dream number for us, but we will finally exceed that level. ROE too, more than 10% on this occasion. Sorry. The net debt ratio has come up slightly. But like Mr. Ueda was saying, we have the cash reserve for Abadi. So it is not to be netted. But if you actually net this, that was 0.2% impact. So there is no issue from the financial position perspective. That is the result. This is the waterfall chart.
So this JPY 450 billion, this is the upside case. In this case, around July is when Abu Dhabi will normalize. That is the time that we had assumed, and this time we have JPY 510 billion. This time Abu Dhabi's normalization will be around October, and that is the revised timing. That is how we came up with this number. The left-hand side is the external factors, and mostly, the Middle East, the conflict and the impact from that is reflected. For the foreign exchange, because of the Middle East, there is some yen depreciation. On the oil price, this is the only different area. In the past, in the full year forecast, when we announced the results, we talked about the sensitivity, oil price sensitivity. This time, compared to the May forecast, oil prices dropped, but the oil impact is positive.
That is because of premium, LPG and those. There was a lot of premium, so that is why it is a reverse situation. That is also coming from Middle East conflict. JPY - 17.5 billion is a project factor. As mentioned before, Abu Dhabi cash is included and also we have profit booster, but the TA recycling is included. It is about JPY 100 billion of TA recycling included this time. So the investment incentive and combined together a total of JPY 100 billion or so. With three included or in total, those are the external factors. We thought it would be positive in the May forecast, but this time it was slightly negative, but more there were positive factors than negative. So that is why there is about JPY 10 billion of improvement. With the Middle East, it is a positive thing and it is not really a good news, but that was the actual result.
For the others, we have the Ichthys where the sales volume increased. There is a 10 cargo per month and the sales are doing well. Then we have JPY 16.9 billion and on the right-hand side we have one-off. There is some impairment in ARO as well as others. So it is about JPY 20+ billion and in the end JPY 510 billion. We are starting from October. We think it will be normalized in October and it is hard to say for the Strait of Hormuz, but let us say it will be normalized by end of the year, what happens? We also have that calculation. Let us say it will not normalize in the year-end. If it is still not normalized until next year, I think it is not JPY 10 billion, but maybe JPY 7.7 billion -JPY 8.8 billion of decline. But the oil price will not change, and that is the assumption.
Excess production will not change. Then maybe less than JPY 10 billion will be the impact if it will not normalize by end of the year. Next is the cash flow. The very top, you can see the operating cash flow, which is more than JPY 1 trillion, and the investment cash flow, JPY 859 billion. From May forecast, about JPY 60 billion of increase. However, as you can see in the bottom, the growth investment is declined. The reason is because in Abu Dhabi was not so much of a change for Abu Dhabi, but there is a slight decline plus the other interest investment we had that was about JPY 100 billion, which went over the fiscal year. So the growth investment is mostly no problem. The reason why there is an increase in investment cash flow is the others. It says JPY 183 billion, and that is Abadi.
The cash reserves for the development of Abadi, about JPY 100 billion or JPY 200 billion is what we have set aside. In May, there is some increase and decrease, so that is why we thought it will not be so much of an amount. We could not make these cash reserves. This time we had additional JPY 100 billion, so this is how we ended up. Next is the investment cash flow. As you can see on the left-hand side, as mentioned, JPY 800 billion is JPY 859 billion today. The content is mostly the same, but just one thing is the cash reserves for Abadi. We did not factor this in the May forecast, but now we have this included, and we have JPY 859 billion in total. JPY 859 billion and also the JPY 200 billion for Abadi. How to look at this?
In 2026, end of December, we will have an increase of JPY 770 billion. This will be a cash to be used for the upstream. JPY 770 billion will be used. In the midterm plan, we had about JPY 600 billion - JPY 800 billion, but in a one year prior timing, we are able to achieve that. The JPY 1.9 trillion is on track to what we stated in the midterm plan. On the right-hand side, as mentioned, these are the disclosed projects we have and also the profit contribution. Abadi, before the Abadi production startup will happen, we have these investments. This is the ROIC by segment. As you can see, this is the detail. That is all from me. Thank you very much.
We would now like to directly questions. We will receive questions from the venue first. After that from online participants. I ask that you only ask two questions at a time. For those people participating through Zoom, there is a raise hand function, and so please use that. For those designated by the moderator, please state your name and your company name before asking your question. Anyone with a question? Yes, the person in the middle at the front.
I have two questions and, somewhat held back because of the strong message, but I will ask a question. Two questions from me. The first question is regarding Abadi. On page seven, you have shared with us the schedule and the progress on different paths, and this was very easy to follow. I think the situation has been clarified a lot through this information. As indicated in the text on this slide, this project and equity IRR, we are going to aim for the mid-teen percentage for equity IRR. This is something you have been explaining from the past, and I understand that things are progressing quite steadily. In regards to marketing, it seems that you have been able to come to a consensus in terms of the terms at an early stage, which is quite a strong progress.
In order to secure equity IRR mid-teens, in order to secure that, what would be the biggest hurdle, and what is the progress against that hurdle, if you like, at this point in time? That is the first question. I think it is really up to the negotiation with the Indonesian government, in my view, based on the presentation material. So the taxation or the conditions with the Indonesian government is likely to be the key. But equity IRR, in order to achieve this number, what would be the biggest hurdle? If you could give some explanation about that. That is the first question. Together with that, you said several in the JPY 770 billion of the cash reserve, which is a year ahead of your original schedule. With that, for the upstream portion, the expected amount of the fund, have you already secured the amount required?
If you could also refer to that as well, that would be helpful. So that is the first question. The second question is on your slide, page 21. Together with the investment, the project, you have also provided information with regards to the timing of profit contribution. This is very helpful. Although it may be difficult for you to respond, I want to ask anyway. Abu Dhabi related, where you are investing a lot in recent times, so the profit contribution as well as the production increase, the contribution, can you give some more color? It may be aligned with the government initiative, but you said that there will be contribution prior to the Abadi start. If there is anything more that you are able to speak about. So prior to Abadi production start, Abu Dhabi is an important, the profit, the growth driver.
Could you give some more color in terms of the timing of our profit contribution and so forth? So these are my two questions. Thank you.
First of all, in regards to Abadi equity IRR, more than 10%. What is the biggest hurdle? For me, I feel that there are two major factors. First is Indonesian government and so negotiation for incentive, whether this will go well or not. But more important is to what extent can we achieve a reduction in cost of the project? We are currently undergoing the FEED process right now. So cost is not something that comes up as a lump sum and that is it. We can talk with the contractors. Can we reduce cost here? Can we actually change the schedule here and so forth? There are a lot of the negotiations. If we are able to reduce local content a little bit, then the cost will come down this much. So there are various ways we can work on cost reduction.
For us to achieve success of the project, economics is important. But prior to incentive, we have to work on achieving cost reduction through various means. In that regard, the cost is not something that you can actually address in one go. I will not say it is a living thing, but it is like that. We need to continue to thoroughly and continuously work on achieving reduction in cost. This is one significant hurdle for us, in my view. But even after that, if the economics is not sufficient, then we need to engage in negotiation with Indonesian government for incentives. So these would be the two hurdles. Your second question, Abadi. We have cash reserve of JPY 770 billion. Is this sufficient for the investment for upstream? It really depends on the CapEx. So the project cost.
It is difficult to say, but if we think about the past, the Abadi CapEx in 2018 when we did a Plan of Development, it was said that it was about JPY 20 billion. I am sorry, $ 20 billion. We are going to add to this, so there is a 5% increase in terms of cost. This was the number back in 2018, but after that, we need to change that to 2026 numbers. Of course, the cost has increased quite significantly due to inflation in the meantime. If we take all that into consideration, then that becomes the total CapEx of the project. How much will this be? We need to think about the cost reduction initiatives that we are working on that will have a significant impact. We do not know at this point in time.
FEED or EPC tender, so we need to go through those processes. The number will become more clear. From the numbers in 2018, even if the cost increases by 30% or 40%, it is not going to be a significant surprise. That is the CapEx for the entire project, upstream and downstream. We have 56%, so that is the equity portion, and upstream, downstream, the LNG plant. We need to actually allocate funds for that. The downstream, it will be a power purchase agreement plus the borrowing scheme. We will be borrowing the money where we will provide the credit guarantee, debt guarantee. The cash is required for the upstream. JPY 770 billion is what we have built up as a cash reserve. We do not know at this point in time whether this is sufficient or not.
I do not think this has reached 100%, so we probably need additional effort. Your second question, the increase in production impact from Abu Dhabi. We have the confidentiality agreement, so we cannot talk about the production volume very much, and I hope you will forgive me for that. On that basis, on page 21, there are a few projects related to Abu Dhabi. One is the Upper Zakum, the further development now in 2026 or 2027. We will reach about 5 million barrels per day, from 4 million or so right now. That is where there is going to be a large production increase in the Upper Zakum oil field. We will be spending several hundred billion yen of investment over these years, and we expect a large contribution from that in several times.
Above the Bab Gas Cap by development. This is to develop the gas, which is on top of the oil. We are currently doing FEED for this right now, and hopefully, during 2026, we want to make the FID. The production start is likely to be 2028, 2029. That will be the kind of timing where we can potentially expect a profit contribution. We are expecting several billion JPY of profit contribution from each of the projects described on this slide.
Two questions. First, Abadi. My question is, as you explained, the long-term contract of 8 million tons out of 8 million tons, 5.9 million tons is the base contract that you completed, and you have a good inquiry today. So in order to build into long-term profit, to have a stabilized profit, the long-term contract, as you can see, or as you mentioned, there are a lot of inquiries. You will be increasing more of these long-term contracts. Is that a possibility? So these long-term stable contracts or fixed volume contract is something that you are planning to increase. Is that what you are thinking? That is number one. Second is regarding the shareholder return. There is a strong message today, and of course, that strong message in this fiscal year is where you have more weight on share buyback. I think that is one point.
On the other hand, the total payout will be 53%, so within the range. But it is actually just a part of the JPY 50 billion and above, 50% and above of the total payout that you mentioned. Just per se, if you have a strong will or intention, maybe we can try to increase the percentage more. Also for the cash reserves, you are going to have a one-year achievement, one year in advance. So thinking about the cash, is there maybe a stronger message that you can communicate? I just wanted to purely think whether that is possible or not. Not thinking that you would increase the shareholder return itself, but once again, I just want to ask your opinion or what your views are. Thank you.
Thank you very much. The first question was Abadi, and the fixed contract or the long-term contract. I think the question is whether we should increase that or not. Basically, we think it is possible completely. However, we are not trying to do that as a company. That is the answer. Because as mentioned by the LNG, we have 9.5 million tons of LNG plus 150 mm gas pipeline, so that is the business. Out of that 9.5 million tons of LNG, for Ichthys is 90 some percentage of long-term contract. So it was a good finance situation. But just because of Ichthys, when we had a lot of troubles, if we have too much tighter contract, then we may not have any room. So for Abadi, we wanted to have some buffer. That was the policy.
As mentioned, 9.5 million tons. Out of that, 1.5 million tons is something we like to have a buffer. That means the 8 point some million will be the long-term contract. We thought 8 point some million can be the long-term contract, as mentioned. So far from the overseas buyers, we have a strong inquiry today. So we can assign this right away or we can increase further. But as mentioned, because of the reasons, we are not trying to increase more of the long-term contract than what we have today. The second is regarding the shareholder return. Why do not we do a more stronger message of increasing this reward? I think that would be a strong request, but I would like to use that as a good reference. In our company's policy, however, instead of doing a forceful reward, we are a growing company and while growing, we would like to reward our shareholders along the way.
Therefore, the total payout this time is 53% as I forecast. By maintaining that level, we would like to make sure we have growth and then a good return to our shareholders. That's the policy that we want to implement. If that happens, then it will be around 53%. As you mentioned, the feedback, we would like to take back your feedback, going forward. Thank you very much.
I would like to ask two questions. Before asking my question, your share price or ROE and also profitability improvement in comparison to five years ago, there's been significant improvement. Personally, I'm very happy and I hope that you will continue with this momentum going forward. To what extent can we trust the profitability of Abadi? That's not going to be easy, but I hope that you will continue to engage in proactive disclosure like this outside the stock market. The inflation, the investment may potentially go up, or there could potentially be delay. These are inevitable in one sense, but I hope that you will continue to disclose and work on improving profitability in a much shorter term basis as well. Now, two questions, more than 10% for Abadi.
I don't know whether you can talk about this at this point in time, but what would be your assumption for the crude oil price? I understand you may not be able to refer to a price, but if you could give some idea there, that would be helpful. I'm asking maybe too much, but at $50 Brent, can you still target mid-teens IRR? If you're able to make a comment like that will help in terms of discussion. You may not be able to talk about it right now, it's okay, but if you could potentially refer to this when you make the FID, that would be helpful. The second question is regarding ROE. The midterm management plan, one graph that I like, the ROE and the growth rate graph and the graph that you showed today, the growth rate, is also a great graph.
I would like for you to continue to use that. ROE 10%, the shareholders' equity was JPY 5 trillion, so JPY 500 billion of net profit for this fiscal year. This is a very encouraging number, which I'm happy to see. What I want to say is that, in the midterm, the material, ROE and the growth. ROE was slightly lower than the majors from U.S. or Europe. You mentioned that, and I thought it was great that you recognized that and trying to work on that. ROE and the more than 10% is the target for 2035 onwards. I think that's the kind of level that you're working with. Making investment for Abadi and crude oil price remaining where we are right now, and the profit boost, the second stage and third stage, can we expect that? That is the kind of my second question.
I will respond to the first question. In regards to Abadi equity IRR at 10%, and what is the oil price assumption. This will be up to the discussion with the Indonesian government going forward so I cannot say anything too clear. When we discussed in 2018, we were thinking $65 per barrel, and that was the number we had in mind when we engaged in discussion. Back then, it was $65, and we had placed $65 to remain flat artificially, but that is not really in line with the real situation. I think it is up to discussion.
ROE, the second your question. Let me talk about the ROE. ROE 10%, and slightly lower than the majors, which you are fully aware of course. For us, if you look at our portfolio and the core is Australia, Abu Dhabi, and Japan. These are countries of a very low country risk where we have our portfolio. In that regard, Chevron, ExxonMobil, they have similar portfolio in Europe. The European majors, they do have their assets in countries where country risk is higher. When we make a comparison against them, the risk-adjusted ROE, if there is such a concept, then our ROE in comparison to that is not inferior. The portfolio rating is higher. In other words, we have assets in a low-risk area, and so it is not a bad level.
This fiscal year, more than JPY 500 billion and more than 10%, but we do not intend to stop at that. We want to continue to work on it. Profit booster. Now that the recycling can be done now. Seven, eight, 10 years, this level can be maintained, providing that INPEX sees that we can continue. We have the second stage. It is not going to be easy. What we are looking at always is, our balance sheet is more than JPY 8 trillion in size. We set our numbers based on IFRS. The difference to balance sheet is recognized as a profit or loss. When the balance sheet is so large, a small movement in the FX, small movement in the oil price, small movement in interest rates. We end up with a significant fluctuation in realized gains or loss.
The balance sheet, the previous year to this fiscal year, the difference is registered in P&L. That is the IFRS. With that, and also tax included, when you look at the financial, not everything will work out as a proper booster, but depending on how we look at it, whether it be related to tax, whether it be proper to profit, we may be able to have some improved contribution to profit. We are always looking at it, and it is unfortunate that I cannot say this conclusively, but there are some possibilities because it is Australian-owned, and we have portfolio globally, and the oil price and FX moves quite significantly. The unrealized gains or loss on a balance sheet is quite significant. That could potentially contribute to the profit. We will certainly look at the finance and tax situation from that perspective. Thank you.
Two questions. Number one is about Ichthys in Australia, the country risk of Australia, what is your view on that? If you can give us the color. Just looking at recently, there is in-house or domestic supply responsibility. I do not know if the strike example would be appropriate, but is it something that we do not have to be so concerned? Or because of the nationalism, do we have to keep that in mind as a country risk as well? That is number one. The second is the shareholder return. Today, we are still at the second quarter results, so the oil price movement will make a difference of that, of the JPY 510 billion of net profit on the full year.
But different from Yamazaki-san, the total payout ratio, at this time, mentioning about going above, is it because even though the oil price may move, you already have confidence in the net price and net profit for this fiscal year? Is that the reason? Or the net profit might move or fluctuate, however, against the stock price because it is discounted, you are thinking that the dividend payout can still be achieved. Including the oil price fluctuations, how much confidence do you have in these forecasts? That is the second question. Thank you.
I would like to answer the first question. Regarding Ichthys or the Australian country risk, how to look at that as a company, and the domestic supply responsibility nationalism. We do have concern, and that is honestly what we feel. About one month ago, I went to Canberra, Australia, and met with some financial minister and met with some people. The challenge, in Australia, there are a couple of holes. Like you mentioned, there is a domestic gas reservation policy in Australia, and that is a direction that there is a discussion at this moment to introduce that. What this is to the LNG export, 20% of the export should be used for internal supply to the internal market. That is the new discussion and whether that will be executed or not. The reason why this is happening is because there is a lack of gas in the east coast of Australia.
For that, they want not to be used for export, but for internal use. That is why the internal or the domestic supply responsibility is the discussion. From our standpoint, if that happens, then if 20% of export will be used domestically, the domestic market will have oversupply situation. The gas price domestically will go down or plummet, and in the end, Australian energy business, domestic energy business, will have difficulty. If 20% of export will be used for domestic use, it depends on what kind of contract, but we think there is a lot of challenge and that is the concern we have. From our standpoint, it is not the export that is an issue, but it is under-investment. There is so much gas in Australia, so they should make more investment and they should produce them. But without doing that, they are just saying the export should be diverted to domestic market.
That business environment is actually They are missing opportunity and they are just discouraging the investor mindset. In the future course, it might be under-investment. Rather than that, I believe that they should make investments in a good way, and then they should solve the issue. Those are discussions we are having with the Australian government. Within the government, they are still having a lot of discussions. There are still domestic issues, and the cost of living is the biggest challenge where the inflation is happening. If that is the case, why don't we get more money from the overseas company? Those are discussions. When we talk with the government, they say gas is important, and they want to make sure they will be able to secure those. On the other hand, there are also various reasons that have to be discussed for domestic reasons.
Domestic gas reservation policy outside of that, there are also other discussions saying the foreign company should have more tax, paying more tax, and various discussions of such. That kind of business environment iteration is something that we honestly have in Australia, and we have communicated that honestly to the government as well.
The second question, I would like to answer that question. For these numbers, there are a lot of discussions internally, and as Mr. Ueda explained today, this time we have more focus on the share buyback as shareholder return. 53% of total payout is what we have announced as of Q2, and by end of the year, what happens if there is a fluctuation in the market? I think that was your question. As you know and understand, for Ichthys, the net profit of that 70% of the profit is coming from Ichthys. That LNG price is five or six months beforehand. The oil price is used five or six months before, and that is how it is calculated. By end of July, the oil price is already set. Therefore, the fixed price in the long-term contract is how we sell.
By end of December, a certain amount of profit is already how much visibility we have today. If we have extra cargo, we can sell this on spot. That is also another upshooting possibility. As Yamada-san explained today, the Strait of Hormuz will be normalized. If that will be delayed, then there will be negative impact. There is a range for that difference. The pillar of the growth is Ichthys LNG, the selling price. To some extent, at the point of August, we have a certain visibility. At this point, a 53% of total payout ratio is something that we can commit, and we do not think that is a forceful thing as a company. Thank you very much.
Please allow me to ask two questions. It is related to the Australia issue. So Ichthys train three, as of now, how much volume have you have visibility? You said that Beetaloo has quite a large potential, but unfortunately you could not invest in the Browse. How much visibility do you have? Second question, it may be a little bit early, but for next fiscal year. This fiscal year, Abu Dhabi tax burden has been reduced and there was benefit from the premium. The impact from the Middle East has functioned somewhat positively. Next fiscal year, will you have a rebound, a negative? Is there a potential increase in volume? If some of the negative factors, if you do not need to consider that, if you could also refer to that.
I will respond to your first question then. For Ichthys train three, how much visibility do we have? It is not the case that we have a lot of visibility in terms of volume regarding train three. Cash-Maple and various gas fields developed right now near Ichthys, that is the extent, the plateau of Ichthys. We do have certain visibility in that regard, but for train three, we need to identify sizable gas fields. We need to secure gas fields of a certain size. Beetaloo, some people say that it has gas reserve equivalent of Permian in U.S. Some people say no. We can expect a large reserve there, but it is only likely at this point in time, so we do not know for sure. Over the next couple of years, then we are going to do exploration and to identify the amount of the reserve.
That is the kind of thing that we want to do to master in the situation. If there is that much reserve, then from Beetaloo to Ichthys, we want to install a pipeline and potentially build a train three. We are studying that. In terms of visibility, it is really up to the result of the exploration, the activities that we will undertake.
Next year, at this point in time, I cannot say anything certain. What will happen to oil price? What will happen to exchange rate? That will have significant impact. If the oil price or the FX remains at around the level that we have right now, so JPY 160, for example, then Ichthys. There could potentially be a bit of shutdown, but we are not expecting much reduction from the Ichthys. We do not know what will happen in the future.
Still, we may be able to target similar level. We expect the earnings level to pick up. If we are able to achieve JPY 500 billion and we have been able to control the shareholders' equity, we may be able to maintain 10% ROE, if nothing really happens. That is the kind of situation.
We are over time, but this is the end for today's event. For the questions that we cannot answer today, please contact our IR group today. Thank you very much for all your participation out of your busy schedule. Thank you very much.