Hello, everyone. Thank you very much for attending the INPEX Investor Day 2026. My name is Akiko Sugimoto, a news caster covering economy, and I will serve as the MC for Investor Day 2026 today. I will also serve as the moderator for each of the sessions in the program today. Thank you. Today's meeting will be a hybrid session with both physical attendance and those attending through online, and simultaneous interpretation will be provided into English. For those participating through Zoom, please choose the language of your preference, and for the presentation material, please choose the language of the presentation material using the button at the top of the screen. At today's Investor Day, we will introduce through dialogue with the management of INPEX in regards to the growth strategy of INPEX in view of the changes in the recent energy situation and business environment.
We will also have a session with outside directors, where they will talk about their contribution thus far, as well as their expectations for further growth. As for the program today, the first part will be held under the titles, The World Post Closure of Hormuz Strait, as well as INPEX Growth Potential, and we will have a dialogue covering the growth strategy and investment as well as shareholder return in view of the changes in recent time regarding energy situation. Then we will have a Q&A session. In the second part, we will invite Mr. Iio, Saiki, and Takaoka, our outside directors, where we will have a panel discussion in regards to the initiatives towards corporate governance as well as enhancement of corporate value. We will also have a Q&A session after that as well.
After the end of the program today, we are also scheduling to hold a reception. This will be a great opportunity for us to further deepen dialogue, which is the theme of the Investor Day, and so we encourage you to participate. Without further ado, I would like to ask Mr. Ueda to come up onto the stage. I'd like to start the first part of the program. The first session is The Post-Hormuz Closure World, and we will have a dialogue with Mr. Takayuki Ueda, Representative Director, President, and CEO.
Let's get started. At the end of February, there was a significant military confrontation between U.S. and Iran, and the closure of Hormuz Strait is continuing, and it seems to have prolonged more than expected. Given that situation, how has and how will the energy supply structure on the world will change? Could you give a kind of review of what had happened so far as your views in regards to what may happen in the future?
Today, the war between U.S. and Iran, and this has kind of prolonged. You have the midterm in U.S. coming up, and post the elections, that could potentially see the restart of the confrontation. Market has embedded that to an extent. On a Brent oil basis, the crude oil has increased $109-$110, WTI $100. This is reflecting the forecast of the situation prolonging. But when and what happens is really a political situation, so it's difficult for me to comment. But in terms of our business world, the economy world and the world is assuming.
Separate from what may happen to the Strait of Hormuz, but starting to move towards the new world after the post-Hormuz closure. That means that we will not go back to a situation before the closure of Hormuz Strait. If hypothetically, the Hormuz Strait situation stabilizes, the flow of energy or crude oil as we saw in the past or the business style, I don't expect those to go back to where we were before. That's my view. Through the Hormuz Strait, crude oil was arriving into Japan. Because of the confrontation, the pipeline, the crude oil, I understand, has also increased. Right now, how has the flow of products changed? Let me talk about the pipeline situation. Post-Hormuz, one development, if you like, is pipeline construction in the Middle East.
You can see a map here, and UAE is a country to which we make a lot of investment. Outside the Hormuz Strait, there is a port called Fujairah, and there is already one pipeline there. The oil produced in UAE on land goes to Fujairah through this pipeline, and this is from where the export is made. Within the Strait of Hormuz or within the Persian Gulf, for example, the business that we are conducting at Zakum oil field, for example. Zakum oil field is located within the Strait of Hormuz. Even when we produce, we can't actually sell the oil. Given that kind of situation, what is UAE thinking right now? They are thinking of exporting their oil without going through the Strait of Hormuz.
First pipeline already exists, but in addition to that, they are currently constructing the second pipeline, more or less in the same route. Likely, they will also build a third pipeline. The second pipeline, the construction has progressed very fast and likely to be completed next year, the third probably in 2029. Very simply put, oil produced in UAE, whether it be in the Persian Gulf or whether it's on land, almost 100% of the oil will not have to go through the Strait of Hormuz, and can be sent to Fujairah Port through a pipeline from where the export can be made. That is the kind of discussion that is currently being held. In fact, the construction is making progress, and we are welcoming this very much.
Even if the Strait of Hormuz stabilizes, we don't know whether it will remain stable perpetually. Without having to go through the Strait of Hormuz, if we are able to export 100% of oil from UAE, then that would certainly contribute to our resilience. We are in a position to provide proactive support towards this initiative. The same thing is happening in Saudi Arabia. We don't have much interest in Saudi Arabia, so I can't talk very much, but there is a port called Yanbu where there is already a pipeline. They have to go through Bab el Mandeb Strait if they export through this port. That is also difficult.
But in any case, establishing transportation routes that do not have to go through the Strait of Hormuz and to try to enable 100% export without having to rely on the Strait of Hormuz, that is the significant development in the Middle East right now. I think there is a progress in the resilience. But recent news says that there has been drone attacks in Saudi Arabia and the Houthi, they are also making attacks and this is intensifying on a daily basis according to what the news is reporting. On that basis, energy out of the Middle East, can Japan continue to procure as we have in the past, in the future? We have export out of Fujairah that as I mentioned before, and for Saudi Arabia out of Yanbu.
Then they cannot go through the Bab el Mandeb Strait, but they can go to the Mediterranean Sea and go through the Cape of Good Hope. So 100% may be difficult, but even to a certain extent, the crude oil from the Middle East is being delivered to around the world even today. Right now, there is a movement to secure alternative source. So crude oil imported into Japan, as you can see here, over the last year or so, has changed quite significantly. Yes, that is true. As you can see on the slide, and this is the post-Hormuz situation, so alternative sourcing, this is the case of Japan. But prior to the closure of Hormuz, we depended on 93% of the oil which went through the Strait of Hormuz.
But right now, as you can see on the right, only 70% of the oil that we import into Japan are from the Middle East. Between 93% and 70%, about a quarter, where does this come from? In the case of Japan, we are importing from the U.S. In the case of Japan, when we reduce the dependence on the Strait of Hormuz outside the Middle East, we have decided to choose the U.S. This is the situation for Japan.
Those are the movements we are seeing today. For those alternative source, U.S. is one or South Africa as well. Outside of the Middle East, we are trying to have these supply source diversification, and that is becoming the case today. For the case of Japan, temporarily, there is some difficulty or some risk of not being able to procure the crude oil. But the U.S. oil is now supplementing that situation. We are able to secure the amount that is needed. Today there are some stockpile oil which is 220 days in Japan. These alternative source included, we are procuring the crude oil and the price is high. However, so far today, we are able to have a stable supply of energy in Japan. The Middle East itself, to export out outside of the Hormuz.
Also if you try to have a non-Middle East oil, those are the other initiatives we are seeing today. But after the stabilization, we think those are the trend that will continue to be in place.
As you mentioned today, the cost is increasing, and I think that's one of the point people are focusing. In fact, when it comes to these alternative source, for example, from the U.S., rather than sourcing from the Middle East, it will take longer days for transport or the insurance, and also the transportation fees will be higher, so the cost will be quite more expensive. Is that the case?
Yes.
Like you just mentioned, let's say, why don't we stop importing from the Middle East? Why not from other markets?
That is also one discussion. However, when it comes to these alternative source, I think that is important.
But when it comes to the attractiveness of the Middle East, that is still a large attractiveness even today. Number one is the amount of reserve. There are a really huge amount of reserves, and the production is efficient in the Middle East. Also the vessel is another important thing. Not only where we produce, but also the entire supply chain is what we have to look at. Supply chain security is something we have to look at. When it comes to securing these vessels, it's also very important. As you can see in this slide, how many days it will take for this shipping time is shown. From the Middle East, it's about 20 days through the VLCC large tankers.
For other routes, as mentioned earlier, for the Middle East, for example, or from the Mediterranean, for example, producing in Azerbaijan, trying to bring that to Japan, it will be going through the Cape of Good Hope, and it will take 55 days. From the U.S., if you go through the Suez Canal, it will be quite short. But Suez Canal is small. You cannot have a large tanker passing the Suez Canal. So you have to go through the Cape of Good Hope, which will be a longer route, and it will be, let's say, 20 days from Middle East, but compared to that, two times or three times of longer shipping time in that case. Therefore, in the end, when it comes to Middle East, the importance of that market, I believe, is going to be unchanged.
When it comes to the non-Hormuz security of these crude oils, we have to increase that security. Plus, for example, UAE is one, but we have to have collaboration with those and have an increase in capacity production of those markets. Those are things we have to look at going forward. So post-Hormuz, even in the post-Hormuz closure world, the Middle East is still important for INPEX. Then moving on to LNG. There are many projects that are underway today.
At this moment, if you can explain what are the situation and also what are the supply-demand outlook for the Asian market going forward.
Yes. Crude oil is one, but also LNG. For LNG in Qatar, there are a lot of production in the Middle East of Qatar, and then the Qatar of Middle East.
If you look at the resilience, this is also important. Where we have to produce is also another important thing. Where the LNG will be consumed, where is the demand? That is the question. As you can see in this slide, this is the future LNG demand in the world and the supply as well. What kind of areas we have the supply and demand is very clear, as you can see. Asia market is where we have a huge demand growth. Asia supply, on the other hand, including Australia, as you can see in this picture, is very shortfall of supply compared to demand. Therefore, where we are going to bring that difference, whether it is the Middle East or whether from the United States, those will be the answer. However, from what we are seeing today, the supply chain is very important.
As mentioned earlier, if you can show the vessel. Today, the Strait of Hormuz and also Bab el-Mandeb Strait are what we have today. The other one is Strait of Malacca. Going back to the picture earlier, it might be difficult to read, but through the Asian market, when they come to Japan, it is a small strait, which is Malacca, and there is no problem today. But in the future, we cannot say it is going to be safe forever. We also have the Taiwan Strait, and we do not have no problem today. But those choke points, so-called choke point, if you think of all these choke points, we have to be close to the demand area. If it is Asia demand, then we have to do in proximity of Asia when it comes to production.
Considering the security and the cost, that is the large direction as a company. Compared to the Western majors, it would be a different position as a company, and that is the local production and local consumption in Asia. That is the role you can play. When it comes to Asia network, we have Australia, Indonesia, various projects we are underway, and the production know-how, the supply know-how, the marketing know-hows, we have a lot of those. In Asia, we produce and then consume in Asia. Those are the trends we like to pursue going forward, which is different strategy than other super majors. In this way, there are very sad environmental change, but within your company, you are doing the portfolio management so that you can put more funds and investment into more profit-generating projects.
But in the mid to long-term growth strategy of the company, what areas will be making investments in particular, and what areas are considered to be curbing for the investment standpoint? For LNG, as mentioned earlier, Asia is mainly going to be the main driver of demand, and the LNG throughout the year is 400 million tons of trade. In 2030, about seven or eight times of that is expected. The Asian supply, if you consider the supply for Asia, that is not the total area, but local production, local consumption is one consideration. Australia and Indonesia is where, as you know, we have a large asset in Australia, for example, and then for Indonesia. But these are areas we will be focusing. These are also our past strategy.
But with the Middle East situation, we are also thinking these are very effective strategy as a company going forward. Where are we going to produce them? We have done a lot of selection and deselection, so we are not trying to stop any areas or de-emphasize. But in the way of thinking, we have looked at where we can produce with more efficiency. Going forward, we have to look at the length of the shipment days and also the portfolio have to be considered from various perspectives.
So I'd like to ask Mr. Ueda. There is the annual general meetings of the shareholders in March, and there was some buzz on X, because you mentioned that without buying, because of war, we want you to buy a stock of INPEX because of growth. Not because of war, but because of growth. So there was a lot of reaction and buzz around that.
Yes. Well, INPEX, as a company, we have our profit linked to the oil price, and today the oil price is high. In that situation, there are many interests among many investors. But when the oil price goes down, there are less interest, and that is usually the case. But what we're trying to aim at is not really that situation. But because of growth of the company, we want to increase the cash flow, increase our profit, and that is what we like to bring, reward our shareholders more and have more dividend. So those are things we like to do.
In the AGM, for those people who have shares in a company, when they want to buy INPEX, instead of buying because of the war, we want you to look at the growth potential and the actual growth is something we hope you can make investments in our company, because of that as a trigger.
So can still expect growth. So it is a growth stock. That's what you're saying, right?
Well, that is our view.
In August, when you announced the second quarter earnings, there were a number of positive surprises.
Full year net income forecast was adjusted upwards. Dividend was revised upwards and JPY 110 billion, the ceiling on the share buyback program. This is making progress towards the end of the year. If you go to the highest level, sorry. If you go to the ceiling in terms of share buyback, this will be the largest in history for the company. You are also quite proactive towards our growth investment. This I think is the message that the share price is discounted or too low. In terms of shareholder returns, the full year forecast. We expect about JPY 510 billion of profit. This is dependent on the oil price as well.
Our cash flow is based out of many operations, including Australia, which are all going quite well. The production volume in Australia this year is expected to reach the highest on record, in my view. If that is the case, JPY 510 billion of profit towards the year-end is not a dream. I do feel that this can be realized at quite a high probability. Of course, we do not know what may happen in the future, but from the management perspective, we feel that we have issued a forecast with high likelihood. On that basis, the total payout ratio more than 50%. That is what we have committed in terms of a midterm plan. Increasing dividend and undertaking JPY 110 billion of share buyback, the highest on record in the future. The total returns will also be the highest on record.
This is indicative of our confidence. What sits at the basis is the growth is stable and the growth of INPEX. If we grow, we are going to increase in returns. This is not just verbal remarks. We want to show this in practice. We want to execute this. That is our thought. You are now about the 60th in terms of market cap ranking and hopeful of expecting further upside. In terms of our share price being low, we will introduce various numbers later in the session today. Based on various calculation, growth rate, the speed of growth that we are thinking of. The growth expectation calculated from various market numbers, there are significant gap between the two. Of course, the share price is the growth in the units per share or the expected growth.
It's not all determined on these factors. But even then, the view towards our growth is not as significant by the market as to what we see, and that could be the reason as to why the share price does not increase. If that's the case, it's important for us to send out a message. And when the share price is low, we undertake share buyback. That's the reason we are undertaking buyback of JPY 110 billion. So we are communicating to the market through numbers of our view that our share price is low. So until here, we talked about the desire to continue investing to achieve further growth, in the new normal, in the post-Hormuz closure world.
Thank you very much, Ueda-san, for your dialogue. Next, I would like to invite Mr. Takimoto and Mr. Yamada, they're both directors, to prepare for the next part.
I'd like to proceed to the next session, and the next session is titled INPEX's Growth Potential. The session will be attended by Mr. Toshiaki Takimoto, Director, Senior Executive Vice President, Corporate Strategy and Planning, and Mr. Daisuke Yamada, Director, Executive Vice President of Finance and Accounting. So Takimoto-san, Yamada-san, thank you for your contribution. I'd like to start with a question to Mr. Takimoto, the title, the growth potential of INPEX. What sits behind as a background to this comment, and where do you expect to see growth potential for INPEX going forward? The growth potential, what is that?
Seven or eight years ago, the oil and natural gas was considered to see demand, and they were talking about stranded assets when it comes to these assets. Then after that, Russia invaded into the Ukraine.
Because of the Middle Eastern crisis, our business environment has changed 180 degrees in one sense. Oil and natural gas into the future remains to be an important source of energy. It will continue to be required. So in that regard, the potential growth for INPEX, in other words, our story for growth. That is what I like for the investors and the shareholders to understand. From such a perspective, we wanted to share what we as INPEX is thinking of. If we take a look at this slide, the graph on the left. From 2018, when Ichthys started to produce, it's showing the growth in cash flow as well as investor returns, and shareholder returns, I should say. But as you can see, in terms of cash flow, from JPY 212.7 billion- JPY 1.055 trillion.
The level has in fact, increased five-fold in terms of shareholder returns from JPY 26.3 billion- JPY 273 billion, which has actually increased almost tenfold. So I want you to understand this track record. Going forward, we will have the Abadi LNG business that we are going to develop. So once Abadi starts production, which is in the early part of 2030s, our cash flow from operating activities will reach JPY 1.5 trillion. In other words, the business size will expand by 60%. INPEX Vision 2035 is what we have announced. The target there is something we will head towards as a growing company.
We cannot actually promise the shareholder returns in the early 2030s at this point in time, but the current return level will be maintained at least, so that we can live up to the expectations of the investors. The graphs on the right, on the bottom right is the production volume. in 2018, we were at 450,000 bbl of oil equivalent per day. That was where we were back in 2018. This fiscal year, 630,000 bbl of oil equivalent per day. This is where we have grown to. Abadi, that I mentioned before, the startup of Abadi will enable our production to reach 800,000 bbl of oil equivalent per day. As indicated in this title, we are a company with still a significant growth potential. On top right. This is comparing ourselves against the majors, major oil company and independent E&Ps.
If we consider the production volume at 100, and if we index this going forward, the majors or the independent E&Ps, they have a production volume which are three or four times larger than us. Just maintaining the production level, they need to invest JPY 1 trillion, JPY 2 trillion. Even with that investment, their production volume are likely to remain relatively flat or just a slow increase. That is based on our analysis. What is shown in a purple line, which is INPEX's production volume. Against our competitors, we are going to show a significant growth. This is what we are thinking of from the long-term forecast perspective.
Over long-term, after the Abadi startup, INPEX has this level of potential growth expectations. On that basis, our current midterm management plan from 2025 to 2027, the three years, what would be your focus on the investment areas as well as the regions. These growth investment, how will they expect to contribute towards profit generation going forward? If you could give some specific example, please.
This slide is showing the period from 2025 to 2027, how we intend to allocate our cash and also showing the net D/E ratio transition. If you could look at the left. Here, this is showing the cash coming in. Over the three years, we are expecting JPY 3 trillion of our operating cash flow, and we also have JPY 350 billion of borrowings. On total basis, we will have JPY 3.35 trillion of cash that will come in.
How we are going to use that, in terms of the cash going out, we will first have our growth investment, where we will spend JPY 1.95 trillion, which I will come back to later.
For the shareholder returns, we have JPY 700 billion or more. As we have committed, we also have progressive annual dividends starting with JPY 90 per share, and we have committed that amount for the midterm plan and the total return ratio of 50% or more. On top of that, we have the cash reserves for Abadi LNG development, which is starting from next fiscal year. JPY 700 billion or more is the amount that we are expecting for the cash reserves. These are the investment plans and the cash flow plans. When it comes to net D/E ratio, it is shown on the right-hand side. In terms of the financial discipline, we have the net debt to equity at 0.3 to 0.5.
From 0.3 to 0.5 is the range that we like to keep to have a good financial discipline, and that is how we like to do cash allocations going forward. Going to the next page. Before the Abadi production startup, are we not going to make any investments? That is the frequently asked questions from our investors. That is actually not the case. For sustainable growth story of the company and to have other people understanding about that growth story, on the left-hand side, you can see in the Southeast Asia, in the current three-year midterm plan period, the new investment plans we have in place. The red is the future investment. For the green, this is the exploration project. As you can see, over the long term, the pillar for the profit is the E&P development in the Malaysian, Indonesian market.
These are shown in green. When it comes to production, we have Malaysia. We have acquisition of the interest in Block 2E off the coast of Sarawak, and those assets are acquired. On the right-hand side, you have Abu Dhabi and NIS. In Abu Dhabi, you can see the red, which is also the producing assets, the Upper Zakum further development. Those are the plans we have today, and we are participating in that project. For Abu Dhabi, for the first time, we have the gas development. As you can see, the Bab Gas Cap development. These investments are already decided. Also from this fiscal year, we will have a P&L contribution as a growth investment, which is the Azerbaijan ACG oil fields, where the acquisition of additional shares were made.
Before the Abadi production startup, we are trying to make these investments for the growth. Next page, please. The earnings contribution from these investments. These are also frequently asked questions from our analysts and investors. When those growth investments will start to contribute into our earnings, those are the questions we hear. As mentioned, JPY 1.9 trillion is the midterm growth investments we are making. If you can look at the gray at the bottom, the current 663,000 bbl today. To maintain that investment is JPY 950 billion. That is the base. JPY 950 billion. On top of that, we are going to grow as a company. With that intention, we are going to look at what are the earning contributions, which is on the top. The Malaysia in-production investment, producing projects, and also the Azerbaijan increase in the stake.
Ichthys interest increase, additional acquisition. These are the short-term contribution. In the midterm perspective, we have the Middle East and Southeast Asia investment, as well as what we mentioned earlier, which is Abu Dhabi, the gas development. These are about approximately JPY 400 billion of investments. Furthermore, we have the long-term earning contributions, which as we mentioned before, Indonesia Abadi LNG, as well as in Australia, we have a new acquisition of the interest, which is in the location of Beetaloo, which is a shale gas project. In the long term, we think if it works well, it will be connected to the onshore plant of Ichthys, and that will contribute to the expansion of Ichthys production. Or it will be the exploration projects in Australia. These are in total of JPY 950 billion of investment.
As you can see on the right-hand side, on top of the current earnings, we will have these investments, and these are the trajectory of our growth. After Abadi production startup, about 60% or so will be expansion in our business size and also production volume. That is what we're thinking today. Thank you very much.
In 2028 and beyond, I would like to ask a question. Around this time, the investment for Abadi project will be in full swing. Could you share once again your thoughts around cash allocation?
Yes, thank you very much. From a long-term perspective, what kind of cash allocation we're thinking as a company, this is shown on the graph. On the very left-hand side, this is 2025 to 2027, the current midterm plan period. As mentioned earlier, this is the cash allocation.
This is shown on annual average. The middle is once the Abadi investment goes into full swing, what kind of cash allocation we have. We have the borrowing as well as the cash reserve of Abadi as a drawdown, and those are the source we are going to use for the investments. With the drawdown of Abadi as well as the borrowings, these are how we're going to make the investments. In that case, when the Abadi gross investments will be maximized, even in that circumstance, we will have enough amount for the investment as well as shareholder returns. That's the current assumption. On top of that, from 2031 to 2033, on the right-hand side, the cash in, cash out are shown. Abadi will have a production startup.
On top of the growth investments, we have the repayment of the borrowings for Abadi. We'll go into the harvest phase. That is the mid to long-term cash allocation of our company, and that's the view we have today.
Thank you very much. I'd like to move to Mr. Daisuke Yamada. I would like to ask questions. As Mr. Toshiaki Takimoto explained how steady growth investments will be made for projects that potentially have profit contribution, I believe the level of external borrowings will increase to some degree when Abadi investment will go into full swing. Do you have any concerns around the investment discipline?
Thank you very much. Please go to page six. If you look at this graph, on the horizontal axis, you have the net D/E ratio, and the vertical axis is the recoupment years for the debt.
On the top right, you can see Ichthys development peak in that circle. At that time, there was a huge borrowings for the Ichthys project. At that time, the net D/E ratio was close to 0.9 and the redemption period about six years. It was quite a tough period. Today, we are in the circle in the middle. INPEX 26 is where we are at today, but we are in net D/E 0.3, 0.4. We have a good discipline, financial discipline, and also redemption of two years or below. Abadi, as a huge investment, what happens when that happens? At this current estimate, it is going to be slightly towards the right. The net D/E ratio will be about 0.5. That is going to be the base. Then redemption period will be about two years.
Ichthys is where we had a lot of cash generation. Therefore, the excess cash will be as a base. When Abadi will go into a maximum level of investment, we still can maintain the financial discipline. We think there will be no problem around the financial discipline, and we can make these investments.
Thank you very much. Based on what we have discussed so far, there is a large growth potential over the long term, and you will make steady growth investments in the areas where profit contribution is expected, plus you have no concerns for financial discipline. On that flip side, as Mr. Ueda mentioned, what is your view on the recent stock price? Today, JPY 3,800 and then JPY 4.8 trillion of market cap. PBR is unfortunately less than 1x. In this situation where you have growth potential and whether that is reflected in the stock price today, what is your view at this moment? Thank you very much.
JPY 3,800 for the share price. When we approach JPY 4,000, it made us somewhat restless. As the CSO or Mr. Takimoto has mentioned, despite the fact that we are growing this much, medium-term growth rate seems not be reflected into the share price that much. We want to target even higher level. We have done an analysis by calculating back from the P/E ratio. If you look at the graph on the left, you can see INPEX on the top. The red dotted line, what is this? This is earnings per share, EPS. Between 2025 and 2026, this is a 10-year moving average. The P/E ratio is shown in blue, which is coming down gradually. What does this mean? The EPS, the share price has not really kept up with the increase in EPS.
You can see O&G appears in the bottom and there is a clear correlation there. What does this mean? Maybe our valuation is that we are expected to undergo negative growth. If you look at the table on the right and what is shown at the top, P/E ratio is the share price per EPS. So 1 divided by expected return. Expected return is cost of equity minus expected growth rate. The cost of equity, 10%. Ogino-san is not here, unfortunate, but it is market concession. So we use 10% as instructed by Ogino-san. What does this mean? The expected growth. So g = r - r1 / pr. On that basis, on the right, the P/E ratio of INPEX, this is for 2025, December, which is 9.4 x.
The cost of equity, if you use 10%, then the expected growth, which is g, ends up being 0.59%. So despite the fact that we are saying we are going to grow this much, it seems that the market will undergo negative growth. This is what is indicated if we calculate it back from P/E ratio. As I said at the outset, the earnings per share has been increasing. So in the future, people still suspect us to grow. This is one issue that we have identified. Next page. That being the case, what would be the long-term growth rate for us? What is our view in that regard? As you can see at the caption, we are expecting to grow at about 3%. The pie chart on the left, we have the actuals for 2025.
That was about JPY 100 billion. In 2035, this is after the start-up of Abadi. As Takimoto-san was explaining, we will undertake a number of growth investment. So we wait for the start-up of Abadi, then we have back with full investment for the excess. Also in Europe and the Middle East, we will invest to increase the production. So we should be able to generate a net income of about JPY 600 billion in 2035. If that is the case, the CAGR over this period will be around 4%. On the right, if the INPEX Vision 2035 is taken seriously, and if the growth strategy is understood by the shareholders or the investors, what will happen? So we will generate, expecting JPY 394 billion of profit increase to JPY 600 billion.
Then the market, the expected growth is 3.06, then caption one below, until 2035, 40%. We are quite confident of achieving that kind of growth until 2035. But after that, probably inflation level, we said 1% thereafter. Then if you calculate back from there, 0.06 would be expected growth. That is what we can expect. Based on this, then the cost of equity is considered at 10, then the P/E ratio would be 14.4 x. That would mean that the share price should be around JPY 6,000. Some of you may think that we are saying something bold, but that is not the case. The P/E ratio of 14.4 x is not that high because major oil players are about 15 x and 1.6 x against the PBR. So our share price could be at this level. It is not too excessive.
If we could go to the appendix section. Yes, here. I am re-emphasizing this point. If you look at the graph on the left, the top 500 companies are listed on the prime market as compared against INPEX. Horizontal axis is EPS growth rate, and we are using the moving average. It has been kind of smooth, and the vertical axis is expected growth. If you look at where INPEX is. The EPS growth rate is at the top right, a top-tier company. But expected growth for us is less than zero. Even when you look at this, expected growth has not been reflected into valuation. That is what this says. It is our issue. IR activities have not really penetrated into the investors, so we probably have to do more of this.
Then if we go back to the previous slide, this is a message that I wanted to communicate today. We have calculated back from P/E ratio, but the market may be considering us as a mature company or a declining company. The growth implied by the market is -0.59% based on what we have calculated. But as I said many times, we are going to grow. We have room for growth, potential growth. We are confident that we are a growth company. Based on the INPEX Vision, our long-term growth rate, it is implied at 3.1%. So between what the market is looking at and our view, there is a 4% gap. Our activity is being conducted so that we are able to close this 4% gap.
To the investors and to the analysts, we want to thoroughly look at our growth strategy and think about the valuation of our shares. We will continue to engage in investor relation activities more into the future. I would like to seek your understanding in that regard.
That is a very interesting calculation. More than JPY 6,000 share price from a theoretical perspective. But the expected growth, the G, this is being negative. Internally, how the company did react?
Everyone kind of stood up and we kind of looked down, which is of course a joke. But when we actually calculated back from P/E ratio and worked out that the market expected growth. This was the first time we realized this because this was first time we did this exercise, but we are talking about growth so much.
When we actually calculated from P/E ratio and ended up with an implied negative growth. The share price has reached around JPY 4,000 level. We thought it has increased, but in practice, we are where we are. That is what was implied when we calculated back from P/E ratio, and this is something that we need to pick up and continue to think about.
Do you feel that there is a misunderstanding, the image of the INPEX being a fossil fuel company, or the fact that the government has a golden share? What do you think?
First of all, the view regarding fossil fuel, maybe five or six years ago, there were talk about the oil and gas sanction, but that has changed significantly. So that probably is not the case as Mr. Takimoto and the President had explained.
So the Asia-centered LNG and oil demand. I do not know whether there will be a peak or not. It still remains to be unknown. But still the same, the oil and gas demand is expected to continue. In that regard, we are not a declining company in that regard. It is quite clear. A golden share and the share price relationship, it is difficult to analyze that.
But if that is impacting,
I do not think it is impacting. The fact that we have a golden share means that we are protected from acquisition. A golden share having impact towards the share price is probably not what is happening, but I wanted to ask you, what do you think?
Okay. Thank you very much, Mr. Daisuke Yamada. To conclude the first part, Mr. Toshiaki Takimoto, can you tell us why we should invest in INPEX once again?
Thank you very much. In the second part, from the corporate strategy and planning as well as finance and accounting section, these are what we want to communicate. Why it is valuable to make investment in INPEX, why there is a value in that investment is, as we explained today, the growth and the reward can be achieved both. That is something that our investors and analysts, we hope you understand. That is the most important topic that we wanted to convey in today's session. As we do the IR activity and comparing to the peer companies, why is there a necessity making investment in INPEX? What is the difference of INPEX versus peer companies? Those are the frequently asked questions.
On top of that, as we showed in the slide, PBR and the EPS are increasing trend. However, when it comes to the stock price, it is not catching up to those growth. As Mr. Daisuke Yamada explained earlier, that is what we are seeing today. In a PBR standpoint, we are low compared to peer companies, and that means INPEX's growth is not reflected on the stock price. We are not blaming the market entirely, but we think these are things we have to appeal more to the market from our perspective. As mentioned at the beginning, compared to peer companies, for example, production volume or the cash flow, there are more rooms to grow by several folds, and that is one of the major difference of INPEX versus peer companies. The biggest mission of INPEX is Japan and Southeast Asia having a stable supply of energy.
Especially in this Middle East crisis or situation, as a company having LNG in the Asian market, we are going to grow based on this foundation. We are trying to grow our business, and that is what we would like you to understand. As our president mentioned at the beginning, the energy transition and as energy in that situation and also as a transition fuel, the importance of natural gas and the crude oil is increasing. Also in the Asia-Oceania region, which is the center of the demand, we would like to provide the LNG existing body energy going forward, and that is one thing we have to look at. When it comes to growth investment, on top of that, the short-term, midterm, long-term contribution to profitability in a good balance. These are how we like to strike as a company.
The target is in the mid to long-term perspective, INPEX Vision 2035, as shown in that vision, in 2035, 60% of increase in the corporate value and 60% GHG reduction. Energy stable supply as well as low carbonization is something we like to work together simultaneously. We hope you can understand. LNG as a foundation, we have the LNG power and CCS. We'd like to become one of the important company, and that is the message we like to communicate as a management. These are the business we have today, and we hope the investors and analysts can understand, and whether it's important to make investment in INPEX or not. We hope you can think of this more carefully, and also what we have explained today, we hope you can understand the business that we're conducting.
That's the main comment we'd like to make today.
Thank you very much, Mr. Takimoto and Mr. Yamada. Now we'd like to go into the Q&A session. Mr. Ueda, please come on stage again. We'd like if you have any questions for the participants. From the floor, we like to ask if you have any questions, and then followed by that, we'd like to ask any participants on Zoom to ask your question. Each person, please refrain your question to one, and then also state your company name as well as your name. For those people attending from Zoom, please press raise your hand button, and when you're named, please give your company name as well as your name upon making these questions. Anyone who has question, please raise your hand.
First, today regarding the presentation, it was a clear message and a lot of detail analysis, and half of the analyst job were also being explained. Once again, I had to review my presentation through listening your presentation. First, you talked about the golden share owned by the government, but as I'm dealing with investors, there's not so many discussions around that anymore. I've been in charge of following your company 15 years. In the old days, there were a lot of discussions around that, but not today. Today, as the main topic is the growth potential, and that's how much there's more certainties in the market. That's, I think, more important today. On top of that, I would like to ask question. The large direction of growth in the story is clear.
Before Abadi production, the growth before that is, as Takimoto-san explained earlier, that's something where there's not a good understanding in the market yet, including myself. On page four, as you explained, when it comes to detailed project and the profit contribution, before the Abadi production start up, you still have room to grow, and that's what you explained. I think that was quite interesting. For this, I would like to ask question, and I didn't want to go into too much detail, but in the short term, you have mentioned about JPY 20 billion and then JPY 60 billion, and on the right, you can see the project as well as cash allocation. In each project, in our understanding in the past, that we think the large contribution will come from the Middle East.
Because of the geopolitical risk, I think that is one thing we have to consider. Over the short term, having this project contribution, what kind of project will have a larger contribution, and what kind of risk are you looking at at this moment? Then, coming up with these figures, what are the embedded risks? Especially which projects do you have any confidence? Including that, can you please explain your message? Thank. That is all for me.
Takimoto-san, please explain.
Yes. As you asked the questions, Iyan-san, we like to try to explain more clearly and what is a short term, what is a midterm, and what is the long-term contribution. As mentioned, JPY 1.95 trillion is the investment. Then when we are going to receive these contribution, that is why we prepared this slide. Today, there are some negotiations underway, so we cannot disclose everything.
There are some uncertainties in that sense. For example, one of the example we can give is on the left-hand side graph, the second from the top, which is the share from the METI, for the ACG oil fields. The profitability will be doubled. Those are the short-term contributions. Then for the Southeast Asia, we have a producing project where we acquired the interest, and from next year, we think there will be profit contribution next year or so. The short-term profit contribution is where we are making investments, and that is shown in this graph. Then also, not only working on these short-term thing, but also in the mid to long-term as well, before Abadi, during Abadi, and post Abadi. The details we can give as far as today is shown on this slide.
On top of that, outside of this, we have some investment projects outside. Once we are able to disclose them, we would like to give more details, what kind of a growth curve we will have by 2035. But this time, relatively speaking, it will be easier to understand for our investors. We have this growth investment and the earning contribution from these investments in the short, medium, and the long-term perspective.
For CCS, we would like to ask question. Today, there was a growth story explanation, and I was able to revisit that again, and I revisit that growth potential. But behind these projects, there are CCUS, and for your company, we believe that is also one differentiating project for your company. But today, for CCUS, what are the progress? Because it is unclear.
I think it is quite a future in the long-term perspective, but what is the current progress and your view impacts? You have the well and the exploration technologies, and you have going to be the platform potential. For each of the companies in overseas, they are working on CCS. Most probably when you compare those with Japan, we believe that the question is which is better? But what do you think is going to be your advantage or the strength that we can expect for CCS, and what is your view at this moment? On top of that, I would like to ask for each of the project, you are entering a phase for making these growth investments. But considering the CCS potential, having more leverage, balance sheet, transition, I think that is something that might be possible in the future, if that is the case or not.
Because just listening to what you just explained today, I think quite conservative balance sheet leverage is the consideration, but depending on these CCS, is the leverage going to change in the future or not? Thank you.
Yeah. I'll go. CCS. Let me talk about CCS, CCUS. I'll explain the status quo. We currently have three major CCS projects. One is related to Ichthys, and this is the project in Australia called the Bonaparte CCS Project. The second is a Metropolitan CCS Project in Japan. This is near Tokyo. It's a CCS project. The third is the Abadi CCS. This is to process CO2 coming from the Abadi production. These are essentially the three major CCS projects that we want to undertake. The situation differs between the three. In regards to the Australian Bonaparte CCS, just recently, we have received a declaration of identified greenhouse gas storage formation. In other words, essentially, CCS or the CO2 can be stored at this site. This was a declaration from the Australian government.
Based on the result of drilling thus far, the Bonaparte CCS will not be sufficient, not only to store CO2 from Ichthys but has a capacity in excess of being able to accommodate CO2 from other project. This is becoming rather certain, so we want to realize this project. On that basis, we will start the FEED, the operation in next year or nearby. After we complete the FEED, we will make a CapEx, and we'll proceed to establish the project. But right now, we are now moving to a phase of conducting the FEED towards the realization of project. That's the Bonaparte CCS. The second project is the Metropolitan CCS Project. Gathering CO2 from the Tokyo Bay area, taking it offshore Chiba, and to essentially store the CO2 there under the ocean.
In the Boso offshore, we are actually doing the drilling work right now. We are amidst that work right now. We don't know the details of the result as yet, but it seems that we should be able to store large amount of CO2. There is a kind of a sand layer that we are now confirming that we have that kind of area off the coast of Chiba Prefecture. We will proceed with the pre-FEED based on the results, and we'll proceed to designing of the CCS project. Now Abadi. In order to build the Abadi project, we will have a CCS project to store the CO2 from Abadi. This is considered to be a part of the Abadi project. Abadi itself right now is going through the FEED process, the basic design essentially.
A FEED process was covering the onshore plant, the FPSO, and also for the CCS, we have completed the FEED work. Going forward, we will enter into the EPC of the FID, and we are looking at the timing for FID to be mid-next year. With that in mind, within the Abadi project itself, we intend to undertake the CCS project together with the Abadi project construction. We are currently going the tendering process for the EPC for the Abadi CCS as part of them. In that regard, whether it be the Bonaparte or the Metropolitan or Abadi, we have relatively large CCS project, the three project that we're currently working on. We feel that they have made a lot of progress.
As far as the challenges are concerned, what would be the economics of these projects?
We are still halfway through in this regard. Of course, if we conduct a CCS project, it will push up cost. We're still considering this as a cost basis. Will this become a kind of asset? Can we commercialize? Can we store CO2 at a price in excess of the cost? At this point in time, it is still considered as a cost item.
That's the current situation. How about the leverage on the balance sheet? Mr. Daisuke Yamada, if you could respond to that question.
Yes, thank you for the question. Our leverage on the financial discipline is between 0.3 and 0.5, and so we are operating between that level. We don't want to increase or decrease the leverage too much, and I think this is a good balance. When we say 0.5, one may think that the leverage level is quite low.
The equity is about JPY 5 trillion, and so 0.5 means that JPY 2.5 trillion. We need to borrow this in USD. This is a U.S. dollar-based investment. Think about three mega banks and JBIC, and JPY 2.5 trillion is quite a significant amount. Temporarily, if there is a significant investment, there could be times when we may exceed 0.5, but we feel that we need to maintain healthy finance, and so we should keep it in between these ratios. When we explain our investment before, we are quite balanced to investment. If we are to increase the leverage going forward, essentially, we are buying our shares at leverage. What to do? We may face that kind of situation in the future, but as I have been explaining, we are now working on the trustee borrowing for the downstream Abadi.
We are needing to make significant funding for that going forward. If I are to do FID next year, then we need to secure commitment at the start of next year. As you know, the interest rate continues to increase in USD, so there is an availability challenges, potentially. The earnings result, the equity ratio, and the financial stability. This, until we have secured the TB, trusted borrowing scheme, we need to maintain our discipline at a strong level. From the creditor's perspective, they don't want leverage to be increased too excessively, which may be a little bit different for the investors. If you think about the balance between the two, we should think 0.5% as being the kind of ceiling for the time. We need to strike the right balance to invest as well as to borrow.
In that regard, I think we are at quite a well-balanced situation.
Thank you. Having listened to your presentation today, I thought that your growth strategy was very clear. You have analyzed your share price in a very thorough way. In terms of growth, Middle East, you have been investing in that area, I understand that. But Middle East, I think, is a key now. The president has made a keynote message that the importance of the Middle East remains unchanged. I wanted to do a deep dive on that. On page three, you explained about investment in Abu Dhabi, but other contribution towards the Middle East, if there is a pipeline issue, will potentially support the pipeline construction.
In providing that support, would there be opportunity for you to generate earnings, or as the government is doing, but towards the Middle East to support safe and secure their transportation, leading to potential earnings. Is that possible?
Allow me to respond to this. In terms of the Middle East, as I said before, despite the various situation, they will remain to be very important. From the INPEX perspective, we will continue to value Middle East, particularly UAE, where we will continue to invest. This fundamental thinking remains unchanged. In regards to investment towards the pipeline, we are going to collaborate proactively. Right now, ADNOC, the state-owned oil company in Abu Dhabi. The pipeline construction costs and tariff, various things will come up in the future. How should that be operated going forward? That kind of discussion has only started recently.
For us, the pipeline itself as to whether it is going to contribute to our earnings or not remains uncertain at this point in time. But still the same, constructing the pipeline basically would be a redundancy because within the Persian Gulf, in other words, within the Strait of Hormuz in the Persian Gulf, we already have a shipment facility. Normally we can just ship from there using tankers. But despite that, establishing pipeline for the emergency so that we are able to actually ship from Fujairah. In other words, we are going to invest in redundancy. By this, rather than contribution to earnings, but rather it is more to invest in order to enable security. That is the nature. But by doing this, we will be able to achieve long-term stability, delivering crude oil to customers. This is an investment that is essential.
Therefore, in terms of Abu Dhabi investments, we are talking about these investments, including the pipeline. But rather than generating profit from those, there are a couple of other discussions. For example, having collaboration for the total production increase in Abu Dhabi or the Bab Gas Cap development is underway, but the natural gas development will be done in Abu Dhabi. For those potential areas, we are going to make investments and then increase the gas and increase the oil production. That is where we may try to do and expand profitability. That is what we are looking at when it comes to security investment. Thank you very much.
My question is, as you explained today, the growth potential not being factored in the stock price as a possibility. As I also discussed with investors, I think the growth potential is recognized well.
However, when it comes to being an upstream company and in Ichthys, there are quite a lot of concentration of the profit. The diversification risk is also one thing that is factored in the stock price, I believe, as a discount factor. That's my view. Abadi that you're working on today, by having that included, I think there'll be more diversification of the risk, and I think that's what we can look forward to. But in that interim, if you look at the short-term and midterm investments for the risk diversification, I think how you're looking at those short-term and midterm investments from that perspective. Also in the pre-Abadi startup, rather than production, I think the marketing is something I would like to ask a question. If it's LNG, I think your sales are mostly oil-linked, and a long-term contract basis.
But in the spot price today is increasing, and if it's linked to the LNG price, I think if you have more of those marketing, it would be better from an outside view. From that marketing standpoint, is there any way you can try to do a risk diversification as well? That might be factored in the stock price going forward. Is there any view of such? Thank you.
Thank you very much for that question. I would like to answer that question. First is when it comes to diversification of the supply source, as you just mentioned, at this moment, 70% of the net profit is coming from Ichthys project. As much as possible, we have to diversify that, and that's what we also believe is necessary.
In Abadi, once that startup happens, then in Oceania and Asia, there'll be quite a lot of diversification as well. On top of that, in terms of production volume, Middle East is still number one, and when that happens, there will be three pillars of profitability. We think, if you ask the question whether that's enough for us, as you just mentioned, if some geopolitical risk happens, and that may happen, as much as possible, we have to diversify the source of supply. In the area where there's demand, that's what we like to do. The producing assets and the E&P project we have in Southeast Asia is what we just explained before Abadi. But compared to Ichthys, Abadi, relatively speaking, the investment we are doing today and the participating project we have today are not large-scale.
On top of that, on top of the three pillars, I think the fourth and the fifth pillar, those growth investments project is something we have to consider in the current core area or in the other non-core areas as well. That's what we are thinking in the current position. In terms of the marketing, for the case of Ichthys, 89 to 90 some thousand tons. Long-term contract is 8 million tons secured. For Abadi, 9.5 million tons out of that production capacity, 8 million tons or so is a long-term contract secured. For the remaining, as you just mentioned, is a spot market, where we have flexibility selling, and we should have that kind of flexibility. I think that was the comment. With that, on top of the existing with Abadi, the three pillars will be diversified.
Also the marketing flexibility, like when we have an energy crisis like we have today, to meet that situation, we have to have flexibility. Those are being discussed internally. Then we have to have this evaluated by the market going forward. So we think that is something we should do in the future course.
There are so many questions today, and we really appreciate all your participation. So for those questions we are not able to entertain today, please contact the IR department, we would like to answer those questions. Now the last program of today, we would like to go into the corporate governance dialogue with outside directors. In the first part of today's program, the INPEX management shared their views around the analysis of external environment, business progress, investment strategies, and the cash allocation.
From this session, I would like to ask the views of outside directors from the context of how the board of directors would supervise those growth strategies and capital allocation, as well as how they can funnel those efforts towards increasing corporate value. So we have the outside directors, Mr. Norinao Iio, Ms. Naoko Saiki, and Mr. Hidenori Takaoka. So the first half of this session, I will have a dialogue with each of you, and then in the latter part, we will have questions from the participants. It is a limited time, but we would like to have the sessions going forward. Thank you.
We would like to start. The first question is, based on your experiences, what roles would you like to play for the sustainable growth and the improvement of corporate value of INPEX? Please share some of your knowledge and expertise or your individual strengths as well. First, I would like to have Iio-san, please.
This is Iio speaking as an outside director. First, in INPEX, after joining INPEX, it has been 10 year or the 10th year. The first is in the board of directors related to the governance of the directors. There has been a large change over the past 10 years. 10 years ago, I also come from the energy background, but in the same field, most of the people were in that position as an outside director. Today, myself and Mr. Takaoka were the only ones. But at that time, as people came from the same field, we tend to have a same agreement or come to the same conclusion. But looking at today, there are a lot of lively discussions. Compared to 10 years ago, there is a large change in the board structure today.
Having that kind of diverse opinions in the board means, in a large sense, how would I put it? In the right direction, I think we will get closer and we will be able to bring the company closer to the right direction. I think that will be the direction. But when it comes to these lively dialogue, it is not something that will link directly to the company's performance. Talking about INPEX, as mentioned from the past, these highly potential projects are what we have to secure, and then piling up those projects, I think that is really the essence of the operation. So in that situation, the E&P for the development and investment of these development for oil and gas, there is some kind of a hole that you might fall into.
In the past 10 years I have been in the company, there were the investments that we made in certain projects before, and then there were some impairments we had to book from those projects. For myself, when I was still in the Mitsui & Co. Energy Department, I also fell in that hole of E&P, and I had a bitter experience, as I remember. When I talk about these hole, I think there are various different types, but we have to avoid them and try to make sure those will happen. Based on my past experience, if there is some project I feel uncertain when the board approves in the project and I am the only one objecting, there were some cases of such in the past board meetings.
Because of my past experience, kind of having that sense of project, it is not really in a positive way, but from that kind of negative type of projects is what we like to reduce, and those are things we have to look at. We have many projects for investments, and those are things I would like to look at going forward.
Thank you. Even for those people who are not from the energy industry, the members are from the perspective of diversity. You also have Mr. Miller, a non-Japanese national, being the board member. Mr. Iio, from comparison to 10 years ago, has the discussion become much more active and more prolonged? Is it often that the opposing opinions are expressed?
Yes. How could I put this? People come with various backgrounds, and Mr. Miller is an Australian, and he has a rich experience. Saiki-san sitting next to me. Nomotsu-san used to be the parliamentary minister in the Ministry of the Environment, Mr. Morimoto. We have people from various background, which makes the discussion very active and lively. INPEX, as a company, operates as an E&P company, basically.
I am supportive of people of various background joining the board, but it is also important to have a number of board members who have experienced E&P. The experience of failing in the E&P projects in the past will certainly be of great value going forward.
Next, I wanted to ask Saiki-san. Saiki-san, you have become a board member this year, so your experience thus far.
Yes, my name is Naoko Saiki, and I became an outside Director as of the AGM, held in March this year. Sustainable growth and enhancement of our corporate value, if I am able to contribute towards these goals, I feel I can contribute from three perspective. One is expertise, second, objectivity, and the third is what Iio-san was mentioning, diversity. First of all, in terms of expertise, I have been involved in the Ministry of Foreign Affairs for 40 years.
I'm also advisor now, so I was at the forefront of negotiation in terms of diplomacy, so national laws, economy, security. I have been involved in the establishment, implementation, and so forth, of various policies covering these areas. I have expertise, experience, know-how, people contact, that I have nurtured through my career, can be utilized to make advice and a proposal to the management of INPEX. In April this year, outside directors had a kind of round table meeting, and the facilitator back then was Mr. Takimoto, Senior Executive Vice President. The dialogue is included in our integrated report. Mr. Takimoto back then said, for example, the risk management for overseas business or resource, the diplomacy establishment of international relationship through international laws. He had expectations for me to contribute in those areas.
From that kind of expertise and know-how, I want to certainly make contribution. In the Ministry of Foreign Affairs, I was also involved in the people development for quite many years. Developing people, utilization of people, this also is an area where I am engaged in proactive advice. Second is regarding objectivity, and Ms. Iio also touched upon this. Myself, have not been deeply involved in the energy area in my experience. Apart from the management experience in the administrative area, I've not been involved as a part of the executive member in the corporate management. Because of that, there are fresh, I suppose views that I may be able to share because of my, I suppose background. Common sense within the company or the common sense within energy industry, I don't know them because of my background.
In that regard, I can provide an opinion from an independent and objective view, and to be engaged in the, I suppose the monitoring of the management and risk management compliance. When it comes to these topics, external views are very important, and I feel that I can play a role in that regard. The third point is diversity. In regards to the corporate policy of the corporate governance of the INPEX, so the cultural background, the international aspect, and all those are very important. The female ratio. By 2030, we want to target 30%. This is something that we have announced externally. I myself, by chance, as a woman, and fortunately, I have not experienced discrimination because I was a woman.
I am a woman, and so from such a perspective, I am able to contribute to discussion when it comes to the diversity, and I want to certainly contribute in that area. I have strength as a woman as well, and that would also be something that I want to utilize. When it comes to diversity, what is important is, as Ms. Iio was explaining, despite the lively discussion, despite the diversity being secured, it doesn't mean that the corporate earnings will increase. That is true. Diversity at the same time does enhance the resilience of an organization. It also improves the quality of discussion. I do feel that they are facts, and so that would be the kind of perspective from which I can contribute to enabling INPEX to establish much resilient corporate structure and to link to higher quality decisions.
Saiki-san, you also serve as the Outside Director of another company, but any surprises having joined INPEX? Anything that you felt in the discussion at the board?
I do not really find anything to be different. I think INPEX is a great company, even from looking at the company from the outside. Now being a member of the board, I feel that this is a great company. Added to that, I think the company continues to evolve and change. For example, prior to the board, there is a kind of a pre-board explanation and various support is being provided. When I became the Outside Director in March, even prior to that March, whether it be the various board and so forth, I am able to look at the materials from those board meetings, other meetings, even before I became the board.
That is a learning experience. There is significant support. There is no Japanese person. There were five auditors. There are 15 people on the board, and inclusive auditors, more than majority are outside. The Outside Auditor, there is another woman on the board in addition to myself. We are able to engage in active discussions under very good environment and atmosphere.
Takaoka-san, I understand that you joined the board this year as well. Until now, what has been your experience?
My name is Takaoka. I am from Mitsubishi Corporation, and I am kind of advisor of the Mitsubishi Corporation right now. Mitsubishi Corporation had a low PBR until several years ago. We were making appeal of enhancing that, but it was not that easy. Within the company, whether LNG oil, we did actually have that business within the company.
Mitsubishi, we have engaged in many business. For the top management or the stakeholders, how can we communicate the fact that LNG is great, but that was difficult to obtain understanding. I have struggled a lot in my career. It reminds me of my experience. Where I can contribute is first, in the energy industry, is where I have been involved for 40 years. I am from the industry, I do have certain level of know-how. Mitsubishi Group association, I am actually Director of 15 different organization, including the industry associations. There is a committee for assisting investment and so forth, and I was a member as well as the Chair for four years. Mitsubishi Energy Group, I was leading that. I was leading the North American operation.
I was involved in the management of the operating company for many years as well. In that regard, I have been involved in many investment project. I was also looking at management and operation of the company for quite how many years. I am also contribute from such a perspective as well.
I'd like to move on to the next question. In order for INPEX to gain higher reputation from the stock market, what should the company improve the most from your perspective as outside Directors? You may talk from various points of view, including growth expectation, capital efficiency, shareholder returns, information disclosure, et cetera. I'd like to start with Takaoka-san.
Thank you. There were so many discussions earlier, and I think it's difficult, but first of all, INPEX, as an internal officer, maybe we should not be too close. But I think if there's a good area, we have to look at those more from objective perspective, and I think we can contribute from that standpoint. Having so much high profitability and also a stable cash flow, there's not so many companies. Although we say LNG, Mitsubishi also started from Alaska, and it's a wonderful industry.
As an LNG, in Japan, the only company doing operator of a major project. Going forward, I think gas and LNG has a more room to grow going forward. As the only company who can be in charge of operatorship from the upstream, midstream to downstream, I think the mission and the roles played by the company are still many folds in the future. We'd like to do more PR activity in a more objective point of view, and then showing that clearly to the market is something we can do, and that's how we can contribute. The other thing is, as you know, a super fossil fuel company, and then the two main pillar of business are in that field. I think from the market, oil price, foreign exchange, and a lot of regulations, so there's a huge volatility.
That's the nature of the business, and hard to understand from investors' perspective. But I think that's why we have the INPEX Vision 2035. But after the midterm plan until 2035, what kind of trajectory, what kind of things are we going to do? We like to clearly show that going forward. I think that's one, and also the existing backfill expansion is what we're looking forward to, and also Abadi. But of course, things we have to do are indispensable. We have to work on them. So, the very detailed discussions and also while working with everyone, in some instance, maybe we have to come to a conclusion, we have to stop and discontinue. For important projects, I think we have to have that kind of stance. If there's any challenge or any request to the company- There are such.
There are so many challenges. When I was in the United States, there was the Biden administration that started, so it was a really huge difficulty I had to face, because from the headquarter, I was given direction to stop the Sakhalin project. Until yesterday, LNG was considered clean, but then suddenly it became a dirty energy. So a huge difficulty we faced. But since then, it's only four or five years, and today, LNG is the third pillar. So those things happen in LNG or in the energy field. From the coal, you become oil and then gas and then renewable. From Mitsubishi Corporation or Tokyo Gas, we started with the cokes coal, and then from that, the oil gas, naphtha gas, LPG, LNG, and then up to today, that's how it evolved.
If you look at 2035, there's a large wave. With that large wave, while grasping on that wave, the small vibration that may happen in the meantime is something we have to manage, and that's very difficult. There is a long-term and a short-term challenge, but we have to identify them carefully and then allocate resources accordingly. That's very difficult. I don't have an answer clearly to the question, but as a whole team INPEX, that's how we like to solve the issue and challenge going forward.
Thank you very much, Ms. Saiki. Next, please.
Thank you. If I were to mention one thing, I would like to limit to one. For the organization, the most important challenge is the human resource development and utilization.
From that standpoint, I think in the company, we have a good recruitment, development, and also utilization of the human resource. Depending on the people, some people might say INPEX is a super white company. I might say that we are too relaxed, but at any rate, when it comes to the human resource management, what kind of system, what kind of structure we have to put in place, and how we're going to strengthen and how to operate that, we think is very important. At the same time, I think what's more important as well is the improvement in the awareness of each employees. What I'm always thinking is the corporate culture, which is important.
When it comes to corporate culture, of course, we have our management vision and sustainability, and INPEX values are decided, and then we also have the INPEX Vision 2035 and then brand message, brand statement. The corporate culture is defined well and well put in words, and then we're trying to share those throughout the whole organization. I highly evaluate that culture. Having that in words is something we are trying to spread among all of the individual employees, and there are a lot of efforts made in that front. What I think is once the brand message is communicated, saying this is INPEX value, deciding on that value, and then not being relaxed with the current status quo is important because the corporate value have to be brushed up each time.
Our self-awareness is important and from our proactive manner, in a proactive way, we have to try to create a good culture, a better culture with each individuals. That's going to lead to a more shared value by each employees, and then it'll be a deeper understanding by each individuals. I think there are so many things that's been created. For example, brand message. With the global strength, we are trying to endeavor into the future. I think endeavoring into the future is very important and wonderful. It's only been 6 months since I came to INPEX, so it's still early, but there are so many shared value and trying to increase the understanding. When it comes to endeavoring into the future, we have this in the brand message, but I think INPEX has high-risk, high-return operation, and that's what we are doing.
Each project has a long-term period. As a corporate culture, I think we have to increase awareness more, which is resilience and also challenge. I think in various statements and also integrated reports, I think that is what we are trying to achieve. But we have to be consciously polishing those in the culture. From that standpoint, I think as a management, top of the management and also for the employees individually and also the overseas employees who are 40% of the total employee base, those are things we have to make sure that resilience and also challenge, that should be understood by the employees going forward.
Thank you. Ms. Iio.
Yes, it is really hard to say. But talking about E&P, this is a niche market. Talking about the stock price, it is related to stock price discussion.
But for example, the oil major, the upstream, downstream, and also the NOCs in Japan, for example, has both upstream and downstream. But in case of INPEX, we only have upstream. So to the market or the Society, we do a lot of PR activities, IR activities, and also we do a lot of advertisement or trying to have people understand more. But when it comes to peer companies, automotive companies, compared to those players, companies, I think the understanding of what INPEX does is something that is not really well understood. So I think that is the destiny, and then that is something we cannot do anything about. But today in the IR event, and then the audience hearing all of these discussions and presentations, and then going to your customers saying, "This is INPEX." I think it all depends on you, all of you.
Through TV and those advertisements, it is really hard to explain about upstream company. It is hard to increase that awareness.
That is what I thought, having involved myself. But if I am to add another point, like Saiki-san has mentioned. So development of people, and INPEX, in my view, have a lot of treasure. We are the first operator of an LNG project, almost 10 million tons of LNG operation that we are engaged in. The INPEX employees were involved in this because they will now be introduced into Abadi project going forward. This is a great asset for us. The people create jobs, and the jobs create people. It is exactly this that we are seeing right now. We are seeing this occurring within INPEX, and we are putting a lot of effort into developing people. We talked about a lot of numbers today. But if people are convinced. The very strong points of this company.
Please communicate that to your customers. Thank you. I would like to proceed to Q&A session. We will first take questions from the venue, people attending in person, and then take questions from Zoom. Please ask only one question at a time. When you are asking a question, please explain your affiliation, your name, before asking your question. For those people participating through Zoom, please use that raise hand function. Also, if you were to ask questions through Zoom, please state your name and affiliation before asking your question. First of all, people in this room, anyone with a question?
I wanted to ask about the board structure and the monitoring of the management INPEX. Mr. Ueda is the chair of the board. Recently, the chair is often served by outside directors. How do you secure an independence of the outside directors? In other companies, sometimes non-directors are holding meetings only amongst the independent directors making the proposals to the management. The fact that Mr. Ueda, you are the chair of the board. How do you secure the independence of the outside directors?
Could I ask Ms. Iio to respond to this question?
Our view is that there is no issue at all in terms of independence, despite the fact that Mr. Ueda is the chair. He has facilitated the meeting in a very fair manner. Also, the agenda of the meetings have been presented under the appropriate rules. Thus far, we have never had any concerns of this matter. Outside directors, we do have a meeting to exchange opinions.
It is not that we are gathering to oppose the management, but there are times when we want to confirm things, and we do actually gather amongst the outside directors from time to time. You have been talking about the personal talent, and INPEX as a Japanese company for the first time, have engaged in operatorship of large project. In that regard, people are very important. I fully agree with that. If I see a virtuous cycle, then I think this will lead to the next leaps in your company. You were talking about quantitative element in terms of growth thus far, but in non-financial area, I think you could probably pick up on this more. What Mr. Takaoka was talking about, be persistent. I think that is something that you probably had within INPEX, which you can be leveraging Abadi.
The keywords that you mentioned, I think you can use these keywords to appeal the company externally going forward. This is just my impression. On that basis, based on the experience thus far, and you are outside directors. Between outside directors and the management side, were there cases where opinions were not aligned? Where you kind of opposed each other? Any kind of episode that you may have experienced? Maybe Iio-san . How did you come to consensus, having experienced something like that, to move forward? Any episode or anecdotes that you may be able to share, that would be a great reference to understand the type of discussion being held at the board.
There was one time when we did not agree at all, and this was in regards to acquisition of a certain company in Australia. And CEO was to be the local person, but I thought that we should send someone from Japan. I remember that the management side, they decided not to proceed with their view. There are little things, of course, from time to time. Indeed, management side will provide a response at the following board meeting to have time to think over any issues. We try to study up to try to understand and to be more convinced.
There was one time when we did have that kind of difference of opinion completely, but normally, it's not the case that we enter into quite a radical proposal. It's not that case that we have to oppose.
Thank you very much for the invaluable opportunity today to ask this question.
Now, the external environment continues to change, and as Takaoka-san was mentioning, there are several fluctuations and how to achieve that growth over the medium to long-term growth. The natural gas has been revalued in one sense, in a positive way that is true. But in Australia, there is an issue regarding the Scope 3 emissions. Sometimes the approvals are subject to question, and the gas price could potentially increase as a result. The expected growth rate, you talked about 4% gap. The reason for the gap. Is it that the realization or the vision is not fully understood, or is it that the natural gas, the market concerns regarding market risk or the price? CCS positioning could also be a factor for you. Could I have your views in that regard? Takaoka-san, can you respond to that question?
Well, if I'm able to respond to that question. How could I put this? It's not going fully to the decarbonization. I don't consider natural gas to be perpetual asset either. But Japan lacks resource, and we have been struggling to come up with the best mix. Sometimes, the green went too far a number of years ago. But though that wasn't right in one sense, we talked about affordability before. Just being clean and green is insufficient. Price, economics, security, safety, and these perspective that the world is assuming to look at energy more from the comprehensive perspective. Now, benefits and the risks associated with natural gas business, we need to look at both of these aspects. Right now, we may be going a little bit to the right or to the left.
If we have more, I suppose, financial capability, I may be able to address both. But there is also a limit to strength. Going to the right a little bit or the left, we probably have to go back and forth to try to identify the right direction. I may not have answered your question fully, but that is the situation.
If there's anyone who have a clear answer to this question, I think you're able to win all the challenges. That concludes today's Q&A session. We really appreciate all of your various questions today. If you have any questions further, please contact our IR group. We're at the hour, therefore, we would like to come to the end of INPEX Investor Day 2026. Thank you very much for gathering here out of your busy schedule today.