1

Idemitsu’s challenge in

global energy market

January 28, 2016

Takashi Matsushita

Managing Director

Idemitsu Kosan Co.,Ltd.

2

The environment surrounding the

Japanese oil industry

The action of Japanese oil industry

Idemitsu’s domestic and international

activity

Closing remark

Contents

3

Trend of global petroleum demand 6

Heavy Fuel Oil

Gas Oil

Kerosene

Unit : million BBL/Day

Source : EIA, METI data

0

20

40

60

80

100

120

0

5

10

15

20

25

30

35

40

45

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

World

Japan

Asia-Pacific

Forecast

Annual average growth

Asia-Pacific World

1988-2015 2015-2030

Japan -0.3% -3.4%

World 1.3% 1.0%

Asia-Pacific 3.5% 2.0%

50%

60%

70%

80%

90%

100%

110%

0

5

10

15

20

25

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

4

Trend of Japanese Petroleum Demand 6

Heavy Fuel Oil

Gas Oil

Kerosene

Unit:10million KL Forecast

Source : Related Ministries(METI, etc), IEE

Naphtha

Jet

Gasoline

2030：117million

Population

2008：127million

Car’s Fuel Efficiency

(for Gasoline)

1996：12.1Km／L

2013：22.5Km／L

Refining Capacity

2014：3.9million/day

1998：5.4million/day

Retail Site

2014：33,510place

1994：60,421place

5

The environment surrounding the

Japanese oil industry

The action of Japanese oil industry

Idemitsu’s domestic and international

activity

Closing remark

Contents

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

1975 1980 1985 1990 1995 2000 2005 2010 2014 2016e

6

70% 66% 62%

76% 80% 78%

87% 85% 82% 88%

60%

80%

100%

（KBPSD）

FY

Date Source: IEE Japan, Report “Mizuho Industry Focus Vol176”

5,940

3,917

Capacity

▲34%

Refinery (CDU)Utilization

Rationalization of refining capacity in Japan

CDU Capacity Crude Oil runs

7

Nippon Mitsubishi Oil Nippon Oil

Japan Energy

Tonen General Sekiyu

Exxon Mobil

Exxon Mobil Group

Tonen General Group

Idemitsu Kosan

JX Nippon Oil

& Energy

Tonen General

Group

Kygnus Sekiyu

Taiyo Oil

In Apr 1999

In Dec 1992

In Jul 2000

In Jun 2002

Capital transfer in Feb 2014

In Apr 2010

In Oct 2008

Reorganization of oil company in Japan

Showa Shell Sekiyu Showa Shell Sekiyu

In Jan 1985

Cosmo Oil

In Apr 1986

Cosmo Oil

Idemitsu Kosan

Showa Oil

Shell Sekiyu

Nippon Oil

Mitsubishi Oil

Kyushu Oil

Nippon Mining

Kyodo Oil

Tonen

General Sekiyu

Esso Sekiyu

Mobil Sekiyu

Mitsui Oil

Kygnus Sekiyu

Taiyo Oil

Daikyo Oil

Maruzen Oil

Cosmo Oil

18 companies

in 1984

7 companies

in 2015

Further

reorganization

announced

8

The environment surrounding the

Japanese oil industry

The action of Japanese oil industry

Idemitsu’s domestic and international

activity

Closing remark

Contents

9

Strengthen domestic production platform

Aichi refinery

Hokkaido refinery

Chiba refinery and petrochemical plant

Tokuyama complex

High conversion refinery Integrated complex

Rationalization of refineries/petrochemical plant

Olefin center

Add the value to products

Secure safe and stable operation

Fully utilize resources

Enhance energy saving

Promote an effective staff training

3 refineries and 2 petrochemical plants

Reduce surplus capacity and maximize utilization

10

Fully utilize resources by integrated operation

To plant Utility Electricity, Steam

To refinery

By-Prod, Utility Gasoline base Hydrogen, Fuel gas

Aroma Solvent Olefin Resin

Shift to • Naphtha • LPG

From fuel to chemical;

Integration of Chiba refinery and plant

LNG

Crude oil Effluent oil

Sea water Partner -Chita LNG

To power plant

Idemitsu

Enhance energy saving by integration with partner

Discharge

Photo: Chita LNG & Idemitsu Aichi

Chita LNG

Idemitsu

Utilize waste cold sea water of partner’ s plant

Vaporizer

CDU

Sea water

Connect the pipeline

12

Effective staff training in training plant

Training plant

Idemitsu training plant

Trainee from overseas

⇒ Middle East : 800 people / Asia : 900 people

Control room Site Instructor’s DCS

(Dynamic simulator)

Set various condition

Modified from diesel HDS to training plant.

Realize various operating condition by

Dynamic simulator.

Input

(6,300 Idemitsu’s operators have had a training.)

Communication

13

＝Sales office : 17

＝Oil terminal : 18

Strengthen the sales network

・Retail site : around 4,000

Optimization of logistics

・Private coaster : 52

・Tank lorry : around 1,400

Emergency logistics system

Idemitsu’s supply network cover all over the country.

Securing stable supply including times of natural disaster.

Strengthen the stability of domestic supply network

14

Idemitsu’s Renewable Energy Business

＝Solar Power

＝Wind Power

Solar Power

Biomass Power

Wind Power

Geothermal Power

＝Biomass Power

＝Geothermal Power

15

Idemitsu’s international activities

Idemitsu is expanding the business in the growing market.

Expanding functional materials businesses

16

OLED materials Excellent color reproduction capability and

high-speed response to moving images.

Agri-Bio Environmentally friendly microbial products

to prevent crop disease.

16

Idemitsu’s unique products through the development of new technologies

Lubricants High-performance, environmentally friendly

products.

XAREC SPS(Syndiotactic Polystrene)

XAREC boasts remarkable heat and chemical resistance, as

well as superior dimensional stability, making it the preferred

SPS in many fields.

17

The environment surrounding the

Japanese oil industry

The action of Japanese oil industry

Idemitsu’s domestic and international

activity

Closing remark

Contents

18

Closing Remark : Our Vision

Stabilizing and strengthening our business

foundation in Japan

Expanding global petroleum business

and supporting Japan’s energy security

Promoting global growth strategies in the

functional material businesses