INPEX CORPORATION (INPEX) has reached a collective agreement through its subsidiary TEIKOKU OIL ECUADOR and alongside certain of its joint venture partners (collectively, the Joint Venture) with the government of the Republic of Ecuador (the Government) whereby the Government shall pay cash compensation of a total of 318.7 million US dollars (approximately 35.0 billion Japanese yen at USD1 /JPY110, of which INPEX is entitled to approximately 19.9 billion yen) to the Joint Venture for the termination by the Government of the Joint Venture’s contracts related to Block 18 (the Block Contracts) in 2010. The compensation is scheduled to be paid in instalments within 2018.
Following the Government’s policy change in 2010 proposing to alter the contractual framework of the Block Contracts from a concession arrangement to a service arrangement and subsequent negotiations, the Joint Venture and the Government did not reach an agreement, which resulted in the termination of the Block Contracts. The Joint Venture thereafter filed for compensation pursuant to Ecuadorian law, through international commercial arbitration.
TEIKOKU OIL ECUADOR had acquired a participating interest in Block 18 in 2008.
In terms of the impact on the company’s consolidated financial results for the year ending March 31, 2018, INPEX plans to report its entitled portion of the compensation from the Government on the condition of payment. As this matter has not been factored into the consolidated financial forecast for the year ending March 31, 2018 announced on February 8, 2018, the company plans to issue a revised forecast upon revaluation. INPEX is also currently revaluating the impact of its upstream assets in the Americas taking into account factors including the future outlook of natural gas prices in the region outlined in the most recent forecasted consolidated financial results.