Inpex Corporation (1605) Earnings Call Transcript & Summary

I would now like to start the Investor Day of Inpex Corporation. Thank you very much for everyone for gathering today despite the hot weather and despite your busy schedule. My name is Wakita, General Manager of the Corporate Communications unit, and I'll be serving as the MC for the session today. Let me introduce the speakers: Representative Director, President and CEO, Mr. Takayuki Ueda; Director, Senior Managing Executive Officer, Senior Vice President of Oceania Projects; Mr. Hitoshi Okawa; Director, Senior Managing Executive Officer and Senior Vice President of Finance and Accounting, Mr. Daisuke Yamada; Director, Senior Manager and Executive Officer, Senior Vice President of Corporate Strategy and Planning, Mr. Toshiaki Takimoto; Managing Executive Officer, Senior Vice President of Asia Projects, Mr. Akihiro Watanabe; and Executive Officer and Senior Vice President of Hydrogen and CCUS Development, Mr. Shoichi Kaganoi. As for the program today, we'll spend an hour to explain and also respond to questions for the 2 agendas to begin with, then we'll take a 10-minute break, and then we'll hold a 15-minute general Q&A session. Today's meeting is held in a hybrid meeting with online participants and with simultaneous interpretation. For those participating through Zoom, please select the language of your choice. And for the presentation material, please make your selection using the button at the top of the screen. And we'll ask Mr. Ueda, President and CEO, to make opening remarks.

Hello, everyone. My name is Ueda, President and CEO of Inpex Corporation. Thank you very much for coming today despite the hot weather. And for those people participating through Zoom, thank you very much for giving us your valuable time. I'd like to express our sincere appreciation. As for the Investor Day, this is the second occasion following the first Investor Day last year. The uniqueness of this Investor Day is those with responsibility for project. And so today, for Abadian and for Hydrogen & CCUS. So the VP is responsible for this business, will explain about the current status, the future prospect as well as any trouble that we may be experiencing. So we will try to give that explanation directly to you. And for other projects or for the course of direction for the company overall, you are able to ask questions about those themes using the general Q&A session that we've scheduled at the end of the session today. And -- the overall session will be 2 hours. Some people have indicated that it may be too long, but I look forward to your participation throughout the day. Thank you very much once again for your participation.

So I will now provide an explanation on the topic, expansion strategy of the LNG business. So Mr. Okawa will first talk about the Ichthys LNG project.

My name is Okawa from Inpex. Following from last year, I would like to explain about status quo about Ichthys as well as talk about the future of the project going forward. So today, I would like to cover 5 topics. And a long-term stable operation of the project is our mission. And so how can we achieve that stable operation? And what are the challenges to enabling this? And that is what I'd like to explain as our first topic. And the second topic is backfilling or train expansion for maintaining plateau. What are the strategies employed in this area? And we have a massive production facility. So we'd like to utilize that as an advantage and expand business. And the third topic is making cleaner. And of course, when we are developing and producing a fossil fuel, we have a mission to reduce CO2 emission. And how can we achieve that cleanest well expanding production? That is the challenge that I would like to describe. The fourth is about the Inpex brand. And we are continuing a sizable business. And in that regard, the brand of the company is very important. So can people trust Inpex? Are there people wanting to work for Inpex? And we consider that to be very important. And in the past, we have started the Inpex brand where we had no visibility. So what's the current situation? And the final point is the energy business and investment environment in Australia. And we gave explanation about this last year. So what have been the changes? What have been the changes in regards to the stand of the Australian government? So these are what I'd like to cover in my part. So first of all, the long-term stable operation of the project, there are 4 key points in this regard. First, the continuance of safe operation, and this is going to be the key. But not just working on stable operation, but we need to improve the reliability of the equipment to improve the productivity. And there is also quite an important issue in regards to the production plan and also the ship arrangement. So how we're going to work on that. And also reduction of CO2 emission is also something that we need to work on. And what's the current situation in regards to production for this fiscal year? Please allow me to explain a bit on this. And I'd like to talk about the first half of the year and the second half of the year. So the first half of year, first and second quarters, we were able to operate very smoothly, and we were able to achieve a high level of facility utilization, achieving stable production. So everything went well until then. But as you are probably well aware already. But in July and August, we did actually have production issues. And right now, the production has dropped to around 35% level. So today, I would like to explain about the facts and explain why we have implemented production reduction. And what's the situation now. And when are the expected recovery timing going forward. I would like to explain those in some detail. Now in July, heat exchanger is what we use, but this heat exchanger is used within the process where we remove heavier gases like ethane or butane or propane. And there is a process to extract those heavier gases, so that we were able to just leave methane in the end. And what -- it plays an important role here in the heat exchanger. Now there was a small amount of gas leakage from the heat exchanger. And when there is any gas leakage, there is a possibility of fire. So despite the fact that the volume of leakage is small, we felt that we need to do a proper inspection. And so in that regard -- and when we talk about the heat exchanger, and we have 2 trains, and these are the Train 1 and Train 2 that, as you know -- but for both Train 1 and Train 2, there are 3, the heat exchanges utilized. So we have 6 heat exchanges in this process. And 1 of the 3 in Train 2 ended up with a small amount of the gas leakage. So we need to first inspect that. And so in July, we were working on that. But because we have 3 systems and another system -- in other words, a second out of data 3 lines in Train 2 also caused the gas leakage. And so when you stop the 2 systems, you have to stop the train. And so in August, when we identified the second trouble, we have to shut down the operational Train 2. And so we were only operating with Train 1. In other words, we were producing at 50% for the entire facility. But since then, as you know, '22 and '21, we use the same equipment. And if that's the case, how can we secure safety of Train 1. Then of course, you need to address this potential concern. So in order to ensure safety for Train 1, we decided to inspect 1 of the 3, the system. And so that is what we are doing right now. And so when we are doing that inspection, the production volume for Train 1 had to be reduced by 30%. In other words, we are currently operating at 70%. So Train 2 is 0, Train 1 is at 70%. So in total, we are operating at 35% of production volume right now. That's the current situation. So today, we discussed with the vendor who is supplying and from the vendor, the engineers who are dispatched already on site in Darwin. And in Darwin, there has been works conducted. And as a result, as 1 of the Train 2, 3 out of -- 1 out of 3 is okay. There was a confirmation. But for Train 2, basically, end of September is when we're going to have 100% production, and that is what we are scheduling today. So for Train 1, the question is what is the situation for Train 1. There are also a diesel inspection that is required. Therefore, for Train 1, end of October to November, beginning of November, there will be various confirmation made. And in total, beginning of November, we may go back to 100% production. That is what we're thinking. However, after inspection or surveys, we don't know what will happen. Therefore, we'd like to work on those details. And then looking at safety, we'd like to make sure that production will start. However, the key points here is talking about the heat exchanger. Why is there a trouble in the heat exchanger facility itself or whether we won't have the same trouble in the future. For this, there are a couple of root cause. And today, we are still are not in a situation where we can identify the recourse at this moment. But there are mainly 2 to 3 root causes that we have identified or we are able to skew down to. And therefore, once that is clear, we'd like to take more drastic measures to improve the situation. However, as mentioned, at the beginning of November is when we'd like to resume back to 100% production, and that is the schedule. So it's slightly long. But today, the production situation and the trouble and the expected recovery going forward is what I just covered. And regarding the Ichthys performance, it is improving. And the awareness to our safety on the contractor side as well has been improved quite a lot. And with the contractors, we are working on these HSE performance, we have given a lot of directions in detail. And finally, we are coming to fruition. So regarding the performance, HSE performance, we are able to have quite a high level of security today. So that is number one. And next page, please. The plateau maintenance, backfill train and expansion. So as mentioned before, in Ichthys, to maintain the plateau, if we don't do anything, in 2030s -- in the latter half of 2030s, there will be production drop. Therefore, to offset that situation, we are thinking of backfill. As one of that, we have Cash Maple project, which we have secured. So this Cash Maple is how we can maintain the plateau for several years. But just the several years, of maintaining is not enough. So for backfill, we have to think of something following Cash Maple. That's one of that in the nearby location. Surrounding block, we have the exploration blocks as well. So we would like to communicate that well. So first, there are 2 exploration blocks or wells that we drilled. However, those were dry, unfortunately, unsuccessful. So for the exploration of the surrounding blocks, we'd like to review once again our plan. And then we'd like to come up with the policy for these explorations. Because as overall, in the surrounding blocks, if you know it's a small amount. There are some gas reserves. And for commercialization, it is close, so we can commercialize easier, and that is very important. Close proximity is very important. So even though it's a small amount, we can commercialize them. Then that will lead to maintaining the plateau, and that's clear. Therefore, the maintaining of this exploration, we have unsuccessful 2 exploration wells, but we would like to review big plans going forward for these exploration blocks in the surrounding areas. And then for the train expansion. Last year, as we explained -- today, we are in the acquisition process. and that's what we mentioned last year. So in last year's presentation, we mentioned about in the following year, in May or so of the following year, we may have those news. And so you may find out what area Inpex is targeting. So until then, please wait until those details, that's what we mentioned. And whether we have that information in May, no, we don't have that. That's because the process itself is in the very peak time today and in various ways. There are a lot of technical assessments. And there's been a lot of progress. However, those technical assessment and the actual development plans assessment, there are times taken or consumed. Therefore, at this moment, we cannot give the details yet today. We think it will be in the future. However, when it comes to the candidates, we'll be skewing down those candidates going forward. So perhaps by end of the year, we may be able to have more clarity and we may find out whether we can go into the final round or not. At this moment, to explain the status quo, from our development, we have a certain confidence from our development activities. So we hope we can go to the final round. However, there are various factors. Therefore, I cannot just give all the details today. But in the near future -- in the next time, for sure, we hope that in the near future, we can discuss more details. So next page, please. And regarding the CCS business. In here, by end of this year, the 2 appraisal wells was planned to be completed, and that is mentioned. However, in fact, 2 -- out of the 2, 1 has already been drilled, and we are mostly close to the end of the drilling activities. And in July, on the 25th, we started the drilling activities. The second is starting from 25th of September, that is the schedule. Therefore, by end of the year, we will finish the drilling. And for one, we have already finished and the second is already going to be started. So we have a good progress on this front. Based on this result, the Bonaparte CCS G7 appraisal is what we'd like to make sure, we do well. And then whether we can have CO2 injection. And the injection is what we are going to appraise going forward. So by end of the year, around the end of the year, we think that Bonaparte CCS will have more visibility on how much capability we have. In that process, simultaneously, we have to evaluate other factors. So how much size we will run this project with. Ichthys is a 6 million tons of CO2 emission. However, 6 million tons, whether economics will work, it was unclear. So if it's 10 million tons of our size, it has to be 10 million tons. And that means other demand have to be raised. So that means CO2 will be transported from Japan. And with the buyers, we have to discuss. So once the demand is clear, I would like to talk about the exact project size. Therefore, today, actual drilling -- and regarding this layer, how many CO2 injection can be made. And along with that, with -- what size of operation we'll have in this project, we are working on getting the buyers -- potential buyers today. And also the Darwin-based CCUS Hub, et cetera, those led by the Northern Territory government, there is a change in the government in August. So today, it's a change to Liberal Party. So what kind of policy will be used going forward, we would like to discuss continually with the new government. And then we will have more clarity on what kind of hub we will have in the future. And in fact, regarding the current activities, the facility that we are running today itself, it has to be decarbonization activity as well. So electrification is one. And using renewable energy, we have to bring electricity and use electric power. So those are things we have to commercialize. And also Wheatbelt Connect project, we have afforestation activities. So we are expecting offsetting here as well. However, unless we go ahead with these projects, it's hard. And acquiring the land is really difficult. And unless we are able to successfully acquire these lands, we won't have afforestation activities. So these are areas we are struggling at this moment. Next page, please. And this is the Inpex brand we have established. In the past 1 year or 2 years, our awareness of the Inpex brand has dramatically increased. Last year, as explained, we also discussed about that brand awareness, but how people can feel this is really from the government. If there is any change in the government industry policy, and our feedback is requested. So we give our feedback to the government, and that is the normal operation today. So that means that we have a high awareness of our brand. And in the last time, as we mentioned slightly, the government is -- if it's trying to change the policy. And it was difficult before to give some comments. But now we have a say, so that we can give some comments and say no to some activities. So that is one thing that we have changed. And from September 2018, we started the production. And we have come to today, and we have continued safety operation until today. So that is why we have increased credibility against the operatorship and also our contribution to the Australian government. I think that was well recognized today. So we started from 0 as recognition, but we now have established quite a strong recognition in Australia. Now for us to engage in this business going forward, there are 3 key points. We need to be the employer of choice. Like I said before, last year, we need to be a company that is chosen. We need to require a company that people want to work for because projects are people, and we need strong capable people. So to what extent we're able to gather these people is going to be key. But now, we are becoming well known. So we are seeing increased number of people who would like to come and work for us, leaving out their former employer. And so the employer of choice, I think we are making a lot of progress there. The second is partner of choice. And so companies are wanting to partner with us and work. The biggest renewable company in Australia that we've -- in partnership with last year, they want to engage in a joint venture with us in Australia, and this was because we were a partner of choice, their own companies wanting to engage in business with us. And starting with renewable energy business, the company of Inpex is going to be considered even higher, and our brands will be established more strongly and will become even greater, the partner of choice. And the third is contribution to local communities. To what extent are we able to contribute to the local people, this is a very important point. So irrespective of how much we want to expand our business, if the local people are against that, we can't expand our business. And so in that regard, the local contribution is something that we are going to continue at even greater pace than what we have done thus far. And last year, these 5 points that I've explained about the change in the approach of the Australian government. And Australian government has tightened their grip in regards to the development of fossil fuel. But what has happened since then? Well, there was a significant development this year in May this year, in 2024, the Australian government has announced their future gas strategy. And we were asked for our opinion in this, and we were able to communicate our opinion. And these were put together as the future gas strategy. The biggest point here is that under the labor government -- and they have not really recognized the importance of natural gas. And like West Europe, there was a period when they had leaned so much towards the renewable energy, and the importance for oil and natural gas was very much looked at lightly. But since then, the situation started to change. And just based on renewable energy, insufficient. And so, natural gas is now considered as a transition fuel, as a cleaner fuel. And so it has been re-recognized as such. So using their words, they have now started to refer to natural gas as being an indispensable energy. And they've started to recognize that additional investments are required. And CCS, which wasn't considered very much previously, has been re-recognized as being an indispensable technology. But despite that, despite the importance being recognized, we have not really seen much the financial support. Well, we said that we won't see more specific the support being expressed inclusive of a financial support. We are making requests to the government in that regard right now. And the relationship that we have been able to establish with the government thus far, and we want to leverage all that and say what we need to say, and we want to be proactive in communicating with the Australian government. This is something we've already been doing. And so in that regard, this type of approach will not change. So that was quite brief. But with that, I'd like to complete my explanation. Thank you.

So next, Mr. Watanabe will talk about the Abadi LNG project.

My name is Watanabe, responsible for the Abadi LNG project. And so today, I would like to talk about the current status and the future prospects for the Abadi project. So moving to the next slide. And these are what I'd like to cover in my part today, 4 topics. Moving to the next slide. This slide explains the overview of the outline of the Abadi LNG project. And I explained about this last year as well, but the 4 unique features is what I would like to talk about. And so we have until 2055 until the project license expires. So it's quite a long-winded project. And the second is the participating interest and apart from ourselves but the Pertamina and the Petronas. So this is an LNG project with some Asian operators. And Indonesia and Malaysia, the state-owned -- the oil companies from these countries are participating. And so this is a project with the strongest -- the oil and gas companies in Southeast Asia participating. And the third point is the production volume. And so LNG, 9.5 million tons per annum of production. If you look at the illustration on bottom right, the development cost there. How are we going to develop the project. And as was explained, this project is very similar in terms of development as exists that we have already developed. And the fourth point is, as shown at the bottom of the slide. In regards to the Abadi project, we are also planning to employ CCS. And CCS is to be done in parallel at the same time as the LNG, the production start, we have already received approval from the Indonesian government in that regard. And current status, last point. And right now, we are making preparation towards starting to feed the operation. And I will explain in more detail about this using the next slide. And so on this slide, it explains what we are doing this year. And there are 4 bullet points shown on this page. So for the project operation, the 3 top bullet points are what we are currently working on. And so we're making per preparations towards FEED. And so we are doing G&G survey, geophysical and geotechnical survey, both onshore and offshore. And for us to do design, we need to understand that the geological strength and so forth. And so we need to engage in activity to gather information about the geology. The second point, we want to start FEED as quickly as possible. And so we are trying to go through the selection of an engineering company to do the FEED work. So we are going through the tender process for FEED. And the third point here is environment-related permits or obtaining land on which the plant is to be built. And we are currently working on the approval, they're obtaining work with the Indonesian government. So for this year, these are the 3 major points. So in regards to Indonesia, people might think that relationship with government could be difficult. But what is making the best progress out of the 3 points that I've mentioned is the third point, the environment related permits and so forth. And we have received a strong support from the Indonesian government. And so we have not experienced any major problems in this regard and making a very good progress in regards to lease permitting work. And together with this project work, we are also working on the marketing tools, LNG sales going forward or to work on financing. And in regards to these initiatives, a more explanation will be given in the subsequent slides. So this page talks about the marketing and also financing activities and the status right now. In regards to these activities, in order for us to work on this project, in essence, we need to start the FEED to understand the cost and the schedule of the project, we need to understand that correctly. And so for example, when it comes to marketing, from when can we start to supply LNG, that would be the most important point for information in engaging sales activities. And also for financing, how much will this project cost? And how much do we need to receive finance from the market? We need to understand this correctly. So this information is something that we'd like to update based on FEED, and we will have more accurate information or accurate numbers. So at this moment, we are doing some activities. And from gas LNG, those potential buyers, we are discussing with those potential buyers are asking for potential financial institutions who can lend us. And these are what we are confirming today on these lending activities, lending expressions. And for the marketing and financing both, we have a positive encouraging feedback today at this moment. And these are positive situation we are seeing today. And going forward, the actual contracts will be forming these in the future. But for that reason, as mentioned earlier, the project side will catch up. And from when we will have fast production start-up. And from when we can realize this project, these are information we need to obtain. So for the meantime, the challenge is the project progress and also -- so that we can have a base foundation for the marketing and financing activities in the future. So that's what we are thinking at this moment. Then when it comes to the actual project, what we are going to do in the future. So for the project work, as mentioned before, we are still in the preliminary stage today. So going forward, the things that we'll be discussing is actually the content of the -- not the actual content of what we'll be doing. But in what -- based on what policy we'll be working on this project, and that is put in the next slide as a summary. As you can see in the slide, the majority of these have been disclosed in the Investor Days or talked in the Investor Days last year. But as an important point, there is no change in the policy that we have discussed. So that's the first thing. And then in this project, what we have to realize is the IRR, internal rate of return, a mid-10% range is the basic idea that we aim in this project. And to realize this, we are going to manage the project in the future. And that's the current policy. The 3 bullet points or 3 points underneath is as a challenge we face today. So the actual challenge is, number one, project execution risk, how to manage that and how to work on the cost in the schedule, whether we can proceed the project as planned. These are things we have to manage. And also, as mentioned before, we have a strong support from Indonesian government. We have a good environment for proceeding with the permits. However, we still have some country risk. So that's the current understanding. So those are things that we like to manage as well. And these are the risks that we have. And in the future, when we do the FEED, in the future, how are we going to manage these risks is something we have to work on in terms of risk mitigation, risk management, and we'd like to come up with those plans. And then going into the actual EPC work and when we start the construction, we have to make sure we won't be exposed to these risks and manage them well, and that's how we like to proceed the project so that the economics level that I mentioned earlier can be achieved. Having said that, the project execution always have uncertainties. So in the final course, we don't know whether everything will be successful. But as mentioned at the very bottom, after the FEED at that point, the updated costs or schedule, which will be more accurate, and also the revaluation of the economics of the project will be done. And together with the government of Indonesia, with that reviewed project economics, we'd like to talk about more in-depth about the project economics. That's what we have committed so far. And what kind of discussions we'll have in particular, is as you can see in the top, the IRR, mid-10% range is what we are targeting in order to realize that what we need to do to execute the project. So these are things we'd like to discuss with Indonesian government. And in some cases, we may have additional support from the government or incentives. These are things we also have in mind. And these are kind of a preliminary basic ideas we have. So with the Indonesian government, we have already shared these views. And these are things that we like to follow as a policy so we can execute the project. And as a result, Abadi project will be one of the growth drivers of our company. And for the shareholders, investors, we hope to meet the expectation. So that's how we'd like to proceed and work hard on this project. So we hope to receive your continued support on this project as well. Thank you very much.

Followed by that, we'd like to go into Q&A.

So Ichthys and Abadi, I would like to ask 1 question each. First is regarding Ichthys. Recently, the trouble that is happening recently, there's a lot of detailed explanation today. Thank you very much for that. And there are some concerns in the market as well. So thank you very much for that explanation. And then on top of that, simply put, the Ichthys, the next 5 to 10 years span, the cash flow -- to identify the cash flow, the key points, what are the key points that you would like to highlight? And if possible, the CapEx, for example, CCS, expansion and also the backfill and the further exploration work? So in Ichthys, from maintenance CapEx, if there is any plus of increase in the spending? And in what point, what timing or how much increase? Could you please give some color around that? And also for operating cash flow, the tax and the inflation costs, the cost increase based on inflation, how are you planning to manage these as well, especially for inflation? With the workers, I'm sure you have the contract, which is ending in the early 2026. So what are you thinking to manage this in the future? And for tax PRRT impact, how is your view on that impact? So regarding Ichthys cash flow, including all these factors, can you please elaborate on that? That's number one. And regarding Abadi, the project IRR or the IRR, 10%, the mid-10% range. Just to clarify the definition of this, this is equity IRR? Is that correct? That's number one. And then also regarding the financing from debt providers. You have confirmed their intention, but you don't know how much size will be required for this project, so it's still early. But from the debt financing side, there is some expected expression. So there is a certain flexibility to some extent? Or you are -- you have a room to have a certain leverage? Is that what you feel today? So IRR definition and also the financing between equity and debt, what is the breakdown you're thinking today? And the market -- the expression, how much breakdown you're expecting today? So that's I'd like to ask for today.

Thank you very much for your question. First, for the next 5, 10 years, what kind of cash flow we can expect and what kind of CapEx flow can be expected from Ichthys. So first, for example, if you look at the next 5 to 10 years, what we're going to do is the question. At least, regarding plateau, we will be creating the foundation where we can maintain the plateau. So for the first time after maintaining the plateau, we will be working on expansion. So that's a very important timing. And how much investment will be required in that activity. And regarding the size of the investment, first is the subject of plateau once we have identified the subject. For the plateau, there are several ways of looking at this, as mentioned, so first is exploration activities. And then on top of that, the other discovered but not developed project reserves, what -- we're going to work on those. And we are working to skew down the subject today. As mentioned last year, we have still in a situation where it's hard to say in clear, ensure how much size we're expecting. And so we cannot give those details today. But the PRRT or the labor, the workers relationship is the question. So first is PRRT, there's some impact. And we are becoming more in a position where we have to pay PRRT. So there is certainly going to be an impact in this project. When it comes to exact amount, we don't know. But from 2026, we will have these numbers, and we'll be 40%, 50% corporate tax, income tax, so there will be some impact, a significant impact, and that's one thing we can say for sure. And regarding the labor unions relationship, that will be the challenge going forward. But regarding the labor union, as you already know, it's a very strong position in Australia. So recently, we have also had other companies to shut the labor union. They came to some agreement, but that is -- if that becomes a precedent, then we have to raise the salary quite largely. So especially when it comes to offshore facilities, there will be increased additional payment for the offshore. And if there is room for 4, we have to use -- have a change to a room of 2 or 1 person in 1 room. So that is how we have to change going forward. And also, there will be some constraint in the offshore facilities. So when it comes to our plan, there is a risk that we won't be able to execute them as planned. But going forward, we'll be negotiating on them in the future. And when it comes to these precedent, that's one thing. But when it comes to actual execution of our projects, to some extent, it has to be rational for us as well or else it will not work. Therefore, we are discussing with the labor union today about our business. And if this business does not work, then they will lose their job. So that's why we have to make sure that we have -- we find the route so that both of us can survive. So these are negotiations that we are going to unfold going forward. But in Australia, there is a strong position of the labor union. That's one thing we can say. And the offshore, the government also supports them. So we have to work on them very carefully. I hope I answered your question.

And please allow me to explain the situation in regards to IRR for Abadi. Whether -- is it project IRR or is that an equity IRR and how much the leverage can we expect, I think that was the gist of your question. But prior to responding to your question and you probably noticed already, but when we raise funds for Abadi, then how would they be reflected into data purging? And please allow me to explain those fundamental aspects to begin with. So for Abadi project. And so this is a PSC, production sharing contract with the Indonesian government. So that's a framework for the project. And the basic thinking for the PSC is that in the case of Abadi, the sales from LNG. And we and the government, how would that be shared between the 2? That is what is determined on the PSC. Normally, the production income will reflect recovery of cost invested thus far and what it remains a profit. And that the profit is on share between the Indonesian government and ourselves and the ratio is decided or predetermined on the contract. And that is the basic -- the contract. But when we raise fund using the framework of the project, then the cost recovery and the profit sharing. And in addition to these 2 elements, when we raise funds, then there is another stream of repayment. And this comes into play. And if we were to make repayment under the PSC framework, there is something that is positive. Normally when we raise funds, then the interest that we paid to the financial institution occurs outside the project, so we will normally be responsible for paying the interest. But if it is included as part of the production stream, then the interest can also be returned from the project down. And so we are able to recover the cost in regards to interest. And under the PSC framework, if we actually raise funds, then this is one of the biggest benefits that we were able to achieve. And so towards that with the support of Indonesian government, we are currently feeling around in regards to the potential financing and inclusive of the cost recovery, including the interest rate, we need to look at that for the project, for full project. And when we spoke about IRR, based on this project framework, the financing included would be the basis for IRR. And whether we're going to call this the project IRR or whether we're going to call this the equity IRR, it really does depend on the definition use. But as I said before, and we are using the same yardstick with the Indonesian government, who understand the economics of the project. And if we are not arriving at the mid-10% range, then we need additional support, and so the project, which is the fundamental -- the common fundamental element. So the fundraising is included as the PSC framework, and we are going to recover cost for the interest under the PSC. That is the assumption. And if that's the case, then a certain level of leverage is reflected in terms of IRR. But to what extent the leverage which will function, then that will be dependent on the actual financing, what's going to be the interest rate. Of course, the leverage will become larger if we're able to raise funds inexpensively. So a certain level of leverage is already embedded in regards to what we are thinking of right now, but whether this is going to be large or smaller, it would, to extent, be dependent on line initiative for financing going forward. So inclusive of that, we are currently looking at mid-10% range for IRR.

Understood. So in that regard, I think it is probably closer to equity IRR?

Yes. But to recognize this as a project IRR. And so from Indonesian government, and this will be the return from the Abadi project. If you ask the same question to Indonesian government, then they probably will say this is going to be a project IRR. But from our perspective, it's -- we are looking at equity increasing leverage. And so unless I need to provide an explanation of this type, I could be potentially misleading. So I gave that for explanation.

So for the next question -- Mr. Kaganoi will talk about the next part of our session today, which is challenges towards realizing a decarbonized society.

Hello, everyone. My name is Kaganoi from the Hydrogen & CCUS Development Department. In 2021, as Inpex, we have established a new department for decarbonization, so it's been 3.5 years now. And we have considered various projects in both in and outside Japan, we've been talking with various entities and players. And today, I wanted to give update in regards to the progress. And if we go to the next slide, these are the topics that I want to address today. And when we think about new business, it's not that easy, of course. And someone asked about inflation before in the Q&A session, but it is somewhat challenging in terms of cost as well. So from #1 and #2, we are kind of wanting to focus on support measures. And on top of that, we want to talk about a number of the main project and it's going about the status of these major projects. First of all, in regards to hydrogen and ammonia. In May this year, our Hydrogen Society Promotion Act was established. The official name is longer, the name for this act. But under the new act, there is a contract for difference or there is a support for the physical site. And because these subsidies or support have been defined, they will be implemented going forward. And there is a schematic diagram below on the slide, and this explains the contract for different subsidy. And the base price has shown as a red line is that if we want to supply hydrogen, then we are able to supply if the price at this level. And the blue line -- so based on the existing fossil fuel, what would be the price, in other words, the parity price. And the difference between the 2 is where the price support needs to be provided. And with the support, a new type of business can finally be launched. However, as you know, the national budget is limited. And so within the limited budget, we need to somehow secure the subsidy. And so we are certainly engaged in a lot of discussions both in and outside the company with that in mind. Next, the CSS. CCS Business Act was enacted in May this year at the same time as the previous act. And based on this act, we can finally now work on CCS as a commercial operation, but Japan does produce a lot of CO2 emission. So if we are needing to transport CCS abroad and as I described at the second point. And the ratification of the London Protocol. And this was actually done this year at the Diet. And we now have the basis for transporting CO2 overseas. So we are able to store CO2 overseas if we are able to come to an agreement between the 2 countries going forward. And there is illustration at the bottom of the slide, and this is a kind of a chronological development from left to right. And before operation is where the government is responsible for. So where the CCS is going to be located and would be the operator is decided. And the next part, during operation, and we are thinking of the impacts being the operator here. So we will be doing the injection and storage, and we will monitor that it is actually the stored properly. And we also have obligation to make sure that the CO2 is stored without a problem. And after that, we confirm that we would transfer this to the government and JOGMEC on the behalf will continue with this type of business going forward. Then moving on to the next page. There are a couple of things that we picked out, and this is the project progress of a couple of projects. Number top is the blue hydrogen and ammonia production and usage at Kashiwazaki City of Niigata. Underneath that is the world-class e-methane Pilot Project. This is where there's a good progress in construction. And then underneath that, you have the commercialization. The first is the advanced CCS project, which I will explain in detail after this slide. And then after that, we also have the ammonia as clean energy brought from overseas like Texas. And also domestically, we have in Niigata, the footprints. That's a footprint we have one Niigata. And with this, how we can reduce the CO2 or decarbonize. These are the projects we have on hand. Next page. First is the advanced CCS project. So this time, there are 9 projects where we are working on these candidate projects, and that was selected by JOGMEC. And among those 9, 2 are where we have involved. So one is the Tohoku region, West Coast CCS; and the other one is a metropolitan area of CCS. For the metropolitan area CCS impacts is to lead the project. So we'll be working as a leader, and that's how the project will be proceeded. And then the next slide talks exactly about this metropolitan area CCS project. And this is a rough map. And in Chiba, there is top [ 1 to x emission ] in Chiba prefecture. And in the Tokyo Bay Area, as you can see, the emission source is where the CO2 will be put together and using the CO2 pipeline will be brought outside to the ocean. And then on the coastal area or in the bottom at the 1,000 meter depth, there will be CO2 storage. On the right-hand side, you can see some drawing. So for example, the steel plants, the power plants and those various plants are where the CO2 will be captured and separated. And those CO2 will be transported through the pipeline and then brought to the outside area coastal area for a cheaper prefecture. And using the wells, it will be brought underground using the compression facility. So 2030 is when we are targeting the start and that's where we are changing our gears today. So official contract is signed. And the other day, we also had a press release announcement. So for this project, out of the 9 candidate project, which was selected, there was -- this is one of their projects that was selected first -- as a first step. So as a government, we have the focus on this project as well, and we'd like to work hard with our full efforts. Followed by that, we have another one, which is not a project, but this is a demonstration project. And on the left-hand side, it is as of September last year as we showed in the Investor Day of last year. And then if you go to the right-hand side, there's a bigger picture where you can see the print status, which is becoming more like a plant today as of August. And there are a couple of points explaining on the left bottom, you can see hydrogen power generation. This is 100% utilization of hydrogen and the gas engines are already being installed. And then the CO2 compression and also the hydrogen production facilities and also the CO2 collection facilities, these are all laid out. And actually, on the backside of this picture, you can see there are 2 pillars. And these are -- one is for the wells for the CO2 compression to the underground or by injecting CO2 underground, the gas that's coming up from that process will be collected. So regarding CCUS, these are the wells related to CCS. The other facility underneath that facility is exactly where Inpex had a gas field where the gas was produced. So the old well is filled and the extra CO2 is being trapped, so it will not come out. So these are done simultaneously. So this is exactly our own natural gas in our gas fields as well as our technology. These are all used, and by 2030 and beyond Inpex is going to have these same supply of energy for the low carbon energy as well. And from this demonstration, we hope we can show and prove to the society. We are planning to start this operation in summer of next year or so. So we hope that we can give more details going forward on this project on this demonstration. So that's all for the current situation about the hydrogen ammonia and the decarbonization. Thank you so much for your interest. So I'd like to move on to a Q&A session.

So obtaining the support from the government is difficult. It is difficult competition, like you mentioned, but it is your company, I'm sure you can obtain the support. But as plane B your risk, if you're not able to have these support our subsidy, what are kind of -- what are the plan B for you? Are you're going to -- I'm sure you're not going to discontinue these projects just because you cannot obtain the subsidy, but what kind of risk or plans do you have?

So I guess it really depends on these projects. Depending on some projects, we may discontinue in some instances. However, energy decarbonization, if you have to look at this over a long term or certain -- based on certain time lines, so slow down maybe one option or downsizing the project. They are in some wells, it might be possible. On top of that, if we cannot proceed with the project without any subsidy or any support, it might be the case in some cases. But if you add another type of project together and combine them, it might be possible. So as there are many options, we think that discontinuing and stopping project, it will be something we want to as a developer of energy, and we have to work on various ways and record brains on coming up with various options. So I think it's case by case, but that's how we like to approach these projects. Thank you very much.

Now I'd like to go into the general Q&A session. So the 2 agenda that we uncover today as well as the financial results and outlook or management ESG and other projects, you can ask any questions. So anyone who have questions?

I have mainly one question. So today, regarding the LNG and decarbonization. So LNG and for is increasing, but for the decarbonization will be going down. But how much price you will have on GHG? That is going to be the ultimate question. So in your company, strategy or thinking about the financial initiative, the GHG reduction or emission reduction, I'm sure it's difficult to think as -- in a global phase. But in terms of carbon pricing, by having 1 unit of GHG and absorbing that, having that in a single price and then if the market works, market economics work. And on top of that, you'll be doing business. So weather is going to be in that way of thinking? Or in other words, in extreme way, that might be one option. But in other countries, looking at the restriction as you explained at the beginning of today's presentation, each country is not necessarily single price and there might be support or restrictions in various countries. So talking about GHG reduction of 1 unit and 1 reduction of unit, we don't think it's going to be equal. So in extreme calculation, it does not make sense. But how we're going to have that in the final course is something difficult to question. But for this type of form area, if you think of the future strategy, having a single price, it might be different by area, but having a single price type of approach. And based on that, we'll be thinking about the strategy or making investments based on that, is that the case? Or in fact, today, there are various rules and regulation restrictions in various areas. So based on that, you may follow 1 area -- 1 policy in one area or the other policy in other areas, whether you'll be proceeding in that manner in the next decades. So is that what you're thinking or what kind of approach you're having as a company today, and what you're thinking to do in the future? And also, all of the executive officers who have appeared initially, if I can ask on what your views are on these projects as well.

So I think everyone has one word. So from my side, I'd like to mention, so this is a very important issue. And talking about CO2, it's something that we do not have to pay to emit in the past. And talking about CO2, making this as a business means you need to have pricing like carbon pricing. And that is not clear today in this operation. So as a company, the CO2 issue is working in 2 phase, and that's how we like to separate discussion. Number 1 phase is the so-called emission of CO2 by our operation, own operation, and that will be reduced. So whether if it is Abadi or domestic Nagaoka gas field. So the CO2 that we met ourselves is something that we'd like to offset as much as possible. So that is rather natural gas and oil business. For our operator doing these businesses, this is a social responsibility. So it's a license to operate and the operation -- in order to have that operation, the license or equivalent has to be taken and also CO2 reduction in these kind of activities are basically not a cost issue, but as mentioned, that's how we like to proceed in this kind of challenge. And because of that, there is also a restrictions in Australia, but already today, the Bonaparte CCS and the drilling of wells, as Okawa-san mentioned earlier, is one thing. And for Abadi as well the production start, from the start of production, we have already CCS activities. And so basically, as a producer of natural gas, we think that is the role we play. And the other thing is the metropolitan CCS and those type of CCS activities. So with this CCS itself, processing other companies carbon dioxide that's one thing. So metropolitan or in the Akita prefecture, these are one of the representing project like selling blue hydrogen, blue ammonia. So this is also relating to those projects. But for these, for the emission that was done without any cost, we will have to pay the cost. So based on that cost, we have to make sure the benefit is also obtained. For example, how much it costs for CCS. That is another discussion. And there are various estimates or calculation and as including the metropolitan areas, we are doing various calculations today. But in Japan, most probably if we are to do CCS, we have to collect the CO2 and transport. For the metropolitan CCS, we have the pipeline for transportation, but mostly, it is done through the vessels over the ocean. So that's also one thing you have to do. And then have that injected into the underground. So that is this CSS project. And if you look work on these projects in total, the cost for processing that, of course, is different by project and also depending on the size, it will be different. But mostly in Japan, for 1 tonne of CO2 injection will be JPY 20,000 to JPY 35,000 per tonne in Japan, that will be the cost. So who is going to bear the cost is the question? Are these still companies whether they're going to pay for the costs or the chemical companies will bear the costs. So these are exactly the issue around common pricing. So in a simple way, the steel company, if they want to use CCUS or not, is up to emissions. So for example, CO2 cost is JPY 20,000, JPY 30,000 per tonne. And if the emit and the emission is cheaper, then they will be choosing that a cheaper option, so there will be a higher cost. There will be more cost for CCUS. For example, carbon pricing will be -- if it's more than JPY 20,000, 30,000 per tonne then that means people will have to pay money the more they emit so that is what they may choose when it comes to CCUS and blue hydrogen. So that is the social system or I think a typical example is carbon pricing. But also there might be subsidy. And in Australia, there's a restriction. So in the case of Australia, there is a mechanism with the government in each year from a certain amount, 4.9% of CO2 reduction will -- is the responsibility of the operators. And if you have more emission than that, the Australia credit ACCU is something we have to buy in Australia. And so that structure is in place so the carbon pricing and those CO2 reduction restriction is in place or subsidies and those might be combined together. But as a whole, CO2 reduction or the market system is something that needs to be established, and that is something that is a precondition for this commercialization. Plan B, there were question about plan B or if you're able to have these costs. Now we have to think of first ways to reduce the cost, of course, but that mechanism in the market if that does not exist, and we have to do commercialization. We think that is not really practical or it's not really possible. And Kashiwazaki, we have the hydrogen pilot project and this is what we're starting today is still under pilot. So we're doing a study today so we are paying these R&D cost to study the situation. But when it comes to making this a social system. To create the system, there will be several billions or maybe trillion yen of OpEx that will be required. Now for that reason that kind of social system has to be established. And as a package, these projects will be proceeding and that is perhaps something that is required in the future. And then as mentioned before, for metropolitan CCUS, the feed costs, including the well cost, overall, the government has to bear these costs in total. And then the construction of EPC, we go into the construction phase, and then the social system has to be existing then because it will be difficult to go to FID because of that. So we will have feed period going forward. So during that period, we will be receiving government support. So that can social system preparation has to be made. And based on that, we would like to look at the project and whether they make the economics of the project or not. And if they don't, it will not be viable. So we would like to proceed a project based on that viewpoint. And that's all for me.

And thank you, Ueda-san. Takimoto also has an opinion on this.

Yes, like you mentioned, in any conference, it's a characteristic policy that is required and people will talk about that. And whether it's going to be single price or not, we don't know. But when it comes to social consensus, there will be cost associated to decarbonization. And based on the consensus, adjustments, carbon price and also the subsidy from the government is something we have to have both dually, and we have to decarbonize the social -- from the social activities. So to evaluate the economics of our project in the country where there is no restriction, we will set internal common price. And even though there's a decarbonization, we have to make sure that the economics of the works. And we have to confirm that to proceed on the new and existing projects. That is the current situation.

Thank you. And what needs to be done as a fossil fuel operator, there are things that we need to work on. So what about the CCS profitability or for Abadi it's included as the total project may be somewhat different as a concept. But CO2 reduction associated with fuel, and when you are to work on reduction, you want to do the CCUS and JPY 20,000 to JPY 30,000 require. It may be different between Japan and Australia, but from your perspective because you are producing gas and selling gas, then you are probably going to judge that some kind of cost incurred would be inevitable, there may be some kind of subsidy in the end. But if you are asked to do the very tough things then to say that it may be difficult for you to produce gas -- natural gas. So how should we think about that?

Well, that issue, well, in Australia because experts in Australia, there is a safeguard mechanism, which is an environmental and regulation that is applied in Australia. So not only for us, but all LNG operators or all the emitters required to reduce CO2 emission by 4.9% per annum, this is an obligation. So if we end up emitting more than that, then we need to buy ACCU Australian carbon credit unit in Australia. So if we do the CCUS then we are able to respond to this 4.9% reduction. But if we don't do CCUS then we need to buy ACCU equivalent to several million tonnes of emissions. So within the Australian environment then it's to do at CCS would be more beneficial then continuing to buy ACCU at the Australian carbon credit, it makes more economic sense. And also from the social reputation perspective, and we may be criticize for just buying credit without doing anything to address that emission. So in that regard, we want to work on the CCS. But there is no question that cost will be required. And in the case of Australia, it may not be as costly as in the case of Japan that we're trying to drill 2 wells right now, but there will be some kind of cost associated with CCUS in Australia. So that cost in international market is going to be assessed in an appropriate way in the international market or the Australian government for what they provide some support. Right now the Australian government in regards with CCS as part of the gas strategy. So they're saying that you can do this. It's okay to do that. But have not quite going so far as to say that they're going to provide financial support or subsidy, that's the situation in Australia so if we store the CO2 underground for the CCS. Now the natural gas with CCS, will they be traded at a higher price than the international market vis-a-vis those gas, which does not come with us this CCS. So once we have a single price internationally, then irrespective where you emit or work on emission reduction and the cost is required in balance that market, this type of vision should be resolved. But at this moment in time, we don't have such a system. So as an operator in Australia, do we need to bear cost or would that be reduced through a subsidy or in international market, low carbon LNG is going to be considered highly where we are able to enjoy somewhat of a higher pricing. Now all this situation is dependent on the international discussion, they're progressing going forward. Did I answer your question?

That was very clear.

Any other questions? So just about that.

Let me add some more comment about the Australia situation. For us to continue production from Ichthys, we can't just continue to emit CO2. As I said before, to obtain support from the stakeholders to continue to receive the support from the stakeholder then we need to address a CO2 issue. So separate from whether it makes economic sense or not, we need to do CCS, so that's the first point. But we are not doing philanthropy business. So how can we commercialize this on its point. So as I said before, we are emitting 6 million tonnes of CO2, then would it make economic sense at 6 million tonns. We need facility at 10 million tonnes, then we need to source CO2 from other operators. But we don't have the legal framework portfolio established. And we need a bilateral agreement between countries. So to bring CO2 from other country we need to see agreement reached in that regard. But in the case of Australia, the green part is are very strong. And so bringing CO2 from other country there will be likely votes against to a certain extent. But what is important is the countries emitting CO2. All those countries providing solution for CO2. So we will see these type of countries evolving in the future. So in order to convince Australia, then Australia as a nation is going to be providing solution to address the CO2 matter to provide that on a global basis, can we not think of the situation from such a large framework. And that's the kind of strategy that we are currently speaking with in terms of Australian government right now, I just wanted to add that.

I have maybe 2 things. Number one, the first thing is over the mid- to long term, the LNG supply and demand, looking at the future supply and demand, you have the 2 major projects, existing -- exist in the future Abadi. So for this, it's rather the price disclosure with the existing buyers. And for Abadi, the new marketing. And from those regards, considering the global supplying demand, what is your view today? And that's one thing I'd like to ask. So in general, in the late 2030, there'll be other regions like Qatar. There might be some lack of supply demand at that time, and there are some views around that today. But based on that perspective as well, regardless of how much long the stable operation will continue for exist. But the renewal of the pricing, for example, with the existing buyers, and whether you will have some disadvantage with the renewal of the contracts that might be one thing. And then also with the new LNG Abadi project, the marketing timing is slightly delayed or different timing. So I think maybe you don't have to be concerned, but that's number one. And the second for Ichthys, there is some cash flow mentioning about Ichthys. But as a whole company, if you look at the whole company with the oil price in the Forex, If those are kind of stable pricing and the operating cash flow generation, look at the next 5 years or so, it's not going to largely change, is that the case? Or PRRT and data costs considering various costs, we have to consider some risk factor. And in other projects, the contribution of production, whether we can accept expect an upside from other projects. So if we can share some views around the operating cash flow. And also in the next midterm plan in February next year, we think those will be one of the key points. But the lowering of the interest-bearing debt is progressing quite well. And as I explained in the previous results announcement, the investment -- growth investment and the shareholder return, I think it's a question of how to allocate those different areas. But I think you're just going to hammer the midterm plan, so we cannot give details today. But today, what you're thinking about the cash allocation. So first, how much cash in generation you can have is one thing and how we need to allocate that in the future? So can you please share your view as of today.

So the first rig in LNG, I'd like to talk about that. And first step for a cash flow question, I'd like to have Yamada-san explain that. And then I would like to explain that later. So first is the LNG supply demand. Then over the mid- to long term, the LNG supply demand, what is our view on that? There are vast discussions on this, but in many market experts, what they say is in late 2020's, there will be new LNG projects in Qatar. So there will be some difference in the supply-demand balance, more supply and the price will not be so high that's the view. And then in the 2030s beyond 2030's, the supply demand will become tighter quite significantly. So that is the general view that people have today. In our view as well is close to that view. And what we have realized recently is that the transition is not that easy. So natural gas or LNG is going to be the core role in the transition period, and that might be extended as a period. And more than what we expect the demand for LNG and natural gas will be stable going forward. And Abadi, as you already know, in 2030 is the release timing for the production start. And beyond 2030, if you look at the market environment, based on those assumptions, we are doing a lot of marketing discussions today. And in that situation, as Watanabe-san explained earlier today, the nonbinding basis is what we have a certain expectation of the amount of supply, and there are more requests exceeding the volume we're expecting. So that's how we have a nonbinding agreement. And then going forward, we will go into feed work for everybody. And in this situation, the nonbinding will be converted to binding contract, long-term contract, and that is the necessary work we have to uncover going forward. And in that, we'll be discussing more of these long-term contracts. But at any rate, 2030 and beyond, when it comes to supply and demand, we think that globally, especially in Asia, there will be increase in demand and also in Europe because of the current situation, there's just demand. And so with that LNG supply demand balance situation, considering all these factors, Abadi as a commercial project is a type of project that has enough room to have a successful operation. And that is what we are also what we feel in the process of negotiating with the buyers today.

So there was a question about operating cash flow. So I'd like to explain from my side. In August, we talked about the full year forecast. And at that time, Forex, JPY 148 per dollar and oil price was $80 or so, and that will be about JPY 9 billion of operating cash flow. And going forward, if you look at several years, it's before Abadi starts. So if you look at the next midterm plan period, the oil price in the Forex, it will largely change based on this assumption, but let's say it's $70 and JPY 135 into dollar. If you look at that range, about JPY 700 billion or so is the operating cash flow versus the PY 900 billion of today. And so Okawa-san mentioned earlier about the bottom part. But in the Australia, we have PRRT where the tax increase burden will increase, that'll be negative. For Abu Dhabi, we have the increase in production, that's a positive factor. So they'll be offsetting each other and about JPY 700 billion will be the stable amount. And then Abadi start, as the Abadi starts, we will have investment cash flow and then 2030 and beyond, we'll have the operating cash flow to compensate those factors. So that's image we have. And the way to use the cash is as explained before. So we are not at the stage to lower the debt. So how to make these investments and also the investment until Abadi start and also how to have more reward to our shareholders that's another point. So the detail will be in February onwards when we have a new mid-term plan. We will have to have more discussions on these points at that time. Thank you.

I have two questions. First question, and so my question is related to cash flow. And you talked about investment, but investment environment so something new other than Ichthys. Right now, I think you are investing quite proactively in the peripheral area. But for you, I think there is a focus area elsewhere. And what is the situation regarding investment for other focus areas? Is that an environment can you make an investment, if you could give some explanation on the environment right now. The second question is decarbonization. And so you talked about challenges towards achieving or realizing the decarbonization societies. So I think you do receive the government support to an extent. But what are the type of support that you require in addition, maybe this is something that I should have asked in the previous session, but if you could give some commentary on that, please.

Well, and cash flow or the investment environment, how to make that investment right now. And as you know, we have 5 core areas that we have designated. So if this is Abadi as we have already explained. But apart from that, we are continuing with selection and focus or concentration in the harder core areas that basic thinking needs to be maintained. Now on that basis, for example, Abu Dhabi. For Abu Dhabi, they are in government by 2027. They want to increase the current 4 million bpd to 5 million bpd of a production. And so next to total, we are providing the production increase plan for oil and natural gas. And so in that regard, we want to engage in proactive from the investment we have [indiscernible] and newly Block 4, block that we have newly acquired recently and there for gas. And natural gas and we have been able to make discovery that could be linked to commercial production. And so together, together with ADNOC, the stake on the oil company of Abu Dhabi, we are currently working on how can we proceed to potential the commercial production. So in that regard, Abu Dhabi core area, our oil, natural gas and also new discoveries, there will be a potential requirement for investment for increased production increase, which should also contribute to a profit for Southeast Asia. Apart from Abadi and in Malaysia, we've acquired a block and we are at the exploration at this stage right now, and we are working on that right now in Australia -- sorry, in Europe, we have also acquired a block in Norway. So we will engage in those type of activities. Also in the Net Zero area in the United States, and there is a project in Houston and in Abu Dhabi, we also have a project that we're engaged in. And so we will continue to work on those types of projects. So as to whether the environment is conducive with investment or not, it's difficult to give a straightforward answer, but we'll be focusing on gas. And for gas, we want to work on low carbon gas as much as possible. And from the perspective of profit and cash flow, we need to place our focus there as a company strategy and so for CCS and hydrogen. The environment -- in the world once the environment is prepared, those businesses could become a business that is profitable. And that will be what we're working on. And Kawano-san do you have anything to add?

In terms of decarbonization, apart from the government support I already provided, I think that was what you have asked about. Well, in terms of government, there are 2 points. First is, as I've already explained before, the cost the related support. And so that would be the first thing that will kind of appear. But what we would like to ask for our government new is to say that something's new like this is a good thing. And we often talk about this as being a public acceptance. For example, a prefecture A to prefecture B, the CO2 is transported, then prefecture B may say why that we have to accept the CO2 from prefecture A. Now if we end up into this type of discussion then things will not make much progress. And so in that regard, and we are trying to communicate using all sorts of different opportunities, but the government should do communicate that we're going to work on these hydrogen, the CCUS then I think the government should be engaged are more proactively in communicating to the people that it is something that the government will work on. Not just the government, maybe it's going to be the government who will come up with the money. But my town or my prefecture and they need to be benefits for the local government, of course. I'd say, for example, if there is going to be a CO2 pipeline that will pass through a certain town then the CO2 pipeline If there is a kind of a tap through which CO2 equity injected at any time. Now if that was the case, and let's say, our factory could be located nearby where the CO2 could be injected into that pipeline immediately. And the local government can think about the development of their own the municipality and these are also something that need to be worked on as a town or prefecture or national government. And what we like to ask for support in terms of local government, is a leadership, even if they don't have the money to actually work on that type of initiatives and not depending on others. But when it comes to hydrogen ammonia, similar types of supply chain as LNG will be required for CCS. Then reverse side in supply chain, so we need to collect CO2 and then transport that to the cycle storage. So that is kind of a change that we need to see establish. So irrespective of how much we said that we're going to produce hydrogen or how much we say in terms of being able to store the CO2, just saying that will not enable the business to be commercially viable. So in establishing that chain and maybe not a support for those companies involved in the chain, we need to establish a strong linkage of the collaboration in that regard, that is what I'm thinking.

So first is I have 2 questions, but first is Abadi or excessive compared to excessive FID. Abadi, for the FID of Abadi, I think there are less contractors you can select to. And if you look at the LNG companies who are doing LNG, there will be higher contingency requirements. So in this kind of environment, what is your view today? Earlier, you talked about the cost or if there's a cost overrun, there will be also support that you want from the Indonesian government. But is that something that you're going to seek for or you have different views in the project? That's number one. And the second question, as you mentioned about transition, as a company, green bond or transition bond, what is your view today for those bonds? I think in your company in 2021, you have issued a green bond, but you have not done so much green finance since then. CCUS, hydrogen, LNG as a transition energy that is also important, transition bond regardless of the interest-bearing debt level, but to have a symbolic approach, I think that can be also issued. So what is the view on transition bond? And the private public, there are a lot of support today. So if you participate in that, I think they will be quite an interesting approach. So I think that's one thing I'd like to ask.

So number one, about Abadi, we are struggling today. And what Watanabe-san also mentioned, we'll mention about that later, but green bond is something Yamada-san will also cover later.

So for your question, the first question about Abadi, the contractors or the bidding environment, I'd like to explain that. So like our presenter Yamada-san mentioned earlier, this is an area that we are struggling or having a headache today. I'm spending along a lot of time today in this issue. It's a good thing in batting at the same time, perhaps. But today, engineering company, the contractor market is very tight. And on top of that, there are various projects conducted globally. So that kind of order backlog is quite high today and that is the status quo, and that is also our recognition. So in that situation, as I explained before, finally, how much -- no matter how much cost we will have we just have to have a discussion with the Indonesian government, that is also true, and that is what we discussed earlier in the presentation, but that's not enough for us. And basically, we have to also look at the competitiveness to be maintaining the competitiveness of the project, and that's very critical. So as much as possible, we will manage the cost and increase the project economics. And on top of that, as a last resort, we will have discussion with the Indonesian government, and I think that is how we should approach. And in that situation, as there was a question earlier, the market environment is allowing us to do that. But in that situation, the FEED or the following APC bidding process, how to work on these and also how to reach the FID based on this process, something that we are working on a daily basis and having headache on a daily basis, but that is what we're thinking today. And just wanted to let you know about the situation. Basically, the things that we can do within our capability, there is a limit to what we can do ourselves, but the contractors or the engineering company how they're viewing the situation is something that we'll have to rely or we have to look at their decision as well. But as for as what we can do is to win the order of Abadi, for them will be attractive, and that kind of attractiveness is something we have to increase. I think that is the necessary step for us. So in that situation, things we can do is something we'd like to come up as an idea. And from the contractor's perspective, the Indonesian Eastern part is something that might increase as a burden for these contractors, and we understand that it's a situation in the remote area. So the company taking the order as well as the company, ourselves, placing order and also within nation government, what is the best way to bear the cost. And in Indonesia, we used to have a lump-sum contract where the contractor will take all the costs, and that was the EPC basic idea. But with that, there's not so many contractors who will be proactively winning has to do Abadi. So in that situation, the risk we have to think of what kind of risk we can bear? What kind of from risk that contractors can bear or the Indonesian government, what can kind of risk they can also bear. So these are things that we have to think of in the Abadi cost collection scheme. So ultimately, how much cost reimbursement can be made by the government is also important. And so within the 3-party, appropriate risk bearing and also how to bear the cost? And what kind of viewpoint will be deal. And of course, from our perspective, we need to keep the economics. We have to keep the costs low. Therefore, how do you pay these costs is something we have to come up with. And Indonesia, maybe in the past, there is some framework that was not used, but we can also think of these possibilities racking our brains and with many contractors -- EPC contractors, we want them to have a participation in the bidding process, and we would like to have that kind of competitive bidding and that is what we are facing as a challenge today. I cannot give a direct answer right now, but these are things that we hope that contractors and the Indonesian government, we are unfolding daily, negotiation or discussions today. And after this meeting, we are also having plans to have discussion about this point exactly within the Indonesian government. So this is not an answer to your question directly, but these are issues that we feel on a daily basis and that we are working on this taking time and working on these challenges today.

And talking about the market today, EPC contractor there are so many projects for the EPC contractors. It's quite a market -- seller's market. And for them, they don't want to work on a high-risk project. They don't want to work on a project. They don't want to work on. So based on that, with Abadi, which is high risk in remote area, how we're going to win these contractors. And there are many issues that these contractors are coming up with the issue in Indonesia. So there are some discussions like local content and how to adjust the local content, for example, is a question. So for the contractors, it does not matter on which area they will make the product, but for the Indonesia government, there is still a local contents issue. So how to really process those things are one area that we have to rack our brains and come up with ideas. Obviously, we are struggling in reality, but that is where we stand today..

So regarding green bond and transition bonds. So earlier, we issued a green bond and then it's been a while since then. But today, green bond transition bond on a daily basis is not like a market transaction exists every day. But from the previous time, we issued and from what we are looking at today, there are some constraints and it's not necessarily. This is always the case ideal situation. And what is the meaning behind the green bond, I think we have to think about this well. Of course, on the asset side, if it's green and liability is also green. So we can appeal twice with these. And I think that's attractive. But in the end, upon financing of debt, what is important is the volume and also the periods and the interest rates. So considering all these factors, for the investors, if it's green, it's not like there is some variable interest in how the offer is made or the period is more favorable. That's not the case. So in total, we have to think of these projects and the bonds. And including Abadi, the debt issuance will be debt financing will be required. So in total portfolio, we have to think of the financing activity. Of course, the green bond we're now saying we won't do green bond. And so far, we have been making a lot of investment in renewable energy. So we have a lot of possibility of doing green bond financing. But in total, we'd like to think whether it's a straight bond or green bond that's necessary for us. We'd like to think of this comprehensively. Thank you.

We are nearing the end of the session, so we'll take one more question.

I have one question, a simple question. A while back, you talked about the medium-term cash flow outlook and Yamada-san talked about how to fulfill or the returns to the shareholders. Now I think the next midterm management plan will be announced after February. And what are the type of discussions are you having internally towards formation of the next -- the midterm management plan? Anything that you are able to speak on in that regard.

Well, of course, we are engaged in various types of discussions. But specifically, we are still not decided. And as we have pointed out, we have a certain level of our operating cash flow and the repayment of debt, interest-bearing debt is not necessary a priority right now. So are we going to use the available cash for returns, and are we going to use that for growth investment. What are we going to do in terms of the allocation in terms of return, it could be the dividend share buyback. And so how are we going to communicate that in what way. And we have received various -- the idea from you should be based on cash flow. We should do more share back and a lot of opinion. So we have reflected that in various type of discussions to determine about the course of future. Of course, it's not really appropriate to talk about anything specific at this point in time. And I'm unable to talk about the details at this point in time. But as far as the investors are concerned and in August, when we made an announcement, we did this quite a bold the return of JPY 36 for dividend and additional JPY 80 billion of share buyback, JPY 130 of return in total. And that was reflective of our cash flow and profit level at that point in time. And that was certainly a level that was doable from our perspective. And I think we should be -- we probably have been able to respond to the expectation of the investors to a certain extent. Unfortunately, the environment has not been all that positive since then, which is unfortunate. But our fundamental thinking in regards to return, we intend to continue with the approach in the next midterm management plan. So please do not expect that the returns will not be reduced significantly in the next midterm management plan. So we all think of the investors on the return policy in the upcoming midterm management plan. Thank you very much.

So we've reached the scheduled time, so we'd like to close at this point in time. [Statements in English on this transcript were spoken by an interpreter present on the live call.]