Oil & Gas

Japan Petroleum Exploration (Japex) has announced a strategic shift in its investment priorities, choosing to focus on oil and gas exploration and production (E&P) through 2030. The decision revises an earlier plan to expand aggressively into renewables, citing challenges in securing fair returns from offshore wind and other renewable sources due to rising costs. This marks a significant shift in Japex’s long-term energy strategy, prioritizing profitability over rapid diversification.

Japex’s move aligns with a broader industry trend, as global energy companies scale back renewable investments amid lower returns. The surge in oil and gas profits, driven by supply disruptions following Russia’s invasion of Ukraine, has reinforced Japex’s commitment to E&P. While the company initially aimed for a balanced revenue split between E&P and other businesses by 2030, President Michiro Yamashita now expects oil and gas earnings to remain at 70%-80%, supported by expansion in the U.S. and Norway. This underscores the ongoing dominance of fossil fuels in Japex’s revenue model despite global clean energy goals.

To support this shift, Japex plans to increase its E&P investment significantly, exceeding its original budget of 230 billion yen ($1.5 billion) over nine years by at least 1.5 times. The company is particularly focused on acquiring a tight oil operator business in the U.S., with an investment cap of $300 million per project to avoid past losses. Yamashita emphasized the importance of building an investment structure that ensures sustainable profits. Japex’s disciplined investment approach reflects lessons learned from past financial setbacks, including its exit from a Canadian oil sands project.

Looking ahead, Japex is balancing its financial soundness, shareholder returns, and disciplined investments while exploring opportunities for gas asset acquisitions. The company sees the Trump administration’s energy policies as favorable for business stability, particularly regarding liquefied natural gas (LNG) exports. However, Japex remains cautious about large-scale projects like the Alaska LNG initiative due to economic uncertainties. This measured approach highlights Japex’s strategy of selective investment to mitigate risks while capitalizing on favorable market conditions.