Annual Report 2013

Looking at efforts to secure stable income from investments made during the previous medium-termmanagement plan, please provide details of strategic investments and any projections regardingrecoveries on investments during the period of the new plan. Q.09As a countermeasure aimed at addressing the decline in gasoline demand in Japan, we are targeting further growth inour petrochemical business by diverting surplus gasoline constituents to para-xylene (PX) production. We are alsobolstering production capabilities for PX and mixed xylene (MX), basic raw materials in the manufacture of such everydaycommodities as polyester fi ber and PET bottles, which are enjoying a sudden surge in demand in emerging countries. Asa part of these endeavors, we brought online an MX production unit (annual capacity 300,000 tonnes) at our YokkaichiRefi nery in 2011. Moreover, we established Hyundai Cosmo Petrochemical Co., Ltd. (HCP), a joint-venture company withHyundai Oilbank Co., Ltd. (HDO), and commenced commercial PX production with an annual capacity of 800,000 tonnesin January 2013. Together with its existing capacity of 380,000 tonnes, this will bring HCP’s annual production to a worldleading 1,180,000 tonnes. On this basis, contributions to ordinary income in fi scal 2017 from the petrochemicalbusiness are estimated at ?9 billion compared with fi scal 2012.In our oil exploration and production business, our subsidiary Abu Dhabi Oil Co., Ltd. executed a new 30-yearconcession agreement over the three existing Mubarraz, Umm Al Anbar, and Neewat Al Ghalan oil fi elds in December2012, while acquiring additional concessions over the Hail Oil Field, which includes undeveloped reservoirs. This new oilfi eld is estimated to have a similar production capacity (approximately 20,000 barrels) to those of the existing three fi elds.Amid expectations that the price of crude oil will continue to hover at a high level, the start of production from 2016 isprojected to contribute signifi cantly to earnings. Taking the aforementioned into consideration, the oil explorationand production business is forecast to boost ordinary income by ?17 billion in fi scal 2017 compared withfi scal 2012.Turning fi nally to activities in the renewable energy sector, the introduction of Japan’s feed-in tariff (FIT) scheme in July2012 has fi xed the rate that can be charged by wind power generation fi rms producing more than 20 kW at ?23.10/kWhover the next 20 years. EcoPower Co., Ltd., which was included in the Group’s scope of consolidation as a subsidiarycompany in 2010, has taken a strong fi rst step toward harnessing its full potential. By enhancing its maintenancecapability, the company has increased its operating rate and turned a profi t in its fi rst year of operations. Building on ourexisting generation capacity of 145,810 kW, we plan to construct three new sites, which will add a further 90,000 kW byfi scal 2016. This is expected to substantially boost profi ts. In the solar power business, we established the joint-venturecompany, CSD Solar,* with a generation capacity of 26,000 kW in January 2013. Plans are in place to commence partialcommercial operations at the end of 2013. Based on these factors, the renewable energy business is projected tohave an estimated ?2 billion positive impact on ordinary income in fi scal 2017 compared with fi scal 2012.*A joint-venture mega-solar business formed by Cosmo Oil Co., Ltd., Showa Shell Sekiyu K.K., and Development Bank of Japan Inc. (DBJ).A.09