Inpex Corporation is a publicly listed upstream oil and gas company headquartered in Japan with part owned by government of Japan. In 2020, it had USD 7.14 billion in revenue and a reported 3,117 employees*. Inpex’s total scope 1, 2 and 3 emissions in 2019 were equivalent to 7% of Japan’s 2019 total emissions. The company’s updated Net Zero business strategy still lacks strong targets and clear development plans for a successful low-carbon business.
Inpex is targeting net-zero scope 1 and 2 emissions by 2050 and has an interim target to reduce its scope 1 and 2 emissions intensity by 30% or more by 2030 compared to 2019. However, the company plans to use an unspecified amount of offsets to achieve these goals, which means the targets could not be assessed for their alignment with a 1.5°C scenario. More worryingly, Inpex has set no target covering its scope 3 emissions, which accounted for approximately 86% of the company’s total scope 1, 2 and 3 emissions in 2019.
Inpex’s scope 3 emissions were approximately 42% higher in 2019 than in 2014 due to increased oil and gas production. The company’s forecasted production from just its existing and approved fields is expected to lead to scope 3 emissions that exceed its corresponding 1.5°C carbon budget by 72% between 2019 and 2050. This does not account for the development of new oil and gas fields, which according to the International Energy Agency (IEA) cannot be approved for development under a 1.5°C scenario. Unless Inpex commits to stop new exploration and reduces production from its existing fields, it will not stay within its 1.5°C carbon budget.
In 2019, Inpex invested approximately 0.6% of its capital expenditure (CapEx) in renewable energy, and decreased this share to just 0.2% in 2020. However, under its new strategy the company is planning to increase CapEx dedicated to low-carbon technologies. In its Business Development Strategy, which it announced in early 2021, it has stated an intention to dedicate approximately 9.1% of its total CapEx to low-carbon projects and technologies. Although this is an improvement, it is still significantly lower than the sectoral expectation for oil and gas companies to invest at least 77% of CapEx in low-carbon and mitigation technologies to align with a 1.5°C scenario.
Inpex can improve its management of climate change issues in several areas. While it has board-level oversight of climate change issues, none of its board members have significant expertise in the low-carbon transition. Further, only one executive vice-president’s renumeration appears to be linked to climate-related actions and it is unclear what proportion of the executive’s overall renumeration this accounts for. The company has set an internal carbon price of USD 35 per tonne of CO2 equivalent (tCO2e). However, this is too low in comparison to the IEA’s 1.5°C scenario expectation for advanced economies’ carbon price to reach USD 75 tCO2e by 2025.
Inpex continues to be a member of trade associations that oppose climate policy and it lacks a policy for taking action and withdrawing from such trade associations. The company is a member of Keidanren, which has reportedly advocated against carbon pricing and has supported coal in the electricity mix. It also sits on the board of the Australian Petroleum Production and Exploration Association (APPEA), which is reported to have lobbied against scope 3 reporting requirements and against state-level renewable energy targets in Australia.
Inpex has started to set out general plans for low-carbon business activities. The company is aiming to develop geothermal and offshore wind power generation, with the goal to increase the share of renewable energy in its business portfolio to 10% by 2040. It is seeking to develop a hydrogen production business, though it currently only has one blue hydrogen project, which is in its testing stage.
Inpex is also testing using captured carbon to create lower-emissions methane, but is not expected to commercialise this activity until after 2030. All of Inpex’s low-carbon activities are at early stages and the company has not set clear targets and deployment schedules to expand them.
Inpex receives a trend score of -. If the company were reassessed in the near future, its score would likely decrease. Inpex ‘s scope 3 emissions are expected to exceed its 1.5°C carbon budget by 72% between 2019 and 2050 based on just its existing and approved fields. Despite this, the company continues exploring for new oil and gas. The company’s new business strategy is unlikely to be sufficient to align it with a 1.5°C pathway. It lacks a target covering scope 3 emissions as well as targets and deployment schedules to back its plans to scale up low-carbon business activities.
Inpex plans to increase the share of gas and liquified natural gas (LNG) in its sold product mix, as well as use carbon capture and storage (CCS) technologies. It plans to invest around 9.1% of its CapEx in 2021-2025 in low-carbon and mitigation technologies. The company intends to use offsets to help meet its targets.
Inpex’s business strategy was updated in January 2021 to have a stronger focus on the low-carbon transition. The company recently established three new executive officer roles with a focus on low-carbon business activities. However, the company dedicated only 0.6% of its CapEx to renewables in 2019 and only 0.2% in 2020.
Inpex has neglected to set targets that cover its scope 3 emissions. Its plans to develop renewable energy, hydrogen and methanisation businesses lack detail. Innovative low-carbon technologies are a key part of the company’s transition plan, but it does not disclose the proportion of research and development (R&D) expenditure it dedicates to these technologies.