Japan Petroleum Exploration (Japex) is adjusting its strategic focus, prioritizing investments in oil and gas exploration and production (E&P) over its previous goal of expanding renewable energy projects, according to President Michiro Yamashita. In an interview on Wednesday, Yamashita explained that the company will continue to prioritize E&P until 2030, citing the rising costs of renewable energy ventures, such as offshore wind, as a key challenge in securing a profitable return.
“Securing a fair return from renewable energy sources is difficult due to rising costs, so for now, the investment focus will remain on oil and gas,” Yamashita stated.
This shift aligns with trends seen among global energy companies, many of which have dialed back their renewable investments in response to the ongoing challenge of lower returns. In contrast, the surge in energy prices—fuelled by the disruptions in supply following Russia’s invasion of Ukraine—has boosted profits in the oil and gas sector.
Japex had initially set a goal in 2022 to achieve a 50/50 split in profits between E&P and other businesses by the 2030 fiscal year as part of its commitment to the energy transition and carbon neutrality. However, Yamashita revealed that the company now expects the current E&P profit share, which currently stands at 70%-80%, to remain steady through 2030, bolstered by expansion efforts in the United States and Norway.
The company is also open to selective investments in non-oil and gas sectors if the returns prove viable, Yamashita added.
Japex’s original investment plan envisioned spending 230 billion yen ($1.5 billion) over nine years on E&P. However, with current crude oil prices far exceeding the projected $50 per barrel, the company now expects to invest 1.5 times that amount, or potentially more.
“My biggest challenge now is acquiring a tight oil operator business in the U.S. and establishing an investment structure that ensures sustainable profits,” Yamashita said, noting that Japex aims to secure a deal by 2026.
The company intends to cap individual project investments at $300 million, a reflection of lessons learned from past setbacks, including its exit from a Canadian oil sands project. Japex is committed to balancing shareholder returns with financial prudence and investment discipline, Yamashita emphasized.
In Norway, Japex aims to increase profitability through expanded production at an existing project and further exploration initiatives.
Yamashita also expressed favorable views toward U.S. energy policies under the Trump administration, particularly due to their potential to provide stability and predictability. As part of its strategy, Japex plans to gradually acquire gas assets, with a focus on the expansion of liquefied natural gas (LNG) exports. However, the company does not view the Alaska LNG project, which is backed by the Trump administration, as a feasible investment due to unclear economics and its large scale.
Japex’s evolving strategy reflects a broader trend in the energy sector, as companies reassess their plans in response to shifting market conditions and the need for financial sustainability.
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