Floating Production Storage & Offloading Facility NGANHURRA for the Enfield Oil Project in Offshore Northwestern Australia

Key Roles the General Trading Companies (Sogo Shosha) Play in a Major Energy-Consuming Nation

Gas processing facilities of Qatargas Japan depends on foreign sources for most of its oil and natural gas and is one of the major consuming countries, thus making procurement from overseas essential. Mitsui & Co., Ltd. (Mitsui), has many associated companies in the energy field and in the short term is pursuing strategies aimed at developing liquefied natural gas (LNG) projects, securing business revenues from oil distribution and trading, and implementing measures to improve and strengthen its associated companies in the domestic petroleum industry. In addition, in the medium term, the Unit is working to further develop its petroleum and gas business and build foundations in new energy business, including power retailing, gas to liquids (GTL), di-methyl ether (DME), and environment-related business. Thus far, in the upstream segment of the energy industry, the Unit has partnered with leading oil producing countries and oil majors in the development as well as production of crude oil and natural gas and has played an important role importing LNG for Japan's electric power as well as gas utilities. In the midstream and downstream segments of the energy sector, the Unit imports crude oil for power utilities and oil refineries, while also importing and selling petroleum products to a range of industries in Japan. Moreover, in the domestic market, the Unit has oil refining and sales companies among its associated companies and is engaged in a wide range of related business operations, including the retail of gasoline through its network of service stations.

In recent years, demand for LNG, which is a clean energy source that releases relatively little CO2 into the atmosphere, has expanded. Mitsui has a long track record for developing LNG business. We are involved in four LNG projects that are in operation: "Abu Dhabi Gas Liquefaction Limited (ADGAS)" in Abu Dhabi, in which we hold a 15% interest, has some 5 million tons per annum LNG production capacity, "Northwest Shelf (NWS) JV" in Australia, in which we hold an 8.33% interest, has some 7.5 million tons per annum production capacity, "Qatar Liquefied Gas Company Ltd. (Qatargas)" in Qatar has some 7.7 million tons per annum production capacity, and "Oman LNG L.L.C. (OLNG)" in Oman has some 6.6 million tons of annual capacity. The majority of the LNG produced by these ventures is sold to Japan and Korea on long-term contracts with remaining volumes sold to customers in various LNG markets on short-term agreements. 19 million tons a year of LNG from these ventures are supplied to Japanese utilities companies, which is about 35% of the total amount of LNG imported to Japan.

In the NWS JV, the construction work has progressed on the fourth LNG producing train, which has a capacity of 4.2 million tons per year and is scheduled to begin in the latter half of 2004. In Qatar, the modification work for debottlenecking on the existing LNG facilities is under way in order to expand LNG production capabilities by 1.5 million tons per year in 2005. These new LNG producing capacities will supply both existing and new customers.

In addition, Sakhalin Energy Investment Company Ltd., for which we hold a 25% interest, announced on May 15, 2003, that it would begin the second phase of development of the Sakhalin II Project. This announcement marks the beginning of the full-scale development of the Piltun-Astokhskoye oil field aimed at year-round crude oil production, which is scheduled for 2006, and Lunskoye gas field, including the construction of a two-train LNG plant in the south of Sakhalin Island for export to Asian/Pacific LNG markets, which is scheduled for 2007. At the peak, the facility will produce 60 million barrels of crude oil and 9.6 million tons of LNG per annum.

We have put high priority on expanding our oil and gas equity reserves together with our associated company Mitsui Oil Exploration Co., Ltd. (MOECO). Identifying and implementing prospective oil and gas reserves are key factors to success in this area. Our principal strategic regions for this business are Australia, Southeast Asia, and the Middle East. In fiscal 2002, we acquired exploration and production rights for the Block 9 oil and gas field in Oman and participated in the Bass Gas Project in Australia. These newly acquired properties helped boost our oil and gas reserves to 1.5 billion barrels oil equivalent (boe) at the end of March 2003, despite the decrease in production of 33 million boe of equity barrels during fiscal 2002.

Aggressive Initiatives in Distribution and Project Investments

To respond to growth in energy demand and market-opening measures in the medium term, the Unit has established stable distribution business operations and is aggressively developing its global oil and petroleum product trading activities through its subsidiaries in Singapore, London, and the West Coast of the United States. Mitsui and these trading subsidiaries handle a total of 1.6 million barrels per stream day.ese activities we are pursuing the commercialization of the fruits of this development and research.

Mitsui's energy-related business activities began with developing energy sources worldwide and providing stable supplies to the Japanese market. Today, Mitsui has expanded its objectives to include the development of its energy business worldwide.