Medium-Term Business Plan

Basic Policies to Formulate the Medium-Term Business Plan

The new medium-term business plan was formulated by following the basic policies of the medium-term business plan for fiscal 2010-2012 announced in 2009 and by taking into account the subsequent drastic changes in the business environment. The new business plan has set forth a distinct management vision for upstream and downstream operations. In upstream operations, AOC Holdings, Inc. (AOCHD), will seek "Revitalizing the business and restructuring of the base of profitability" while in downstream operations, AOCHD will aim to be "A leading class petroleum refiner with strong international competitiveness, uniqueness, and independence."

Assumptions about the business climate	· Crude oil and petroleum product prices will stay steady · Petroleum product demand is firm in Asia while domestic demand is on a declining trend
Management vision	AOC: Revitalizing the business and restructuring of the base of profitability FOC: Aiming to be a leading class petroleum refiner with strong international competitiveness, uniqueness, and independence

Upstream operations

As the lead time for recovery of investments is long in upstream operations, AOCHD has created a five-year business plan covering the period up to the year ending March 31, 2015, positioning the Middle East, including Egypt, and Norway as core areas of operations, and is seeking to bring projects already being undertaken onto a commercial basis without fail. The plan's specific targets are to achieve oil reserves of 20 million barrels in crude oil equivalent and oil production of 10 thousand barrels per day by the year ending March 31, 2013.

AOCHD will also position the engineering and technical research business in upstream operations as another pillar of business operations to maximize profitability.

Downstream operations

In downstream operations, AOCHD has established the corporate structure to respond to changes in the business environment with flexibility and agility, following completion of a series of steps for equipment sophistication at the Sodegaura Refinery. These steps included completing heavy oil treatment and export facilities. AOCHD will now seize every opportunity available to improve profitability by leveraging these facilities to the fullest possible extent. AOCHD will also continue to improve safe operation, environmental preservation, and quality control systems; strive to reduce greenhouse effect gas emissions by promoting energy conservation; and build up an efficient and stable supply system for petroleum products. Furthermore, AOCHD will exert thorough cost-cutting efforts across the Group and maintain a stable base of profit and sound finances.

Business plan

Upstream operations (AOC)		Downstream operations (FOC)
Basic business strategy (FY2010～2014) In addition to oil and gas exploration, develop business and reestablish and expand upstream business structure by including engineering and technical research activities	Basic business strategy (FY2010～2012) Improve profitability and strengthen competitiveness by making the utmost use of upgraded refinery facilities
Revitalize business and restructure the base of profitability by means of utilizing, to the maximum extent, manpower resources vested with technical skills and management experience --> Focus on the Middle East (including Egypt) and Norway as core areas Promote engineering and technical research business --> Utilize, to the maximum extent, technology and know-how to secure new sources of earnings	Reinforce profit base by flexible and agile operation of state-ofthe-art facilities Improve systems continuously for safe operation and environmental preservation and promote energy conservation Maintain a stable base of profit and sound finances by saving costs

Upstream operations (AOC)

Downstream operations (FOC)

Basic business strategy
(FY2010～2014)

In addition to oil and gas exploration, develop business and reestablish and expand upstream business structure by including engineering and technical research activities

Basic business strategy
(FY2010～2012)

Improve profitability and strengthen competitiveness by making the utmost use of upgraded refinery facilities

Revitalize business and restructure the base of profitability by means of utilizing, to the maximum extent, manpower resources vested with technical skills and management experience
--> Focus on the Middle East (including Egypt) and Norway as core areas

Promote engineering and technical research business
--> Utilize, to the maximum extent, technology and know-how to secure new sources of earnings

Reinforce profit base by flexible and agile operation of state-ofthe-art facilities

Improve systems continuously for safe operation and environmental preservation and promote energy conservation

Maintain a stable base of profit and sound finances by saving costs

Target figures of reserves and production by fiscal 2012:
- Oil reserves: 20 million barrels
- Oil production: 10 thousand barrels per day

Improve profitability at every possible opportunity by maximum utilization of heavy oil treatment and export facilities
Improve systems for safe operation, environmental preservation, and quality control of products; promote greenhouse effect gas reduction through energy conservation; and establish a stable and efficient supply system of petroleum products
Maintain a stable base of profit and sound finances by making a thorough effort to save costs

Capital Investment Plan

In upstream operations, under the management vision of revitalizing the Group's business and restructuring of the base of profitability, AOCHD will make intensive investments for the purpose of early commencement of production in existing planned projects, and will also invest in new projects. Over the five-year period through the year ending March 31, 2015, AOCHD will invest a total of yen;25.0 billion, comprising ¥15.5 billion for existing planned projects and ¥9.5 billion for new projects.
In downstream operations, AOCHD will invest a total of ¥6.0 billion, comprising ¥2.5 billion on safety measures and maintenance of operations and ¥3.5 billion on energy conservation measures over the three-year period through the year ending March 31, 2013.
Furthermore, by fully taking into account the progress of the new medium-term business plan and paying due heed to the direction of future business operations, AOCHD will consider active investments in upstream operations, which are indispensable for mapping out the Group's growth strategy.

Upstream Operations

Billion yen		Fiscal 2010	Fiscal 2011	Fiscal 2012	Total (three years)	Fiscal 2013-2014	Total (five years)
Planed Projects		6.5	5.5	3.5	15.5	0	15.5
	Norway	5.5	1.0	1.5	8.0	0	8.0
	Egypt	1.0	4.5	2.0	7.5	0	7.5
New Projects		0.5	2.5	2.5	5.5	4.0	9.5
Total		7.0	8.0	6.0	21.0	4.0	25.0

Total in five years: 25.0 Billion yen

Downstream Operations

Hydrogen production facility under construction
Offshore production unit in the Yme oil field

Billion yen	Fiscal 2010	Fiscal 2011	Fiscal 2012	Total (three years)
Safety measures and maintenance of operations	0.5	1.5	0.5	2.5
Energy conservation, others	1.0	1.0	1.5	3.5
Total	1.5	2.5	2.0	6.0

Total in three years: 6.0 Billion yen

Forecast on Sales of Crude Oils & Petroleum Products

Crude Oil (Thousand Barrels/day)

		FY2010	FY2011	FY2012	FY2013	FY2014
Khafji Crude Oil		40.0	40.0	40.0	40.0	40.0
Equity Crude Oil		1.6	5.2	5.3	5.6	4.8
	Norway	1.5	4.7	3.5	2.9	2.1
	Egypt	-	-	0.8	1.2	1.1
	New Projects	0.1	0.5	1.0	1.5	1.6
Total		41.6	45.2	45.3	45.6	44.8

Petroleum Products (Thousand Kiloliters)

	FY2010	FY2011	FY2012
Gasoline	2,038	2,107	2,210
Naphtha	396	339	366
Middle distillate	3,397	3,271	3,302
Heavy fuel oil C (incl. for electric power company)	478 (364)	510 (360)	474 (360)
Benzene / Xylene	517	513	523
Others	1,025	976	1,053
Total	7,854	7,718	7,930
Incl. For Export (Gas Oil)	1,066	495	628
Crude refining volume	7,960	7,887	8,054

Forecast on Consolidated Financial Results (FY2010-FY2012)

(¥Billion)	FY2010			FY2011			FY2012
Crude Oil (Dubai)	$75.0/Bbl ¥90/$			$75.0/Bbl ¥90/$
Differential (AL-AH)	$3.0/Bbl			$4.0/Bbl
	Up-stream	Down- stream	Total	Up-stream	Down- stream	Total	Up-stream	Down- stream	Total
Net Sales	101.0	456.0	557.0	105.0	465.0	570.0	106.0	474.0	580.0
Operating Income (Excl. inventory val.)	(2.0)	4.6	2.6	3.5	6.5	10.0	2.0	9.5	11.5

Secure an operating income of over ¥10.0 billion in the year ending March 31, 2013

Forecast on Consolidated Cash Flows (FY2010-FY2012)

Group Organization