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Environment-related Data : Environmental Accounting

The Cosmo Oil Group began environmental accounting in FY2000, and the practice is now in its 6th year.
In order to create an environmental accounting, we reference the Ministry of Environment's "Environmental Accounting Guidelines (Fiscal 2005 Edition)" and "Environmental Conservation Cost Categories Guideline 2003 Edition", and tabulated the environmental conservation costs and environmental conservation benefits. In addition, in tabulating the environmental conservation costs, all accounting items in the financial accounts were covered as has been in the past. The following characteristics must be taken into consideration when thinking about the environment in relation to the petroleum industry:

  1. In order to control the substances with environmental impact generated when products are used (at the time of combustion) by the customer, an enormous cost must be incurred (refer to upstream/downstream costs).
  2. Since petroleum products from Mid-East crude oil are high in sulfur content, a tremendous amount of investment has been made for many years in terms of environmental conservation (refer to year-end acquisition costs).

In order to make it possible to ascertain these characteristics in value terms, we created "upstream/downstream costs" accounting items in the environmental conservation costs. Furthermore, in order to make it easier to understand the aggregate cost from the past, we also tabulated "year-end acquisition costs".

Preconditions of accounting

Period and Scope

● Calculation Period:

Fiscal 2005 (from April 1, 2005 to March 31, 2006)

● Scope of Calculation:

4 refineries owned by Cosmo Oil, Yokkaichi Kasumi Power Station, Head Office, branches, R&D center, Cosmo Matsuyama Oil Co.,Ltd. and Cosmo Oil Lubricants Co.,Ltd. For affiliates, only those costs and benefits which are closely related to our refineries are identified and compiled.

● Site-by-site Data:

Site-by-site data are shown for 4 refineries of Cosmo Oil, R&D Center, Cosmo Matsuyama Oil Co.,Ltd. and Cosmo Oil Lubricants Co.,Ltd. (Yokkaichi Refinery's data include those of Yokkaichi Kasumi Power Station.)

Company Site Remarks
Cosmo Oil Co.,Ltd. Chiba Refinery Calculated all data at the site
Yokkaichi Refinery Calculated all data at the site
Sakai Refinery Calculated all data at the site
Sakaide Refinery Calculated all data at the site
Yokkaichi Kasumi PS Calculated all data at the site
Head Office
Branches 		Environment related donations, environmental report production costs and electricity bills
Costs of recycled paper, environmental remediation costs.
R&D Center Only environmental conservation costs and benefits of the research and development.
Cosmo Matsuyama Oil Co.,Ltd. Costs for environmental impacts of products, etc.
Cosmo Oil Lubricants Co.,Ltd. Chiba Plant Green purchase costs of lubricant raw materials (other than those are included in the figures of Cosmo Oil Chiba and Yokkaichi Refineries).
Yokkaichi Plant

Changes from the Previous Year

There is no particular change compared with the previous year for environmental accounting.

Methods of Compiling Environmental Costs

Investments/Expenses Difference:Fiscal 2005 - 2004
● Investments•••Capital investment for depreciable assets acquired for the purpose of environmental conservation.
● Expenses•••Expenses during the period associated with environmental activities (inc. depreciation)

  1. Business Area Costs

    ● Pollution Prevention
    • Air pollution prevention costs (Sulfur recovery units, nitrogen oxide control units, etc.).
    • Water pollution prevention costs (Wastewater treatment equipment, sour water treatment equipment, etc.).
    • Soil contamination prevention costs (Soil contamination investigation costs, etc.).
    • Levies under the Law concerning pollution-related health damage compensation and other measures.
    ● Global Environment Conservation
    • Costs associated with establishment of energy conservation equipment such as cogeneration facilities.
    ● Resource Circulation
    • Costs associated with waste treatment and recycling.

  2. Upstream and Downstream Costs

    ● Green Purchasing
    • Costs associated with the provision of products with low environmental impacts to customers.
    ● Reducing Sulfur Content of Products
    • Costs associated with reducing sulfur content in products to reduce sulfur oxides emitted when products are in use.
    ● Replacement of Toxic Substances in Gasoline
    • Costs associated with reduction and refinery of toxic substances in gasoline such as benzene and lead.
    ● Reduction of Aromatic Substances of Petrochemical Products
    • Costs associated with removal of aromatics and olefins from raw materials used in petrochemical products.

  3. Administration Costs

    Costs associated with environmental education for company staffs, management and maintenance of the environmental management system, plant maintenance and afforestation of offices and monitoring and assessment of environmental impacts.

  4. Research and Development Cost

    Costs Associated with Environment R&D Activities.

  5. Social Activity Cost

    Costs Associated with Non-business Activities, such as Afforestation.

  6. Environmental Remediation Cost

    Costs associated with soil decontamination at service stations.

Methods of Compiling Environmental Benefits

Reduction: Amount of FY2004 - Amount of FY2005

  1. Benefits Corresponding to Business Area Costs

    ● Concentration/Unit Values
    • Environmental impact per crude oil equivalent throughput.
    ● Environmental Impact
    • Environmental impact originated from business area.

    Note: Yokkaichi Kasumi Power Station and Cosmo Matsuyama Oil Co.,Ltd. are excluded from concentration/unit values calculation, as crude-based processing volume estimation is impossible with these facilities where crude process is not carried out.

  2. Benefits Related to Upstream and Downstream Costs

    Benefits of reducing environmental impacts in products.

    ● Concentration/Unit Values
    • Reducing sulfur content of products: sulfur content in products
    • Replacement of toxic substances in gasoline (low-benzene gasoline):benzene concentration in gasoline
    • Reduction of CO2 emissions from product use: value obtained by dividing the environmental impact (see below) by the output of petroleum products
    ● Environmental Impact
    • Potential environmental impact: Potential environmental impact expected to occur from product use
    • Reducing sulfur content of products: amount of potential SOx emissions obtained by multiplying average sulfur content of products with production volume
    • Replacement of toxic substances in gasoline (low-benzene gasoline): value obtained by multiplying average benzene concentration of gasoline with production volume
    • Reduction of aromatics in petrochemical products: volume of aromatics in petrochemical products eliminated in business areas
    • Reduction of CO2 emissions from products use : value obtained by multiplying per unit CO2 emissions of each product with production volume
    • We do not take into account the desulfurization of flue gas at our customer's site: therefore the actual SOx emissions are lower than the potential SOx emissions.
    • As we select the optimum production method based on the relationship between cost and environmental conservation, the sulfur content value in each product is lower than JIS specification.
    • Naphtha is used as petrochemical raw material and fertilizer raw material and does not emit SOx or CO2 ; however it is included in the value.
    • In relation to CO2 emissions, we calculate the data by the method recommended by the Ministry of Environment's "Guidelines for accounting greenhouse gas emissions from the industry (draft)",Costs associated with non-business activities, such as afforestation.
    • We revised CO2 emissions in business areas for Fiscal 2004 from 4,918 to 4,990 thousand t-CO2 since we reviewed the method to calculate the CO2 emissions from electric power sold by Kasumi Power Station.
    • We revised COD discharge for Fiscal 2004 from 152.2 to 152.9t since we reviewed the method to calculate the COD discharge at Cosmo Matsuyama Oil Co.,Ltd.
    • We calculated the difference of reduction benefits of environmental impact between Fiscal 2004 and 2005 without rounding off the raw data. So as a total, the last figure may differ by one. The same method is applied for the site data.

Methods of Compiling Economic Benefits

● Energy Conservation (cogeneration)
Conservation by cogeneration = Conservation by steam generation + conservation in electricity – fuel costs (LPG, heavy fuel oil, etc.)
● Catalyst Recycling
Purchase cost of new catalysts saved by recycled catalysts in oil refining, plus disposal costs of waste catalysts
● Gypsum Sales
Sales proceeds of gypsum, a by-product of fuel-gas desulfurization at Yokkaichi Kasumi Power Station
● Ammonia Recycling
Purchase price of ammonia saved by recycled ammonia at Yokkaichi Kasumi Power Station plus disposal costs of waste alkali
● R&D (royalties)
Income received for royalty, and cost conservations realized through R&D activities
● Electricity Conservation (head office)
Electricity conservation, in year-on-year change, at the head office.
Difference in electricity charge between Fiscal 2004 - 2005
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Environmental accounting results Fiscal 2005

● Environmental Conservation Cost

The calculation results in Fiscal 2005 indicated an investment of 2.5 billion yen, decreased by 12.3 billion yen compared with the previous year. The reason is that the construction of FCC gasoline desulfurization units for producing sulfur-free gasoline was completed in Fiscal 2004 and no large-scale investment was carried out in Fiscal 2005.
Furthermore the expenditure reached 68.1 billion yen increased by 11.7 billion yen compared with the previous year. The main reason is that the price of fuels consumed in our refineries increased drastically in proportion to a sharp rise of crude oil cost.
The year-end acquisition cost was 168.0 billion yen increased by 2.5 billion yen compared with the previous year.

●Environmental Conservation Benefits

As for environmental conservation benefits in business areas, the environmental impact per crude oil equivalent throughput was reduced in Fiscal 2005 compared with the previous year. The main reason is that the promotion of energy conservation improved the unit energy consumption.

Environmental Conservation Cost

(million yen)
Item Investment Expense
Fiscal 2005 Change Fiscal 2005 Change
1. Business area costs        
Pollution prevention 212 -132 5,573 -252
Global environment conservation 17 -120 10,111 1,497
Resource circulation 0 -20 644 -24
2. Upstream and downstream costs        
Green purchasing 0 0 120 49
Reducing environmental impact of products 2,200 -12,050 49,451 10,370
Reducing sulfur content of products (1,529) (-11,247) (37,127) (8,732)
Replacement of toxic substances in gasoline (671) (-803) (12,190) (1,621)
Reduction of aromatics in petrochemical product (0) (0) (134) (17)
3. Administration cost 14 12 363 -19
4. Research and development cost 99 -34 1,201 113
5. Social activity cost 0 0 1 0
6. Environmental remediation cost 0 0 650 -64
Total 2,542 -12,344 68,113 11,669

Environmental Conservation Costs (reference)

(million yen)
Item Fiscal 2005 Change
Purchase cost of recycled paper (whole amount booked) 4 -8
Environment related donations 41 10
Environmental report production cost 32 -3

Note: Change compared with previous year (Fiscal 2005 - 2004)

Environmental Conservation Benefits

Item Concentration/unit value Environmental impacts
Reduction Fiscal 2005 Reduction Fiscal 2005
1.Benefits corresponding to worksite costs        
Resources input into business activities        
Energy input 0.27
(kl-crude/1,000kl)		 8.96
(kl-crude/1,000kl)		 -2.510 (TJ) 75,418 (TJ)
Water input 9 (kg/kl) 178 (kg/kl) 136 (1,000t) 42,805 (1,000t)
Benefits related to environmental impacts and wastes generated by business activities        
Emission to air CO2 0.91
(kg-CO2/kl)		 23.23
(kg-CO2/kl)		 -96
(1,000t-CO2)		 5,086
(1,000t-CO2)
  SOx 4.6 (g/kl) 21.5 (g/kl) 649 (t) 5,543 (t)
  NOx 0.5 (g/kl) 14.0 (g/kl) -50 (t) 3,154 (t)
  Benzene 0.0 (g/kl) 0.03 (g/kl) -0.01 (t) 10.37 (t)
Discharge to water COD 0.12 (g/kl) 0.64 (g/kl) 14.8 (t) 138.1 (t)
Industrial waste Generated 26 (g/kl) 208 (g/kl) 3,951 (t) 46,634 (t)
  Recycled 4 (g/kl) 67 (g/kl) 4,235 (t) 14,532 (t)
  Landfill 1 (g/kl) 2 (g/kl) 227 (t) 380 (t)
2. Benefits related to upstream and downstream costs        
Benefits of reducing environmental impact in products        
Reducing sulfur content of products (sulfur: mass%) (sulfur: mass%) (potential SOx emissions: t) (potential SOx emissions: t)
High octane gasoline 0.0000 0.0004 1 6
Regular gasoline 0.0017 0.0004 142 35
Naphtha -0.0008 0.0283 -28 957
Jet fuel oil 0.0049 0.0141 61 429
Kerosene 0.0008 0.0005 40 30
Diesel fuel oil 0.0012 0.0007 94 61
Heavy fuel oil A 0.0123 0.4049 763 26,343
Heavy fuel oil C 0.0152 1.5865 5,066 132,429
LPG -0.0001 0.0006 -1 7
Total 0.0251 0.3352 6,137 160,298
Reducing benzene in gasoline 0.0150
(vol %)		 0.4981
(vol %)		 1,117 (t) 30,495 (t)
Reduction of aromatics in petrochemical products     -446 (kl) 7,319 (kl)
Reduction of CO2 emission from products in use 0.0083
(t-CO2/kl)		 2.5240
(t-CO2/kl)		 -3,564
(1,000t-CO2)		 77,015
(1,000t-CO2)

Economic Benefits

(million yen)
Detail of Benefit Amount
Energy Conservation (cogeneration) 2,408
Catalyst recycling (disposal cost saving, etc.) 0
Gypsum sales 75
Ammonia recycling 104
R&D (royalties) 16
Electricity conservation (Head office) -2
Total 2,601
Environmental Conservation Costs Environmental Conservation Costs
Year-end Acquisition CostsYear-end Acquisition Costs
Year-end Acquisition Costs
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Integration of environmental impact and environmental productivity

We have engaged in integration of environmental impact and environmental productivity since Fiscal 2001 to enrich the content of environmental accounting. The Environmental Impact Points (EIP: index value by JEPIX) for the impacted arising from the business areas was 9,795 million points, increased by 49 million points compared with the previous year. This shows that the environmental impacts slightly increased, but the environmental productivity was improved compared with the previous year. The reason is considered that the higher production level in Fiscal 2005 than the previous year increased the energy consumption and environmental impacts, while the promotion of energy conservation improved energy efficiency and environmental productivity.
Environmental productivity calculates the production volume per unit of integrated environmental impacts, and the larger this volume, the more was produced with less environmental impacts.

Environmental productivity = Crude oil equivalent throughput / Integrated environmental impacts (EIP)

Note: We changed the method of calculating the environmental productivity as below.
Fiscal 2004: Production volume / Integrated environmental impacts (EIP)
Fiscal 2005: Crude oil equivalent throughput / Integrated environmental impacts (EIP)

Integration of Environmental Impact

(million Environmental Impact Points)
JEPIX Weighted Environmental Impact
Fiscal 2005 Reduction (compared to the previous year)
Business area    
Greenhouse gas 4,850 ▲165
Ozone depleting substances 0 1
Toxic air pollutants 520 ▲43
Optical oxidants 704 56
NOx 2,004 ▲36
SPM10 433 35
COD to rivers 0 0
COD to sea areas 440 49
Nitrogen 705 23
Phosphorous 119 16
Landfill waste 20 15
Total for within the business areas 9,795 ▲49

Note: ▲Increase

Environmental Productivity

(production kl /Environmental Impact Points)
JEPIX Production Volume per Integrated Environmental Impacts
Fiscal 2005 Reduction (compared to the previous year)
Total for the business areas 0.02131 0.00040
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