Japan Canada Oil Sands Limited (JACOS), a consolidated subsidiary of JAPEX, is currently operating a demo plant at Hangingstone with approximately 8,000 barrels per day of bitumen production using SAGD (steam-assisted gravity drainage). It has 19 horizontal well pairs and wells will be added as required to maintain production at between 9,000 and 10,000 barrels per day for the next 10-15 years.

JACOS (75%) along with NEXEN (25%) are pursuing development plans for a larger portion of the Hangingstone lease; the expansion project would increase production capacity in JACOS’ Hangingstone area operations by more than 300%.

In advancing the Project, JACOS submitted an application for development approval to the Alberta Energy Resources Conservation Board and Alberta Environment in April 2010.

The major components of the Expansion Project include:

• a central processing facility (CPF) consisting of seven once-through steam generators, production processing, water treatment and recycling facilities, solid waste handling and disposal;

• associated water supply and liquid disposal facilities, a proposed landfill and other infrastructure, as required;

• 26 wellpads consisting of a total of 175 well pairs required to supply production to the CPF over the currently projected 25-year project life;

• associated network of pipelines and roadways connecting the wellpads to the CPF;

• camps for drilling, construction and operation, construction laydown areas and civil storage areas;

• an all-weather-road connecting the CPF to the existing Highway 63 intersection; and

• infrastructure expansion to the site including a natural gas pipeline (by JACOS), diluent and diluted bitumen pipelines and power transmission (by other parties).

While JACOS had originally targeted a development approval date sometime within the current year, the company continues to discuss with the relevant authorities the technical aspects of the development plan. Accordingly, JACOS projects that further six months will be required before the company has confidence to obtain development approval.

On receipt of development approval, JAPEX will make a final investment decision and promptly JACOS will commence development and construction work.