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Researched by Industrial Info Resources (Sugar Land, Texas)--The refining capacity reduction plan for all five major oil refiners in Japan is nearly set. The plan is expected to help in resolving the nation's oversupply of gasoline. Reasons for the reduction include the promotion of eco-friendly cars, such as hybrid vehicles (HV) and electrical vehicles (EV); the major energy shifts from gasoline to other energy resources; and the shrinking demand in Japan, which will continue for some time.
Another factor forcing oil refiners to cut gasoline production is an energy law called "Sophisticated Methods of Energy Supply Structures," mandated by the Ministry of Economy, Trade and Industry (METI). If refiners do not meet the requirements, they will be advised and ordered; if they do not heed these orders from METI, then they must pay a fine of approximately $11,000 or less. The law became effective in August 2009.
As mentioned earlier, there are five major oil refiners, including Showa Shell Sekiyu Kabushiki Kaisha (TSE:5002) (Tokyo, Japan), Idemitsu Kosan Company Limited (TSE:5019) (Tokyo), Cosmo Oil Company Limited (TSE:5007) (Tokyo), JX Nippon Oil & Energy Corporation (Tokyo) and TonenGeneral Sekiyu Kabushiki Kaisha (TSE:5012) (Tokyo).
On February 14, TonenGeneral announced that it will decommission crude units in Kawasaki Refinery (Kawasaki, Japan) and Wakayama Refinery (Arida, Japan). By decommissioning the crude units, it will cut 105,000 barrels per day (16%) of production capacity.
The first company to respond was Showa Shell. It closed its 120,000-barrel-per-day Ogimachi Refinery in September 2011. The refinery is operated by Toa Oil Company Limited (TSE:5002) (Kawasaki, Japan), an affiliate of Showa Shell. This reduces 23% of Showa Shell's production capacity.
The second company to respond was Idemitsu Kosan, which announced that it is planning to shut the only crude unit permanently at its 120,000-barrel-per-day Tokuyama Refinery (Shunan, Japan) by March 2014. By converting the refinery into a petrochemical plant, Idemitsu Kosan can reduce 19% of its production capacity.
The third company to respond was Cosmo Oil, which announced that it will close its 140,000-barrel-per-day Sakaide Refinery by July 2013. Cosmo Oil is the only company of the major oil refiners that is considered substandard. However, it is planning to meet the standards by either additionally decommissioning equipment or increasing its cracking unit in the 2013 fiscal year.
JX Nippon Oil & Energy announced will stop oil refining at its 180,000-barrel-per-day Muroran Refinery by March 2014. Including the production capacity that has been reduced already, JX Nippon's reduction will total 580,000 barrels per day, or 38%. The company also will change this refinery into chemical plant. Teiseki Topping Plant Company Limited (Joetsu, Japan), which is a subsidiary of INPEX Corporation, also closed its 4,724-barrel-per-day Kubiki Refinery in December 2012.
For the oil refiners cooperating, the reductions will help to resolve the excess in supply by next spring, but it will not be a fundamental structural reform for the refinery industry. However, the refiners will continue to invest in upgrades to produce high-value middle distillate products, or to convert refineries into chemical plants that will continue until all structural reforms are complete.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Another factor forcing oil refiners to cut gasoline production is an energy law called "Sophisticated Methods of Energy Supply Structures," mandated by the Ministry of Economy, Trade and Industry (METI). If refiners do not meet the requirements, they will be advised and ordered; if they do not heed these orders from METI, then they must pay a fine of approximately $11,000 or less. The law became effective in August 2009.
As mentioned earlier, there are five major oil refiners, including Showa Shell Sekiyu Kabushiki Kaisha (TSE:5002) (Tokyo, Japan), Idemitsu Kosan Company Limited (TSE:5019) (Tokyo), Cosmo Oil Company Limited (TSE:5007) (Tokyo), JX Nippon Oil & Energy Corporation (Tokyo) and TonenGeneral Sekiyu Kabushiki Kaisha (TSE:5012) (Tokyo).
On February 14, TonenGeneral announced that it will decommission crude units in Kawasaki Refinery (Kawasaki, Japan) and Wakayama Refinery (Arida, Japan). By decommissioning the crude units, it will cut 105,000 barrels per day (16%) of production capacity.
The first company to respond was Showa Shell. It closed its 120,000-barrel-per-day Ogimachi Refinery in September 2011. The refinery is operated by Toa Oil Company Limited (TSE:5002) (Kawasaki, Japan), an affiliate of Showa Shell. This reduces 23% of Showa Shell's production capacity.
The second company to respond was Idemitsu Kosan, which announced that it is planning to shut the only crude unit permanently at its 120,000-barrel-per-day Tokuyama Refinery (Shunan, Japan) by March 2014. By converting the refinery into a petrochemical plant, Idemitsu Kosan can reduce 19% of its production capacity.
The third company to respond was Cosmo Oil, which announced that it will close its 140,000-barrel-per-day Sakaide Refinery by July 2013. Cosmo Oil is the only company of the major oil refiners that is considered substandard. However, it is planning to meet the standards by either additionally decommissioning equipment or increasing its cracking unit in the 2013 fiscal year.
JX Nippon Oil & Energy announced will stop oil refining at its 180,000-barrel-per-day Muroran Refinery by March 2014. Including the production capacity that has been reduced already, JX Nippon's reduction will total 580,000 barrels per day, or 38%. The company also will change this refinery into chemical plant. Teiseki Topping Plant Company Limited (Joetsu, Japan), which is a subsidiary of INPEX Corporation, also closed its 4,724-barrel-per-day Kubiki Refinery in December 2012.
For the oil refiners cooperating, the reductions will help to resolve the excess in supply by next spring, but it will not be a fundamental structural reform for the refinery industry. However, the refiners will continue to invest in upgrades to produce high-value middle distillate products, or to convert refineries into chemical plants that will continue until all structural reforms are complete.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
