Idemitsu Kosan Plans Shut Down of Tokuyama Refinery

---

Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--Effects from a refining law enacted last year by the Ministry of Economy, Trade and Industry (METI) are beginning to surface in Japan. The new regulations call for refining companies to increase the country's ratio of residue cracking units (RCUs) to crude distillation units (CDUs) by the first quarter of 2014, as refining operational capacity continues to decline due to lower domestic demand. The June 2011 year-over-year figures showed that the operational capacity of Japan's refining industry had dropped by 9%, with capacity reduced at five of the country's 27 refineries.

Rather than build new RCUs, refiners are choosing to shut down entire refineries. In September, Toa Oil Company Limited (TYO:5008) (Kawasaki, Japan) permanently shut down its 120,000-barrel-per-day (BBL/d) Ohgimachi, Kanagawa, refinery, part of the Keihin refinery. JX Nippon Oil and Energy Corporation (TYO:5001) (Tokyo) is contemplating the shutdown of its 180,000-BBL/d Muroran refinery in Hokkaido, while Petrobras (NYSE:PBR)(Rio de Janeiro), which owns the Nishihara refinery in Okinawa, is currently considering selling the 100,000-BBL/d refinery.

In direct relation to the METI law, Idemitsu Kosan Company Limited (TYO:5019) (Tokyo) has become the latest refining company to announce its plans for shutdown. The company is currently planning to shut down its Tokuyama refinery located in Yamaguchi prefecture by the METI-designated deadline in 2014. Tokuyama is also the site of one of Idemitsu's petrochemical plants as well, with the other located at the Chiba prefecture refinery. As of now, Idemitsu plans to keep the Tokuyama petrochemical plant running.

Though refining companies are complying with the METI regulations, they are looking to increasing capacities in the future as regional demand expands and domestic demand wanes. Most refiners have expressed dismay over the METI law hobbling the industry further in the next few years. The Japanese refining industry took a heavy blow in March following the Great East Japan Earthquake. Two refineries, one of JX's and one belonging to Cosmo Oil Company Limited (TYO:5007) (Tokyo), are still offline due to extensive earthquake and tsunami damage.

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.