Japan’s 2nd, 5th oil refiners agree to merge next April

Japan’s major oil refiners Idemitsu Kosan Co. and Showa Shell Sekiyu KK said Tuesday that they have agreed to merge next April as Idemitsu’s founding family finally dropped its long-standing opposition to the deal.

The deal will create Japan’s second-biggest refiner after industry leader JX Nippon Oil and Energy to share a third of the domestic gasoline market amid declining oil demand in the country.

Under the plan, Showa Shell will be delisted on March 29 before becoming a subsidiary of Idemitsu through a share swap on April 1, the Tokyo-based firms said in a joint statement, adding that they will aim to achieve net profit of JPY 500 billion (USD 4.5 billion) or more in the total of three fiscal years through 2021.

The nation’s second- and fifth- biggest oil wholesalers first announced that their business integration would be completed in 2015, but Idemitsu’s founding family, which owns more than 28 percent of the company, had blocked the deal. The family eventually approved the merger after obtaining some concessions. “The domestic oil industry faces structural challenges such as a medium to long-term decline in the demand for oil products, and overcapacity, which materially influences current and future management not only of our companies but also of dealers, distributors, transport companies, and cooperative companies that have been working alongside our companies,” they said in the statement.

“Considering that the business environment surrounding our companies is becoming more challenging, we recognize that they urgently need to implement the business integration of our companies, and produce further synergies,” they added.

Although Japan is the world’s No. 3 energy consumer, its petroleum demand has been declining chiefly due to the falling birth rate, the aging population and energy-saving technologies. State-run Kuwait Petroleum International (KPI) is engaged in a joint venture with Idemitsu and two other firms to construct a refining and petrochemical complex in northern Vietnam.

Source: Kuwait News Agency