Nippon Oil, Japan Energy Enter Broad-Based Business Tie-Up
By Kyodo News International, Tokyo
Jun. 20–TOKYO — Nippon Oil Corp., Japan’s biggest oil wholesaler, and Japan Energy Corp., its sixth-largest, jointly said Tuesday they have agreed to enter into a broad-based tie-up, including on developing fuel cell technology and deliberating joint operations of neighboring refining and petrochemical facilities.
The 10-year tie-up accord, able to be automatically renewed under a contractual clause, also involves the joint use of facilities for transporting petroleum products and the consolidation of the two firms’ oil storage facilities, they said.
“We will seek to strengthen our international competitiveness by implementing a range of measures for enhancing our cooperation,” they said in a joint press release.
The companies will press ahead with joint development of fuel cells to cut back on research and development costs for the high-tech product, they said.
In addition, they will consider implementing joint operations of their refinery and petrochemicals factory in Kurashiki, Okayama Prefecture, they said. Japan Energy’s refinery and Nippon Oil’s petrochemical factory are located side by side in Kurashiki’s Mizushima area.
The refinery is designed to put emphasis on diesel oil and kerosene, and the petrochemical plant is designed to put emphasis on producing such petrochemicals as benzene, toluene and propylene.
“We are considering enabling the two firms to use each other’s facilities in Mizushima by linking them with an undersea pipeline,” a Nippon Oil spokesman said.
“We will consider creating a mutual products supply system at various plant locations of ours and, as the first model for such a mutual supply system, the Mizushima facilities are the most promising candidates,” the spokesman said.
In their joint press release, the companies said they will consider using each other’s crude oil tanks and tankers, while seeking to integrate and use each other’s refining and shipment facilities.
They will also consider the feasibility of conducting joint oil field exploration and development and of joint acquisitions of assets, they said, adding they will accept and train each other’s engineers in oil field development.
The companies struck the broad-based agreement at a time the domestic petroleum products market is leveling off.
Industry officials said the two have been unable to sufficiently pass on higher costs of crude oil to the retail prices of the products amid intense competition and have been forced to see profits squeezed.
The tie-up arrangements may open the way for a reconfiguration of ties among large Japanese oil refiners and wholesalers, the officials said.
Nippon Oil posted group sales and a pretax profit of 6.11 trillion yen and 309.1 billion yen, respectively, in the year to March 31, 2006. Japan Energy booked group sales and a pretax profit of 3.03 trillion yen and 188.7 billion yen during the same period.
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