TOKYO - The shake-up in Japan's refining industry, where four of the five biggest refiners are pursuing mergers, will result in the biggest contraction of capacity by a single country and reshape international markets, a Reuters analysis shows.
Japan, the world's third-biggest economy, is likely to be left with about 3.2 million barrels per day (bpd) of refining capacity by 2020, the analysis shows, a contraction of about 1.5 million barrels in a little over a decade.
Reuters spoke to industry officials, analysts, government officials and suppliers to try to map out the short-term direction of the refining industry, which is in the throes of the biggest merger spree in its history.
At 3.92 million bpd, Japan has the world's fifth-biggest oil-refining capacity, including splitters for condensate, an ultra-light crude oil. But, with 23 gasoline stands going out of business every week, there is less and less justification for operating some existing refineries.
With domestic oil demand in long-term decline, industry sources told Reuters about 100,000 bpd of capacity, the size of a standard crude distillation unit (CDU) that is the centrepiece of a refinery, will need to be cut every two years.
The merger between JX Holdings <5020.T> and TonenGeneral Sekiyu <5012.T> and Idemitsu Kosan's <5019.T> takeover of Showa Shell Sekiyu <5002.T> may also result in refinery shutdowns, according to the Reuters analysis.
JX, the country's biggest refiner with seven refineries, may shut one plant located in western Japan to comply with government requirements to tighten excess supplies by March 2017, industry sources said.
Because of its size JX is also the most likely company to shut units once it completes the merger with TonenGeneral.
JX officials have said there are opportunities to streamline operations in Osaka and near Tokyo where it and TonenGeneral have refineries.
Looking longer term, one in three CDUs may be shut by 2030, bringing capacity as low as 2.3 million bpd, the Reuters analysis showed.
The following table lists Japan's refineries with the year they started operations in brackets in the first column. The "retain" column lays out the likelihood each unit will be closed or kept in operation. Capacity is in 1,000 bpd.
Refineries Capacity Retain Notes
JX Nippon Oil
Sendai(1971) 145.0 Yes Only refinery in
northern Tohoku region.
Handles Mideast,
Asia-Pac crude
Negishi No.1 120.0 No Handles mostly Mideast
(1964) crude
Negishi 150.0 No Handles mostly Mideast
No.4(1964) crude
Mizushima-A 140.0 No Handles Mideast,
No.3(1961) Asia-Pac crude
Mizushima-B 95.2 Yes Handles Mideast,
No.2(1961) Asia-Pac crude
Mizushima-B No.3 110.0 Yes Handles Mideast,
(1961) Asia-Pac crude
Mizushima-B(1961 35.0 Yes processes condensate
)
Marifu 127.0 No Needle coke output from
No.4(1943) coker profitable.
Handles Mideast,
Asia-Pac crude
Oita (1964) 136.0 No Only refinery on Kyushu
island. Only JX plant
that docks VLCCs.
Handles Mideast,
Asia-Pac crude
Kashima No.1 189.0 Yes Operated jointly with
(1970) Mitsubishi Chem, Tepco
Kashima 63.5 Yes processes condensate.
(1970)
Osaka (1971) 115.0 No JV with PetroChina.
Handles Mideast,
Asia-Pac crude
TonenGeneral
Kawasaki 180.0 Yes Handles Mideast, West
No.2(1960) Africa, Asia-Pac crude
Kawasaki No.3 78.0 No Handles Mideast, West
(1960) Africa, Asia-Pac crude
Sakai No.1(1965) 156.0 Yes Handles Mideast, West
Africa, Asia-Pac crude
Wakayama 132.0 Yes Export capacity raised.
No.3(1941) Handles Mideast, West
Africa, Asia-Pac crude
Chiba No.1(1968) 152.0 Yes Handles mainly Mideast
crude.
Idemitsu Kosan
Hokkaido 160.0 Yes The only plant in
No.1(1973) northern Hokkaido
island. Handles mostly
Mideast crude
Chiba No.2(1963) 200.0 Yes Capacity to be cut by
up to 35,000 bpd by
March 2017. Handles
mainly Saudi crude
Aichi No.1(1975) 175.0 Yes Highly efficient export
plant. Handles mainly
Saudi crude
Showa Shell
Yokkaichi 100.0 Yes Tie-up with Cosmo at
No.2(1958) Yokkaichi complex.
Handles mainly Mideast
crude
Yokkaichi 155.0 Yes Handles mainly Mideast
No.3(1958) crude
Seibu Yamaguchi 120.0 Yes Handles mostly Mideast
(1969) crude
Toa Oil 70.0 Yes Handles mostly Mideast
Keihin(1955) crude
Cosmo Oil
Chiba (1963) 100.0 No To be scrapped possibly
in mid-2018. Handles
mainly Saudi crude
Chiba No.2(1963) 120.0 Yes Handles mainly Saudi
crude
Yokkaichi 63.0 Yes Tie-up with Showa Shell
No.5(1943) at Yokkaichi to
streamline ops.
Yokkaichi 69.0 No One of Cosmo's
No.6(1943) Yokkaichi CDUs to be
shut by March 2017.
Sakai (1968) 100.0 Yes Coker exists. Handles
mainly Mideast crude
Fuji Oil
Sodegaura 143.0 Yes Capacity may be lowered
No.2(1968) by March 2017. Used to
refine large Iran
volumes.
Taiyo Oil
Shikoku 88.0 Yes Capacity may be lowered
No.1(1938) by March 2017. Handles
Mideast, Asia-Pac crude
Shikoku 30.0 Yes Capacity possibly cut
No.2(1938) by March 2017. Handles
Mideast, Asia-Pac crude
Nansei Sekiyu
Nishihara 100.0 No Operations suspended.
(1972) To be closed and turned
into oil terminal
Total capacity: 3,916.7
(Compiled by Osamu Tsukimori; Editing by Aaron Sheldrick and Christian Schmollinger)
