Cosmo Oil, TonenGeneral, Mitsui Oil sign MOU to optimize Chiba refining

Japanese refiners Cosmo Oil, TonenGeneral, and Mitsui Oil signed a memorandum of understanding (MOU) to start jointly pursuing ways to optimize refining operations at two refineries in Chiba, the companies said.
The deal comes as the three companies aim to utilize and improve operational efficiency and increase their competitiveness both domestically and internationally at both refineries in the Keiyo Rinkai Industrial Zone.
Among the areas of possible cooperation, the three companies will consider building a pipeline between Cosmo Oil’s 240,000 bpd Chiba refinery and the nearby 175,000 bpd Ichihara refinery in Chiba owned by TonenGeneral and Mitsui Oil to increase efficiency at the refineries.
The three companies said they would also consider jointly selecting crudes and working together to optimize production plans by possibly establishing a, “joint organization to coordinate operations among the two refineries.” The companies declined to elaborate.
EMG Marketing, a 99% subsidiary of TonenGeneral, has a 50% stake in Kyokuto Petroleum Industries which operates the Ichihara refinery in Tokyo Bay. Mitsui Oil owns the rest of the joint venture.
It was the second time this year that TonenGeneral has announced possible areas of cooperation with fellow Japanese refiners.
In March 2013, TonenGeneral and Showa Shell said they had agreed in principle to consider detailed areas of cooperation in their oil product supply system, specifically around crude oil and petroleum products transport.
For Showa Shell, the bilateral developments came after its Chairman Shigeya Kato and President Jun Arai told a press conference on February 18 that the company was mulling alliances with other local refiners to expand its domestic oil business due to lower domestic oil demand.
In early September, the Nikkei newspaper reported that TonenGeneral had decided in principle to buy Mitsui Oil for around JPY40-50 billion (USD406-507 million). TonenGeneral intends to reach a basic agreement with Mitsui Oil by the end of this year.
Mitsui & Co will use the funds it receives from selling Mitsui Oil to acquire a 10% stake in TonenGeneral from ExxonMobil, the Nikkei said.
In June 2012, ExxonMobil’s stake in TonenGeneral fell to a non-controlling 22% stake from 50.02% earlier.
A Mitsui Oil official said at the time he could not comment as the report was not based on any announcement from the company or its parent.
The news comes as Japan’s refining sector is expected to see another round of reorganization to cope with the expected surplus refining capacity due to diminishing domestic demand.
(September 30, 2013)