2 Japanese Oil Firms May Merge Refinery Divisions

Two middle-ranked Japanese oil firms are mulling merging their refining divisions, which would create Japans biggest refiner and help them survive an impending shakeout in the industry. Analysts said a merger would allow the two to cut costs dramatically, helping to soften the blow from high oil prices and a weak yen.

Showa Shell Sekiyu KK announced on Monday that it was considering merging its oil refining and distribution divisions with that of Mitsubishi Oil Co Ltd.

We have been exchanging information with Mitsubishi Oil on a possible merger. However, thats just one of many options we have in mind, said Mitsuaki Nabetani, managing director of the Showa Shell, Japans fifth-biggest oil distributor.

 

We have already been cooperating with Mitsubishi Oil in such fields as oil distribution and we are now studying if we can expand this cooperation further, he told a news briefing.

Sixth-ranked Mitsubishi Oil said on Sunday it was studying the possibility of a merger as one option to streamline its business operations, while a Showa Shell spokesman said it was being considered as a way to cut costs.

Neither company said when a final decision would be made.

Financial daily Nihon Keizai Shimbun said on Sunday that the two firms may come up with a basic plan in May under which they would integrate their combined eight refineries in Japan.

If they merged their units, the two firms would create Japan's biggest oil refining company in terms of capacity.