MOSCOW (MRC) -- Idemitsu Kosan Co. and Showa Shell Sekiyu KK has signed a non-binding agreement to merge, as Japan’s refiners consolidate amid declining domestic demand and a fuel glut, reported Hydrocarbonprocessing.
The two companies expect 50 billion yen (USD407 million) of synergies by the fifth year after a deal, according to a filing on Thursday to the Tokyo Stock Exchange.
The merger is expected to be completed between October 2016 and April 2017. A value for the transaction wasn’t provided.
The memorandum of understanding isn’t binding and most details, including the method for merging, haven’t been decided. In July, Idemitsu agreed to purchase a 33.24% stake in Showa Shell from Royal Dutch Shell for 169 billion yen. A full combination of the two would create a company with about a third of the domestic gasoline market.
Oil demand in Japan has been declining as the nation’s population shrinks and as a shift to more energy-efficient cars prompts refiners to lower output.
The government, a backer of industry consolidation, has asked for cuts in processing capacity as the US boosts exports and new production redraws global gasoline and diesel trade flows.
As MRC informed previously, Shell’s presence in Japan spans more than 100 years and it remains an important LNG market for Shell’s upstream integrated gas business. It also remains an important market for Shell’s downstream business conducted in partnership with Showa Shell, including lubricants, chemicals and trading. Shell will continue to license its brand to Showa Shell for use in its retail business.
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
Idemitsu Kosan is a Japanese petroleum company. It owns and operates oil platforms, refineries and produces and sells petroleum, oils and petrochemical products. The company runs two petrochemical plants in Chiba and Tokuyama. The two naphtha crackers can produce up to 997,000 tonnes of ethylene per year.
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