Refiners Nippon Oil, PetroChina expand ties

TOKYO - Nippon Oil Corp., Japan’s biggest refiner, has agreed to expand ties with PetroChina, tightening bonds with Asia’s top oil producer and aiding efforts to boost exports.

By (Reuters)

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Published: Fri 9 Mar 2007, 6:21 PM

Last updated: Sat 4 Apr 2015, 10:47 PM

The move is the latest by Nippon Oil to take advantage of expanding overseas markets as domestic demand declines, and comes less than two months after it struck an alliance with South Korea’s SK Corp

“Nippon Oil’s refining capacity is in surplus in the domestic market, so they are keen on export and its exports will probably continue to rise for the next two years,” said Ken Hasegawa, a manager at commodities futures broker Himawari CX in Tokyo.

Under the deal, the two firms will supply each other with petrochemical products and gas in the next business year, on top of an expanded deal for supplying oil products to China’s number-two refiner, Nippon Oil said on Friday.

The Japanese refiner said it will get 100,000 tonnes of liquefied petroleum gas (LPG) a year, while providing an undisclosed amount of propylene, a basic building block for the chemical sector.

A company source said Nippon Oil will supply 20,000 tonnes per year (tpy) of propylene to PetroChina.

The deal, signed by top executives of the two firms earlier in the day in Kagoshima, southern Japan, will build on years of cooperation under which Nippon Oil leased out a small part of its capacity to Chinaoil, trading arm of PetroChina, to process crude in Japan and supply diesel, jet fuel and fuel oil to China.

The Japanese firm will also refine 50,000 barrels per day (bpd) of crude for Chinaoil in the financial year from April, up from 40,000 bpd now. The firm is also refining 40,000 bpd for Japan’s Idemitsu Kosan Co. Ltd.

The Nippon Oil group has a capacity to refine 1.2 million bpd of crude, or about a quarter of Japan’s total.

Japan eyes overseas

Refiners in Japan, which slipped behind China to become the world’s third-largest oil consumer several years ago, are investing and seeking partnerships to help them gain access to overseas markets that they have rarely if ever tapped.

The deal also symbolises China’s growing demand for oil products.

“We need to boost our resources, both for trading and to meet Chinese demand,” said a Beijing-based PetroChina trader.

PetroChina, via its trading arm Chinaoil, is poised to boost its trading portfolio when its 14.5 million-barrel tank storage in Singapore, jointly owned with top Asian independent trader Hin Leong, starts operations around end-2007.

The PetroChina trader said the deal would follow last year’s model to process mainly Middle Eastern crude priced off a basket of several grades such as Oman, Dubai and Murban.

In January, Nippon Oil and South Korea’s top refiner SK Corp. formed a cross shareholding and business alliance to boost their competitiveness.

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