Japanese oil refiner Nippon Oil Corp. (NPOIY.PK) and Nippon Mining Holdings Inc., (NMHDF.PK) set to merge in April, said they will shut three oil refining units and cut capacity at another plant by March 2011 as fuel demand shrinks in the Japan, the world's second-biggest economy. The cuts amount to about more than 20% of their total capacity.
Demographic changes such as an aging population and a move to energy conservation have driven down fuel demand in Japan, making one-third of the country's refining capacity surplus. The two companies said they plan to reduce petroleum refining capacity by 400,000 barrels per day by the end of March 2011, with December 4, 2008 as the benchmark date.
December 4, 2008 was the date of the basic agreement of the business integration between the two companies. The companies plan to further reduce petroleum refining capacity by 200,000 barrels per day by end of March 31, 2015.
The companies noted that their refining capacity, which as of December 2008 was 1,792 thousand barrels per day, would thus be reduced to 1, 392 thousand barrels per day by the end of March 2011.
Nippon Oil said it will close three crude distillation units in Japan with a combined capacity of 204,000 barrels a day. The company will shut a 110,000 barrel-a-day crude distillation unit at the Mizushima plant, a 70,000 barrel-a-day unit in Negishi and a 24,000 barrel-a-day unit in Oita, according to the statement. Meanwhile, Nippon Mining will cut capacity at its refinery in Kashima by 21,000 barrels a day. The companies said that they have agreed upon the operational structure of oil refineries, manufacturing facilities and branch offices of JX Nippon Oil & Energy Corp to be established on July 1, 2010. The new company will operate eight oil refineries, three manufacturing facilities and ten branch offices throughout Japan. Further, the companies said that the branding to be used in the petroleum refining and marketing business after the business integration will be "ENEOS", in order to enhance the value of the branding and to better realize early the benefits of the business integration. "ENEOS" was coined from the words "ENERGY" and "NEOS," which means "NEW" in Greek.
NPOIY.PK last traded on December 24 at $9.25, down $0.15 or 1.60% on a volume of 2,601 shares.
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