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Press Release

Business Partnership Between Cosmo Oil Co. LTD and
Showa Shell Sekiyu K.K. in Yokkaichi Region

May 14, 2015
Cosmo Oil Co., Ltd.
Showa Shell Sekiyu K.K.

Cosmo Oil Co. LTD (President, Representative Director, Chief Executive Officer Keizo Morikawa, hereafter, Cosmo Oil) and Showa Shell Sekiyu K.K. (Tsuyoshi Kameoka, Representative Director, Chief Executive Officer, hereafter, Showa Shell) are pleased to announce the start of a business partnership between the Yokkaichi refinery of Cosmo Oil (processing capacity132,000 barrels per day, hereafter, Cosmo Yokkaichi) and Showa Yokkaichi Sekiyu Co., LTD, Yokkaichi Refinery (President, CEO, Jun Arai, processing capacity 255,000 barrels per day, hereafter, Showa Yokkaichi Oil), a subsidiary of Showa Shell, effective March 2017, and the companies agreed, as a result of meaningful discussions on measures to enhance competitiveness of refineries of both companies, that Cosmo Oil and Showa Shell will improve competitiveness through optimization of these refining facilities. The companies submitted a plan for effective use of crude oil and other matters to the Ministry of Economy, Trade and Industry (hereafter, METI), reporting this partnership as the way to comply with ”the second announcement of the Sophisticated Methods of Energy Supply Structures” (hereafter, post Kodoka-ho), and the plan has been accepted by METI.

1. Background

With domestic demand for oil in a structurally-downward trend, and a number of new refineries under construction overseas, notably in the Middle East and Asia, this will likely accelerate competition in Japan. Under this environment, Cosmo Oil and Showa Shell discussed optimization of facilities of both companies by forming a business partnership in the Yokkaichi Region, which will lead to improving the effectiveness of operations. Also, both companies believe that it will be more effective to comply with post Kodoka-ho together than on their own.

2. Overview of business partnership

  • (1) Cosmo Oil and Showa Shell will decrease crude oil processing capacity in Yokkaichi Region on the assumption that the demand for oil will decrease in future, and that both companies have to comply with post Kodoka-ho.
  • (2) Such capacity reduction for both companies will be realized by suspending operations of one of the toppers at Cosmo Yokkaichi. In addition, Showa Shell shall provide petroleum products and semi-finished petroleum products from Showa Yokkaichi Oil equivalent to Showa Shell’s requirement to comply with post Kodoka-ho for Cosmo Oil in Yokkaichi Region.
  • (3) By effective utilization of the residue processing units of both companies’ refineries, this will secure competitiveness of both companies and stable/sustainable supply through production of high-value added products and cost effectiveness.
  • (4) The companies will also discuss the possibility of forming a broader partnership with respect to off-site facilities such as product tankage.
  • (5) This business partnership is expected to become effective as of March 2017, and in the interim both companies will continue discussing the details on products trade and other relevant issues.
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