Japan: Idemitsu, Shell agree to merge amid weak oil market
Japanese oil distributors Idemitsu Kosan Co. Ltd. and Showa Shell Sekiyu K.K. have agreed to merge amid difficult market situation in Japan, reported the Japan Times.
Japan’s oil market is in a complicated situation as it experiences a prolonged oversupply. Domestic demand is forecasted to decline further in the light of energy-efficient vehicle production. Falling oil prices have also affected oil companies’ revenues.
“As one company, our natural synergies will help us cut costs and increase the value of our products in a way we couldn’t if we were two,” said Susumu Nibuya, director at Idemitsu.
A Memorandum of Understanding for the Business Integration has been signed observing the spirit of equality between the two companies, according to an ARC Advisory Group report.
The merged company will have some ¥8 trillion ($65 billion) in sales, making it the second biggest refinery operator in Japan, according to Reuters. It is aiming to earn 50bn yen in five years.
The two companies, moreover, operate 7 oil refineries and about 7,000 service stations.
However, the refineries will not be integrated as they complement and both have high level of competitiveness, according to Hiroshi Watanabe, an executive officer at Showa Shell.
Nibuya likewise assured in a Nikkei Asian Review report that the management will "not force staff reductions to suit the company's plans."
A binding definitive merger agreement will be finalized and the combined company is expected to start operating between October 2016 and April 2017.
