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2008年12月 8日 (月)

社説:石油会社統合 和製メジャーにつながるか

(Mainichi Japan) December 7, 2008

Will new merger result in big oil's first major Japanese player?

社説:石油会社統合 和製メジャーにつながるか

Nippon Oil Corp. and Nippon Mining Holdings Inc. have announced plans to combine their operations. Nippon Oil is currently the largest domestic oil distributor in terms of revenues, and Japan Energy Corp., a subsidiary of Nippon Mining, is the nation's sixth largest oil distributor. The new entity that will be formed after the merger can expect sales of more than 13 trillion yen annually, and will enter the ranks of the world's largest oil companies, or majors.


The two firms plan to establish a joint holding company in October next year, and will set up enterprises in April 2010 in three business sectors -- oil refining and sales, oil field development, and mining -- to fully integrate their operations in each sector.


Although the price of oil had been soaring prior to the rapid slowdown of the global economy, it has plunged in the wake of the crisis and is expected to fall further as economic conditions continue to deteriorate. The two companies decided to combine their operations in order to improve efficiency and to strengthen their financial position.


The excess capacity of the domestic oil industry has led to excessive price competition between gas stations and reduced the profitability of oil companies. Since oil companies are unable to earn adequate profits from downstream activities, they have not been able to invest sufficiently in upstream activities such as oil field development. We hope that the combination of these two firms will bring about a structural transformation of the Japanese oil industry. The new company to be formed after the merger will rank 8th globally in terms of revenues, but still won't come close to the world's top players in terms of profitability.




To boost profitability, it will be important to take advantage of the merits stemming from consolidation to promote efficiency, and to assert control over the pricing of gasoline and other oil products. The two companies operate around 13,000 gas stations and account for 36 percent of domestic gasoline sales. Nippon Oil distributes gas through its ENEOS gas stations, and Nippon Mining through Japan Energy's JOMO gas stations. The new company will have twice the number of gas stations and twice the market share of the No. 2 oil distributor, Exxon Mobile Corp.



The new company will seek to reap economies of scale by closing and consolidating unprofitable refineries and gas stations, which will boost its ability to negotiate prices, and to pursue overseas drilling projects. Domestic oil companies already have tie-ups in areas such as distribution and refining, but the merger of Nippon Oil and Nippon Mining raises the possibility of a new round of realignment in the industry.



The oil industry is operating in an increasingly harsh environment, facing challenges that include, in addition to the economic downturn, a declining birth rate, declining car use among young people, and regulations on greenhouse gas emissions.


This does not change the fact that oil remains an important resource. In a time of rising resource-nationalism, Japan must take measures to ensure a stable supply of oil. Japan needs oil companies that have a solid business foundation, and that are capable of pursuing the development of fuel cells and other new energy technologies and acting globally.


Whether the merger of Nippon Oil and Nippon Mining will lead to the birth of the first Japanese major player is still unclear, but we would like to view it as a positive step in that direction.


毎日新聞 2008125日 東京朝刊


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