Idemitsu, Showa Shell to Cut Oil Refining on Demand

By Michio Nakayama and Shigeru Sato

Nov. 28 (Bloomberg) -- Idemitsu Kosan Co., Japan’s second- largest oil refiner, and Showa Shell Sekiyu K.K. will cut crude oil processing in the quarter ending Dec. 31 as the nation’s demand for gasoline and other petroleum products declines.

Idemitsu will process 15 percent less crude, or 7.4 million kiloliters (505,935 barrels a day), in the three-month period, the Tokyo-based refiner said in a statement on its Web site. Today’s cut is deeper than the 14 percent reduction proposed in September. Showa Shell, the Japanese unit of Royal Dutch Shell Plc, said it will cut processing by 8 percent.

The move follows an announcement yesterday by Nippon Oil Corp., the country’s biggest refiner, that it will reduce output in December because of weak demand. Gasoline demand fell for a sixth month in October as the recession accelerated the decline in automotive fuel sales. Crude oil imports for the month dropped 7.7 percent from a year earlier, the trade ministry said today.

Showa Shell will process a total of 6.66 million kiloliters of crude oil during the fourth quarter, it said on its Web site. It will cut output in November and December by an additional 100,000 kiloliters from what it originally planned.

The refiner will quadruple exports in the fourth quarter to 850,000 kiloliters. The company will reduce fuel shipments to the local market by 17 percent.

Gasoline Sales

Domestic gasoline sales dropped 7 percent from a year earlier to 4.68 million kiloliters last month, the Ministry of Economy, Trade and Industry said in a monthly oil report today. Demand for all refined oil products slipped 13.1 percent to 15.9 million kiloliters.

Idemitsu processed 2.27 million kiloliters of oil in October, 19 percent down from last year. It will process 2.24 million kiloliters this month, down 23 percent, and 2.89 million kiloliters in December, down 4 percent, spokeswoman Maki Yusunaga said by phone.

The refiner will lower wholesale fuel prices in the week starting Dec. 1, it said in the statement. Gasoline prices will be cut by 3.6 yen (4 cents) a liter and kerosene will be reduced by 1.5 yen.

To contact the reporter on this story: Michio Nakayama in Tokyo at Mnakayama4@bloomberg.net.