Japan's Idemitsu to boost stake in Fuji Oil to bolster energy transition cooperation

Japan's second largest refiner Idemitsu Kosan will boost its stake in refiner Fuji Oil to 13.04%, the company said March 19, in a move that will boost competitiveness in its bilateral oil products business and enhance cooperation toward 2050 carbon neutrality.

Under an agreement, Idemitsu will acquire all of Sumitomo Chemical's 6.46% stake in Fuji Oil on March 26, bringing its stake in the refiner to 13.04% along with its 6.58% stake and become the largest shareholder.

Idemitsu said it plans to acquire additional stakes in Fuji Oil and turn it into an equity-method affiliate -- investment representing ownership of 20% to 50% of the outstanding voting shares -- and it does not plan to buy further stake in Fuji Oil after making it the equity-method affiliate.

Following the deal, JERA, which buys low sulfur fuel oil from Fuji Oil for power generation, will be the second largest shareholder in the refiner with its stake of more than 8%, which will be followed by Kuwait Petroleum Corporation and the Saudi Arabian government holding over 7% each, said a Fuji Oil spokesperson.

While JERA's stake in Fuji Oil would be sufficient to turn it into an equity-method affiliate, an Idemitsu spokesperson declined to comment on whether Idemitsu would acquire JERA's stake in the refiner.

Idemitsu, in which Saudi Aramco has an over 7% stake, decommissioned its 120,000 b/d Yamaguchi refinery March 1, bringing down its total refining capacity to 825,000 b/d over five refineries in Japan.

Bilateral deal

Under a bilateral deal, Idemitsu currently lifts 60%-70% of Fuji Oil's oil products output from its sole 143,000 b/d Sodegaura refinery in Tokyo Bay that is located close to the former's 190,000 b/d Chiba refinery, the Fuji Oil spokesperson said.

As for crude procurement, both Idemitsu and Fuji Oil regularly purchase Abu Dhabi Murban crude in the spot market, according to Singapore-based trade sources with close knowledge of the light sour crude deals for Japanese end-users.

In addition, Idemitsu and Fuji Oil regularly purchased Iranian medium and heavy crude grades before sanctions against Iran. However, the two refiners have been resorting to other alternatives, including Upper Zakum, Qatar Marine, Banaco Arab Medium, as well as a few Ecuadorian grades to fill the Iranian supply gap post the sanctions.

In the area of energy transition, Idemitsu aims to establish 500,000 kiloliter/year or 3.14 million barrels/year of sustainable aviation fuel production capacity in Japan by 2030 after starting supply from the world's first 100,000 kl/year alcohol to jet technology-based SAF production plant at its Chiba complex in Tokyo Bay in 2026.

Fuji Oil said in April 2023, it received its first independently-certified low-carbon ammonia produced by SABIC Agri-Nutrients with feedstock from Aramco at its Sodegaura refinery from Saudi Arabia for co-fired power generation.