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Japan's Idemitsu, Showa Shell start joint crude procurements under alliance

Tokyo — Japan's Idemitsu Kosan and Showa Shell said Tuesday that the refiners inMarch began joint crude procurements as part of a plan to optimize operationsunder their alliance introduced a year ago.

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The move is the latest in a series of efforts under the alliance agreedlast May aimed at strengthening the companies and helping them to compete in amarket facing a drop in demand for oil products.

The business alliance came after Idemitsu Kosan's acquisition of 31.3% ofShell's stake in Showa Shell in December 2016, following the green light fromthe Japan Fair Trade Commission for the consolidation between Idemitsu Kosanand Showa Shell.

Speaking at an earnings press conference in Tokyo, senior Idemitsu Kosanofficials said Tuesday that the company was not overly concerned about thepotential impact from the recent US decision on sanctions against Tehran asits Iranian crude imports are negligible.

"At the moment, we are not concerned because our [Iranian crude]procurement volumes are extremely small," according to Noriaki Sakai, generalmanager of the company's treasury department.

Koji Tokumitsu, general manager of Idemitsu Kosan's Investor RelationsOffice, said Idemitsu's Iranian crude imports account for less than 1% of itsprocurements, adding that it will consider how to deal with Iranian crudeunder its joint procurement arrangement with Showa Shell.

"We are already jointly procuring crude oil [with Showa Shell],"Tokumitsu said. "Based on the latest situation, we will consider in detail howwe will deal with Iranian crude procurements."

Showa Shell declined to comment Tuesday on its current level of Iraniancrude imports. But a senior National Iranian Oil Company official told S&PGlobal Platts last year that Showa Shell was the only Asian company NIOC woulddirectly discuss prices with.

US President Donald Trump decided last week to withdraw from the Irannuclear deal and re-impose sanctions that have been frozen since January 2016as part of the Joint Comprehensive Plan of Action.

International buyers of Iranian oil have until November 4 to wind downcontracts before the US re-imposes sanctions on the oil, energy, shipping andinsurance sectors, according to a US Treasury Department fact sheet.

The US will also consider allowing countries to continue importingIranian crude as long as they demonstrate that they are significantly reducingthose volumes every 180 days, the fact sheet showed.

-- Takeo Kumagai, takeo.kumagai@spglobal.com

-- Gawoon Philip Vahn, Philip.Vahn@spglobal.com

-- Edited by James Leech, james.leech@spglobal.com