Photo/Illutration The Yamaguchi refinery of Seibu Oil Co. (Provided by Seibu Oil Co.)

Oil giant Idemitsu Kosan Co. will close one of its group company’s refineries and slash gasoline production by about 10 percent in anticipation of declining demand for fossil fuels.

And in a sign of the times, it will consider eventually turning it into an energy production site that does not produce carbon emissions.

The major petroleum company announced on June 14 that the Yamaguchi refinery operated by Seibu Oil Co. will stop operations sometime around March 2024.

Idemitsu Kosan, which is the top shareholder of Seibu Oil, announced that it would also buy the stakes held by other shareholders to make Seibu Oil a wholly owned subsidiary ahead of the refinery closure.

At a news conference in Ube, Yamaguchi Prefecture on June 14, Satoshi Handa, the president of Seibu Oil, explained that the company’s 435 employees would be assigned new jobs at Idemitsu Kosan group companies.

He indicated that Seibu Oil would not ask any employee to take early retirement.

Idemitsu Kosan is making the move now because the recent surge in gasoline prices has led to huge profits. In the fiscal year that ended in March, the company recorded net profits of 279.4 billion yen ($2.1 billion), an eightfold increase over the previous year.

Susumu Nibuya, an executive vice president at Idemitsu Kosan, held a separate news conference the same day in Tokyo and explained that there are several reasons behind the Yamaguchi refinery closure.

Those include the aging and declining Japanese population, changes in lifestyles due to the novel coronavirus pandemic, the global move away from fossil fuels and the plunging demand for petroleum products.

The Yamaguchi refinery is one of six currently operated by the Idemitsu Kosan group.

Nibuya indicated that the Yamaguchi site would not be the only refinery to close in the future.

The Idemitsu Kosan group currently processes about 945,000 barrels of petroleum a day, but Nibuya said the company will have a processing surplus of about 300,000 barrels a day by 2030.

He said by 2050, demand for petroleum products would decrease by 60 to 70 percent from 2010 levels.

The industry has shuttered more than a dozen refineries in recent years.

According to the Petroleum Association of Japan, while there were 36 refineries throughout Japan as of the end of March 2001, the number had decreased to 21 by the end of March 2022.

Nibuya said in the future, Japan will likely only need five or six refineries in total.

Idemitsu Kosan is also contemplating moving into new forms of energy production.

Once operations end at the Yamaguchi refinery, the company is considering turning the plot of 1.93 million square meters into a base for hydrogen or ammonia by the late 2020s. Burning those materials does not lead to carbon dioxide emissions.

(This article was written by Junichi Miyagawa, Kazuya Omuro and Junichiro Nagasaki.)

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