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Japan’s Eneos to scrap Wakayama refinery by 2023

25 Jan 2022 11:14 GMT
Japan's Eneos to scrap Wakayama refinery by 2023

Tokyo, 25 January (Argus) — Japan's biggest refiner Eneos will scrap its 127,500 b/d Wakayama refinery in the western Kansai region by October 2023 because of falling demand.

The company's refining capacity is expected to drop to 1.62mn b/d by then, after another planned 120,000 b/d crude distillation unit (CDU) shutdown at its 270,000 b/d Negishi refinery this October.

Eneos announced today that it will permanently shut down its Wakayama refinery because of a decline in domestic demand for oil products, which was worsened by the Covid-19 pandemic. Fiercer international competition has also pressured the company.

Eneos also cut its capacity by 61,000 b/d in October last year after scrapping its 115,000 b/d Osaka refinery. The company increased the capacities of six CDUs at its Kawasaki, Sakai, Mizushima, and Kashima refineries when it shut the Osaka plant, but it did not disclose if it will make a similar move after the Wakayama closure.

Eneos predicts Japanese demand for oil products in 2040 will be half that of 2018's demand, saying that the Wakayama closure is part of its plan to consolidate capacity. Japan's domestic consumption has been declining by 2-3pc/yr, oil industry lobby group the Petroleum Association of Japan said.

The country's overall oil product consumption in 2020 was around 2.6mn b/d, down by 11pc from 2.9mn b/d in 2018, data from Japan's trade and industry ministry show.

Eneos is considering transforming the Wakayama refinery site into a mega-solar or biomass power generation plant, or allowing other companies to use the site, but a decision has not yet been made.