UPDATE 1-Japan's Cosmo Oil to work with Spain's CEPSA

Tue Jan 21, 2014 5:08am EST

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(Recasts to cite Cosmo after its announcement)

TOKYO Jan 21 (Reuters) - Japanese oil refiner Cosmo Oil Co and Spain-based Compania Espanola de Petroleos (CEPSA) have agreed to work together on crude and natural gas development, the Japanese company said on Tuesday.

The agreement expands overseas investment opportunities for Cosmo, which has been losing money in its domestic downstream business due to falling oil demand as Japan's population declines and because of a series of refinery outages.

The tie-up deepens cooperation with Abu Dhabi's state-owned investment vehicle International Petroleum Investment Co (IPIC), which owns all of CEPSA and is the biggest shareholder in Cosmo, with a 20.8 percent stake.

The companies plan to work together in the Middle East, where Cosmo has experience, and in North Africa and South America, where CEPSA is active, the Japanese refiner said in a statement.

The companies will also seek to develop natural gas fields, Cosmo said.

Cosmo has 495,000 barrels per day (bpd) of refining capacity, while CEPSA refineries total 527,000 bpd, the statement said.

Koji Moriyama, Cosmo's general manager of corporate planning, said the alliance does not involve a capital tie-up. It will last an initial two years with automatic annual extensions, he said.

He told reporters that Cosmo Oil has no experience in gas development and that the two firms could work jointly on some projects if the fields have oil and gas reserves, adding that it's possible to swap stakes in some existing projects.

CEPSA has recently started exploring two deep-water blocks offshore Brazil that it acquired last year. (Reporting by Osamu Tsukimori; Editing by Aaron Sheldrick and Tom Hogue)

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