Japan's KPI to cut Chiba refinery capacity by 13 pct

TOKYO, March 24 Mon Mar 24, 2014 2:50am EDT

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TOKYO, March 24 (Reuters) - Japanese refiner Kyokuto Petroleum Industries (KPI) will cut capacity of its Chiba refinery by 13 percent, or 23,000 barrels per day (bpd), on March 31 to meet government norms on improving efficiency, its parent TonenGeneral Sekiyu said.

The Japanese government imposed a law in 2010 requiring decades-old refineries to either scrap inefficient crude distillation units (CDUs) or invest in heavy residue cracking units by the end of March 2014 to better compete with Asian rivals.

TonenGeneral, the nation's second-biggest oil firm by refining capacity, said last month it was examining cutting capacity of the sole 175,000 bpd CDU at KPI's Chiba refinery by 23,000 bpd.

TonenGeneral also said its previously flagged plans to scrap the 67,000 bpd No. 1 CDU at its Kawasaki refinery and the 38,000 bpd No. 2 CDU at its Wakayama refinery, as well as plans to raise capacity of a residue hydrocracking unit at Kawasaki to 34,500 bpd from 31,000 bpd would all take effect on March 31.

The TonenGeneral group will meet the requirements under the mandate through these four steps, a company spokesman said on Monday.

The refining law comes as a falling population and a shift to less polluting vehicles has cut demand in Japan for everything from gasoline to petrochemicals used to make nappies, leading to surplus capacity at refiners, estimated at around 20 percent, or more than 1 million bpd, in 2010. (Reporting by Osamu Tsukimori; Editing by Muralikumar Anantharaman)

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