RPT-UPDATE 2-Nippon Oil, Nippon Mining say mulling merger

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By James Topham

TOKYO, Dec 4 (Reuters) - Japan's top refiner Nippon Oil Corp (5001.T) and sixth-ranked Nippon Mining Holdings Inc (5016.T) said they are considering a merger to better compete amid sliding prices and slower demand.

The merger, which a Nippon Mining spokesman said could be announced on Thursday after board meetings planned at both firms, would create the world's eighth-largest oil major.

Both companies issued statements saying they were considering a merger but that nothing concrete had been decided, responding to a report in the Nikkei business daily.

Major refiners in Japan, the world's third-biggest oil consumer, have been slashing crude refining plans as the financial crisis has weakened domestic demand and hurt the market for exports. [ID:nT146190]

The global economic slowdown has curbed industrial activity, exacerbating a slowdown in oil demand caused by an ageing population and a shift towards greener energy sources.

Japanese oil product sales in October tumbled to their lowest level for the month in 20 years as distress in the financial system continued to eat into energy demand. [ID:nT137450]

Nippon Oil's operations and Nippon Mining units Japan Energy Corp and Nippon Mining & Metals Co are to be reorganised to create three entities specialising in oil refining and sales, oil development, and metals, all operating under a new holding company, the Nikkei said.

Details such as the merger ratio, the merged company's name and the executive lineup have yet to be decided, the newspaper said.

With estimated combined group sales of 13.15 trillion yen ($141 billion) based on forecasts for the business year ending next March, the merged company would become the world's No.8 oil major, the Nikkei said.

Among Japanese companies, it would be fourth in terms of sales, after Toyota Motor Corp (7203.T), Mitsubishi Corp (8058.T) and Mitsui & Co (8031.T).

Nippon Oil plans to cut its crude runs by 18 percent in December from a year ago and has said it may keep refining less until January if demand stays weak. [ID:nT146190]

The company halted some operations at its Mizushima refinery in western Japan from Nov. 14 for at least a month. [ID:nT274236] ($1=93.29 Yen) (Additional reporting by Nathan Layne; Writing by Hugh Lawson; Editing by Michael Watson)