October 30, 2009 / 5:32 AM / 9 years ago

UPDATE 2-Nippon Oil, Nippon Mining to merge as JX from April

* Moves forward planned 400,000 bpd capacity cut by 1 year

* May move forward extra 200,000 bpd cut from March 2015

* Nippon Oil Pres: job cuts in oil business to be considered (Adds details)

By Osamu Tsukimori

TOKYO, Oct 30 (Reuters) - Nippon Oil Corp 5001.T, Japan’s top refiner, and smaller peer Nippon Mining Holdings Inc 5016.T said their merged JX Group would move forward by a year a plan to cut oil refining capacity by 400,000 barrels per day (bpd).

As a result of weak domestic demand, the new firm, which will have 38 percent of Japan’s refining capacity, will make the cut by March 2011. It also aimed to reduce an extra 200,000 bpd refining capacity by the end of March 2015.

Nippon Oil President Shinji Nishio, who will serve as chairman of the holding company JX Holdings Inc to be created in April, said the timetable for a 200,000 bpd cut may be pushed forward depending on oil demand.

Nippon Mining Holdings President Mitsunori Takahagi said the move to cut refining capacity by a third, or 600,000 bpd, at a time that the nation is faced with a 1 million bpd overcapacity would give it a significant edge over other rivals in cutting costs and making the most of its refining facilities.

A 60,000 bpd Toyama refinery that was scrapped earlier this year is part of the 400,000 bpd cut, and the firms may decide the details of refinery integration by the end of this year, Nishio said.

The two firms aim to become one of the world’s biggest total energy and materials companies by combining Nippon Oil’s strong refining and upstream business with Nippon Mining’s strength in metals and materials business.

For a factbox on the two companies, click: [ID:nT301643]

For graphic on birth of a giant in Japan oil industry click:

here

JOB CUTS?

Nishio said that job cuts in the combined oil business would be considered, adding that the firms have a total 8,000 employees in oil business. “I think about 7,000 may be good,” he told some reporters after a briefing.

Takahagi, who was nominated to be the president of JX Holdings, said his rough goal for the new firm was to earn about 40 percent of recurring profit in 2015 from non-oil business, such as metals, fuel cells and polysilicon for photovoltaic power generation.

Shareholders of Nippon Oil will get 1.07 share in a newly created holding company JX Holdings Inc for each Nippon Oil share, offering $4.23 billion for the smaller peer, the two firms announced on Friday.

Nippon Oil is the world’s second-biggest paraxylene supplier and Nippon Mining the fourth biggest. The combined firm will have an output capacity of 2.6 million tonnes per year (tpy), closing in on top supplier ExxonMobil (XOM.N).

Nippon Mining was formed in 2002 through a merger between Japan Energy Corp, the nation’s sixth-biggest oil refiner, and its largest copper smelter Nippon Mining & Metals. ($1=91.18 Yen) (Additional reporting by Taiga Uranaka and Chikako Mogi; Editing by Jeremy Laurence)

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