Japan Energy Corp. and Showa Shell Sekiyu K.K. said Friday they have reached a basic agreement to integrate their oil refining and distribution operations.
It is estimated the integration will save the companies up to 30 billion yen a year, the two companies said.
The agreement calls for putting the two firms' oil refining operations under a joint company to be formed by September, with an eye to cutting combined refining capacity by 150,000 to 200,000 barrels per day, effective at the end of March 2001.
It has not yet been determined what refineries will be closed, the two companies said.
Japan Energy currently has five refineries, while Showa Shell operates four. Their combined capacity is 1.2 million barrels a day.
The agreement also envisages Japan Energy and Showa Shell integrating product distribution under a joint company they set up Wednesday.
The two companies will also consider integrating the production and distribution of lubricant oil.
Akihiko Nomiyama, president of Japan Energy, said that if the planned integration of operations proves successful, the two firms will consider combining more operations.
He added, however, that the companies have no intention of merging.
In a separate announcement Friday, Japan Energy said it will chalk up a consolidated net loss of 43 billion yen in fiscal 1999, a drastic downward revision from its earlier projection of a 4 billion yen profit.
The revision is due to an extraordinary loss of 74 billion yen the company will register to write off a shortage in reserves for retirement benefits, restructuring costs and other efforts to strengthen its financial standing.