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Nippon Oil strikes refining deal
TOKYO, Japan (CNN) -- Japan's largest oil company, Nippon Oil Corp., will team up with Idemitsu Kosan Co. on refining, in an effort to slash operating costs. Higher crude oil prices have been hurting the bottom line of Japan's refiners, and now both companies are restructuring their operations as the oil industry in Japan goes through consolidation. Nippon Oil has signed a 10-year deal to supply Idemitsu, the country's third-largest refiner, with oil products such as kerosene, jet fuel, gasoline and fuel oil. Idemitsu will supply Nippon Oil with liquefied petroleum gas and naptha. According to one report, the partnership will save the two companies more than 10 billion yen ($81 million) a year in operating costs. Streamlining operationsNippon Oil will expand capacity at its Mizushima refinery in western Japan, to produce oil for Idemitsu. But it is cutting capacity at refineries in Negishi, on Tokyo Bay, and in Osaka. Idemitsu will shut its Hyogo Prefecture refinery in western Japan, a move it says will save it around 6 billion yen ($48.6 million) a year. The 190 workers will be shifted to other operations. It also plans to shut its Okinawa Prefecture refinery in the spring of 2004. Privately held Idemitsu plans to go public in fiscal 2006. But it has a heavy debt load of 1.4 trillion yen in obligations, and is trying to cut that below 1 trillion yen to reassure prospective investors. Nippon Oil already has a partnership with Cosmo Oil, so the tieup with Idemitsu suggests all three companies may seek a broader alliance. Nippon Oil stock closed up 0.21 percent at 473 yen, outstripping a 0.18 percent gain in the Topix and a 0.27 percent decline in the Nikkei average. Venezuela effect being feltOil prices have been relatively stable in the northern autumn at $30 a barrel, and might decline soon if a war is averted in the Persian Gulf. But the Organization of Petroleum Exporting Countries (OPEC) is reportedly mulling a move to raise output quotas in a bid to curb actual production, propping up prices. (Full story) The political turmoil in OPEC member Venezuela, the world's fifth-largest oil producer, also threatens to drive oil prices higher. A general strike is in its second week, crippling the oil industry. But the government agreed Monday to discuss the timing of presidential elections. Hundreds of supporters of President Hugo Chavez demonstrated on Monday outside several television stations in the capital, Caracas, against what they claim is biased coverage of the crisis. January crude increased 27 cents to $27.20 a barrel in New York on Monday as a result of the instability. An increase in oil prices would hurt the major oil-importing economies of East Asia, particularly Japan, South Korea and Taiwan.
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