Japan's Eneos to close Chita petrochemical plant in Oct 2021

Credit: REUTERS/ISSEI KATO

Japan's biggest oil refiner Eneos Holdings Inc said on Tuesday it planned to stop production of petrochemical products at its Chita plant in central Japan in October next year, citing falling local demand and stronger competition in Asia.

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TOKYO, Oct 27 (Reuters) - Japan's biggest oil refiner Eneos Holdings Inc 5020.T said on Tuesday it planned to stop production of petrochemical products at its Chita plant in central Japan in October next year, citing falling local demand and stronger competition in Asia.

The company will hold talks with rival Idemitsu Kosan Co Ltd 5019.T to transfer some of its production facilities at the plant, including those for paraxylene, to Idemitsu, it said in a statement.

The end of production at the Chita plant would reduce Eneos' paraxylene capacity by 400,000 tonnes a year, leaving it with a total paraxylene output capacity of more than three million tonnes a year, Eneos executive vice president Junichi Iwase said.

"We will continue to review our production and supply structure to reflect changing environment," Iwase told reporters in Tokyo, without elaborating further.

Eneos plans to keep all employees of Chita plant through transfer to other locations, he added.

Four of Japan's biggest refiners have merged into two in recent years and cut operations as they seek business from a shrinking, aging population that consumes less fuel because of more efficient vehicles and gasoline-electric hybrids.

The COVID-19 pandemic has piled on the pressure, collapsing fuel demand, especially in jet fuel.

Eneos Chairman Tsutomu Sugimori said last week that demand of crude products could decline more rapidly than it had anticipated as a result of the pandemic and refiners would need to think about their production capacity and structure to reflect the change.

Eneos, formerly JXTG, unveiled last year its long-term strategy with an assumption that domestic oil demand would halve by 2040, or fall 2% annually.

(Reporting by Yuka Obayashi; Editing by Sam Holmes and Rashmi Aich)

((kiyoshi.takenaka@thomsonreuters.com; +81 3 4563 2788;))

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