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Gas station, refinery closures loom over tank law

Kyodo

Declining demand for gasoline and other petroleum products as well as changes in the legal framework governing the industry may prompt the closure of gas stations and refineries in the months ahead.

Under the revised Fire Service Law, by the end of the month, gas stations that installed storage tanks 40 or more years ago will be required to either refurbish or replace them.

The measure is a costly requirement for owners of small stations and might inconvenience drivers whose neighborhood stands are shut down.

A number of refineries are meanwhile closing because of a law enforced in 2009 to improve their international competitiveness. The trend is generating fears about jobs and local economic problems, as well as worries about how to supply fuel in the event of a disaster.

Demand for gasoline and other fuel oils has been dropping recently due to the increasing availability of hybrid and other highly fuel-efficient vehicles, and an overall decline in vehicle ownership in general, especially among young people.

According to the Petroleum Association of Japan, demand shrank to around 200 million kl in fiscal 2011 from around 250 million kl in fiscal 1999.

The Agency for Natural Resources and Energy, a branch of the Ministry of Economy, Trade and Industry, said the number of gas stations in Japan fell to around 38,000 on March 31, 2012, from around 60,000 at the end of fiscal 1994.

The revised Fire Service Law, which took effect in February 2011, requires underground tanks at gas stations 40 or more years old to be refurbished with oil leak sensors and structurally reinforced, or replaced within two years.

Station owners risk losing their licenses if they fail to comply.

The Fire and Disaster Management Agency said 61 oil leaks and other accidents linked to such obsolete tanks were reported in 2011. The agency has also been telling station owners to take steps against corrosion.

Many stations own more than one tank — one for gas and another for diesel, for instance. An industry official says it will cost around ¥7.5 million to refurbish three tanks.

Apparently due to the cost, renovations or replacements had been made for only around 30 percent of all tanks as of Sept. 30.

In a recent industry survey, 7.5 percent of around 500 owners polled said they were planning to close because of the stricter tank regulations.

The remainder may undertake last-minute work with the help of central government subsidies that allow up to about two-thirds of the renovation cost to be offset if work is undertaken by the end of January. But the government has decided to offer aid for refurbishing tanks reaching 40 years of age after Feb. 1 as well.

An industry official said many of the small owners with old tanks are elderly and likely to give up their stations altogether.

Many gas stations also supply kerosene for heating. In cold regions, closures will inconvenience residents who rely on them for their winter fuel.

Meanwhile, wholesalers are paring refinery and processing facilities amid falling sales. Japan’s refinery capacity is projected to drop by around 10 percent by the end of March 2014 from around 4.48 million barrels at the end of October.

Under the 2009 law for enhancing competitiveness, refineries must opt either for trimming capacity by March 2014 or for investing in enhanced refinery standards.

Many are cutting capacity instead, given fuel demand is slowing.

Cosmo Oil Co. said it will close its Sakaide refinery in Kagawa Prefecture in July, and Idemitsu Kosan Co. will stop processing crude at its Tokuyama refinery in Yamaguchi in March 2014.

JX Nippon Oil & Energy Corp., the nation’s largest wholesaler, said it is halting crude processing at its Muroran refinery in Hokkaido at the end of March 2014.