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Brazilian state-owned oil company Petrobras is in talks to buy refiner Nansei Sekiyu K.K., sources close to the negotiations said Friday.

Petrobras’s aim is to refine Brazilian crude in Japan for sale here as well as in the booming markets of China and other Asian countries, the sources said.

The Okinawan refiner is owned 87.5 percent by TonenGeneral Sekiyu K.K., a unit of U.S. oil giant Exxon Mobil Corp., with the rest held by trading house Sumitomo Corp.

The price and other acquisition specifics are expected to be worked out later.

Petrobras, formally named Petroleo Brasileiro SA, has been developing undersea oil fields and raised its crude oil processing capacity to about 1.8 million barrels a day, sufficient for nearly all Brazil’s oil needs. The firm is now gearing up for expansion abroad.

Nansei Sekiyu is falling behind its rivals in cost competitiveness because of its small and aging production facilities. Petrobras on the other hand thinks its location will provide an ideal launchpad for exports in Asia.

The Brazilian firm is apparently planning a state-of-the-art renovation for Nansei’s facilities to produce petrochemicals because its high-viscosity heavy oil requires more sophisticated processing than available at the Japanese company, industry observers say.

In that light, Nansei has been targeted for takeover. Oil demand in Japan is on the decline, and its combined crude oil refining capacity stands at some 4.8 million barrels a day against an estimated demand for petroleum products of only 4 million barrels.

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