Japan Energy Corp., the oil refining unit of Nippon Mining Holdings Inc., said Thursday it is holding talks with Osaka Gas Co. and Itochu Corp. to combine their liquefied petroleum gas businesses.
The companies aim to complete talks for an LPG business merger by Sept. 30, Japan Energy said in a statement on its Web site. Itochu may take on the role of importing gas for the new alliance, Japan Energy said.
Japanese LPG importers and wholesalers are combining their operations to cut costs and compete with suppliers of liquefied natural gas, an alternative fuel. Showa Shell Sekiyu K.K. and Sumitomo Corp. said in December they will integrate their LPG businesses as early as April following an agreement in June by Mitsui & Co. and Marubeni Corp. to merge their LPG units.
"Japan's LPG industry is experiencing severe strain, given that competition between LPG and other alternative fuels is intensifying," Japan Energy said in its statement. "We need to form a new LPG alliance group and strengthen our competitiveness."
Japan's LPG demand growth may be as slow as 1 percent annually in the next three fiscal years, according to data from the Japan LPGas Association. By contrast, natural gas sales by the country's 215 distributors increased for a 29th year, by 4 percent in the 12 months that ended last March 31, led by industrial users, according to the Japan Gas Association.
Natural gas sales by the country's 215 distributors grew 4 percent in the year to March 31, 2007, marking the 29th consecutive year of gains.
Astomos Energy Corp., Japan's largest LPG distributor, was formed in December 2005 by the merger of Idemitsu Kosan Co.'s LPG unit, Idemitsu Gas & Life Co., with Mitsubishi Liquefied Petroleum Gas Co. and Mitsubishi Corp.'s LPG division. Idemitsu holds a 51 percent stake in the venture.