Aramco, Showa Shell agree to solar-cell joint venture

Showa Shell Sekiyu KK’s wholly owned subsidiary Showa Shell Solar KK and Saudi Aramco have agreed to explore “the possibility” of engaging in a small-scale electric power generation business using solar power.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, June 25 -- Showa Shell Sekiyu KK’s wholly owned subsidiary Showa Shell Solar KK and Saudi Aramco have agreed to explore “the possibility” of engaging in a small-scale electric power generation business using solar power.

“Following basic investigations based on this agreement, pilot plants will be built and operated to test and verify technologies particularly those on connecting to the existing local independent grid (micro grid),” Showa Shell said.

Under the initial plan, Aramco and Showa Shell will choose several sites in Saudi Arabia to construct electric power plants capable of generating 1,000-2,000 kw, with each facility supplying electricity to 200-400 buildings, such as homes and schools.

The output from the plants, which will total 10,000 kw at a cost of several billion yen, will find support from Tokyo Electric Power Co. in electric power generation and in the operation of power distribution equipment.

The project will use copper indium diselenide solar cells, which are currently produced at a Showa Shell factory in Japan’s Miyazaki Prefecture. These cells are cheaper to make than conventional cells because they do not contain silicon.

“Based on the result of the tests and verifications, the project will proceed to a full-scale commercialization phase in Saudi Arabia,” the Japanese firm said.

However, Showa Shell’s ambitions go well beyond Saudi Arabia, according to Japan’s Nikkei Weekly which recently reported that, “Showa Shell aims to tap demand for energy in emerging countries in the Middle East, Africa, and Asia by leveraging the Saudi Arabian state-run oil company's strong finances and regional presence.”

In May, Showa Shell announced a 5-year business plan and said it aims to capture about 10% of the global solar cell market by 2014. Global demand for solar cells has been rising rapidly over the past few years, and Showa Shell expects demand to reach 13 Gw in 2013.

The firm targets an overall pretax profit of ¥100 billion in fiscal 2014, of which half is to come from solar cell operations. For its oil business, which is facing declining domestic demand, Showa Shell is also targeting ¥50 billion in ordinary profit in fiscal 2014.

However, at the time, Arai and Showa Shell Chairman Shigeya Kato said the company may consider a reduction in its group refining capacity of 515,000 b/d in 2010-14 as the Japanese government expects domestic oil demand to fall on an average of 3.5%/year over the next 5 years.

In contrast, according to a report by analyst Global Insight, the Japanese government predicts the country's usage of solar power “is likely to grow tenfold up to 2020, while other regional markets such as China, Bangladesh, and India are also planning significant increases in solar panel technologies.”

Under its new business plan, Showa Shell said it will raise its solar cell production capacity to about 1 Gw/year from the current 80 Mw/year—an expansion that is expected to help generate about half of the company's pretax profit.

Showa Shell has one solar cell factory with a capacity of 20 Mw/year, and recently built a 60-Mw electric power plant in Kyushu. The firm has also announced plans to build a third factory at a cost of about ¥100 billion, with the site yet to be determined.

Showa Shell Solar is a 100% subsidiary of Showa Shell Sekiyu. Aramco has a 15% stake in Showa Shell Sekiyu, Japan's fifth largest refiner, which is 35% owned by Royal Dutch Shell PLC.

Contact Eric Watkins at hippalus@yahoo.com.

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