Eric Watkins
Senior Correspondent
LOS ANGELES, July 18 -- Japan's Cosmo Oil Co. and Idemitsu Kosan Co. are taking steps to increase or start exports of products such as gasoline, diesel fuel, and kerosine to the US—California in particular.
Both firms are targeting California where—according to a University of California report authored by Severin Borenstein, James Bushnell, and Matthew Lewis—demand for gasoline is increasing, and refining capacity is stretched.
California also has higher prices because the low-polluting gasoline blend required by state rules is made only by 13 in-state refineries, according to the report, issued in May.
Just ahead of that report, Cosmo in April began testing the market by selling diesel fuel that complies with California's standards after securing its own unloading tanks in the suburbs of Los Angeles.
For the first time, Cosmo began selling diesel to local retailers, having before sold to US oil companies only through spot deals.
Cosmo hopes to increase its exports to the US to 700,000 kl. That's about 2% of its domestic sales and represents a three-fold increase of its exports to the US over the previous fiscal year.
Meanwhile, Idemitsu, which intends to start exporting diesel and kerosine after securing its own receiving tanks in Los Angeles, plans to set up a sales office in the city by September.
As part of its venture, Idemitsu plans to install pipelines to connect its tanks to facilities where its products will be delivered to retailers.
Japan's oil industry is thought to have refining capabilities that exceed demand by about 800,000 b/d or about 5% of US demand.
In May, Japanese oil companies were planning to increase exports of products by as much as 50% this year due to a decline—for the fourth year running—in domestic demand for fuel oil (OGJ Online, May 8, 2007).
According to California's Energy Commission, the state currently imports more than 10% of its gasoline, and those imports are expected to grow to about 20% by 2010, so the outlook for the Japanese export strategy appears strong.
Contact Eric Watkins at [email protected].
