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Taiyo Oil's Opinion on the Basic Approach to Revising the Sophisticated Methods of Energy Supply Structures Notice

The Petroleum and Natural Gas Subcommittee of the Natural Resources and Fuel Committee of the Advisory Committee for Natural Resources and Energy held on March 28, at which the Ministry of Economy, Trade and Industry (METI) set out its opinions regarding the basic approach to revising the Sophisticated Methods of Energy Supply Structures notice. The following sets out those basic matters covered by those opinions that Taiyo Oil considers to be of particular importance.


METI is seeking (1) a reappraisal of the definition of “raising equipment ratio” in ways that focus not only on capability at the numerator level to crack heavy oil, but on ability to process resid oil, and, in the light of this, (2) to set revised targets for the whole of the nation’s oil refining industry and set a “target improvement ratio” for each company to strive for, according to its ability.

However, at the meeting of the Petroleum Committee of the Advisory Committee for Natural Resources and Energy, held on April 9, 2010, heavy oil refining equipment was defined as comprising three types of equipment: resid fluid catalytic cracking unit, resid oil cracking unit, and resid oil hydrogenation unit. It was declared necessary to “ultimately raise the ratio (equipment ratio) of the combined capacity of these units versus that of the crude oil distillation unit to achieve the level (19%) found in major Western and Asian nations.” The current Notice established the first step in making this long-term goal a reality. However, the current revision of this numerator can only be said to run counter to the direction of that policy.

Without wishing to belabor the point, the oil refining industry has made decisions on important matters, such as investment, in consideration of long-term trends in the business environment. The first step towards achieving the long-term goal that the government itself proclaimed has just been completed. For the government to then introduce this change at this point is a major impediment to business for the oil refining industry. Taiyo Oil does not believe that any change should be made to the definition of “raising the equipment ratio,” as this revision of the notice seeks to do.

There are already several companies that have raised their equipment ratio to beyond what is posited as the ultimate target ratio of 19%. Requiring such companies to further increase their equipment ratio would place an excessive burden on them and, furthermore, disrupt their optimal equipment configuration and weaken their international competitiveness. This in turn elicits concern for the debilitating effect it would have on the whole of the nation’s oil refining industry, and the difficulties this would pose for ensuring a steady supply of petroleum products.

Taiyo Oil’s sole refinery is its Shikoku operations, which began with an equipment ratio surpassing the 20% standard, but which, as a result of the current Notice, now achieves more than 24%: the highest for any domestically marketed petroleum product. Also, the above refinery is basically “bottomless,” not turning out any heavy or resid oil. That is to say, from the point of view of effective use of crude oil, Taiyo Oil’s Shikoku operations are already fully effective. For the company to then be required to further raise the equipment ratio of its heavy oil refining equipment is, in policy terms, completely inappropriate.


This concludes Taiyo Oil’s presentation of its basic opinion. We sincerely hope that this opinion will be taken into account on the matter of the revision of the Sophisticated Methods of Energy Supply Structures notice, and that due consideration be given to not impairing the competitiveness of the domestic oil refining industry’s international competitiveness or impeding the stable supply of petroleum products.