Idemitsu's new medium-term plan focuses on fossil fuels

Idemitsu Kosan, a Japanese oil refiner, announced on Tuesday a new medium-term fossil fuel-focused plan. The company plans to invest in a total of 1.8 trillion yen (11,4 billion dollars), with 830 billion yen going to existing businesses.

This move is a major departure from the previous plan of Idemitsu, which was to reduce fossil fuel assets by fiscal 2030 and generate more profit from non-fossil businesses.

Noriaki Sakai, president of Japan, said that the previous plan was based upon an assumption that fossil fuel use would decrease. However, "the long-term prospects have become increasingly uncertain." Japan imported 95% of its crude oil from the Middle East before the Iran War began in February. It has been forced to find alternatives due to the effective closure of?Strait of Hormuz.

Sakai said at a press event that "we aim to strengthen existing businesses such as fuel oil whose'social importance' is increasingly being recognised." He added that idemitsu has scrapped an older target i.e. reducing domestic refinery capacities. Companies that reoriented portfolios in response to climate change are now refocusing their attention on oil and natural gas. Returns have improved following the rebound of fossil fuel prices after COVID-19 pandemic lows.

Idemitsu stated that the remaining expenditure for fiscal 2026- 2030 will be primarily targeted at growth and decarbonisation. This includes expanded global operations in upstream gas, liquefied gas, and LNG trading businesses.

Idemitsu targets a pretax profit of 360 billion yen, excluding financial expenses, in fiscal 2030. This compares to 244 billion in operating profit and equity-method earnings for fiscal 2025 which ended in march.

Sakai stated that Idemitsu secures crude oil from North and South America while also?procuring from Saudi Arabia and United Arab Emirates via?routes which bypass the Strait.

He said that "we are not experiencing extreme difficulties in procuring alternative supplies."

Sakai stated that Idemitsu prioritizes petroleum shipments to Japan, even though overseas markets have higher margins. He added that the 4,000,000 barrels of crude oil purchased for Vietnam's Nghi Son Refinery was an exception at the request of the Vietnamese government.

(source: Reuters)