JX may advance refining cuts 1 year

TOKYO (Reuters) - Japan's oil and mining giant JX Holdings Inc (5020.T) may advance by another year a plan to cut refining capacity by 600,000 barrels per day (bpd) to end-March 2013 if the nation's oil demand falls much faster than expected, its president said on Wednesday.

"We currently plan to complete the cuts during 2013/14 (ending March 2014), but if demand falls much faster than expected, we would have to consider bringing it forward by another year," Mitsunori Takahagi said at the Reuters Global Energy Summit in Tokyo.

JX Holdings, created on April 1, 2010, through the merger of Nippon Oil and Nippon Mining Holdings, earlier this month had moved forward the schedule by a year to the end of March 2014.

The company, which has a 34 percent market share in domestic oil sales, may have to close another domestic refinery by 2020 after plans to close one by 2014, he said.

It may also build one to two heavy oil cracking units, such as a coker and a residue fluid catalytic cracking (RFCC) unit, by 2020, to boost the competitiveness of its refineries, he said.

Construction of one heavy oil cracking unit may start as early as 2013 with the completion of the unit in 2015 to save purchases of more expensive lighter crudes and take advantage of expected widening values between heavy and light crude, he said.

"Currently, Japan on average is buying crudes with an average American Petroleum Institute (API) gravity of 35," he said.

"Our Mizushima refinery is buying crudes with API of about 31."

He added that if one or two heavy oil crackers start operations, JX could reduce the API of crudes that it buys to around 26 or 27, helping it save money in oil purchases.

Takahagi also said JX would like to boost paraxylene output capacity to 4 million metric tons per year (tpy) by 2020 from 2.6 million tpy now to cater to an expected strong demand growth.

He added that it may consider building a new paraxylene unit overseas in Southeast Asia or the Middle East.

Takahagi said he expects the company's oil refining and marketing sector to post its first profit in five quarters in April-June, as Japanese oil companies finally started to curtail production after two consecutive years of losses in real terms.

"The market has started improving in late March as a sense of crisis has prevailed," he said.

"No one, I believe, is now trying to expand market share by ramping up production, faced with a decline in domestic demand."

JX booked a 10.8 billion yen ($119.5 million) recurring loss, which is pretax and before special items, in January-March in the oil refining and marketing sector, when the effects of the value of inventories are eliminated.

It booked a 135.8 billion yen recurring loss in the year ended March 2010 in the sector in real terms. Sales from oil refining account for the majority of JX's planned 2010/11 sales of 9.16 trillion yen.

Sales from oil refining account for the majority of JX's planned 2010/11 sales of 9.16 trillion yen.

BOOSTING COPPER BUSINESS

JX Holdings aims to bring the ratio of copper purchases from its own mines to 80 percent by 2020 from the current 20 percent.

It is currently pursuing two mining development projects -- with the Caserones mine in Chile expected to start production in 2013 while a feasibility study in the Quechua mine in Peru is due to be concluded this year.

The firm can raise the ratio to 60 percent when these projects are on track. It plans to get the additional 20 percent through the development of new copper-refining technology, such as the Nikko Chloride Process which allows effective recovery of copper as well as gold from low-grade copper concentrates.

"Buying interests in existing mines is an option but I doubt if anybody would be willing to let go of their interests," Takahagi said, especially when copper demand is expected to strengthen.

"By offering a technology that could retrieve metals from low-grade mines or mines which have been abandoned, we could get interests in mines relatively favorably, and could expand the selection of mining development opportunities," he said.

There are many such mines in Canada and Australia, he added.

He said having an edge in development technology was also an effective hedge against market volatility. But he added this was a long-term option and there was no specific mine the company was looking at currently.

Nippon Mining & Metals, a metals unit of JX Holdings, has begun a pilot plan in Perth, Australia.

(Additional reporting by Chikako Mogi; Editing by Ramthan Hussain)