Japan may be forced to shut more than a fifth of its refining capacity, at least 1 million barrels per day, in the next five years as oil demand falls faster than expected, the head of the country's top refiner said on Tuesday.
Nippon Oil Corp President Shinji Nishio also told the Reuters Energy Summit that the company, after its planned merger with Nippon Mining, might shut in 200,000 bpd more capacity than originally planned by 2015, underscoring the rapid demand erosion in the world's No. 3 consumer.
Japan's trade ministry projects oil sales will fall by an average annual 3.5 percent to 168.2 million kl (2.9 million bpd) in the year from April 2013, from a total 3.46 million bpd last year. It has the capacity to refine 4.8 million bpd.
"Unless we cut the capacity by (1 million bpd), the nation's production will not be at an optimum level," he said. "When you think about the future beyond (2013), we will have to cut even further."
Total oil sales in the year ended March 31 slumped 8 percent, the sixth straight year of decline, as the global economic crisis has slowed industrial activity, adding to already waning demand caused by an aging population, a shift toward smaller, fuel-efficient cars and drive to embrace greener energy sources.