Japanese refiners seek to invest windfall profits in energy transition

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File photo: JX Nippon Oil & Energy Corp’s logo and its brand Eneos logo can be seen at its refinery in Yokohama, Japan on February 7, 2017. REUTERS / Kim Kyung-Hoon

TOKYO, Nov. 11 (Reuters) – Japanese refiners reported strong profits for April-September and raised their annual forecast as soaring oil prices led to sizable valuation gains on inventories and boosted profits from their upstream oil assets.

The companies said they would use the extra cash to help pay for needed investments in cleaner energy as part of a global decarbonization drive.

Japan’s leading refiner Eneos Holdings (5020.T) said on Thursday its first-half net profit rose 480% to 211 billion yen ($ 1.9 billion) as the value of its inventories rose as the Soaring copper prices also increased its profits from metals.

The oil and metals giant doubled its profit forecast for the year as of March 31 to 280 billion yen, beating a forecast of 222 billion yen based on the average estimate of 10 analysts compiled by Refinitiv.

Earlier this week, second-largest refiner Idemitsu Kosan (5019.T) and third-largest Cosmo Energy Holdings (5021.T) more than doubled their annual profit guidance.

In their key refining operation, Idemitsu and Cosmo recorded a profit gain as they benefited from a recovery in margins at home and abroad. Meanwhile, Eneos suffered a series of setbacks at its refineries, resulting in an April to September refining cycle of 61%, while Idemitsu hit 73% and Cosmo usage was 95% .

“Rising resource prices have resulted in a significant increase in profits from upstream oil and metal assets, but the performance of our flagship energy segment has been very unsatisfactory,” Eneos Chairman Katsuyuki Ota said, at a press conference.

“Cash flow from the energy segment is the main source of our future investments in new businesses, so we need to do better in this area,” he said.

Like many other global oil companies, Eneos accelerated its transformation into a low-carbon energy supplier and decided to acquire a renewable business and invest in hydrogen projects. Read more

“There is no time for complacency (about solid profits) because 90% of our profits come from fossil fuels. We will allocate our money to innovations to help our energy transition,” Idemitsu president said. , Shunichi Kito.

“The oil sector is the money tree. We generate money from it and allocate it to renewable energy, which will allow us to make sustainable transitions,” said Takayuki Uematsu, CEO of Cosmo.

($ 1 = 113,0,900 yen)

Reporting by Yuka Obayashi; Editing by Elaine Hardcastle

Our Standards: Thomson Reuters Trust Principles.

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