Skip to main content
Select Source:

Showa Shell Sekiyu K.K.

Showa Shell Sekiyu K.K.

Daiba Frontier Building
2-3-2 Daiba
Minato-ku
Tokyo 135-8074
Japan
Telephone: (03) 5531-5591
Fax: (03) 5531-5598
Web site: http://www.showa-shell.co.jp

Public Subsidiary (50 Percent Owned by Royal Dutch/Shell Group)
Incorporated:
1942 as Showa Oil Co., Ltd.
Employees: 1,122
Sales: ¥1.62 trillion ($13.65 billion) (2002)
Stock Exchanges: Tokyo Osaka Nagoya Fukuoka Sapporo
Ticker Symbol: 5002
NAIC: 324110 Petroleum Refineries; 324121 Asphalt Paving Mixture and Block Manufacturing; 324191 Petroleum Lubricating Oil and Grease Manufacturing; 422710 Petroleum Bulk Stations and Terminals; Petroleum and Petroleum Products Wholesalers (Except Bulk Stations and Terminals); 447110 Gasoline Stations with Convenience Stores; 447190 Other Gasoline Stations; 454311 Heating Oil Dealers; 454312 Liquefied Petroleum Gas (Bottled Gas) Dealers

Showa Shell Sekiyu K.K. is one of Japan's leading oil refiners and distributors of petroleum products. The company is part of the Royal Dutch/Shell Group, which holds a 50 percent stake in Showa Shell. The company's main petroleum products include gasoline, diesel fuel, fuel oil, kerosene, jet fuel, naphtha, liquefied petroleum gas, lubricants, and asphalt. It controls three crude oil refineries in Japan through three affiliated companies: Showa Yokkaichi Sekiyu Co., Ltd. (refinery in Yokkaichi), Toa Oil Co., Ltd. (Keihin), and Seibu Oil Co., Ltd. (Yamaguchi); collectively, these refineries have a daily capacity of about 515,000 barrels. Two plants manufacture lubricants in Yokohama and Kobe, and the company also maintains a petroleum import terminal in Niigata. Showa Shell operates approximately 5,200 gasoline service stations in Japangarnering a 13.5 percent share of the domestic gasoline market in 2002and also is engaged in the direct sale of various petroleum products to manufacturing firms, power companies, construction firms, and others. The company has entered into alliances and joint ventures with Japan Energy Corporation whereby the two firms cooperate in certain aspects of their refining and distribution operations. Showa Shell has further interests in the alternative energy sector, principally solar power generation systems and fuel cells. Showa Shell Sekiyu was formed through the 1985 merger of two oil companies, Showa Oil Co., Ltd. and Shell Sekiyu K.K. The two companies had had close ties ever since the close of World War II.

Early History

Petroleum was not commonly used in Japan until after 1868, when Japan opened its commerce to Western markets. Until that time, domestically mined coal was used for heating and energy. Though some oilfields were discovered in Japan, from the 1880s through World War II the Japanese oil market was dominated by two foreign organizations, Standard Oil and Royal Dutch/Shell. These groups, already operating on a global scale, were able to flood the Japanese market with cheap imported oil.

With Japan's military and industrial buildup in the years preceding World War II, petroleum came to be important to the country's economy. Jet fuel in particular was crucial to the success of the Japanese air force. Tokyo-based Showa Oil Co., Ltd. was established during the war, in 1942, from the merger of three smaller oil companies, Hayama Oil, Asahi Oil, and Niitsu Oil.

Shell Sekiyu was begun around 1876 in Yokohama by Samuel Samuel & Co., a forerunner of the Shell Group. In 1900 the company was incorporated as the Rising Sun Petroleum Company, to handle escalating petroleum imports.

Prior to World War II, oil production had never really been enough to support the industrializing nation. In addition, bombing during the war had decimated the company's physical plants. After the war occupation forces refused to allow the Japanese refining industry to start up until 1949. At that time joint operation with a foreign company was the most effective way to revive the almost dead petroleum industry, and Showa Oil signed an operating agreement with Royal Dutch/Shell in 1949. Shell Sekiyu did the same a year later. The U.S. occupation forces encouraged these mergers. In 1951 the ties between Showa Oil and Royal Dutch/Shell deepened when the latter began making equity investments in Showa, eventually gaining a 50 percent stake. Shell Sekiyu remained 100 percent owned by Royal Dutch.

Building Refinery Capacity in the Postwar Era

In the 1950s Showa Oil and Shell Sekiyu were among several foreign-owned companies that dominated the Japanese petroleum market, focusing on rebuilding and expanding their refineries. Like most Japanese oil companies at that time, the Shell companies were not interested in exploration but in importing crude. The crude was refined, marketed, and distributed in Japan. In 1949 Showa Oil's Kawasaki refinery could handle 6,000 barrels of crude per day but capacity increased to 102,000 barrels per day by 1965. At the same time Shell Sekiyu had the capacity to refine 180,000 barrels per day. Most of the crude oil was imported from the Persian Gulf countries.

The tremendous buildup of the Shell affiliates' refining capacities was made possible without government loans, and with minimal government regulation. In the early 1960s, however, Japan's Ministry of International Trade and Industry (MITI) took an increasingly large role in the oil industry, in some ways working against Showa and other foreign-owned companies. The Petroleum Industry Law was enacted in 1962, which favored the development of domestically owned oil companies; the law also assigned to MITI a permanent supervisory role over the future development of the petroleum industry. The Japanese government wanted to avoid control of the oil industry by international oil companies, as had been the case before the war, and used its regulatory forces to ensure that domestic companies got favorable positions in the booming petroleum market. Around this time, Showa and Shell Sekiyu supplied roughly 12 percent of the Japanese oil market. Foreign-owned companies combined controlled roughly 80 percent of Japan's oil market, of which the Shell group was the third largest. MITI's aim was to approximate an even split between the international and domestic companies' shares of the market. MITI achieved this desired balance over the next ten years, without adversely affecting Showa Oil or Shell Sekiyu. The new government regulations directly or indirectly shaped the business strategies of the Shell companies in the years to come.

An overall effect of the 1962 regulatory act was to increase competition among all the companies dealing in the Japanese oil market. MITI actively encouraged mergers between smaller domestic companies so they could rival the larger, older, foreign-affiliated firms such as Showa. The major zaibatsu established banking and corporate dynasties such as Mitsui, Sumitomo, and Mitsubishi, and plunged into the oil business around the end of the 1950s. With longstanding political and economic power in Japan, these groups did not take long to come to the fore of the petroleum industry. The Japanese oil market became more competitive because the major companies were for the most part caught up to each other technologically. Japanese engineers, sponsored by MITI, were working diligently to master and improve petrochemical technology. As long as the price of imported crude remained stable, the competitive edge in the domestic market would go to the company with the most efficient, low-cost refining technology.

The powerful backing of Royal Dutch/Shell propelled Showa Oil and Shell Sekiyu through the first decade of MITI's regulation. In addition, Royal Dutch/Shell had sources for crude oil in all parts of the globe. Foreign-affiliated firms still had advantages, particularly in international contract negotiations. The newer Japanese companies had little experience in negotiating drilling and exploration rights. Experts in Japan and abroad agreed that the new Japanese companies were not yet ready to take a major position in the world oil scene.

In the early 1970s, with rising political tensions in the Middle East, finding new sources of crude became important to the stability of the oil industry. By comparison with the other major international oil firms, Royal Dutch/Shell was considered short on crude oil. Its historical position as one of the two or three largest international oil companies was based on its efficient refining and marketing and long-range planning. Well before the 1973 OPEC embargo, the Shell companies were looking for oil sources outside the Middle East. Showa Oil began to seek out joint refining ventures abroad at the same time.

In 1975 Showa made an agreement with Algeria's National Hydrocarbon Corporation to provide technical assistance for the design and operation of two new oil refineries. Royal Dutch/Shell discovered a large natural gas field off Australia's northwest shelf around the same time; that gas was intended for marketing in Japan. Royal Dutch/Shell discovered the gigantic North Sea gas field in 1979, which improved the Shell affiliates' position considerably.

Company Perspectives:

Showa Shell has a unique corporate culture that features the best of both Japanese and Western management practices. While working to accurately grasp the needs of local customers, we are quickly and boldly taking on the challenges of the changing roles required of today's companies. This hybrid business style has enabled us to lead the Japanese oil industry in corporate reforms. As a member of the Royal Dutch/Shell Group, a multinational corporation operating in more than 100 countries, the Showa Shell Group benefits from its shared technologies, expertise and data, and continues to move forward with industry-leading structural reforms in order to remain highly competitive in today's deregulated, international energy market.

In the same year as the North Sea discovery, Showa Oil acquired a 25 percent interest in another Japanese company, Toa Oil Co., Ltd., which interest was formerly held by C. Itoh, a Japanese holding company. In addition to operating a refinery in Keihin, Toa Oil had valuable contracts to import and wholesale 230,000 barrels of oil daily through direct purchases; Toa could buy this oil directly from the oilfield, without any international oil company intermediary. MITI had encouraged the domestic oil companies to make direct purchase contracts. Though C. Itoh initiated the sale of Toa to Showa, MITI was disturbed by the transaction. The domestic company would lose its direct purchase contracts to the foreign-affiliated Showa, shifting the balance within the Japanese oil industry to foreign affiliates. The market split between the foreign and domestic groups was very nearly 5050 before the Toa sale, and MITI wanted to maintain this even split or tip it in favor of the domestic companies. In this case, however, the industry went against the regulators' wishes.

Following the acquisition of Toa, Showa strengthened its ties with Kuwait. In 1980 the Kuwaiti government agreed to export 30,000 more barrels of crude oil per day to Showa Oil. Showa's efforts to secure a variety of sources for crude oil were generally successful in the 1970s. In the 1980s Showa found its profits still too closely tied to the fluctuations in the price of crude. In 1981 the company posted a loss of ¥21.2 billion. The next year, Showa showed a profit of ¥1.2 billion. In spite of highly sophisticated refining and marketing techniques, the company could do little to control the swings of the world's crude oil markets. Showa began to diversify its product line, and in the 1980s built and bought office buildings and apartment houses, to gain rental income. Showa also invested in rental car and travel businesses.

Formation of Showa Shell Sekiyu: 1985

Showa Oil and Shell Sekiyu formally merged in 1985. They had had a close operating relationship through most of their history. The merger made them equal partners in the new corporation, Showa Shell Sekiyu K.K. Royal Dutch/Shell retained a 50 percent interest in the new company. The merger streamlined the Shell affiliates' operations and made management more efficient and cost-effective. Tokio Nagayama was named chairman of Showa Shell, having served for 17 years as president of Showa Oil, earning the nickname the "Emperor."

Despite the company's ventures into non-oil areas, including the 1987 launch of a computer software company, Computer Plaza K.K., Showa Shell Sekiyu's focus remained on oil. Exploration was still very much a part of the company's interests. For example, in 1990 the company bought a 20 percent interest in the development rights to inland oil concessions in Myanmar. Two years later Showa Shell took a stake in exploration blocks off the southwestern coast of Vietnam. By this time, Nagayama had retired, and Kiyoshi Takahashi had taken over as chairman, with Takeshi Henmi serving as president.

The two leaders, however, resigned in August 1993 to take responsibility for a huge loss that Showa Shell had incurred on foreign-exchange futures contracts. The company had revealed in February of that year that it had an unrealized loss of ¥125 billion ($1.05 billion) stemming from $6.4 billion worth of speculative foreign-exchange contracts involving bets on the value of the dollar versus the yen. The loss later ballooned to ¥166.3 billion because of further declines in the U.S. currency's value. As it wrote off these losses over the next couple of years, Showa Shell compensated by raising cash through the sale of securities and property.

Restructuring Following Deregulation, Late 1990s and Beyond

The Japanese oil industry entered a new, more highly competitive era in the late 1990s as a result of deregulatory moves initiated by the government. In April 1996 a law limiting oil imports to 29 refiners and distributors was repealed, opening the door for supermarkets, trading companies, and even farm cooperatives to begin importing petroleum products for direct distribution in Japan. Further roiling the industry was the late 1990s introduction of self-service gasoline stations in the Japanese market for the first time, after they had long been banned because of an arcane fire regulation.

Even before the deregulation began, Showa Shell launched an aggressive, multiyear program of restructuring to retain its competitiveness in the new environment. An ambitious cost-cutting effort gradually reduced the corporation's annual operating costs by ¥111.2 billion ($937 million) by 2002. During this period the workforce was cut in half mainly through attrition and voluntary retirement programs. The new competition resulted in lower gas prices at the pump, leading in turn to many gas stations no longer being profitable. Showa Shell, along with the other Japanese refiners, began shuttering underperforming outlets. Between 1996 and 2002, Showa Shell reduced the number of stations in its network by nearly 2,000. The company also joined in on the self-service revolution, opening its first such stations in 1999 and operating nearly 200 of the cheaperto-operate outlets by 2002. In 1999 Showa Shell also closed down one of its four refineries, the one in Niigata, which had a daily capacity of 40,000 barrels. In addition to the cost-containment efforts, Showa Shell also strengthened its balance sheet, reducing its interest-bearing debt from ¥439.8 billion in 1996 to ¥150.5 billion in 2002.

Key Dates:

c. 1876:
Forerunner of Shell Sekiyu is founded in Yokohama by Samuel Samuel & Co., a forerunner of Shell.
1900:
Yokohama firm is incorporated as Rising Sun Petroleum Company.
1942:
Tokyo-based Showa Oil Co., Ltd. is established from the merger of three oil companies, Hayama Oil, Asahi Oil, and Niitsu Oil.
1949:
Showa Oil signs an operating agreement with Royal Dutch/Shell.
1951:
Royal Dutch/Shell begins making equity investments in Showa Oil, eventually gaining a 50 percent stake.
1979:
Showa Oil buys 25 percent stake in Toa Oil Co., Ltd.
1985:
Showa Oil and Shell Sekiyu merge to form Showa Shell Sekiyu K.K., which is 50 percent owned by Royal Dutch/Shell.
1993:
Company loses ¥166.3 billion from $6.4 billion worth of speculative foreign-exchange contracts.
1996:
Deregulation of Japan's oil industry begins; Showa Shell launches a multiyear restructuring program to adapt to the new environment.

In another key move during this period, Showa Shell began concentrating on the downstream side of the oil business, that is, refining and distribution. The company gradually dissolved and liquidated its oil-field development projects, finally shutting down its remaining upstream subsidiaries in the early 2000s. Eventually, therefore, the company began relying fully on imports from other firms to supply its refineries, and increasingly it derived its crude oil from companies within the Royal Dutch/Shell Groupnearly 50 percent of the total by 2001.

The new competitive environment, coupled with overcapacity within Japan in both refining and distribution, brought about pressure for consolidation within the oil industry. For instance, Nippon Oil Company, Limited bought Mitsubishi Oil Co., Ltd. in 1999, and Tonen Corporation merged with General Sekiyu K.K. to form TonenGeneral Sekiyu K.K. the following year. For its part, Showa Shell in 199798 had discussed a merger of its refinery operations with those of Mitsubishi Oil, but the latter firm called off the talks. In the early 2000s, however, Showa Shell succeeded in creating several alliances and joint ventures with Japan Energy Corporation through which the two firms began cooperating in various areas of refining and distribution. Showa Shell was simultaneously pursuing a greater focus on more profitable value-added products. In March 2002 the company launched Shell Pura in the Tokyo metropolitan area, touting the new product as a high-octane "environmentally friendly," "engine-cleansing" gasoline; it was formulated to remove deposits from automobile engines, thereby improving performance and reducing the emission of harmful pollutants. Following its successful Tokyo introduction, Shell Pura began to be rolled out to other areas.

Heading up Showa Shell in the early 2000s was Haruyuki Niimi. In March 2002 John S. Mills was promoted from vice-president to president and chief operating officer, with Niimi remaining chairman and CEO. Mills became the first foreign national to occupy the presidency at Showa Shell Sekiyu, and he was expected to promote closer ties with the Royal Dutch/Shell Group. Showa Shell had positioned itself through its thorough post-deregulation restructuring as one of the most financially sound of the major Japanese oil industry players. The company seemed poised to survive another round of industry realignments that many analysts were anticipating.

Principal Subsidiaries

Showa Yokkaichi Sekiyu Co., Ltd. (75%); Toa Oil Co., Ltd. (37.4%); Seibu Oil Co., Ltd. (24.5%); Showa Shell Sempaku K.K.; Hiewa Kisen Kaisha, Ltd.; Japan Oil Network Co., Ltd. (49%); JLS Corporation (50%); Niigata Joint Oil Stockpiling Co., Ltd. (28%); East Ogishima Oil Terminal K.K. (70%); Hokkaido Joint Oil Stockpiling Co., Ltd. (10%); Oita L.P.G. Joint Stockpiling Co., Ltd. (15%); Shoseki Engineering & Construction Co., Ltd.; Red and Yellow Co., Ltd.; Nippon Grease Co., Ltd. (99.3%); Rekisei Kagaku K.K.; Showa Solar Energy K.K. (75%); K.K. SVC Tokyo; Shoseki Kako K.K.; Shoseki Gas K.K.; K.K. Rising Sun; Sallis Co., Ltd.; Kyoto Sky Parking K.K.; K.K. Creco.

Principal Competitors

Nippon Oil Corporation; Idemitsu Kosan Co., Ltd.; Cosmo Oil Company, Limited; TonenGeneral Sekiyu K.K.

Further Reading

Ando, Mayumi, "Slick Moves Fuel Financial Strength," Nikkei Weekly, September 9, 2002.

"Competitive Pressures Fuel Oil Refiners' Move to Combine," Nikkei Weekly, February 24, 1997.

Dawkins, William, "Fueling Japan's Petrol Price War," Financial Times, December 14, 1995, p. 30.

Friedland, Jonathan, "Shell-Shocked in Japan," Far Eastern Economic Review, March 4, 1993, p. 58.

Harney, Alexandra, "Showa Shell to Cut Costs with Refinery Closure," Financial Times, July 16, 1998, p. 41.

Ikeya, Akira, and Hiroshi Toyofuku, "Showa Shell Execs to Resign over Losses," Nikkei Weekly, March 1, 1993.

"Japan: Today and Tomorrow," Oil and Gas Journal, May 31, 1965.

Nakamoto, Michiyo, "Tremors Follow Showa Shell's Futures Shock," Financial Times, February 23, 1993, p. 26.

Nakamoto, Michiyo, and Deborah Hargreaves, "Top Two at Showa Shell to Quit over Losses," Financial Times, February 26, 1993, p. 29.

"Shell's Foreign Exchange Disaster," Economist, February 27, 1993.

Vernon, Raymond, Two Hungry Giants: The United States and Japan in the Quest for Oil and Ores, Cambridge, Mass.: Harvard University Press, 1983.

Watanabe, Mika, "Japan Energy and Showa Shell Face Hurdles As New Partners," Asian Wall Street Journal, March 20, 2000, p. 22.

, "Showa Shell Hopes Restructuring Will Prevent a Japanese Oil Glut," Asian Wall Street Journal, August 6, 1998, p. 23.

Yoshino, M.Y., Japan's Multinational Enterprises, Cambridge, Mass.: Harvard University Press, 1976.

Angela Woodward

update: David E. Salamie

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Showa Shell Sekiyu K.K.." International Directory of Company Histories. . Encyclopedia.com. 19 Aug. 2017 <http://www.encyclopedia.com>.

"Showa Shell Sekiyu K.K.." International Directory of Company Histories. . Encyclopedia.com. (August 19, 2017). http://www.encyclopedia.com/books/politics-and-business-magazines/showa-shell-sekiyu-kk-0

"Showa Shell Sekiyu K.K.." International Directory of Company Histories. . Retrieved August 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/showa-shell-sekiyu-kk-0

Showa Shell Sekiyu K.K.

Showa Shell Sekiyu K.K.

Kasumigaseki Building
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo 100
Japan
(03) 3580-0123
Fax: (03)3580-3811

Public Company
Incorporated:
1942 as Showa Oil Co., Ltd.
Employees: 2,350
Sales: ¥1.65 trillion (US$12.15 billion)
Stock Exchanges: Tokyo Osaka Nagoya

Showa Shell Sekiyu is one of Japans leading distributors and refiners of fuel oil. The company is 50% owned by Royal Dutch/Shell. The company deals principally in petroleum products such as gasoline, naptha, jet fuels, and fuels for electrical power generation, as well as in kerosene, heating oil, lubricants, and coal. Showa Shell operates more than 7,700 gasoline service stations in Japan. The company operates crude oil refineries in Japan at Kawasaki, Niigata, Yokkaichi, and Yamaguchi. Two plants manufacture lubricants in Yokohama and Kobe. The company has extended its business into non-oil areas, with interests in rental car, travel, and real estate businesses. Showas subsidiary, Computer Plaza, is dedicated to developing Japanese-language computer software. Another interest of Showa Shell Sekiyu is the development of solar-powered batteries. Showa Shell Sekiyu was formed in 1985 by the merger of two oil companies, Showa Oil Company and Shell Sekiyu. The two companies had had close ties ever since the close of World War II.

Petroleum was not commonly used in Japan until after 1868, when Japan opened its commerce to Western markets. Until that time, domestically mined coal was used for heating and energy. Though some oil fields were discovered in Japan, from the 1880s through World War II the Japanese oil market was dominated by two foreign organizations, Standard Oil and Royal Dutch/Shell. These groups, already operating on a global scale, were able to flood the Japanese market with cheap imported oil.

With Japans military and industrial buildup in the years preceding World War II, petroleum came to be important to the countrys economy. Jet fuel in particular was crucial to the success of the Japanese air force. The Showa Oil Company was established during the war, in 1942, from the merger of three smaller oil companies, Hayama Oil, Asahi Oil, and Niitsu Oil.

Shell Sekiyu was begun around 1876 in Yokohama by the Samuel Samuel & Co., a forerunner of Shell. In 1900 the company was incorporated as the Rising Sun Petroleum Company, to handle escalating petroleum imports.

Prior to World War u, oil production had never really been enough to support the industrializing nation. In addition bombing during the war had laid waste to the companys physical plants. After the war occupation forces refused to allow the Japanese refining industry to start up until 1949. At that time joint operation with a foreign company was the most effective way to revive the almost dead petroleum industry, and Showa Oil signed an operating agreement with Royal Dutch/Shell in 1949. Shell Sekiyu did the same a year later. The U.S. occupation forces encouraged these mergers. Showa Oil, before its 1985 merger with Shell Sekiyu, was 50% owned by Royal Dutch/Shell and Shell Sekiyu was 100% owned by Royal Dutch.

In the 1950s Showa Oil and Shell Sekiyu were among several foreign-owned companies that dominated the Japanese petroleum market, focusing on rebuilding and expanding their refineries. Like most Japanese oil companies at that time, the Shell companies were not interested in exploration but in importing crude. The crude was refined, marketed, and distributed in Japan. In 1949 Showa Oils Kawasaki refinery could handle 6,000 barrels of crude per day but capacity increased to 102,000 barrels per day by 1965. At the same time Shell Sekiyu had the capacity to refine 180,000 barrels per day. Most of the crude oil was imported from the Persian Gulf countries.

The tremendous buildup of the Shell affiliates refining capacities was made possible without government loans, and with minimal government regulation. In the early 1960s, however, Japans Ministry of International Trade and Industry (MITI) took a increasingly large role in the oil industry, in some ways working against Showa and other foreign-owned companies. The Petroleum Industry Law was enacted in 1962, which favored the development of domestically owned oil companies; the law also assigned to MITI a permanent supervisory role over the future development of the petroleum industry. The Japanese government wanted to avoid control of the oil industry by international oil companies, as had been the case before the war, and used its regulatory forces to ensure that domestic companies got favorable positions in the booming petroleum market. Around this time, Showa and Shell Sekiyu supplied roughly 12% of the Japanese oil market. Foreign-owned companies combined controlled roughly 80% of Japans oil market, of which the Shell group was the third largest. MITIs aim was to approximate an even split between the international and domestic companies shares of the market. MITI achieved this desired balance over the next ten years, without adversely affecting Showa Oil or Shell Sekiyu. The new government regulations directly or indirectly shaped the business strategies of the Shell companies in the years to come.

An overall effect of the 1962 regulatory act was to increase competition among all the companies dealing in the Japanese oil market. MITI actively encouraged mergers between smaller domestic companies so they could rival the larger, older, foreign-affiliated firms like Showa. The major zaibatsu, established banking and corporate dynasties, such as Mitsui, Sumitomo, and Mitsubishi, plunged into the oil business around the end of the 1950s. With long-standing political and economic power in Japan, these groups did not take long to come to the fore of the petroleum industry. The Japanese oil market became more competitive because the major companies were for the most part caught up to each other technologically. Japanese engineers, sponsored by MITI, were working diligently to master and improve petrochemical technology. As long as the price of imported crude remained stable, the competitive edge in the domestic market would go to the company with the most efficient, low-cost refining technology.

The powerful backing of Royal Dutch/Shell propelled Showa Oil and Shell Sekiyu through the first decade of MITIs regulation. In addition Royal Dutch/Shell had sources for crude oil in all parts of the globe. Foreign-affiliated firms still had advantages, particularly in international contract negotiations. The newer Japanese companies had little experience in negotiating drilling and exploration rights. Experts in Japan and abroad agreed that the new Japanese companies were not yet ready to take a major position in the world oil scene.

In the early 1970s, with rising political tensions in the Middle East, finding new sources of crude became important to the stability of the oil industry. By comparison with the other major international oil firms, Royal Dutch/Shell was considered short on crude oil. Its historical position as one of the two or three largest international oil companies was based on its efficient refining and marketing and long-range planning. Well before the 1973 OPEC embargo, the Shell companies were looking for oil sources outside the Middle East. Showa Oil began to seek out joint refining ventures abroad at the same time.

In 1975 Showa made an agreement with Algerias National Hydrocarbon Corporation to provide technical assistance for the design and operation of two new oil refineries. Royal Dutch/Shell discovered a large natural gas field off Australias northwest shelf around the same time; that gas was intended for marketing in Japan. Royal Dutch/Shell discovered the gigantic North Sea gas field in 1979, which improved the Shell affiliates position considerably.

In the same year as the North Sea discovery, Showa Oil acquired a 25% interest in another Japanese company, Toa Oil, which interest was formerly held by C. Itoh, a Japanese holding company. Toa Oil had valuable contracts to import and wholesale 230,000 barrels of oil daily through direct purchases; that is, Toa could buy this oil directly from the oil field, without any international oil company intermediary. MITI had encouraged the domestic oil companies to make direct purchase contracts. Though C. Itoh initiated the sale of Toa to Showa, MITI was disturbed by the transaction. The domestic company would lose its direct purchase contracts to the foreign-affiliated Showa, shifting the balance within the Japanese oil industry to foreign affiliates. The market split between the foreign and domestic groups was very nearly SO-SO before the Toa sale, and MITI wanted to maintain this even split or tip it in favor of the domestic companies. However, in this case the industry went against the regulators wishes.

Following the acquisition of Toa, Showa strengthened its ties with Kuwait. In 1980 the Kuwaiti government agreed to export 30,000 more barrels of crude oil per day to Showa Oil. Showas efforts to secure a variety of sources for crude oil were generally successful in the 1970s. In the 1980s Showa found its profits still too closely tied to the fluctuations in the price of crude. In 1981 the company posted a loss of ¥21.2 billion. The next year, Showa showed a profit of ¥1.2 billion. In spite of highly sophisticated refining and marketing techniques, the company could do little to control the swings of the worlds crude oil markets. Showa began to diversify its product line, and in the 1980s built and bought office buildings and apartment houses, to gain rental income. Showa also invested in rental car and travel businesses.

Showa Oil and Shell Sekiyu formally merged in 1985. They had had a close operating relationship through most of their history. The merger made them equal partners in the new corporation. Showa Shell Sekiyu K.K. Royal Dutch/Shell retained a 50% interest in the new company. The merger streamlined the Shell affiliates operations and made management more efficient and cost-effective.

Despite the companys ventures into non-oil areas, including the 1987 launch of a computer software company, Computer Plaza K.K., Showa Shell Sekiyus focus remained on oil. At the end of the 1980s, oil market analysts were predicting an even larger Japanese presence in the world oil market in the decades to come. MITI would like 30% of Japans oil to come from fields leased or owned by Japanese companies by 1995. In 1989, only 10% came from such sources. Also in 1989, MITI agreed to give tax incentives to companies that buy existing oil fields. Showa Shell Sekiyu made it clear that the companys aim is to become a major producer as well as refiner in the 1990s. Kiyoshi Takahashi, executive chairman of Showa Shell Sekiyu, compared his company at the end of the 1980s to the Japanese car industry 15 years earlier, implying that the big boom is still to come.

The affiliation of Showa Shell Sekiyu with Royal Dutch/ Shell continues to be a crucial element in the companys success. As political turmoil racks the Middle East in the 1990s, and most Japanese oil companies are exploring alternative sources of crude, partnership with the worlds largest oil company places Showa Shell a step ahead in the search for new petroleum markets. Showa Shell Sekiyu plans to continue to ensure a steady flow of oil into Japan in the coming decades.

Principal Subsidiaries

Showa Shell Sempaku K.K.; K.K. Rising Sun; Showa Oil K.K.; Shoseki International Corp. (U.S.); Showa Oil Hong Kong; Showa Yokkaichi Sekiyu K.K. (75%); Higashi Ohgishima Oil Terminal K.K. (52%); Toa Sekiyu K.K. (42.17%); Seibu Sekiyu K.K. (24.19%).

Further Reading

Japan: Today and Tomorrow, Oil and Gas Journal, May 31, 1965; Yoshino, M.Y., Japans Multinational Enterprises, Cambridge, Massachusetts, Harvard University Press, 1976; Vernon, Raymond, Two Hungry Giants: The United States and Japan in the Quest for Oil and Ores, Cambridge, Harvard University Press, 1983.

Angela Woodward

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Showa Shell Sekiyu K.K.." International Directory of Company Histories. . Encyclopedia.com. 19 Aug. 2017 <http://www.encyclopedia.com>.

"Showa Shell Sekiyu K.K.." International Directory of Company Histories. . Encyclopedia.com. (August 19, 2017). http://www.encyclopedia.com/books/politics-and-business-magazines/showa-shell-sekiyu-kk

"Showa Shell Sekiyu K.K.." International Directory of Company Histories. . Retrieved August 19, 2017 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/showa-shell-sekiyu-kk