Public Announcement On Joint Operation Between The Two Companies

COMPANY PRESS RELEASE: K.K. Japan Energy (Head office: 2 chome Toranomon, Tokyo President: Akihiko Nomiyama) and Showa Shell Sekiyu K.K. (Head office: 2 chome Daiba, Tokyo Chairman and President: Haruyuki Niimi) have been jointly studying the potential for forming comprehensive alliances in the area of Distribution, Lubricants, and Refining.

Japan Energy and Showa Shell Sekiyu wish to announce their agreement of the key principles for the establishment of a Joint Venture company and formation of comprehensive alliances in the above mentioned three business areas as follow;

Expected financial benefit of the alliance

Through this alliance, joint benefit of 25-30 billion yen per annum is expected.

Overview of the alliance in each business areas

The companies established a Joint Venture Company, K.K. JLS (see remark) on 15th March, 2000.

The JV company shall manage joint operation in order taking and lorry delivery programming. The JV company is planned to become operational as of October 2000.

As a result of the alliance, cost savings of 6 billion yen per annum is expected including 1 billion yen per annum saving as an effect of joint operation through the JV company.

The JV company is intended to become a comprehensive logistics company in the future covering marine transportation and depot operations.


For the joint operation in lubricants blending and product transportation, the parties are currently exploring corporate structure options including the establishment of a new JV company and the rationalization of the 5 blending plants presently maintained by the companies, and aim at making this alliance fully operational by January 2001.

Cost savings of 4 billion yen per annum is expected through this alliance.

The formation of this alliance is subject to approval of relevant authorities including Fair Trade Commission, and the shareholders of the companies


The alliance is aimed at achieving fully optimized refining operation and in rationalizing refinery capacity.

The parties will jointly establish a new JV company by September 2000 and are currently working to develop the necessary details to enable the JV company to be fully operational by early 2001 thereby realizing maximum alliance effects through fully optimized refinery operations.

The target figure for refinery capacity rationalization is set at around 150-200 kbo/pd with a target date of March 2001.

Our initial analysis has identified a joint savings of between 15-20 billion yen per annum with some upside potential, which shall be explored further in detail.