Investment in Sophisticated Oil Refineries and Entry into the Wholesale Business of CARB-diesel on the West Coast Area of the US

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November 21, 2006

Making efforts to further sophisticate oil refineries under the "Consolidated Mid-term Management Plan," Cosmo Oil Co., Ltd. (Headquarters: Minato-ku, Tokyo; President: Yaichi Kimura; Capital: 62.4 billion yen) has come to a decision to newly install a set of Heavy Oil Cracking Unit (coker) in our Sakai Oil Refinery. Moreover, to secure a market for the diesel oil produced by this equipment and make this business profitable, we will enter into the wholesale business of CARB-diesel on the west coast area of the US.

Details

1.About the Heavy Oil Cracking Unit to be installed
To keep our refineries competitive and make them sophisticated, we must respond to structural changes in domestic oil demand, particularly a reduction in the demand for heavy oil, and strengthen our capabilities to supply our products to the overseas potential oil markets, the demand for which is expected to grow constantly. Accordingly, we have determined this new installation. The equipment uses the asphalt fraction as raw material to produce naphtha, jet fuels, and diesel oil. This allows a shift to profitable production, for example, from heavy oil made from crude to middle distillate.

Project summary

  • Place Sakai Oil Refinery (3-16, Chikkoshin-machi, Nishi-ku, Sakai, Osaka)
  • Capital investment Approx. 100 billion yen
  • Start Fiscal year 2010

Facilities summary

  • Throughput of Heavy Oil Cracking Unit (coker) 25,000 bbl/day
  • Throughput of Resolved Gas Oil Distillate Hydrodesulfurization Unit 25,000 bbl/day
  • Throughput of Naphtha Hydrodesulfurization Unit 17,000 bbl/day

Production capability summary
Annual production: Naphtha: 250,000 kl; Jet fuel: 700,000 kl; Diesel oil: 350,000 kl; Petroleum coke: 400,000 tons

2.Our entry into the wholesale business of CARB-diesel in the west coast area of the U.S.
We have been actively looking into robust overseas oil markets, particularly in Oceania and Asia. With acceleration of surplus of diesel oil in Asia as well as prevalence of production capacity of ultra-low sulphur diesel oil, the markets are becoming more and more competitive, and we have also been searching for new markets.

Recently, our technology for producing diesel oil has successfully cleared the environmental standards set by California Air Resource Board (CARB). With market price level maintained stable in the U.S. west coast area, we have decided to enter into the wholesale trade of the CARB diesel oil.

  • Areas On the west coast of the U.S. (California)
  • Product CARB diesel
  • Sales volume 400,000 – 600,000 kiloliters per year
  • Start of the business April 2007
  • Business entity in charge Cosmo Oil of U.S.A. Inc. (our wholly owned subsidiary)
  • Sales mode Racks for tank trucks and pipelines

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