Japanese oil merger
Japan's #1 oil company Inpex recently announced it would take over rival Teikoku (#3) in a $3 billion deal. Both companies have far-flung operations with combined total reserves of 1.8 billion barrels.
In an increasingly competitive world oil market, the smaller Japanese firms have found it hard to compete not only with Western rivals, but increasingly with Chinese and Indian companies. As a Bloomberg report stated (11/87/2005), "The takeover will leave government-controlled Inpex dwarfed by its biggest Asian rivals. PetroChina Co. is worth eightfold more than the enlarged Inpex and India's Oil & Natural Gas Corp. more than double."
Scale matters increasingly in developing increasingly more remote and physically inaccessible oil resources. As a Wall Street Journal article explains ("Japan Oil Firms Set Tie-Up Pact To Gain Scale", 11/7/05) notes:
Japan's oil industry has suffered through the years because it was made up of many small players, with almost every oil refiner and trading company setting up its own oil-exploration firm. Most of those little companies were able to get into only small exploration projects, most of which resulted in dry wells.
It's another example of the way in which consolidation spawns imitators, even in Japan where merger and acquisitions are far less common than elsewhere.
