Idemitsu Kosan

Sazō Idemitsu founded Idemitsu & Co. (出光商会, Idemitsu Shōkai)[1] in 1911, selling lubricant oil for Nippon Oil in Moji, northern Kyushu. He expanded to selling fuel oil for fishing boats in Shimonoseki.[8][9]

Idemitsu supplied lubricant to the South Manchuria Railway

After success in Japan, Idemitsu & Co. expanded to Manchuria (China) in 1914 where the Japanese-owned South Manchuria Railroad Co. Ltd. was a major customer of lubricant. A branch was opened in Dalian, northeast China and Idemitsu attempted to enter the Chinese market that was dominated by western companies like Standard Oil and the Asiatic Petroleum Company (a Shell subsidiary). The company extended through northern China and into Korea and Taiwan.[8][9]

After the Japanese invasion of Manchuria in 1932 the oil trade became government controlled and Idemitsu was forced to scale back. Instead he went into transport by oil tanker. In 1940 the headquarters were moved to Tokyo and the name changed to the current Idemitsu Kosan K.K. (kabushiki kaisha: stock company). With the Japanese military expansion and United States joining the Pacific War the government took control of all industries.[8][9]

After the war Idemitsu Kosan lost its overseas trade with the Allied occupation of Japan. It was among the ten petroleum suppliers selected by the Ministry of International Trade and Industry (MITI) and cut its ties with Nippon Oil. Idemitsu began importing naphtha (an intermediate oil product) first from the United States and later from Venezuela and Iran. The protectionist Oil Industry Law helped Idemitsu against foreign competition in Japan, but also made owning its own refineries important. Idemitsu's first Tokuyama Refinery opened in 1957. This was followed by the Chiba oil refinery in 1963, Hyogo oil refinery in 1970, the Hokkaido oil refinery in 1973, and the Aichi oil refinery in 1975.[8][9]

In 1953 Idemitsu sent its large tanker Nisshomaru to Iran to purchase oil. Iranian prime minister Mohammed Mosaddeq had recently nationalized the oil fields and was under British-led embargo (Abadan Crisis). Idemitsu managed to buy the oil at 30% below market price and displeased the British. This was popular with the Japanese public but got Idemitsu in conflict with the Japanese government and MITI. Later the same year was the 1953 Iranian coup d'état. In the 1960s, Idemitsu imported crude oil from Russia. Again, it got a good price at 40% below market value but angered the United States who decided to boycott Idemitsu when buying fuel for its military jets in Japan. Idemitsu called the boycott "an odd Christmas gift" but "utterly negligible."[8][10] In 1978 it broke off contracts with the Soviet Union.[11]

The company also came in conflict with the Petroleum Association of Japan which was set up by MITI to restrict production and Idemitsu even left the organization. In 1965 the seamen's union went on strike, the first of its kind in Japan. This led to petroleum shortages. Idemitsu then ignored the quotas and produced at full speed. When the price control and production quotas were removed in 1966, Idemitsu rejoined the PAJ. To please the MITI, Sazō Idemitsu's younger brother Keisuke Idemitsu took over as company president, while Sazō became chairman of the board, keeping the actual control.[8]

In 1992 Idemitsu Kosan began constructing oil platforms in the North Sea (not the pictured platform)

The company continued its vertical integration strategy of controlling the whole supply chain with more tankers and opening petrol depots and warehouses. In 1976 it started drilling for oil and gas in the offshore Aga Field in the Niigata Prefecture (Sea of Japan). Commercial production began in 1984. Idemitsu took interest in foreign oil fields, and in 1987 it started an oil field in southeast Turkey with Finnish company Neste Oy. Idemitsu acquired stake in Norwegian Snorre oil field and in Australia, as well as participating in oil drilling around the world.[8][9]

The company diversified into coal, importing from Australia and bought mines in Muswellbrook, New South Wales and Ebenezer, Queensland. It became the largest coal mining company in Japan and developed the coal cartridge system for small users. It worked on geothermal power experiments and uranium mining in Canada with Cameco and Cogema. The sharp 1985 price drop on oil made Idemitsu's non-oil operations less profitable.[8]

Japanese import restrictions on oil once again came under debate. As in 1962, Idemitsu favored opening up to foreign competition, in opposition to most of the Japanese oil industry. The Japanese government eventually settled on a compromise that would slowly open for free importation and remove production quotas on refineries.[8]

As a means of diversifying its business in the wake of global oil shocks, Idemitsu began development of OLED technology in the 1980s, culminating in the development of a practical full-color LED display introduced by Pioneer in the late 1990s. Idemitsu's technology was eventually adapted by Samsung Electronics for use in its Galaxy line of smartphones.[12]

Idemitsu was quick to open self-service gas stations when it was allowed in Japan in 1998.

By 1997 Idemitsu was the largest seller of fuel oil in Japan, due largely to capital investments by president Shosuke Idemitsu during the 1980s and early 1990s. However, these investments left the company deeply in debt with a speculative credit rating. Akihiko Tembo, the first president from outside the founding family, instituted several reforms to alleviate the company's finances, including cutting retroactive discounts offered to distributors. Tembo also merged parts of the company's operations with Mitsubishi Corporation and Mitsui Chemicals.[13]

In the 1990s, Idemitsu began opening service stations outside Japan, in Portugal and Puerto Rico, as well as a lubricant factory in the United States. Oil industry deregulation took big leaps with the abolishment of the Special Petroleum Law and self-service pumps became legal. Toward the end of the 1990s, the demand in Japan decreased due to the long economic crisis. The oil industry was too large and many companies merged. At the turn of the century, Idemitsu Kosan was the only major oil refining company in Japan that had not merged. The company was entirely held by the Idemitsu family and company employees.[8] In 1994, Unioil became the exclusive distributor of Idemitsu products in the Philippines.[14]

In 2006 Idemitsu Kosan became publicly traded on the Tokyo Stock Exchange after an initial public offering (IPO), raising 109.4 billion yen.[5][15]

In 2016, Idemitsu management announced plans to merge the company with Showa Shell Sekiyu, the fifth-largest oil wholesaler in Japan. The transaction was opposed by the founding Idemitsu family for several reasons, reportedly including ongoing friction between the family and Tembo's management team, cultural differences between the two companies, geopolitical issues (Idemitsu being a major importer of Iranian oil while Showa Shell would remain partly owned by Saudi Aramco), and pressure from rival JX Nippon Oil & Energy which was simultaneously planning its own merger with TonenGeneral.[13] Without approval from the Idemitsu family for a full merger, company management purchased 31% of Showa Shell in December 2016, and launched partnerships in refining and logistics starting in April 2017.[16]

Showa Shell was ultimately acquired by Idemitsu in 2018; it was absorbed into Idemitsu in 2019.