Showa Shell: No big investment in power sector soon

Japanese refiner Showa Shell Sekiyu KK said recently it had no near-term plans to invest in Japan's power sector following a tie-up with Tokyo Gas Co Ltd and a Royal Dutch/Shell Group business unit in July.

"There will be no such big projects in the next four to five years because for the next few years it will be difficult to judge the progress of the power industry liberalisation," Showa Shell Chairman Haruyuki Niimi told Reuters.

"Government policy is not clear yet and power generation requires a huge amount of investment. I think it is very difficult to expect a very attractive rate of return because of the nature of the industry -- it's a public utility -- so this is not an area where we should concentrate our capital nowadays."

Tokyo Gas said in July it would work with Showa Shell and Shell Gas & Power Japan to build a 1.2-1.5 million kilowatt power plant in Yokohama, just outside of Tokyo, that would burn 600,000 tonnes of liquefied natural gas (LNG) a year.

The deal provided the parent Shell group with a new outlet for its LNG, while Tokyo Gas, keen to expand into the power business, won a stable supplier.

Niimi said Showa Shell's involvement was primarily to use land owned by the company and to get an entry point in the market. Japan plans to deregulate its power market, including all high-voltage electricity consumers from April 2005.

Reuters