An alliance between Nippon Oil, Japan's largest oil refiner, and sixth-ranked Japan Energy may point to a restructuring of the country's increasingly competitive oil industry.

Nippon Oil and Japan Energy, the oil unit of Nippon Mining Holdings, said earlier they would form a 10-year alliance covering oil field development, refining, logistics and fuel cell manufacturing.
Japan's efforts to decrease its dependence on oil and promote alternatives like liquefied natural gas, as well as a slowdown in demand as the population shrinks is adding to pressure for industry reorganisation.
"We have seven or eight main players in the sector with a combined 30 refineries -- which is too many," said Mitsubishi UFJ Securities analyst Reiji Ogino.
"Some small refineries will in future have to go, but to some of these companies now, a small refinery is still very important. Only when the companies get bigger will they be able to act."
Ogino said he saw restructuring happening over the coming three years, but did not see any mergers or acquisitions in the next year.
A mergers and acquisitions banker in Tokyo, who declined to be identified, also said deals were unlikely in the near term.
"This is one of the industries in which we may see potential movement, but just because consolidation is theoretically the right thing to do it does not mean it will happen straight away."
Nippon Oil and Japan Energy plan to integrate operations at their neighbouring refineries in Mizushima in western Japan, creating what they said would be Asia's biggest refinery with capacity of some 450,000 barrels a day.
Hidetoshi Shioda, senior analyst at Mizuho Securities, said the deal could lead to a long-term capital alliance between Nippon Oil and Japan Energy, and added that he saw this year as the first in an era of mergers and acquisitions in Japan's oil industry.
"They are better off doing this than nothing at all.”