JX Nippon Oil & Energy, which is facing declining demand in its domestic market Japan, is looking to other markets in Southeast Asia, particularly Indonesia and Vietnam, to expand, Executive Regional Officer Shoichiro Yuhara said in a recent interview with Platts, an industry newsletter.

Last month, JX signed an agreement with Indonesia’s state-owned Pertamina to help upgrade Pertamina’s 260,000 barrel-per-day (bpd) Balikpapan refinery. Now, JX is looking to secure a gasoline retail license in the country.

Earlier this month, Indonesia removed gasoline subsidies, allowing fuel retailers to set their own margins of between 5% and 10% on the islands of Java, Bali and Madura. This is expected to open up the retail fuel sector to private companies like JX.

JX expects Indonesia’s fuel demand to grow by 17% from 2020 to 2030, from 1.38 million bpd to 1.61 million bpd. Demand in 2013 was 1.15 million bpd.

“We have strategically been aiming to make forays into fairly regulated but large markets without many competitors,” said Kotaro Sunaga, group manager of the company’s Southeast Asia business development department.

“That is why we are looking at Indonesia and Vietnam. It is our strategy to develop our base [in these markets] before regulations are lifted, [so we can act] quickly after [the regulations are] lifted.”

Japanese original equipment manufacturers (OEMs) are heavily present in both markets, thus Indonesia and Vietnam make the most sense for Japanese oil companies, which typically follow the footsteps of their OEM customers, to enter.

If successful in gaining the retail license, Sunaga said that JX is considering building up to 20 retail outlets. This would also be JX’s first oil retail venture outside Japan. While Yuhara says that it would be beneficial to get the license this year, it could realistically take as long as two-and-a-half years to secure the license and land, as well as lease storage tanks and find local distribution partners.

JX also has a memorandum of understanding with Vietnam’s state-owned Petrolimex to take a stake in Petrolimex by the middle of this year. The Vietnamese government is looking to lower its stake in Petrolimex to a maximum of 75%. Owning a stake in Petrolimex would allow JX to sell oil products in Vietnam indirectly. Yuhara declined to specify the potential size of the stake.

JX may also build a 200,000 bpd refinery in the Van Phong economic zone in Khanh Hoa province, but Yuhara says the company will consider this when the Petrolimex deal has been finalized.