April 1 (Bloomberg) -- Showa Shell Sekiyu KK, the oil refiner seeking land to build its third solar panel factory, said it’s in talks to buy Hitachi Ltd’s mothballed plasma television panel plant in southern Japan.

The Hitachi factory in Miyazaki Prefecture on Kyushu island is near Tokyo-based Showa Shell’s two existing solar panel plants, the refiner said in a statement on its Web site today.

Showa Shell said the third solar panel production plant would cost an estimated 100 billion yen ($1 billion) and is set to start operating in 2011. The Royal Dutch Shell Plc unit is diversifying from fuel production as Japan’s petroleum demand declines because of a shrinking population and increased energy conservation by households and businesses.

Shares in Japan’s fourth largest oil refiner jumped 6.9 percent in Tokyo trading to 958 yen by 11 a.m. in Tokyo, poised for their biggest gain since March 23.

Hitachi confirmed the talks with Showa Shell in a separate statement today. Japan’s second-biggest plasma television maker suspended operations at the plant in the town of Kunitomi last year as the global recession battered demand for home electronics. Hitachi has been studying alternative uses for the facility, it said.

Showa Shell invested 5 billion yen in its first solar panel factory and 15 billion yen in the second, with combined production capacity totaling 80 megawatts a year. The proposed third plant would have output capacity of 1,000 megawatts.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Michio Nakayama in Tokyo at mnakayama4@bloomberg.net.

Last Updated: March 31, 2009 22:24 EDT