Japan will review the country’s future petroleum reserves systems, including joint crude oil storage projects with oil producing countries, to ensure its oil security amid prolonged tensions in the Middle East, Japan’s newly appointed Minister of Economy, Trade and Industry Hiroshi Kajiyama said Tuesday.
In spite of the tensions in the Middle East, “we have more than 200 days’ worth of domestic consumption in the petroleum reserves, including those held by the private sector as well as in joint storage with producing countries,” Kajiyama said in a group interview in his office.
“While we will closely monitor the Middle East situation, we will rigorously consider the future of the petroleum reserves, including the joint storage with producing countries,” he added.
Kajiyama became Japan’s de-facto energy minister on Friday, when he was appointed by Prime Minister Shinzo Abe following the resignation of predecessor Isshu Sugawara earlier in the day.
Tokyo became nervous after the September 14 attacks on Saudi Arabian oil facilities, which occurred after two ships, including one operated by a Japanese shipping company, were attacked on June 13 just outside the Strait of Hormuz.
Saudi Arabia was the largest crude supplier to Japan over January-August, when its supply accounted for more than a third of the total imports of about 3.07 million b/d. The Strait of Hormuz, a key route for oil tankers in the Persian Gulf, is used for around 80% of Japan’s crude imports.
At the end of August, Japan had a total 83.88 million kl or 527.59 million barrels of petroleum reserves, equivalent to 238 days of consumption, according to METI data. The total petroleum reserves also equate 199 days of Japan’s imports based on the International Energy Agency standard.
The petroleum reserves also included 1.50 million kl or 9.43 million barrels of crude stocks at the end of August, which accounted for four days of domestic consumption and four days of imports, held by Saudi Arabia and Abu Dhabi. A breakdown of oil stocks held by Saudi Arabia and Abu Dhabi was not available.
RENEWING JOINT STORAGE
Japan and Saudi Arabia have recently agreed in principle to renew a joint crude oil storage scheme in Okinawa, ahead of its expiration in October, a move that gives the Middle East supplier quick and easy access to its key customers in East Asia and provides energy security for Tokyo amid mounting geopolitical woes.
The current agreement with Saudi Aramco under a scheme known as the Joint Crude Storage by Producing Countries, and where Tokyo pays for storing Saudi Arabian oil at leased storage tanks in Okinawa in Japan’s southwest, is due to expire in October.
Under the current agreement, Saudi Aramco leases 1.3 million kiloliters or 8.18 million barrels of crude oil storage capacity at Okinawa for commercial purposes in exchange for prioritizing supply to Japan in the event of an emergency.
For Japan, storing oil domestically from its strategic suppliers such as Saudi Arabia and Abu Dhabi has become more important after a series of events this year in the Middle East, from where Japan sources close to 90% of its crude import requirements.
Another joint crude storage scheme with Abu Dhabi National Oil Company is also up for renewal this year. Currently ADNOC leases crude oil storage capacity of up to 1 million kl, or 6.29 million barrels, at Kiire in Japan’s southwest.
The UAE was Japan’s second largest crude supplier during the first eight months of this year, when its supply accounted for about 30% of the total imports.