Idemitsu to lift pre-suspension term Khafji crude once Neutral Zone supply restarts: chairman

Tokyo — Japanese refiner Idemitsu Kosan expects to lift Khafji crude oil, as per the term contract signed before production was suspended, once supply from Saudi Arabia and Kuwait's shared Neutral Zone resumes, its chairman told reporters Thursday.

"As far as Idemitsu is concerned, I understand that the remaining contractual supply volume will be maintained once production is restarted," Idemitsu's chairman Takashi Tsukioka said at a press conference in Tokyo.

"We welcome the restart of heavy Khafji crude oil in the Neutral Zone amid suspended exports from Iran," Tsukioka, speaking as the president of the Petroleum Association of Japan, said.

Tsukioka's comments come as Saudi Arabia and Kuwait will gradually ramp up production from the offshore al-Khafji field and the onshore Wafra field, Kuwait's oil minister Khaled al-Fadhel said on February 16, according to a report by state-run KUNA news agency.

Production suspension

Crude oil production from the Neutral Zone, where Saudi Arabia and Kuwait share equal output, will reach 550,000 b/d by the end of the year after a trial pump started on February 16, the Kuwaiti oil minister said.

The offshore Khafji field, owned by Saudi Arabia's Aramco Gulf Operations Co. and Kuwait Gulf Oil Co., was shut on October 2014 by Aramco, which cited new government emissions standards for gas flaring as the reason for the shut down.

The onshore Wafra field is operated by KGOC and Saudi Arabian Chevron. It was shuttered in May 2015, after Chevron said it had encountered difficulties in securing work and equipment permits.

Prior to production suspension, Khafji crude had an API gravity of 28.5 degrees and a 2.85% sulfur content, with Wafra having 24.5 API degrees with 3.88% sulfur.

Khafji crude

Khafji crude is among popular coker feeds in Japan over many years. Japan last imported 672,248 barrels of Khafji crude in November 2014, according to the Ministry of Economy, Trade and Industry data. Over January-November 2014, Japan imported 16.74 million barrels of Khafji crude, as well as 3.85 million barrels of Wafra crude, METI data showed. The Wafra crude imports were suspended in 2015, when Japan imported a total of 2.21 million barrels.

Refiner Fuji Oil, which has a 33,000 b/d coker at its sole 143,000 b/d Sodegaura refinery in Tokyo Bay, intends to consider procuring Khafji crude oil once supply is resumed, a company spokesman said.

Idemitsu Kosan has a 6.66% stake in Fuji Oil, with state-owned Kuwait Petroleum Corp. holding a 7.52% stake and the Saudi Arabian government a 7.52% stake.