Japan's METI panel proposes oil shipping aid to bypass Hormuz

A working group at Japan's Ministry of Economy, Trade and Industry proposed a framework on Aug. 7 to help reduce transportation costs for crude oil and naphtha shipments that do not transit chokepoints such as the Strait of Hormuz.

The proposal comes as Japan has recognized a policy need to consider reducing dependence on crude oil imports that pass through chokepoints such as the Strait of Hormuz, as alternative transportation routes, including pipelines in Saudi Arabia and the UAE, functioned effectively, according to the working group documents.

The move follows the July 24 launch of the Working Group on Strengthening the Resilience of Oil and Other Fuel Supply Structures, as Japan secured crude purchases in July that were equivalent to 100% of its average monthly imports a year earlier, without using national oil reserves.

In a sign of Japan's latest crude diversification effort, METI said Aug. 10 that ENEOS Corp. is scheduled to receive an oil tanker loaded with Canadian crude at its Kiire oil terminal as early as Aug. 12, marking the first arrival of the Canadian barrels since the conflict in the Middle East. ENEOS was not immediately available to comment.

Japan decided in March to release the equivalent of about 50 days' worth of national petroleum reserves, while also implementing a 15-day reduction in required private-sector inventories and releasing approximately six days' worth of jointly held oil stocks maintained with oil-producing countries, as tankers have effectively been unable to pass through the Strait of Hormuz. The Middle East accounted for 94% of Japan's crude oil imports in 2025, according to METI data.

Proposed framework

The working group identified that a key challenge in diversifying crude oil and other fuel procurement sources is that transportation costs and related expenses may increase during normal times due to factors such as longer shipping times and the use of pipelines.

"Accordingly, consideration is being given to introducing a mechanism that would promote diversification of supply regions and transportation routes, while smoothing risks and costs across both normal periods and times of crisis," according to the working group documents.

The proposed framework involves certification by the METI minister of crude and naphtha importers that undertake diversification initiatives and submit their procurement plans.

Under the proposed framework, Japan Organization for Metals and Energy Security would provide support for transportation and related costs associated with approved diversification initiatives, based on a comprehensive assessment of factors such as economic efficiency and the degree to which the initiative contributes to diversification.

The financial resources for the support program would be derived from contributions collected from all importers of crude oil and petroleum products, according to the proposed framework.

Reserve buyback

During the Aug. 7 working group meeting, METI also proposed buying back crude oil released from the national oil reserves to restore the reserves to the International Energy Agency's standard of 90 days of net imports, as early as fiscal year 2026-27 (April-March).

Japan's national crude oil reserves are currently below the IEA's 90-day net import standard, according to a METI official.

During fiscal year 2027-28, Japan will aim to restore reserves to the equivalent of 90 days of crude oil imports, including domestically refined naphtha, which is not currently covered by the national oil stockpiling system, while taking crude oil prices and other market conditions into consideration.

Japan's petroleum reserves were equivalent to 202 days of domestic consumption as of Aug. 7, comprising 103 days in national oil reserves, 96 days in privately held reserves and four days in a joint crude oil storage program with oil-producing countries, according to the latest METI data released Aug. 10.

Japan has indefinitely extended its measure allowing the country's privately held oil reserves to be lowered by 15 days until the IEA Governing Board decides on its future policy regarding a coordinated stock release, METI said July 15.

The July 15 move followed METI's June 15 announcement that Japan had extended its measure allowing refiners and oil product importers to reduce private-sector reserve levels from the current 70 days to 55 days for another month.

Japanese Prime Minister Sanae Takaichi said May 12 that the country will not release additional oil reserves after securing sufficient crude oil for June.