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Japan PM to visit Saudi Arabia, UAE, Oman to ensure energy, shipping security

Tokyo — Japanese Prime Minister Shinzo Abe will begin his visit to Saudi Arabia, the UAE and Oman from Saturday, in an effort to ensure energy security as well as safety of shipping in the Middle East, Chief Cabinet Secretary Yoshihide Suga said on Friday.

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"This visit is part of our country's diplomatic efforts to avert further escalation in developments amid the intensifying Middle East situation," Suga said at a news conference in Tokyo.

During the visit, which is slated to last until January 15, Abe is "expected to request each country cooperation in ensuring stable supply of energy as well as safety of sailing," he added.

The Japanese premier's visit to the Middle East nations comes just days after Iran said it took "proportionate measures in self-defense" for its missile attacks on two US military bases in Iraq, after a US attack killed Tehran's top military commander in Baghdad.

The Middle East accounted for 89% of Japan's crude imports, or an average of 3.01 million b/d over January-November, according to Ministry of Economy, Trade and Industry data.

Around 80% of Middle East oil supplies transit through the Strait of Hormuz to Japan.

Japan's oil imports from the Middle East

Saudi Arabian and the UAE supply accounted for 65.2% of Japan's total crude imports over January-November 2019, while Omani supplies amounted to 2% of the total imports in the same period, according to METI data.

Japan will closely work with the International Energy Agency to ensure steady oil supply in the event of any disruption in crude flows from the Middle East, METI Minister Hiroshi Kajiyama said on Tuesday.

"In the event of an emergency, we will take necessary action with the IEA and other relevant countries," Kajiyama told reporters at a news conference. "Crude procurement from the Middle East will continue to be significantly important for us going forward," he added.

Japan's total petroleum reserves stood at 81.98 million kiloliters, or 515.64 million barrels at the end of October 2019, equating 234 days of domestic consumption, according to METI data.

Crude oil accounts for 75% of the petroleum reserves held by the Japanese government and the private sector, with the crude stocks held by Saudi Arabia and Abu Dhabi accounting for 1% of the total oil reserve.

VISIT MAY HELP EASE MARITIME TENSIONS

Shipping industry executives are hopeful that Abe's visit will soothe nerves after the recent escalation in tensions between Iran and the US.

Market participants in the tanker markets said Japan is perceived as a neutral country in the Middle East imbroglio and a mediator.

"This can benefit [the tankers industry] because of Japan's sizable imports of crude and naphtha," said a Japan-based chartering source.

Every week a few naphtha cargoes load from the Middle East to be delivered in Japan, and their security is at stake because of the recent tensions, said the same source.

Japan, along with South Korea, is among the world's largest importers of naphtha.

At a time when several countries are diversifying their sourcing of crude, Japan continues to buy a lion's share of its crude imports from the Middle East, and its safe passage hinges on peace in the region.

Like other countries, Japan is also bearing the brunt of high additional war risk premia, or AWRP because it has multiplied the overall cost of delivered cargoes of oil, gas and oil products from the Persian Gulf and the Strait of Hormuz, said a Singapore-based VLCC broker.

A definite outcome is not immediately expected from this visit but Japan's role as peacemaker in the Persian Gulf cannot be understated and will be positive in the medium term, another broker said.

-- Takeo Kumagai, takeo.kumagai@spglobal.com

-- Sameer Mohindru, sameer.mohindru@spglobal.com

-- Edited by Agamoni Ghosh, agamoni.ghosh@spglobal.com