Tokyo — Japan has agreed to boost Abu Dhabi's leased crude oil storage capacity to 1.3 million kiloliters, or 8.18 million barrels, from 1 million kl, a move that will not only enhance the Asian consumer's supply security, but also help to expand the Middle East supplier's access to the East Asian market.
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Under the agreement, which involved the renewal of the existing joint crude oil storage scheme for three years, the Abu Dhabi National Oil Company can use the leased facility at Kiire in southwestern Japan as an East Asian supply base in exchange for prioritizing supply to Japan in the event of an emergency, an official at the Ministry of Economy, Trade and Industry said Tuesday.
ADNOC's expanded leased crude storage capacity of about 8 million barrels is equivalent in volume to four VLCCs.
The renewal of the deal, which was signed in Abu Dhabi on Monday by senior METI minister Hideki Makihara and UAE state minister, who is also ADNOC group CEO, Sultan al-Jaber, in the presence of Japanese Prime Minister Shinzo Abe and the Crown Prince of Abu Dhabi Mohammed bin Zayed, according to METI.
"We are pleased to extend and expand our storage agreement, which positively contributes to Japanese energy security, while also supporting ADNOC's broader trading ambitions," Jaber said in a statement carried by the UAE's state-run WAM news agency.
"Given the current world geopolitical situation, it is well-timed to expand our Joint Oil Storage Project," Makihara was quoted as saying in the WAM news report.
The Japanese premier is on a visit to Saudi Arabia, the UAE and Oman from January 11, in an effort to ensure energy security as well as safety of shipping in the Middle East.
The Middle East accounted for 89% of Japan's crude imports, or an average of 3.01 million b/d over January-November, with supplies from Saudi Arabia and the UAE amounting to 65% of overall imports during the period, METI data showed. Around 80% of Middle East oil supplies transit through the Strait of Hormuz to Japan.
Following the latest deal, Japan's leased crude storage capacity to its top two crude suppliers -- Saudi Arabia and the UAE -- rose to a total of 2.6 million kl or 16.35 million barrels, equating to eight days of domestic oil consumption, according to the METI official.
Japan sees its joint oil storage project with Saudi Arabia and the UAE among its key policy measures to ensure stable supply in times of emergency.
Japanese refiners also favor Saudi Arabian and UAE crude oil, the most utilized grades in Japan, which are stored under the joint oil storage project and to be released in case of any supply disruptions.
"Releasing [petroleum] reserves" will be the refiners' top preferential option to ensure continuity in supply of
domestic oil products in the case of a disruption in regional crude supply, Petroleum Association of Japan's president Takashi Tsukioka told reporters on January 7.
"Among our priority is to release the reserves held by oil producing countries under a system run by the Japanese government," Tsukioka said on the sidelines of the PAJ's New Year reception.
Japan's total petroleum reserves stood at 81.98 million kl, or 515.64 million barrels, at the end of October 2019, equating to 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 Saudi Arabia and Abu Dhabi's crude stocks accounting for 1% of the overall oil reserve.