Japan Oil Refiners to Tap Reserves in Case of Middle East Disruption

Reuters

16:36 JST, April 17, 2024

TOKYO (Reuters) – Japanese oil refiners see no immediate impact from escalating tensions in the Middle East on their crude procurement, but will use the country’s reserves in case of contingencies to ensure stable oil supplies, the industry group’s head said.

“We don’t believe that there are any obstacles to the procurement of crude oil to Japan for now,” Shunichi Kito, the president of Petroleum Association of Japan (PAJ), told a news conference on Wednesday, when asked about the impact of the Iranian counter-attack on Israel over the weekend.

Kito acknowledged that if the conflict were to escalate and affect the broader Middle East it would pose a serious problem.

“In case of any disruption in crude oil supply, it is important to be prepared by making flexible use of the oil reserve to ensure that the oil supply will not be disrupted,” he said, noting Japan’s public and private sectors have a combined 240-day oil reserve.

Oil prices have softened so far this week as the Iranian attack on Israel proved less disruptive than anticipated.

Japan relies heavily on Middle Eastern crude, importing over 95% of its oil from the region.

Kito, who is also the president of Japan’s No.2 oil refiner Idemitsu Kosan, said his company is looking into possibility of substituting some supply from the Middle East with other sources.

“As alternative sources, we are considering crude from West Africa and North America, if they can be transported and processed smoothly in our refineries,” he said.

But he noted that most Japanese refineries are designed to process crude from the Middle East, and it would not be easy to switch to new supplies as they may not fit with their facilities.