Japan refiners to diversify crude sources, explore support for Hormuz bypass routes

TOKYO: Japanese oil refiners plan to diversify their supply sources while supporting Middle Eastern producers through pipeline expansion projects that avoid the Strait of Hormuz, the head of an industry group said on Wednesday.

Shunichi Kito, president of the Petroleum Association of Japan (PAJ) and chairman of refiner Idemitsu Kosan, told a news conference that it is of the utmost importance to establish a viable alternative to crude oil transported through the Strait of Hormuz, rather than simply replacing crude sourced from the Middle East.

Middle Eastern producers, including the UAE and Saudi Arabia, have asked the Japanese government to participate in or support plans to expand oil pipelines to bypass the strait, Kito said.

The UAE intends to accelerate construction of a new oil pipeline to double its export capacity via the port of Fujairah by 2027. Saudi Arabia is considering expanding the capacity of its oil pipeline to the western Red Sea coast.

Kito identified US crude as one diversification option. However, he noted that the current configuration of Japanese refineries, which are better suited to Middle Eastern grades, makes it difficult to handle large volumes of US crude at present.

Energy resilience measures

Kito said he hopes the government’s energy resilience package, due to be finalised by the end of August, will help ensure a stable energy supply while strengthening industrial competitiveness.

Drawing lessons from the Iran crisis, the oil industry will seek to strengthen supply chains by deepening ties with oil-producing countries, securing tanker capacity and improving refinery flexibility, he added.

Kito declined to comment on a possible naphtha stockpiling scheme that Industry Minister Ryosei Akazawa recently said the government would consider.