Japan’s Ministry of Economy, Trade and Industry signed on Dec. 1 an agreement with state-run Kuwait Petroleum Corporation to lease out 500,000 kiloliters (3.14 million barrels) of oil storage capacity at Kiire in southwest Japan.
The METI announcement confirmed an S&P Global Platts report on Nov. 27 that the deal was set to be signed.
Following the agreement, KPC is expected to start filling the leased oil storage at Kiire with Kuwaiti crude in the first quarter of 2021, a METI source told S&P Global Platts on Dec. 1.
The deal will give Kuwait, the third-largest crude supplier to Japan so far this year, flexibility to meet prompt demand from Japan and other Asian markets as regional consumption gradually recovers from the coronavirus pandemic.
METI had been looking to increase the number of oil producing countries storing their oil in Japan for commercial purposes in exchange for prioritizing supply to Japan in the event of an emergency under a scheme known as the “Joint Crude Storage by Producing Countries.” Japan already has deals with Saudi Arabia and Abu Dhabi.
The latest agreement increases Japan’s leased oil storage capacity to the three Middle East producers to a total of 3.1 million kiloliters, or 19.5 million barrels, with Saudi Aramco and Abu Dhabi National Oil Company each holding 1.3 million kiloliters, or 8.2 million barrels of capacity.
At the end of September, Saudi Arabia and Abu Dhabi held a combined total of 2.42 million kl or 15.22 million barrels of their crude oil at leased oil storage in Japan, according to the latest METI data.
Unlike the agreements with Saudi Arabia and Abu Dhabi, the deal with Kuwait allows the stored oil to be used during an emergency to supply other Asian countries, including Vietnam, under Japan’s new international resources strategy formulated in March 2020, the METI source said.
Kuwait supplies Kuwait Export Crude to Vietnam’s 200,000 b/d Nghi Son refinery, in which Kuwait Petroleum International and Japan’s Idemitsu Kosan each have a 35.1% stake.
Middle East focus
Japan’s crude imports from the Middle East have risen to as high as 95% of total imports this year and the country’s largest refiner ENEOS intends to focus on procuring crude from the Middle East in 2021 because of its shorter voyage time compared with other markets such as the US, according to a company executive.
Japan imported an average of 233,733 b/d from Kuwait over January-October this year, accounting for roughly 9% of its total imports of 2.47 million b/d, according to METI data.
Imports of Saudi crude averaged 965,545 b/d during January-October, with imports from the UAE averaging 807,665 b/d, making the two countries its top two suppliers.
Japan’s crude imports from the top three producers accounted for 81% of total imports during the 10-month period.