Japan’s biggest oil refiner, Eneos Holdings, will likely move to diversify its crude supply from a heavy dependence on the Middle East in the wake of the shock disruption of flows through the Strait of Hormuz, the company’s chief financial officer, Soichiro Tanaka, told Reuters in an interview published on Friday.
Before the Iran war, Japan and its refiners relied on the Middle East for a massive 95% of all crude imports. But the shock loss of supply forced refiners to seek alternatives and the government to release oil from strategic reserves to offset the lack of supply through the Strait of Hormuz.
In recent weeks, Eneos has stabilized its procurement and has lined up enough crude not needing the Strait to last it through September, the executive said.
“We have a good outlook for supplies through September. The situation has become much more stable,” Tanaka told Reuters.
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The disruption, however, is prompting Japanese refiners to seek permanent alternatives to replace some of the Middle Eastern volumes.
“From the perspectives of risk hedging and national energy security, there is no doubt that reducing dependence on the Middle East over the medium to long term would be preferable,” Eneos’ executive said.
Refiners and the Japanese government are likely to hold discussions in the near future on alternative supply, Tanaka told Reuters, but noted that importers need to strike a delicate balance between supply security and the economics of refining.
Japan in April imported the lowest volume of crude oil from the Middle East on record dating back to 1979 as the Iran war and the closure of the Strait of Hormuz choked supply from the region.
Japan has released crude from its strategic reserves as part of an IEA-coordinated global effort to release 400 million barrels of crude and oil products. The oil stocks release, Japan’s biggest ever, has helped refiners increase throughput. So has alternative supply from producers outside the Middle East, including the United States, as well as rare cargoes from Azerbaijan and Latin America.
By Charles Kennedy for Oilprice.com
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