Japan’s oil refineries expect to maintain sufficient supplies of crude oil and refined products during the peak summer demand season thanks to a strategy of diversifying suppliers and using national reserves. The industry is seeking to reduce the impact of geopolitical tensions in the Middle East that have complicated oil transit through the Strait of Hormuz.
The United States gains prominence as an alternative supplier
As explained by Shunichi Kito, president of the Petroleum Association of Japan, crude oil from the United States has become the main alternative to replace part of the traditional supply from the Middle East. At the same time, companies continue to manage purchases from Saudi Arabia and the United Arab Emirates via sea routes that avoid the highest-risk areas.
Likewise, some Japanese companies are supplementing their imports with oil from Mexico, Ecuador, Venezuela, Alaska, and the Russian Sakhalin-2 project, a strategy that broadens supply options in the event of potential market disruptions.
Logistics increase transportation costs
The change in the origin of crude oil also brings new logistical challenges. Very large crude carriers (VLCCs) transporting U.S. oil cannot pass through the Panama Canal, so they must sail around the Cape of Good Hope.
This alternative extends travel time to approximately 55 days, more than double the usual route from the Middle East. As a result, transportation costs rise considerably, and refineries anticipate that part of that increase could be passed on to the final price of fuels.
Japan’s refineries strengthen their supply strategy
Before the increase in geopolitical tensions in the region, around 95% of Japan’s oil imports came from the Middle East. This level of dependence has prompted the refining sector to accelerate the search for alternative suppliers and strengthen the country’s energy security.
Meanwhile, refineries are evaluating the characteristics of different types of crude oil to adjust feed blends and optimize processes without making significant modifications to existing facilities.
Energy diversification gains importance
In addition to expanding the supplier portfolio, the industry considers it necessary to strengthen preparedness for future crises through investments that enable processing a wider variety of crude oils and progressively increasing the use of non-fossil fuels, including biofuels.
These measures aim to improve the resilience of Japan’s energy system against disruptions to international supply and reduce the country’s exposure to geopolitical risks affecting the global oil market.
Source: Energy Now
Photo: Shutterstock
