Prime Minister Shinzo Abe is planning to visit Saudi Arabia during Golden Week to discuss securing a stable oil supply for Japan. Abe is likely to sign an energy security pact during his visit which will start in late April.
Last month, Trade Minister Toshimitsu Motegi visited Saudi Arabia, which is OPEC’s biggest producer, for talks on securing extra oil. There was also talk that the two nations will set up a telephone hotline to allow Japan to quickly seek additional oil supplies in the event of extraordinary circumstances such as terrorist attacks, Middle East unrest or a spike in the price of oil.
Oil markets have been on edge for months over the security of Middle Eastern supplies amid mounting tensions between the West and Iran over Tehran’s disputed nuclear program, with Brent crude prices averaging above $111 a barrel last year. A move by Japan to be first in line to tap Saudi oil could further stoke oil supply concerns among other leading oil importers.
Although Saudi Arabia retains significant spare crude oil production capacity, its exports are falling due to growing domestic oil demand and plans by the kingdom to expand refineries to export more refined products.
Crude imports from Saudi Arabia accounted for 31% of Japan’s total in 2012, with shipments rising 5% from a year earlier to 1.14 million barrels per day, partly offseting a 39.5% decline in Iranian crude imports.
Japan has relied on cooperation with Western oil importing countries through the International Energy Agency to ensure oil supply security since the 1970s.
As one of the most oil import-dependent countries in the industrialized world, analysts say it has always been acutely vulnerable to the prospect of a sudden halt to crude shipments.
Japan is not the only large Asian country at risk in the event of an oil supply shock. China and India are both increasingly reliant on imported oil to fuel their economies and both have far less access to emergency stockpiles than Western importers.
Asia’s top economies have also been less able to rely on Iranian imports.
Iranian oil exports fell by 1 million barrels per day by the end of 2012 due to Western sanctions aimed at forcing oil importers, like Japan, to reduce their purchases of Iranian crude.