Japanese oil refiners are strategizing to diversify their crude oil supply sources while backing Middle Eastern producers in expanding pipeline projects that circumvent the Strait of Hormuz, a critical shipping chokepoint. This initiative was outlined by Shunichi Kito, president of the Petroleum Association of Japan (PAJ) and chairman of Idemitsu Kosan, during a recent press briefing.
Kito emphasized the importance of establishing a reliable alternative route for crude oil transport that does not merely replace Middle Eastern crude but provides a sustainable solution to the risks associated with the Strait of Hormuz. Middle Eastern nations such as the United Arab Emirates (UAE) and Saudi Arabia have approached the Japanese government to engage in or support efforts to enhance oil pipeline infrastructure that bypasses this strategic waterway.
In a significant development, the UAE plans to expedite the construction of a new oil pipeline aimed at doubling its export capacity through the port of Fujairah by 2027. Meanwhile, Saudi Arabia is contemplating an expansion of its oil pipeline capacity leading to the western Red Sea coast, further facilitating alternative export routes.
Regarding diversification, Kito identified crude oil from the United States as a potential option. However, he pointed out that the current design of Japanese refineries, optimized for Middle Eastern crude grades, limits their ability to process large volumes of US crude oil at this time.
On the domestic front, Kito expressed hope that the government’s forthcoming energy resilience package, expected to be finalized by the end of August, will contribute to securing a stable energy supply while enhancing the competitiveness of Japan’s industrial sector.
Reflecting on lessons learned from the Iran crisis, the oil industry plans to bolster supply chain resilience by strengthening partnerships with oil-producing countries, securing tanker capacity, and increasing refinery adaptability. However, Kito refrained from commenting on a potential naphtha stockpiling scheme recently mentioned by Industry Minister Ryosei Akazawa.
