Japan To Count Saudi, UAE Crude Storage Toward Reserve Goals

Japan will start treating as “quasi-strategic reserves” some of the crude stored by Saudi Arabia and the United Arab Emirates in the Asian nation, as a way to help meet Tokyo’s strategic reserve obligations, a trade ministry panel said on Wednesday.

Japan has been lending 10.7 million barrels (1.7 million kilolitres) of crude tank capacity to the two countries, in a deal that gives them a supply depot close to their largest customers in exchange for priority access to Japan in an emergency.

The volume of loaned tanks is set to grow to a total of 12.6 million barrels (two million kl) next fiscal year and possibly higher in the following years, in a move to strengthen Japan’s ties with the two main suppliers of crude, the panel said.

The panel said it would seek to add half of the crude tank capacity used by the producers to the national strategic reserves to meet a storage target of 90 days’ worth of oil under International Energy Agency (IEA) obligations.

The panel also said Japan would delay by a year its plans to boost national stockpiles of liquefied petroleum gas (LPG) to 1.5 million tonnes until some time in the financial year starting April 2017, to account for the expected lower cost of imports from the United States from next year.

About 60 new large LPG vessels will be introduced in 2015 and 2016, and the start of a new shipping route, with the completion of the Panama Canal expansion, is projected to bring a significant saving in LPG costs from 2015, the panel said.

Japan boosted its national LPG stockpiling capacity by 850,000 tonnes to 1.5 million tonnes in March 2013 by completing the construction of two bases in its west, one in Namikata in Ehime prefecture, and the other in Kurashiki, in Okayama prefecture.

Japan’s two new facilities take to five the number of stockpiling bases it has. It now aims to raise national LPG stockpiles to full capacity by March 2018 so as to have 40 days’ worth of imports. Together with 50 days’ worth of stocks in commercial storage, Japan aims to have 90 days of stockpiles.