Nippon Oil Buys Crude From Sakhalin-1 Under Long Term Contract

(Bloomberg) — Nippon Oil Corp., Japan’s largest refiner, signed a long-term contract to buy Russian oil from Sakhalin island, the first such agreement by the country’s refiners in a drive to diversify supply from the Middle East.

Nippon Oil will purchase one vessel of oil, or 720,000 barrels, every quarter from the $13-billion Sakhalin-1 project starting this year, said people who declined to be identified because the deal is confidential. Quantities and other conditions will be re-negotiated within three years, they said.


Japan gets 87 percent of its crude oil from the Middle East and can reduce costs for the fuel by buying from Sakhalin, a four-day sea journey to Japan compared with more than two weeks from the Persian Gulf. Dubai crude oil, a price benchmark for Asian buyers, has surged 64 percent in the past 12 months.

“Buying oil from Sakhalin is an obvious option because it’s so close to Japan; the buyer can benefit from lower shipping costs,” Hirofumi Kawachi, an energy analyst at Mizuho Investors Securities Co., said in a phone interview.

Bloomberg