Saudi-Japan oil accord on cards

Japan and Saudi Arabia will sign an agreement this weekend that will allow Tokyo to make emergency requests for additional supplies of crude oil, Japan’s Nikkei newspaper reported in its yesterday’s edition.

The agreement would set up a telephone hotline between the two governments to allow Japan to quickly seek additional oil supplies in the event of extraordinary circumstances such as terrorist attacks, unrest in the Middle East or a spike in the price of oil.

Japan opted to seek the supply deal because Saudi Arabia’s crude oil exports are set to decline, the ‘Nikkei’ report said.  Although the kingdom retains significant spare crude oil production capacity, its crude oil exports are falling due to growing domestic oil demand and plans to expand Saudi oil refineries to export more refined products.

“If true, it shows how nervous importers are due to the fragility in the Middle Eastern situation, particularly Asian buyers,” said Amrita Sen of oil consultancy Energy Aspects.
Toshimitsu Motegi,   Japan’s economy, trade and industry minister, will travel to Saudi Arabia today to sign the pact, Nikkei said. He will later visit other Middle Eastern oil  exporters, including the UAE.

China and India
The deal, as described, would represent a significant increase in cooperation between one of the world’s largest oil importers and the top producer in Organisation of Petroleum Exporting Countires (Opec). 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 industrialised world, analysts say it has always been acutely vulnerable to the prospect of a sudden halt to crude shipments.
Any move by a major oil importer to be first in line to tap Saudi Arabia’s spare oil production capacity in the event of a crisis may further stoke global oil supply security concerns.

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.

Oil markets have been on edge for months about the security of Middle Eastern oil supplies amid mounting tensions between the West and Iran over Tehran’s disputed nuclear programme.

Iranian oil exports fell by 1 million barrels a day 2012-end due to Western sanctions aimed at forcing oil importers, like Japan, to reduce their purchases of Iranian crude. In retaliation, Iran has at times threatened to cut off shipments of oil or block major shipping routes.

times of oman