Saudi Aramco Prioritizes Crude Oil Shipments to Japan

---

Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--On December 14, 2010, Saudi Aramco (Dhahran, Saudi Arabia) signed a contract with the government of Japan for the diversion of products during times of need or crisis. Under the agreement, Japan would lend crude oil tanks to Aramco to streamline the logistics of shipments to China and other countries in Asia, in exchange for diverting products intended for these regions to Japan during a crisis.

Japan Oil, Gas and Metals National Corporation (JOGMEC) (Kawasaki, Japan), a government institution that is responsible for securing sources of oil, natural gas, nonferrous metals, and minerals for domestic use, represents the Japanese government in the agreement. Japan secures approximately 87% of its crude oil from the Middle East.

The contract between Japan and Aramco calls for a term of three years, lasting from December 2010 to December 2013, and a storage capacity of approximately 3.8 million barrels. Aramco's storage space is at Okinawa Petroleum Terminal in Uruma. 65% of the terminal is owned by JX Nippon Oil & Energy Corporation (TYO:5001) (Tokyo), while the remaining 35% is owned by Cosmo Oil Company Limited (TYO:5007) (Tokyo), two Japanese refiners that been affected the most by last month's earthquake and tsunami. Of the terminal's 45 tanks of 630,000 barrels each, six are used by Saudi Aramco. Two shipments under this agreement have already arrived in Okinawa; a 1.9 million-barrel shipment arrived at the end of February, while a second shipment of 1.8 million barrels arrived between April 5 and April 7. According to sources on site, all six of Aramco's tanks are currently full.

It is not clear at this point which refiners will receive Aramco's shipments. Aramco owns shares in Showa Shell Sekiyu K.K. (TYO:5002) (Tokyo) which owns and operates refineries in the Mie, Kanagawa, and Yamaguchi prefectures for a maximum operating capacity of 515,000 barrels per day (BBL/d). Showa Shell has halted exports and has prioritized supplying northern Japan with refined products. The Saudi Arabia-based company also exports to Taiyo Oil Company Limited (Tokyo), which owns and operates one 120,000-BBL/d refinery in the Ehime prefecture.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.