The President of the Petroleum Association of Japan (PAJ), Shunichi Kito, stated on Wednesday that in response to potential supply disruptions due to current geopolitical conflicts in the Middle East, Japanese refineries are taking a two-pronged approach by releasing national strategic reserves and developing alternative procurement channels. It is anticipated that Japan will be able to ensure sufficient supplies of alternative crude oil and refined products during the upcoming summer peak energy consumption period.
Kito noted that U.S. crude oil has now become Japan's primary alternative source. Simultaneously, Japan is actively coordinating efforts to continue purchasing crude oil from Saudi Arabia and the United Arab Emirates via land routes or alternative shipping lanes that bypass the Strait of Hormuz. Additionally, some Japanese companies have already begun extending their procurement reach to Alaska, the Sakhalin-2 project in Russia, and Latin American countries such as Mexico, Ecuador, and Venezuela.
Addressing the logistical challenges brought by supply chain restructuring, Kito emphasized that due to Very Large Crude Carriers (VLCCs) transporting U.S. crude being unable to pass through the Panama Canal, some vessels are forced to detour via the Cape of Good Hope. This route takes approximately 55 days, more than double the duration of traditional Middle Eastern shipping lanes, leading to a significant increase in transportation costs. He acknowledged that refineries will ultimately have to pass on these sharply rising costs to end consumers. Currently, refineries are urgently analyzing the physical properties of alternative crude types and adjusting blending ratios to adapt to the process limitations of existing refining equipment.
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