The Yomiuri Shimbun
The Japanese government plans to build a system to subsidize the costs of securing crude oil supplies that do not pass through the Strait of Hormuz, according to three bills the government is considering to diversify crude oil procurement routes, The Yomiuri Shimbun has learned.
The government aims to submit the bills to an extraordinary Diet session by the end of October, after presenting them to a ruling coalition subcommittee.
The three bills are those for new laws on the diversification of the procurement of crude oil and other resources as well as crude oil transportation insurance, and an amendment to the Japan Organization for Metals and Energy Security (JOGMEC) Law.
In the past, more than 90% of the crude oil imported by Japan was transported via the Strait of Hormuz. Under a system to be built under the procurement diversification bill, importers will be reimbursed for a portion of the costs incurred in procuring crude oil through more expensive routes. The funding will be supported by contributions widely collected from crude oil importers under a system to be newly built.
To prepare for large payouts, insurance companies enter reinsurance contracts with reinsurance companies. The new crude oil transportation insurance law will state that a grant system will be built whereby the government will cover a portion of insurance claims for damage to oil tankers and other transportation vessels in cases where reinsurance cannot be secured with insurance firms due to escalating international tensions.
The amendment to the JOGMEC Law will allow JOGMEC to invest in projects such as the development of pipelines necessary for alternative procurement.
Since the Strait of Hormuz was effectively blocked due to hostilities in the Middle East, the government has been working to secure the crude oil needed for domestic use. Currently, demand is being satisfied through imports from regions outside the Middle East, such as North America, and with crude oil from the Middle East transported through pipelines that bypass the strait.
The government aims through these bills to secure crude oil procurement routes that would not be affected by international situations.
----
This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.
YDN-M0000236308-1
Comments