Japan is considering introducing a scheme to share costs among refiners and trading houses to support imports of diversified crude cargoes that do not transit the strait of Hormuz, as it seeks to strengthen energy security following recent disruptions in the Middle East.
The country's trade and industry ministry Meti set up a working group in late July to enhance the resilience of Japan's petroleum supply chains. At its latest meeting on 7 August, the group proposed a scheme to raise and disburse funds to support stable imports of crude oil and naphtha that do not pass through the strategic chokepoint.
The scheme would cover additional diversification costs, such as higher freight and insurance expenses, compared with shipments routed through the strait of Hormuz, Meti said.
Under the proposed scheme, importers such as refiners and trading houses will pay funds to Japan's energy security agency, Jogmec. Such importers would submit plans for crude sourcing diversification to the government, and Jogmec will provide financial support for approved projects based on criteria such as economic efficiency and their contribution to crude procurement diversification.
Such diversified procurement would require higher transport costs in normal times, because of longer delivery days or the need to use pipelines. By collecting funds from importers and providing them for diversification efforts would provide greater certainty for importers and help offset the higher costs associated with longer transportation distances compared with supplies via Hormuz, Meti said. The working group has yet to discuss and design further details of the scheme.
Meanwhile, the working group also proposed replenishing Japan's strategic petroleum reserves (SPR) during the April 2026-March 2027 fiscal year, Meti said. Japan released around 90mn bl of government-held SPR following the outbreak of the US-Iran war. After the release programme was completed, government stockpiles stood at around 170mn bl.
As current inventory levels are below the IEA standards, so Tokyo is considering replenishing the SPR to restore compliance, Meti said.
Japan faced supply disruptions especially for naphtha, as the country was reliant on the Middle East for naphtha imports. The working group is also discussing how to secure stockpiles to meet domestic demand for naphtha, and it proposed replenishing strategic crude stockpiles to levels equivalent to 90 days' worth of Japan's crude imports during the April 2027-March 2028 fiscal year, while taking into account feedstock requirements for domestic naphtha production.
There is an opinion that it would be preferable to hold stockpiles in the form of crude oil from a safety perspective, given naphtha's high volatility, Meti said.
