28/08/26
Japan’s Eneos to keep Middle East as main crude source
Tokyo, 28 August (Argus) — The Middle East will continue to be Japanese refiner
Eneos Holdings' main crude source, but dependence on the strait of Hormuz could
be lowered depending on the cost and risk balance, executive vice president and
chief financial officer Soichiro Tanaka said in an interview with Argus . "The
Middle East will remain a crude source with a significant share, although its
share may decline from past levels," Tanaka said. The firm will return to Middle
Eastern crude to some extent as the situation stabilises, given its economic
advantages and the firm's experience of processing Middle Eastern crude as its
main crude supply. Nationwide, Japan has started discussions to diversify crude
oil sourcing, including a scheme to raise funds from refiners and importers to
support diversification. "If it becomes an economically viable framework and
offers greater overall value in various respects, we will choose to make use of
it," Tanaka said. The framework will have influence on Japan's future dependence
on the Middle East for crude, but "Middle Eastern crude will not drastically
decrease," he said. Japan sourced 94pc of its crude imports from the Middle East
in 2025, and most of the volumes passed through the strait of Hormuz. To reduce
geopolitical risk, Japan is also considering financial measures to support
construction and enhancement of alternative supply facilities in the Middle
East, such as pipelines bypassing the strait. Reducing reliance on the strait
"depends not only on buyers but also on suppliers' measures such as pipeline
construction," Tanaka said. "Hopefully, it will settle at the point where risk
and cost are best balanced, but that is beyond our control," he added. Currently
the disruption at the Bab el-Mandeb strait is affecting Eneos' crude
procurement, but the level is limited and Eneos can still meet domestic supply,
he said. "Some adjustments have been necessary, but there is no supply shortage.
It is a matter of timing and a temporary structural fluctuation." Exploring
overseas potential Eneos as a group aims to raise its overseas revenue to around
50pc in the April 2030-March 2031 fiscal year. As part of this strategy, the
company has announced plans to acquire petroleum assets in southeast Asia and
Australia from Chevron, including its 50pc share of Singapore Refining Company's
export-oriented 290,000 b/d refinery, as well as terminals and supply networks
in southeast Asia and Australia. The firm has not fully utilised its capacity to
conduct trading, and there is potential here, Tanaka said. The acquisition of
assets in southeast Asia will provide a return in trading backed by assets, he
reiterated, highlighting the expected growth in demand for petroleum in the
region. The growth in southeast Asia's demand for petroleum could also be a key
driver for the Japanese refiner to seek a broader market to absorb Japan's
expected surplus of refining capacity, since Japanese demand is on a downtrend.
"We are not considering any immediate action. But over time, refining capacity
will be somewhat excessive relative to domestic demand. On the other hand,
demand will continue to grow in southeast Asia," Tanaka said. "We will determine
the future refining capacity based on how much overseas markets such as
southeast Asia grow and whether supply from domestic refineries can be used
there." "It is a matter of how we balance between the future outlook and
marginal refineries, so it is an issue that we need to assess on an ongoing
basis," Tanaka said. Eneos has around 1.64mn b/d of refining capacity in Japan,
accounting for the largest share in the country's overall capacity around 3.11mm
b/d. "There are no specific projects under consideration, but we are looking at
whether there is still room to expand further in the downstream business in
southeast Asia," Tanaka said. Eneos is also exploring the possibility of
expanding overseas business in other sectors. The company has also recently
announced the plans to acquire US-based chemical producer TPC Group . "The US
market is attractive given the competitiveness of ethane crackers and
feedstock," Tanaka said. Eneos is also focusing on southeast Asia as the "core
area" for upstream business including the LNG sector and aims to expand it,
Tanaka said. By Kohei Yamamoto Send comments and request more information at
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