Saudi Arabia is boosting its use of leased oil-storage tanks on a small island in a region of Japan better known for its white sandy beaches and holiday resorts.
The world’s largest crude exporter is seeking to reduce freight costs and increase shipping flexibility as it competes with Middle East suppliers for market share in Asia.
The Okinawa port where state-run Saudi Arabian Oil Co, known as Saudi Aramco, leases storage has received about 6.13 million barrels from the country this year, near the highest level since the Middle East supplier started leasing the tanks in 2010, according to data from the Japanese Ministry of Finance.
Saudi Arabia is expanding investments in refining and petrochemicals, and bolstering ties with Asian customers as part of its strategy to lock in demand for its oil amid a global glut.
Aramco might spend as much as US$80 billion on overseas acquisitions and investments the next five years, people with knowledge of the matter said in May.
Japan’s Okinawa prefecture consists of about 150 islands approximately 1,530km southwest of Tokyo.
The subtropical island chain is a popular summer holiday destination spot for Tokyoites and famous for its coral reefs.
The oil storage tanks are on reclaimed land between the islands of Henza and Miyagi.
Over the past decade, crude flows from the Middle East to Asia have increased, and both Japan and South Korea have held stockpiles for suppliers from that region, according to a July report from the International Energy Agency.
Lease agreements have given Middle East producers “strategic sites with which to facilitate their supplying of Asian customers” and monthly volume changes indicate the tanks are used for “commercial operations,” the agency said.
“When a market is oversupplied that puts a premium on flexibility. If you can make your supply more flexible you are better positioned to tap pockets of demand if and when they pop up,” BMI Research oil and gas analyst Emma Richards said.
“The shipping distances are smaller and that can lower your freight and also your insurance costs, and that can shave US$1 or US$2 a barrel off your price. When oil is at US$50, that is quite significant,” she said.
Saudi Aramco did not immediately answer e-mailed questions about its use of the Japan storage capacity.
An official at the Japanese Ministry of Economy, Trade and Industry declined to comment yesterday because the information is private.
Saudi Aramco’s use of the Okinawa tanks is a part of the company’s strategy to gain a bigger foothold in Asia through investments in midstream and downstream oil assets, and help secure demand for its crude against other Middle East suppliers, Richards said.
The company hired Deutsche Bank AG to advise on the potential acquisition of some marketing, retail and refining assets from China National Petroleum Corp (CNPC, 中國石油天然氣) four people with knowledge of the matter said this month.
The supertanker Voss Spirit was set to arrive in Okinawa yesterday after loading oil at Saudi Arabia’s Ras Tanura last month, according to ship-tracking data compiled by Bloomberg.
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