Saudi Arabia and the United Arab Emirates
are seeking larger oil reserves in Japan and South Korea as regional conflict threatens
supply routes.
·
Saudi
Arabia and UAE seek larger overseas reserves: The two Gulf producers are discussing
with Japan
plans to increase their crude-oil storage there by up to 10 times the current
level.
·
Current
Japanese stocks: Saudi
Arabia and the UAE each hold roughly 8
million barrels in Japanese storage facilities.
·
South
Korea also targeted: Saudi
Arabia and the UAE are reportedly holding similar discussions with South Korea to expand
overseas crude inventories.
·
Energy-security
strategy: Gulf
producers are seeking to move more crude outside the Middle East to protect
supplies from maritime
chokepoints and regional attacks.
·
Strait
of Hormuz remains major risk:
Continued disruption around the Strait
of Hormuz has made dependence on Gulf shipping routes
increasingly vulnerable.
·
Red
Sea threat:
Houthi attacks and instability around the Red Sea have added another layer of risk to
Middle Eastern oil shipments.
·
Pipelines
provide limited alternative:
Saudi Arabia and the UAE have overland
pipelines bypassing the Strait of Hormuz, allowing limited
exports even when shipping through the strait is disrupted.
·
Benefits
for Asian importers:
Larger overseas stockpiles would provide Japan, South Korea and other Asian
consumers with an additional buffer
against prolonged supply disruptions.
·
Storage
constraints in Japan: The
quantities sought by Gulf producers could exceed Japan’s available tank
capacity, while additional foreign crude storage could compete with space
needed for Japanese
refiners and national reserves.
·
Cost-sharing
negotiations:
Discussions are continuing over the quantity
of crude, available storage capacity and how storage costs will be divided.
·
Japan
supports energy resilience:
Japan’s economy ministry confirmed that it is working with Middle Eastern
countries to strengthen energy
security, without commenting on specific negotiations.
·
Long-standing
storage arrangement: Japan
has stored foreign-owned crude for decades, providing Gulf producers with a
commercial hub close to Asian customers while giving Japan preferential access
during emergencies.
·
Existing
Gulf reserves in Japan:
o UAE began storing crude in Japan in 2009.
o Saudi Aramco followed in 2010.
o Kuwait began in 2020.
o Current emergency buffers include about 8 million barrels each from Saudi Arabia
and the UAE, plus 3
million barrels from Kuwait.
·
Japan
already used reserves: Japan
released part of these stocks during the current conflict, equivalent to
roughly six days of
domestic oil demand.
·
Renewed
push after ministerial visits:
The expansion effort gained momentum following Japan’s economy minister’s May visit to Saudi Arabia and the UAE,
with the UAE subsequently sending a tanker to replenish depleted stocks.
·
Potential
Asian-wide model: The
arrangement could be expanded to other Asian economies heavily dependent on
Middle Eastern crude.
·
Southeast
Asia particularly exposed:
Countries such as the Philippines
are seeking to establish national oil reserves but face high costs.
·
Shared-cost
model:
Producer-government agreements could enable developing countries to build
strategic inventories without bearing the entire cost themselves.
·
Broader
energy-market transformation:
The crisis is prompting Gulf producers to expand bypass pipelines, while
Asian importers are seeking alternative oil and gas supplies and accelerating
investment in domestic
energy and renewables.
The
prolonged disruption around the Strait
of Hormuz is reshaping global oil-security strategies. Gulf
producers are increasingly looking to store crude in Asia, while Asian
consumers are seeking larger strategic buffers and diversified energy supplies.
The emerging producer-consumer
shared-storage model could become a major new component of
energy security across Asia.
Middle
Eastern energy giants are scrambling to move more oil into stockpiles safely beyond
the turbulent Persian Gulf region, as a prolonged conflict forces exporters and
their biggest customers to rethink how to safeguard supplies.
Saudi
Arabia and the United Arab Emirates have urged Japan to expand reserves in Japanese
tanks by as much as 10 times the roughly eight million barrels each now holds, according
to three people familiar with the discussions, who asked not to be identified because
the talks are private.
Officials
with Saudi Arabia and the Emirates are having similar discussions about expanding
their oil stockpiles in South Korea as well, two of the people said.
For
the Gulf exporters, which store much of their oil in the region, warehousing more
crude abroad offers protection against maritime chokepoints that have become increasingly
precarious, from Houthi attacks in the Red Sea to a Strait of Hormuz that shows
little sign of opening. Saudi Arabia and the Emirates both have overland pipelines
that bypass the strait and enable them to continue exporting limited amounts of
oil.
For
Asian nations, the world’s largest consumers of Middle Eastern crude, bigger stockpiles
would provide an additional buffer against prolonged supply disruptions. At the
same time, allocating significantly more tank capacity to foreign oil companies
reduces the available space for domestic refiners’ commercial inventories and Japan’s
own national reserves.
The
volumes being sought by Middle Eastern producers would probably exceed Japan’s available
tank capacity and face other logistical constraints, the people said. Talks are
continuing over how much oil could ultimately be stored and how the costs would
be shared, but the joint stockpiles are expected to increase substantially, they
said.
A
spokeswoman for Japan’s economy ministry declined to comment on the details of discussions
with Saudi Arabia and the Emirates, but said Japan was working with Middle Eastern
countries to enhance energy resilience.
A
spokesperson for the Abu Dhabi National Oil Company, the Emirati state energy giant,
said in a statement: “We look forward to building on our role as a reliable supplier
to Asian markets, ensuring stable flows of energy to support market stability and
keep prices in check.”
Officials
from South Korea and Saudi Arabia did not immediately respond to requests for comment.
The
push to relocate oil reserves is one of several fundamental shifts reshaping global
energy markets nearly six months into the United States’ war with Iran. Just as
the oil shocks of the 1970s prompted governments to build strategic reserves and
accelerated a drive toward more energy-efficient cars and factories, today’s crisis
is forcing countries and companies to rewire supply networks.
Across
the Middle East, producers are building or expanding pipelines designed to bypass
the Strait of Hormuz. Major importers, meanwhile, are racing to secure more oil
and gas from outside the region while accelerating investment in domestic energy
sources, including renewables.
In
the early months of the war, hopes repeatedly surfaced that the Strait of Hormuz
might soon reopen, said Tatsuya Terazawa, head of the Institute of Energy Economics,
Japan, a think tank.
“But
at this point, we cannot rely on hope that President Trump will fix this,” Mr. Terazawa said. The Middle East and other parts of Asia with
the greatest economic exposure to the crisis “need to find ways to deal with vulnerabilities
on our own.”
Japan
already has a long history of storing foreign-owned crude from Saudi Arabia, the
Emirates and Kuwait. As domestic oil consumption has declined from its peak in the
2000s, Japanese storage facilities have had more spare capacity available to lease
to overseas producers.
The
arrangements give Middle Eastern state energy companies a commercial export hub
close to major East Asian customers. For Japan, an island nation that imports virtually
all its fossil fuels and gets more than 90 percent of its crude from the Middle
East, the setup provides preferential access to the stored oil during severe supply
emergencies.
The
Emirates began storing crude in Japan in 2009, followed by Saudi Aramco in Okinawa
in 2010 and Kuwait in 2020. The agreements have provided Japan with emergency buffers
of roughly eight million barrels each from Saudi Arabia and the Emirates, along
with three million barrels from Kuwait. Japan tapped those reserves, equivalent
to about six days of demand, during the early months of the current conflict.
The
push for larger stockpiles gained momentum after Ryosei Akazawa, Japan’s economy
minister, visited the Emirates and Saudi Arabia in early May. Later that month,
the Emirates dispatched a tanker to replenish depleted stocks.
The
model could now spread more widely across Asia.
Southeast
Asian economies heavily dependent on Middle Eastern crude have been hit particularly
hard by supply disruptions, and countries including the Philippines are pushing
to establish national oil reserves. But building strategic stockpiles can cost hundreds
of millions of dollars, putting them out of reach for many developing economies.
Agreements
in which governments and producers share storage costs could offer an alternative,
Mr. Terazawa said. The acute sense of vulnerability in
the Middle East and beyond in Asia makes this an opportune moment to expand such
agreements, he said.
From
an energy security perspective, “it would be a win-win kind of solution” and “some
kind of possible silver lining from this crisis,” Mr. Terazawa
said.