Japan's oil industry

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Japan is the world's third largest consumer of oil. Its oil industry relies heavily on oil output from members of OPEC (Organization of Petroleum Exporting Countries).

"Although Japan has cut its oil dependence by a third since the mid-1970s, oil remains the country's main source of energy, and Japanese dependence on oil imports is one of the highest among the industrialized nations. This is one reason that the security and stability of its oil supply have always been a priority in the Japanese government's energy policy. ... The Japanese government sees further development of nuclear energy, which has already significantly reduced oil consumption, as the only way to decrease dependence on foreign oil." --Petr Vinokurov, Carnegie Moscow Center, May 2004.

Free Trade Agreements (FTAs)

"Resource-poor Japan plans to open FTA negotiations with the oil-rich Gulf Cooperation Council (GCC) in summer [2006] with a view to ensuring stable oil supplies," Hisane Misaki reported in Japan Focus March 12, 2006.

"As the World Trade Organization's trade talks falter, countries all over the world are pursuing their own separate FTAs with trading partners. Bilateral or regional integrations, especially in the form of FTAs, have popped up all over the world since the early 1990s. They include the North American Free Trade Agreement (NAFTA), the European Union (EU) and Mercosur, a Latin American customs union initially comprised of Argentina, Brazil, Paraguay and Uruguay. In East Asia, too, many countries are now competing for FTAs with trading partners in and outside the region.

"Japan joined the FTA competition, concluding its first FTA, with Singapore, in 2002. It signed its second FTA, with Mexico, in 2004, and third one, with Malaysia, in December last year. Japan has also reached basic agreements in FTA negotiations with the Philippines in November 2004 and with Thailand in August last year, and has been negotiating FTAs with South Korea, Indonesia and the 10-member Association of Southeast Asian Nations (ASEAN) as a whole in the past year or so," Misaki wrote.

"In mid-February [2006], Japan and Vietnam held preparatory talks in Hanoi for formal FTA negotiations, which are expected to start as early as this summer. In late February, Japan and Chile, a gateway to Mercosur, held the first round of FTA negotiations in Tokyo. Chile is an associate member of Mercosur. ... Japan is also expected to kick off FTA negotiations this year with India and is moving toward FTA talks with Australia, Switzerland and South Africa."

Japan and Iranian Oil

"Japan, Iran's biggest oil customer, has become the first country to reduce its imports of Iranian oil because of Tehran's nuclear dispute with the West," ITPBusiness reported April 4, 2006. Nippon Oil Corporation, "Japan's largest refiner, will cut its purchases of Iranian crude oil by 15% this year, Fumiaki Watari, Nippon's chairman, said last month.

"The 22,000 barrels per day (bpd) cut is only half a per cent of Japan's total imports. However, the ramifications of this decision could be huge, if other Japanese customers decided to follow suit and turn their backs on the Middle East producer," ITPBusiness said.

  • "Iran is the world's fourth-largest oil producer. Everyday, it exports more than two million barrels of crude - twice as much as Iraq." [1]
  • "Iran primarily exports oil to Japan, China, South Korea, Taiwan and Europe." [2]

"Although another major Japanese oil company, Arabian Oil Company, said it has no plans at the moment to cut imports, the company said it is taking precautions. 'We are considering other ways to ensure a stable supply, such as increasing imports from other countries, in the event of an emergency,' Masatoshi Kasuya, a spokesman for AOC Holdings, Inc, Arabian Oil Company's holding company told Japan Times." [3]

Saudi-Kuwait Divided Zone

"The Saudi-Kuwait Divided Zone contains about 5 billion barrels of proven oil reserves. Within the Divided Zone, Japan's Arabian Oil Co. (AOC) traditionally had operated two offshore fields (Khafji and Hout) with 300,000 bbl/d in production, but in February 2000, it lost the concession (in January 2003, AOC reached an agreement with Kuwait on the right to purchase at least 100,000 bbb/d of crude for the next 20 years from Khafji). The offshore Saudi Divided Zone had represented Japan's most significant upstream oil interest, with 80 percent of revenues going to AOC and 10 percent each to Saudi Arabia and Kuwait. ChevronTexaco, meanwhile, operates three onshore fields (Wafra, South Fawaris, and South Umm Gudair) in the Divided Zone. Saudi Arabia had stated that it wanted AOC and Japan to increase their investments in Saudi Arabia (including more than $1 billion in a railway linking remote mining areas to export terminals), as well as their purchases of Saudi oil, as a condition for renewal of AOC's drilling rights in the Divided Zone. Efforts to negotiate an extension with Saudi authorities failed when Japan refused to commit to investment in development projects desired by the Saudis. Saudi Aramco has taken over operation of the former AOC fields." --U.S. Department of Energy Country Analysis Brief: Saudi Arabia, as of August 2005.

Japanese Oil Companies

Inpex Holdings

"The formation of a new Japanese oil company, Inpex Holdings," announced April 3, 2006, is the "result of a government-orchestrated merger between Inpex Corp and Teikoku Oil, [and] the new firm appears to have been conceived as a 'national policy corporation' designed to secure supplies for Japan from abroad. The government believes that the combined firm's greater size will better serve this purpose," Hisane Misaki reported in the April 4, 2006, Asia Times.

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