Japan and Saudi Arabia Tuesday signed a contract allowing the kingdom to store its crude for commercial use in Japan in exchange for prioritizing the supply of crude to the Asian country in an emergency, Japan's Ministry of Economy, Trade and Industry said in a statement.
Under the deal, Saudi Aramco will lease tanks in Okinawa with a total capacity of 600,000 kiloliters (3.77 million barrels) from Japan Oil, Gas and Metals National Corporation for three years starting December to store crude oil, Jogmec said.
The Japanese government has storage capacity in tanks leased from local refiners of around 31 million barrels at two separate facilities, the smaller of which can hold 4-5 million barrels.
According to the latest METI forecast, Japan's domestic oil products demand is set to fall to 160.80 million kiloliters (2.77 million b/d) in fiscal 2014-15, down 12.5% from an estimated 183.75 million kiloliters for the current fiscal year ending March 31, 2011. In 2009, Saudi Arabia was the largest crude supplier to Japan, supplying 1.092 million b/d of crude, accounting for 29.9% of the country's total crude imports of 3.65 million b/d in the year, according to METI data.
The UAE was the second-largest crude supplier, supplying 779,876 b/d of crude, or 21.4% of the country's total crude imports, METI data showed.
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Saudi Arabia exports more than 50% of its output to Asia, where it expects to see more energy demand growth than in its former traditional US and OECD markets.