Japan is considering ending its support for overseas oil pipeline investments as it shifts its focus towards diversifying energy sources and reducing its reliance on the Strait of Hormuz. This potential policy change comes after Japan's oil import bill reached a record $89.46 billion in June, driven by surging global crude prices and a weakening yen.
The Japan Petroleum Association, led by Shunichi Kito, has indicated that Japanese oil refiners will diversify their supply sources and explore alternative routes. Kito emphasized the need for practical alternatives to crude oil transported through the Strait of Hormuz, rather than just finding alternatives to Middle Eastern oil imports. This move is part of an "energy flexibility package" aimed at ensuring stable energy supplies and enhancing industrial competitiveness.
Simultaneously, Middle Eastern producers like the UAE and Saudi Arabia have requested Japanese support for expanding oil pipelines that bypass the Strait of Hormuz. The UAE plans to accelerate the construction of a new oil pipeline to double its export capacity via the port of Fujairah by 2027, while Saudi Arabia is considering expanding its Red Sea coast pipeline capacity. However, Japan is also looking at diversifying beyond the Middle East; for example, Japanese investors are pouring $2.1 billion into the Texas GulfLink deepwater crude export terminal in the U.S. Still, Kito noted that Japanese refineries are currently better suited for Middle Eastern crudes, making it difficult to handle large volumes of U.S. crude immediately.
Industry Minister Ryusei Akazawa also mentioned the government is considering proposals for naphtha storage. The broader strategy also involves strengthening supply chains by deepening ties with oil-producing countries, securing tanker capacity, and improving refinery flexibility, drawing lessons from crises that have impacted oil supplies. Prime Minister Sanae Takaichi stated that Japan's crude oil imports in July are expected to be 100% sourced from areas that do not require transit through the Strait of Hormuz, signaling an immediate shift away from the vulnerable waterway.
