Japan said to raise crude storage for Saudi Aramco by 30%

The Japanese government is preparing to raise the crude storage capacity that it lends to Saudi Aramco by 30 percent this summer, Japan’s Ministry of Economy, Trade and Industry said on Friday, as reported by Reuters.

This would help Saudi Arabia, the world's biggest oil exporter, to keep its customers in northern Asia amid a global glut and relatively low prices.

Last October, Japan and Saudi Arabia agreed to raise the storage capacity in Okinawa, an island southwest of Japan, by 1.9 million barrels to 8.2 million barrels (1.3 million kilo liters) this summer, a ministry official said, without mentioning a detailed timetable on launching the new tanks.

Preparations are under way for the additional storage at a facility in Uruma City in Okinawa Prefecture, the official added.

Saudi Aramco has been storing crude oil in Okinawa since February 2011 at no cost and has been using the facility to supply oil to Japan, China, and South Korea among others.

Japan is currently the biggest market for Saudi crude oil.

Japan has a similar no-cost deal with Abu Dhabi National Oil Co. (ADNOC), under which ADNOC can store up to 6.29 million barrels (1 million kilo liters) at Kiire oil terminal in Kagoshima, in southern Japan.

ADNOC does not use the storage for commercial purposes, the official said.

Japan treats Aramco and ADNOC’s stored crude oil as quasi-government oil reserves, counting half of the barrels as national crude reserves. In return for providing free storage, Japan gets the priority to claim oil in case of an emergency.

Aramco and ADNOC have to always fill at least half of the storage. Japan has extended the storage deals with both companies to the end of December 2019.

Saudi Aramco and ADNOC stored 10.5 million barrels at the end of April, Trade Ministry data showed, which is equal to about 83.5 percent of space that Japan lends to them, according to calculations by Reuters.