The Japanese government has allowed the release of three days worth of consumption from the country's strategic petroleum reserves held by the private sector to ease an oil supply shortage in the wake of its largest ever earthquake last Friday, Minister of Economy, Trade and Industry Banri Kaieda told reporters Monday.
Japan's de facto energy minister's announcement confirms a report by Platts earlier in the day that Tokyo had been considering releasing the country's oil stocks as early as Monday.
Kaieda said the government has decided to allow the private sector to lower its legal requirement to hold strategic oil stocks worth 70 days of consumption by three days to 67.
A Meti official told Platts that the minister's decision followed a request earlier in the day from the Petroleum Association of Japan to be allowed to release three days worth of privately held stocks. The official added the PAJ requested that it be allowed to release the privately held stocks within a month from Monday.
At least 1.4 million b/d of refining capacity in Japan has been shut in the aftermath of Friday's earthquake, accounting for 31% of the country's overall capacity of 4.52 million b/d, according to Platts calculations.
Japan holds 550 million barrels of crude and oil product stocks, equivalent to about 198 days of consumption according to the country's strategic oil stockpiling regulations. Of the total, Japan has roughly 85 days worth of crude and products stocks in privately held strategic reserves at present, giving the private sector the capacity to release up to 18 days worth of consumption as a result of the government's decision Monday.
According to International Energy Agency standards, Japan's strategic oil reserves of 550 million barrels are equivalent to 165 days of consumption.
Of the total, the government holds 310 million barrels of crude stocks, and 818,000 barrels of oil product stocks. Japan's private sector holds 110 million barrels of crude and 120 million barrels of oil products for the strategic reserves.
The IEA said Japan would not need its permission to release oil from reserves as the country holds "well above the minimum of 90 days of net imports." Nor would the IEA itself need to be involved in coordinating a release because "there are ample stocks in the country itself," it said.
Nevertheless, the agency is in close contact with Japan's Meti.
"We are ready to act if necessary," it said.
This is only the second time Japan has allowed the release of stocks from its privately held reserves, following a release in the wake of Gulf of Mexico production and refining disruption caused by Hurricane Katrina in 2005.
At that time, Japan asked its private sector to release 7.32 million barrels of oil from its product stockpiles after the IEA requested a coordinated response to alleviate the supply tightness, as the Japanese government did not have any products stocks of its own at the time. Japan has never released any of its government strategic oil stocks as yet.
Japan began stockpiling oil in 1972, when the private sector informally started storing oil equivalent to 50 days worth of consumption, or 17 million kiloliters of oil products and 16 million kl of crude. The government set up its strategic reserves in 1978, starting with 88 days worth of consumption.
