Japan plans to support the construction of pipelines that bypass the Strait of Hormuz after the U.S.-Iran conflict laid bare the country’s vulnerability to disruptions in Middle Eastern oil supplies. The plan is part of a new energy strategy that’s aimed at strengthening supply security, according to documents from Japan’s Cabinet Office released on Wednesday. Other measures include diversifying oil procurement sources and providing support with shipping costs, the documents show.
Her government is seeking to finalize the strategy by year-end, she added. Japan relied on the Middle East for more than 90% of its crude prior to the war, which started in late February, and the nation’s refiners have been forced to seek alternative supplies from countries including the U.S. Processors have also drawn on the nation’s strategic stockpiles to make up for the shortfall.
Under the proposed strategy, there are plans to enhance the risk-financing capabilities of the Japan Organization for Metals and Energy Security (JOGMEC) to encourage participation in new pipeline projects. JOGMEC is a government-backed agency that provides money and liability guarantees to help Japanese companies buy and develop overseas stakes in resources. Japan will also look to ensure stable oil shipments by securing necessary insurance coverage for vessels, and will seek to bolster crude reserves to cover the domestic production of naphtha.
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