Saudi Aramco and Japan Oil, Gas and Metals National Corporation (JOGMEC) have renewed for a further three years a deal for crude oil storage on Japan’s Okinawa island. The renewal of the previous accord, which expired in December 2013, also raises significantly the volume of crude oil that the state-owned Saudi oil company will store close to its three key Asian customers. Aramco said in a statement posted on its website that in return for the offer of free storage tank capacity, Japan will get a priority claim on crude in tanks in the event of a supply emergency. The volume of crude to be stored has also been raised to 6.3mn barrels from 1.3mn barrels under the original 2011 deal. The expansion of storage capacity will make the Okinawa storage site larger than Saudi Aramco’s facility in Rotterdam, where it has 3.9mn barrels of capacity to serve northeastern Europe, where demand is stagnant. It also confirms the kingdom’s shift from West to East. Saudi Aramco gave up its lease to store 5mn barrels of crude in the Caribbean to China in 2009, ending a 14-year practice of keeping its oil close to the largest oil importing nation.
The move at the time was the clearest signal that Saudi Aramco no longer regarded the US as its key oil export market and that it had shifted its focus to Asia, which accounts for more than half of total Saudi oil exports. China is now on the cusp of overtaking the US as the largest oil importing nation, as US shale oil production has displaced seaborne imports of crude oil (see graph 1). (CONTINUED - 1205 WORDS)