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TOKYO – Saudi Aramco informed Japan's leading oil distributor of a potential shift in shipments, fueling concerns over the kingdom's ability to supply crude after attacks on its refineries a week ago, a learned on Saturday Nikkei.
The state-owned company Aramco has not explained why it wanted to pass the quality of oil that it provided to JXTG Nippon Oil & Energy from light to heavy and medium, as of October. , said JXTG officials.
The ruling, however, indicates that the Saudi oil company is struggling to restore production as quickly as promised, despite repeated assurances that supplies will be restored by the end of September.
On September 14, two refineries in Aramco were attacked during a drone strike and cruise missile strike. These attacks, claimed by Iranian-backed Houthi rebels in Yemen, have neutralized more than half of the country's oil production.
JXTG officials said they suspected Aramco was taking longer than expected to repair its desulphurization plant, which is needed to produce light crude oil used in the production of gasoline and light diesel.
Saudi Arabia accounted for nearly 40% of Japanese petroleum imports in 2018.
Medium and heavy grade crude is cheaper but more expensive to process. This change will likely result in higher retail prices for petroleum products, such as gasoline, in Japan.
The unit JXTG Holdings expects to have to buy light crude to other suppliers, such as the United Arab Emirates. Its refineries need a certain amount of light grade crude as well as medium and heavy grade to function properly.
Aramco has not notified other Japanese oil distributors, such as Idemitsu Kosan and Cosmo Energy Holdings, a change of supply. This suggests that Aramco first tries to test the waters with its biggest customer in Japan.
Aramco has already told the three Japanese distributors that October shipments will be delayed by several days.
Japanese distributors are scrambling to find alternatives to other producers, such as Russia and the United States, in case Aramco's production does not resume as quickly as the company promised.
"It's hard to believe that Aramco's production will be fully restored by the end of the month," said a JXTG executive.
The attacks have reduced Saudi Arabia's production capacity up to 5.7 million barrels a day, or 5% of the world's oil supply. Aramco said the production capacity would be 11 million barrels a day by the end of the month.
The United States accuses Iran of these attacks and decides to classify Friday its central bank and its two other financial institutions in the list of terrorists. Iran denies the accusations.
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