JAPAN DATA: Imports Russian Sakhalin Blend crude for first time in 8 months in Jan

Japan imported 747,706 barrels of Russian Sakhalin Blend crude in January, marking the first import of Russian crude oil in eight months, preliminary data released Feb. 28 by the Ministry of Economy, Trade and Industry showed.

Japan's intake of Russian crude comes as refiner Taiyo Oil said it had taken the Russian barrels in early January, having loaded the cargo in late December. The cargo was part of the remainder crude volume from its 2022 term contract, a Taiyo Oil spokesperson said.

The January imports of Sakhalin Blend was the first since Japan took 650,793 barrels of the Russian crude in May, and it was down 1.6% from 760,236 barrels in January 2022, according to METI data.

Japan did not import any Russian crude for seven straight months to December 2022, as the country's top two refiners, ENEOS and Idemitsu Kosan, did not sign new Russian crude contracts.

The move by the Japanese refiners followed Prime Minister Fumio Kishida's May 9, 2022 comments that Japan will impose an "in principle" ban on Russian oil imports after the latest commitment by G7 leaders.

The suspended crude inflows led to a 60.2% decline in Japan's Russian crude imports to just 35,548 b/d in 2022. At the same time, Japan boosted its 2022 share of crude imports from the Middle East to 94.1% from 92.7% a year ago, the METI data showed.

The supply of crude oil from the Middle East accounted for 94.4% of Japan's crude imports in January, up from 91.8% a year ago, according to the data released Feb. 28.

The January imports of the Sakhalin Blend crude came as Petroleum Association of Japan President Shunichi Kito said Feb. 15 that Japan may look at importing Russian crude oil if the need arises, to ensure stable LNG supply from the Sakhalin 2 project.

"At present, we do not have any formal request but we will likely take a certain action in the event of facing needs to ensure stable LNG supply [from the Sakhalin 2 project]," Kito told a press conference in Tokyo.

"We will likely consider Russian crude oil imports as an exception," Kito, who is also the president and CEO of the country's second-largest refiner Idemitsu Kosan, said

G7 price cap

On Dec. 5, 2022, Japan enforced a price cap of $60/b on Russian crude oil imports as part of coordinated steps taken by the G7 and Australia.

Japan, however, exempted crude oil imports from the Sakhalin 2 project from the price cap as it considers it a matter of energy security.

The country views it essential for the Sakhalin Blend crude from the Sakhalin 2 project to continue to flow so as to prevent a suspension of LNG production from the same project, according to METI.

Should crude tanks be allowed to fill up due to a suspension of shipments, it would hamper upstream operations and impact the flow of all hydrocarbons from the project.

Under a general license, the US also exempted Japan's crude oil imports from the Sakhalin 2 project from the Russian crude oil price cap until Sept. 30, 2023.

LNG supply from Sakhalin 2 accounts for roughly 9% of Japan's total LNG imports, which equated to 3% of the country's total electricity supply, according to METI.

More than half of the 9.6 million mt/year LNG production capacity at Sakhalin 2 in Russia's Far East is committed to Japanese offtakers.

Boosted imports

Overall, Japan's crude imports in January averaged 2.72 million b/d, up 0.3% from a year ago, marking the first year-on-year increase in three months, on the back of the rise in imports from key suppliers in the Middle East.

Saudi Arabia remained Japan's top crude supplier for the second consecutive month in January, when its supply accounted for 44.2% of Japan's crude imports in the month.

Japan imported 1.2 million b/d of Saudi Arabian crude in January, followed by the UAE which contributed 34.2% to Japan's overall crude imports in the month. The Asian consumer imported 930,858 b/d of crude from the UAE, up 13.2% from a year ago.

Crude imports from Kuwait, Japan's third largest supplier, jumped 25.9% on the year to 279,807 b/d in January, while imports from Qatar, Japan's fourth largest crude supplier, plunged 47.3% from a year ago to 124,994 b/d.

The US was the fifth largest crude supplier to Japan in January when Japan imported 71,142 b/d of US crude compared with zero a year ago.

Japan did not import any Su Tu Den crude from Vietnam and Thailand Fuel Oil in January, compared with 907,599 barrels of imported Vietnamese crude and 43,985 barrels of Thai fuel oil in December 2022, after a buying spree that lasted several months for barrels commonly used for thermal power generation.

Japan had a domestic shipment of 162,063 barrels of crude oil for power generation in January, more than five times higher from 31,455 barrels a year ago and nearly double from 87,447 barrels in December.

Source: Ministry of Economy, Trade and Industry