In the event Saudi Arabia’s leased storage capacity of 1 million kiloliters, or 6.29 million barrels, at Okinawa, in Japan’s southwest, is actually increased, it could further help cement its already strong crude marketing outlet in Asia. The possible development over a crude storage deal came as Saudi Arabian Deputy Crown Prince Mohammed bin Salman is scheduled to visit Japan over August 31 to September 3, when memorandums of understanding of bilateral cooperation are expected to be signed.

The Japanese government sources said that Tokyo is now working to finalize details on possible MOUs, which include cooperation in areas such as energy, and confirmed that the crude storage framework, known as the joint crude storage by producing countries, is among potential items to be included. The Saudi Gazette reported Wednesday that the kingdom’s discussions with Japan for an MOU on cooperating in the energy sector were approved by the Cabinet.

The deputy crown prince is visiting Tokyo en route to China to attend the G20 meeting, and it comes after a Cabinet session this week delegated several ministers to discuss with the Chinese side an MOU to cooperate in the energy sector and an initial cooperation memorandum on crude storage, according to the Saudi Gazette.

Since unveiling its Vision 2030 — Saudi Arabia’s new economic blueprint — in late April, the deputy crown prince has made numerous international visits to talk about his economic agenda ahead of an expected IPO of up to 5% of Saudi Aramco shares.

Strategic Use of Okinawa

Japan’s prospective talks about the leased crude storage in Okinawa comes as Saudi Aramco’s three-year contract with state-owned Japan Oil, Gas and Metals National Corporation is due to expire in December, the sources said.

The existing three-year contract allows Saudi Aramco to store its crude for commercial use at Jogmec’s Okinawa terminal, in exchange for prioritizing the supply of crude to Japan in times of emergency.

In May, Saudi Arabia supplied a total of around 2.45 million barrels of crude oil to China and Japan from its bonded storage tanks in Okinawa, a move that highlighted the strategic use of leased storage for crude oil sales into Asian markets by the Middle Eastern supplier.

Platts trade flow software cFlow showed that Saudi Arabia made two crude shipments, on the Aframax Alyarmouk to Longkou in China and on the VLCC Kiho to Kiire in Japan’s southwest, from the Okinawa terminal in May.

Alyarmouk carried a 730,000-barrel cargo of Arab Heavy crude that was sold on an FOB basis by Saudi Aramco to Chambroad Petrochemicals, in what was the first sale by the world’s largest oil exporter to China’s emerging independent refining segment.

Chambroad has a 70,300 b/d refinery in Shandong province, around 300 km from Longkou port.

The crude storage idea was first proposed in 2007 when Japanese Prime Minister Shinzo Abe, during his first term as premier, met with Saudi Arabia’s late King Abdullah in Riyadh.