May 13, 2019 [S&P Global Platts] – Iranian oil accounted for over 20% of Japanese refiner Fuji Oil’s crude requirements in fiscal 2018-19 (April-March), forcing the company to seek alternatives through spot and term deals, its president and CEO Atsuo Shibota said Thursday.
“Either way we have a certain term procurement volume so it will likely be a combination of term and spot [purchases for the replacement of Iranian barrels],” Shibota said at an earnings press conference in Tokyo.
Shibota added that Fuji Oil will ensure the same quality of its oil products supply from blending different grades of crude while it cannot take Iranian oil.
“Based on our trades so far, we basically do not see any major changes in the crude markets where we can trade freely, allowing us to procure various [grades],” Shibota said. “We do not see any obstacle to seeking alternative supplies from other sources.”
Fuji Oil’s exposure to Iranian oil amounted to around 30,000 b/d, based on its crude distillation capacity of around 143,000 b/d at the sole Sodegaura refinery in Tokyo Bay, according to S&P Global Platts calculations.
In the fiscal year ended March 31, Fuji Oil processed 7.946 million kiloliters or 136,928 b/d of crude oil, which translates to an average run rate of 95.8% in the year, the company said.
The move by Fuji Oil, a major Japanese buyer of Iranian crude, comes as the US recently decided not to extend sanction waivers on the import of Iranian oil beyond May 2. Japan was among eight countries affected by the US decision.
Business as Usual with Showa Sell
Fuji Oil, in which 6.57% is held by Showa Shell, does not see any change in its oil products supply to the shareholder, its major customer, Shibota said.
“There is no fundamental change as of now,” Shibota said when he was asked whether Fuji Oil would continue to supply oil products to Showa Shell.
On April 1, Showa Shell became a wholly owned subsidiary of refiner Idemitsu Kosan through a share exchange, but the transfer of Showa Shell’s assets, liabilities and rights and obligations to Idemitsu Kosan will only be effective from July 1.
This will also include Showa Shell’s 6.57% stake in Fuji Oil, which operates the sole 143,000 b/d Sodegaura refinery in Tokyo Bay. Showa Shell also has an oil product supply contract with Fuji Oil.
Idemitsu Kosan was scheduled to hold a board of directors meeting in late April to decide on the execution of agreement, including Showa Shell’s assets and contracts beyond July 1. But Idemitsu has declined to comment on an outcome from the board of directors meeting.