Under the deal, Saudi Aramco will lease tanks in Okinawa with a total capacity of 600,000 kiloliters (3.77 million barrels) from Japan Oil, Gas and Metals National Corporation for three years starting December to store crude oil, Jogmec said.

Following the deal, the maiden Saudi cargo on a VLCC will arrive in February, METI said.

The idea was first proposed when then Japanese Prime Minister Shinzo Abe visited Saudi Arabia’s King Abdullah in Riyadh in 2007.

Platts reported earlier this year that Saudi Arabia may opt to store up to three VLCCs worth of crude in Okinawa, which would allow it to have surplus supply capacity for the fast-growing Asian market, given Japan’s falling domestic oil demand.

The Japanese government has storage capacity in tanks leased from local refiners of around 31 million barrels at two separate facilities, the smaller of which can hold 4-5 million barrels.

According to the latest METI forecast, Japan’s domestic oil products demand is set to fall to 160.80 million kiloliters (2.77 million b/d) in fiscal 2014-15, down 12.5% from an estimated 183.75 million kiloliters for the current fiscal year ending March 31, 2011. In 2009, Saudi Arabia was the largest crude supplier to Japan, supplying 1.092 million b/d of crude, accounting for 29.9% of the country’s total crude imports of 3.65 million b/d in the year, according to METI data.

The UAE was the second-largest crude supplier, supplying 779,876 b/d of crude, or 21.4% of the country’s total crude imports, METI data showed.

In June 2009, Japan struck a similar crude storage deal with the UAE when METI and Abu Dhabi’s Supreme Petroleum Council signed a basic agreement on storing the emirate’s crude in Japan.

Under the agreement, the first of its kind, Abu Dhabi can use Japan’s crude storage tanks for commercial purposes in exchange for prioritizing the supply of crude to Japan in an emergency.

The Abu Dhabi National Oil Company subsequently signed a three-year contract in December last year with refiner Nippon Oil to store its crude at Nippon Oil’s 620,000 kiloliter terminal in Kiire, southwestern Japan.

Saudi Arabia exports more than 50% of its output to Asia, where it expects to see more energy demand growth than in its former traditional US and OECD markets.

In a further sign of this shift, state-owned oil giant Saudi Aramco last December relinquished its Caribbean storage in St Eustatius to PetroChina.

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