Bloomberg/Tokyo

Saudi Arabia is boosting its use of leased oil-storage tanks on a small island in a region of Japan better known for its white sandy beaches and holiday resorts.
The world’s largest crude exporter is seeking to reduce freight costs and increase shipping flexibility as it competes with Middle East suppliers for market share in Asia. The Okinawa port where state-run Saudi Arabian Oil Co, known as Saudi Aramco, leases storage has received about 6.13mn barrels from the country this year, near the highest level since the Middle East supplier started leasing the tanks in 2010, according to data from Japan’s Finance Ministry.
Saudi Arabia is expanding investments in refining and petrochemicals and bolstering ties with Asia customers as part of its strategy to lock in demand for its oil amid a global glut. Aramco may spend as much as $80bn on overseas acquisitions and investments the next five years, people with knowledge of the matter said in May.
Japan’s Okinawa prefecture consists of about 150 islands approximately 1,530km (950 miles) southwest of Tokyo. The subtropical island chain is a popular summer holiday destination spot for Tokyoites and famous for its coral reefs. The oil storage tanks are on reclaimed land between the islands of Henza and Miyagi.
Over the past decade, crude flows from the Middle East to Asia have increased and both Japan and South Korea have held stockpiles for suppliers from that region, according to a July report from the International Energy Agency. Lease agreements have given Middle East producers “strategic sites with which to facilitate their supplying of Asian customers” and monthly volume changes indicate the tanks are used for “commercial operations,” according to the IEA.
“When a market is oversupplied that puts a premium on flexibility. If you can make your supply more flexible you are better positioned to tap pockets of demand if and when they pop up,” said Emma Richards, an oil and gas analyst with BMI Research. “The shipping distances are smaller and that can lower your freight and also your insurance costs, and that can shave $1 or $2 a barrel off your price. When oil is at $50, that is quite significant.”
Saudi Aramco didn’t immediately answer e-mailed questions about its use of the Japan storage capacity. An official at the Ministry of Economy, Trade and Industry in Tokyo declined to comment Friday because the information is private.
Saudi Aramco’s use of the Okinawa tanks is a part of the company’s strategy to gain a bigger foothold in Asia through investments in midstream and downstream oil assets, and help secure demand for its crude against other Middle East suppliers, according to Richards. The company hired Deutsche Bank AG to advise on the potential acquisition of some marketing, retail and refining assets from China National Petroleum Corp, four people with knowledge of the matter said this month.
The supertanker Voss Spirit is set to arrive in Okinawa Oct. 16 after loading oil at Saudi Arabia’s Ras Tanura in September, according to ship-tracking data compiled by Bloomberg. So-called very large crude carriers can typically hold about 2mn barrels of oil.