JAPAN REVEALS PLAN TO ENHANCE ENERGY SUPPLY STRUCTURE - TOKYO JAPAN

JAPAN REVEALS PLAN TO ENHANCE ENERGY SUPPLY STRUCTURE - TOKYO JAPAN

@Jr_Paku Midin Channel

TOKYO

Japan's government on Wednesday revealed a comprehensive plan to strengthen its energy supply structure, focusing on diversifying oil procurement sources and supporting pipeline construction in crude-producing nations amid the conflict in the Middle East.

The package of policies, which also seeks to promote decarbonization and enhance Japan's energy self-sufficiency through renewable and nuclear power, was presented at a government meeting on green transformation held at Prime Minister Sanae Takaichi's office in Tokyo.

Takaichi said the government will confront changes in the global energy landscape head-on and "protect the lives of our people and their economic activities." The meeting was partly open to the media.

The move came after Takaichi expressed her intention in June to craft a plan for a more solid energy structure by the end of August and instructed industry minister Ryosei Akazawa, who doubles as minister in charge of green transformation, to advance preparation.

Highly reliant on Middle Eastern crude imports, Japan has taken a heavy blow from the effective closure of the Strait of Hormuz, a vital oil-shipping route for the resource-poor Asian nation, in the wake of the U.S.-Israeli war against Iran since late February.

As part of efforts to promote supply diversification, the government will introduce a system for oil wholesalers and trading firms to share the extra costs of importing crude from regions other than the Middle East, according to the new plan.

A levy collected from the wholesalers and trading companies will be used to fund subsidies for businesses that import oil that does not pass the Strait of Hormuz.

To reduce the dependence on transportation routes through the strait, Tokyo will also cooperate with Middle Eastern countries in laying pipelines via the government-backed Japan Organization for Metals and Energy Security.

Among other measures specified in the plan is the stockpiling of oil-derived naphtha, commonly used as a raw material in the production of plastics, packaging materials and printing ink solvent. A shortage of naphtha has recently disrupted the business activities of many Japanese firms.

Given naphtha's high volatility and the difficulty of long-term storage, this will likely involve securing extra reserves of crude oil to be allocated for naphtha refining needs during a shortage or storing it in the form of solid petrochemical derivatives.

Although the Japanese government has said that crude oil supplies are expected to be stable for the time being, reviewing a supply chain heavily dependent on the Middle East and higher costs of alternative procurements remain key challenges.

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