* Japan's trade minister flying to Saudi on Friday for talks
* Tokyo seeking to shore up Saudi supply in case of
* To sign emergency oil supply pact and establish
(Recasts with government official on Saudi trip, adds detail)
TOKYO, Feb 8 Japan's trade minister heads to
Saudi Arabia on Friday for talks on securing extra oil, an
official said, after a report the two will set up a telephone
hotline to allow one of the world's top importers to seek
emergency supply from OPEC's biggest producer.
A hotline would allow Japan to quickly seek additional oil
supplies in the event of extraordinary circumstances such as
terrorist attacks, Middle East unrest or a spike in the price of
oil, Japan's Nikkei newspaper reported.
Oil markets have been on edge for months over the security
of Middle Eastern supplies amid mounting tensions between the
West and Iran over Tehran's disputed nuclear programme, with
Brent crude prices averaging above $111 a barrel last year. A
move by Japan to be first in line to tap Saudi oil could further
stoke oil supply concerns among other leading oil importers.
"Saudi Arabia has large spare supply capacity, so the big
purpose of this visit is to request that they are ready to deal
with supply instability in global oil markets by raising
production," an official in Japan's Ministry of Economy Trade
and Industry told Reuters.
The official, who spoke on condition of anonymity, declined
to say whether Trade Minister Toshimitsu Motegi would request a
hotline, but said the previous trade minister made a similar
request for supply assurances in 2011.
"These are the things that Japan has conveyed to the Saudis
in oil relations for a long period, say 10 to 20 years," the
official said. "The request will be made but no one knows
whether it will develop into something more detailed because the
meeting has not been held yet."
Motegi will fly to Riyadh later on Friday, according to the
Ministry. He will also travel to the United Arab Emirates.
Although Saudi Arabia retains significant spare crude oil
production capacity, its exports are falling due to growing
domestic oil demand and plans by the kingdom to expand
refineries to export more refined products.
"If true, it shows how nervous importers are due to the
fragility in the Middle Eastern situation, particularly Asian
buyers," said Amrita Sen of oil consultancy Energy Aspects.
Crude imports from Saudi Arabia accounted for 31 percent of
Japan's total in 2012, with shipments rising 5 percent from a
year earlier to 1.14 million barrels per day, partly offseting a
39.5 percent decline in Iranian crude imports.
Japan has relied on cooperation with Western oil importing
countries through the International Energy Agency to ensure oil
supply security since the 1970s.
As one of the most oil import-dependent countries in the
industrialized world, analysts say it has always been acutely
vulnerable to the prospect of a sudden halt to crude shipments.
Japan is not the only large Asian country at risk in the
event of an oil supply shock. China and India are both
increasingly reliant on imported oil to fuel their economies and
both have far less access to emergency stockpiles than Western
Asia's top economies have also been less able to rely on
Iranian oil exports fell by 1 million barrels per day by the
end of 2012 due to Western sanctions aimed at forcing oil
importers, like Japan, to reduce their purchases of Iranian
In retaliation, Iran has at times threatened to cut off
shipments of oil or block major shipping routes.
Additional restrictions imposed by the United States took
effect this week and there are few signs that a negotiated
settlement to the dispute is at hand.
Iran's Supreme Leader Ayatollah Ali Khamenei dismissed an
offer of direct talks made by U.S. Vice President Joe Biden this
The Nikkei report did not specify how much oil Japan might
be able to request from Saudi Arabia in the event of an
emergency under the proposed oil supply agreement.
Nor did it specify on what terms Japan would be able to
secure more oil nor whether a request for emergency supplies
would be binding on Riyadh.
OPEC heavyweight Saudi Arabia has repeatedly pledged to
supply global markets with enough oil to meet demand. But the
kingdom has traditionally guarded its sovereignty over its
energy resources and has often rebuffed calls from oil consuming
nations to produce more oil to depress high prices.
Saudi Arabia, which currently pumps approximately 9.05
million bpd, maintains the ability to produce up to 12.5 million
bpd if needed, the only significant amount of spare oil
production capacity worldwide.
Japan has grown increasingly reliant on fossil fuels since
the Fukushima nuclear disaster in 2011, which has led to the
shutdown of most of the country's nuclear power plants.
Saudi Arabia signed a deal with Japan in 2010 to store 3.8
million barrels of crude in the Asian nation's Okinawa Oil Base
for emergency supplies to the kingdom's customers in the region.
China's Sinochem Corp in March last year loaded a
cargo from the Okinawa facility due to shipping delays at
Saudi's largest crude export terminal in Ras
(Reporting by Robert Campbell and Osamu Tsukimori in Tokyo;
Editing by Peter Galloway, Marguerita Choy and Ed Davies)