February 10, 2012 / 4:06 AM / 7 years ago

UPDATE 1-Japan to build up national reserves of oil products

* To boost state-held fuel stocks to 4 days’ consumption

* Stocks increase could underpin weak fuel product market

* To boost support for private sector energy development (Adds details)

TOKYO, Feb 10 (Reuters) - Japan will build up state-held reserves of kerosene, gasoline and two other fuel products to bolster disaster preparedness, a government official said, supplementing privately held stocks and helping to underpin a weak domestic market for oil products.

The government will submit a bill to the current parliament to boost official reserves of kerosene, gasoline, gas oil and A-type fuel oil by one day’s worth of consumption each in the fiscal year starting in April, the official said on Friday.

As of January, Japan held one day’s consumption of kerosene stocks, or 820,000 barrels (130,000 kl), and no stocks of the other oil products in its state-owned reserves, although oil refineries, which are separately required to hold 70 days of oil consumption as part of the national reserves, hold about half that amount in the form of oil products.

Japan also held 315 million barrels (50.11 million kilolitres) of crude oil as of January, and together with kerosene, total state-financed reserves are equivalent to 95 days of oil consumption.

The state-owned fuel product reserves will be stored by oil companies and will be boosted to four days’ consumption each over the next few years, the official added.

Japan, the world’s third-biggest oil consumer, is expected to see soft demand for fuel products over the next year, except for B- and C-fuel oil used by power plants, as the economy remains sluggish, its crucial export sector hobbled by a strong yen and Europe’s economic crisis.

The legislation also aims to allow the more flexible release of oil product stocks, after regulatory snags delayed the release of fuel to the disaster-struck northeast when the earthquake and tsunami last March damaged service stations and disrupted fuel transport. State-owned reserves can currently be released only to deal with external events such as unexpected cuts in crude imports.

In addition, the government will propose a law to boost funding to the state-run Japan Oil, Gas and Metals National Corp (JOGMEC) to support private sector energy exploration and production, another government official said.

The law would allow JOGMEC, which is currently focused on metal mining development, to use 92.7 billion yen ($1.20 billion) in funds during the fiscal year from April on natural gas, coal and geothermal energy projects in addition to metals projects, the official said, a seven-fold increase from this year’s spending.

Japan is the world’s top importer of liquefied natural gas, and diversifying its energy suppliers has become a priority after last year’s nuclear crisis shook up the country’s energy sector, forcing utilities to burn more fossil fuels to make up for a fall in nulcear power utilisation. ($1 = 77.3150 Japanese yen) (Reporting by Risa Maeda; Editing by Edmund Klamann)

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