SINGAPORE (Reuters) - Japanese refiner Cosmo Oil has replaced its Iranian crude oil imports with supplies from other Middle Eastern producers ahead of U.S. sanctions on Iran in November, top company executives said.
Refiners in Japan, the world’s fourth largest crude oil importer, halted oil imports from Iran in mid-September, the country’s refinery association said last week, allowing time for payments before sanctions are imposed.
“Japan will not import any crude from Iran in November because of the U.S. sanctions,” Cosmo Oil President Shunichi Tanaka told Reuters ahead of the Asia Pacific Petroleum Conference (APPEC).
Saudi Arabia, the United Arab Emirates and Kuwait are supplying more crude to Cosmo Oil to replace its 10,000 barrels per day (bpd) shortfall from Iran, or 5 percent of the refiner’s imports, he said.
Some of these producers have visited Japan and “told us if you need more crude oil, we can supply,” said Cosmo Oil’s director of supply Masashi Nakayama.
The Organization of the Petroleum Exporting Countries (OPEC) and other oil producers are considering raising output by 500,000 bpd to counter falling supply from Iran.
“Saudi Arabia has room to produce more oil to cover. They can’t cover everything but they can cover something so the impact on the whole market is not that big,” Nakayama said.
Under previous U.S. sanctions, some buyers received waivers as long as they reduced imports but the current administration aims to cut Iran’s oil exports down to zero to force Tehran to negotiate a nuclear treaty.
Still, Japanese trade officials will visit Washington again in late September in a bid to negotiate sanction waivers, the executives said.
Cosmo Oil, a unit of Japan’s Cosmo Energy Holdings, is the country’s third-largest oil refiner by sales.
The refiner will start supplying fuel to local wholesaler Kygnus Sekiyu K.K. from 2020, which is expected to increase Cosmo’s market share in Japan from 11 percent to 15 percent, Tanaka said. Cosmo bought a 20 percent stake in Kygnus in 2017.
In the coming winter, Japan could see a rise in kerosene oil imports after natural disasters disrupted local refiners’ operations in the third quarter, the executives said.
Typhoon Jebi led to flooding in western Japan while an earthquake has shut the only refinery in Hokkaido, owned by Idemitsu Kosan, since Sept. 6.
“The recent typhoon and earthquake in Japan have had a big impact on Japanese refineries as some had to shut down or reduce run rates,” Tanaka said, adding that Cosmo Oil is working to secure supplies of kerosene, which is vital for northern Japan in winter.
Ahead of IMO 2020 when ships have to switch to fuels with much lower sulphur content, Cosmo Oil will stop production of high-sulphur fuel oil once it expands its delayed coker at the Sakai refinery by end-2019.
The refiner said it will also install scrubbers on half of the six Very Large Crude Carriers that it charters on a long-term basis.
Reporting by Florence Tan in SINGAPORE; additional reporting by Osamu Tsukimori in TOKYO; editing by Richard Pullin