Saudi Arabia is poised to expand use of oil storage tanks in Japan and China, strengthening ties with its two largest Asian buyers as it fends off competitors for market share.
The world’s biggest exporter plans to increase the amount of storage capacity it uses on Japan’s Okinawa islands, where it’s been leasing tanks since 2010, Amin Nasser chief executive officer of Saudi Arabian Oil Co., said Thursday in Tokyo. The state-run producer, known as Aramco, is negotiating for commercial and government crude storage projects in China to help the country import more Saudi crude, Oil Minister Khalid Al-Falih said in an interview with Al-Arabiya television.
“It helps Saudi Arabia to be seen as the preferred supplier, who can easily help during sudden unforeseen events, and gives it a leg up against rival producers,” said Tushar Tarun Bansal, director at Singapore-based Ivy Global Energy, a consultant. In addition to investing in Asian oil refineries, storage is part of the “Saudi strategy to be closer to their largest markets,” he said.
Oil storage near buyers can give producers greater logistical flexibility to quickly tap pockets of local demand and helps establish themselves as reliable suppliers during emergencies. This may bolster Saudi Arabia’s defense of its market share amid a global glut that’s halved prices in the last two years and left buyers with more choices of supply.
Iran boosted exports to major oil consumers in Asia during the first half of this year after international sanctions that restricted its supplies were eased in January. Japan’s purchases increased 28 percent, India bought 63 percent more, South Korea’s imports more than doubled while shipments into China gained 2.5 percent, government and shipping data compiled by Bloomberg show.
Russia has made in-roads into China thanks to its East Siberia-Pacific Ocean pipeline. In the first half of this year, Saudi Arabia and Russia each had a 14 percent share of China’s oil market, according to China customs data. This compares with Saudi Arabia’s 15 percent stake versus Russia’s 13 percent the year before. In 2014, Saudi Arabia has a 16 percent share, while Russia had 11 percent.