Petroleum Industry in Japan Petroleum Association of Japan September 2013 CONTENTS 1. Preface.......................................................................................................................2 2. Profile of Petroleum Association of Japan .............................................................3 3. Oil Supply and Demand in Japan ...........................................................................7 4. Energy Policy in Japan ..........................................................................................13 5. Oil Stockpiling and New Emergency Response Measures ................................20 6. Japan’s Petroleum Resource Development .........................................................25 7. Regulatory Reform and Petroleum Industry ........................................................27 8. Petroleum Product Distribution and Marketing ..................................................32 9. Toward a Fundamental Reexamination of Petroleum-related Taxes .................36 10. Reinforcement of Corporate Structure .................................................................41 11. Thorough Safety Measures ...................................................................................43 12. Preparation for Major Oil Spill Incidents .............................................................45 13. Environmental Measures in the Oil Refining Sector ..........................................47 14. Quality Improvement in Automotive Fuels ..........................................................50 15. The Global Warming Issue and Oil .......................................................................53 16. Utilization of Biomass Fuel ...................................................................................59 17. Efficient Use of Oil .................................................................................................62 18. Efforts toward Developing New Technologies .....................................................65 u Stable Oil Supply to End Consumers even at aTime of Disaster ......................67 Appendix: ......................................................................................................................69 N Location of Refineries and Crude Distillation Capacity in Japan N Overview of the Japanese Petroleum Industry N Main Product Specifications in Japan N Web Address of PAJ’s Oil Statistics Website 1 1 Preface Prices of crude oil (Dubai) at the beginning of petroleum industry, the whole picture of the 2012 were at the level of 105 US dollars per barrel nation’s future form of energy has not been clari- (US$/Bbl), reflecting the enactment of the National fied due to the government’s vacillating energy Defense Authorization Act in the United States at policy. Under such circumstances, each oil compa- the end of 2011 to tighten sanctions against Iran, ny has announced a reduction in its refining capac- etc. Then the prices jumped to the level of 110 US$/ ity or the closure of its refineries in order to achieve Bbl early in January and, triggered by Iran’s threat the installation ratio of heavy oils cracking units to blockade the Straits of Hormuz in late January, based on the Law Concerning Sophisticated Meth- crude oil prices further increased and reached the ods of Energy Supply Structures. level of 120 US$/Bbl in late February. Then, the pric- Taking into account the lessons learned from the es gradually declined and temporarily dropped Great East Japan Earthquake, the Oil Stockpiling below the level of 90 US$/Bbl due to reignited con- Act was amended to add such provisions as the cerns about the debt problems in Europe, etc. How- revision of the government stockpiling release ever, even after certain prospects for the debt requirements, the formulation of a cooperation problem were in sight at the European Union sum- plan among oil companies at a time of disaster, mit meeting at the end of June, oil prices contin- and the expansion of the government’s oil product ued rising above the level of 115 US$/Bbl by the stockpiling. This will enable a more flexible middle of September. After that the prices stayed in response to release the government’s oil stockpile, a range between 105 and 110 US$/Bbl. As a result, which had originally been assumed to be released Japan’s average crude oil price (CIF) in 2012 was during an oil supply disruption from oil producing 114.8 US$/Bbl, up about 6 US$ versus 2011. On a countries, at a time of domestic disaster. In addi- yen basis, the CIF was 57,493 yen/kiloliter (¥/KL), tion, the petroleum industry itself is enhancing its 2,843 ¥/KL higher on average than the previous disaster response capabilities, from the hardware year. side, at the industry’s core petroleum supply chain In relation to such movements of crude oil prices, facilities like refineries and oil terminals. Also, the gasoline retail prices (regular gasoline on a nation- industry is enhancing its software measures such al average) in the domestic market in 2012 had as preparing a system for collecting and transmit- started at 143.2 ¥/KL,and advanced to 158.3 ¥/KL in ting information such as product inventory and early spring. Then the prices dropped temporarily shipping status of each oil terminal, operating sta- below the level of 140 ¥/KL early in July, reflecting tus of each service station, and is sharing informa- the decline in crude oil prices until late June. After tion with local governments for fuel supply to their that the prices basically remained in a range essential facilities. between 140 and 150 ¥/KL. This brochure has been created to provide con- Regarding domestic petroleum product demand sumers as well as stakeholders with a better for 2012, Heavy Fuel Oil C for power generation understanding of the current situation and the continued showing high growth as it had in 2011 future efforts of the petroleum industry in Japan. due to the shutdown of nuclear power plants. Die- We hope this brochure will help to give you a sel fuel demand surpassed that in the previous sound understanding of oil and the petroleum year, attributable to reconstruction in the quake-hit industry in Japan. areas getting into full swing, and gasoline also showed a slight increase. Consequently, total fuel oil demand for 2012 exceeded that of the previous two years annual demand. As for the business environment surrounding the 2 Profile of Petroleum Association of 2 Japan Petroleum Association of Japan (PAJ), incorpo- reform relevant to the upcoming increase in the rated in November 1955, is composed of 14 oil consumption tax, strengthening coordination and refiners and primary oil distributors (Motouri) in response capabilities at a time of disaster, advocat- Japan. ing “the Capabilities of Oil”, and proper execution of PAJ deals with all matters concerning the refining various subsidy activities. For the implementation of and marketing of petroleum products. The main these business activities, adequate attention will be activities are: paid to the efficient management of budgets. 1. Publishing information on important issues for the petroleum industry 2. Advocating the industry’s opinions and submit- 2. Projects and Main Activities in FY2013 ting proposals to the government, business associations, the media and the general public 1. Addressing issues concerning the petroleum 3. Researching and coordinating activities related policy in the future to important petroleum issues and providing (1) Make proposals for energy policies focusing information on such issues on how the petroleum industry should be in 4. Undertaking governmental subsidy programs the future. such as the “Major Oil Spill Response Program”, (2) Manage biomass fuel issues. including international conferences (3) Tackle the global warming issue. 5. Enhancing communication and understanding among member companies 2. Opposing a rise in taxes, urging comprehensive reexamination of petroleum-related taxes and ensuring fairness in taxation among energy sources 1. Basic Policy for Fiscal Year (FY) 2013 Business Activities 3. Strengthening both the domestic and interna- tional competitiveness of the petroleum refining Regarding the reexamination of energy policy, industry in Japan there is a real need for advocating that all parties (1) Take actions toward international issues concerned fairly position oil as a core energy related to the refining industry and efforts to source. To that end, it is necessary to have a stable reinforce further competitiveness. supply of petroleum products and it is also essen- (2) Identify issues by analysing the corporate tial to maintain the current petroleum supply chain. management and financial condition of the In 2013, taking these into account, PAJ is working petroleum industry. on such major issues as seeking the incorporation of the petroleum industry’s opinions into the gov- 4. Promoting various uses of petroleum products ernment’s reexamination of energy policy toward (1) Promote activities to encourage broad use of the development of the Basic Energy Plan, and PAJ’s High Energy Efficiency Oil Utilization maintaining the petroleum supply chain by secur- Systems. ing a stable scale of oil demand, etc., through (2) Cope with issues related to automotive fuels. encouraging broad use of the facilities and sys- (3) Conduct research study on qualities of petro- tems which use oil. leum products which meet environmental Furthermore, PAJ is dealing with various issues requirements. for improving the business environment as well as for enhancing