Japanese refiners boost US crude purchases in bid to replace Iranian supply

Japanese Prime Minister Shinzo Abe greets US Defense Secretary Jim Mattis before their meeting at Abe’s official residence on Friday. Abe could fend off demands from the US president to sign a bilateral trade agreement by offering to buy more oil. (AFP)
Updated 29 June 2018
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Japanese refiners boost US crude purchases in bid to replace Iranian supply

  • Increasing purchases by refiners such as JXTG, Japan’s biggest, are likely to please US President Donald Trump, who is pushing Japan to reduce its trade surplus with the US.
  • Nearly 4 million barrels of US crude are due to arrive in Japan, the world’s fourth biggest oil importer, between June and September.

TOKYO: Japanese refiners are ramping up purchases of US crude as it becomes cheaper relative to their usual Middle East supplies and are assessing heavy grades from US shale production as a replacement for supplies from Iran, industry sources said.

Increasing purchases by refiners such as JXTG, Japan’s biggest, are likely to please US President Donald Trump, who is pushing Japan to reduce its trade surplus with the US, which topped $63 billion in 2017.

Nearly 4 million barrels of US crude are due to arrive in Japan, the world’s fourth biggest oil importer, between June and September, according to the sources and Thomson Reuters Eikon shipping data.

They will add to about 2.4 million barrels worth 16.81 billion yen ($153 million) imported in the year through May, according to the latest statistics from the country’s Ministry of Finance.

Japan’s imports of US oil are still tiny compared with total imports of around 3.2 million barrels a day in 2017. Refiners tend to buy only when lower US demand from events such as refinery maintenance drives down US oil prices.

Japan imported an 18-year high of 10.3 million barrels of US crude in 2017, but imports slowed sharply in the first five months of this year as US spot crude prices were stronger than Middle East benchmark Dubai. A steep rise in US output has since widened the price gap between the two benchmarks to more than $5 a barrel, making US oil more attractive.

At least one Japanese refiner has been assessing US Mars crude as a potential replacement for Iranian crude as the company plans to cut Iran loadings after September as US sanctions are reinstated, said a source with knowledge of the matter.

“Because of (sanctions on) Iranian crude, we are looking at US heavy crude” as a substitute, the source said, in particular grades such as Southern Green Canyon and Mars, which are similar to crude from Iran.

JXTG Holdings recently bought 2 million barrels of West Texas Intermediate crude for arrival by September, according to three industry sources.

A JXTG spokesman would not comment on individual deals but said: “US crude is one of the candidates for replacing Iran oil.”

Cosmo Energy Holdings is also lifting 2 million barrels of US oil between April and July, according to shipping data and a source familiar with the matter. Cosmo declined to comment, but said it buys US crude from time to time.

Trump in May withdrew the US from a 2015 agreement that curbed Tehran’s nuclear capabilities and ordered the reimposition of US sanctions against Tehran.
On Tuesday, a senior State Department official said the US wants to stop all exports of Iranian oil from November and is unlikely to offer any exemptions as it did during previous sanctions.

Japan’s Prime Minister Shinzo Abe has also been trying to fend off demands from the US president to sign a bilateral trade agreement by offering to buy more American products.

“Prime Minister Abe will probably try to accommodate President Trump as much as possible on the trade imbalance and buying crude oil is a no-brainer as long as the economics work,” from Tony Nunan, senior oil risk manager at Mitsubishi Corp. in Tokyo.

“To replace Iranian oil it makes sense to go for a sour grade such as Mars and Green Canyon. The problem is these grades are also needed in the US and it is the very light sweet grades that are in excess,” Nunan said.

This meant supplies of the heavier grades would likely only be available when US demand dropped, during refinery maintenance periods for example.
Japan ramped up purchases of Iranian crude after the end of sanctions.


Nissan governance steps, board win shareholders’ approval

Updated 9 min 41 sec ago
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Nissan governance steps, board win shareholders’ approval

  • The Japanese automaker had seen profits and dividends tumble amid a high-profile scandal involving its former chairman Carlos Ghosn
  • Some shareholders expressed worries about the future of the automaker

YOKOHAMA, Japan: Scandal-battered Nissan won shareholders’ approval Tuesday for a new system of committees to oversee governance and for keeping Chief Executive Hiroto Saikawa on its board.
The Japanese automaker had seen profits and dividends tumble amid a high-profile scandal involving its former chairman Carlos Ghosn. Some shareholders expressed worries about the future of the automaker.
Saikawa and the other board members, including French alliance partner Renault Chairman Jean-Dominique Senard, bowed deeply at the meeting at a convention center in the port city of Yokohama, where Nissan Motor Corp. is based.
“I’d like to offer my deepest apologies, representing the company, for how the misconduct has caused serious concern for our shareholders,” Saikawa said.
Ghosn, who led Nissan for two decades, was arrested in November and is awaiting trial in Japan on charges of financial misconduct, including falsifying documents related to retirement compensation. He says he is innocent.
The proposals to have committees overseeing compensation, board nominations and auditing required a majority of shareholders for a quorum and two-thirds of those voting for passage.
Approval was shown by clapping among the more than 2,800 people present at the meeting. Most of the votes were submitted in advance.
French automaker Renault, which owns 43 percent of Nissan, had earlier signaled it may abstain, saying it wanted more representation on the committees.
To satisfy that request, the committees have Senard, who replaced Ghosn on the Nissan board, and Renault Chief Executive Thierry Bollore.
Saikawa told shareholders he had “two kinds of responsibility,” for what had happened in the past as well as building toward a future and a recovery, including nurturing his successor.
“I would like to work toward putting Nissan on a stable track,” he said, asking for shareholders’ approval for his remaining as Nissan’s leader. “I want to speed up the preparations for a succession.”
Although Nissan has been trying to put the scandal behind it, many have been wondering why the alleged wrongdoing, if true, had gone unchecked, especially how much Saikawa knew. One shareholder asked whether Nissan officials besides Ghosn shared in the alleged misconduct.
For the fiscal year that ended in March, Nissan’s profit plunged to about half of what it was the previous year, partly because of the scandal, as well as problems in the lucrative North American market. The maker of the Leaf electric car and Infiniti luxury models is projecting a further deterioration in its earnings, but promising a recovery for the year after that.
It logged $83 million (¥9.2 billion) in costs for the fiscal year that ended in March from alleged underreporting of Ghosn’s compensation.
The proposal, which won shareholders’ approval, called for an 11-member board, including seven outside directors such as Andrew House, formerly with Japanese electronics and entertainment company Sony Corp.
For the appointment of directors, a third of the shareholders made for a quorum, and passage needed a simple majority of those voting.
Some analysts suggest a deepening rift between Renault and Nissan after a planned merger between Renault and Fiat Chrysler fell through earlier this month. Nissan expressed reservations about immediately joining the merger.
Some shareholders expressed worries about the alliance, and one who stood up to ask a question said the main person who had made decisions, referring to Ghosn, was now gone.
Nissan held an extraordinary shareholders’ meeting in April to oust Ghosn. Last week, Mitsubishi Motors Corp., a smaller Japanese automaker in which Nissan owns a 34 percent stake, won shareholders’ approval to oust Ghosn.