Japan refiners to back Hormuz bypass pipelines for supply security
Japanese oil refiners are exploring financial and operational support for Middle Eastern pipeline projects to bypass the vulnerable Strait of Hormuz and secure stable energy supplies.
Japanese oil refiners are preparing to fundamentally restructure their supply chains by backing pipeline projects that bypass the Strait of Hormuz. The strategic pivot comes after Middle Eastern producers, including Saudi Arabia and the UAE, directly requested Japanese government and industry participation in expanding their alternative export routes.
"It is of the utmost importance to establish a viable alternative to crude oil transported through the Strait of Hormuz, rather than simply replacing crude oil sourced from the Middle East," said Shunichi Kito, president of the Petroleum Association of Japan (PAJ). This approach shifts the industry's risk management focus from merely sourcing different crude grades to physically mitigating concentrated geopolitical chokepoint risks, drawing on lessons from the Iran crisis.
While U.S. crude represents a potential diversification avenue, Kito noted that Japanese refineries are heavily optimised for Middle Eastern grades. This technical configuration limits the immediate feasibility of substituting large volumes of American oil, meaning capital must instead flow toward securing the existing supply routes from the Gulf.
The targeted infrastructure investments aim to create physical bypasses around the strait. The UAE plans to accelerate construction of a pipeline designed to double its export capacity through the eastern port of Fujairah by 2027. Concurrently, Saudi Arabia is evaluating an expansion of its pipeline infrastructure to reach the western Red Sea coast.
For market participants, these infrastructure commitments signal a long-term strategy to cap regional risk premiums associated with Gulf shipping. Alongside pipeline support, PAJ intends to reinforce supply chains by locking in tanker capacity and improving operational flexibility at domestic plants. Kito declined to comment on a potential government naphtha stockpiling scheme recently flagged by Industry Minister Ryosei Akazawa.
The industry's infrastructure goals align closely with a broader government energy resilience package due for finalisation by late August. Kito, who also chairs refiner Idemitsu Kosan, emphasised that the forthcoming state policies must successfully balance supply security with the preservation of Japan's industrial competitiveness.
