South Korea and Japan intend to enhance collaboration on oil supply security, as the recent Israel-Iran conflict serves as a stark reminder for Asia’s leading crude importers to remain prepared for potential disruptions in Middle Eastern sour crude trade, industry officials and refinery sources said over July 22-25.

Earlier this month, KNOC and the Japan Organization for Metals and Energy Security (JOGMEC) conducted their annual meeting in Ulsan to discuss the oil reserve policies of both nations, according to a KNOC official.

KNOC’s Head of the Reserve Business Division, An Beom-hee, and JOGMEC’s Deputy Head of the Reserve Division, Tetsuya Furuhata, attended the meeting. The two sides reviewed the current status of oil reserve policies for both governments, management of reserve facilities, quality control of reserve oil, disaster management protocols, and other operational issues related to reserve facilities.

Both South Korea and Japan depend on imports for nearly all their crude oil needs. Additionally, as Asia’s third and fourth largest crude buyers, they rely significantly on Persian Gulf sour crudes, with Middle Eastern crude grades comprising over 90% of Japan’s total refinery feedstock on a regular basis.

In this regard, KNOC and JOGMEC’s regular and close collaboration is essential, especially for oil reserves and supply security purposes, according to officials at KNOC and JOGMEC as well as feedstock managers at South Korean and Japanese refiners, including ENOES and S-Oil.

South Korea holds a total of 206.9 days’ worth of oil reserves, combining both government and private sectors, while Japan holds a total of 199.3 days’ worth of oil reserves, according to KNOC.

Saudi Arabia and the UAE account for over 80% of Japan’s crude oil purchases. While OPEC+ production increases enhance Japan’s energy security, the Israel-Iran conflict highlights the need for refiners to prepare for worst-case scenarios, said feedstock managers from major Japanese refiners told Platts previously. Platts is part of S&P Global Commodity Insights.

KNOC and JOGMEC plan to continue holding regular meetings and sharing experiences in their respective business areas to further strengthen their cooperation system for energy security in both countries.

The technical-level staff from both sides, especially, plan to exchange ideas and hold meetings more frequently to devise research and cooperation plans related to oil reserves, a KNOC official said. JOGMEC delegation visited KNOC’s Pyeongtaek reserve facility on July 9, and both sides discussed technical experiences related to underground LPG storage.

Private sector collaboration

It is possible for South Korean jet fuel and kerosene suppliers to prioritize Japanese buyers when offering spot cargoes in the Asian market during peak travel and winter heating seasons, according to middle distillate marketers at two major South Korean refiners.

The South Korean refining industry has established a robust business relationship with Japanese trading companies and refiners over the past decade.

In addition to honoring long-term supply contracts, South Korean middle distillate suppliers will issue regular invitations for spot cargo tenders specifically for Japanese traders, particularly during the peak winter season for jet fuel and kerosene demand, refinery product sales executives based in Seoul and Ulsan said.

South Korea — Asia’s top middle distillate fuel supplier — exported 5.37 million barrels of oil products to Japan in June, up 12% from a year earlier, latest data from KNOC showed.

Japan is among South Korea’s top three oil product export markets. The tourism boom in Japan had led to a severe shortage of jet fuel in the country in 2024, but South Korean refiners were eager to help cover those shortages, a middle distillate sales manager at a major South Korean refiner in Ulsan said.
Source: Platts