Japan and Saudi Arabia will sign an agreement this weekend that will allow Tokyo to make emergency requests for additional supplies of crude oil, Japan’s Nikkei newspaper reported in its Feb 8 edition.
The agreement would set up a telephone hotline between the two governments to allow Japan to quickly seek additional oil supplies in the event of extraordinary circumstances such as terrorist attacks, unrest in the Middle East or a spike in the price of oil.
Japanese Economy, Trade and Industry Minister Toshimitsu Motegi will travel to Saudi Arabia on Saturday to sign the pact, Nikkei said.
The Nikkei report did not specify how much oil Japan might be able to request from Saudi Arabia in the event of an emergency.
Japan opted to seek the supply deal due to Saudi Arabia’s diminishing ability to ramp up oil exports in the event of a crisis, according to the report.
Although Saudi Arabia claims its crude oil output capacity has remained stable at 12.5 million barrels per day, the amount of oil it can export has been declining due to higher domestic consumption of crude oil for power generation in the summer and the construction of new oil refineries.
The deal would represent a significant increase in cooperation between one of the world’s largest oil importers and the top producer in OPEC.
Saudi Arabia’s stated policy has been to supply the world oil market with enough crude oil to meet demand but the kingdom has traditionally guarded its sovereignty over its oil resources.
Japan has grown increasingly reliant on fossil fuels since the Fukushima nuclear disaster, which has led to the shutdown of most of the resource-poor country’s nuclear power plants.