The key issues in the oil industry in Japan, Takata said, are poor natural resources, deregulation and excessive competition. Domestic crude production supplies only 0.3 percent of total demand. The countrys basic policy is to import crude and refine domestically.

Takata said that Japans total oil demand is fairly stable, while refining capacity has declined. In 2005, total demand was 4.1 million barrels per day, compared to 4.2 million b/d in 2000. Refinery crude capacity in the same period, however, has dropped 10 percent, from 5.3 million b/d in 2000 to 4.8 million b/d in 2005. There are now 30 refineries in Japan, of which seven are owned by Nippon Oil Corp., the countrys largest petroleum company. Two refineries have been shuttered since 2002.

Japan relies heavily on the Middle East for oil. The United Arab Emirates and Saudi Arabia together supply about 55 percent of Japans crude. Iran, Indonesia, Qatar and Kuwait together supply another 30 percent, said Takata. While the major oil companies once provided the lions share of Japans imported crude, 80 percent now is supplied by national oil companies. Less than 20 percent now comes from the majors.

Petroleum continues to be Japans primary source of energy, although its share has declined steadily since the 1970s. By 2010, Takata projected that oil will supply just 46 percent of the nations energy.

To meet the nations emissions goals, Takata said, the government is planning to reduce the countrys overall oil dependence to less than 40 percent by 2030, and the transportation sectors dependence on oil for energy – about 98 percent today – must drop to less than 80 percent by 2030.

Fuel cell demonstration projects are very big in Japan, Takata noted, and Nippon Oil is a leader in the field.

Japans Lubes Market
Lubricant sales in Japan total 2.5 million kiloliters per year, Takata said. Nippon Oil has the largest market share, 26 percent, followed by Idemitsu (23 percent), ExxonMobil (14 percent), Cosmo (11 percent), Japan Energy (10 percent), Showa Shell (9 percent), and others (7 percent). The market has been essentially flat since 2001.

Base oil exports, however, have grown since 2000, from about 350,000 kiloliters to more than 500,000 kiloliters in 2006. Most exports are to Asia, said Takata, especially to China. Nippon Oil exports 12,000 to 15,000 kiloliters per year to Asian countries, he noted.

Japan is long on API Group I base oils but short on Group III, and there are no plans for refinery expansions, so Takata expects to see increased imports of Group III stocks. Japans situation contrasts with Korea, where Group I supplies are short and are imported from Japan and Singapore. Koreas SK Corp. and S-Oil are the worlds suppliers of Group III. In China, supplies of Groups I, II and III are short, and there is a demand surge for Group I, said Takata.

According to LubesnGreases magazine, Japans total base oil capacity is 48,050 b/d, of which 38,200 is Group I, 2,750 is Group II, 25,000 is Group III, and just 3,600 is naphthenic.

Although no refinery expansions are planned in Japan, Takata noted that base oil production capacity in Asia overall will reach 15.7 million kiloliters by 2010, up from 12.6 million in 2005.

Japanese oil companies have strong connections with Japanese OEMs, Takata said. As demand increases for Japanese cars, he expects it will also increase for Japans engine oils. In the last year, for example, Nippon Oil opened two new blending plants, one in China and one in Alabama.

Noting that the Asia-Pacific region has 60 percent of the worlds population but consumes just 31 percent of its lubricants, Takata pointed out that that region has the greatest potential for growth in lube consumption, and for demand for high quality base oils. Japan needs Group III, said Takata, predicting that Group III demand in Japan will double from 2002 to 2010.