Pre f a c eThis brochure, Petroleum Industry in Japan, has been

Under the acceleration of global actions to combat

continuously issued by the Petroleum Association ofclimate change, the Japanese government, too,Japan for more than a half century, with the aim of

declared in October 2020 its aim to achieve "Carbon

providing consumers and other stakeholders with

Neutrality by 2050.” In response to this, the Petroleum

up-to-date information on the Japanese petroleum

Association of Japan (PAJ) formulated its "Vision forindustry and the industry’s initiatives.

Carbon Neutrality in the Petroleum Industry" in

The new coronavirus Covid-19, which has had aMarch 2021, and is taking on the challenge oftremendous impact on the economy and society,undertaking various initiatives to contribute to theunderwent a change in May of this year in how it isrealization of a carbon neutral society.

positioned in the Infectious Disease Law and theThis brochure is revised from time to time tosteady recovery of economic activities. Amidst theseprovide explanations in a concise and easy-to-readcircumstances, the petroleum industry continued tomanner regarding the various trends surrounding thework to ensure a stable supply of petroleum

petroleum industry. We hope this brochure will help

products by thoroughly implementing measures togive you a sound understanding of oil and theprevent the spread of infection in the supply chain.

petroleum industry in Japan.
December 2023

Co n t e nt s

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1

Global Environmental Measures in the Japanese
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Petroleum Industry

2

Security and Resilience Measures in the Japanese・・・・・ 9〜15
Petroleum Industry

3

Energy Policies and Taxes Related to the Japanese・・・・・16〜21Petroleum Industry

4

Trends of Oil Supply and Demand in Japan

2〜8

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・22〜28

Chapter1

Global Environmental Measures in the JapanesePetroleum Industry

1.A Vision for Carbon Neutrality in the Japanese Petroleum Industry
In October 2020, the Japanese government declaredthat Japan would realize "Carbon Neutrality by 2050.” In
response to this, the Petroleum Association of Japan(PAJ) renewed its “Long-term Low Carbon Vision for the
Petroleum Industry” in 2019, and newly formulated the“Petroleum Industry’s Vision toward Carbon Neutrality.”
Furthermore, the vision was revised in December 2022,
based on the realization of innovative technology
development, etc.
The biggest point of this vision was the aim ofachieving virtually zero CO2 emissions (carbon neutrality)
associated with business activities (in other words,
Scope 1+2). In addition, the December 2022 revision
included the additional challenge of achieving virtuallyzero CO 2 emissions that are associated with the
supplied products (Scope 3).
To achieve this, the petroleum industry as a whole will

have to take on the challenge of not only strengthening
e xis ting mea sures, such a s promo ting energy
conservation and the use and development of renewableenergy, but also carrying out “innovative technology
development” by 2030, such as the reform of therefining process through technological developments,
including the use of CO2-free hydrogen, and the carbon
recycle (CCS and CCU), and subsequently put them into
societal implementation by 2050.
In addition, as measures for CO2 emission reduction
and carbon sinks, the development of infrastructure,such as hydrogen fueling stations and EV charging
stations, expansion of the renewable energy business,development of waste plastic recycling technology, andconversion of raw materials for petrochemical products
to next-generation biomass, will contribute to therealization of carbon neutrality in society as a whole.

Fig.1-1 A Vision for Carbon Neutrality in the Japanese Petroleum Industry
Now

2030

Strengthen existing measures, R&D

2050
Challenge to achieve practical use

1② Promoting the use and development of renewable energy andzero-emission power sources

CO2
reduction③ Transforming refining processes(Development of CO2-free hydrogen technology, etc.)*

Practical use④ CCS/CCU (carbon recycling) technology development*

2

Reduction of CO2
emissions associatedwith products supplied(Scope 3)① Utilization of first-generation biofuels② Development of fuels that contribute to improved fuel efficiency of ICEs

Practical use

CO2
reduction③ Introduction and technological development* of next-generation biofuels (SAF)

Practical use④ Development of CO2-free hydrogen technology*

Practical use⑤ Development of synthetic fuels “e-fuel” technology (carbon recycling)*

Practical use

Change in user and public awareness,
Transformation in the automotive industry
3

CO2 emission
reduction and sinkmeasures① A low carbonization of value chain(e.g. environmentally friendly products, lubricants)② Infrastructure development of hydrogen stations, EV charging③ Promoting the expansion and the development of renewable business

Increased
reductioneffect④ Development of technology for recycling waste plastics*

Practical use⑥ Feedstock conversion of petchem products (biomass/carbon recycling)*

Practical use⑤ Development of hydrogen supply chain technology*⑦ CCS/CCU (carbon recycling) technology development*

Scope 1: Direct greenhouse gas emissions by businesses themselves (Fuel combustion, Industrial process)Scope 2: Indirect emissions from the use of externally supplied energy, e.g. electricity, thermal or steam, etc..
Scope 3: Indirect emissions in the supply chain outside of Scope 1,2 (Emissions of others)

Practical use
Practical use

Virtually zero CO2 emissions associated with the supplied products (Scope 3)

Vision① Strengthening energy efficiency measures, promoting fuel transition

Virtually zero CO2 emissions associated with business activities (Scope 1+2)

Reduction of CO2
emissions from own
business activities(Scope 1+2)

*Innovative technology

Practical use includes e.g.
global deployment

2Chapter 1. Global Environmental Measures in the Japanese Petroleum Industry

2. Images of the Challenge Towards Carbon Neutrality
The quantity of greenhouse gases emissions in Japan(actual FY2021 figures) was approximately 1.2 billion
tons (CO2 equivalent) in total, with energy-derived CO2
accounting for about 1 billion tons, of which around 1/3
was the result of the consumption of petroleum. Of the
CO 2 emissions from the consumption of petroleum,emissions from refineries (Scope 1) accounted for about
3 million tons, and the majority of the emissions camefrom petroleum consumed by the supplied petroleum
products (Scope 3), so the reduction of these emissions
is of great importance.
Heading towards 2050, the petroleum industry intends
to take on the challenge of reducing CO2 emissions
associated with supplied petroleum products (Scope 3)

to virtually zero through the development andcommercialization of such innovative technologies as
SAF, CO2-free hydrogen, ammonia, and synthetic fuel(e-fuel), as well as promoting the development ofrecyclable energies and other measures.
The challenge of reducing Scope 3 CO2 emissions tovirtually zero is extremely ambitious and difficult toachieve. Nevertheless, every oil company will contributeto the realization of carbon neutrality in society as awhole by making proactive efforts in the research,development, and societal implementation of carbon
neutral technologies, as well as continue their activities
for a stable supply of energy demanded by consumers.

Fig.1-2 Images of the Challenge Towards Carbon Neutrality

1,170

Reduction through development,
practical application and social
implementationof innovative technologies

CO2 from oil consumption
358
Oil・Scope1
32 (3%)

Energyrelated
CO2
988
(85%)

Unit: million tons of CO2

Natural
Gas
209
(21%)

Coal
421
(43%)

① Domestic production and supply of SAF● Start of domestic production project fromwaste cooking oil and alcohol② Production and supply of CO2-free hydrogenand ammonia

Oil・Scope3
326
(33%)

● D e v e l o p m e n t o f i n n o v a t i v e p ro d u c t i o ntechnologies and supply chain● Establishment of hydrogen and ammonia
supply chain in industrial complexes andregions③ Development of innovative production
technologies for e-fuel④ Promotion of the development of renewableenergies

Balance of emission
and absorption

Others182(15%)
FY2021

Sink measures(CCS, Forest, etc.)

Virtually zero
emissions2050*1 2021 emissions and breakdown are calculated from the Ministry of Environment and the Greenhouse Gas Inventory Office emissions by fuel type

(Domestic emissions)
Scope3 for oil are calculated from the emissions of crude oil and petroleum products minus refinery’s CO2 emissions (oil portion)*2 Scope1 emissions for oil are the CO 2 emissions of refineries minus CO 2 emissions from purchased electricity, etc.

3

Chapter 1. Global Environmental Measures in the Japanese Petroleum Industry

3. Key Features of Synthetic Fuels
Synthetic fuels (e-fuels) is a fuel made by combining
CO2 and hydrogen. It is a clean fuel that can be usedwithout increasing atmospheric CO 2 emissions byextracting hydrogen through electrolysis using electricity
derived from renewable energy sources. As e-fuels is aliquid at room temperature, it has high energy density
and is also excellent in terms of portability and ease ofhandling.
Moreover, e-fuels is being developed with the aim ofhaving properties that are similar to already existing
gasoline and diesel fuel. For this reason, e-fuels has theadvantage of being able to be used by itself, as well as
being blended with existing gasoline or diesel fuel foruse in vehicles and combustion equipment withconventional internal combustion engines (ICEs), andwith regard to its supply infrastructure (tank trucks,
service stations, etc.), as well, the existing oil supply
chain can be used as is. In other words, even in the“transition period” toward carbon neutrality, e-fuels has
the excellent characteristic of providing a stable supply
while holding down the increase in the burden to the
public.

Fig.1-3 Key Features of Synthetic Fuels (e-fuels)

New supply chain and equipment are needed

HydrogenHydrogen
CO2-Free

Renewable energy
Synthetic
reaction
CO2
CO2RecoveryRecoveryIn airCO2

CO2
Carbonrecyclinge-fuels:
・Products such as gasoline and diesel fuelsynthesized from hydrogen and CO2
・Similar properties and handling to current
fuels

Refining

Gasoline,
Jet,
Kerosene,andDiesel fuelFuel-cellvehicleAutomobiles*CO2-free hydrogen and recovered CO2
as feedstock are referred to as ”e-fuels”
CO2

Emission Gas

Hydrogen
supply station

Available in oil supply chain,automotive,
and combustion equipment

e-fuels(Liquid at room temperature)

Synthetic
crude oil

FCV

Use
(Combustion)

Factories/
homes

Current
supplynetwork（SS)
AircraftEasy to stockpile,and excellent for emergency
response4Chapter 1. Global Environmental Measures in the Japanese Petroleum Industry

4. Utilization of Biomass Fuels

5well, an annual target of 500,000 kl of crude oil
equivalents is to be maintained for five years until March
2028.
Moreover, the criteria that took effect on April 1, 2020,
set an annual target of 10,000 kl (ethanol equivalents) for
the five years from FY2023 to FY2027, for petroleum
refiners for the utilization volume of next-generation bioethanol. This amount is counted in the overall target of
500,000 kl of bio-ethanol (crude oil equivalents). In
addition, for bio-jet fuel that is used on and after April 1,
2023, it has become possible for ethanol converted tocalorific value to be counted as part of the target
amount of bio-ethanol.
With regard to jet fuel, in December 2021, the Ministryof Land, Infrastructure, Transport and Tourism
formulated a process chart for promoting
decarbonization in the field of aircraft operation and set
a goal of “replacing 10% of jet fuel used by Japanese
airlines with sustainable aviation fuel (SAF) by 2030.”
Initiatives are underway in the petroleum industry, as
well, to achieve this goal by 2030, including the start ofimports of SAF during 2023, with the aim of starting
production and supply of SAF in Japan from 2025.
Fig.1-4 Image of expansion of SAF supply system
Quantity of supply

Biomass fuels can be produced from renewablematerials, such as agricultural crops and trees, and areconsidered to be a form of energy that is effective for
global warming measures as the quantity of CO 2
emissions generated when they are combusted is notcounted. The implementation target amount of biomass
fuels for transportation use was set in the Kyoto
Protocol Target Achievement Plan (April 2005) at
500,000 kl of crude oil equivalents.
In January 2006, based on the request of the Agency
of Natural Resources and Energy, the petroleum industry
made the decision to “blend 210,000 kl of crude oil
equivalents of bio-ethanol, as bio-ETBE, with gasoline in
FY2010,” with the aim of cooperating in the achievementof this government plan. After the test marketing of biogasoline (containing bio-ETBE, ethyl-tertiary-butyl-ether)in FY2007 and FY2008, the petroleum industry
introduced 200,000 kl of bio-ETBE in FY2009, a year
before full-scale introduction in FY2010.
Furthermore, it was stipulated in the “Criteria for Useof Non-fossil Energy Sources” in the Law Concerning
Sophisticated Methods of Energy Supply Structures in
November 2010 that approximately 820,000 kl of bioethanol (500,000 kl of crude equivalents) should be
blended directly with gasoline or in the form of bio-ETBE
for use as automobile fuel in FY2017, with the target
volume for each fiscal year set in phases. The petroleum
industry has been steadily achieving this target using thebio-ETBE method.
The “Technical Review Committee for the Utilization of
Biofuels in Japan” was established in December 2017, inorder to compile the basic ideas for the development of
criteria for FY2018 and beyond. In consideration of theissues of almost complete dependence on imports,
relatively high raw material cost, and competition withfood, the committee decided that the period for the next
criteria should be a "transitional period," in which theestablishment of a system for the full-scale introductionof cost-effective, eco-efficient bio-ethanol (domestic
production and next generation) was given the highest
priority from the perspective of the 3E (Energy security,
Environmental concern and Efficient supply). According
to the criteria indicated in April 2018, an annual target
volume of 500,000 kl of crude oil equivalents was to be
maintained for five years until March 2023.
Subsequently, in the criteria indicated in April 2023 as

Supply SAF
in the formof synthetic fuel(Currently underdevelopment)

Produce SAF
domestically(Bio-mass feedstock
procured domesticallyor imported)

Import SAF(Blended domesticallywith jet fuel)

Import SAF
blended fuel

2020

2025

2030

2050

* SAF-blended fuel: SAF blended with conventional jet fuel (can be used as is as fuel)Chapter 1. Global Environmental Measures in the Japanese Petroleum Industry

5. Roadmap for "Transition Finance" in Oil Sector
In order to achieve carbon neutrality, the Ministry of
Economy, Trade and Industry (METI) formulated asector-by-sector roadmap for "transition finance" todecarbonization, based on the ministry’s view that it isimportant to promote financing for transition efforts tosteadily move toward decarbonization in industries that
emit large amounts of CO2. The roadmap for the oil
sector was compiled in February 2022 as information foroil companies to consider their climate change
countermeasures by using transition finance and also forfinancial institutions and others to determine theeligibility of the strategies and initiatives of oilcompanies. The "Technology Roadmap," which sortedout the implementation years for each low-carbon anddecarbonized technology, is also consistent with the"Vision for Carbon Neutrality in the Petroleum Industry”
compiled by PAJ.
To achieve virtually net zero CO2 emissions in the oil
sector, it is essential not only to work toward low-carbon
and decarbonization of the refining processes, but also toadvance the transition with all options in mind, including
the launching of CCS, CCU, and other decarbonizing
technologies, and the shifting to a decarbonized fuelsupply system, such as biofuels and synthetic fuels.
On the other hand, the basic concept of the roadmap
is that even when moving forward with the transition, thekey prerequisite is the stable supply of oil, and this must
be taken into consideration by each company when it
develops its transition strategy and when financial
institutions, etc. make a decision about theappropriateness of the company’s procurement offunding.
Recently, oil companies have begun to raise funds
through transition financing, and the petroleum industry
is working to realize its vision of carbon neutrality while
also utilizing such funds.
Fig.1-5 Direction toward CN for Petroleum ,etc.
Major sourcesof emissions

Crude oilprocessing

Product
combustion

Overview

Use of heat duringpetroleum refining,and emissions fromelectricity self-generation

Emissions fromcombustion of
petroleum products
produced by the oil
industry

Percentageofemissions*

Approx. 4%

Approx. 93%

Direction
toward low
carbonization
anddecarbonization

Energy conservationand higher efficiency● Conversion to lowcarbon and decarbonizedfuels● Introduction of CO2
capture, etc.
●●

Conversion to lowcarbon and decarbonizedfuels (Hydrogen andammonia/Biofuel/Synthetic fuels/Lowcarbon fuel)*The remaining approx. 3% comprising Others (emissions from transportation and mining, etc.)

falls outside the scope of this roadmap.
Source: Based on Roadmap for "Transition Finance“ in Oil Sector, Feb., 2022, METI

Fig.1-6 Technological Road Map to Low-Carbon and Decarbonization in Oil Sector
2020

2025

2030

2040

2050

Direction of decarbonization(further promotion in cooperation
with other fields)

Strengthening energy efficiency measures: Effective use of heat / introduction of advanced
control and high efficiency equipment/improvement in power system efficiency / Large-scale
improvement and upgrading of processes, etc.
Crude oilprocessing

Promoting fuel conversion

Conversion to decarbonized fuels•Achieve decarbonization＋ CCUS

Promoting the use and development of renewable energy and zero-emission power sources
Transforming refining processesof crude oil treatment andpetroleum products throughenergy conservation,
renewable energy, refinery
process innovation, andwaste plastic recycling

Hydrogenandammonia
Biofuels, etc.

Chemical recycling of waste plastic
New fuel that contributes to improving the fuelefficiency of internal combustion engines

Establishment of a CO2-free hydrogen andammonia supply chain
Development of hydrogen stations, etc.
Bioethanol, etc.

Synthetic
fuels, etc.

SAF, etc.
Synthetic fuels/automotive fuel, SAF,
chemical raw materials, etc.

＋ Carbon free electricity

Low-carbon and decarbonizedfuels and products

CCS/CCU
Improving theefficiencyof existing
fuels•Recycling of waste plastic
contributes to decarbonizationin the chemical industry•Supply decarbonized fuels
to achieve decarbonization
at the product use anddisposal stage•Biofuel and synthetic fuels
manufacturing technologies
also contribute to decarbonizationin the chemical field

Source: Based on Roadmap for "Transition Finance“ in Oil Sector, Feb., 2022, METI

6

Chapter 1. Global Environmental Measures in the Japanese Petroleum Industry

6. History of Initiatives for Global Warming Issues
In response to calls by Keidanren, PAJ drew up its
voluntary action plan and engaged in efforts to saveenergy at oil refineries. In line with Keidanren’s basic
policy, PAJ formulated the “Petroleum Industry’s Action
Plan for a Low Carbon Society” in March 2010, andannounced its goal of achieving an energy saving
volume of 530,000 kl (crude oil equivalent) at refineries
in FY2020 by means of energy saving initiatives enacted
from FY2010 onward. As a result, this goal was realized
as of FY2016, when an energy saving volume of 551,000
kl was achieved.
With regard to initiatives for FY2020 and beyond, PAJ,in response to Keidanren’s call, formulated “Petroleum
Industry’s Action Plan for a Low Carbon Society – PhaseII” in March 2015, and stated “the achievement of energy
saving of one million kl of crude oil equivalents at
refineries in FY2030 compared to the FY2009 level, bymeans of energy saving initiatives enacted from FY2010
onward” as its goal, which took into consideration thecontinuity of the existing initiatives. As a result, theenergy saving in FY2021 was 712,000 kl, which was atarget achievement rate of 71.2%.
In October 2020, the Japanese government declaredthat Japan would realize "Carbon Neutrality by 2050.” In
response to a call by Keidanren, which had learned ofthis declaration, PAJ revised its “Action Plan for a Low
Carbon Society” to the "Carbon Neutral Action Plan fort h e P e t r o l e u m I n d u s t r y ” i n S e p t e m b e r 2 0 2 1.

Furthermore, in July 2023, the numerical targets for theenergy saving volume for FY2030 was shifted from being
expressed in terms of crude oil equivalent to being
expressed in terms of the total volume of CO2 emissions,in order to conform with the national government’s
targets, so “the total volume CO2 emissions will be 29.1
million tons (a reduction of 28% compared with
FY2013).” Consequently, in line with the shift in theabovementioned target, the total volume of CO 2
emissions for FY2022 was 32.32 million tons (areduction of 19.9% compared with FY2013, with 71.3%
of the target being achieved.
Fig.1-7 Volume of CO2 Emissions at Refineries
Unit: millions of tons of CO2

50
45
40

41.54 40.33

28%▲
38.44

38.23
38.33

35

38.08

36.82

34.46
30.39

30

31.74 32.32
29.10

25
20
15
10
5
0

2005 13

14

15

16

17

18

19

20

21

22 2030

Base year

Target year

* Volumes of CO2 emissions are actual results based on electricity emissions factor aferreflecting carbon credits

7. Volatile Organic Compounds (VOC) Reduction Measures
To control VOC emissions, crude oil tanks andgasoline tanks, etc., at refineries and oil terminals have asealed floating roof or internal floating roof. In addition,
VOC emitted by railroad tank cars, tank trucks, etc.,
when transporting products is recovered by a vapor
recovery system.
PAJ is undertaking efforts to control VOC emissions
under its Voluntary Action Plan. VOC emissions in
FY2021 totaled 28,700 tons, a 53% reduction comparedwith FY2000.

Fig.1-8 Annual Trend of VOC Emissions
Unit: thousand of tons/year

70
60

61.4
54.9

50

Target: 30% reduction (vs FY2000)
Actual: 31% reduction (accomplished)
42.6

40

39.2

37.3

36.9

33.3

30

29.0

28.7

20

2021FY

20
10
0

2000

05

10

12

14

16

18

Source: VOC emission control voluntary action plan (PAJ)

7

Chapter 1. Global Environmental Measures in the Japanese Petroleum Industry

8. Fuel Quality Control Act
The import of petroleum products was liberalized withthe abolition of the Provisional Measures Law on the
Importation of Specific Refined Petroleum Products(Fuel Import Restriction Law) at the end of March 1996.
The Act on the Quality Control of Gasoline and Other
Fuels (Fuel Quality Control Act) was enacted to replace
the Gasoline Retail Business Law, to maintain the qualityof gasoline, kerosene, and diesel fuel in Japan, where
the quality is already among the highest in the world.
The new act specified the existing quality standards ascompulsory ones from both environmental and safety
standpoints, and obliged oil refiners, distributers, andretailers to maintain such quality standards.
The act also introduced the display of a Standard
Quality (SQ) certificate at service stations for fuels thatsatisfied the standard quality requirements.
At first, compulsory standards were specified on eightitems for gasoline quality, and on three items each fordiesel fuel and kerosene quality. The Fuel Quality Control
Act has been amended since then, as various newimporters entered the market, and new regulatory items

were added as a result of problems that were not initiallyenvisioned and also the emergence of new eco-friendly
fuels. For example, as a measure to deal with engine
fires and other accidents caused by imported fuel with ahigh concentration of alcohol (more than 50% of thecontent was alcohol), an amendment was drawn up in
August 2003 that added the two items of oxygen
content (1.3 mass percent or less) and ethanol (3 masspercent or less) to compulsory standards for gasoline,
and banned the sale of fuel with a high concentration of
alcohol for ordinary gasoline-powered vehicles.
Furthermore, as a part of preparing the environment
for the use of biodiesel that are being used recently as acountermeasure for a global warming, mandatory
standards for FAME (fatty acid methyl ester), triglyceride and four other materials were added to diesel
fuel quality requirements, effective March 2007. In
February 2009, a registration system and quality
assurance system were established for new entrants inthe business of blending ethanol, ETBE, etc., withgasoline.

Fig.1-9 The Fuel Quality Control Act-Compulsory Standard (as of Apr. 2023)
Gasoline

Diesel Fuel

Kerosene

Heavy Oil

Items

Specification

Items

Specification

Items

Specification

Items

Specification

Lead

Non-detectable

Sulfur content

0.001 mass% max.

Sulfur content

0.008 mass% max.

Sulfur content*3 0.5 mass% max.

Sulfur content

0.001mass% max.

Cetane index

45 min.

Flash point

40℃ min.

Inorganic acidMTBE

7 vol% max.

+25 min.

1 vol% max.

360℃ maxColor,Saybolt

BenzeneDistillation,
T90%

Kerosene

4 vol% max.

Triglyceride

0.01 mass% max.

MethanolNon-detectable

FAME*2

0.1 mass% max.

Washed gum

5 mg/100ml max.

Color

OrangeNon-detectable

Oxgen content*1 1.3 mass% max.
Ethanol*1

3.0 vol% max.

*1 For an automobile that received registration by the Road Vehicle Act or its vehicle number is specified by law as a vehicle compatible with E10, gasoline specifications for both oxygenand ethanol are relaxed to 3.7 mass% and 10 vol% max, respectively.

*2 This specification is applicable to diesel fuels without international blending of FAME (Fatty Acid Methyl Ester). Compulsory standards allow FAME upper blending limit of 5.0 mass%. In
such a case, additional standards include:• Methanol: 0.01 mass% max. • Acid value: 0.13 mgKOH/g max.
• Formic acid + Acetic acid + Propionic acid: 0.003 mass% max. • Acid stability: 0.12 mgKOH/g max.
*3 3.5 mass % max. (In case the vessel is installed with sulfur oxide removal systems)

8Chapter2

Security and Resilience Measuresin the Japanese Petroleum Industry

1. Japan’s Oil Stockpiling System
In response to OECD’s recommendation in 1962
obliging member countries to hold oil stockpiling level at
a 60-day equivalent to the nation’s oil demand, theEnergy Committee of the Industrial Structure Council
made a proposal in December 1963 regarding thenecessity of oil stockpiling.
When the Third Middle East War broke out in 1967,
Japan’s sense of crisis rose rapidly, as it was alreadydependent upon on oil for 65% of its primary energy,
and it essentially began its oil stockpiling system from
FY1972.
The first oil crisis occurred in 1973, causing great
turmoil worldwide, including Japan. For this reason, the"Expansion Plan for Private Sector Oil Stockpiling
Obligation to 90 Days" was announced in October 1974
to develop a system to strengthen oil stockpiling inJapan. In November 1974, the International Energy
Agency (IEA) was established as a subordinate officeunder the Organization for Economic Co-operation andDevelopment (OECD). With the promulgation of thePetroleum Reserve Law in 1975, measures werelegislated by the government to set stockpiling targets;
put an obligation on oil refiners, distributors, andimporters, etc., of petroleum to hold oil stockpiling atleast above the level of their basic obligation volumes;
and lower the basic obligation volume for a fixed period,
especially when it is deemed necessary to secure astable supply of oil in the event of an oil supply shortagein Japan. After coping with the second oil crisis in 1979,
the 90-day equivalent oil stockpiling system (the private
sector’s 90-day equivalent volume obligation) wasestablished in April 1981.
Government stockpiling by the Japan National Oil
Corporation (currently Japan Organization for Metals andEnergy Security: JOGMEC) was started in 1978. The
government oil stockpiling target of 50 million kl wasachieved in February 1998. During this 20-year period,
ten national oil stockpiling bases were constructedacross the country. As a result of the expansion of
government stockpiling, the private-sector stockpiling
was reduced by four days each year from 1989 to 1993,
and since then a 70-day equivalent oil stockpiling9

system (the private sector’s 70-day equivalent volume
obligation) has been maintained. From FY2015, a
method to calculate the government stockpiling level
was changed from quantity-based to days-based, and it
was decided to secure an amount equivalent to about
90 days of net crude oil imports, including half of thetotal from joint stockpiling with oil-producing countries.
With the abolition of the Petroleum Industry Law at theend of December 2001, the Petroleum Reserve Law was
renamed the Oil Stockpiling Act. In order to ensure thefulfillment of oil stockpiling obligations as well as
strengthen the foundations for emergency responses,
the following provisions were amended by the new act:
① Notification requirements for business
commencement of oil refiners, distributors and retailers;clarification of registration requirements for oil importers② Clarification of the provisions concerning a releaseorder of government oil stockpiles by the Minister of
Economy, Trade and Industry (METI)③ Recommendation to increase the crude oilprocessing volumes above planned volumes
Subsequently, the government oil product stockpilingsystem was introduced in view of the need to establish amore flexible oil stockpiling system. As a result,kerosene stockpiling has been implemented since 2009.
(After the Great East Japan Earthquake, the Oil
Stockpiling Act was amended in 2012 to expand the
product stockpiling to four fuel products, i.e., gasoline,
diesel fuel, and heavy fuel oil A, in addition to kerosene.)
In addition, the Japanese government initiated a joint
stockpiling project with oil-producing countries. In the
project scheme, oil-producing countries could reserve
their crude oils in Japan and use them commercially
under normal circumstances; however, in an emergency,
Japanese oil companies would receive preferentiallycrude oil supply from their reserves under the projectagreement. Such joint crude oil stockpiling in Japan wasstarted with Abu Dhabi National Oil Company (ADNOC)
in 2009, Saudi Arabia's state-owned oil company (Saudi
Aramco) in 2011 and Kuwait Petroleum International(KPI) in 2020.

Chap. 2: Security and Resilience Measures in the Japanese Petroleum Industry

Fig.2-1 Changes in Oil Stockpiling Volume and Days (fiscal year end)
10,000
(142)
8,278

8,000
(88)
6,048

6,000

(95)
6,593

(100)
6,984

(127)
7,098
(74)

(78)

(168)
9,043

(193)
8,075

(197)
8,343

(78)

(83)

(84)

(79)

(185)
8,590

(193)
8,406

(83)

(199)
8,147

(80)

(207)
7,997

(81)

Unit: 10,000 ㎘, (days)

(208)
7,782

(215)
7,716

(222)
7,745

(229)
7,614

(78)

(79)

(85)

(86)

(244)
7,350

(232)
7,119

(88)

(81)

(224)
6,943

(80)

(92)

4,000
(81)

(88)

(90)

(68)

(76)

(85)

(90)

(114)

(113)

(102)

(110)

(117)

(122)

(126)

(131)

(132)

(138)

(149)

(146)

(137)

(2)

(4)

(4)

(6)

(5)

(6)

(7)

(5)

(7)

(54)
(35)

0

Private sector stockpiling
National stockpiling
Stockpiles held jointly with oil-producing nations

(88)

(68)
4,593

2,000

(150)
8,953

(163)
9,080

(7)

(7)

1975(FY) 1978 1979

Applied Cases
for Stockpiling
Releases(Reduction ofprivate stockpilingobligations)

(10)

1980

1985 1990 1995 2000

2005

2010

2011 2012 2013

The Second Oil Crisis

The Gulf War

Hurricane Katrina

Mar 1979〜Aug 1980
Based on application

Jan 17, 1991〜Mar 6, 1991
82 days → 78 days (4 days)

Sep 7, 2005〜Jan 4, 2006
70 days → 67 days (3 days)

Volume: Product equivalent basis
Days: Oil Stockpiling Act basis

2014 2015 2016 2017 2018 2019 2020 2021 2022

The Great East Japan Earthquake
Mar 14〜Mar 21〜May 20, 2011
70 days → 67 days → 45 days (25 days)
Based on application

Ukraine Situation
Mar 10,2022〜Apr 16〜Apr 30.2024 (Plans)
70 days → 66 days → 63 days (7 days)

Libyan Situation
Jun 24, 2011〜Dec 31, 2011
70 days → 67 days (3 days)

Source: METI

2. Release of Oil Reserves in an Emergency
Under the IEA’s cooperative emergency response
measures (a mechanism in which IEA member countries
coordinate to release their oil stockpiles), steps to draw
down the private sector oil stockpiling obligation volume
may be taken.
When the Gulf Crisis broke out in 1990, the privatesector stockpiling obligation volume was lowered fromJanuary to March 1991, in accordance with the IEA’s
decision, as a part of the international coordination
system. In addition, in August 2005, when oil production
and refining infrastructure was devastated in the U.S.
Gulf of Mexico by Hurricane Katrina, private-sector
stockpiles were reduced for approximately four months,
and Japanese primary oil distributors (Motouris)
exported gasoline to the U.S. as an emergency measure.
In June 2011, when a civil war erupted in the OPEC
member country of Libya, the supply of crude oil fromthat country was disrupted. As a result, the privatesector stockpiles were lowered for about six months aspart of the IEA’s cooperative framework. In 2022, in lightof the turmoil in the oil market caused by Russia's
invasion of Ukraine, the IEA held its Extraordinary
Ministerial Meeting on March 1 and agreed on acoordinated oil release from emergency reserves in orderto stabilize the energy market. An additional coordinatedrelease of oil was agreed upon on April 1. In response tothis, the private-sector obligation volume was loweredfrom March, and it was decided in April to further reduce
the private-sector obligation volume as well as to releaseoil from government stockpiles.
Fig.2-2 Location of National Stockpiling
Hokkaido Joint Oil Stockpiling

National stockpiling base

Tomakomai-Tobu

National stockpiling in tanks leased
from private oil companies
Mutsu Ogawara
Akita* Okinawa CTS(JO)

Kuji

Okinawa Terminal
Seibu,Yamaguchi

Fukui

Shirashima

Idemitsu,Niigata
Onahama

KikumaKamigoto

Niigata Joint Oil Stockpiling

Kushikino* ENEOS,Kiire(JO)Shibusi

Kashima,KashimaFuji,Sodegaura*Includes stockpiles held jointlywith oil-producing nations
Source: METI

10

Chap. 2: Security and Resilience Measures in the Japanese Petroleum Industry

Fig.2-3 Current Status of Oil Stockpiling in Japan (as of Apr 2023)
Private sector stockpiling

National stockpiling

Stockpiles held jointlywith oil-producing nations

86 days

138 days

7 days26.7 million kl

42.6 million kl

2.1 million kl

Obligation Days

70 days of domestic demand

90days of net import together with
one-half of the joint stockpiling of oilproducing countries---

Holding Method

Through production
and distribution processes

In sealed designated storage tanks(Oil products are held throughproduction and distribution
processes)

Through commercial stocks of oilproducing countries

Private sector tanks in refineries
and oil terminals

Crude oil: ① Tanks of national
stockpiling bases
		 ② Tanks borrowed fromprivate sector
Oil products: Private sector tanks inrefineries and oil terminals

Private sector tanks contracted byoil-producing countries

Crude oil : 50%
Oil products: 50%

Crude oil : 97%
Oil products: 3%

Crude oil:100%

Stockpile Days

Stockpiling Volume

Holding Location

Composition

Administrative Body

①10 national stockpiling bases (2/3
Oil refiners and importersof government reserve)(It is, however, possible for the joint②Private oil companies (1/3 ofstockpiling companies to act for suchgovernment reserve):
management)(Management on consignment)

Effect of
Stockpile Release(Reduction)①Private oil tanks are leased①Strong psychological effect on
to national oil companies ofthe market when the government
oil-producing countries with
①Prompt supply to distribution
announces its decision to releasemarkets as a large part ofgovernment support.
its stockpiling to increase oil supply
stockpiles are held at refineries and
The companies use the tanks asin the market
oil terminals
storage bases for East Asia, while②Crude oil has to be transported
giving priority to the supply of②Flexible release of stockpiles
from the stockpile sites to refineries
depending on crude procurement
stocks to Japan in the event of a
③Oil products are stockpiled instatus and seasonal demand
shortage of supplies to Japan
private tanks at refineries, oilfluctuation②Oil need to transported from thedepots, etc., and can be supplied
private oil terminals to the refineries
promptly
by tanker

Cases of
Stockpile Release(Reduction)①2nd Oil Crisis (Mar 1979~Aug 1980)②Gulf Crisis (Jan~Mar 1991)③Hurricane Katrina aftermath(Sep 2005~Jan 2006 )①Ukraine situation (Apr 2022~)④The Great East Japan Earthquake(Mar~May 2011)⑤Libyan situation (Jun~Dec 2011)⑥Ukraine situation (Mar 2022~)

Financial Measures

11

Subsidy for oil purchasing costs
and tank construction costs

Government's budget(Part of product cost)

Private oil companies (Managementon consignment)

None

Subsidy for tank leasing costs(Part of product cost)Chap. 2: Security and Resilience Measures in the Japanese Petroleum Industry

3. The Great East Japan Earthquake: Experiences and Lessons Learned
In the aftermath of the Great East Japan Earthquake ofMarch 11, 2011, while the supply of electricity and city
gas was stopped, oil, which features excellent handling,storage, and portability, played a significant role as themost independent and distributed disaster-resistantsource of energy. Oil was effectively used as fuel for
emergency power generation at hospitals, heating at
evacuation centers (kerosene heaters), and emergency
vehicles.
On the other hand, shipping bases, such as refineries
and oil terminals, and also service stations (SS) suffered
severe damage from the earthquake. Six of the ninerefineries located in the Kanto and Tohoku regions halted
production (equivalent to about 30% of Japan’s total
refining capacity), and almost all of the oil terminals on thenorthern Pacific coast were also unable to carry out
product shipment. Consequently, although there wereadequate inventories, because harbor facilities, roads, andother forms of social infrastructure were paralyzed, andthere were also logistic problems, there was a temporarylack of supply of petroleum products in some regions.

The government received about 5,000 requests forvarious emergency relief supplies from the disasterareas, of which about 1,400 of them, or 30 percent, werefor petroleum fuels. The Petroleum Association of Japan(PAJ) set up an operation center to cope with urgent
support requests from the Prime Minister’s Office and
METI, and responded promptly on a 24-hour basis.
Through the efforts of the prefectural government, theMinistry of Land, Infrastructure, Transport and Tourism,
and other agencies, the oil terminal in Shiogama (Miyagi
Prefecture), which is a large-scale facility located in thedisaster-stricken area, resumed shipping its stocks on
March 17 (6 days after the disaster), and started
receiving fuel products from coastal tankers on March
21. At the time, when an institutional framework basedon laws and agreements did not yet exist, various
cooperative systems were built that went beyond theboundaries of companies, such as the joint use by fiveMotouris of the facilities of two companies that had
recovered quickly from the disaster.

Fig.2-4 Response to the Great East Japan Earthquake○ Strengthen production system of refineries in operation (Raising operating rate, increasing production capacity, etc.)○ Urgent import of gasoline and restricting product export (Increasing domestic supply)○ Shipping petroleum products to disaster area from western Japan and Hokkaido (Coastal tanker, tank car and tank truck)○ Cooperation among oil companies in the disaster area. (Joint use of oil storage facilities)○ Shifting of tank trucks from western Japan to the disaster area (Special engagement of approximately 300 trucks)○ Public relation activities in the disaster area for relieving consumers’ anxiety such as informing them of service stations in operation

4. Information Sharing with Local Authorities
In the Great East Japan Earthquake, each Motouri
responded to emergency supply requests from thecentral government or local governments for fuel for
critical institutions such as hospitals. However, due toincorrect or inadequate information from those making
the requests about the kind of fuel or equipment, suchas tank inlet specifications, some delivery problems
occurred.
As preliminary preparation for responding quickly andsmoothly to urgent requests for supply from areas
affected by a disaster in the future, PAJ has beenworking since 2012 on sharing necessary information
about fuel supply to key institutions designated by local
governments and authorities.
To date, PAJ has concluded the Memorandum ofUnderstanding for information sharing with 46
prefectures, governmental organizations, and designatedpublic institutions.
* In 2008, PAJ and the Tokyo Metropolitan Government concluded the“Agreement on the Stable Supply of Petroleum Fuels in the Event of a Largescale Disaster,” which is currently being implemented.

12Chap. 2: Security and Resilience Measures in the Japanese Petroleum Industry

5. Disaster Response through the Oil Stockpiling Act Amendments
At the time of the Great East Japan Earthquake inMarch 2011, the petroleum industry made every effort toprovide a stable supply of oil products at all stages, fromrefining to distribution. Taking into account the lessons
learned from the great earthquake, the petroleum
industry has advocated the formulation of an agile andflexible stockpiling system to control disorder arisingfrom a shortage of petroleum products, and made thefollowing proposal to provide a stable supply of oil intimes of disaster:
1. The government’s reserve of petroleum products
should be built up to be a last resort of oil supply whennormal product distribution is interrupted;
2. Such government product reserves should be kept
at refineries, etc. as an operating inventory to secure
mobility and quality maintenance (a unified public andprivate storage method);
3. To secure logistics, a system to directly supply
petroleum products to critical facilities, such as
evacuation centers and hospitals, should be built byorganizing a cooperative structure between oil storage
management companies and transportation companies
to enhance prompt and assure deliveries.
In November 2012, the Oil Stockpiling Act wasamended to make it possible to release government
crude oil reserves not only at the time of a domestic oil
supply shortage in certain areas due to a disaster, butalso when there is an oil supply shortage from overseas.

On the other hand, the kinds of petroleum products
subject to the government petroleum product stockpilingbecame gasoline, diesel fuel and heavy fuel oil A, in
addition to kerosene, which had been stockpiled fromthe very beginning. Moreover, based on the amended
act, in anticipation of a large-scale domestic disasterthat could cause a shortage of oil supply to a particularregion, oil refiners and Motouris jointly formulated the"Oil Supply Coordination Plan in Disaster" for each of
the 10 regions nationwide to ensure a stable supply insuch region, and submitted it to METI. The plan calls forthe establishment of a joint operation room to serve as acommand center for the industry to (i) collect and share
information on each company's shipping terminals,
logistics, affiliated SS, etc., (ii) respond to urgent supply
requests for petroleum products received via thegovernment, and (iii) share the use of shipping terminals
of other companies when one’s own shipping facility is
no longer available due to damage or other reasons. In
the event of a major disaster, METI can recommend thatrefiners and Motouris take the measures specified in theplan.
PAJ has been conducting the training stipulated in theplan every year to enhance the proficiency level ofdisaster response capabilities and to study and develop
countermeasures for the various issues learned from thetraining sessions.

Fig.2-5 Outline of the Plan for Joint-Operations of Oil Supply in Disasters
In case Shortage of supply of oil in specific areas of Japan caused by the occurrence of a disaster

Oil Products Supply

13

Urgent Supply Response Office(respond to urgent supply request from the government)

WG for Joint Use of Terminals(allocation of tanks, shipping schedule, etc.)(Motouri)Information Gathering Room(collect and share information on company’s terminals, SS, etc.)

Specified oil refiners, etc.

(review and decide on the general response measures relating to oil supply)Supply request

Joint Operation Room

RequestAgency of Natural Resources and Energy

RequestPrime Minister's Office(Disaster Management Headquarters)

RequestAffected Areas (Local Authorities)

Ministry of Economy, Trade and Industry recommend specified oil refiners, etc. to implement the Plan for Joint-Operations of Oil Supply in Disasters

Chap. 2: Security and Resilience Measures in the Japanese Petroleum Industry

6. Response of the Petroleum Industry at the Time of Kumamoto Earthquake
The Kumamoto earthquake, which struck on April 16,
2016, was the first disaster for which the “The Plan for
Joint-Operations of Oil Supply in Disasters” of the Oil
Stockpiling Act was put into action.
In line with this plan, PAJ held joint operation room
meetings every day from the day of the disaster until
April 21 to share information on shipping facilities anddistribution of each oil refinery and Motouri, as well as
engage in discussions and make decisions on response
policies as the oil industry, based on the government’s
response policy measures.
Specifically, on the day of the disaster, PAJ confirmedwith the member companies that there was no major
damage to their shipping terminals or distribution
channels in the region. The member companies
reinforced their shipping capabilities to ensure thesupply of oil to the affected areas by continuously using

backup tank trucks from the surrounding areas andextending the operating hours of their shipping
terminals. They also shared information on the business
operation status of their affiliated SS in and around theaffected areas, aiming at early restoration of operationsat SS where operations had been restricted orsuspended. Furthermore, with regard to emergency
power transmission to power lines by high-voltage
generator trucks, an action that was carried out byelectric power companies as a measure to deal withwidespread power outages in the Aso area, PAJ
responded to urgent requests for the supply of diesel
fuel, which was used as fuel to generate electric power.
Through such prompt and appropriate response in the
Kumamoto earthquake, the industry was able to secureoil supplies to the disaster areas from an early stage.

7. Resiliency Measures for the Oil Supply Infrastructure
Taking into account the lessons learned from the Great
East Japan Earthquake, it was revealed that a major
challenge for the petroleum industry is maintaining andstrengthening the supply chain to ensure a stable supplyof fuel to end consumers, even in times of disaster. The
industry has been strengthening its emergency response
capabilities in terms of both facilities and systems.
In terms of facilities, the industry has been carrying out
seismic retrofitting construction at shipping terminals,
waterproofing work on electrical equipment, andinstalling emergency power supplies. At the all refineries
currently operating in Japan, various works have been
carried out to meet earthquake-resistant and liquefaction
standards that exceed the requirements of existing laws
and regulations. In addition, as there were many urgent
requests for small-lot drum deliveries to sites where tanktrucks could not unload fuel, drum filling facilities weremaintained and expanded. At service stations (SS),disaster response measures were initiated to install aback-up power source, put hand-driven pumps in place,store emergency use materials, and prepare SS as

temporary evacuation sites.
On the system side, as considerable time was needed
for the shipping bases in the disaster-stricken area andeach oil company to exchange information after theearthquake, a system was built to consolidate
information at PAJ from each oil company at the time ofan emergency, by securing and strengthening
transmission and communication methods, such as
deploying satellite phones. Moreover, in December 2013,
PAJ drew up BCP (Business Continuity Plans) guidelines
for oil supply, with each member company formulating
its own BCP in accordance with the guidelines.
The petroleum industry has been carrying out
measures to strengthen the oil supply infrastructure,including refineries and oil terminals, in preparation forearthquakes and tsunamis (seismic sea wave). The
industry formulated a plan to further strengthen fromFY2021 its disaster response capabilities against heavy
rains and typhoons that have been frequent in recent
years.

14

Chap. 2: Security and Resilience Measures in the Japanese Petroleum Industry

8. Safety Measures at Refineries
Facility layouts at oil refineries are planned so thatlegally mandated safe distances are kept not only
between the petroleum processing and storage sites
and the nearby residential areas, but also between thefacilities themselves to ensure safety from fire andexplosion accidents. In addition, each plant facility andstorage tank is also designed to comply with the seismic
design standards. Periodic overhaul inspections,
shutdowns, inspections during operation, daily
inspections, etc. are conducted at refining facilities andstorage tanks, in an effort to detect abnormalities at an
early stage that could lead to accidents. Also, in order tominimize damage in the event of an abnormality, anemergency shutdown system and an initial fire
extinguishing system have been installed. In-housedisaster prevention organizations and joint disaster-

prevention organizations consisting of regularly trained
disaster prevention personnel have been established toensure that the company can respond appropriately andquickly in the event of an accident, such as a fire or oil
spill. These organizations are equipped with large
chemical fire engines, elevated water spraying vehicles,
foam liquid carriers, oil booms, and oil recovery
equipment and vessels, etc.
PAJ formulated its “Voluntary Action Plan on Industrial
Security” in August 2013. Thereafter, the plan isreviewed annually and revisions are made accordingly.
The basic concept behind this plan is to set theindustry’s specific goal as “Zero Serious Accidents” andimplement measures based on a risk-based approachthat invests finite resources in effective safety measuresaccording to the magnitude of the risk.

9. Enhancement of Smart Industrial Safety
Taking the environmental changes surrounding
industry safety into account, METI established the
Subcommittee on the Basic System for Industrial
Security in February 2021, under the Committee for
Security and Consumer Products Safety of the Industrial
Structure Council, and began deliberations on
re-examining safety regulation systems, such as theHigh Pressure Gas Safety Act.
As a result of the deliberations, the subcommittee
finalized the following system changes, which should beundertaken not to lower the level of safety, but rather tosustainably improve the safety level through the use oftechnology: (1) To allow “business operators that areable to independently execute a high level of safety
while utilizing technology” to shift to a self-management

15

type of safety, instead of uniform individual and ex-ante
regulations, under appropriate auditing and supervisionby the government, and (2) To amend the law (to create
new institutional measures that have the promotion ofsmart industrial safety in mind), in order to take steps toreexamine the procedures and inspections so they takethe form that corresponds to the above. The final
summary of these institutional changes was approvedby the Subcommittee as "Efforts toward Immediate
Institutionalization and Main Issues for the Future in the
Industrial Safety Field,” in December 2021.
The High Pressure Gas Safety Act was revised in June
2022, with the revised Act going into effect in December2023.

Chapter

3

Energy Policies and Taxes Related
to the Japanese Petroleum Industry

1. Changes in Petroleum-related Regulations
Under the Petroleum Industry Law, which was enacted
in July 1962 as a fundamental law, regulations for the
petroleum industry in Japan have been implemented
with securing a stable supply of petroleum as thehighest priority. Thereafter, the Petroleum Reserve Law,
the Gasoline Retail Business Law, and the Provisional
Measures Law on the Importation on Specific Refined
Petroleum Products (Fuel Import Restriction Law) wereenacted, and a broad range of regulations, including
administrative guidance, have been placed on theimporting, refining, manufacturing, and marketing of
petroleum.
However, as advances have been made in stages for
petroleum-related regulatory reforms in line with theglobalization of the Japanese economic society, in
addition to ensuring a stable supply, realizing an efficient
supply based on market principles became the goal of
petroleum policy. With the repeal of the Fuel Import
Restriction Law in March 1996 (liberalization of
petroleum product imports) and the Petroleum Industry
Law at the end of December 2001 (abolition of oil supply
and demand adjustment regulations), the petroleum
industry was liberalized, except for regulations regarding
stockpiling (the Oil Stockpiling Act) and fuel quality (theAct on the Quality Control of Gasoline and Other Fuels).
Thereafter, against the backdrop of liberalization and adecrease in demand for oil, the rationalization offacilities, etc. proceeded.

Fig.3-1 Changes in Petroleum-Related Regulations and Regulatory Reform
Enactment of Petroleum Industry Law

Dec ’01

Repeal of Petroleum Industry Law

Dec ’73

Enforcement of two laws for emergency responses

Jan ’02

Enactment of New Oil Stockpiling Act

Apr ’76

Enactment of Petroleum Reserve Law

Feb ’09

May ’77

Enactment of Gasoline Retail Business Law

Partial Revision of Act on Quality Control of Gasoline andOther Fuels (Registration and Quality Assurance Obligationof Processors)

Jan ’86

Enactment of Provisional Measures Law on Importation ofSpecific Refined Petroleum Products(Fuel Import Restriction Law)

Aug ’09

Act on the Promotion of Use of Non-fossil Energy Sources
and Effective Use of Fossil Energy

Jul ’87

Automatic Approval for Installation of Product Upgrading
Facilities

Jul ’10

Notification of Criteria for Judgment Concerning Promotionof Effective Use of Fossil Energies (Raise Installation Ratioof Heavy Oils Cracking Units to about 13% by Mar. 2014)

Mar ’89

Abolition of Guidance on Gasoline Production Quota

Nov ’10

Notification of Criteria for Judgment for Using Non-fossil
Energies (Set Target Volumes for Using Bio-ethanol for
Mixing with Gasoline by Mar.2018)

Oct ’89

Mar ’90

Sep ’91

1st Phase Deregulation

Jul ’62

Abolition of Guidance on Kerosene Inventory Build-up for
Winter

Feb ’11

Abolition of Guidance on SS Construction (Scrap-and-Build
Rule) and on Transfer of SS Brand between PrimaryDistributors

Mandatory measures for prevention of leakage fromSS underground tanks

Nov ’12Amendment of Oil Stockpiling Act

Flexible Approval for Installations of Crude Processing
Facilities

Jul ’14

Notification of Criteria for Judgment Concerning Efficient
Use of Crude Oils, etc. at oil refiners (Raise Installation
Ratio of Residual Oil Processing Units to 50% by Mar. 2017)

Oct ’17

Notification of Criteria for Judgement Concerning Efficient
Use of Crude Oils, etc. at refiners (Raise Processing Ratio
of Vacuum Distillation Units to about 7.5% by Mar. 2022)

Apr ’18

Notification of Criteria for Judgement for Using Non-fossil
Energies (Set Target Volumes for Using Bio-ethanol for
Mixing with Gasoline by Mar. 2023)

Apr ’20

Notification of Criteria for Judgement for Using Non-fossil
Energies (Set Target Volumes for Using next-generation
Bio-ethanol during 2023 and 2027)

May ’22

Amendment of Act on the Promotion of Use of Non-fossil Energy
Sources and Effective Use of Fossil Energy (Compatibility of
Effective Use ofFossil Energy and Environmentally Friendly Use ofEnergy Sources)

Apr ’23

Notification of Criteria for Judgement for Environmentally
Friendly Use of Energy Sources (Set Target Volumes for Using
Bio-ethanol for Mixing with Gasoline by Mar. 2028)

Abolition of Guidance on Crude Processing (Throughput)

Mar ’93

Abolition of Tariff-quota System (TQ) for Heavy Fuels

Mar ’96

Repeal of Fuel Import Restriction Law (Import liberalizationof fuel products)

Apr ’96

Enactment of Act on Quality Control of Gasoline and Other
Fuels by revising Gasoline Retail Business Law

Apr ’96
Jul ’97
Dec ’97
Apr ’98

2nd Phase Deregulation

Mar ’92

Amendment of Petroleum Reserve Law
Automatic Approval of Petroleum Product Exports(Export Liberalization of Fuel Products)
Abolition of SS Certificate System for Fuel Supply-source
by its Branded Primary Distributor
Lifting of the Ban on Manned Self-service SS

16

Chap. 3: Energy Policies and Taxes Related to the Japanese Petroleum Industry

2. The Strategic Energy Plan
The Basic Act on Energy Policy, enacted in June 2002,
emphasizes the three basic principles of energy policy(the “3E”) of ensuring a stable energy supply (Energys e c u r i t y ) , c o m p a t i b i l i t y w i t h t h e e n v i ro n m e n t(Environment), and making use of market mechanisms(Economic efficiency), and also stipulates the formulationof the Strategic Energy Plan (SEP), which lays out thebasic direction of energy policies, as well as mandating
the review of the Plan at roughly three-year intervals.
In the 4th SEP, formulated in April 2002 after the Great
East Japan Earthquake, the basic stance of the energy
policy was "S+3E," which placed top priority on ensuring
a stable energy supply based on the premise of ensuring“Safety,” realizing energy supply at low cost throughimproved economic efficiency, and at the same time,achieving environmental conformity.
The 6th SEP, which was approved at a Cabinet
meeting in October 2021, continued to focus on thesimultaneous achievement of "S+3E" as the basic
stance of the energy policy. Because of petroleum’s
portability and ease of storage, and its mobility, such as
the ability to respond to the need for fuel at a disasterstricken area immediately after a disaster occurs, it isregarded as “the last bastion” of energy supply in timesof disaster. And petroleum is positioned as “an energy

source that is indispensable to the lives of people andfor economic activities,” and as an energy source thathas a wide range of fuel and material applications that
contributes to the energy supply not only in ordinary
times but also in times of an emergency.
In conjunction with the formulation of the 6th SEP, theEnergy Supply and Demand Outlook was revised toreflect the raising of the greenhouse gas reduction target
in FY2030 (46% reduction versus FY2013).
According to the new supply and demand outlook, theshare of oil in the primary energy supply in FY2030 will
be about 31%, a decrease from around 33% in theprevious Long-term Energy Supply and Demand Outlook
formulated in July 2015. However, it is estimated that it
will still account for more than 30% of the primaryenergy supply.
The 6th SEP also stressed the importance of ensuring
an oil supply system that can respond not only inordinary times but also in times of an emergency with aneye to 2030. The plan also calls for the need to further
strengthen the supply network to cope with disasters,
maintain the stockpiling levels, improve productivity, andstrengthen competitiveness. The need to decarbonize
refineries through energy conservation and CO2-freehydrogen was also mentioned.

Fig.3-2 Outlook of Energy Supply and Demand Toward 2030
Energy Demand

Unit: %, million kiloliters (㎘) Crude oil equivalent(COE)

Primary Energy Supply

Ambitious Energy Saving / 62 million ㎘ (18% saving)
363 million ㎘
Power
25%

Economic Growth : 1.4% / year
Population : decrease of 0.6%
Passenger transport amount :decrease of 2%

326 million ㎘
280 million ㎘

Powerabout 28%

Power
about 28%

Renewable
about
22〜23%
Nucleaabout 9〜10%
Natural Gas
about 18%

Thermal,Fuels, etc.
75%

Thermal,Fuels, etc.
about 72%

Thermal,Fuels, etc.
about 72%

FY2030

FY2030(2015 Forecast)

Renewable
about
13〜14%
SelfSupply ratio/
about 30%

Nuclearabout
10〜11%

SelfSupply ratio/
about 24.3%

Natural Gas
about 18%

Coal
about 25%

Coal
about 19%

Oil etc.
about 31%

FY2013489 million ㎘

Hydrogen, Ammonia
about 1%430 million ㎘

FY2030Oil etc.
about 33%

FY2030(2015 Forecast)
Source : METI

17

Chap. 3: Energy Policies and Taxes Related to the Japanese Petroleum Industry

3. Making Advances in Energy Supply Structure
In July 2009, the former Act on the Promotion of
Development and Introduction of Alternative Energy,
which only aimed to reduce dependence on oil, wasreexamined, and the Law Concerning SophisticatedMethods of Energy Supply Structures (SophisticatedMethods Act) was enacted to urge energy suppliers(electric power, city gas and oil) to expand the use ofnon-fossil energy resources, as well as to promote theeffective use of fossil energy resources. The “Criteria for
Judgment by Oil Refiner Concerning the Effective
Utilization of Crude Oil, etc.” (The First Ministerial Noticeon the Sophisticated Energy Supply Law) wasannounced in July 2010, in which oil refiners were given
the target of raising the nation’s facilities installation rateof heavy oil cracking units (about 10% in 2010) to about
13% by March 2014, with each oil refiner being
obligated to achieve an improvement rate that was inline with its facilities installation rate. Each oil refiner
made an effort to raise the installation rate of heavy oil
cracking units by means of (1) the reduction of crudedistillation units, and (2) a combination of constructing
new and building up existing heavy oil cracking units.
Consequently, the average facilities installation rate ofJapan’s heavy oil cracking units improved to around
13% as of the end of FY2013. The Second Ministerial
Notice on the Sophisticated Energy Supply Law waspresented to oil refiners in July 2014. The purpose of thislaw was to define the facilities installation rate, a target
indicator, to be residual oil processing unit installationr a t e ( a b o u t 4 5% a s o f F Y 2 014 ), w hi c h i s t h econventional heavy oil cracking units with the addition ofheavy oil direct desulfurization units, fluid catalytic
cracking units, and solvent deasphalting units, with thetarget percentage of the new facilities installation rate
being raised to 50% by the end of March 2017. Each oil
refiner was obliged to attain the facility improvement thatwas in line with its facilities installation rate. As a meansof achieving the target, some flexibility regarding refining
capacities through collaboration between refineries andbusiness restructuring was permitted. Moreover, each oil
refiner was requested to make a periodic report to METI
on the progress status of its concrete program toachieve this target, together with its businessrestructuring plan as a base for facility optimization.
Consequently, the facilities installation rate of residual oil
processing units reached an average of 50.5% at theend of March 2017.
In May 2017, the Natural Resources and Fuels
Subcommittee of the Petroleum Council’s Advisory
Committee for Natural Resources and Energy presented
the basic direction “to promote the effective utilization ofheavy oil cracking units through improvement of thecapacity utilization rate, collaboration among refineries,
capacity expansion, etc., thereby achieving further
utilization of heavy oil cracking capacity." Then, the Third
Ministerial Notice on the Sophisticated Energy Supply
Law was announced in October 2017. Oil refining
companies were obliged to achieve an increase in theirvacuum-residue (VR) oil cracking rate that was inaccordance with their actual performance. The target
index was to raise the VR processing rate to about 7.5%
in FY 2021. As a result of efforts by each refiner, the VRprocessing rate in FY2021 was 8.1%.
In May 2022, taking the 6th SEP into account, thepurpose of the Sophisticated Energy Supply Law wasrevised from "promoting the use of non-fossil energy
sources" to "environmentally friendly use of energy
sources"; however, the effective use of fossil energy
feedstocks remained unchanged. Based on this, for the
Fourth Ministerial Notice regarding measures for FY2022
onwards, consideration is underway in order to promote
new initiatives that contribute to CO2 emission reductionin the refining process, while maintaining the concept of
the Third Ministerial Notice. (As of July 2022)

18

Chap. 3: Energy Policies and Taxes Related to the Japanese Petroleum Industry

4. Petroleum Industry Reorganization Movements
In view of the flow of global realignment of Western oil
majors and fierce competition in the domestic oil market
after the abolition of the Fuel Import Restriction Law, themovement toward reorganization of domestic oil refiners
and primar y oil distributor s (Motouri) became
increasingly active. In the wake of the merger of Nippon
Oil and Mitsubishi Oil in April 1999, reorganizations took
place on a scale and at a speed that were
unprecedented.
In June 2002, Esso Sekiyu, Mobil Sekiyu and otheraffiliated companies were integrated into the newly
established ExxonMobil Y.K. In 2008, crude oil prices
soared and competition became fierce in the overall
energy market, and it was against this background that
Nippon Oil merged with Kyushu Oil in October of thatyear. Furthermore, even more consolidations andcorporate efforts aimed at greater rationalization andstreamlining were carried out. For example, JX Nippon
Oil & Energy was established in July 2010 as a result of
the business integration with Japan Energy and Nippon
Oil, which had up to that time a business alliance withJapan Energy covering a wide range of fields, fromupstream operations to refining and distribution
operations, fuel cell business, and technology
development. Then in June 2012, the ExxonMobil Japan
Group changed its domestic capital ties, and with newJapanese capital, started up the TonenGeneral Group,with TonenGeneral Sekiyu at its core.
Thereafter, more business alliances and businessintegrations were carried out with the aim of further
strengthening competitiveness by streamlining productsupply and logistics. In February 2017, Cosmo Oil andKygnus Sekiyu entered into a capital and businessalliance, and in April of the same year, JX Nippon Oil &Energy* 1 and TonenGeneral Sekiyu merged to form
ENEOS* 2. Furthermore, the business integration ofIdemitsu Kosan and Showa Shell Sekiyu in April 2019
resulted in the consolidation of Japan’s Motouris into
five companies.
*1 In January 2016, JX Nippon Oil & Energy changed its name to JX Energy.
*2 In June 2020, JXTG Energy changed its name to ENEOS.

Fig.3-3 Reorganization Trends of Primary Distributors (Motouri) in Japan
Idemitsu Kosan
Showa Oil
Shell Sekiyu
Nippon Oil
Mitsubishi Oil

Idemitsu Kosan
Merger in Jan 1985

Showa Shell Sekiyu

Kyodo Oil
Tonen
General Sekiyu
Esso Sekiyu
Mobil Sekiyu

Nippon Mitsubishi
Oil

Maruzen Oil
Kygnus Sekiyu
Taiyo Oil

19

Nippon Oil
Mergerin Oct 2008

Mergerin Apr 2010

JX Nippon Oil& Energy*1

Merger in Dec 1992

Japan Energy

Mergerin Apr 2017

Merger in Jul 2000

ENEOS

*2

TonenGeneral Sekiyu

Merger in Jun 2002

ExxonMobil

Mitsui Oil
Daikyo Oil

Idemitsu Kosan

Showa Shell Sekiyu

Merger in Apr 1999

Kyushu Oil
Nippon Mining

Merger in Apr 2019

Merger in Apr 1986

Cosmo Oil

ExxonMobil
Group

TonenGeneral
Group

Capital transfer
in Feb 2014

Alliance
in May 2017

Cosmo Oil
Kygnus Sekiyu
Taiyo Oil

Chap. 3: Energy Policies and Taxes Related to the Japanese Petroleum Industry

5. Various Petroleum-related Taxes
Various taxes are levied on oil in multiple stages. First,
customs duty (currently levied only on imported
petroleum products) and a petroleum and coal tax are
levied on crude oil, which is the raw material for
petroleum products, and petroleum products at theimport stage. By the time the petroleum becomesproducts that are delivered to consumers, individual
indirect taxes, such as gasoline tax (a gasoline tax andlocal gasoline tax), gas oil delivery tax, aviation fuel tax,
and liquefied petroleum gas tax (tax applied only topetroleum and gas used for automobiles) are levied.
These various petroleum-related taxes amount to about
3,850 billion yen, which accounts for approximately
3.3% of the total national and local tax revenue. If theconsumption tax of approximately 1,910 billion yen(levied on the sale of petroleum products that include
various taxes on petroleum) is added to thesepetroleum-related taxes, the total tax related topetroleum amounts to about 5,760 billion yen. The basic
tax rates of the gasoline tax and gas oil delivery tax are
28,700 yen/kl and 15,000 yen/kl, respectively; however,with the application of the provisional tax rate, those tax

rates become 53,800 yen/kl and 32,100 yen/kl,
respectively, for the time being.
Fig.3-4 Tax Rate of Gasoline and Gas Oil
Delivery Tax
Basic
Tax Rate

SpecialProvisions
for Tax Rate

24,300yen/kl

48,600yen/kl4,400
yen/kl5,200
yen/klTotal

28,700yen/kl

53,800yen/klGas Oil Delivery Tax

15,000yen/kl32,100yen/klGasoline Tax
Gasoline Tax

Local
Gasoline Tax

Imported Oil
Products

Customs Duty
6.9 billion yen

Liquefied Petroleum Gas Tax
9,800yen/kl

10 billion yen

Gasoline

Gasoline Tax
53,800yen/kl

2,212.9 billion yen

Petroleumand Coal Tax
2,800yen/kl

Gas Oil

Gas Oil Delivery Tax
32,100yen/kl

927.5 billion yen

Jet Fuel

Aviation Fuel Tax
13,000yen/kl

49.2 billion yen

647 billion yen

NaphthaKerosene

Consumers

Tax revenue

Imported
Crude OilTax rate

LP GasConsumption Tax 10%

Fig.3-5 Multiple Types and Stages of Taxation of Petroleum-related Taxes (initial FY2023 budget)

Heavy Fuel Oil
OthersImport Stage

Product Stage

Total Petroleum-related Tax: Approx. 3,850 billion yen
Total: Approx. 5,760 billion yen

Consumption Stage
Consumption Tax
1,910 billion yen

Includes 280 billionof Tax on Tax
Source: Ministry of Finance

20

Chap. 3: Energy Policies and Taxes Related to the Japanese Petroleum Industry

6. Origins of Petroleum Taxation and Changes in Tax Rates
In 1949, the gasoline tax, which had existed before thewar, was reinstated to secure general postwar financial
resources. In 1954, the gasoline tax was designated as a
specific revenue source for road construction(hereinafter referred to as the road specific revenue
source), and together with the local road tax (gasoline issubject to taxation) established the following year, theentire amount was allocated to road maintenance andimprovement. In addition, the gas oil delivery tax was
introduced in 1956 as a local tax and specific revenue
source for road construction in order to balance the tax
burden between gasoline and gas oil. Thereafter, in
1974, in response to requests for securing revenue
sources for road construction, etc., a provisional tax ratethat was added on top of the gasoline tax and local roadtax was applied, and in 1976, the provisional tax rate
was applied to the gas oil delivery tax as well. These
provisional tax rates were subsequently raised to secure
the financial resources needed for road construction andmaintenance. Consequently, the tax rate for petroleum
taxes reached a level much higher than the regular tax
rates.
At the time when the consumption tax was introduced
in 1989, adjustment measures with the existing individual
indirect taxes (e.g., double taxation on consumption tax
to be abolished by being absorbing into consumption
tax, or the duplicate consumption tax portion to be
reduced while maintaining the double taxation) were21

taken, in order to not increase the tax burden on
consumers. However, the petroleum tax burden wasneither abolished nor reduced on the grounds that thosetaxes were used as the road specific revenue source.
Therefore, the consumption tax portion was added tothe sales price of fuel in which petroleum taxes were
included as simple double taxation and deferred. In
2009, though the road specific revenue source system
was abolished (incorporated into a general revenue
source), no specific adjustment measures were takenwith regard to the consumption tax and petroleum taxes(the local road tax was renamed the local gasoline tax).
The provisional tax rates were abolished in April 2010,
but the existing provisional tax level was to be
maintained for the time being.
The petroleum and coal tax started as the petroleum
tax in 1978 to secure financial resources for promoting
the stockpiling and development of oil. In 2003, in
addition to coal being added as a taxable fuel (and thepetroleum tax was renamed the petroleum and coal tax)
in order to balance the tax burden among fuels, new tax
rates were also established for each fuel. Furthermore, atax rate corresponding to the amount of CO2 emissions
was added in October 2012 as a special taxation for
global warming countermeasures, and as a transitional
measure, the tax rate was increased in three stages until
April 2016.

Chapter

4

Trends of Oil Supply and Demand in Japan

1. Results of Supply and Demand of Energy
Final energy consumption in Japan for FY2021 was
12,276 PJ, Crude Oil Equivalent (COE): 317.05 million kl,
an increase of 1.6% year-over-year (YOY). Broken down
by energy source, petroleum consumption was 5,683 PJ(COE: 147 million kl), a decrease of 0.9% YOY, andelectric power consumption was 3,325 PJ (COE: 86
million kl), an increase of 1.1% YOY.

Supply of primary energy domestically was 18,760 PJ(COE: 482 million kl), an increase of 4.1% YOY. Of thisamount, petroleum supply (including LPG) was 6,720 PJ(COE: 174 million kl), an increase of 2.9% YOY. Its shareof the total energy supply compared to the previous year
decreased from 36.4% to 36.0% YOY.

Fig.4-1 Changes in Final Energy Consumption
1973FY

Unit: %, million kiloliters (㎘) Crude oil equivalent(COE)

68.5

1980

63.2

1990

55.5

14.1
15.1

2000

2.9
3.9

12.0

4.2

2013
47.4

9.3

8.7

7.1

2021

46.3

10.0

8.9

7.4

100

20.3
5.4

0.4

7.7

0.4

22.1

7.4

8.1

2020

0

7.5

7.9

10.4

48.9

0.0

1.1

9.3
9.8

49.4

0.0

1.1

16.6

55.1

2010

13.4

25.3

7.1
27.2

Coal

350

Natural Gas,
City Gas

409

312
317

0.3

200

286

364

0.3

0.3

27.1

Oil

380

0.2

25.3

287

300

1973FY

Unit: %, million kiloliters (㎘) Crude oil equivalent(COE)

77.4

15.5

66.1

1990

56.9

2000

50.8

16.9

2013

45.4

24.1

0

1.1

4.7 5.2
10.2

9.3
12.9

12.1
10.6

22.1
22.9

24.8

200

4.1 2.9

17.2

24.2

100

1.0

4.1

18.1
21.5

38.9

0.6

16.7

43.5

2021

1.5

6.1

2010
38.3

Renewable,
Recovered
Energy*Source: METI

Fig.4-2 Changes in Total Primary Energy Supply

2020

Electricity

400* Effective recovery use of wasted energy

1980

Heat

1.7 3.6

20.3

300

3.1

3.2 2.9
3.1 4.2
4.9

0.4

400

Oil

429

Coal

522

Natural Gas

610

Nuclear

600
572
481

9.3

3.1 3.4

416

Hydro Power
Renewable,
Recovered
Energy

507

9.5

500

600
Source: METI

Fig.4-3 Changes in Domestic Primary Energy Supply
1973FY

75.5

1980

17.6

1990

56.0

2000

49.2

2010

40.3

2013

42.8

2020

36.4

2021

36.0

2030

About 31％

(Outlook)

16.9

64.7

0

100

1.6
6.4

16.9

Unit: %, million kiloliters (㎘) Crude oil equivalent(COE)
0.6

1.0

4.4

10.5

18.5

23.8

200

21.4
About 9〜10％

300

11.2

1.8 3.7
3.2 3.6

About 22〜23％

400*Primary Domestic Energy Supply is total supply minus exports and changes in inventories508

4.2 3.0
12.6

23.3

25.8
About 18％

9.6

18.2

25.2

About 19％

411

13.5

22.7

24.6

387

1.1

4.9 5.4

3.3 4.4

3.2

586

3.3 3.0

5.2

0.4

568
544
463

9.6
10.0

482

About 1%

500

430
600

Oil
Coal
Natural Gas
NuclearHydro Power
Renewable,
Recovered
EnergyHydrogen,Ammonia

Source: METI

22

Chapter 4. Trends of Oil Supply and Demand in Japan

2. Makeup of Electric PowerThe rate of oil-fired thermal power generation in the
power supply configuration in FY2021 (confirmed report)
increased to 7.4% from 6.3% in the previous fiscal year.
After the Great East Japan Earthquake, thermal power
generation by means of oil and other sourcescompensated for the amount that had been generated

by nuclear power prior to its shutdown. While the ratio of
LNG- and coal-fired power generation were maintained,that of oil-fired thermal power has fallen below 10%
again since FY2010, and has been on a downward trend
since then.

Fig.4-4 Changes in Generated Electric Energy by Power Source

Unit: %, 100 million kWh

0.2

1980FY

45.6

4.5 15.4

16.9

1990

28.6

9.7

22.2

2000

10.7

2005

10.8

2010

8.6

2013

0.2
27.3

11.9

26.4

18.4

9.6
30.8

27.8

34.2

0.9

2019

6.3

32.0

37.3

2020

6.3

31.0

39.0

3.9

2021
2030

7.4

34.4

6.9

(Outlook)

2

0

31.0
19

20

6.2

8.4
10.4

7.8
7.8

4,000

6,000

3.6

5.9

7.5

12.8
1

8,000

10,000* Solar, Wind, Geothermal and Biomass

Coal

2.2

11,494
10,845Natural Gas
NuclearHydro Power

10,404

Renewable*

10,210Hydrogen,Ammonia

10,004

12.0

36〜38

20〜22

2,000

7.3
0.9 7.3

40.9

Oil

9,889

25.1
40.9

4,850
7,376
9,396

0.9
8.2

29.0
32.9

9.7

0.6

34.3
23.7

25.6

14.4

2015

17.4

10,3289,340
12,000Source: METI, FEPC (Federation of Electric Power Companies)

3. CO2 Emissions from Energy
Due to the effects of the economic recovery after the
Covid-19 pandemic, CO 2 emissions from energy
consumption increased in FY2021 (confirmed report) for
the first time in eight years, reaching 988 million tons, anincrease of 2.1% year-on-year (YOY). It was a 20.0%
decrease compared to the most recent peak in FY2013.
CO2 emissions increased for four consecutive years from

FY2010 to FY2013 due to the shutdown of nuclear
power plants, etc. after the Great East Japan
Earthquake. However, since then, emissions have been
on a download trend because of the decrease in energy
demand, and low-carbon power generation due to the
spread of renewable energy and the restart of somenuclear power plants.

Fig.4-5 Changes in CO2 Emissions from Energy
1990FY

59.4

2000

12.1

57.0

2005

19.5
13.3

57.3

2010

2020

55.7

2021

57.0

17.2

10

22

18.2

20.1
19.0

15.8

18.7

8.2
8.7

19.0

15.4

60

2030

20.4

16.3

56.1

7.6

20.1
16.8

56.6

2019

22.1

15.7

56.7

2015

1,068

9.0

14.2

55.5

2013

Unit: %, Mt-CO2

8.3

1,170

Residential

1,201

Transportation

1,137

EnergyTransformation

1,235
1,146

8.2

1,028

8.3

967

8.2

988

8.5

677

8

(Out look)

0

200

400

600

Industry

800

1,000

1,200

1,400
Source: METI

23

Chapter 4. Trends of Oil Supply and Demand in Japan

4. Crude Oil Imports
Japan imported 156.6 million kl of crude oil in FY2022,
an increase of 5.1% YOY. The crude import volume byregion showed that Middle Eastern oil producing
countries accounted for 95.2%. The countries fromwhich Japan imported crude oil, shown in order ofvolume, were Saudi Arabia (39.2% of total imports), theUnited Arab Emirates (38.5%), and Kuwait (8.5%). The
top two countries accounted for more than threequarters of Japan’s total crude oil imports.

Fig.4-6 Crude Oil Imports by Country (FY2022)
Neutral Zone: 0.3%
Bahrain: 1.0%
Oman: 1.1%
Qatar: 6.5%

Kuwait:8.5%

156.6
Million㎘

Saudi
Arabia:39.2%

U.S.A.: 1.5%
Russia: 0.4%
Latin America: 1.9%
Southeast Asia: 0.7%
Oceania: 0.2%
Africa: 0.1%

UAE: 38.5%〈Middle East: 95.2％〉

Source: METI

5. Petroleum Supply System in Japan
One method used for supplying petroleum products is
to import petroleum products themselves, and anothermethod is to import crude oil and refine it domesticallyto produce petroleum products (refining oil in the
consumption locale method). Refining oil in the
consumption locale is the principal method used inJapan. This method has many advantages, such as
making it possible to reduce procurement costs byimporting a massive amount of crude oil using very large
tankers, to adjust the production proportion of petroleum
products to a certain degree in line with the domestic
demand structure, to easily adjust product quality tocomply with domestic environmental standards, and to

be in a favorable position to respond to emergencies.
As the domestic crude oil output in Japan in FY2022
was 410,000 kl, which represents only 0.3% or theequivalent of about one day’s worth of the 156 million kl
of Japan’s crude oil processing capacity, almost all ofJapan’s crude oil is imported from overseas. Because ofthis, all of Japan’s 20 refineries (with a crude oilprocessing capacity of 3,230 thousand barrels per day)are located in coastal areas, as of the end of October
2023. Together with the continuing decline in demand for
petroleum products, the number of refineries and thecrude oil processing capacity are also on a downward
trend.

Fig.4-7 Location of Refineries and Crude Oil Processing Capacity (as of end October 2023)
unit : b/d

TOTAL : 20 Refineries (3,230,400 b/d)
Idemitsu Kosan (Aichi Complex) 160,000
Cosmo Oil (Yokkaichi Refinery) 86,000
Showa Yokkaichi Sekiyu (Yokkaichi Refinery) 255,000
ENEOS (Mizushima Refinery) 350,200
ENEOS (Marifu Refinery) 128,000
Seibu Oil (Yamaguchi Refinery) 120,000
ENEOS (Oita Refinery) 136,000

Idemitsu Kosan (Hokkaido Refinery) 150,000

ENEOS (Sendai Refinery) 145,000
KASHIMA OIL (Kashima Refinery) 210,100 *1
Cosmo Oil (Chiba Refinery) 177,000
Osaka International Refining Company (Chiba Refinery) 129,000
Idemitsu Kosan (Chiba Complex) 190,000
Fuji Oil (Sodegaura Refinery) 143,000
ENEOS (Kawasaki Refinery) 249,100
TOA Oil (Keihin Refinery) 70,000
ENEOS (Negishi Refinery) 153,000
Cosmo Oil (Sakai Refinery) 100,000
ENEOS (Sakai Refinery) 141,000
Taiyo Oil (Shikoku Operations) 138,000*1 KASHIMA OIL (Kashima Refinery) include the capacity of condensate splitter

24

Chapter 4. Trends of Oil Supply and Demand in Japan

6. Production of Petroleum Products
The principal crude oil refining processes, from theprocessing of crude oil at the refinery to the productionof petroleum products, involve (1) “distillation” toseparate the raw material into various components byusing different boiling points, (2) “desulfurization” toremove sulfuric components from the raw material, (3)“cracking” to convert the raw material to a lighter (lighter
molecule) structure, and (4) “reforming” to change thechemical bonding of the crude oil.
Petroleum has the characteristic of producing“co-products,” in other words, producing multiple
products (gasoline, kerosene, gas oil, heavy fuel oil, etc.)
simultaneously from crude oil in certain proportions(yield), and it is impossible to product only a specificproduct from crude oil. Recently, on the other hand, in
terms of demand, the proportion of so-called “white oil,”such as gasoline, kerosene, and gas oil, is increasing.
Consequently, efforts are being made to deal withchanges in demand by selecting lighter crude oils andcracking heavy oil for use as the base material for
gasoline, kerosene, etc. Production of main petroleum
products in FY2022 was 150 million kl, an increase of
5.7% YOY. The production yields are about 39% for thelight fractions, about 46% for four intermediate
products, and about 10% for heavy fractions, with thetotal production amounting to approximately 95%.

Fig.4-8 Changes in Petroleum Products Yield from FY1973 to 2022FY
10.7

1973FY
1980

12.1

15.1

1.5

9.2

8.9

2.0

10.4

1990

20.9

5.8 2.3

2000

23.5

7.5

28.0

2010

7.0

7.2
9.4

11.5

44.3
9.1

11.7

9.6

6.7

91.7

36.0

16.3

4.4

Unit: %

12.9
17.4

91.2
21.1

11.9

9.4

20.6

90.8

15.3
7.8

91.5

10.4

92.5

2020

31.2

9.0

4.6

9.4

23.5

8.1

8.9

94.7

2021

30.8

9.2

5.8

8.2

24.5

7.1

9.8

95.4

2022

29.7

9.1

7.0

7.4

25.0

6.7

10.3

95.1

0

10

20

30

40

50

60

Jet Fuel
KeroseneGas oil
FOA
FOB,C

Heavy
FractionsIntermediates

Light Fractions

Gasoline
Naphtha

70

80

90

100
Source: PAJ

7．
Import of Petroleum Products
Naphtha imports account for far and away the largest
share among imported petroleum products every year;
about 70% of domestic demand for petroleum products
was covered by imported products in FY2022. As Japan
has adopted the method of refining oil in the
consumption locale, petroleum product imports play asupplemental role, with the exception of naphtha, for25

which Japanese petrochemical companies import theirown naphtha as a petrochemical feedstock.
Furthermore, as jet fuel and heavy fuel oil, etc. that areimported for refueling international aircraft and oceangoing vessels are not supplied to the domestic market,
they are not included in the volume of imported
products.

Chapter 4. Trends of Oil Supply and Demand in Japan

8．
Export of Petroleum Products
As for the quantity of exports by fuel product in
FY2022, ranked in descending order are heavy fuel oil B
and heavy fuel oil C (FOB and FOC), gas oil, and jet fuel.
Exports of jet fuel are about 1.8 times as much as thedomestic demand. This is because the volume of jet fuelthat is supplied domestically to international flights(bonded exports) is considered as an export. Similarly,
when heavy fuel oil produced in Japan is supplied toocean-going vessels, this volume is considered as anexport, and these exports account for about 60% of the
FOB & FOC exports. In addition, gas oil produced inJapan has a sulfur content of 10 ppm or less, and alarge volume of gas oil is exported to Australia, where
sulfur content is strictly regulated. About 40% of Japan's
total gas oil exports went to Australia in FY2022. With
domestic demand declining, gasoline and other fuels arealso being exported, depending on the trends inoverseas markets.

Demand for Petroleum Products
9．
The total petroleum products demand for fuel oil in
FY2022 was 151 million kl, a decrease of 1.9% YOY.
Compared to its peak in FY1999, demand decreased by
39% due to improvements in fuel efficiency and energysaving measures, etc. Especially, demand decreased
sharply in FY2020 due to the impact of the spread of theCovid-19 pandemic and other factors.
Naphtha, kerosene, and gas oil decreased 8.2%,
9.4%, and 1.3% YOY, respectively, while gasoline, jetfuel, heavy fuel oil A, and heavy fuel oil B and C
increased 0/6%, 21.6%, 2.8%, and 10.7% YOY,
respectively.

Fig.4-9 Changes in Domestic Demand by Petroleum ProductTotal Fuel Oil

1,673

1973FY

27,22336,24021,93016,75919,306234,138

111,007

2,967

1980

34,543

26,29723,566

21,56421,083

209,219

79,199

3,739

1990

44,78331,423

26,701

37,68027,066

218,01246,623

4,639

1999

57,251

48,004

2000

58,372

47,68629,94943,46829,15133,505245,966 *1

41,74529,516

31,364

243,218

38,203

29,10026,556237,245

37,11627,78027,009236,109

4,611
29,924

Unit: 1,000㎘
Gasoline
Naphtha
Jet Fuel
KeroseneGas Oil
FOA
FOB,C

4,906

2004

61,476 *2

49,02627,977
5,129

2005

61,421

49,38828,265
5,153

2010

58,15946,69920,34932,891

15,425

17,343

196,019

3,974

2012

56,20743,172

18,884

197,770

33,391

13,75928,382

33,594

11,871 14,241

180,476

7,378

161,920

5,464

2015

46,234

53,127

15,946
5,151

201949,30442,55013,62733,754

10,156

2,733

2020

45,52440,323

14,49832,027

10,226

6,622

151,953

32,075

10,135

8,544

153,754

3,313

2021

44,50941,66013,5184,027

2022

44,774038,23250,00012,249100,000*1: maximum “Total Fuel Oil” value @245,966 thousand ㎘*2: maximum “Gasoline” value @61,476 thousand ㎘

31,665

10,421150,8259,456

150,000

200,000

250,000
Source: METI

26

Chapter 4. Trends of Oil Supply and Demand in Japan

10．
Petroleum Logistics in Japan
Petroleum products that have been produced atrefineries are delivered to users or service stations (SS),which are sales offices, either directly from the refineries
or from oil terminals, which are transshipment stations.
The delivery methods employed to deliver the petroleum
products include coastal tankers, railroad tank cars, tanktrucks, etc., depending on the location of the delivery
destination, the handling volume, and the transportation
distance, etc.
A coastal tanker is used for marine transportation
between seaside districts in order to transship oil from arefinery to an oil terminal, or delivering oil directly from arefinery or an oil terminal to users. This method is
e x c e ll e n t f o r l a rg e - v o l u m e a n d l o n g - di s t a n c etransportation. The amount transported by one tanker isabout 1,000 to 7,000 kl.

Railway transportation, which is used to transship oilfrom seaside refineries to oil terminals in inland areas bytrains made up of special freight wagons called railroadtank cars, makes it possible to transport vast quantitiesof petroleum products at one time to inland areas. The
amount transported by one railroad tank car is about 60
kl, and about 1,200 kl by one train.
A tank truck is used to deliver oil from refineries or oil
depots to SS and users. The amount transported by one
vehicle is about 20 kl, which is less than the amounttransported by coastal tankers or railroad tank cars, buttank truck transportation has the distinct advantages ofbeing superior in terms of mobility and flexibility.
Thus, various means of transportation are used todeliver oil to consumers.

Fig.4-10 Oil Supply Chain (Logistics and Distribution Channels)

Import●Crude Oil Tankers

481 Vessels in operation(estimated in FY2022)

Crude oil storage
and stockpiling●Crude Oil Tanks

Capacity:36,456 thousand ㎘
Number of Tanks: 512(end of FY2019)●Tanks and distribution facilities

Refining

Oil Terminals:Capacity; 13,450 thousand ㎘
Number of Tanks: 3,075(end of FY2019)
Coastal Tanker:510 Vessels (end of FY2022)
Railroad Tanker:1,305 (end of FY2022)
Tank Truck:6,515 (end of FY2017)●Facilities for petroleum products
Refinery:21 Sites
Capacity:3,331 thousand B/D(end of FY2022)

Products storage
and stockpiling(including semi-products)

Distribution andLogistics

Sales andMarketing27●Tanks for petroleum products
Capacity:32,119 thousand ㎘
Number of Tanks: 2,392(end of FY2019)●SS(Service Station)

27,963 Sites (end of FY2022)

Chapter 4. Trends of Oil Supply and Demand in Japan

11．
Changes in the Business Environment Surrounding Service Stations (SS)
Domestic gasoline sales volume is showing adownward trend due to structural factors, such as
population decline and improved fuel efficiency ofvehicles. Moreover, an increase in next-generation
vehicles, such as electric vehicles (EV), plug-in hybrid
vehicles (PHV), and fuel cell vehicles (FCV), are seen as
factors for a further decline in gasoline sales in the
future. With fierce market competition due to declining
petroleum fuel demand and the heavy burden ofmeasures against accidental oil spills from undergroundtanks (UGT), the number of SS peaked at 60,421 at theend of March 1995, but has continuously declined,
falling to 27,963 at the end of March 2023. The Agency
for Natural Resources and Energy (ANRE) under METI
surveyed the number of “SS depopulated areas” where
there were three or fewer SS in a single municipality, andfound that there were 348 municipalities at the end of
March 2022, an increase of five from the end of theprevious fiscal year.
While the number of SS is decreasing, attention isturned to SS every time a big natural disaster occurs,
because SS serve as bases for supplying fuel. The
Kumamoto Earthquake of April 2016 prompted thegovernment to promote the establishment of “Local
Community SS,” which has private power generating
equipment so that fuel can continue to be provided to

local residents in the disaster-stricken area, even during
a power outage, for as long as possible. As of the end of
May 2023, there were 14,461 Local Community SS,
which is more than half of all the SS in the country.
On the other hand, deregulation brought about the
introduction of manned self-service SS, where SS
attendants with certain qualifications oversee how refuelingis being done by drivers. Since the introduction of thissystem in April 1998, it has become possible to carry out
operations at such SS more efficiently than full-service SS,with the number of manned self-service SS increasing to
10,721 as of the end of March 2023, accounting for
approximately 38% of the total number of SS.
Moreover, for improved efficiency and diversification ofoperations at SS, it has been possible since April 2019
to conduct outdoor sales of goods, etc., at SS, and forattendants at self-service SS to use tablet devices, etc.,
for issuing refueling permission, etc. In addition,
promoting the strengthening of added-value sales at andstreamlining the management of SS in order to respondto changes in the business environment have become
an issue. With regard to this, various measures areunderway at SS, including the setting up of other typesof businesses in SS, such as a convenience store, or
handling car leasing, etc.

Fig.4-11 Changes in SS and Self SS
59,99058,26360,00060,421
sites
59,615The number of SS
The number of self SS

55,15356,44450,00052,59253,70450,06747,584
51,29444,057
48,67245,79240,35742,09040,00037,74334,70632,33336,34930,747 29,637
28,47533,51031,46730,070 29,005
27,96338,77730,00020,00010,000085 191 422
1994 95

96

97

98

9,728
9,928
10,320 10,608
9,275
8,596
8,296
7,023
10,10010,467 10,721
9,856
8,862
9,530
4,956
8,449
7,774
3,423
6,162
1,353
4,104
2,523

99 2000 01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21 2022End of each FY

Source: METI, Oil Information Center.

28

Appendix Profile of Petroleum Association of Japan (PAJ)
Petroleum Association of Japan (PAJ), incorporated
in November 1955, is composed of 11 refiners andprimary distributors in Japan. Its main activities are:
1. to collect the opinions of the member companies
and compile proposals to be incorporated in thegovernment petroleum policy.
2. to survey the situation of the petroleum industry.
3. to provide information relating to the petroleum
industry.
I. Activities
PAJ deals with all matters concerning the refining andmarketing of petroleum products. The main functions
by PAJ are as follows:
1. Publishing information on important issues for the
petroleum industry
2. Advocating the industry’s opinions and submitting
proposals to the government, business associations,the media and the general public
3. Researching and coordinating activities related toimportant petroleum issues and providing information
on such issues
4. Researching and coordinating activities related toclimate change issues related to petroleum,andcarbon neutral
5. Undertaking governmental subsidy programs suchas the “Major Oil Spill Response Program”, includinginternational conferences
6. Enhancing communication and understanding among
member companies
Ⅱ. Main Activities and Projects in FY2023
1. Improvement and reinforcement of the petroleum
industry’s business structure(1) Advocate deliberations on the new energy policy(2) O ffer opinions to strengthen international
competitiveness of the industry(3) Offer opinions to the deregulation of the industry
and refinery safety(4) Appropriately handle tax revision(5) O ffer the formation of a fair and transparent
domestic petroleum market(6) P rovide information and statistical data of thepetroleum industry
2. Emergency response measures to secure stablesupply of petroleum products(1) Strengthening efforts to secure stable supply of
petroleum products during the transition period(2) M aintain and strengthen petroleum supply
network through reviewing safety regulations onservice station29(3) P rovide timely and appropriate information in
emergencies
3. Environment and social responsibility(1) S trengthening efforts to realize carbon neutral
vision in 2050
(2) Enhance voluntary safety management action plan
(Risk-based approach)(3) Implement PAJ Major Oil Spill Response Program
4. PR activities for better public understanding of thepetroleum industry(1) Strengthening the dissemination of informationon the industry’s effort to combat climate change,
including carbon neutrality(2) Strengthen the dissemination of information on
the industry’s efforts to enhance security andresilience(3) Provide opinions on oil and energy policy basedon the premise of S+3E
■ Executives
President

Shunichi KITO

Representative Director
President and Chief Executive Officer
Idemitsu Kosan Co., Ltd.

Vice-President

Yasuhiro SUZUKI
President
Representative Director
Chief Executive Officer
Cosmo Oil Co., Ltd.

Vice-President

Tomohide MIYATA
Representative Director
Executive Vice-President
ENEOS Corporation

Senior Managing Director

Shinya OKUDAManaging Director

Uichiro YOSHIMURAPAJ Member Companies (11)

• Idemitsu Kosan Co., Ltd.
• TOA OIL CO., LTD.
• KASHIMA OIL CO., LTD.
• Taiyo Oil Company, Limited• Fuji Oil Company, Ltd.
• Cosmo Oil Co., Ltd.
• Cosmo Oil Marketing Co., Ltd.
• ENEOS Corporation• Kygnus Sekiyu K.K.
• SHOWA YOKKAICHI SEKIYU CO., LTD.
• Seibu Oil Co., Ltd.

Appendix. Profile of Petroleum Association of Japan (PAJ)■ Management and Committees
General Assembly= Sub-committees

Auditor

Policy Planning
Carbon neutral Promotion

Board of Directors
Committee ofManaging Directors

Policy Planning
Committee

Stockpiling
Labor Policy

Petroleum Distribution Laws
SS Technological Issue
Distribution Committee
Aviation
Petroleum Energy System

Environment &Safety Committee

Global Environmental Issue

Technical Committee

Environment & Safety
Facilities Management

Fules Technology
Carbon neutral Technology
Development
Refining Technology
Quality Control

Associated Organizations

Taxation &Finance Committee

Oil Statistics Committee
PAJ Oil Spill Cooperative (POSCO)
Japanese National Committee
for ISO TC28

JIG: Joint Inspection Group

Petroleum-related Taxation
Inland Transportation

Transportation Committee
Marine Transportation
Public Relations Committee

ISO: International Standardization
Organization
T C : Technical Committee

JIG Japan

FinancePublic Relations

Crisis Management
Crisis Management Committee
Cybersecurity30