Friday, August 13, 2010

Shipping Crude Oil to Japan

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When it comes to energy consumption, Japan is perhaps one of the most vulnerable among developed economies. It is only 16% self-sufficient in energy; 50% of its energy requirements is met by oil imports from the Middle East, and each day of the year it imports about 5 million barrels!

How does this oil reach Japan? How many tankers does it take to transport this huge volume of crude, over a distance of 8000+ km, though some of the diciest sea-lanes in the world?

There are approximately 3500 tankers available in the international oil transportation market. So far its unclear how many of these are directly owned by Japanese firms but perhaps one can assume that most of the oil is transported in lease-hired vessels, and that most of them would be the largest available, since they offer the best economies of scale.

This brings the tanker-count to 435 VLCCs (Very Large Crude Carriers) which account for one-third of all the oil carried. Each VLCC can carry about 300,000 deadweight tons of crude oil, which comes to about 2 million barrels.

So each day of the year, it takes just two or three VLCCs arriving at a Japanese port, to supply enough crude for the daily oil requirements of the country.

Not so bad as I imagined...
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Note 1: Obviously the calculation is rather simplistic, and, well, crude. It does not account for refining, marketing or distribution. In January 2008, Japan had 4.7 million bbl/d of oil refining capacity at 31 facilities,  and this was the second-largest refining capacity in the Asia-Pacific region after China. The refining sector in Japan has been characterized by overcapacity in recent years, as domestic petroleum product consumption has stagnated.

Note 2: Japan maintains government controlled oil stocks to ensure against a supply interruption. Total strategic oil stocks in Japan were 328 million barrels at the end of April 2008, according to the EIA. Currently, private refiners in Japan are required to maintain petroleum product stocks worth 70 days of consumption, which imposes large additional costs to these companies.

Note 3: What can you get out of one barrel of crude oil? From a standard barrel of oil containing 44 US gallons of crude oil, it seems you can extract 44 gallons of petroleum products! (why? how?) Taking 1 US Gallon= 3.785 Liters, one barrel of 159 Liters can yield -
  • Motor gasoline: 19.65 gallons (~47%) = 74 L
  • Diesel / Distillate fuel: 10.03 gallons (~24%) = 38 L
  • Jet fuel: 4.07 (~10%) = 15 L
  • Residual oil: 1.72 gallons (~4%) = 6.5 L
  • Other bye-products (still gas, petroleum coke, liquified refinery gas, asphalt and various oils for lubricants, kerosine, waaxes, etc..: 6.53 gallons (~15%) = 24.7 L
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