Japan's Oil Refineries - The Journey and Challenges of Petroleum Refining: Refineries Located Near Demand Centers on the Pacific Coast with Easy Port Access

Overview

This is a comprehensive analysis by Yoshihiro Hashizume of the Japan Energy Economics Research Institute, discussing the historical development and current challenges of petroleum refining in Japan. The detailed explanation covers the development process of domestic refineries from the Meiji era to the present and the significance of the consumption-area refining method for energy security. ## Key Points ### 1. Historical Development of Japan's Petroleum Refining - **1890**: Japan's first modern refinery (Amagase Refinery) built in Izumozaki, Niigata Prefecture - **End of Meiji Era**: Japan was one of the world's leading oil-producing countries, meeting domestic demand through domestic refining - **1941**: Pacific War began due to US embargo on petroleum exports to Japan - **1950**: Post-war resumption of operations at large Pacific-side refineries - **1960s**: Intensive capital investment during high-growth period, expanding atmospheric distillation capacity from 70,000 barrels/day in 1950 to 5.94 million barrels/day in 1975 ### 2. Establishment and Benefits of Consumption-Area Refining Method - **Definition**: Method of importing crude oil from oil-producing countries and refining it into petroleum products at domestic refineries in consumption areas - **Benefits**: - Crude oil is more readily available than products with higher supply stability - Possible to adjust supply-demand and quality according to domestic consumption and environmental regulations - Scale benefits from larger crude oil tankers - Foreign currency savings through domestic value-added retention - Regional development through complex formation - **Example**: During the 1990 Gulf Crisis, while crude oil prices rose to the $30s, kerosene prices soared to nearly $100 ### 3. Current Refinery Locations and Characteristics - **Current Status** (March 2025): 19 locations with total refining capacity of 3.11 million barrels/day - **Location Conditions**: - Berths capable of accommodating large crude oil tankers - Securing industrial water for cooling - Proximity to major consumption areas - **Distribution**: Concentrated in Pacific Belt Zone (from Keihin to Ise Bay, Osaka to Yamaguchi and Oita) - **Scale**: 164,000 barrels/day per location on average (smaller than Korea's 590,000 and Singapore's 450,000) - **Equipment Ratio**: FCC equipment ratio 20%, catalytic reforming equipment ratio 15%, higher than neighboring countries ### 4. Future Challenges and Prospects - **Aging Problem**: Even the newest refinery (Idemitsu Hokkaido) was built in 1976 - **International Competitiveness**: "Yen depreciation barrier" since second half of 2022 has prevented issues from surfacing - **Industry Restructuring Results**: - Major company withdrawals in the 2010s - Excess capacity reduction through Energy Supply Structure Sophistication Act - Improved profitability and preparation for carbon neutrality ### 5. International Diversification of Petroleum Refining - **Oil-Producing Countries**: Export refineries began operations from mid-1980s - **Intermediate Refining**: Singapore, Taiwan, and India import crude oil and export products - **Japan's Response**: Complete liberalization since 1996, but product imports remain limited except for naphtha This article clearly demonstrates the historical background and structural characteristics of Japan's petroleum refining industry, reaffirming its importance for energy security.