Magazine article Business Asia , Vol. 11, No. 10
Japan's Nippon Oil, China's Sinopec Group and South Korea's SK Corp said they plan to set up an energy market with other North East Asian oil refiners to force Middle East suppliers to cut the region's US$68 billion ($94 billion) oil bill, Refiners and oil buyers from Japan, China and South Korea, which use three-fifths of Asia's oil, set out proposals in Tokyo this month aimed at setting up a market for trading fuels, coordinating emergency oil stockpiles and jointly negotiating contracts with Middle East suppliers such as Saudi Aramco, the world's biggest crude oil producer.
Refiners in North-East Asia pay as much as US$10 billion more a year for imported oil than the cost in Europe or the US, partly because of competition among Asian refineries for supplies. The three countries rely on the Middle East for 80 per cent of their imported crude oil.
There's an "urgent need to come up with a concerted group response from China, Korea and Japan", said Heon Jung, vice president of energy and marketing strategy at SK Corp, Korea's largest oil refiner, "Excess refining capacity and the Asian premium threaten the survival of the East Asian petroleum industry."
North-East Asia's crude oil imports will probably double to 18 million barrels a day by 2020, from about nine million barrels in 2000, mainly because of surging demand from China, according to the Asia Pacific Energy Research Center.
China's oil and gas consumption may triple by 2020 on surging car sales and growing demand for power, said Houxue Zhao, vice director of development and planning at Sinopec,
"We must move from competition to cooperation," said Yasushi Kono, general manager of Nippon Oil's supply and overseas business department, "We're geographically close to each other and share common targets and concerns. …