Japan is asking its refiners to ship some of their gasoline supplies to the United States to fulfil Tokyo's part of a global oil stockpile release in the wake of Hurricane Katrina, industry officials said on Monday.
As a member of the International Energy Agency (IEA), Japan has committed to releasing 240,000 barrels per day (bpd) of oil into the market to help ease US shortages. Its contribution is 12 percent of the total 2 million-bpd release.
The government wants refiners to sell down commercial inventories of oil products such as gasoline, instead of using the government's crude oil reserves, officials said, and may relax refiners' mandatory minimum stock levels to help do so.
"Releasing oil product could be more effective to ease the current supply situation in the United States, compared with releasing crude oil," Hideji Sugiyama of the Ministry of Economy, Trade and Industry (METI) told a news conference.
No decision has yet been made on how the release would work or whether refiners would be compensated in any way.
Refiners were lukewarm to the idea, proposed at a meeting on Monday, due to the cost of shipping oil across the Pacific and the questionable economic incentives given higher prices in the Asian spot market, an industry source said.
"The government told us to send gasoline directly there. But this is not an easy task," the industry source told Reuters.
"Nevertheless, if the cabinet decides on it, we will follow the decision," the source added.
Sugiyama said the government had not finalised details on the oil-stock release plan, including how they would engineer the stockdraw, or what types of oil products would be involved.
Japan's largest oil industry group, Petroleum Association Japan, said the government was likely to decide the ways to release oils on Monday and make an announcement on Tuesday.
Refiners and wholesalers currently maintain oil stockpiles equal to 70 days of consumption, but that level could be lowered to offset the drawdown in commercial stocks, which would otherwise need to be later refilled back to normal levels.
The IEA said on Friday its members would release 2 million bpd of oil over an initial period of 30 days - half of that from the United States - to address the impact of Katrina, which knocked out US Gulf Coast refineries and oil rigs.
The Japanese government holds about 320 million barrels of crude in its national reserve, but no oil products.
Japanese oil companies have crude and oil product stockpiles totalling nearly 200 million barrels, of which about 12.6 million barrels are gasoline, the latest industry data showed.
Gasoline demand in Japan, the world's second-biggest auto-fuel user after the United States, is about 1 million bpd, one-tenth that of the United States.
Oil traders have said it might not be profitable to ship gasoline to the US market since Asian spot prices are also strong after China, the top regional exporter, cut back shipments to address its own domestic supply squeeze.
They said it would take some 20 days for Asian exports to hit the US West Coast and a month to reach the battered Gulf Coast, while European supplies take just 10 days. European refiners have already lined up an armada of US-bound cargoes.
South Korea, another Asian member of the IEA and the world's fourth-biggest crude oil buyer, will release 2.88 million barrels over 30 days - an average of 96,000 bpd - via auction, but the sale is open only to local refiners.
Details such as when the auction would take place and whether it would involve crude or oil products such as gasoline were still under discussion, an energy ministry official said.