Japan’s Narita Airport set for first direct jet fuel imports amid domestic shortages

Japan’s Narita International Airport is set for what will be the first ever direct import of jet fuel from abroad via trading houses as part of its efforts to alleviate ongoing aviation fuel shortages, a company spokesperson told S&P Global Commodity Insights July 11.

“To increase our supplier options, we are requesting trading houses in addition to refiners to import jet fuel directly from overseas,” the spokesperson said.

“We are proceeding with what will be the first fuel import from abroad,” said the spokesperson, declining to elaborate on import volumes and delivery schedules.

The move by Narita Airport, Japan’s largest international airport, comes as it has been facing shortages of jet fuel for starting flights for foreign airlines, the spokesperson said.

Narita Airport typically receives jet fuel from the nearby Chiba port via pipeline and stores it at its two refueling terminals with a total storage capacity of 192,000 kl, or 1.21 million barrels, spread across the No. 1 144,000 kl and No. 2 48,000 kl refueling terminals, the spokesperson said.

The number of arrival and departure international flights at Narita Airport rose 25% from a year earlier to a total of 76,696 flights over January-May, according to airport data.

In comparison, a total of 1.402 million kl of jet fuel was supplied at Narita Airport during the first five months of the year, rising 14% on the year, airport data showed.

Policy steps

The news of direct jet fuel imports by Narita Airport emerged as the Japanese government is considering compiling a policy response to address aviation fuel shortages in the country at a task force meeting July 16.

Importing jet fuel from South Korea and others by airport terminal operators, trading houses and refiners is likely to be part of the policy response that would be decided at the third round of the task force meeting, an official at the Ministry of Land, Infrastructure, Transport and Tourism said.

Transporting jet fuel directly via ocean liners to ports nearby airports is among options, said the MLIT official, adding that the Chiba port can berth up to a 6,000-kl ship for instance.

Among the policy steps under consideration is securing a total of three clean product tankers for jet fuel transport and involves turning a Japan-flagged ocean liner for coastal shipping use from July, turning a foreign-flagged tanker into a Japan-flagged vessel in October and building a new ship over the next few years, the official said.

With Japan’s coastal shipping regulations requiring ships to be Japan-flagged and operated by Japanese crews, the first step could involve changing the crews to Japanese, said the official, adding that changing the flagship registry would take two to three months.

The size of tankers under consideration for jet fuel coastal shipping is about 5,000 kl to 10,000 kl, the official added.

Jet fuel supply shortages have increasingly led to regional economic issues and became political in recent weeks, resulting in the launch of a task force by the Japanese government June 18.

In its July 3 plea, the National Governors’ Association of Japan urged the government to take immediate steps to address the dearth of jet fuel supplies from local refiners by probing into plausible factors, including refinery consolidations and scarcity of coastal vessels as well as labor shortages for tank trucks.

Following a recovery in inbound demand from international flights after a pandemic-led hiatus, “there is a shortage of jet fuel supply amid difficult situations in jet fuel supply from refiners to airline companies,” the governors said in a statement.

Market reaction

While the country’s aviation fuel supply woes have not provided a significant boost to the Asian jet fuel/kerosene complex so far amid ample regional supplies, the market could tighten should Japan seek higher supplies from neighboring countries such as South Korea or China, a South Korean middle distillates trader said July 11.

Platts, part of Commodity Insights, assessed the front month August-September time spread for FOB Singapore jet fuel/kerosene swaps, an indication of near-term market sentiment, at minus 12 cents/b at the Asian close July 10, widening 3 cents/b on the day but narrowing 6 cents/b on the week.

Platts assessed the FOB Singapore jet fuel/kerosene outright price falling $3.42/b on the week to $98.67/b on July 10.

South Korean refiners have said that they are more than willing to increase jet fuel exports to Japan, taking advantage of pent-up demand in the neighboring country as well as an improving Asian crack spread.

However, it has been difficult to provide and guarantee extra monthly spot jet fuel cargoes due to term supply contract and other large volume sales commitments with major buyers in the US and Australia, middle distillate marketers at two South Korean refiners told Commodity Insights.

“A lot of efforts are currently put in place to provide extra jet fuel cargoes for our Japanese trading partners … any surplus barrels after meeting all the monthly supply deals to US buyers would be set aside for incremental shipments to Japan,” a middle distillate sales trader at a South Korean refiner said.

Jet fuel exports from South Korea to Japan jumped to 4.4 million barrels in the first five months of 2024, from 2.6 million barrels during the same period a year earlier, latest data from state-run Korea National Oil Corp. showed.
Source: Platts