Japan, US near oil production and storage deal

Japan and the United States are in the final stage of negotiations on a comprehensive agreement to boost crude oil production in the US through Japanese investment and to expand joint oil storage capacity in Japan, according to government sources cited by The Japan News.

The deal is expected to be finalised during a meeting in Washington on Thursday, March 19, between Japanese Prime Minister Sanae Takaichi and US President Donald Trump.

The initiative comes amid a sharp surge in global oil prices following Iran’s effective blockade of the Strait of Hormuz, a critical chokepoint for global energy supplies. The agreement is intended to stabilize oil prices and diversify Japan’s energy import sources.

Planned investments in increased US oil production will form part of a broader $550 billion Japanese investment package agreed during bilateral tariff negotiations. While specific figures are yet to be determined, an oil field in Alaska is considered a leading candidate for investment, alongside shale oil projects in other regions of the United States.

Japan currently imports around 90% of its crude oil from the Middle East. Oil shipments from Alaska would travel directly across the Pacific Ocean, reducing transport times by nearly one week compared to Middle Eastern routes. A senior government official emphasized that the arrangement would significantly strengthen Japan’s economic security.

For the United States, securing export markets for Alaskan oil remains a pressing priority. Output from Alaska alone is equivalent to more than 10% of Japan’s annual oil consumption, though most of it is currently distributed domestically.

Since the shale revolution of the 2000s, the United States has become the world’s largest oil producer, and the Trump administration continues to advocate for further expansion of production. Establishing stable demand through Japanese storage and purchases could provide a strong incentive for continued sector growth.

Japan’s oil storage facilities are also being considered as potential regional supply hubs for Asia, particularly if stored oil can be re-exported. Both existing and currently unused storage capacity may be utilized under the plan.

The agreement also reflects efforts by both governments to ensure stable bilateral energy supplies, allowing oil reserves stored in Japan to be made available in the event of an emergency.

Rising oil prices, driven by escalating tensions in the Middle East, are increasingly seen as a risk to both economies, reinforcing the urgency of the initiative.

By Tamilla Hasanova