JAPAN, NEW ZEALAND SIGN STRATEGIC OIL RESERVE PACT

UNCLAS TOKYO 005197 SIPDIS SIPDIS PARIS FOR OECD E.O. 12958: N/A TAGS: ECON ENRG JA PGOV PREL SUBJECT: JAPAN, NEW ZEALAND SIGN STRATEGIC OIL RESERVE PACT ¶1. (U) Japan and New Zealand signed a pact November 5 which allows New Zealand access to Japan's strategic oil reserves for emergency use according to the Ministry of Economy, Trade and Industry (METI). Under the agreement, New Zealand may purchase up to 90,000 metric tons, or 659,700 barrels of oil from Japan in 2008 and apply this amount towards the 90 day strategic reserves required under its commitments to the International Energy Agency (IEA). The contracted amount represents approximately six days of supply for New Zealand and 0.2 days of supply for Japan. In 2006, New Zealand purchased 460,000 metric tons from the United Kingdom, the Netherlands and Australia to meet its IEA commitments. ¶2. (SBU) According to METI Agency of Natural Resources and Energy (ANRE) Deputy Director Kazuhiro Fukushima, this is the first time Japan has ever entered into such an agreement and there are no plans to conclude similar agreements with other countries at this time. Fukushima stated should New Zealand opt to purchase Japanese oil, the reserves would come from Japan's private sector stockpile, not from national reserves. ¶3. (SBU) Petroleum Association of Japan (PAJ) Petroleum Distribution Division Director Fumio Sato told an Embassy economic assistant while the agreement allows the sale of excess oil reserves, industry is "not particularly enthusiastic" with the small volume and the prospect of a low sale price due to competition from other countries, particularly the U.K., the Netherlands and Australia. Sato said Japanese companies were requested to place bids before November 5, but he did not know whether any had been submitted. SCHIEFFER