Head of industry association says that Canada's oil supply is not as reliable as Japan's, but the Canadian market is still tough.

The head of an industry association in Japan said that Japanese refiners need to diversify their supply sources, as 95% its crude oil imports are from the Middle East. However, importing Canadian oil may be difficult due to its heavy nature.

According to two sources who are familiar with the issue, Canada's largest oil-producing province, Alberta, is considering investing in Japan's refinery sector as a way to reduce its dependence on the United States for oil exports.

The sources stated that the Alberta government has begun early discussions with several Japanese refiners about a possible joint venture where it would fund the construction of coker units to allow one or more Japanese firms to process heavy crude from Alberta's tar sands.

When asked about Alberta's decision, Shunichi Kito (President of the Petroleum Association of Japan, PAJ) said at a press conference that "there is no specific request" being made.

Kito, a Kito expert on the oil industry, said that while Japan should diversify away from Middle Eastern crudes, importing Canadian oil due to its high quality would be difficult.

Kito, also the president of Idemitsu Kosan - Japan's second largest oil refiner - said that he could not imagine investing in new facilities due to a 2% decline in domestic demand. He said that the final decision was up to each company. (Reporting and editing by Bernadette B. Baum; Yuka Obayashi)

(source: Reuters)