Japan’s JAPEX hints at profit cuts due to Middle East disruption

Japan Petroleum Exploration (JAPEX) has issued a press release warning of the impact on its business from escalating tensions in the Middle East, indicating that higher LNG procurement costs and suspended oil production are expected to weigh on earnings.

The company said it sources LNG under a number of fixed-term contracts and other arrangements for use in gas supply and also power generation at the Fukushima Natural Gas Power Plant.

However, owing to the on-again, off-again blockade of the Strait of Hormuz, JAPEX has been forced to replace two LNG cargoes originally due from the Gulf in the first quarter of FY26 with spot purchases from other regions. In turn, this is expected to increase procurement costs significantly higher than predicted pre-crisis levels.

From a supply standpoint, though, the JAPEX press release indicates there is no risk of disruption to gas or electricity supplies as alternative ready-made sourcing plans are in place.

Separately, the company confirmed that production and shipments of crude from the Garraf oil field in the south of Iraq, in which it participates through its subsidiary Japex Garraf Ltd, have, for the foreseeable future, been put on hold by a force majeure declaration by the Iraqi government.

With no timeline issued for a restart of operations, no revenue from the project can be assumed. Operations at the field are conducted jointly with PETRONAS Carigali Iraq Holding, a subsidiary of Malaysia’s PETRONAS.

JAPEX also noted that higher crude prices and a weaker Japanese yen – both linked to the ongoing tensions – are linked to revenue and profits. However, these gains are likely to be offset by increased LNG costs from unplanned spot purchases and the loss of Garraf output.

In addition, the company pointed to tightening supply-demand conditions for its chemical products used in domestic oil and gas operations and warned that a prolonged squeeze would further increase operating costs.

JAPEX has said it is now assessing the financial impact of these factors and will incorporate estimates, based on assumptions about future developments, into its earnings forecast for the year ending March 2027, which is due to be released on May 13, although the overall effect on results for the year ended March 2026 is expected to be limited.