TOKYO REPORT: Japanese refineries are tearing up unused fuel supply chains and preparing beach ships and storage tanks to meet the demand for additional fuel this summer.
Demand for natural gas and inflation in Japan during last winter’s cold snap is expected to plummet in Europe and Asia. Say executives and analysts.
For the first time since the Fukushima disaster in 2011, there was a severe shortage of fossil fuels, especially those used to power ships.
The two best refineries in the country, Enos Holdings and Edimitsu Kossan, are receiving large orders from petroleum companies to ensure adequate power supply during high demand, their executives said.
“We have received orders from a number of companies to double the amount of oil we exported in January and February this year,” said Edithitsu President Sunichi Quito.
The move comes after the government warned that electricity supply could be too tight this summer, and urged energy companies to stockpile enough fuel to avoid power outages.
Recent cold snap models in Japan, Korea, and northern China have caused utilities to worry about the fact that winter is getting colder as winter approaches.
But Japan, a former refinery, has significantly reduced its production capacity in recent years and is now unable to produce enough oil, said Feks Global Energy (FGA) Chairman Frederick Fesakiraki.
“If there is a problem with one of the nuclear plants, you will not be able to convert to oil as much as you did in the past to save the Japanese economy,” Fesharaki said, referring to the post-Fukushima power crisis ten years ago.
Last summer, Japanese LNG consumers competed with buyers in China and South Korea for a competitive market, and as a result of the cold snap, Japan’s electricity prices rose internationally.
Japanese utilities needed more fuel at the time to increase operating costs at their gas stations, but refineries struggled to cope with demand, Quito said.
“The questions came suddenly and it took us a while to prepare the beach and so on. So now we are preparing in advance as the consumer goods are doing,” he said.
The spokesman said Edithitsu was increasing its production of oil and planning for ships.
A.D. Fuel consumption will hold 2.6 percent in 2019, down from 18.3 percent in 2012. A year after the Fukushima disaster, the closure of nuclear power plants forced Japan to import fossil fuels.
Japan relied heavily on fossil fuels in the 1970s, accounting for half of the country’s gross domestic product.
However, Japan has reduced its supply of coal to coal, LNG, and nuclear energy by less than 5 percent in 2019 to boost energy security and reduce costs.
“With the declining demand for oil, our relationship with the utilities has been weakening, but we have received a lot of questions from our contacts this summer,” said Inyos’ president Katsuyuki Ota.
Eneos has a 50% market share of net products in Japan.
The head of the Japan Petroleum Association (PAJ) said last month that he had asked for additional fuel supplies for refineries as he tried to convert resources from expensive LNG.
He said Japanese utilities, including Hokkaido Electric Power and Kansai Electric Power, have provided enough fuel to meet demand this summer.
“We are keeping a lot of fuel on the way to winter,” said Shikoku Electric Power spokesman.
(Report by Uka Obayashi; Additional Report by Aaron Sheldrik; Edited by Michael Perry)