Japan’s Idemitsu will meet winter fuel demand for electricity from production, not imports

Japan’s second-largest refiner, Idemitsu Kosan, intends to meet all of its winter fuel demand for thermal power generation from production, not through imports, the company said on November 12, despite requests for supplies from some electric utilities that are double the peak volume last. Winter.

“Currently, we are not importing fuel oil for power generation, and we have no plans to do so for this winter,” a company spokesperson told S&P Global Platts. “We will provide our own manufactured product. “

Idemitsu said on Nov. 9 that it plans to increase its refinery production rates to over 80% in the second half of fiscal year 2021-22 (April-March), which would increase its average production rate. for exercise at about 80%. . Rates in the first half of the fiscal year ending March 31 averaged 73% due to intensive refinery maintenance programs.

Idemitsu’s comments came just days after Shunichi Kito, chief executive officer of the Japanese refiner, said on November 9 that he had already received requests for winter fuel oil from a few utilities in electricity at double the peak volumes seen last winter, when the country’s power supply was stretched to critical levels during periods of extreme cold.

“Amid concerns over the power shortage this winter, electric utilities are considering early purchases,” Kito said at a press conference. “We also received supplies [requests] from a few electric utilities to about double the January-February level, which we plan to firmly fill. “

Japan’s largest refiner, ENEOS, is also receiving a large number of requests from electric utilities for winter oil supply, company chairman Katsuyuki Ota said on November 11, fearing that refiners of the country may not be able to meet all demands for oil supplies. local electric utilities for the coming winter.

“We are getting a huge volume of utility utility requests for the winter,” Ota said at a press conference, which he attributed to the high LNG prices.

Petroleum Association of Japan chairman Tsutomu Sugimori said on October 27 that Japanese refiners were unsure whether they would be able to meet all demands for oil supplies from electric utilities. premises this winter. Sugimori is also president of ENEOS Holdings.

Last winter
In January, Japanese refiners increased the supply of fuel oil to generators following an emergency request from the Federation of Electricity Companies of Japan.

Japan experienced an electricity shortage last winter as demand increased during periods of extreme cold in January as local electric utilities were forced to restrict gas-fired power generation due to low LNG stocks.

This has been exacerbated by problems in coal-fired power plants, low hydropower generation due to droughts, fluctuations in solar power generation due to weather conditions, reduced oil-fired power generation capacity and low production of nuclear energy.

“At the beginning of this year, when the power [supply] has tightened considerably, a very difficult time has come all of a sudden, ”Kito said, adding that there had been logistical issues for refiners to ship cargoes of fuel oil to electric utilities in due to the lack of coastal vessels.

“Following such events, the electric utilities are preparing for the start of this exercise, and we are also securing the ships as part of the first preparations to avoid great confusion and maintain a stable supply,” Kito said. “However, we cannot predict the degree of power [supply] sealing. We believe that we must react with caution to situations.

According to data from the Ministry of Economy, Trade and Industry, total sales of fuel oil in the domestic market increased by 43% on the year to reach 179,585 bpd in January. There was also a shipment of 751,109 barrels of crude oil for power generation, nearly double the 429,323 barrels of December 2020 and after no shipment of crude for power generation in January 2020.

In February, fuel oil sales fell 20.2% month-on-month and 4.3% year-on-year to 143,370 bpd, as demand for petroleum for electricity fell as LNG stocks were rebuilt. in mid-February, according to METI data. Electric crude shipments slipped to 112,613 barrels in February.

Japanese imports of fuel oil stood at 798,641 barrels in January and rose further to 1.27 million barrels in February, from 164,157 barrels in December 2020, according to METI data. Imports of fuel oil fell to 149,917 barrels in March.
Source: Platts

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Felix J. Dixon