After 8.9 quake, explosion hits pchem complex in Japan

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 11 -- A major explosion occurred at a Japanese petrochemical complex in the northeast city of Sendai just hours after the largest earthquake in the country’s history triggered a devastating tsunami.

Television images showed huge orange balls of flame rolling up into the night sky as fires raged around the complex, while another huge fire also engulfed a Cosmo refinery in Iichihara near Tokyo.

“The fire at Cosmo Oil’s Chiba refinery appears to have destroyed several natural gas storage tanks, but it remains unknown whether it has caused more extensive damage to the plant,” said Centre for Global Energy Studies, London.

“Operations have also been halted at several Japanese…refineries,” CGES said, adding that JX Nippon has shut its refineries in Sendai, Kashima, and Negishi.

Cosmo’s Chiba refinery had a throughput capacity of 240,000 b/d, while the three SK Nippon refineries have capacities of 145,000 b/d (Sendai), 340,000 b/d (Negishi), and 210,000 b/d (Kashima).

After refiners shut the plants, oil prices fell below $100/bbl in New York for the first time in more than a week after Japan’s strongest earthquake in at least a century.

The magnitude 8.9 earthquake that devastated northern Japan generated 178 times as much energy as the Great Hanshin Earthquake, a magnitude 7.3 temblor that rocked the area around the city of Kobe in 1995.

“The earthquake is having a psychological impact on the market in triggering a rise in risk aversion,” said an analyst at Commerzbank AG in Frankfurt. “The effect is also physical, in that oil demand from Japan could temporarily be lower.”

CGES said, “The impact of the earthquake and tsunami on Japan’s oil demand over the coming weeks is far from clear at present,” adding, “Prolonged refinery closures in Japan would have an impact on the country’s crude oil demand.”

Atomic power emergency
CGES noted that while damage to refineries would cut Japan’s oil requirement, the prolonged closure of its nuclear power stations would likely have the opposite effect, raising the demand for alternative fuels for electric power generation.

“While much of the need could be met with increased LNG imports, past disruptions to the country’s nuclear power industry have also seen increases in oil imports,” the group said.

Meanwhile, Japan declared a state of atomic power emergency after the country was hit by its largest-ever magnitude earthquake, while saying no radiation leaks have been detected at or near any nuclear power plants as of evening on Mar. 11.

The International Atomic Energy Agency sought details from contacts with Japan's industry ministry, while saying in a statement that at least four nuclear power plants “closest to the quake have been safely shut down.”

A total of 11 nuclear reactors were automatically shut down at the Onagawa plant, Fukushima No. 1 and No. 2 plants and Tokai No. 2 plant after the quake. There were no immediate reports from monitoring posts of abnormalities near the nuclear plants.

Contact Eric Watkins at hippalus@yahoo.com.

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