Japan disaster may be 'death knell' for nuclear power

Sam Fletcher
OGJ Senior Writer

HOUSTON, Mar. 15 -- Dangerous radiation leaks from four stricken reactors after a tsunami hit Japan’s Fukushima Daiichi nuclear plant last week may be “the death knell” for a pending “nuclear renaissance,” increasing demand for natural gas, residual oil, and coal to fuel electric power generation, said several industry analysts.

“It took just 3 days after the Japanese earthquake and tsunami disaster for the antinuclear political backlash to begin in other countries,” said analysts in the Houston office of Raymond James & Associates Inc. On Mar. 14, the German government instituted a 3-month moratorium on the operating life extension of the country's seven reactors that were built before 1980.

“As part of the safety review, all seven reactors will be temporarily shut down, and the government has made it clear that there will be no restart until each reactor's safety is fully proven. Chancellor Angela Merkel's government has historically been pronuclear, but under intense popular pressure it is clearly backtracking. Will other countries follow suit? We are inclined to think so, especially in Europe,” they said.

‘Opportunism under way’
“Policy opportunism is already well under way,” said Frank Maisano, a Washington, DC-based energy and political analyst. Rep. Ed Markey (D-Mass.) “shockingly” fired off a letter to the Nuclear Regulatory Commission raising issues about nuclear plants in the US, “and antinuclear groups are sending releases saying, ‘I told you so,’” Maisano reported. “What they aren’t telling you is that most experts are saying the quake caused little of the damage, whereas the tsunami was the real factor that has placed the Japanese plants at risk.”

He said, “Just like last year’s Macondo spill should not have slowed or stopped drilling, this tragic event should not slow our interest in nuclear power.”

Raymond James analysts noted, “The post-earthquake emergency at the Fukushima I nuclear power plant, which appears to be in the midst of a partial meltdown, comes almost exactly 25 years after the Chernobyl disaster in 1986. It is clear that some if not all of Fukushima I will be permanently shut down. The more far-reaching question is whether this crisis will have the same damaging effect on public attitudes towards nuclear plant construction as Chernobyl (and, earlier, Three Mile Island).”

There was a third explosion at the Fukushima Daiichi plant early Mar. 15. In Zug, Switzerland, Olivier Jakob at Petromatrix said, “With the situation at the Daiichi nuclear plant seemingly spinning out of control, we have to consider that there is for this week a greater probability of a nuclear implosion in Japan than a social implosion in Saudi Arabia” after a proposed “Day of Rage” fizzled in the kingdom last week.

Citing media reports, officials at UBS Securities LLC, New York, said Mar. 14, “Japan’s tsunami flooded both primary and secondary diesel generators that are used to cool the nuclear reactors. Thus far, none of the core reactors themselves have been compromised by the earthquake. However, we believe public confidence in nuclear buildout is at risk. Safety concerns will likely lead to increased regulatory oversight at both existing and proposed facilities.”

Natural gas to benefit
Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston, said, “The long-term impact of the Japanese nuclear meltdown could be far-reaching. This is not only Japan's Three Mile Island; it will also cause alarm globally about the safety of nuclear power plants. In the US, nuclear power already needs government loan guarantees to justify economics, and the potential incremental costs and regulatory delays associated with additional safety scrutiny could nip most of the newbuild proposals in the bud. This should benefit the natural gas industry and LNG markets in the long run as it would make the usage of natural gas as a power generation fuel even more attractive.”

Over the medium term, however, Sharma said, “LNG and coal should benefit as much of the shutdown nuclear capacity will take months for partial restart and years for a full resumption. In fact some of the capacity might be permanently shut. The resulting increase in the Japanese LNG demand and higher Asian LNG prices would attract more LNG cargos to Asia. Japan is the biggest LNG user in the world and already consumes over one third of global LNG supply.

At KBC Energy Economics, a division of KBC Advanced Technologies PLC, analysts said early reports indicated 9.7 Gw, or 30% of Japan’s total nuclear power generation capacity and 7% of its total power generation capacity, were taken offline by the tsunami.

As a result, they said, “The mix of Japan’s electricity generation source will need to be rebalanced. Japan relies on nuclear power for about one-quarter of its total electricity generation, while conventional thermal power accounts for 65% of total generation capacity. Of the 65%, coal, LNG, and oil make up approximately 25%, 30% and 10% respectively. Due to high oil prices over the past few years, oil-fired power plants in Japan are used primarily as extra capacity to meet peak demand,” said KBC analysts.

They added, “With explosions in some nuclear plants and the subsequent radioactive scares, it’s very likely that a significant amount of nuclear power generation capacity will remain shut for a long time. Given the existing mix, the supply shortfall from nuclear will have to be filled by coal, LNG, and fuel oil. The rebalance should be supportive to these substitutive energy sources. That said, there is likely to be some short-term demand drop due to general slow-down of economic activities and as short-term imports dip due to damaged infrastructure.”

Sharma said, “Much of this shut-down [nuclear] capacity will be substituted by natural gas (LNG) fired power generation. Even if only 50% of the shut-down nuclear capacity gets substituted by natural gas, this could result in over 1 bcfd of additional LNG demand.”

He said, “Asian LNG prices are likely to strengthen on expectations of higher demand, which in turn will also provide support to UK National Balancing Point [a virtual trading location for sale, purchase, and exchange of UK natural gas] prices. Since the domestic natural gas market is more localized and the LNG imports at only 1 bcfd currently have become less of a factor in supply-demand dynamics in the US, the Japanese earthquake might not immediately have much impact on the US natural gas markets.”

Raymond James analysts reported, “There are currently 443 operating nuclear reactors globally (including 104 in the US)—essentially flat vs. 2002.” The World Nuclear Association (WNA) previously forecast the world’s stock of nuclear reactors could more than double in the next 15 years. India and China and other “energy-ravenous” countries say they will continue using existing nuclear power plants and building new ones, despite problems in Japan.

Analysts at Raymond James said, “While 62 reactors are under construction (only 1 in the US), the WNA projects that 143 will close by 2030, which means many more new projects are needed just to offset the ‘depletion rate.’ If the Fukushima crisis leads to nuclear plants being shelved, the likely beneficiaries will be other low-carbon power sources: natural gas (including LNG), renewables, and longer-term, clean coal.”

US President Barack Obama’s energy plan depends strongly on nuclear power to reduce carbon dioxide emissions and reduce oil imports. To that end, he proposed tripling federal loan guarantees in the 2012 budget to $54.5 billion to help build reactors. But the energy resource he embraced in lieu of fossil fuels is now the latest policy in peril.

Nonetheless, Sec. of Energy Steven Chu—the most vocal advocate for nuclear power within the Obama administration—told a House panel, “The American people should have full confidence that the US has rigorous safety regulations in place to ensure that our nuclear power is generated safely and responsibly.” He said the administration “is committed to learning from Japan's experience.” He told panel members US reactors in the US are designed beyond the specifications necessary to withstand a worst-case earthquake and tsunami.

Meanwhile, KBC analysts anticipate the shut-down of several Japanese refineries will affect refining margins, product cracks, and Japan’s oil import-export balance, especially since fire damage may keep Cosmo Oil’s 220,000 b/d refinery at Chiba “out of operation for a long time.” The refinery shutdowns likely will “cause more imports of gasoline and fuel oil and less export of middle distillates,” they said.

In other news, KBC reported at least six Japanese ports were damaged by the earthquake and tsunami, including four severely damaged. Rebuilding is likely to take months, “or much longer in the case of Sendai,” the port nearest to the epicenter of the earthquake, which was been virtually destroyed. It is estimated that the ports affected handle 7% of Japan’s industrial output.

Contact Sam Fletcher at samf@ogjonline.com.

Related Articles

BP Energy Outlook projects global energy demand to jump 37% by 2035

02/17/2015 Global demand for energy is expected to rise by 37% from 2013 to 2035, or by an average of 1.4%/year, due in large part to ongoing economic expansi...

Bear Head LNG exempted from 2012 Canadian environmental act

02/16/2015 Liquefied Natural Gas Ltd.’s wholly owned subsidiary Bear Head LNG Corp. received notice from the Canadian Environment Assessment Agency (CEAA) tha...

Watching Government: New York moves ahead on LNG

02/16/2015 New York, a state more often associated with fiercely resisting unconventional natural gas exploration and production, established a program to reg...

BG's 2015 budget 'significantly lower' than 2014

02/16/2015 BG Group plans capital expenditures on a cash basis of $6-7 billion in 2015, a range it says is "significantly lower than 2014" due to &q...

Alaska LNG project partners file resource reports with FERC

02/12/2015 A series of draft environmental and socioeconomic reports for the Alaska LNG project have been submitted to the US Federal Energy Regulatory Commis...

Australia Pacific LNG receives first gas at Curtis Island

02/12/2015 The Origin Energy Ltd.-led Australia Pacific LNG (APLNG) has reached a major milestone with first gas arriving at the group’s LNG plant on Curtis I...

InterOil wins arbitration over rights dispute with Oil Search

02/11/2015 The International Chamber of Commerce arbitration panel in London has found in favor of InterOil Corp. in its battle with Oil Search Ltd. over pree...

Study finds FLNG scheme ‘viable’ for Pandora field development

02/11/2015 A recent study has found that Cott Oil & Gas Ltd’s plans to use a floating LNG (FLNG) vessel for development of Pandora gas field in the Gulf o...

OGJ Newsletter

02/09/2015

International news for oil and gas professionals

White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Cognitive Solutions for Upstream Oil and Gas

When Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected