Japan urges boost from fossil-fueled power plants

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 17 -- The Japanese government, confirming earlier reports, will urge utilities to increase output at fossil fuel-fired electric power plants to boost power shortages after an earthquake and tsunami crippled Tokyo Electric Power Co.'s Fukushima Daiichi nuclear power plant and other facilities.

Tokyo said it aims to draw up plans within a month to allow the utility firms enough time to prepare for the high-demand summer season, according to a report in the Nikkei business daily.

The government also may give the firms priority access to oil and coal, the report said, adding that other proposals include relaxing regulations regarding periodic inspections, enabling utilities to ramp up production sooner.

TEP has already brought online some fossil-fueled power plants, including a Chiba Prefecture facility shut down after the earthquake and tsunami hit the country on Mar. 11.

Tohoku Electric Power Co., which is based in the area hit hardest by the disaster, hopes to quickly secure output of more than 3 million kw by restarting fossil-fuel power plants suspended after the quake.

The utility will also resume partial operations at an old facility in Niigata Prefecture that had been closed prior to the quake.

According to the Petroleum Association of Japan, the country’s fuel oil inventories stood at around 2.39 million kl between Feb. 27 and Mar. 5, down 170,000 kl on the year.

Reports earlier this week said Japan is likely to turn to oil—mainly low-sulfur fuel oil or low-sulfur crudes—as replacement power-generation fuel, with Barclays Capital estimating that 200,000 b/d of oil would be needed (OGJ Online, Mar. 15, 2011).

Trading markets in turmoil
The decision by Tokyo follows news that global trading markets have been thrown into turmoil by the threat of nuclear meltdown in Japan, along with a decision by Germany to halt operations at its seven oldest nuclear reactors.

Prices have spiraled upward as Japan has bought fossil fuels to replace lost nuclear output and after German Chancellor Angela Merkel announced the decision to close some of the country’s nuclear plants.

Ricardo Leiman, chief executive of Noble Group, one of the largest traders of coal and emissions credits, told the Financial Times that Japan’s nuclear crisis would boost demand for other energy commodities.

“We think it is going to impact positively on thermal coal and gas. The world is going to be reluctant to expand nuclear in a big way,” Leiman said.

That view was underlined in Japan on Mar. 17 when the head of Japan's main opposition Liberal Democratic Party said it will be difficult for the country to keep its nuclear power policy.

“It will be extremely hard (to find) locations for nuclear plants hereafter,” Sadakazu Tanigaki told a news conference. “Our party must draw up new measures after analyzing data based on this accident,” said Tanigaki.

Approvals suspended
Earlier this week, China announced that it had suspended approval for nuclear power plants across the country, halting a development program that accounts for nearly 40% of the world’s planned reactors.

“Until the [new] nuclear safety plan is approved, we will suspend approvals of new plants including those in the predevelopment phase,” China’s State Council said on Mar. 16. “We must fully understand the urgency and importance of nuclear safety.”

With global uranium prices falling 25% cent since the Mar. 14 shutdown in Japan, any long-term change in China’s nuclear program would likely have major ramifications for global uranium miners like Cameco, Rio Tinto, and BHP Billiton.

Meanwhile, Japan’s Economy Minister Banri Kaieda told a news conference on Mar. 17 that the government has set up a gasoline supply system for areas in northeastern Japan devastated by the earthquake.

The new system will provide the Tohoku region with a total of about 20,000 kl/day of gasoline and gas oil by raising operating rates at refineries in western Japan.

The Ministry of Economy, Trade, and Industry plans to secure a total of 38,000 kl/day of gas—equivalent to the daily, pre-earthquake demand in the region—by increasing supplies from two refineries in Hokkaido.

A massive amount of kerosene will also be transferred by additional tankers, as well as in drums.

The decision follows reports earlier in the week that Japan could face fuel oil and gasoline shortages, along with higher prices, as it continues to grapple with the aftermath of the earthquake and tsunami.

Oil wholesalers are now said to be scrambling to address higher fuel demand, while facing challenges of their own—including higher oil prices and damaged refineries.

The nation's refining capacity is down 25% due to suspended operations at five refineries in the Tohoku and Kanto regions.

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 (OGJ Online, Mar. 11, 2011).

Contact Eric Watkins at hippalus@yahoo.com.

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