FACTS: Earthquake, tsunami take 'massive toll' on Japan's refineries

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 8 -- Japan’s refining industry has been hard hit by the 9.0-magnitude earthquake and resulting tsunami that struck the country on Mar. 11, according to a report by FACTS Global Energy.

“At one point, as many as six refineries halted operations, suspending approximately 1.4 million b/d of refining capacity, or about a third of Japanese total capacity,” FACTS said.

“This significant shutdown of refining capacity is expected to help to tighten the petroleum product markets in the region as Asian refineries enter the spring maintenance season,” the FACTS report said.

Fortunately, planned shutdowns this year—mostly from China, South Korea, and India—are not as high as in 2009 and 2010.

Nonetheless, FACTS said the crack spreads of products started to show an apparent shift after the quake in Japan. Net diesel exports from Japan averaged 190,000 b/d last year.

The Singapore diesel spread relative to Dubai has strengthened from $19.36/bbl in the Mar. 1-10 period to $22.83/bbl for Mar. 11-16.

“We expect an increase in low-sulfur fuel oil demand for power generation due to outages of nuclear plants,” FACTS said, adding that the crack spreads of low-sulfur waxy residual fuel oil (LSWR) improved from a discount of $7.73/bbl to Dubai crude prior to the quake to $3.68/bbl after the quake.

Change in gasoline crack spreads is limited, according to FACTS, with a rise of only $0.42/bbl over the same period. Japan was a small net exporter of gasoline in 2010 averaging 20,000 b/d.

Naphtha crack spreads, on the other hand, dropped by $1.65/bbl over the same period as several petrochemical crackers have been shut down as a result of the quake. Japan imported 468,000 b/d of naphtha in 2010.

As a result of a significant rise in diesel crack spreads, overall Singapore cracking margins have increased $2.29/bbl since the earthquake (Mar. 1-10 vs. Mar. 11-16). Hydroskimming margins also improved close to $2.90/bbl due to the strengthening of fuel oil crack spreads.

“As a major net exporter of diesel and major net importer of naphtha, Japan has a significant influence on these two products,” FACTS said.

The surge in use of LSWR can also have an impact on the market as Asian supply is tight, the report states. Hence, it is important to have a better understanding on the current status of the affected refineries.

Making up the loss
To make up for the loss in Japanese refining capacity in the aftermath of the disaster, some refiners have planned to increase their crude runs.

Brazil’s Petroleo Brasileiro SA (Petrobras) has reportedly increased production at its 100,000-b/d Nansei Sekiyu Nishihara refinery in Okinawa by 24%. Production at the facility was 46,000 b/d before the earthquake.

JX also has reportedly planned to increase operating rates at its Okayama and Oita refineries by 30,000 b/d.

FACTS said Cosmo Oil has also reportedly planned to increase runs at its three other undamaged refineries in Sakai (100,000 b/d), Sakaide (110,000 b/d), and Yokkaichi (125,000 b/d).

Cosmo Oil is said to be negotiating with the Ministry of Economy, Trade, and Industry (METI) to reverse last year’s decision that decreased the company’s overall nameplate capacity by 12% due to falling oil products demand in Japan.

The Japanese government has lowered the obligation for industries to hold emergency stocks by 3 days to 67 days, according to the International Energy Agency. As a result, around 8 million bbl of products could be released into the market.

“Nonetheless, Japan’s product imports may still rise as a result of the refining outages, and some damaged refineries may take a while to come back on stream,” FACTS said.

Depending on the duration of the shutdown at the affected refineries, it is possible that METI will allow refiners to reverse (at least temporarily) some or all of the 285,000 b/d of refining capacity closures that occurred in 2010.

A further 160,000 b/d was scheduled to permanently be removed from operable capacity this year at Fuji Oil’s Sodegaura and Toa Oil’s Keihin plants, but this could potentially be postponed to aid the country during reconstruction.

“Overall, barring a meltdown of nuclear plants, we should start to see the market easing back to normalcy over the next few weeks, and as a result, we expect cracking margins to moderate,” FACTS said.

Contact Eric Watkins at hippalus@yahoo.com.

Related Articles

Chevron Phillips Chemical makes executive appointments

07/10/2015

Chevron Phillips Chemical Co. LLC has made several executive appointments, all effective Aug. 1.

Lukoil taps new blending technology for Russian refinery

07/09/2015 OAO Lukoil has selected Honeywell Process Solutions (HPS), a division of Honeywell International Inc., to provide process control technology design...

ORPIC lets contract for Sohar refinery expansion

07/08/2015 Oman Oil Refineries & Petroleum Industries Co. (ORPIC), through a contractor, has let a contract to Metso Corp., Helsinki, to supply valve tech...

Croatian refinery lets contract for upgrading project

07/07/2015 Croatia’s INA Industrija Nafte DD (INA) has let a contract to Findland’s Neste Jacobs Oy to provide project management consultancy (PMC) for a resi...

South Africa’s Enref refinery due maintenance

07/06/2015 Engen Petroleum Ltd. will shut down its 125,000-b/d Enref refinery in Durban, South Africa, for planned maintenance beginning on July 9, the compan...

Nelson-Farrar Quarterly Costimating Indexes for selected equipment items

07/06/2015 The Nelson-Farrar refinery construction index rose to 2,475.6 by December 2012 from 2,467.4 in January of the same year. The index continued to ris...

Oman lets contract for Sohar refinery unit revamp

07/06/2015 Oman Oil Refineries & Petroleum Industries Co., has let a contract to MAN Diesel & Turbo SE, Augsburg, Germany, for work related to the ove...

Global oil glut continues despite increasing demand

07/06/2015 A year since crude prices plunged, oversupply lingers, evident in a record-setting stock build, as production by members of the Organization of Pet...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

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
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

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

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


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