Japan’s Idemitsu to meet winter fuel oil demand for power from output, not imports

Japan’s second-largest refiner Idemitsu Kosan intends to meet all of its winter fuel oil demand for thermal power generation from output, not via imports, the company said Nov. 12, despite facing supply requests from some power utilities that are double the peak volume last winter.

“Currently we are not importing fuel oil for power generation, and we do not have any plans to do so for this winter,” a company spokesperson told S&P Global Platts. “We will supply our own produced product.”

Idemitsu said Nov. 9 that it plans to raise its refinery run rates to over 80% in the second half of fiscal year 2021-22 (April-March), which would bring its average run rate for the fiscal year up to about 80%. Rates in the first half of the fiscal year ending March 31 averaged 73% because of heavy refinery maintenance programs.

Idemitsu’s comments came just days after Shunichi Kito, the president and CEO of the Japanese refiner, said Nov. 9 that it has already received winter fuel oil supply requests from a couple of power utilities at double the peak volumes seen last winter, when the country’s power supply was stretched to critical levels during extreme cold spells.

“Amid power shortage concerns this winter, power utilities are considering early procurements,” Kito told a press conference. “We have also received supply [requests] from a couple of power utilities at roughly double the level of last January-February, which we are considering fulfilling firmly.”

Japan’s largest refiner ENEOS is also receiving a high number of inquiries from power utilities for the supply of fuel oil for winter, company president Katsuyuki Ota said Nov. 11, amid concerns that the country’s refiners may not be able to meet all requests for oil supply from local power utilities for the coming winter.

“We are receiving a considerable volume of inquiries from power utilities for winter,” Ota told a press conference, which he attributed to high LNG prices.

Petroleum Association of Japan President Tsutomu Sugimori said Oct. 27 that Japanese refiners were unsure whether they would be able to meet all the requests they were receiving for oil supply from local power utilities this winter. Sugimori is also chairman of ENEOS Holdings.

Last winter
Last January, Japanese refiners boosted fuel oil supplies to power generators following an emergency request from the Federation of Electric Power Companies of Japan.

Japan experienced a power supply shortage last winter as demand surged during extreme cold spells in January, with local power utilities forced to restrict gas-fired power generation due to low LNG stocks.

That was exacerbated by glitches at coal-fired power plants, low hydropower generation due to droughts, fluctuations in solar power output due to weather conditions, reduced oil-fired power generation capacity, and low nuclear power output.

“At the beginning of this year, when power [supply] tightened extremely, a very challenging moment arrived all of a sudden,” Kito said, adding that there had been logistical challenges for refiners to ship fuel oil cargoes to power utilities due to a lack of coastal vessels.

“Following such events, power utilities are preparing early in this fiscal year, and we are also securing vessels as part of early preparations to avoid great confusion and maintain stable supply,” Kito said. “However, we cannot predict the degree of power [supply] tightness. We believe we need to carefully respond to the situations.”

According to Ministry of Economy, Trade and Industry data, total fuel oil sales to the domestic market rose 43% on the year to 179,585 b/d in January. There was also a shipment of 751,109 barrels of crude oil for power generation, nearly double the 429,323 barrels in December 2020 and after no crude shipments 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 b/d as oil demand for power declined with the replenishment of LNG stocks by mid-February, according to METI data. Crude shipments for power burn slid to 112,613 barrels in February.

Japan’s fuel oil imports came in at 798,641 barrels in January and rose further to 1.27 million barrels in February, compared with 164,157 barrels in December 2020, according to METI data. The fuel oil imports slid to 149,917 barrels in March.
Source: Platts