Japan’s refiners unsure they can supply all oil requested for winter power: PAJ chief
Japanese refiners have received oil supply requests from local power utilities for winter amid high spot LNG prices, but are unsure if they will be able to meet all the demand, Petroleum Association of Japan President Tsutomu Sugimori said Oct. 27.
“Spot LNG prices have substantially jumped from tightening supply, like what happened in last December to January this year,” Sugimori told a press conference.
“As a matter of fact, we have received requests from power utilities for oil as an alternative [to LNG],” he said, adding that such supply requests were made to ENEOS and other refiners.
For thermal power fuel costs on a KW basis, LNG has already surpassed oil, prompting power utilities to seek oil as an alternative to spot LNG, Sugimori said.
The Platts JKM for December was assessed at $34.232/MMBtu Oct. 26.
“We are not sure whether we can meet all of the requests,” said Sugimori, citing the country’s reduced oil supply infrastructure, including ships and storage tanks, for power demand because of shrinking demand over the years.
“We intend to meet the requests as much as possible,” he added.
Japanese refiners boosted their fuel oil supply for power generation in January following an emergency fuel supply request from the Federation of Electric Power Companies of Japan to PAJ in the wake of LNG shortages after a surge in power demand during severe cold spells.
Fuel oil sales surged 43% on the year to 179,585 b/d in January, when there were domestic shipments of 751,109 barrels of crude oil for power generation, nearly double the 429,323 barrels in December 2020, while there were no crude shipments for power in January 2020, according to Ministry of Economy, Trade and Industry data.
Cold weather impact
Japan’s eastern and western regions are forecast to experience temperatures below the 30-year average over November 2021-January 2022 with a 40% probability, the Japan Meteorological Agency forecast Oct. 25.
The country’s northern region is forecast to experience average or below-average temperatures with a 30% probability each and a 40% chance of above-average temperatures during the three-month period, compared with a 40% probability for average and 30% for below- and above-average temperatures in the period, according to the JMA.
Japan’s kerosene demand for winter is currently estimated at “95-100%” of the year-ago level, Sugimori said, adding that actual demand will fluctuate significantly depending on the temperature.
“We are seeing an increase in kerosene [shipments to the domestic market] in October,” Sugimori said, adding that October demand was up 15% from pre-pandemic 2019.