“Use air conditioning more at home!” I heard that joke — if it is a joke — from several oil industry sources from different companies in Japan at the start of the country’s three-month summer power demand season.
The phrase symbolized how Japan’s crude and fuel oil demand for power generation in July was a disappointment for the suppliers of those fuels, as demand for oil-fired power generation was not as strong as expected.
The lower-than-expected demand for power in July was a consequence of the country experiencing temperatures that were less than last year, coupled with electricity-saving efforts by companies and individual consumers that beat expectations amid sluggish economic conditions.
Nevertheless, Japan’s 10 major power utilities consumed a total of 2.163 million kl, or 439,000 b/d, of crude and fuel oil for power generation in July. That still was up 62.2% from a year ago, according to data compiled by the Federation of Electric Power Companies. Japan’s LNG consumption for power generation also rose 5% year-on-year to 4.496 million mt in July, FEPC data showed.
The enormous jump year-to-year for crude and fuel consumption is attributable to increased use of oil by most Japanese power utilities, other than Tokyo Electric Power Company, amid their ongoing nuclear outages.
There may be mixed views over describing as “low” the volume of oil used in July to produce electricity. But it was certainly less than expected for the Japanese suppliers that had prepared to meet a spike in demand that they believed could have hit 700,000 b/d of oil.
The estimates were based on widespread expectations that a majority of the country’s 46.15 GW of nuclear capacity, spread over 50 reactors, would remain offline during this summer. That turned out to be true: only Kansai Electric’s two reactors with a capacity of 1.16 GW have been restarted so far following the mass shutdowns in the wake of Fukushima.
That 46.15 GW nuclear capacity represents 20% of Japan’s total installed power generation capacity of 225.667 GW.
To satisfy the oil requirements sought by the power utilities, Japanese refiners and traders have made arrangements to secure low sulfur crudes and fuel oil through a number of term deals between July and September.
Meanwhile, Japan’s oil demand for power generation has increased since around late July after most of the country experienced a rise in temperatures that continued into August. Temperatures were warmer than last year, and also were more than the 30-year average.
The consequence of that was an increased appetite in August for petroleum for power generation from Tokyo Electric Power Co., the country’s largest oil consumer. Tepco’s consumption of crude and fuel oil is expected to be about 1.14 million kl (230,000 b/d) in August, up 31% from its earlier planned consumption of around 870,000 kl for the month.
Tepco’s oil consumption in August also was up 45% from 788,000 kl in July, and was up 98% from 575,000 kl in August 2011, Platts calculations showed. As a result, Tepco bought 150,000 kl or 943,000 barrels more crude and fuel oil than expected from its earlier plan for the month, up 16% to 1.07 million kl or 217,000 b/d, according to a source close to Tepco’s fuels plans.
Tepco’s additional oil purchases in August comprised around 314,000 barrels of fuel oil and 629,000 barrels of crude oil from local suppliers, the source said. Tepco’s oil purchase volume in August is also up 57% from 680,000 kl in July, and is double the 522,000 kl seen in August 2011, according to Platts calculations.
Looking ahead, Japan’s oil demand for power generation in September also is expected to be nearly as strong as August, because those higher temperatures are expected to stick around, according to the latest month-long forecast from the Japan Meteorological Agency.
In the absence of signs of further nuclear restarts in Japan, Japan’s oil demand for power generation will remain steady at least in the foreseeable future.
The reason the air temps are higher is all of the burning of fossil fuels. Japan needs to restart at least one half of their reactors and reduce the CO2 emissions.