FocusJAPAN DISASTER: Refiners up operating rates to ease shortages

25 March 2011 07:28  [Source: ICIS news]

By James Dennis

Fire at Cosmo Oil refinerySINGAPORE (ICIS)--Japan will have to maintain higher refining rates and continue to allow the use of oil products from emergency reserves to mitigate the shortfall created by the continued shutdown of three refineries following the earthquake, industry sources said on Friday.

The three refineries totalling 617,500 bbl/day, or 14% of the overall country’s refining capacity, remain shut following the devastating earthquake and tsunami of 11 March.

These include JX Nippon’s 145,000 bbl/day Sendai refinery, which is located at Miyagi prefecture in northeast Japan, its 252,500 bbl/day Kashima refinery in Ibaraki prefecture, and Cosmo Oil’s 220,000 bbl/day Chiba facility.

Authorities in Japan, which is the world’s third-largest oil consumer, have moved to alleviate the country’s shortfall in oil products by increasing the operating rates at other refineries and allowing the release of oil products from emergency industry reserves.

In addition, refiners have increased their oil product purchases from the international market.

Since the 11 March earthquake, the Japanese Government has lowered the obligatory level of emergency stocks held in private reserves from 70 days to 45 days worth, releasing an estimated 66m bbl of crude oil and oil products.

Japanese refiners JX Nippon Oil & Energy and Cosmo Oil last week raised the production rate at their refineries in western Japan by a combined total of at least 110,000 bbl/day, company sources said.

JX Nippon will increase its crude production by a further 20,000 bbl/day this weekend, after gaining approval to raise the capacity at its refinery in Mizushima to 400,000 bbl/day, a company official said.

JX Nippon had earlier raised the production rate at its 136,000 bbl/day refinery in Oita as well as its Mizushima refinery, by a combined total of 30,000 bbl/day.

Cosmo Oil has raised the output at its 125,000 bbl/day refinery in Yokkaichi and 110,000 bbl/day refinery in Sakaide by 50,000 bbl/day and 30,000 bbl/day, respectively.

Meanwhile, the restart dates for the Sendai, Kashima, and Chiba refineries have not been released as all three facilities have been damaged, company officials said.

However, Cosmo Oil says it has extinguished the fire at its Chiba refinery that was due to an explosion at the facility’s liquefied petroleum gas (LPG) tanks after the earthquake struck northeastern Japan.

The port discharge facilities at JX Nippon’s Kashima refinery were reopened on Friday (25 March) and the refiner was accepting oil product shipments there, a company official said.

In addition, JX Nippon said the supply capacity of gasoline, gasoil and kerosene by tank truck to customers in the Kanto and Tohoku regions has been restored to pre-earthquake levels.

However, there remained some bottlenecks due to infrastructure damage in the region, it added.

Cosmo Oil also said on Friday that its refinery in Chiba was supplying oil products to customers in the Tokyo region by tank truck, but declined to provide further details.

A total of six refineries with a total capacity of 1.4m bbl/day – around 30% of Japan’s total – were initially shut down after the earthquake, according to data from the International Energy Agency (IEA).

However, the operations at many of those refineries were resumed within 10 days of the earthquake.

Tonen General Sekiyu restarted its 335,000 bbl/day refinery in Kawasaki on 17 March and achieved full production rates by 20 March, while Kyokuto Petroleum Industries (KPI) restarted its 175,000 bbl/day refinery at Chiba on 16 March.

JX Nippon restarted its 270,000 bbl/day Negishi refinery in Kanagawa prefecture just south of Tokyo on 21 March, a company source said.

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By: James Dennis
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