Japan’s petroleum industry calls on utilities to keep using oil-fired power plants

Japan’s petroleum industry called on utilities to keep using oil-fired power plants as backups after the nation’s power market faced a supply crunch amid cold weather, the head of the Petroleum Association of Japan (PAJ) said on Thursday.

Japan’s wholesale electricity prices have risen sharply since late last month amid the worst power crunch since the Fukushima disaster nearly a decade ago, sending power companies scrambling for extra supplies, especially liquefied natural gas (LNG), to fuel power stations.

“The electricity industry has requested our industry to provide excess oil and we have done as much as possible,” Tsutomu Sugimori, president of the PAJ, told a news conference.

“But we could not take all the requests, especially from the utilities which have no contracts with us, as it was difficult to quickly prepare tanks, arrange ships, find staff and so on,” said Sugimori, who is also chairman of Eneos Holdings Inc.

The petroleum industry has been asking utilities to keep using oil-fired power plants as backup sources for any emergency cases since before the power crunch, but the decision would be up to the utilities and the government, Sugimori said.

In light of soaring heating demand amid cold weather, Eneos expects kerosene demand to rise by 25% in January from a year earlier, he said.

Demand for oil used by utilities, mainly low sulfur fuel oil, will also rise in January from a year earlier, but Eneos has no plan to increase output of those oil to generate power in February and March just with an assumption of higher demand continuing, Sugimori said.

Japanese power companies have been backing out of crude oil and fuel oil due to higher cost compared with coal and LNG.

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