The Japanese fuel crisis

One consequence of the Japanese earthquake and tsunami that is not receiving as much press as the ongoing struggle to cool the damaged reactors, but which continues to influence more people is the lack of fuel. Nine of the Japanese refineries were damaged and put out of action, and this dropped the amount of fuel being refined from 4,500,000 bd down to 3,100,000 bd. (Note that the Guardian report I quoted earlier was off by a factor of ten.) The lack of fuel for transportation affects not only those in the disaster area, but also those away from it, since food and fuel itself depend on transport to move it to customers around the country.

"What we urgently need now is fuel, heavy and light oil, water and food. More than anything else, we need fuel because we can't do anything without it. We can't stay warm or work the water pumps," said Masao Hara, the mayor of Koriyama city, in Fukushima prefecture.

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The refineries that remain in production are responding to the need. Idemitsi Kosan has raised production at its four refineries by 83,200 bd (from 87% to 100% production) and Cosmo Oil has raised production at its two operating refineries by an additional 80,000 bd but this does not match the size of the problem.

There are several different aspects to the problem, first the oil has to come ashore. With ports closed and unable to re-open for possibly months, shipments from the Middle East, which supplies 80% of Japan’s need, have now been curtailed until the situation becomes clearer. Within the country the Japanese Government has released around 8 million barrels of oil from their strategic reserve. It is also shipping 250,000 barrels of refined product to the area affected by sea (though this runs into the issue of how to get into the ports and distribution network). At Chiba some of the port has been able to re-open ) but not the terminal that fed to the Cosmo refinery (since that had burned).

Then the oil must be refined, there are 29 refineries in Japan, and Wikipedia lists them as follows. (I have modified the list to show which ones have had a status change).

▪ Chiba Refinery (Cosmo Oil) (Cosmo Oil), 240,000 bbl/d (38,000 m3/d) CLOSED BY EARTHQUAKE & BURNING
▪ Yokkaichi Refinery (Cosmo Oil), 175,000 bbl/d (27,800 m3/d) INCREASING PRODUCTION
▪ Sakai Refinery (Cosmo Oil) (Cosmo Oil), 80,000 bbl/d (13,000 m3/d)
▪ Sakaide Refinery (Cosmo Oil), 140,000 bbl/d (22,000 m3/d) INCREASING PRODCTION
▪ Muroran Refinery (Nippon Oil Corporation (NOC)), 180,000 bbl/d (29,000 m3/d)
▪ Sendai Refinery (Nippon Oil Corporation (NOC)), 145,000 bbl/d (23,100 m3/d) CLOSED BY EARTHQUAKE
▪ Negishi Yokahama Refinery (Nippon Oil Corporation (NOC)), 340,000 bbl/d (54,000 m3/d) CLOSED BY EARTHQUAKE
▪ Osaka Refinery (Nippon Oil Corporation (NOC)) 115,000 bpd
▪ Mizushima Refinery (Nippon Oil Corporation (NOC)), 250,000 bbl/d (40,000 m3/d)
▪ Marifu Refinery (Nippon Oil Corporation (NOC)) 127,000 bpd
▪ Toyama Refinery (Nihonkai Oil/Nippon Oil Corporation (NOC)), 60,000 bbl/d (9,500 m3/d)
▪ Kubiki Refinery (Teikoku Oil), 4,410 bbl/d (701 m3/d)
▪ Chiba Refinery (Kyokuto) (Kyokuto Petroleum/ExxonMobil), 175,000 bbl/d (27,800 m3/d) CLOSED BUT RESTARTED
▪ Kawasaki Refinery (TonenGeneral Sekiyu/ExxonMobil), 335,000 bbl/d (53,300 m3/d) CLOSED BUT GETTING READY TO RESTART
▪ Wakayama Refinery (TonenGeneral Sekiyu/ExxonMobil), 170,000 bbl/d (27,000 m3/d)
▪ Sakai Refinery (TonenGeneral) (TonenGeneral Sekiyu/ExxonMobil), 156,000 bbl/d (24,800 m3/d)
▪ Nishihara Refinery (Nansei sekiyu/Petrobras), 100,000 bbl/d (16,000 m3/d)
▪ Keihin Refinery (Toa Oil/Shell), 185,000 bbl/d (29,400 m3/d)
▪ Showa Yokkaichi Refinery (Showa Yokkaichi/Shell), 210,000 bbl/d (33,000 m3/d) SENDING PRODUCT OVERLAND
▪ Yamaguchi Refinery (Seibu Oil/Shell), 120,000 bbl/d (19,000 m3/d)
▪ Sodegaura Refinery (Fuji Oil Campany), 192,000 bbl/d (30,500 m3/d) INCREASING PRODUCTION
▪ Kashima Refinery (Kashima Oil Campany/Japan Energy), 210,000 bbl/d (33,000 m3/d)CLOSED BY EARTHQUAKE
▪ Mizushima Refinery (Japan Energy) (Japan Energy), 205,200 bbl/d (32,620 m3/d)
▪ Shikoku Refinery (Taiyo Oil), 120,000 bbl/d (19,000 m3/d)
▪ Ohita Refinery (Kyusyu Oil), 160,000 bbl/d (25,000 m3/d)
▪ Hokkaido Refinery (Idemitsu Kosan), 140,000 bbl/d (22,000 m3/d) INCREASING PRODUCTION
▪ Chiba Refinery (Idemitsu) (Idemitsu Kosan), 220,000 bbl/d (35,000 m3/d) CLOSED BY EARTHQUAKE BUT BACK ON LINE AND INCREASING PRODUCTION
▪ Aichi Refinery (Idemitsu Kosan), 160,000 bbl/d (25,000 m3/d) INCREASING PRODUCTION
Tokuyama Refinery (Idemitsu Kosan), 120,000 bbl/d (19,000 m3/d) INCREASING PRODUCTION

(The last four refinery increases in production will add another 83 kbd to the total.)

By the end of the month it is expected that the recovery will only be to 3.4 mbd although this will still leave the country some 1 mbd short of the refined fuel it needs.

At present only one LNG terminal, at Shinminato, remains closed, but it is unlikely that this will reopen in the near term. The rest are operational, and LNG cargoes will be made available from a number of sources, if needed.

Japanese LNG ports

The northeast coast ports of Hachinohe, Sendai, Ishinomaki and Onahama are so severely damaged that they are not expected to return to normal operations for months.

Looking at a map (from Stratfor showing the power plants, and the road layout, the damage to the distribution network with the destruction at Sendai illustrates the problem in gaining access to the damaged area and in sending in new fuel. Food to parts of Ishinomaki has had to be delivered by helicopter, and for a town of 160,000 this is not nearly enough.

As the Independent reports

On the drive north out of Sendai city in northeast Japan, a slip-road takes you to a motorway that would normally be filled with traffic but was this week a scene of destruction to rival the most far-fetched Hollywood disaster movie. A thick coating of mud had been deposited at the toll booth, along with smashed vehicles, motorbikes and heavy machinery from a nearby factory. Beyond the booth, the road rose up to meet the highway and a panoramic view of the blitzed landscape below, where a jumble of hundreds of cars, trucks and splintered debris stretched as far as the eye could see. In the background, thick black smoke billowed from fires burning at a damaged oil refinery near the city bay.

Japanese infrastructure (Stratfor)

There are trunk pipelines running from the main LNG terminals, to assist in distribution.

Japanese trunk pipelines and LNG terminals

Fuel needs are not just for gasoline and diesel for vehicles. With the bitter cold that remains over much of the north of Japan, and no electric power, kerosene is also needed for heating. For domestic heating many homes rely on kerosene stoves to heat individual rooms in use, rather than using central heating. Stocks had been falling, before the earthquake, due to the severe winter this year. And with stocks being sent to help refugees, there are now shortages in other parts of Japan.

While there are some indications that the nuclear problems may be being brought under control, the problems of fuel shortage and the cascading problem of food, fuel and other resource distribution that it brings with it, are likely to remain in Japan for several weeks, as the crisis continues.

The UK winter starts - salt, coal, and natural gas supplies

The severe weather that is sweeping the United Kingdom is posing an early demand on the stored supplies of fuel, and on the grit supplies that are used to de-ice travel ways. Part of the problem causing train delays is that the snow and ice are blocking the connections needed to transfer electric power from the rails to the train engines. At the moment it appears that up to 500 gas stations mainly rural stations in north-east England and eastern Scotland may run out of fuel over the weekend. Not that driving is that easy at the moment. When bad weather hit the UK last winter, the shortage of grit (which is largely salt) was one of the difficulties encountered by local councils. The government formed a “Salt Cell” to provide information on salt supplies and needs since salt comes from only three mines, one at Boulby in Yorkshire, the Winsford mine in Cheshire and the Kilroot mine in Ireland. The Winsford mine, which provides 50% of the UK salt need, can lift 500 tons an hour from the underground deposit and has been working 7-day weeks since last December.

With some councils reporting that 20-30% of their winter stocks have already been consumed, the Cell may need to be reactivated this winter. Typically the country stockpiles around 275,000 tons of salt for the winter, however when the country is totally blanketed with snow, then it can use as much as 194,000 tons in a day. (UK DOT figures). After the hiatus last year the Senior Advisor to the Government for Highway Maintenance found that there were no easy answers, since the problem is bound up in limited mine production, limited local storage capacity, the reliance on local authority to deal with the problem, and a European shortage of salt. Yet at the beginning of this season 18% of the UK councils did not have enough salt to get them through the anticipated demand for the winter.

For those who think that this is purely a European problem, Park Forest in Illinois is already noting that it has almost depleted its supply, and there is a state shortage of salt already. Illinois has an average salt bid of 1.4 million tons and this year the prices was $61.60 a ton, down from the $100 of the 2008-2009 year. McHenry County, west of Chicago, orders around 60,000 tons a year. Of course individual cities have different circumstances, Avon Lake near Cleveland, Ohio, for example, has stockpiled more than enough for the year. But there are already shortages showing up in other parts of Ohio that are driving prices back up, with prices of $142 a ton being reported. Pre-planning apparently works.

The problems with UK fuel supplies changes with the fuel that is needed. Coal, for example, is largely maintained in stockpiles at the power stations. In September (the last month with data available) there was some 17.6 million tons in those piles set against a September consumption of 3.63 million tons. (It might be noted that this was roughly half-a-million tons more than the 3.11 million turns consumed in September 2009). With the UK now importing roughly two-thirds of its need, having that stockpile, particularly in a hard winter, might be a wise precaution. About 80% of the UK power stations rely on fossil fuels, though there has been a move to using natural gas over the past few years. This is increasingly supplied by imports, with overall demand rising at 9.6% over the equivalent period in 2009 (). A third of the imported gas comes in the form of LNG, at a level of around 2 billion cf/day, and is needed as natural gas supplies from the North Sea are falling at around 10% per year.

Natural gas supplies in the UK suffer from the lack of sufficient storage capacity, and the limited size of the supply pipes from Europe. A recent plan to use a depleted field in the North Sea won’t come on line until 2015, if it is implemented.

Pipeline gas from Europe to the United Kingdom flows through the Interconnector with the terminal at Bacton and with flow to and from Belgium. During September and October the pipeline recorded record flows going to the continent (16,000 GWh worth), however with the onset of the cold spell the flow reversed.

Flow of gas in MWh equivalents from Belgium to the UK through the Interconnector pipeline (the dates are the end of November and December 1 )

And at 6 am on Wednesday the flow stopped (h/t Luis) however supplies increased through the Langeled pipeline connecting to Norway. And while there were some problems with flow from the gas being stored in the depleted offshore gas field at Rough, it is reported that five LNG tankers are on their way to the UK at the moment.

It is worth noting, in passing, that with five nuclear power stations on maintenance, the French have been importing electric power from the UK.

Power demand in France, where one third of domestic users rely on electricity for heating, is expected to reach a new record high at peak hour on Thursday, according to grid operator RTE.
With demand also at record highs on Wednesday, France was importing power from Britain at the interconnector's full 2,000-MW capacity until around 1630 GMT, National Grid data showed.

And, also in passing it is worth noting that the claims of increased deaths from global warming are not being borne out by the statistics in the UK. A study, back in 2008, noted that there had been no increases in summer deaths from rising temperatures, but rather a fall in winter deaths by some 3% in the UK. However the return of harsher winters has already had an effect. Local councils have reported that with the colder weather last year deaths increased by some 25,000 and one may anticipate a similar impact this year. In a normal year the cold-related winter deaths would average about 20,000.

The Russia:Belarus oil dispute and Western Oil supplies

I hadn’t actually been paying much attention to the Russian:Belarus dispute over oil supplies. After the annual debacles that we are used to over natural gas supplies that flow from Russia to Western Europe through Ukraine, and which seem somewhat quiescent at the moment, I had failed to grasp how much Western supplies of oil from Russia flow through Belarus. But as is pointed out in Foreign Policy the flow is significant, and this is a more far-reaching conflict than I grasped. As a brief review:

In 2001, Belarus unilaterally canceled a contract that mandated the sharing of these revenues, leading to substantial losses for Russian pipeline monopoly Transneft and the Russian state budget. Now, Transneft is demanding that Belarus pay full import duties for the portion of Russian oil that it resells on the European market, a demand that could cost Belarus as much as $5 billion per year. The Belarusian government argues that the Russia-Belarus customs union obviates the need for Minsk to pay duty on imports from Russia. Although deliveries through the Druzhba pipeline have not, as of mid-January, been cut off, the prospect that Transneft (whose chairman is Russian Deputy Prime Minister Igor Sechin, a close confidant of Prime Minister Vladimir Putin) will turn off the taps to force compliance from Minsk is clearly one that has European leaders worried because the European Union imports about a third of its oil from Russia, mostly via Belarus. Already, the prospect of supply disruptions has driven U.S. crude oil prices to a 15-month high, presumably to Moscow's delight.

Well, as my post yesterday showed, I am not convinced that this conflict had a lot to do with the rise in oil prices (which actually dropped a little today, on their overall march upwards). But that does not lessen the longer-term impact of what is going on. It is, as it was with the Ukraine dispute, to with control, with Russia seeking to control fuel distribution in these countries, and through supply controls also influence the directions in which the country moves.

Russia is now warning that it will reduce oil flows to Belarus even further and wants the duty on the roughly 290,000 bd that is refined in Belarus and then exported to the West. At the moment the refineries in Belarus have a relatively short reserve (between a few days and a week, reportedly - depending on source) and the current contracts have expired.

Germany and Poland are believed to be hit hardest once Russia halts shipments through the Druzhba pipeline. Germany depends on Russian crude for about 15 percent of its total consumption, and Poland buys from Russia to meet 75 percent of its market demands.

Minsk has threatened to raise the transit fee for its European customers more than tenfold, from 3.9 dollars to 45 dollars per metric ton, should Moscow not agree to its conditions, RIA Novostinews agency quoted an unidentified expert close to the talks as saying.

At the moment the talks appear to be stalled. However they are not limited to the transit of oil. There is also a dispute over the transmission of electric power. Belarus acts as a transit country for power both to Kalingrad and to the countries of the Baltic. It has assumed somewhat greater urgency with the closure of the Ignalina nuclear power plant in Lithuania. The plant closed on December 31, and there are fears of greater dependence on Russia for future power. Russian complacency about the situation is not, I suspect, exactly helpful.

“It is inevitable that Russia is going to become a bigger supplier of energy to Europe and particularly to the Baltic countries. Ultimately there comes a point where you have to let the old days go,” Chris Weafer, chief strategist on Moscow’s Uralsib bank, told New Europe on 5 January, adding that the Baltics, which sorely need energy supplies, should adopt a pragmatic approach and rely on their eastern neighbor and forget the legacy of the Soviet Union. As long as Russia continues to try and build a modern and diversified economy with greater global integration, then it needs the goodwill of the West just as much as the West needs Russia’s energy.

Bids for construction of a new plant are due to be submitted by the end of this month, with the hope of getting the new plant on line by 2018. (Kalingrad is hoping to have its own reactor in about the same time frame).

In the interim the Baltic states are going to be dependent, not only on Russia for their electricity and oil, but also on satisfactory conditions to allow the transit of both through Belarus on their way.

Meanwhile, over in Ukraine, there is an election underway, with initial voting to take place on Sunday. It is perhaps for that reason that there have been no major gas disruptions so far this year. Anger with the current administration is giving a bit of a boost to a third candidate, so perhaps it is in Russia’s best interests to retain a low profile at this point. In fact Russia is claiming credit for keeping the UK supplied with gas as supplies from Norway dropped due to bad weather at some of the production sites. However Russia is also being nice to Turkey as insurance just in case it will still need to do some bypassing around Ukraine to supply Western Europe after the election is over.

Not that conditions in Ukraine itself have been unaffected. There are some 175 towns and villages that are reported to be still without power, due to the bad weather. This is a decided improvement from the 1,598 who lost power in the Dec 29th storm. At least they are more used to the cold.

Those in Florida who aren’t, and plugged in too many heaters, are also causing power outages down there.

P25. Pick Points

Half-a-dozen or so stories of interest:

What to do about the contradiction that rising commuter traffic is moving to metro train and bus lines as a falling tax revenue reduces support to the systems, and they reduce service? There is not a lot of stimulus for renewables in the new package going through Washington. Much of the money is going for new transmission lines and $1 billion for a smart meter program. And the pressure mounts for more efficient cars.

Not to be outdone European leaders are writing letters to the President asking for climate change legislation, since without it, Europe is at a disadvantage. Although the UK may not be able to keep to the pace of the rest of Europe. Oh, and apropos the tidal system that was in Pick Points yesterday, there is an explanation of how it works. On the other hand they are putting $27 million into the next generation of biofuels, that includes a cellulosic ethanol project that relies on the gribble (I’m glad you asked - it is a marine woodlouse), as well as starting to build houses out of straw - no this is serious, but I do remember a certain rhyme . .

China will get six LNG plants. Given that they are projecting an increase of 16-18% in gas production, but that is from abroad. The success of the first coal liquefaction plant in Mongolia, it ran for 300 hours, is leading to plans for expansion. Chinese coal mine deaths dropped 15% last year. And they are planning to introduce more efficient and energy conscious vehicles. Even as China’s oil demand tanks.

In order to start providing gas for the proposed new gas line from the North Slope, Alaska has given permission for Exxon to start drilling at Point Thomson. Previously the State had cancelled the leases, but they have now temporarily been reinstated. At the same time the weakened economy is not seen as slowing the progress forward of the pipeline, though that is not what BP thinks.

The Iran-Pakistan-India pipeline continues to face problems relating to the price of gas to be paid . Meanwhile Iran’s objections to the pipeline under the Caspian (part of the Nabucco network) are seen as being objections to the loss of monopoly. Politicians from the countries that would receive the gas are urging support at their Budapest meeting. Bulgaria has signed an agreement with Azerbaijan to receive a billion cu m per year through the pipeline. However it is not clear whether Azerbaijan would merely act as a conduit, or whether it would supply the gas itself. And Turkey is thinking of holding the pipeline hostage to its treatment by the EU. Poland will be joining the Nabucco project. All this fuss about alternatives has led to some recriminations against Prime Minister Putin.

The turndown in the economy is hurting rig operations, and Baker Hughes will cut 1500 jobs. On the other hand Petrobras is hiring though reducing costs elsewhere to allow production efforts to continue.

And in the “Haven’t we been here before,” section I see that Libya is talking about nationalizing its oil industry.

For more stories see The Energy Bulletin or Drumbeat at The Oil Drum.