No shortage despite shutdown of three refineries in Japan

Unexpected full or partial shutdowns of three refineries in Japan have resulted in the idling of approximately 12% of the country’s crude-oil refining capacity. The shutdowns occurred in the middle of summer, a time when gasoline demand usually rises. But many traders and analysts, as well as officials of refining companies, are optimistic that the country will not experience a shortage of refined products anytime in the near future because of Japan’s excess oil refining capacity. Cosmo Oil Co. announced that it had cancelled its plan to restart its 120, 000 barrel-a-day No. 2 crude distillation unit at its Chiba refinery east of Tokyo. The unit was originally expected to be back online by the end of July following planned maintenance, but the company cancelled its plan following an asphalt leak into Tokyo Bay from a tank in the refinery. In late July, Idemitsu Kosan Co. shut down its 220,000-barrel-a-day Chiba refinery following a fire. The refinery is undergoing inspection by the local fire department and no specific date for its reopening has been given, but Idemitsu said it has sufficient inventories of refined products and can meet demand for two to three weeks. On the same day that Idemitsu’s refinery caught fire, Japan’s largest refiner by capacity, JX Nippon Oil & Energy Corp., shut down its 205,000-barrel-a-day Mizushima-B refinery in western Japan after discovering false records pertaining to past safety checks of a tank at the site; the refinery was closed to give way to safety checks to determine its compliance with regulations. A company spokesman said no definite date has been set for the restarting of the refinery, and that production at other refineries will not be raised to make up for the lost output. “These [closures] are not sufficient to affect supplies because more than 20% of Japan’s refining capacity is excess capacity,” said Hidetoshi Shioda, an analyst at SMBC Nikko Securities. According to the Petroleum Association of Japan, the country’s average refinery operating rate in the first two weeks of July was around 73%. (July 24, 2012)