Japan Formulates Emergency Safety Measures for Refining Industry

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--During the Great East Japan Earthquake Disaster, at least six refineries were affected, accounting for an initial loss of 1.4 million BBL/d worth of production. Within a month, most had resumed production except for the refinery in Ichihara, Chiba, owned and operated by Cosmo Oil Company Limited (TYO:5007) (Tokyo), and the Sendai, Miyagi, refinery, which belongs to JX Nippon Oil and Energy Corporation (TYO:5001) (Tokyo). Neither of these has resumed operations as of yet, and both are expected to restart next year.

Not only were refinery operations disrupted, but so too were supply chains and transportation lines throughout central and northern Japan. The disruption caused a gasoline shortage, felt the most strongly in the Greater Tokyo Metropolitan Area. The Ministry of Economy, Trade and Industry (METI) has announced that disaster reform for refineries is necessary, just as it is for the electric power industry.

Emergency safety measures include an increase in tsunami and liquefaction protection for at least 13 refineries, as well as requirements for in-house generators. The government is also planning to boost stockpiles from the current 95 days up to a possible 123, while regional supply bases will be established throughout the country. So far, METI estimates that these measures will cost a minimum of $67 billion, though the government has only allotted approximately $416 million toward them through budgeting.

As of now, there are 26 operational petroleum refineries following the closure of the 120,000-barrel-per-day (BBL/d) Ohgimachi refinery, owned and operated by Toa Oil Company Limited (TYO:5008) (Kawasaki, Japan). Other companies, such as Idemitsu Kosan Company Limited (TYO:5019) (Tokyo), plan to close their refineries in order to comply with a law passed by METI last year that aims to balance the ratio between the country's residual cracking units and crude distillation units.

Operating capacity in Japan has declined in the last few years and on average, Japan processes between 3 million and 3.5 million BBL/d, though the country has a maximum throughput of 4.38 million BBL/d. The decline in operating capacity is mainly due to a decline in domestic demand.

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