Japan Refineries Still Rocking from Earthquake

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--In the wake of the magnitude 9.0 earthquake, Japan continues to be rocked by a multitude of problems including shortages of food, water, power and gasoline. Between Tokyo and the northernmost island of Hokkaido are oil refineries with capacities ranging from 140,000 to 220,000 barrels per day (BBL/d).

As of Monday, March 14, JX Holdings Incorporated (TYO:5020) announced that three of its refineries (Sendai, Miyagi; Kashima, Ibaraki; Negishi, Kanagawa) had been shut down due to the earthquake, adding up to a potential loss of about 667,500 BBL/d.

JX's and Idemitsu's facilities in Muroran, Hokkaido, are operating as normal. Cosmo Oil Company Limited's (TYO: 5007) Ichihara, Chiba, facility is no longer burning, but is too hot to enter safely. The fire at the refinery was located primarily in the tank farm; however the crude distillation unit has remained intact.

The refinery of Kyokuto Petroleum Industries, a joint venture of Exxon Mobil Corporation (NYSE:XOM) and Mitsui Oil Company is shut down.

Fuji Oil Company Limited's facility in Sodegaura, Chiba, is running as normal. Fuji Oil is a subsidiary of AOC Holdings Incorporated (TYO:5017).

As of March 15, JX's Kashima, Ibaraki, facility is undergoing inspection to determine damages and a restart date, and the Negishi, Kanagawa, facility has resumed overland shipments, although its supply is very low. Both of these facilities, however, depend on Tokyo Electric Power Company's (TEPCO) (TYO:9501) ability to supply power, which has been compromised due to damaged electrical infrastructure. TEPCO has stated that it cannot guarantee a stable electric supply until the situation at the Fukushima nuclear power station is under control and alternative power supply methods are examined.

The effects of these shutdowns have reached the consumer level. Fuel stations throughout Japan are finding themselves with lines as long as 100 cars, although no trucks are en route to replenish supplies.

For several years, Japanese oil refiners have not been running refineries at full capacity, usually staying between 10,000 and 20,000 BBL/d below full capacity. To compensate for the losses incurred by the shutdowns, many refining companies such as JX are moving toward using full capacity at other operational facilities throughout the country. On Monday, March 14, JX called an emergency committee to examine the unused potential of its remaining refineries to determine when and which facilities could be brought up to full capacity. These talks are still ongoing as of Tuesday, and a decision is expected within the next few days.

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