Oilfields development
Chevron Arranges Crude Oil Shipment To Japan From Indonesia
Chevron Corp. this week arranged a shipment of crude oil from Indonesia to power plants in the region south of Tokyo, said Mike Wirth, the company's head of refining and marketing.
The cargo was booked in response to Japan's rising demand for conventional fuels amid uncertainty over electricity supplies from nuclear power plants.
"The Japanese have the ability to switch fuels pretty regularly," Wirth said. "What we are already seeing, and may see for some time, is power generation from petroleum products."
He added that Chevron, of San Ramon, Calif., is in talks to send more oil to Japan, the world's third-largest oil consumer.
Crude-oil futures have fallen 1.5% since the 8.9-magnitude earthquake as traders anticipated a drop in demand in the near term. After falling as low as $ 98.47 a barrel on Monday, futures rebounded, settling at $101.19 a barrel on the New York Mercantile Exchange.
But there is expected to be a long-term closure of large parts of Japan's nuclear power generation capacity, since roughly a quarter is now offline, and that has provoked widespread speculation there will be a surge in demand for liquefied natural gas, coal and oil used in thermal power plants, which will have to be met by imports. There are worries about a partial meltdown at the Fukushima Daiichi nuclear complex.
Utilities in Japan are capable of burning this low-sulfur Indonesian crude, called Minas, without undertaking a refining process, thus making it a precious asset after the loss of more than 1 million barrels a day of refining capacity.
Typically, Chevron sends this kind of oil to its refinery in Hawaii.
"In the medium-to-longer term, once refineries are operational, but with nuclear generation likely still disrupted, the net effect is to the upside for crude prices," Goldman Sachs analysts said in a research report.
Traders said that while Japan's fuel oil use for power generation will likely surge in the near future, environmental regulations allow the burning only of very low-sulfur fuel oil, with just 0.2%-0.3% sulfur content. There's not much of this petroleum product, so Japanese utilities may be forced to rely more heavily on direct burning of crude oil rather than using fuel oil.
Thailand's Bangchak Petroleum PCL (BCP.TH) , which sells 40 million to 50 million liters of fuel oil to Japan each month, said it expects more demand from Japan for power generation, as well as improved margins.
A lot of the fuel substitution "will be crude burning, more LNG, coal and whatever they can get from the rest of the world," said a Singapore-based trader with a U.S. firm.
