Japan’s petroleum industry calls on utilities to keep using oil-fired power plants
Japan’s petroleum industry called on utilities to keep using oil-fired power plants as backups after the nation’s power market faced a supply crunch amid cold weather, the head of the Petroleum Association of Japan (PAJ) said on Thursday. Japan’s wholesale electricity prices have risen sharply since late last month amid the worst power crunch since the Fukushima disaster nearly a decade ago, sending power companies scrambling for extra supplies, especially liquefied natural gas (LNG), to fuel power stations. “The electricity industry has requested our industry to provide excess oil and we have done as much as possible,” Tsutomu Sugimori, president of the PAJ, told a news conference. “But we could not take all the requests, especially from the utilities which have no contracts with us, as it was difficult to quickly prepare tanks, arrange ships, find staff and so on,” said Sugimori, who is also chairman of Eneos Holdings Inc . The petroleum industry has been asking utilities to keep using oil-fired power plants as backup sources for any emergency cases since before the power crunch, but the decision would be up to the utilities and the government, Sugimori said. In light of soaring heating demand amid cold weather, Eneos expects kerosene demand to rise by 25% in January from a year earlier, he said. Demand for oil used by utilities, mainly low sulfur fuel oil, will also rise in January from a year earlier, but Eneos has no plan to increase output of those oil to generate power in February and March just with an assumption of higher demand continuing, Sugimori said. Japanese power companies have been backing out of crude oil and fuel oil due to higher cost compared with coal and LNG.
BPCL plans to maintain high refinery run rates
India’s state-controlled refiner Bharat Petroleum (BPCL) plans to keep its run rates at capacity to meet increased domestic oil products’ demand, the company’s general manager of crude trading, Shelly Abraham told Argus in an interview. “BPCL refineries are all running at slightly over 100pc of capacity. We started increasing run rates around the middle of November, and in December and January we are still running above 100pc. We expect to continue at this level for the next few months,” Abraham said. “Around October-early November, we were operating at 70-80pc of capacity. And in April-May, during the low demand period, we were running as low as around 50pc of capacity.” Indian refiners boosted throughput of crude by around 1pc in December from a year earlier as demand for some oil products returned to pre-pandemic levels. India’s crude runs rose by 1pc to 4.97mn b/d in December from 4.93mn b/d a year earlier but fell from 5.08mn b/d in November, according to preliminary oil ministry data. India’s crude imports also rebounded in December from a year earlier, rising by more than 3.5pc as refinery runs increased, after falling on the year for eight straight months. BPCL has increased its purchases of light sweet crude over the past year, to take advantage of the narrower price premium of lighter, sweeter crudes relative to the heavier sour grades. “Almost all Indian refineries are designed to run mainly heavy, high-sulphur crude, but recently we have seen more light sweet crudes coming into the market and in terms of the price, the spread between light crudes and heavy crudes has narrowed significantly, and inverted in some cases. Ultimately, refineries go by the valuation and margins, so the percentage of light sweet crudes in our BPCL system has increased,” Abraham said. “In general, in the last year or so, our intake of light, low-sulphur crude has gone up by maybe 15-20pc from earlier levels. This would include US WTI, west African crudes and Mediterranean grades like Azeri and Saharan Blend. If tomorrow the price spread of light crudes to heavy goes back to previous wide levels, we are ready to buy and process more of the heavier grades,” he said.
Govt may not reduce excise duty on fuel soon: Official
The retail inflation, as measured by the Consumer Price Index (CPI), was at a 77-month high at 7.6% in October. Although it softened a bit to 6.9% in November, it was still above the Reserve Bank of India’s medium-term target of 4%, with a band of plus or minus 2%. The Centre is not in a position to forgo easy revenues at a time when it needs huge funds to fight the pandemic and revive the economy, a government official said on Tuesday, a remark that came against the backdrop of growing demands to reduce taxes in order to provide relief to consumers. On Tuesday, petrol price crossed Rs.85 a litre in Delhi, hitting a new high for the fifth time in less than two weeks since January 7 even as India’s average crude oil import price softened a bit, according to official data. “Now, there is no pressure of inflation as retail inflation eased to a 15-month low, at 4.59%. Hence the government would like to wait till budget on reducing excise duty on fuel. However, a final decision will be taken by the competent authority,” the official added, requesting anonymity. The retail inflation, as measured by the Consumer Price Index (CPI), was at a 77-month high at 7.6% in October. Although it softened a bit to 6.9% in November, it was still above the Reserve Bank of India’s medium-term target of 4%, with a band of plus or minus 2%. Retail inflation fell sharply to 4.59% in December, mainly due to declining food prices. Petrol and diesel became costlier by 25 paise per litre on Tuesday in the Capital, taking pump rates in Delhi to Rs.85.20 a litre— a new all-time high—and Rs.75.38 a litre, respectively. Diesel surged to a record Rs.82.13 per litre in Mumbai, according to state-run Indian Oil Corporation (IOC). Petrol was sold at Rs.91.80 a litre on Mumbai. Retail rates of the two auto fuels vary across the country because of differences in local levies. According to IOC, the largest fuel retailer in the country, petrol and diesel rates have been revised upward by Re.1 a litre each after January 7 in four small doses of 25 paise each on January 13, January 14, January 18 and January 19. Official data showed that India’s average crude oil import price was Rs.3,977.18 per barrel on January 7, when petrol price in Delhi, at Rs.84.2 per litre, jumped to an all-time high for the first time after about 27 months. Its previous record was Rs.84 a litre on October 4, 2018. Even as the current price of Indian basket of crude is Rs.3,972.74 a barrel, marginally lower than the January 7 figure, the retail prices of automobile fuels were raised. The price of Indian basket of crude oil represents actual average import cost that also factors in the rupee-dollar exchange rate. India, which imports more than 80% of crude oil it processes, pays the import bill in dollars. Requesting anonymity, a second government official said oil marketing companies enjoy pricing freedom. They align pump prices of auto fuels daily with their respective international benchmarks, which may not necessarily move in tandem with international crude oil prices. According to Indian refiners, crude constitute about 90% of the refining costs. State-run oil marketing companies – IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan petroleum Corporation Ltd (HPCL) — did not respond to email queries. The three companies enjoy monopoly in fuel retail.
Price dispute shrinks Russia oil pipeline exports
Exports of Russian Urals oil via the Druzhba pipeline have dropped this month as sellers opt for the sea route instead, following disagreements over pricing with European refiners, four sources told Reuters on Wednesday. The Soviet-built Druzhba pipeline, named after the Russian word for friendship, links Russian oilfields to European refineries and has the capacity to pump 1 million barrels per day (bpd). Since the start of January some 70 per cent of that capacity is being used, two sources familiar with daily Russian oil export data told Reuters on condition of anonymity. Urals exports via Druzhba have fallen by 10 per cent and 20 per cent compared to December and January 2020 respectively, Reuters estimates based on data provided by the sources show. At the same time, Urals oil exports from Russia’s Baltic ports rose by 35 per cent. Lower seaborne transportation costs for Russian flagship Urals crude in 2020 made exports via the pipeline less profitable compared to shipping oil by sea. In response, the sellers sought to increase prices, but refiners, who have suffered from poor margins have resisted. Russia’s major oil exporter Rosneft has yet to agree on supply terms with Poland for 2021, two trade sources said. The country’s two main refiners – Grupa Lotos, which owns Gdansk refinery, and PKN Orlen, owner of a refinery in Plock, are disputing the price, they added. Rosneft’s supply agreement with Grupa Lotos expired on Dec. 31, 2020, and the contract with PKN Orlen expires on Jan. 31, the sources said. “Poland’s refiners are always tough to agree with as they have the alternative of seaborne supplies,” one of the trade sources said. Rosneft also needs to reach agreement with Total about supplies to its Leuna refinery in Germany before the end of March when a contract expires. At the end of last year, Total failed to agree with another major Russian oil supplier, Surgutneftegaz, which then diverted its oil to Baltic sea ports. Rosneft, Grupa Lotos, PKN Orlen and Total did not immediately answer Reuters’ requests for comment.