The restart of the 890 MW No 2 Sendai nuclear reactor Thursday will likely cut Kyushu Electric's winter oil demand for thermal power generation by around 88% on the year, a company source told Platts.
Kyushu Electric's crude and fuel oil consumption will likely be about 100,000 kiloliters or 629,000 barrels over December-March 2016, down from more than 800,000 kl or 5 million barrels in the same period a year ago, the source said.
Kyushu Electric restarted the No 2 reactor at the Sendai nuclear power plant in the southwest at 10:30 am local time (0130 GMT) Thursday, following the restart of the 890 MW No 1 nuclear reactor at the same nuclear power plant in August.
Kyushu Electric's bearish outlook for oil use during the winter power demand season comes as it expects to use less oil in coming months with its expected restart of coal-fired units from maintenance programs over October-November, the source said.
Like most other Japanese power utilities, Kyushu Electric also faced overall lower power demand in recent months when its oil use was limited to around 20,000 kl of mostly low sulfur fuel oil in September because its oil consumption for peak-hour power demand was reduced due to mild weather, coupled with stormy weather in the month, the source said.
The source added that Kyushu Electric's oil consumption in October will also be about 20,000 kl, and its oil use in coming months would be at a similar level or less on a monthly basis if its overall power demand stays at around the current level.
RESTART EXPECTED
Fuel oil and crude traders in Asia said on Thursday that Kyushu Electrics' restart of the Sendai No. 2 nuclear reactor has already been taken into account for pricing positions but said the restart would reduce direct-burning fuel oil and crude demand.
"LSFO demand and straight-run fuel oil demand has already been very weak, so this latest development simply means that demand will be even worse now," said one Singapore-based trader.
With Kyushu Electric typically buying one or two months ahead for its fuel oil requirements the move was foreseen, and the utility has already cut its LSFO demand by around 50% in recent months, according to traders.
Kyushu Electric's crude and fuel oil consumption was around 270,000 kl over July-September during the summer power demand season, down 46% from around 500,000 kl a year ago, according to the company source.
One trade source said the only hope for low sulfur grades now is to "pray for a strong winter" or hope the fuel oil cracks weaken more.
Meanwhile, Indonesian direct-burning crudes, which have already seen tepid demand from Japan due to increased competition from alternative sources of power generation, will be further depressed by the restart, said crude oil traders.
Spot barrels of Minas, Cinta and Widuri have already struggled to find buyers in Japan this year. Japan's Itochu was heard to have rolled its October and November loading cargoes -- comprising around 200,000 barrels/month each of Cinta and Widuri -- over to December in hopes of stronger winter demand.
"[The restart] is nothing new, although we were expecting it to restart later in the year...it will take away some of the appetite for burning," said a crude trader based in Singapore. "There will be tough times ahead for Cinta and Widuri."
The heavy sweet crudes with high acidity have limited outlets as few refineries are able to process them, although this year, more cargoes were picked up by Chinese buyers as Japanese demand tapered off.
State-owned China National Offshore Oil Corp. or CNOOC has been bringing its monthly spot parcels of around 200,000 barrels each of Cinta and Widuri to China, possibly to meet teapot refinery demand, which will help ease the supply surplus, sources said earlier.
Kyushu Electric's restart of the No. 1 Sendai nuclear reactor in August was the first restart of a nuclear reactor in Japan under new safety standards introduced in the wake of the devastating March 2011 earthquake.
Kyushu Electric had targeted restarting the two 890 MW nuclear reactors at the Sendai nuclear power plant after receiving the green light from municipal and prefecture governments over October-November 2014. This follows approvals from Japan's Nuclear Regulation Authority earlier in the year.
