TOKYO - Water shortages in western and southern Japan have forced at least two utilities to reduce hydroelectric generation and crank up oil-fired power plants, spurring market expectations that utilities' demand for oil may rise this summer, traders said on Friday.
A possibly serious dearth of water in coming months may also affect nuclear power plants, which use huge amounts of the liquid to turn steam-driven turbines and as a coolant, traders said.
"Electricity producers may have to boost their thermal power plants during peak summer demand if they produce less hydro and nuclear power because of a water shortage," an oil trader at a major trading house said.
June saw much less rain than usual in some parts of Japan.
The islands of Shikoku and Kyushu, in western and southern Japan respectively, had the least rainfall and there are serious concerns that water there will be scarce this summer, a Meteorological Agency official said.
"Some areas of Shikoku and Kyushu had about 10 percent of the normal rainfall in June," the official said.
Shikoku Electric Power Co. and Kyushu Electric Power Co. said they had reduced hydroelectric generation and ramped up oil-fired power generation.
A spokesman at Shikoku Electric, which serves 2.87 million customers, said the company had shut six hydroelectric plants.
Shikoku Electric has not boosted its oil purchase volume yet as the combined capacity of its closed hydro plants is just 33,350 kilowatts, less than 1 percent of the company's total.
But it's closely watching the weather.
"We can't do much. The situation will not improve until we have rain," the spokesman said.
Kyushu Electric has not currently bought additional oil for its thermal power plants.
Japanese utilities typically burn low-sulphur fuel oil (LSFO) and crude oil with lower sulphur content, such as the Indonesian Minas grade, at their thermal plants.
The weather agency does forecast more rainfall in July than in June.
"But there will be little rainfall for at least the next week and the amount of the expected rainfall (in July) may not be enough to resolve the situation immediately," the official said.
July temperatures will be higher than normal in southern and western Japan, the agency said in its official forecasts on Friday.
In Japan, electricity demand peaks in late July and August as hot weather increases air-conditioner use.
Electricity demand increases by about 5 million kilowatts, equal to the combined demand of about 1.7 million average households, when daytime temperatures rise by 1 degree Celsius, the Federation of Electric Power Companies industry group says.
So far, the water shortage has not affected the operations of any nuclear power plant.
REUTERS NEWS SERVICE
