Japan refiners not rushing to cover gasoline shortfall

Japan refiners not rushing to cover gasoline shortfall

Tokyo (Platts)--26Apr2006

Sluggish gasoline demand has allowed Japanese refiners to avoid having to
plunge into the spot market to secure supplies to cover a number of refinery
outages, industry sources said Tuesday.
"We have not been pressured into accelerated buying of gasoline even
after our Chiba refinery trouble," a Cosmo Oil source said.
Cosmo Oil's 130,000 b/d No 2 CDU, a 35,000 b/d residue desulfurization
unit, the 60,000 b/d No 2 vacuum distillation unit and the 45,000 b/d No 4
hydrodesulfurizer at its 240,000 b/d Chiba refinery in eastern Japan remain
down since an explosion at the desulfurization unit on April 16.
"We are not too anxious about the impact from the Chiba refinery trouble
as the refinery is scheduled to start a turnaround in the next few weeks," the
source said. Cosmo Oil had already been scheduled to shut the No 2 CDU at
Chiba from May 11 to June 13.
"It is also partly due to our sluggish gasoline retail sales," said the
source, adding that gasoline inventory levels at the end of March were about
19% higher than the same time last year.
"As a result, we are not pressured into importing reformate until July,"
the source added.

HIGH STOCKS
Japan's total gasoline inventories as of April 15 were about 2.3 million
kl (14.49 million barrels), up 2.7% on the year, the Petroleum Association of
Japan said last week.
Industry sources said other Japanese refiners are also keen to look for
gasoline in the domestic spot market, but that they were feeling under
pressure to increase their gasoline procurement significantly despite the
approaching summer driving season between June and August.
Industry sources said Monday that operations at Japan's two fire-hit
refineries--TonenGeneral's Sakai plant and Cosmo Oil's Chiba plant--were
expected to remain suspended for an extended period as routine maintenance
scheduled to start in mid-May creeps up before repairs are over.
"We don't know when we can lift the ban on operations of the CDU and the
reformer because we are still waiting for the refiner to submit a schedule for
engineering works at the refinery," said an official at Sakai fire department
Monday, referring to TonenGeneral. The company's sole 156,000 b/d No 1 crude
distillation unit and a 34,000 b/d reformer at the Sakai refinery in western
Japan remain idled following a fire at the reformer on April 10.
The local fire department ordered the company to suspend operations at
the units after the fire.

REFINERY PROBLEMS
The Ichihara fire department, which oversees Cosmo's Chiba refinery,
plans to lift a ban on the operation of the desulfurizer and an attached
hydrogen production unit in a couple of days, but will instead order that the
units be refurbished. The restart of the units will then depend on Cosmo's
repair work schedule, an official from the Ichihara fire department said.
Industry sources expect the two CDUs at Sakai and Chiba to restart some
time in June after completing scheduled maintenance. The No 1 CDU at Sakai is
scheduled to be shut between May 16-31.
Following the two refinery blasts and the rise in global crude
benchmarks, spot gasoline in the domestic Japanese market were trading at
around Yen 61,000 kl ($82.90/barrel) on April 21, up Yen 1,500/kl from a week
earlier, industry sources said.
On Tuesday, Platts assessed Japan's gasoline import parity price at Yen
63,500/kl. The current level of the fuel import parity has also discouraged
Japanese refiners to accelerate their gasoline or reformate imports, industry
sources said.
--Takeo Kumagai, takeo_kumagai@platts.com

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