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Bloomberg: Japan to Shut Fewer Refineries in Spring, Cut Gasoline Imports

By Yuji Okada

Jan. 16 (Bloomberg) — Japanese oil refiners led by Nippon Oil Corp. plan to shut 19 percent less capacity during the peak spring maintenance season, reducing the need for gasoline imports from Singapore and South Korea.

Asia’s second-largest oil processing industry will idle 10 crude distillation units, or 21.5 percent of capacity, in the second half of May and first half of June, down from a maximum of 26 percent last year, according to a table compiled by the Petroleum Association of Japan and obtained by Bloomberg News. Refiners typically do maintenance and safety checks annually.

The increase in refinery rates may help Japan replenish gasoline inventories that fell in September to the lowest level since 1993, government data show. The processors will also be able to increase supplies of fuel oil after the shutdown of the nation’s largest nuclear power plant increased demand.

“Japanese refiners may not import as much gasoline as in past years, and may continue to export oil products, especially gasoil, in the peak period this year,” said Daisuke Kawashima, an oil product trader at Hanwa Co Ltd. in Tokyo. “The capacity being shut down is less than last year, and slowing domestic fuel demand has been giving headaches to Japanese refiners.”

At the peak of shutdowns in the second half of May and first half of June, Japanese refiners will shut a maximum of 1.05 million barrels a day of crude distillation capacity, down from 1.25 million barrels a day in the second half of May last year, according to the table. Japan had 4.89 million barrels a day of refining capacity as of Dec. 31, 2007, according to the association. In Asia, only China has more capacity.

Gasoline Prices

Retail regular gasoline prices dropped for a third week, to 154.3 yen a liter ($5.42 a gallon) on Jan. 7 from a record 155.5 yen on Dec. 10, the Tokyo-based Oil Information Center said on its Web site Jan. 9. Asia’s benchmark price of 92-octane gasoline in Singapore fell to $99.35 a barrel on Jan. 15 from a record of $105.35 a barrel on Jan. 3.

Japan’s gasoline inventories in September were 1.79 million kiloliters (11.2 million barrels), the lowest since August 1993, according to the Ministry of Economy, Trade and Industry.

Gasoil exports rose 87 percent during the first 11 months of 2007 because of falling domestic sales and increased demand from the U.S., China and Chile, according to data from Japan’s trade ministry.

Refiners in the Northern Hemisphere halt plants between March and July for seasonal repairs. Fuel demand is lowest after the end of winter and before the start of the summer driving season. The shutdowns will reduce crude oil imports from Middle Eastern producers, including Saudi Arabia and the United Arab Emirates.

Increasing Supplies

Oil companies are increasing supplies of fuels other than gasoline and diesel, according to the International Energy Agency in Paris. Jet fuel and kerosene output rose at a 16 percent pace in October, while production of residual fuel oil, used in power plants, increased at a 22 percent rate, according to the IEA. Japan is consuming more fuel oil after an earthquake in July damaged its largest nuclear power plant.

Nippon Oil, Japan’s largest refiner, will shut the 127,000 barrels-a-day No. 4 crude distillation unit at the Marifu refinery in western Japan between March 15 and April 24, and the 145,000 barrel-a-day No. 1 crude distillation unit at Sendai refinery in northern Japan between May 29 and July 10, the report shows. At the 340,000 barrel-a-day Negishi refinery near Tokyo, the company plans to idle the 70,000 barrel-a-day No. 2 unit between May 3 and June 9, according to the document.

The autumn maintenance shutdowns will peak in the first half of October, when 18.8 percent of the nation’s refining capacity will be idled.

Negishi

At Negishi, Nippon Oil plans maintenance on the 150,000 barrel-a-day No. 4 unit between Sept. 16 and Oct. 29, according to the document. At the 250,000 barrel-a-day Mizushima refinery in western Japan, the 140,000 barrel-a-day No. 3 unit will be offline between Sept. 15 and Oct. 15.

Petroleum Association of Japan spokesman Toru Nakata wasn’t available for comment. A Nippon Oil will shut the No. 4 unit in Marifu for maintenance in March, while the schedule for other refineries hasn’t been finalized, a company spokesman said, asking not to be identified because of company rules.

Idemitsu Kosan Co., Japan’s second biggest refiner, plans to idle 120,000 barrels-a-day No. 2 unit at the Tokuyama refinery between October and November, spokeswoman Makiko Iinuma said. Showa Shell Sekiyu K.K., the Japanese unit of Royal Dutch Shell Plc, will shut 120,000 barrels-a-day No. 2 unit at Yamaguchi refinery for maintenance around October, while the turnaround schedule for the company’s other refineries isn’t available yet, a spokesman said, asking not to be identified because of company rules.

Kosuke Kai, a spokesman at Exxon Mobil Corp.’s Japanese unit, wouldn’t comment on refinery maintenance, citing company policy.

To contact the reporter on this story: Yuji Okada in Tokyo at [email protected] .

Last Updated: January 15, 2008 21:08 EST

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