Japan Cut Oil Consumption as Reactor Restarts

Japan's Kyushu Electric Power is shutting down as many as five oil-fired generation units and cutting power purchases from other utilities as it ramps up its Sendai nuclear reactor, in another blow for an oversupplied crude market.

Kyushu Electric began the restart of the Sendai No. 1 unit on Aug. 11, making it the first of the country's 43 reactors to return to operation under new safety standards put in place after the Fukushima nuclear disaster in 2011.

Japan's utilities turned to liquefied natural gas (LNGLF) and coal in record amounts to make up for lost nuclear capacity after Fukushima, but also switched on oil-fired units either mothballed or kept on standby for peak periods of demand.

In July, utilities burned about 210,000 barrels a day of crude and fuel oil to produce electricity. Together they accounted for about 15 percent of total power generation, compared with between 1 and 3 percent in other industrialised economies such as South Korea, Europe and the United States.

Prime Minister Shinzo Abe and much of Japanese industry want the country's reactors to be switched on again to cut fuel bills, but opinion polls show a majority of the public oppose the move. The industry has applied to reboot 25 reactors, with five cleared for restart.

Kyushu Electric kept five of its seven oil-fired units closed on Tuesday, unchanged from Monday, with the 890-megawatt Sendai reactor's power output at 75 percent of capacity, a company spokesman said. That compared with only one oil-fired unit shut at the same time a year ago, due in part to hotter weather and a lack of nuclear power generation.

The five oil-fired units, three of which are over 40 years old, have total generation capacity of 2.25 gigawatts and shutting them all would reduce Japan's oil demand by as much as 63,000 barrels per day, assuming they were operating at full output for 24 hours, according to Reuters calculations.

Kyushu Electric declined to comment on how much less oil and fuel oil it would burn with the reactor's restart, nor from where it would cut fuel purchases. In the business year through March it bought 56 percent of its crude oil from Gabon and 36 percent from Indonesia, the spokesman said.

The company was forced to halt the ramp up to full power because of a fault in a pump, it said on Friday.

It may reopen one or two of the oil-fired reactors later this week based on peak demand projections, according to a timetable issued by the utility.

Kyushu Electric, which has two more oil fired plants, expects to get a second reactor started in October, but has given no details on other potential closures.

The company has also cancelled plans to buy 610 megawatts of electricity supply from two other regional utilities.

Reporting by Osamu Tsukimori