Japanese Refineries Shut As The Nation’s Petroleum Consumption Falls

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In our Brief-Time period Power Outlook, we forecast the bottom annual petroleum consumption in Japan in 2024 since at the very least 1980, partially as a result of its getting older and declining inhabitants. Japan’s diminished consumption is already affecting its refining business.

Japanese refiner ENEOS completely closed a 120,000-barrel-per-day (b/d) refinery in western Japan in mid-October 2023, and one other firm, Idemitsu Kosan, plans to shut a 120,000-b/d refinery in March 2024. These closures symbolize 7% of the nation’s refinery capability.

We forecast consumption of petroleum merchandise in Japan will decline by 3% between 2023 and 2024 to three.3 million b/d. Japan’s petroleum consumption declined by a mean 2% per yr by way of 2022 from its peak of 5.7 million b/d in 1996, largely due to demographic and financial adjustments. The oil depth of Japan’s economic system, measured as barrels of oil consumed per $1,000 of gross home product, has been declining.

Japan’s inhabitants peaked in 2009, and the nation has seen a number of the slowest financial progress amongst OECD nations since then. As well as, the share of Japan’s inhabitants aged 65 and older was 30% as of 2022, in contrast with 21% within the EU, 17% in the US, and 14% in China, in line with the World Financial institution.

Japan’s refineries had been constructed primarily to serve its home gasoline wants, they usually have hassle competing in worldwide markets. These refineries are smaller and fewer complicated than newer refineries in Asia, together with China, South Korea, and India. Complexity refers to a refinery’s secondary processing capability, akin to hydrocracking and coking, which upgrades low-value heavy gasoline oil into helpful transportation fuels. Extra complicated refineries can produce extra high-value merchandise from the crude oil they course of.

Much less complicated refiners like these in Japan additionally course of lighter and sweeter grades of crude oil, that are costlier than heavier and extra bitter grades. Increased yields of lower-value merchandise mixed with utilizing costlier crude oils makes refiners in Japan much less worthwhile and fewer aggressive in world markets. Advanced refinery margins in Asia may be 30%–50% increased than easy refinery margins.

In our current Worldwide Power Outlook, we challenge Japan’s petroleum consumption will proceed to say no past 2024, suggesting that refiners in Japan will face further aggressive pressures.

Principal contributor: Jeff Barron

Initially printed on U.S. EIA’s As we speak in Power weblog.