Northeast Asian utilities expand search for power generation oil amid LNG supply


S Korea East West Power issues multiple LSFO buy tenders

Japan continues searching for direct-burning heavy sweet crude

S Korea’s Q1 LSFO imports seen reaching 12.2 mil barrels

Singapore —
Northeast Asian utilities are set to extend their search for more power generation oil amid tight natural gas and LNG supply, as South Korean power companies issue multiple tenders to secure fuel oil, while Japanese electricity providers continue to search for any available direct-burning crude oil in the region.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

The low availability of spot LNG export cargoes in Malaysia and Indonesia, coupled with Panama Canal restrictions and ice conditions in North Asian ports have contributed to the LNG supply crunch in Northeast Asia in recent weeks.

As a result, the tighter LNG stocks prompted Northeast Asian electricity providers to secure, by whatever means necessary, other sources of power generation and industrial feedstocks to keep up with robust winter energy demand.

South Korea’s East West Power, a utility company, recently issued a buy tender for 27,000 mt of LSFO for delivery over late January to Ulsan after buying two cargoes in December 2020, more than their usual sporadic purchases.

Unlike Japan, kerosene accounts for very little of South Korea’s overall heating energy source during winter. The latter’s households and commercial sector rely mostly on gas and electricity for winter heating.

However, the tight LNG supply will likely prompt South Korea to raise its dependence on fuel oil for winter electricity power generation throughout the cold spells in the first-quarter.

South Korea is estimated to have imported around 11 million barrels of fuel oil in Q4 2020, up 62.7% from 6.76 million barrels received in the same period a year earlier and the shipments may reach around 12.2 million barrels in Q1, up 38.2% from 8.83 million barrels imported in Q1 last year, according to major South Korean electricity providers and refiners surveyed by Platts.

South Korea’s thirst for power generation oil is very much in line with Japan’s latest rush to ramp up fuel oil imports. Chugoku Electric and Kansai Electric have moved to import fuel oil or heavy crude in addition to its domestic procurement amid faltering LNG stocks and tightened power supply-demand balance, Platts reported earlier.

Japan’s power demand rose by 13% year on year during the first week of 2021, averaging 108 GW, with the 3.5% increase in December also supported by cold weather, S&P Global Platts Analytics said.

South Korea’s electricity demand jumped to a wintertime high and state-run Korea Power Exchange, or KPX, has been on high alert. Temperatures in Seoul dropped to minus 18.6 degree Celsius in early January, the lowest in 35 years, according to the Korea Meteorological Administration.

Direct-burning crude

Japan’s refiners are struggling to produce enough burning fuels for the country’s power companies and this could potentially lead to a brief spike in its prompt heavy crude imports as well, industry and market sources said.

Japanese power utilities used to take heavy sweet Indonesian crude grades such as Minas, Cinta and Duri for power generation.

There has been a sharp increase in spot heavy sweet crude purchase inquiries from Japanese utilities around Indonesia and Vietnam in the past few days, according to a fuel oil and crude oil trading source at a Japanese integrated trading firm with close knowledge of the matter.

Some Japanese and South Korean power utilities are even considering buying prompt shipments of heavy sweet Australian crude grades such as Van Gogh for direct-burning purposes as they are likely to struggle to find any heavy sweet crude cargoes available for second half January from…

Read More: Northeast Asian utilities expand search for power generation oil amid LNG supply

Products You May Like