Cease of Indonesia's crude oil export to depress Japan's power demand

Recently media reported that Indonesia considered ceasing crude oil export in order to secure domestic supply.

Indonesia used to be a member of the Organization of Petroleum Exporting Countries, but the nation has decreased crude oil production clearly since 2000 due to drain of old oil wells and a lack of investment in development of new oil fields.
The country's crude oil output in the first 10 months of 2011 fell to 899,000 barrels per day.

On the other hand, petroleum demand in Indonesia continues to increase. Consumption has been exceeding domestic production since 2004 and the demand reached to 1.36 million bpd in 2010.

Indonesia kept annual growth of gross national products above 6% during 2010 and 2011. The steady economic growth is likely to lift regional petroleum consumption further in the near term.

The country's crude oil exports were estimated at 480,000 bpd in October 2011. Even if Indonesia halts crude oil export, the nation's crude oil import is likely to be cut as well.
It means that the absence of Indonesian crude oil export will not affect the global supply and demand seriously.

The cease of Indonesian export, however, is likely to impact on Japanese electric power companies.
Japanese utility firms mainly use locally produced low sulfur fuel oil, or imported low sulfur crude oil from Southeast Asia for petroleum-fueled thermal power units.

Crude oil demand from Japanese electric power companies surged due to nuclear power shortage in 2011. Prolonged maintenance and inspection have been shutting Japan's most nuclear power units after the severe March 2011 earthquake.

Japanese ten major electric power companies bought 152,000 bpd of crude oil in 2011. It jumped by 117.7% from a year ago.

Japan's crude oil imports from Southeast Asia in the year soared 60% on year to 195,000 bpd, while the year-on-year growth of imports from Indonesia stayed at 27% due to the limited spare supply capacity.

Indonesia has accounted for about 50% of crude oil sources for Japanese ten major electric power companies. Especially, Tokyo Electric Power and Kansai Electric Power have bought about 70% of their necessary crude oil from Indonesia.

Stoppage of supply from such important vendor will give Japanese electric power companies a big burden. Oil refiners, who will be urged to produce alternative fuel oil, will have problems as well.

Higher fuel costs are likely to lift Japan's domestic electricity prices and depress electric power demand further.