Power outages are eliminating in India

Electricity supply in India usually has not been enough. The largest power outage in the history occurred in July 2012 in northern and eastern part of the country.
However, the recent lower growth of economy seems to be changing the situation. A decreasing of the power supply shortage ratio is likely to eliminate even minor day-to-day power outages.

The electricity supply capacity in India has not caught up with the growing demand as with other developing nations. Its additional supply capacity only achieved about half of the target set by every five-year economic plan since 1990s. Thus electricity supply capacity was shortage against the peak demand by 12-17% through 2000s.

The shortage ratio has been declining after mid-2010. The decrease is accelerated in this year and the latest number in August was only 2.7%.

Indian economic growth rate was near 10% during the latter half of 2000s except for the Lehman Shock period. But it has been below 5% in the recent three consecutive quarters. Year-on-year growth of the Index of Industrial Production in the country has been almost stopped since Q4 of 2011. Slower industrial activities, of course causes the sluggish energy demand.

In this year, monthly electricity supply in India recorded twice a decrease on year. It did not occur even after the Lehman Shock.

On the other hand, the supply capacity expansion plan that had not been achieved enough previously is also changing during the 12th five-year plan started in April 2012. India installed 22 million kilowatt of new electricity generation capacities in the first year of the current five-year plan. The total capacity of 76 million kw is scheduled to be added during this plan, therefore, the plan seems to be running at a faster speed considerably at moment.

Even if the growth pace of the power generation capacity is slowing down in the near future, further slower growth of electricity demand might prevent the severe blackout.

Overflow from US is changing global oil balance

Domestic crude oil production in the United States was 7.83 million barrels per day, while crude oil imports was 7.58 million bpd, according to the latest weekly report by the Energy Information Administration. Domestic output exceeded imports for the second time in this year after recording for the first time in May since early 1997.

Although crude oil imports exceeded domestic production significantly throughout 2000s, increasing unconventional oil production like shale oil has made narrowing the gap after mid-2011.
Monthly average production has not exceeded imports yet, but it also could be seen in the near future.

Since supply from Canada, that increases unconventional oil production as well, is steady, flows of crude oil from Latin America or Africa into U.S. are decreasing notably.

Crude oil supply in West African Nigeria except for exports to the U.S. has soared by 1 million bpd over  the past several years.

Average domestic crude oil output in the U.S. was slightly above 5 million bpd in mid-2000s, however, it has risen to near 8 million bpd recently and is expected to reach 10 million bpd in a couple of years. On the other hand, petroleum demand in the north America has been capped. Therefore, imports of crude oil are more decreasing than change of production. Suppliers who had relied on the U.S. have to find alternative buyers.

Shrinking oil supply from Iran due to the international sanction has not affected significantly on the global oil market. Recent supply disruption in Libya has not given sufficient impact on the market like civil war in 2011. The reason of these situations seems to be the overflow from suppliers that lost U.S. market.

Since this tendency is seen to be accelerated in the future, temporary oil supply disruptions are unlikely to affect on the real market as ever.

Concession structure in Chinese oil industry to collapse

One of twin Chinese petroleum giants China National Petroleum Corporation is facing serious difficulties since late August due to corruption allegation.

Four executives of the company including two of vice-presidents were dismissed, and received investigation on suspicion of serious breach of discipline. Then, investigation against Jiang Jieming, who was former chairman of CNPC until March this year, was also started in September. He had become a minister in charge of supervise state-run companies after leaving CNPC.

In the company, section manager or higher class have already been confiscated passports in order to prevent escaping to overseas. More employees are likely to be detained or will be called as witness.

Final target of the series of investigations is expected to be Zhou Yongkang who was former CNPC chairman and ex-senior leader of Chinese Communist Party. Dismissed CNPC executives were Zhou's entourages.
Zhou is known as the big boss of petroleum faction in the Chinese political world. But he could be the first arrested ex-Politburo Standing Committee member after the Cultural Revolution.

Chinese media recently reported that family members of Zhou's daughter in law have earned 800 million US dollars through suspicious equipment deals with CNPC. The deals seems to be part of activities to make secret funds of the faction.

The petroleum faction has influenced on Chinese politics in the background of plenty financial power. Business scales of CNPC and Sinopec are not inferior to international oil major ExxonMobil.

However, profit structure of these Chinese companies are not equal. Downstream concentrated Sinopec earns more sales revenue than upstream concentrated CNPC, but Sinopec's profit is about half of CNPC due to unprofitable refining sector.
Since petroleum products prices in China are rigidly limited by the government, refineries often suffer losses when products prices do not cover crude oil costs.

CNPC has enjoyed steady oil prices after 2000s, while its profit ratio looks lower than ExxonMobil. It seems not only due to unprofitable refining sector, but also because of manipulation to make secret funds.

If purge of executives to expand broadly, could CNPC be able to maintain its organization? Collapse of the concession structure also could stimulate competition over it.

Japan's electricity supply has been in the worst crisis during hot summer

Recently Japanese people are not seriously discussing electricity supply shortage, but the nation's power supply during this summer has been in the worst crisis since the severe earthquake in 2011.

Electricity supply capacity utilization by Tokyo Electric Power Company exceeded 90% seven times by the end of August this year, compared to only once during the summer season in 2012.

Electricity demand in the service area of western Japan's Kansai Electric Power Company exceeded its supply capacity excluding two running nuclear units 15 days during July-August. That was occurred only once during the summer in 2012. KEPCO's electricity supply exceeded the critical level of 95% utilization for the first time in June this year and repeated five times during July-August.

Extremely hot day, that is a day temperature exceeds 35 degrees Celcius, was recorded in Tokyo four times in 2011 and six times in 2012. But there were eleven times by the end of August in 2013, according to the Meteorological Agency. Extremely hot days in Osaka were nearly doubled to 23 times in 2013 from 12 times in 2012.

On the other hand, TEPCO's electricity supply often has been in crisis during autumn when many thermal power plants were shut for maintenance after the peak demand season. The company's capacity utilization once exceeded 95% in November 2012.

One of the KEPCO's two operating nuclear units has stopped since 2nd September for regular maintenance, and another unit is also scheduled to shut on 15th September by same reason. End of the maintenance period at the nuclear units is not decided yet.
Power demand in the KEPCO's service area exceeded its supply capacity excluding nuclear units eight times during last winter. If next winter is very cold, electricity supply could be in anxious.

Capital investment by Japanese companies rose from a year ago in April-June 2013 for the first time since Q3 in 2012, according to the Ministry of Finance. Electricity demand in Japan seems to increase even if many companies are still trying to reduce power consumption.
However, expected consumption tax hike may hamper growth of Japanese economy and eliminate electricity supply anxiety.

Libyan unrest causes global oil shortage again

Crude oil production in Libya has been declined to the critical low level close to civil war period. If other members of the Organization of Petroleum Exporting Countries do not increase supply enough, global balance of petroleum supply and demand could be significantly tight.

Labour dispute has been increasing in broad industries of Libya since June. In energy sector, the nation's crude oil output, that had been about 1.4 million barrels per day during first five months in this year, dipped to 1.2 million bpd in June and sunk further to 1.06 million bpd in July.

Average crude oil production in August is estimated at 500 thousand bpd level due to the spreading of strike in major ports. Brega is the only port currently continues shipment at moment, while other major ports have been closed since mid-August.

Moreover, armed group closed pipeline between western major oil fields and ports in late August. Current Libyan crude oil output is estimated at below 300,000 bpd due to the pipeline closure.

Libyan crude oil output once declined from 1.6 million bpd to nearly zero in the civil war period in 2011. NYMEX crude oil futures surged from about $90/bbl to above $110/bbl at that time.

Saudi Arabia and other OPEC members increased supply urgently in order to make  up for the shortage. However, recovery of Libyan oil supply was faster than expected after the cease of the civil war in October. OPEC's total crude oil production in Q2 2012 exceeded the pre-war level by 1.5 million bpd. Crude oil futures dropped to below $80/bbl.

What about current situation? Global balance of petroleum supply and demand in Q3 2013 estimated by the U.S. Energy Information Administration or International Energy Agency and OPEC are as follows.

Necessary volume of OPEC crude oil is estimated at about 30-30.4 million bpd. Meanwhile, OPEC and IEA estimate actual OPEC members' total output in July at about 30.4 million bpd. Average production level in August is seen at 30.2 million level, according to surveys by media.

Since current Libyan production level is estimated to decrease by more than 300,000 bpd from the August average, total OPEC output could be below 30 million bpd. OPEC is not able to supply enough crude oil to the required volume if other members do not increase production.

On the other hand, Libya is anticipated to recover supply sooner after ending the strike, so other OPEC members aggressive supply may cause oversupply in the world crude oil market again.