As Japan goes off the grid, which companies stand to gain?

Coming soon: post-nuclear Japan
The average consumer in the U.S. is without power four hours each year. In Japan, consumers are without power just seven minutes a year –until today. Now a range of fuel companies are set to see profits rocket, according to Bloomberg, as reactors overheat.

Millions are off the grid and will be for weeks or months. 2.5 million homes are without electricity, and over 1 million homes without water. A nuclear power station threatens to go critical, and a state of emergency was declared at five atomic reactors. The damaged Fukushima Daiichi nuclear reactor had already been leaking radiation outside the plant, confirms Japan’s nuclear safety agency and the operator, the Tokyo Electric Power company (tepco).

This evening radiation rose to 1,000 times the safe level the company evacuated surrounding areas in a six mile radius.

The shutdown triggered emergency diesel power supply. But that system failed when the tsunami hit.
According to experts from the Union of Concerned Scientists: “If (the temperature drops far enough, the core would overheat and the fuel would become damaged. Ultimately, a ‘meltdown’ could occur: The core could become so hot that it forms a molten mass that melts through the steel reactor vessel. This would release a large amount of radioactivity from the vessel into the containment building that surrounds the vessel.
“The containment building’s main purpose is to keep radioactivity from being released into the environment. A meltdown would build up pressure in the containment building. At this point we do not know if the earthquake damaged the containment building enough to undermine its ability to contain the pressure and allow radioactivity to leak out.
“According to technical documents translated by Aileen Mioko Smith of Green Action in Japan, if the coolant level dropped to the top of the active fuel rods in the core, damage to the core would begin about 40 minutes later, and damage to the reactor vessel would occur 90 minutes after that.”
Japan’s strongest earthquake on record will boost global demand for natural gas, coal and oil products as production lost from damaged nuclear reactors and refineries is replaced.
Tepco. and other Japanese utilities may increase output at gas, oil and coal-fired plants to replace production from the 11 reactors closed yesterday, Wood Mackenzie Consultants Ltd. said. Companies will need to import fuel from Asian refineries because the quake shut 20 percent of the country’s crude-processing capacity.
The biggest beneficiaries are probably global liquefied natural gas suppliers, analysts at Alliance Bernstein said, a group that includes BG Group Plc (BG/) and Royal Dutch Shell Plc. (RDSA) Reliance Industries Ltd. (RIL), which operates the world’s largest export refinery in India, and other refiners will see demand rise, according to Purvin & Gertz Inc. Power generators in China, Taiwan and South Korea may have to pay more for fuel.
“Over the coming months, it looks like we will need more thermal fuel in Japan, potentially more oil,” Francisco Blanch, head of global commodity research at Bank of America-Merrill Lynch, said in a television interview. “Several nuclear plants are down.”
BG Group jumped 2.9 percent in London, the biggest gainer in the benchmark FTSE 100 index (UKX), on the outlook for gas prices. Reliance advanced 0.7 percent in India on a day the wider stock market dropped. Xstrata Plc (XTA), the biggest miner of coal for power stations, rose as much as 2.4 percent in London.
LNG Diverted
U.K. gas gained amid concern that LNG may be diverted away from Britain to be used in Japan’s power generation. The winter contract, for the six months from October, climbed as much as 3.5 percent. Japan has virtually no domestic gas production and no import pipelines, so relies on LNG for its needs.
“If we have a prolonged nuclear shutdown, you would expect it to have a significant impact on prices,” said Noel Tomnay, head of global gas research for Wood Mackenzie in Edinburgh. “Gas and oil are likely to be more favored. The gas price has a long way to go up before you’d rather burn oil than gas.”
Reactors Shut
Eleven reactors operated by Tokyo Electric Power Co., Asia’s biggest utility, Tohoku Electric Power Co., and Japan Atomic Power Co. were shut, the trade ministry said in an e- mailed statement. Nuclear and other power plants closed by the quake account for at least 9 percent of Japan’s power production capacity, according to calculations based on data compiled by Bloomberg.
The closure of Tokyo Electric’s Kashiwazaki-Kariwa nuclear plant, the world’s biggest, after an earthquake in July 2007 boosted the use gas-fired generation units and Japan paid more than $20 a million British thermal units for spare LNG cargoes. That’s double Asia prices for cargoes last month, Spectron LNG data show. Some of its reactors remain shut down today because of the damage sustained more than three years ago.
Japan is the world’s largest buyer of LNG, gas chilled to a liquid for transport by ship, importing a total of 85.9 billion cubic meters of the fuel in 2009, or 35 percent of the world’s production. The biggest suppliers were Indonesia, Malaysia and Australia, according to BP’s 2010 Statistical Review of World Energy.
Fuel Oil
After the Kashiwazaki-Kariwa incident also brought back decommissioned plants that run on fuel oil, the heaviest product of oil refining, and unprocessed crude oil.
“Direct burning of crude oil and fuel oil will be used by Japanese power plants,” Johannes Benigni, managing director of Vienna-based research consultant JBC Energy GmBH, said in an interview. “The nuclear power plants will go off the grid, because they have to make safety checks and assess the damage.”
Coal-fired plants may also be pressed into action, increasing imports from Indonesia and Australia, the two largest exporters of the fuel. That will boost miners including Xstrata, BHP Billiton Ltd. (BHP) and Rio Tinto Ltd in Australia and Jakarta- based PT Bumi Resources.
“There may be some uptick in thermal coal demand as a consequence” of nuclear shutdowns, said Daniel Brebner, head of commodities at Deutsche Bank AG in London. “Power consumption will immediately decline and that will slowly recover, but as it recovers that will draw mostly on natural gas and coal.”
Japan is the world’s third-largest oil consumer after the U.S. and China, using more than 4 million barrels of crude oil a day in 2010, according to the International Energy Agency.
Firefighters Battling
Firefighters are still battling a blaze at Cosmo Oil Corp.’s 220,000 barrel-a-day Chiba refinery, according to local officials. JX Nippon Energy & Corp. shut refineries at Sendai, Kashima and Negishi with a total capacity of 554,000 barrels a day, the company said.
“The product markets will tighten up as Japan is a significant exporter of distillates in the region,” said Victor Shum, a senior principal at Purvin & Gertz in Singapore, a consultant, referring to group of products includes gasoil, or diesel. “It helps the regional margins.”
Gasoil’s premium to the Asian benchmark Dubai crude, or the crack spread, rose for the first time in four days in Singapore. The difference was $19.77 a barrel compared with $19.72 yesterday, according to PVM Oil Associates, a broker.

One Response

  1. we look at the tragic fall out after katrina and the number of peoples life effected and can only imagine what this is doing to japan. who is big enough to help this many people, the world needs to raise an army for humanity.

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