(EnergyAsia, March 16 2012, Friday) — OPEC expects Japan’s oil demand to grow by about 2% this year, making it one of the fastest in recent memory as the country looks to fossil fuels after shutting down most of their nuclear power plants.

The Organization of Petroleum Exporting Countries (OPEC) said Japan’s oil consumption edged up 0.6% last year to around 4.5 million b/d as fossil fuels demand began to take off after the earthquake-tsunami tragedy of March 11 2011.

According to OPEC, Japan’s economy will rise by about 1.8% this year after contracting 0.7% in 2011, down sharply from a growth of 4.4% in 2010.

The impact has been so dramatic that the initial comparison to the 1995 Kobe earthquake – when the economy recovered swiftly – has turned out to be overly optimistic. The deceleration in the global economy in 2011 was an additional factor delaying the recovery in Japan.

So far this year, there have been some signs of an economic improvement, helping to limit the decline in Japanese exports while domestic demand also has begun to improve.

In addition, last year’s broad stimulus efforts worth 16.1 trillion yen or some US$200 billion undertaken by the Japanese government have boosted the reconstruction of the devastated Fukushima areas and the ailing economy in general. Last November, the government approved another stimulus package worth 12 trillion yen (US$150 billion) that will help the economic recovery this year.

OPEC said the disaster has changed Japan’s economy and energy profile over the medium term. Under public pressure, the government has indefinitely shut down 52 out of a total of 54 of the country’s nuclear reactors. Only 4.6% of Japan’s total installed nuclear capacity is currently operational, and these could be shut by the summer.

Given the capability of dual fuel power plants, the country has switched to other forms of fuel – LNG, fuel oil, and crude oil for direct burning – in order to generate electricity. Given the tight supply of low sulphur crude oil for most of last year, the dominant alternative fuel has been LNG with import volumes jumping by about 25%.

Fuel switching has resulted in positive growth in the country’s oil consumption, in contrast to the negative trend seen over the past few years, when Japan total oil consumption lost nearly 900,000 b/d between 2005 and 2010.

The disaster has also damaged some refineries and caused throughputs to fall below 66% in the second half of 2011. However, most of the refineries have been back on line since July, except for Cosmo-Chiba’s 220,000 b/d plant, and JX-Sendai’s 145,000 b/d unit.

Japan has compensated for this loss by boosting throughput at other refineries. However, as economic activities have been severely affected, the demand for certain fuels has been low for most of last year. As a result, overall refinery utilisation has not been dramatically increased, even in the northern part of the country, where demand for kerosene during the heating season has been met with higher imports in the fourth quarter.

Refinery utilisation currently stands at around 80%, the same level as in the period before the disaster, said OPEC.

Last year, Japan experienced a negative trade balance for the first time in 32 years, which OPEC attributed to three factors: the decline in manufacturing exports due to the disaster; the strengthening of the yen to multi-year highs against the US dollar and euro; and higher bills for energy imports due to the disruption in nuclear power generation.