Japan struggles with power crunch after quake

[March 17, 2011]  TOKYO (AP) -- Densely populated Tokyo endured more rolling blackouts Thursday and faces at least six months of power shortages as earthquake damage to nuclear plants idles factories, with possible global repercussions.

The 9.0-magnitude quake and tsunami that obliterated towns in Japan's northeast Friday forced the utility that serves Tokyo, a center for finance and global manufacturers such as Toyota and Sony, to slash power supplies by a quarter.

Power to parts of the sprawling region, which produces 40 percent of Japan's economic output, is cut for three hours a day, shutting down commuter trains and traffic lights.

Replacing lost power supplies will be a key challenge in getting Japan back on its feet economically after a disaster that may costs as much as $200 billion. Power shortages will last at least six months while conventional generators are repaired or replaced, affecting companies that are key links in global manufacturing and trade. With four nuclear reactors out of action, likely permanently, Japan's demand for oil and gas to fuel power generation is expected to surge, pushing up global prices.

"There is an enormous amount of disruption and expense coming, as well as what has already happened," said Jason Feer, a senior vice president for Argus Media Ltd., which provides energy market analysis.

The economic impact of the quake has been overshadowed by the crisis triggered by tsunami damage at the Fukushima Dai-ichi nuclear complex in Japan's northeast. But its consequences could be far-reaching as power shortages hamper Japanese companies that are a global presence in fields from car manufacturing to finance.

Tokyo Electric Power Co. said the loss of Fukushima and other quake damage cut its power supply capacity to 33.5 million kilowatts per day, 25 percent below demand. Emergency crews have poured seawater into three reactors in a last-ditch tactic to avert a meltdown, leaving them useless as a power source.

Japan shut down 11 of its 54 nuclear power plants after the quake -- a major blow in an economy that relies on nuclear for 30 percent of its power. The extent of possible damage to gas- or coal-fired generators and distribution grids is unclear. Estimates of generating capacity lost at least temporarily range from 10 to 40 percent of Japan's total of 240 gigawatts.

"A bit of that has come back. Some of it will never come back," said Feer. "Four of those reactors are a complete loss. Three have been filled with seawater and everybody acknowledges they will never come back online."

Japan is one of the world's most nuclear-reliant economies and the government has plans to boost that reliance to 40 percent of power generation. Some analysts say those goals are unlikely to change despite announcements by governments in Europe and elsewhere that they would review nuclear plans following Japan's disaster.

"Longer term, Japan probably is going to stick with its nuclear plans," said David Rea, Japan economist for Capital Economics.

For now, Japanese utilities are expected to fill the gap by revving up generators that run on gas, oil or coal. Fuel demand also is forecast to rise as rebuilding work starts. That could bring a windfall for oil or coal suppliers such as Indonesia or Australia but higher demand might push up prices.

Global oil and gas suppliers promised Japan more supplies even before its needs were clear.

On Monday, Royal Dutch Shell PLC said it would divert liquefied natural gas and fuel oil to Japan. In Qatar, the biggest gas exporter, two state-owned companies promised to meet any increased requirements.

Such comments prompted concern supplies for Europe or elsewhere might be shifted to Japan, which pushed up LNG prices this week on the London market, according to Platts, the energy information arm of McGraw-Hill Cos. Citing shipping managers, it said the diversion of tankers to Japan might push up ship rental prices by as much as 50 percent.

Japanese companies are trying to buy extra fuel oil and diesel on global markets, said a trader in Singapore who spoke on condition of anonymity. But he said there is little surplus immediately available because most suppliers sell those products one to months in advance.

Analysts are looking to previous disasters to try to forecast Japan's needs.

Fuel imports spiked in 2002 after the Tokyo utility was forced to idle 17 nuclear plants following accusations it falsified safety records and again in 2006 when an earthquake damaged a major reactor. Demand for crude and fuel oil jumped 25 to 50 percent and use of gas and coal rose 8 to 12 percent, according to Feer.

The latest disruption has forced major manufacturers to suspend production. Toyota Motor Co. says it will lose output of at least 95,000 vehicles. Other Japanese automakers forecast similar losses.

Financial analysts have slashed forecasts of Japanese economic expansion. JP Morgan cut its outlook for second-quarter gross domestic product growth to 0.5 percent from a pre-quake 2.2 percent.

"Probably, power shortages will be less problematic after, let's say, six months," said JP Morgan economist Masaaki Kanno.

But as utilities rebuild, Japan will be confronted by a renewed power crunch this summer when demand from households to run air conditioners and other appliances rises, Kanno said.

"The government will find it difficult to control demand for electricity from households. But the government would ask companies to save energy or reduce activity," he said. "So the impact of the outage is likely to be much bigger on industry and especially in the summertime."

[Associated Press; By JOE McDONALD]

Associated Press writer Alex Kennedy in Singapore contributed.

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