* Top 6 utilities to raise coal use by 24 pct in 2013/2014
* Oil, LNG use to drop slightly, displaced by rise in coal
* 3 out of 5 analysts expect more nuclear restarts by end
By Osamu Tsukimori and Florence Tan
TOKYO/SINGAPORE, March 28 Japan is boosting its
use of cheaper coal at the expense of oil and LNG to counter a
jump in energy import costs that are rising because of a weak
yen and with little prospect of a near-term return of nuclear
power after the Fukushima crisis in 2011.
New Prime Minister Shinzo Abe's policies aimed at raising
exports have weakened the yen, making energy imports priced in
dollars more expensive. At the same time, the nuclear industry
enters a third year of near total shutdown, meaning Japan needs
the lowest cost option to cap a trade deficit.
"Coal remains the cheapest fuel to burn in Japan given the
high prices of oil and LNG," said Amrita Sen, chief oil analyst
at London-based consultancy Energy Aspects.
Strong Japanese demand during seasonal peaks of summer and
winter have helped oil and LNG prices to spike in the past two
years, but the world's fifth-largest energy consumer may catch a
break this year due to ample coal supply - which may mean
leading suppliers Australia and Indonesia cannot necessarily
expect a price boost from the extra demand.
The Newcastle spot coal index, a benchmark for
Asia, has eased to about $90 a tonne from around $100 a year
ago, and in the 1-1/2 years prior, prices ranged from $100 to
more than $136 a tonne.
Though demand from Japan, the fourth-largest user of coal in
2011, may help to support Asian coal markets, coal stocks are
still high and higher imports may not come straight away, said
Japan's top six utilities expect to raise coal consumption
by 24 percent in the fiscal year starting April 1 from calendar
year 2012, with two new coal-fired power units expected to
reduce the need for imports of expensive liquefied natural gas
(LNG) and oil.
Warmer weather may also result in a bump in coal and fuel
demand, with Japan's meteorological agency expecting higher
temperatures than average from April to June, and mostly normal
to hotter-than-average temperatures this summer. Electricity use
usually increases during warm weather to power air conditioners.
Greater use of dirty coal, however, risks raising carbon
emissions from the fifth-biggest greenhouse gas emitter as it
puts a hold on environmental goals to revive its economy.
"Japan is already very aware of environmental concerns and
is investing in renewables, both solar and wind, although the
effects don't come through till 2015," Sen said.
Coal will make up just over a fifth of the top six
utilities' fossil fuel mix in 2013-2014, up from a 16.3 percent
share in 2012, Reuters calculations based on trade ministry and
industry data showed. Data for fiscal 2012-2013 is not yet
LNG's share of the mix will fall from 62.7 percent to just
below 60 percent. Crude and fuel oil will slip from 21 percent
to 19.4 percent.
Even with falling imports from the more expensive fossil
fuels, energy costs won't necessarily fall if the yen continues
to weaken, and that should keep interest in coal strong.
In January, Japan's volume of crude oil imports fell 4.7
percent from a year earlier but the value rose 5.9 percent, and
that was while average benchmark Brent crude prices in the month
were only 0.8 percent higher than a year earlier.
The drive to use more coal comes as Japan did not renew its
commitment to emissions cuts for the Kyoto protocol's second
round that started this year, instead saying it would decide on
a new reduction target for 2020 by November.
The bulk of the coal demand increase will come from two
coal-fired power units built by Tokyo Electric Power Co
that have a combined capacity of 1,600 megawatts in northern
Japan, where the nuclear crisis took place two years ago. The
two new units are scheduled to start trial operations in April
in Fukushima and Ibaraki prefectures.
Japan's second-biggest thermal coal user after J-Power
, Chubu Electric Power Co, will keep its demand
steady in 2013-2014.
NUCLEAR RESTARTS THIS YEAR
Total fossil fuel consumption is forecast to drop 2.9
percent in the next fiscal year from 2012 as the six utilities
expect 11 nuclear reactors to restart.
That could be an overly optimistic view, according to
analysts. Japan's two operating reactors - out of a total of 50
- are due for maintenance in September and tough new safety
checks still may make it difficult to bring units online.
Of five analysts polled, three expect a couple of the idled
nuclear reactors to restart by end of this year in line with the
government's push, despite public opposition.
HSBC economist Izumi Devalier said as many as 10 reactors
could be restarted by the end of 2014, which would save around
500 billion yen ($5.31 billion) in fuel costs and reduce
pressure on the current account.
"Public opinion is divided on the nuclear revival," Devalier
said in a March 6 note. "But with a weak yen pushing up the
import bill, energy-starved Japan might not have a choice."
($1 = 94.2200 Japanese yen)
(Additional reporting by Lee Yen Nee and Risa Maeda; Editing by
Tom Hogue and Ed Davies)