Tokyo — Japanese utilities have “strong concerns” over escalating tensions in the Middle East as any supply disruption in the region will have a big impact on fuel supply and prices, the head of an electric power industry group said on Friday.
Israel launched an attack on Iranian soil on Friday, sources said, in the latest tit-for-tat exchange between the two countries, whose decades of shadow war has broken out into the open and threatened to drag the region deeper into conflict.
Oil prices jumped on Friday as reports that Israel had attacked Iran roiled markets and sparked concerns that Middle East oil supply could be disrupted.
“We have strong concerns,” Kingo Hayashi, chairman of Japan’s federation of electric power companies, told a news conference.
“If the Strait of Hormuz were to be blocked, it would significantly impact our fuel procurement in terms of both volume and price,” said Hayashi, also the president of Chubu Electric Power .
The Strait of Hormuz runs between the Persian Gulf and Gulf of Oman and provides a key route for shipping.
Japan relies heavily on Middle Eastern crude, importing more than 95% of its oil from the region, but the resource-poor country has significantly reduced oil-fired power plants, though it still relies heavily on coal- and gas-fired power generation.
Higher oil prices will likely lead to soaring prices of gas and other energy, Hayashi said, adding Japan’s procurement of liquefied natural gas (LNG) from Qatar could also be affected in the event of disruption of the Strait of Hormuz.
Tohoku Electric Power, which buys LNG from Qatar, also expressed fears over the heightened Mideast tensions.
“We are deeply concerned about rising fuel costs and the inability to procure fuel when we want, which could disrupt stable supply of electricity,” Tohoku Electric President Kojiro Higuchi told reporters.
“We are also worried higher oil prices could bolster coal prices,” he said.
If LNG supplies from the Mideast were to be disrupted, Tohoku Electric will have to consider buying spot LNG and exercising its option to increase the volume from other LNG suppliers with whom it has long-term contracts, he said.
“If that is still not enough, we will shift to coal,” he said.
Reporting by Yuka Obayashi in Tokyo. Editing by Jacqueline Wong and Jane Merriman – Reuters
