Tuesday, October 3, 2023
HomeAnalysisS. Korean refiners slash Middle East crudes to chase margins, low-carbon feed


To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

S. Korean refiners slash Middle East crudes to chase margins, low-carbon feed

The share of Middle Eastern crude in South Korea’s 2021 refinery feedstock import basket could fall to the lowest level in more than three decades, as the world’s fifth biggest importer favors South American grades for higher margins while local refiners also turn to European suppliers for low-carbon feedstocks.

In the first seven months of the year, South Korea imported 321.17 million barrels of crude oil from the Middle East, making up 58.8% of total crude imports of 546.28 million barrels over the same period, showed latest data from state-run Korea National Oil Corp.

At such a rate, the share of Middle Eastern supply is on course to hit the lowest ratio since 57% in 1985, according to S&P Global Platts calculation based on the KNOC data. In 2016, the Persian Gulf suppliers’ market share was more than 80%.

A sharp increase in South Korea’s crude purchases from Central and South Americas, especially Brazil, was one of the main factors behind the loss of Middle Eastern suppliers’ market share. This showed that highly sophisticated domestic refineries are capable of processing heavy and extra heavy crude oil at maximum efficiency, thanks to rigorous plant upgrades conducted in the last few years, according to industry sources and market analysts based in Seoul.

Central and South American suppliers export mostly heavy density crude grades to the Far East.

The number of Asian end-users able to process those grades are rather limited as the feedstocks are often difficult to crack, and the heavy crudes yield mostly low value products such as fuel oil, asphalt and bunker fuel, unless blended with much lighter grades, according to crude traders and refinery feedstock managers in Singapore, China, Japan and South Korea.

Still, South Korean refineries’ ability to efficiently crack extra heavy crudes into high value and clean fuel products like low sulfur marine gasoil has opened up a new sales avenue for South American suppliers, industry and trade participants said.

Brazil successfully sold its first cargo of heavy sweet crudes, including Buzios and Sururu, to South Korea early in 2020. The South American producer has been selling on average around 2 million b/month to the northeast Asian buyer since then, according to KNOC data and a marketing source at Brazil’s state-run Petrobras.

Hyundai Oilbank maximize efficiency

Hyundai Oilbank has been leading by example in terms of maximizing margins and efficiency, as the refiner took full advantage of its state-of-the-art facilities to crack South American heavy crude oil.

Hyundai Oilbank could garner better margins when processing heavy South American crudes than Middle Eastern grades, a company official said.

The refiner operates heavy oil upgraders with a combined capacity of 211,000 b/d, which accounts for 40.6% of its crude distillation unit capacity. This marks the biggest upgrader capacity among South Korean refiners, the official said.

The company had successfully built a solvent deasphalting unit, or SDA, with a capacity of 80,000 b/d in 2018.

Technologies like the SDA are used for upgrading residue. They remove contaminants such as metals, sulfur and nitrogen that cause harmful emissions.

These technologies allow refineries to process larger quantities of heavy, high sulfur, lower priced crudes for a maximum output of cleaner and value added middle distillate products, according to plant operation managers and engineers at South Korea’s refining complexes in Ulsan and Daesan.

“Armed with the upgraders, we can use more extra heavy grades, which are cheaper but more difficult to refine,” the company official said.

Extra heavy grades have accounted for more than 30% of Hyundai Oilbank’s total crude feedstock. The refiner has used around 160,000 b/d of ultra heavy grades so far this year, up from 135,000 b/d averaged in 2020, the official added.

Regular inflow of Norwegian crude

In addition, South Korea is poised to ramp up carbon-neutral crude oil purchases from Norway as major refiners including GS Caltex aim to enhance their environmental, social and governance profiles on the feedstock procurement front.

The country received 6.8 million barrels of crude from Norway during January-July, up almost threefold from 2.5 million barrels in the same period a year earlier.

GS Caltex announced in July that it bought 2 million barrels of Johan Sverdrup crude certified as carbon neutral at the point of production. The shipment is expected to arrive later in September.

The country is poised to regularly receive Norwegian cargoes as GS Caltex President and CEO Hur Sae-hong has said that the refiner strives to reduce its carbon footprint as part of its commitment to good ESG practices.

Other major South Korean refiners and petrochemical makers are also considering picking up low-carbon crude cargoes, including Johan Sverdrup, on a regular basis, according to the refinery sources.

Sweden’s Lundin Energy, a partner in Norway’s giant Johan Sverdrup oil field, said June 16 that all future net production from Johan Sverdrup will be certified as carbon neutral produced by Intertek, under its CarbonZero standard.

Source: Platts

Related Posts


Finance & Economy
Shipping News

TOP Ships Announces Reverse Stock Split

TOP Ships announced that it has determined to effect a 1-for-12 reverse stock split of the Company’s issued common shares. The Company’s shareholders approved the...

Carnival Earnings Outlook Misses While Fuel Costs Near 15-Year High

Carnival Corp. posted a profit for the first time since 2020 but issued a fourth quarter earnings outlook that missed Wall Streets’ expectations as...

Sphinx Investment Corp Increases Stake in OceanPal

On September 28, 2023, an OceanPal SEC filing revealed that Sphinx Investment Corp. had raised its ownership in OceanPal, now holding a substantial stake...

Star Bulk Announces the Repurchase of 10 Million of Its Common Shares

Star Bulk announced that it entered into a Repurchase Agreement (with OCM XL Holdings, LP, a limited partnership incorporated in the Cayman Islands, pursuant...

Trafigura announces executive leadership changes

Trafigura Group Pte Ltd. has announced an evolution of its executive team to further strengthen leadership and focus across its global activities during a...

Baltic index snaps 4-day winning streak as capesize rates slip

The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk...

Baltic index scales 11-month peak on strong capesize rates

The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry...

Baltic index scales over 9-month high on capesize surge

The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry...

Baltic index rises to over 4-month high on stronger capesize rates

The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry...

Houston-Japan VLGC freight rates reach multi-year high

VLGC freight rates from Houston to Chiba, Japan, reached $245/mt Sept. 21 for the...

Ukraine: 5 More Cargo Ships Head For Black Sea Ports – report

Five more ships are on their way to Ukrainian sea ports using a new corridor opened to resume predominantly agricultural exports, an alternative arrangement...

Piraeus Port reports strong H1 2023 results

The Piraeus Port Authority SA, which operates Greece’s biggest and busiest port, reported a 48.8-percent increase in pre-tax earnings for H1 2023 – 49.4...

Greece names Thessaloniki port operator preferred bidder for Volos port

Greece’s privatisation agency has named the operator of Thessaloniki port as the preferred bidder for acquiring a 67% stake in the port of Volos,...

Drewry: Port Throughput Index Down 2.1% in July

The Global Container Port Throughput Index fell 2.1% MoM in July 2023, with the small rises recorded in Africa and Oceania having been insufficient...

Vopak: Agreement with Infracapital on sale of Rotterdam chemical terminals

Vopak announces that it has reached an agreement with Infracapital on the sale of its three chemical terminals in Rotterdam (Botlek, TTR and Chemiehaven)...