South Korean refiners eye profits, reduce closures

South Korean refiners, eyeing the possibility of increased overseas sales due to improved margins for fuel products, plan to shut down less capacity during the peak maintenance season this year.

Feb 9th, 2009

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 9 -- South Korean refiners, eyeing the possibility of increased overseas sales due to improved margins for fuel products, plan to shut down less capacity during the peak maintenance season this year.

Asian refiners generally perform maintenance and safety checks twice a year: between April and June, ahead of the peak summer driving season, and again in October and November, before a surge in heating fuel demand during winter.

But this year, according to a report by Bloomberg News, South Korean refiners will close just two crude distillation units—totaling 410,000 b/d, or 15% of capacity—in the first half of June. That compares with the closure of 24% of capacity during the same period in 2008.

Jason Lee, a petroleum trading manager at SK Networks Co., explained that profits from exports are better than expected because of reduced run rates among Asian refiners such as Nippon Oil which last month said it would reduce crude throughput by 12% from a year earlier in February.

Bloomberg cited a report by the Bank of America that said the margin for refined products in Singapore was $8.34 in the week ending Jan. 16, a 9% increase over the $7.65 recorded during the same period in 2008.

The plans for closures include:

-- SK Energy will close the 240,000 b/d No. 4 crude distillation unit at its Ulsan refinery between Mar. 27 and Apr. 29; the 110,000 b/d No. 2 crude distillation unit June 3-30; and the 60,000 b/d No. 1 crude distillation unit June 19-23.

-- GS Caltex Corp. will shut the country's largest crude distillation unit, the 300,000 b/d No. 4 unit at the Yosu refinery, between May 7 and June 8.

-- S-Oil Corp. will shut the 93,000 b/d No. 1 crude distillation unit at the Onsan refinery Apr. 1-19.

-- Hyundai Oilbank Co. doesn't plan to halt any crude distillation units at its Daesan refinery.

Contact Eric Watkins at hippalus@yahoo.com.

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