South Korean refiners could buy more crude grades from Nigeria and Algeria to meet expanding demand and secure supply of feedstock.
In recent years, South Korean refiners have relied on the United States for the bulk of their light sweet crude requirements but are keeping their procurement options wide open with imports of middle distillate-rich grades from Africa according to reports from S&P Platts.
US crude grades including Eagle Ford, WTI Midland and Bakken have become South Korea’s favourite light sweet refinery feedstock grades since the second quarter of 2017 due to competitive price tags, rising production volumes and improving oil infrastructure.
Algeria’s flagship Saharan Blend and Nigeria’s Escravos condensate and Agbami crude especially attracted plenty of South Korean buyers’ interest since late Q2 2018 the report said.
This could help Nigeria ramp oil exports to a seven-month high of 1.92 million bpd in February from 1.86 million bpd recorded in January after several large grades come back online after a series of pipeline outages in the last couple of months.
South Korea imported 1.07 million barrels from Nigeria in December, according to latest customs data seen by Platts, which means imports from the West African supplier reached 8.82 million barrels for the full year 2018, compared with none in 2017.
South Korea had also imported 15.14 million barrels of crude from Algeria over January-November 2018, more than a two-fold rise from 6.56 million barrels received during the same period in 2017, latest data from Korea National Oil Corp. showed.
SK Innovation, South Korea’s biggest buyer of Nigerian oil, told Platts that it has increased imports of Nigerian grades because they are competitive in terms of prices and quality.
“We have been looking at African producers such as Nigeria as alternatives to Iranian oil,” a company official said.
SK Innovation which runs a 100,000 b/d condensate splitter imported Escravos condensate and Agbami crude, with small volumes of Akpo Blend crude.
South Korea’s biggest petrochemical maker Hanwha Total Petrochemical has also ramped up its purchases of condensate from Nigeria on the back of the US’ re-imposition of economic sanctions on Iran, which essentially raised barriers for many Asian refiners and petrochemical companies to access Iranian South Pars condensate, the report said,
For Algeria, GS Caltex was South Korea’s biggest buyer of Algerian Saharan blend crude last year, while S-Oil has also imported small volumes of the light sweet grade.
Platts said GS Caltex, a 50:50 joint venture between South Korea’s GS Group and US’ Chevron has not imported any Iranian grades in the past one year.
The company said it has been making efforts to diversify crude supply sources so as to ensure stable light sweet crude supplies and to reduce import costs, indicating it can take more cargoes this year from Algeria and other African countries, not just the US.
