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Refinery Explosion And Fire Threatens Supply In South Korea

At least eight people were injured in an explosion and a fire on Thursday at a major 580,000-bpd refinery in South Korea, local news agency Yonhap reports.

The fire and the possible shutdown of a large refinery come at a time when global refining margins are sky-high amid insufficient refinery capacity worldwide.

Refinery capacity globally is now lower than before the pandemic after some refineries closed permanently after COVID crippled fuel demand in early 2020.

Firefighters received a report of an explosion at the refinery in the Onsan Industrial Complex in Ulsan owned by S-Oil shortly before 9 p.m. local time on Thursday. The explosion took place during the processing of crude oil into petroleum, Yonhap quoted authorities as saying.  

The Onsan refinery has three crude distillation units with a combined capacity of 580,000 barrels per day (bpd), according to Argus, which reports that market participants say a full shutdown of the refinery is likely.

Firefighters at the scene appeared to be having trouble controlling the fire, per local reports quoted by The Korea Herald.

The eight people who sustained injuries were rushed to hospital and are being treated for second-degree burns to the face and palms, authorities told The Korea Herald.

Globally, around 3 million bpd of refining capacity has been shut down since early 2020, according to estimates from Wood Mackenzie

“For companies with aging refineries that required significant investment to remain viable, it has been difficult to justify the spending in the face of a weak demand outlook, particularly for gasoline as a result of increased fuel efficiency and the rise of electric vehicles,” Ed Crooks, Vice-Chair, Americas, at WoodMac wrote last week.

At the same time, new refining capacity in the Middle East and Asia is only now entering the market after being delayed, in part because of the pandemic and weak refining margins, Crooks noted.  

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By Tsvetana Paraskova for Oilprice.com

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