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South Korea’s refiner Hyundai Oilbank seeks to diversify its crude oil sources and is looking to buy Canadian oil for the first time, Hyundai Oilbank’s senior executive vice president, Chang Ji-hak, told Reuters in an interview published on Wednesday.
Although South Korea has a big oil refining sector, it imports almost all of the crude oil that its refineries are processing.
“We have strong interest and we have already tested it,” Chang said, referring to Canadian crude oil. The manager said the oil was good quality and suitable for its refinery, but did not specify which Canadian grade Hyundai Oilbank has tested.
The South Korean refiner’s main source of crude oil is, for now, the Middle East, with non-Middle Eastern producers supplying currently some 30 percent of the company’s crude oil. But Hyundai Oilbank—which operates a 390,000-bpd oil refinery—doesn’t plan to raise the share of non-Middle Eastern suppliers in the short term, the manager said.
“Outside of the Middle Eastern grades, the crude is sometimes too light, sometimes too heavy. So there are some limitations,” Chang told Reuters.
The OPEC cuts have lifted the Dubai benchmark prices this year, thus narrowing their spread to Brent, which is an opportunity for South Korea to try other sources of crude oil, Chang said at a panel discussion at the S&P Global Platts Asia Pacific Petroleum Conference in Singapore.
Some South Korean refiners have expanded their supply sources, and more than 30 percent of total purchases have been from non-Middle Eastern producers in recent months, Chang said. South Korean refining companies have been buying crude oil from North, South, and Central America, and from Europe, the manager noted.
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According to market sources who spoke to Platts, South Korean refiners—including GS Caltex, Hanwha Total Petrochemicals, Hyundai Oilbank, and SK Innovation—have bought a total of up to 5 million barrels of Eagle Ford crude and condensate, Mars Blend, and WTI Midland.
Apart from the Dubai/Brent spread, the other major incentive for South Korean refiners to buy oil from outside the Middle East is the government incentives, Hyundai Oilbank’s Chang said at the APPEC conference.
“Any extra freight costs incurred from buying non-Middle Eastern crudes would be compensated by the government,” the manager said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.