South Korea to Shut Fewer Refineries for Maintenance in 2009

By Shinhye Kang and Yuji Okada

Feb. 9 (Bloomberg) -- South Korean oil refiners led by SK Energy Corp. plan to shut down less capacity during the peak maintenance season this year as improved margins for fuel products prompt companies to boost sales overseas.

Asia’s largest oil-product exporter will shut two crude distillation units with a total capacity of 410,000 barrels-a-day, or 15 percent of the country’s total, in the first half of June, according to four refinery officials surveyed by Bloomberg News. This compares with the closure of 24 percent of capacity in the same period a year earlier.

South Korean refiners are benefiting from increased margins for processed fuels and reduced output elsewhere in Asia. Fewer shutdowns will allow refiners to increase exports to their usual customers, which include Europe, Indonesia, Vietnam and Japan.

“The global recession may not affect South Korean refiners’ maintenance plans in 2009,” said Jason Lee, a petroleum trading manager at SK Networks Co., an affiliate of SK Energy, the country’s largest refiner. “Profits from exports are better than expected because of reduced run rates among Asian refiners.”

Nippon Oil Corp., Japan’s largest refiner, and its rivals have slashed output as domestic sales sag. The company announced Jan. 29 it would reduce crude throughput by 12 percent from a year earlier in February, a ninth straight month of cuts. China Petroleum & Chemical Corp., Asia’s biggest refiner, last year had its slowest growth in oil processing in six years because of weaker demand.

The margin for refined products in Singapore was $8.34 in the week ending Jan. 16, according to a report by Bank of America. That compares with $7.65 a year earlier.

Rising Oil Imports

South Korea exported 28 million barrels of oil products in December, up 2.8 percent from a year earlier, according to data from the Korea National Oil Corp. Shipments increased 13.7 percent last year from 2007.

Asia’s third-biggest oil buyer also imported more crude for a second month in January as refiners took advantage of lower prices to build winter stockpiles. Crude imports increased 12 percent to 92.2 million barrels last month from a year earlier, the Ministry of Knowledge Economy said in an e-mailed statement. The imports jumped 23 percent from December.

SK Energy will shut the 240,000 barrels-a-day No. 4 crude distillation unit at its Ulsan refinery between March 27 and April 29, the 110,000 barrels-a-day No. 2 crude distillation unit between June 3 and June 30, and the 60,000 barrels-a-day No. 1 crude distillation unit between June 19 and June 23, said an SK official who asked not to be identified because of company policy.

Largest Unit

GS Caltex Corp. plans to shut the country’s largest crude distillation unit, the 300,000 barrels-a-day No. 4 unit at the Yosu refinery, between May 7 and June 8, according to an official who wouldn’t be named because of company policy. A GS Caltex spokesman, who also wouldn’t be named, couldn’t confirm or deny the outages.

S-Oil Corp. will shut the 93,000 barrels-a-day No. 1 crude distillation unit at the Onsan refinery between April 1 and April 19, a company official said on condition of anonymity because of internal policy. The refiner previously announced it would shut the unit in the second quarter.

Hyundai Oilbank Co. doesn’t plan to halt any crude distillation units at its Daesan refinery, said an official who asked not to be named because of Hyundai’s policy. Spokesman Koh In Soo said the company has no major maintenance plan in 2009.

Kim Woo Kyung, a spokeswoman at SK Energy, and Lee Dong Hoon, a spokesman at S-Oil Corp. declined to comment about the 2009 turnaround schedule beyond what the companies have already stated in recent announcements.

SK Energy is scheduled to shut two crude processing units in Ulsan for 2009 maintenance, the Seoul-based company said in its fourth-quarter earnings statement on Jan. 22.

Refiners in Asia typically perform maintenance and safety checks between April and June before the peak summer driving season. They also shut some units in October and November before a surge in heating fuel demand during winter.

The following is a table of planned shutdowns of crude distillation units and secondary units at South Korean refineries this year:

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Company: Refinery               Capacity       Period
Unit                            (Barrels/day)

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SK Energy Co.: Ulsan refinery:
No. 1 Crude Distillation Unit      60,000     June 19-June 23
No. 2 Crude Distillation Unit     110,000     June 3-June 30
No. 3 Crude Distillation Unit     170,000     No Turnaround
No. 4 Crude Distillation Unit     240,000     March 27-April 29
No. 5 Crude Distillation Unit     260,000     No Turnaround
Total Capacity                    840,000

Secondary Units:
No. 3 Middle Distillation Unit     45,000     April 1-April 24
No. 4 Middle Distillation Unit     58,000     March 29-April 29
No. 1 Residue Desulfurizer         72,000     June 6-July 2
No. 2 Residue Desulfurizer         80,000     April 29-June 3
Vacuum Residue Desulfurizer        38,000     April 2-April 25
No. 2 Vacuum Distillation Unit     88,000     April 2-April 25
No. 3 Vacuum Distillation Unit     18,000     April 2-April 25
No. 4 Vacuum Distillation Unit     13,000     April 2-April 25

Incheon Refinery:
No. 1 Crude Distillation Unit      75,000     No Turnaround
No. 2 Crude Distillation Unit     200,000     No Turnaround
Total Capacity                    275,000

Secondary Units:
No turnaround planned for secondary units

GS Caltex Corp.: Yosu Refinery
No. 1 Crude Distillation Unit     100,000     No Turnaround
No. 2 Crude Distillation Unit     150,000     No Turnaround
No. 3 Crude Distillation Unit     150,000     No Turnaround
No. 4 Crude Distillation Unit     300,000     May 7-June 8
Total Capacity                    700,000

Secondary Units:
Reformer                           10,000     Sept. 1-Sept. 12
Reformer                            7,000     Oct. 7-Oct. 19
No. 2 Kero-Diesel Desulfurizer     70,000     May 7-June 5
Naphtha Desulfurizer               30,000     Feb. 6-March 22
No. 1 Fluid Catalytic Cracker      93,000     Feb. 6-March 22
No. 2 Fluid Catalytic Cracker      60,000     May 7-June 8
Naphtha Splitter                   90,000     March 6-April 1

S-Oil Corp.: Onsan Refinery:
No. 1 Crude Distillation Unit      93,000     April 1-April 19
No. 2 Crude Distillation Unit     232,000     No Turnaround
No. 3 Crude Distillation Unit     250,000     No Turnaround
Total Capacity                    575,000

Secondary Units:
No. 1 Kero-Diesel Desulfurizer     22,000     April 3-April 18
No. 1 Vacuum Residue Desulfurizer  40,000     April 1-April 26
No. 2 Vacuum Residue Desulfurizer  40,000     Oct. 5-Oct. 30

Hyundai Oilbank Co.: Daesan Refinery
No. 1 Crude Distillation Unit     110,000     No Turnaround
No. 2 Crude Distillation Unit     285,000     No Turnaround
Total Capacity                    395,000

Secondary Units:
No. 1 Reformer                      4,000     7 days in February
No. 1 Reformer                      4,000     7 days in
                                                 September
No. 1 Kerosene Hydrotreater        24,000     7 days in June
No. 1 Kero-Gasoil Hydrotreater     26,000     10 days in May
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(Schedule is subject to change)

To contact the reporters on this story: Shinhye Kang in Seoul at skang24@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net.