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Feature: South Korea bucks trend by turning to LSFO after typhoon-led nuclear shutdowns

Highlights

Korea East-West Power buys first LSFO since January

Almost half of South Korea's nuclear capacity offline

Singapore — South Korea is raising its low sulfur fuel oil consumption for power generation for the first time in several years after two typhoons prompted the shutdown of nuclear reactors in early September, bucking the trend of North Asian countries reducing their fuel oil consumption for power as they shift to LNG.

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South's Korea East-West Power Company is likely to consume 70,000 mt/month of low sulfur fuel oil while the nuclear capacity is offline, a company official said Sept. 25.

The company, which operates an oil-fired 1,200 MW power plant at Ulsan, has bought 38,000 mt of LSFO with maximum 0.3% sulfur and with maximum 540 CST viscosity for delivery to Ulsan over Sept. 24-28. This is the first time a South Korean power company has imported LSFO since January.

A total 5.3 GW of nuclear power in South Korea was shut when two typhoons hit the region in early September, according to S&P Global Platts Analytics. Typhoon Maysak prompted the shutdown of four nuclear reactors at the Kori complex on Sept. 3 and Typhoon Haishen the shutdown of two additional reactors at the Wolsong complex on Sept. 7.

"It [the length of the outage] depends on how long the investigation goes on regarding the nuclear power plants... every power plant in the southeast region will run as long as demand for electricity does not drop rapidly... based on this premise, if we run every unit at normal capacity, approximate [consumption] would be 70,000 mt/month," the company official said.

LSFO SUPPLY TIGHTENING

The Asian LSFO market had started to strengthen even before the Korea East-West Power Company emerged to buy because supply is expected to remain limited in October.

Refiners in Asia have been cutting operating rates in recent months due to weak refining margins, especially for middle distillates, reducing production of LSFO. In addition, the inflow of arbitrage cargoes from the west will decline in October, further tightening availability. Singapore is expected to receive 1 million-2 million mt of LSFO from the west in October, down from 2.5 million-3 million mt in September, as Marine Fuel 0.5%S prices in Asia had weakened on ample supply when October-arrival cargoes were traded.

"[South Korea's LSFO requirements] will definitely affect the LSFO market," a fuel oil trader based in Singapore said.

"It will expedite an inventory decrease to some extent," a second fuel oil trader in Singapore said.

However, a source at a South Korean refiner noted: "Most refiners [in South Korea] can maximize low sulfur fuel oil production, even though they are cutting run rates at the moment due to thin margins."

NUCLEAR OFFLINE

A total of 12 reactors with a combined capacity of 10.9 GW are currently offline, or 46.9% of South Korea's overall capacity of 23.250 GW across 24 nuclear reactors, state-owned nuclear power operator Korea Hydro & Nuclear Power said Sept. 28. The current capacity offline is higher than usual as the typhoon outages came as some nuclear reactors were undergoing maintenance during the off-peak autumn season.

Of the 5.3 GW shut by the typhoons, only one 700 MW reactor at Wolsong has restarted operations. It is still unclear when the Kori complex and the other Wonsong nuclear reactors will restart, an industry source said.

The following nuclear reactors are currently not operating;

** Wolsong complex (2): the 700 MW Wolsong-2 has been offline since the Sept. 7 typhoon, 700 MW Wolsong-4 has been shut for maintenance since July 22.

** Kori complex (5): Shin (New) Kori 1- and –2, each 1 GW, and Kori-3 and –4, each 950 MW, have been offline since the Sept. 3 typhoon; the 650 MW Kori-2 has been shut for maintenance since Feb. 17.

** Hanul complex (2): 950 MW Hanul-1 shut for maintenance since July 23; 1 GW Hanul-6 shut for maintenance since July 24.

** Habit complex (3): 1 GW Hanbi-3 shut for maintenance since May 11, 2018; 1 GW Hanbi-4 shut for maintenance since May 18, 2017 and 1 GW Hanbit-5 shut for maintenance since April 10, 2020.