Seoul — South Korean refiners said Monday, January 5, they would seek to import more US condensate to diversify their supply sources after the first such cargoes last year proved competitive against Middle Eastern ultra-light oil despite the longer shipping route.
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"We want to import more volume of US condensate as part of diversifying supply sources heavily dependent on the Middle East," a senior official at South Korea's biggest oil refiner SK Innovation told Platts.
SK Innovation bought a 400,000-barrel cargo of US condensate in November after the US Commerce Department in June granted approval to Pioneer Natural Resources and Enterprise Products Partners to export very light crude that had been processed through a distillation tower.
The refiner tested the US condensate and found it suitable to its existing facility, the official said.
He declined to disclose the import price, saying only that it was lower condensate imported from the Middle East.
"It was almost the same as the prices of condensate imported from the Middle East on arrival basis, which includes transportation costs," the official said.
"There's no benefits in terms of prices because we imported just one cargo of US condensate. If import volume increases, US condensate will get price competitiveness."
US condensate can be used in a 100,000 b/d splitter in SK Innovation's Incheon petrochemical complex or blended with other crudes to be used in its Ulsan complex, the official said. The Incheon complex started commercial output in July.
Last week, the Obama administration issued long-awaited guidance on condensate exports in light of the surge in US oil production.
While analysts said the document clarified some aspects by which processed condensate would count as product not restrained by US crude export restrictions, it left unclear other such as API gravity and potential mixing of condensates with heavier grades.
South Korea's second-biggest refiner GS Caltex, which bought 395,000 barrels of US condensate in September, also said it plans to increase imports from the US.
"We would seek to purchase more US condensate if it meets price conditions," a company official said.
GS Caltex, which does not have a condensate splitter, uses US condensate for blending with heavier crude.
The company is a 50:50 joint venture between South Korea's GS Group and US' Chevron.
South Korea's Samsung Total Petrochemicals also said it could consider buying US condensate to diversify its imports from Libya and the Middle East.
Samsung Total started commercial production at its 150,000 b/d condensate splitter in June.
S-Oil, which started its 89,000 b/d condensate splitter in 2011, has imported almost all of its crude and condensate requirements from Saudi Arabia and Qatar.
"We have no plans to import US condensate at the moment," a company official said.
S-Oil is 63.4% owned by Aramco Overseas Co., a subsidiary of Saudi Aramco.
Kim Jae-Kyung, an oil industry researcher at the state-run Korea Energy Economics Institute, said South Korean refiners need to import more US condensate to meet their expanded splitting capacity.
South Korea's refiners currently have combined 339,000 b/d in condensate splitting capacity, compared with 257,000 b/d of condensate imported by South Korea in 2013.
"There's enough room for splitting US condensate," Kim said.
The country's smallest oil refiner Hyundai Oilbank plans to build a 140,000 b/d condensate splitter by the second half of 2016 at its Daesan complex, south of Seoul, jointly with South Korea's Lotte Chemical.
"South Korea needs to diversify its condensate supply sources beyond the Middle East," Kim said.
South Korea imported 257,000 b/d of condensate in 2013, accounting for 10.3% of its total crude imports of 2.51 million b/d, according to a refinery source.
Of the total condensate imports, 62.7% came from the Middle East, mostly Qatar.
But Kim does not expect South Korea's imports of US condensate to rise sharply due to higher transportation costs.
"Freight costs of US condensate are estimated at $5/b, well above $1.50/b in importing Qatari condensate," Kim said.
"The price of US condensate needs to be low enough to offset the higher freight costs so that South Korea could import the ultra-light oil."
Nevertheless, the US condensate would boost South Korea's leverage in negotiations with Middle East producers, Kim said.