Singapore — South Korea's appetite for Libyan crude oil has been lackluster so far this year and its demand could fall further as inconsistency in the North African producer's output and renewed security concerns surrounding its infrastructure dents the Asian buyer's interest.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
South Korea's crude oil imports from Libya in the first quarter tumbled 56% from the same period a year earlier to 1.573 million barrels, according to data released by Korea National Oil Corp.
The sustained strength in the Brent-Dubai price spread had initially prompted many South Korean refiners to shift their focus from the light sweet Libyan crudes that are linked to the European pricing benchmark, market participants said.
The Brent/Dubai Exchange of Futures for Swaps -- a key indicator of Brent's premium to the Middle Eastern benchmark -- averaged $4.02/b so far this month, the highest since June 2014 when it averaged $4.54/b.
A wider Brent-Dubai spread typically makes various crude export grades from Libya that are linked to the European benchmark less attractive than Dubai-linked Persian Gulf and Far East Russian grades.
In addition, several South Korean end-users have turned their backs on Libyan grades that they used to buy quite regularly -- such as El Sharara and Mesla Blend -- due to unstable output and export volumes amid ongoing violence in the country.
"Price would be the biggest factor of course, then there are some geopolitical issues like the ongoing militant activity in Libya," a senior KNOC official said.
Libya's output has recently been cut by 80,000 b/d after an attack on its export pipeline supplying the Es Sider oil terminal earlier in April.
The OPEC country's output recovered in 2017 to nearly 1 million b/d, having dropped to as low as 300,000 b/d in the years following the 2011 revolution. It remains vulnerable to losses, however, as militant groups continue to target key oil infrastructure.
SK Incheon Petrochem, which imported more than 4 million barrels of light sweet crude oil from Libya last year, has received no volume for the first quarter this year, company officials said.
SK Incheon has been monitoring prices and other conditions including the militant activity and production levels in Libya to decide on import volumes, they added.
South Korea's second-biggest refiner GS Caltex said it has not purchased any Libyan crude since June last year, while Hyundai Oilbank and S-Oil said they had not purchased a single barrel from Libya so far this year.
SK Energy said that it had bought 523,000 barrels of crude from Libya for delivery in February, but added that it rarely purchased Libyan crude and had no plans to import on a regular basis.
It was not all doom and gloom for Libya's sales to Northeast Asian buyers, however, as South Korean petrochemical firms are expected to buy condensate from the country due to tightening supply Middle Eastern ultra-light crude.
Reflecting Iran's increasing domestic requirements following the startup of phase two of the country's Persian Gulf Star condensate refinery in February, the National Iranian Oil Company has slashed South Pars condensate term allocations for the second quarter by 25% from Q1 to around 350,000 b/d.
The Persian Gulf producer exported as much as 600,000 b/d of South Pars condensate during the first half of 2017, an NIOC source said earlier.
Hanwha Total Petrochemical recently said that it was considering ramping up purchases of African ultra-light oil including Equatorial Guinea's Alba and Libya's Mellitah condensate this year in order to make up for the loss of Iranian supply.
South Korea's biggest petrochemicals maker received a 520,000-barrel cargo of the Libyan condensate each in January and February, compared with just three cargoes totaling 1.56 million barrels in the whole of 2017, a company official said earlier.
Apart from South Korean buyers, other regional end-users were also eyeing Libyan condensate, market participants said.
China's Fujian Fuhaichuang Petroleum and Petrochemical recently said that it was interested in low sulfur ultra-light grades within and beyond the Asia Pacific market including Australia's North West Shelf and Pluto, Indonesia's Senoro, Equatorial Guinea's Alba and Libya's Mellitah condensates. "Availability of these condensates is low while prices are high. But we have to take some as we need low sulfur feedstocks in the initial stage," the company source said earlier.
Fujian Fuhaichuang, formerly known as Dragon Aromatics, is set to restart its 4 million mt/year condensate splitter in July following a three-year shutdown.
-- Gawoon Philip Vahn, firstname.lastname@example.org
-- Charles Lee, email@example.com
-- Edited by E Shailaja Nair, firstname.lastname@example.org