- South Korea’s top refiner SK Innovation will increase the supply of low sulfur fuels next year.
- Oil products are expected to have a lower sulfur content making a shift from crude feedstock to light sweet grades, said a company person.
South Korea’s top refiner SK Innovation will increase the supply of low sulfur fuels to 130,000 b/d next year, from the current 23,000 b/d, reports S&P Global Platts.
Implementation of marine fuel regulation
The increase in the supply is intended to meet stronger demand due to the implementation of marine fuel regulation by the International Maritime Organization from January 1, 2020.
An official said that the refiner will also seek to increase imports of light sweet crude with higher yields of middle distillates to brace for the IMO 2020 regulation.
SK Trading International
The refiner’s trading arm SK Trading International is currently supplying 23,000 b/d of low-sulfur light fuels through offshore blending of 86% of gasoil and 14% of bunker C fuel oil.
The company personnel commented that SK Trading International aims to increase its oil blending capacity from an average 23,000 b/d to 90,000 b/d next year.
The trading unit has been involved in the oil blending business since 2010, supplying low-sulfur fuel onboard a tanker after processing half-finished product.
Big leap on IMO’s 0.5% global sulfur cap
The official added that the blending business is expected to take a big leap on the back of the IMO’s 0.5% global sulfur cap on marine fuels.
SK Innovation will also produce 40,000 b/d of low-sulfur fuel oil from its vacuum residue desulfurization, or VRDS, that will start commercial production in April 2020.
- The VRDS will transform heavy fuel oil into value-added low-sulfur light products, producing 34,000 b/d of 0.5% sulfur fuel oil and 6,000 b/d of gasoil.
- The VRDS will increase the company’s heavy oil upgrader capacity to 239,000 b/d from 199,000 b/d currently.
“So, the company’s total low-sulfur fuel oil supply would reach 130,000 b/d,” the official said.
Contracts with major shippers
SK Innovation has already concluded a series of contracts with major shippers to provide low sulfur fuel oil.
There would be a boost in the crack margins because of the short supply in low sulfur fuel oil, said the company official.
The official also said SK Innovation would increase purchases of light sweet crude mainly from the US, Russia or Kazakhstan, citing stronger demand of middle distillates under the IMO marine fuel regulation.
The refiner would also use more light crude to make up for the loss of Iranian condensate, while it has been replacing South Pars condensate with barrels from Qatar, Russia and the US, the official said.
A company source says that the refiner imported a total of 22.07 million barrels of crude from the US over January-May this year, jumping more than four times from 5.28 million barrels in the same period in 2018.
SK Innovation’s US grades
The US grades SK Innovation imported for the first five months were mostly light sweet WTI and Eagle Ford Light and Eagle Ford condensate.
SK Innovation has also imported an average 1 million barrels/month of Kazakhstan’s light sweet CPC Blend crude for the past several months, while increasing purchase of Russia’s light sweet Sokol grade this year.
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source: S&P Global Platts
