S.Korea's SK Energy buys 1st U.S. crude oil in move away from Middle East

GS Holdings

08/08/2017 21:00

* 1 mln barrels of U.S. WTI Midland crude due mid-Oct 
-official 
    * 1 mln barrels of Mexico's Isthmus crude also to arrive in 
Oct 
    * Non-MidEast suppliers seek Asia deals after OPEC output 
curbs 
    * SK received 2 mln barrels of Kazakhstan CPC in July/Aug 
    * MidEast crude import share down to 83.7 pct, from 86 pct 
 
    By Jane Chung 
    ULSAN, South Korea, Aug 9 (Reuters) - South Korea's top 
refiner SK Energy is buying its first-ever continental U.S. 
crude oil shipment as producer club OPEC's output cuts raise 
MidEast prices, giving other suppliers a chance to compete for 
the world's juiciest oil market - Asia.  
    One of Asia's biggest fuel importers, SK Energy said it will 
import 1 million barrels of U.S. WTI Midland crude in 
mid-October. The oil will be processed at its 840,000 
barrels-per-day (bpd) refinery in Ulsan, about 250 miles 
southeast of Seoul, showcased in a recent media tour.  
    The order is dwarfed by SK Energy's overall oil needs of 270 
million barrels per year, mostly supplied from the Middle East. 
But it comes as big players in Asian oil imports snap up more 
U.S. crude since the Organization of the Petroleum Exporting 
Countries (OPEC) pledge to rein in output through March 2018 to 
drain a supply glut and prop up prices.  O/R   urn:newsml:reuters.com:*:nL3N1JR35Q  
    "Light crude oil has become more economically viable than 
before and by importing light crude from Kazakhstan, U.S. and 
Mexico, it helps us boost profits and diversify sources," said 
Kim Woo-kyung, spokeswoman at the conglomerate SK Innovation Co 
 096770.KS  which owns SK Energy.  
    Kim said the refiner is also buying more from Mexico and 
Kazakhstan. "We have decided to import as well 1 million barrels 
of Mexico's Isthmus crude," also to arrive at Ulsan in October, 
she said.  
    SK Energy received a total of 2 million barrels of 
Kazakhstan CPC crude for arrival in late July and early August, 
Kim said. 
    Continental U.S. oil exports to South Korea have become more 
frequent since the United States in 2015 relaxed crude export 
rules, and have been spurred since the OPEC curbs were 
announced: GS Caltex, South Korea's No.2 refiner, said last 
month it bought a total of 3 million barrels of U.S. crude for 
August-October delivery.  urn:newsml:reuters.com:*:nL4N1K324D urn:newsml:reuters.com:*:nS6N1BB00V   
     
    NARROWING BRENT-DUBAI SPREAD 
    Korean refiners have long been eager to gradually diversify 
their crude slate in an attempt to reduce heavy dependence on 
the Middle East. While MidEast crude imports made up 83.7 
percent of total overseas orders in the second quarter, that was 
down from 86 percent in the same period a earlier year, 
according to data from Korea National Oil Corp (KNOC).  
    On top of increasing oil flows from North America, South 
Korean refiners had stepped up purchases of Brent-related crude 
from the North Sea, as well as Africa.  urn:newsml:reuters.com:*:nL3N1HT257 
    The narrowing spread between Brent crude and Dubai crude 
 DUB-EFS-1M  made the Brent-linked crude grades more attractive 
to Asian buyers as it remained below $1 per barrel for three 
months from April, although it widened nearly $1 a barrel in 
July on stronger demand.  urn:newsml:reuters.com:*:nL4N1KP343 
    Lee Chung-hwan, manager at the Ulsan Maritime Agency that 
oversees arrival and departure of oil tankers in Ulsan, said the 
types of crude cargoes had increased this year, now also 
including Kazakhstan's Caspian Pipeline Consortium (CPC) blend. 
    "Kazakhstan CPC crude used to come once or twice a year, but 
so far this year, SK Energy has brought in Kazakhstan CPC crude 
four times," Lee said. 
    As oil trickles in from the new sources, analysts say change 
in the overall structure of supply will be gradual.  
    "Various crude oil supplies will keep coming little by 
little in the long-term," said Lee Dal-sok, senior research 
fellow at state-run Korea Energy Economics Institute.   
 
 
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GRAPHIC: U.S. onshore oil exports to South Korea    http://reut.rs/2htJdau 
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 (Reporting by Jane Chung; Editing by Henning Gloystein and 
Kenneth Maxwell) 
 ((jane.chung@thomsonreuters.com; +82 2 3704 5667; Reuters 
Messaging: jane.chung.thomsonreuters.com@reuters.net)) 
 
Keywords: SOUTHKOREA SKENERGY/CRUDE