Oil and gas
BMI has said that South Korea will benefit from a lower oil price environment. The company has also said that not only will the country’s refiners gain some breathing space after years of poor refinery margins, but it could also see a lower import bill. Gas consumption, BMI has said, is likely to trend downwards towards 2023, owing to slower economic growth in the short term, and a shift away from gas in the power sector in the longer term.
Looking a bit more closely at the refining sector, the country’s refining industry is large and is expected to keep import requirements high. It is indeed heavily exposed to the Middle East, given that the region supplies over 80% of its crude oil needs. BMI has commented that it will be more difficult for South Korea to diversify its crude import sources away from the Middle East given its willingness to offer competitive rates in exchange for market share. The lower oil price environment will however provide short term relief for refining margins in South Korea. Asia will also remain a dominant export market for the country’s refined products and BMI has said that flows to Western Europe will be supported by South Korea’s free trade agreement (FTA) with the EU that allows it to complete with exports from the US.
When it comes to gas BMI has said that South Korea is expected to remain a large LNG importer. Yet, the company forecasts a slow decline in its gas import requirements to 2023 as consumption is limited by slower economic growth and a switch to alternative sources of energy particularly in the power sector.
South Korea has been on drive to expand paraxylene (PX) and this is expected to tap into China’s massive deficit in the polyethylene terephthalate (PET) chain. However, BMI has warned that as Chinese economic growth cools and its capacities develop, export led growth will have to diversify. The industry is reportedly focusing on adding value to the chemicals chain and serving domestic electronics and automotive industries with an emphasis on quality and specialisation. South Korea’s demand for naphtha, which is used as the country’s sole petrochemical feedstock, is increasing with the development of naphtha based aromatics capacity. BMI has said that over the medium term, South Korea will have a stable supply of naphtha feedstock, which does depend on refining rates. Yet, BMI has reported that Korea’s refineries have historically suffered from chronic over capacity and low operating rates.
Edited from report briefs by Claira Lloyd
Read the article online at: https://www.hydrocarbonengineering.com/refining/17022015/oil-gas-petchem-south-korea/