With supply from a major producer, Iran uncertain, big condensate user South Korea is scouring the world for alternative sources of this key ingredient in its large chemical industry, the media reports on Tuesday.
The producers are scouring to avert shortages – a process that is proving to be costly for buyers.
Condensate, a type of ultra-light crude oil, is a feedstock for South Korea’s petrochemical industry.
Iran and Qatar are major condensate suppliers of the condensate that is a by-product of natural gas production.
However, Iran’s exports have fallen sharply this year as production in its South Pars gas field struggles to keep up with rising domestic demand.
Meanwhile, renewed U.S. sanctions on Iran’s petroleum industry crimp exports.
With Iranian condensate in the past years making up more than half of Korea’s overall supply, the shortfall is forcing Korean buyers to seek alternative supplies.
SK Incheon Petrochem, a unit of SK Innovation; Hyundai Chemical, a subsidiary of Hyundai Oilbank Corp; and Hanwha Total Petrochemicals Corp (HTC) are South Korea’s biggest condensate buyers.
“There is huge uncertainty over sanctions.
“’We can’t build a strategy with huge uncertainty in volume,’’ said Sebastien Bariller, Senior Vice President of feedstock purchasing, energy and optimisation at HTC.
Even if the United States extends waivers on sanctions, South Korea is bound by Washington’s condition to continue to reduce Iranian oil imports, said Kim Jae-Kyung.
Jae-Kyung is a research fellow at the Korean Energy Economics Institute.
“South Korea needs to look for other sources,’’ he said.
Bariller said 2018 had been “very special and difficult’ because there were “no more supplies from Iran’’ since the middle of the year.
HTC had bought condensate from “nearly all alternative origins,’’ he said.
The U.S. sanctions and rising domestic demand could cap Iran’s South Pars condensate exports at between 100,000 and 200,000 barrels per day (bpd) in 2019-2020.
This will be down from 400,000-500,000 bpd in 2017, according to consultancy FGE.
Korea’s shift will be a painful loss in revenue for Iran’s already battered economy.
For South Korea, the shift could help deepen ties with its closest political ally, the United States, where production of condensate and naphtha, is growing fast.
“Given its relationships with the U.S. … it would bode well for South Korea … to buy more U.S. oil,’’ said Shin Hyun-don, Professor of Energy Resources at South Korea’s Inha University.
U.S. condensate and liquefied petroleum gas (LPG) could account for 27 per cent of HTC’s total feedstock in 2022.
This could be up from less than five per cent currently, HTC’s Bariller said.
He said HTC was also upgrading some of its facilities to handle LPG, another similar product, of which the United States is a major producer.
Purchases from Saudi Arabia, Libya and Australia of condensate have also risen, according to SK Innovation.
South Korean companies had to pay high premiums to secure enough Qatari condensate to meet more than half of their demand.
Alternative fuels like naphtha, which results from refinery distillation, have increasingly found their way into Korean facilities, said an official at Hyundai Oilbank, who spoke on condition of anonymity.
KEEI’s Kim said high feedstock costs could erode the competitiveness of South Korea’s petrochemical industry against China.
Apart from the costlier feedstock, Korean buyers may need to retrofit their facilities that are used to Iranian condensate.
Using new condensate grades from the United States or Australia could cause technical problems, industry sources said, including the handling of residue and contaminants such as metals in U.S. Eagle Ford condensate.
“It’s not easy to find condensate of similar quality to Iran’s,’’ Kim said.
He added that South Korean buyers may have to spend up to 300 billion won ($270 million) to re-configure their splitters if they want to process U.S. condensate. ($1 = 1,109.5300 Korean won)
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from LEADERSHIP Nigeria Newspapers. Contact: firstname.lastname@example.org
- COVER STORIES19 hours ago
PMB: You Can’t Decide For North, ACF Tells Northern Elders
- POLITICS18 hours ago
Nwosu Alters Imo Gov’ship Calculation With AA
- NEWS19 hours ago
Ex-Army Chief, Salihu Ibrahim, Dies At 93
- NEWS19 hours ago
Secondus Raises The Alarm Over Plot To Arrest Atiku, Saraki, Dogara, Others
- SPORTS17 hours ago
Abuja 2018: Zamfara, A’Ibom, 15 Others Missing On Medal Table
- NEWS18 hours ago
My Refusal To Pervert Justice Caused My Ordeal –Justice Salami
- NEWS5 hours ago
PDP supporters rally for Atiku in Nasarawa
- WORLD8 hours ago
Minimum Wage Rises In UK