South Korean refiners to invest in low-sulphur fuel

According to Reuters, South Korean refiners are set to spend $5 billion on plant upgrades in order to comply with the stricter rules about shipping fuel, thus enhancing the production of low-sulphur fuel and high-end products.

Because of the high price of low-sulphur products many refiners haven’t invest in them. South Korean refiners hope to be benefited from this investment and make profit by producing better quality fuel oil, Hwang Yu-sik, an analyst at NH Investment & Securities noted.

Namely, SK Innovation and Hyundai Oilbank are going to invest more than $5 billion over the next one to three years on low-sulphur units, Reuters reports.

Furthermore, S-Oil, is constructing a $4.3 billion residue fuel oil upgrading and olefin production facility, which is expected to have been completed in the first half of 2018 and says that margins for high sulphur fuel oil from 2020, are becoming worse.

Additionally, Hyundai Oilbank wants to expand its heavy oil upgrading capacity in the second half of 2018 and plans to add a new solvent deasphalting (SDA) unit to produce more low sulphur gasoil, Reuters mentions.

Moreover, SK Innovation announced its plans to spend  $900 million to build a 40,000 barrels-per-day (bpd) vacuum residue desulphurisation unit by 2020.

The new regulation on fuels will increase the demand for gasoil and will give incentives to other refiners to adapt in order to meet the demand, Wood Mackenzie analyst Suresh Sivanandam emphasized.

The above developments are a result of IMO’s decision to implement a 0,5% global sulphur cap in shipping fuel from 2020. This decision represents a significant cut from the 3.5% m/m global limit currently in place and demonstrates a commitment by IMO to ensure that shipping reduces its hazardous emissions and meets its environmental obligations.