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  • South Korea South Korea
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l Special Reports l

n-depth, comprehensive intelligence reports, composed by analysts that are involved in the heart of their industries. Through their expertise we provide data on new trends, issues and technologies in order to assist our clients gain an insight into new opportunities and prospects in the Korean market.

l Executive Summary l

Korea oil industry has become a major influence in the Asia oil market on the back of robust economic growth in the past decades. As the fourth largest oil market in Asia, understanding Korea oil industry is essential for understanding global and Asian oil industry.

Oil is a major energy source for Korea, accounting for 40% of total energy demand in 2012. The government has diversified Korea’s energy demand with policies supporting use of natural gas and nuclear power, but a sizable demand for oil is still coming from the industrial and transportation sectors. In 2012, Korea consumed 2.5 mbd of petroleum products.

On the supply side, Korea has four oil refiners: SK Innovation, GS Caltex, S-Oil, and Hyundai Oilbank. The four refiners have a 2.9 mbd of refining capacity in total and exports around a half of their products, mainly gasoline, jet fuel, kerosene, diesel, and fuel oil. Most of the exports head toward Asian countries such as China and Japan.

The industry has a high dependency on Middle East crude oil. Korea needs to import all of its crude feedstock and 85.1% of the imports came from Middle East in 2012. The largest exporter was Saudi Arabia.

The Korean oil industry is suffering from low refining margins since 2012. The low margins are due to the oversupply conditions caused by demand slowdown in emerging and developed countries and aggressive capacity build-up in China and India. For the time being, we expect the low profitability to continue, while we see longer-term opportunities such as motorization in emerging countries, closures of old refineries in developed countries, and Korean refiners’ diversification into high value-added non-fuel business – petrochemical and lube base oil.

For the Korean oil industry, Ministry of Trade, Industry & Energy (MOTIE) remains the top regulatory authority, although its role has far weakened since the oil market was fully liberalized in the late 1990s. MOTIE set up rules for strategic reserves, fuel spec standards including bio fuel blending, and petroleum tax, guiding the industry and the market toward a stable and sustainable growth. Korea National Oil Corporation (KNOC) is the only state-owned oil company in Korea and is actively involved in overseas E&P projects to improve the country’s energy security.

The four refiners in Korea have different growth stories and are also seeking different paths for their growth. SK Innovation is diversifying its business areas into overseas E&P and alternative energy sources such EV battery. GS Caltex plans to complete its PX project by next year. Hyundai Oilbank is entering into lube base oil business through JV with Shell. S-Oil, a refining arm of Saudi Aramco, seems to be planning a large-scale investment, but the details are not disclosed yet.

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