OIL REFINERS TO SEE PROFIT BOON IN DUBAI'S DROP VERSUS BRENT
SK Energy Company and rivals including Reliance Industries Limited may raise their output as price declines for more dense crudes such as Dubai and Arab Medium boost processing profits, company officials and analysts said, Bloomberg said on Tuesday.
'The more sophisticated refiners benefit from a widening light-heavy spread,' said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. 'It would be a positive for most refiners and certainly help the export refiners like SK. You may see some increased operating rates.'
The premium of light crude oil grade Brent to Dubai, a benchmark for Asian refiners, widened to $2.02 a barrel onTuesday from a discount of 13 cents on Feb. 9, according to data from PVM Oil Associates Ltd. SK Energy, Korea's biggest refiner, plans to raise processing rates to 81.6 per cent this month from 73.6 percent a year ago, a company official said March 31.
Refiners with the ability to upgrade fuel oil into gasoline and diesel gain from a wider difference in heavy and light crude oil when they have access to cheaper feedstocks to process into higher value products. Complex plants such as SK's Ulsan facility and Reliance's Jamnagar, both designed to export high- quality fuels to the U.S. and Europe, may be the biggest beneficiaries.
SK Energy may process about 910,000 barrels of oil a day this month, said the company official, who asked not to be identified because he isn't authorized to talk to the media. That compares with about 820,000 barrels a day a year earlier.
The company can refine up to 1.115 million barrels a day.
The Ulsan plant has two desulfurization units that help lower the sulfur content of fuels to meet specifications for the U.S. and European markets as well as Asian countries. The facility also contains a 50,000 barrel-a-day fluid catalytic cracking unit that turns heavier fuels into gasoline and a 35,000 barrel-a-day hydrocracker that does similar processing into middle distillates.
Reliance's 580,000 barrel-a-day export plant at Jamnagar is considered among the most sophisticated in the world with a Nelson Complexity Index rating of 14. The index measures a refinery's ability to process oil into high-value products.
Reliance may raise imports of heavier Middle Eastern crudes as the Organization of Petroleum Exporting Countries increases their output, according to analysts from JBC Energy GmbH.
Reliance 'lies only two or three days away from the world's largest crude production region,' JBC said in its weekly Asian report. 'Widening light-heavy differentials are expected to help it grab oil from the four corners of the earth.'
Demand for heavier grades may reduce OPEC's compliance with output quotas further, Shum said. The group met only 53 percent of the cuts in March, down from 54 percent in February, according to a survey of oil companies, producers and analysts.
'A widening light-heavy spread is a good thing for the overall oil industry both upstream and downstream,' said Purvin & Gertz's Shum. 'That will mean more demand for oil and further leakage from OPEC is likely.'