Korean refiners and petrochemical companies could see higher prices for their products with the shutdown of major oil processing plants in Japan following the devastating earthquake there.
Share prices for these Korean companies’ refiners rose sharply yesterday in anticipation of improved profit margins.
Japan is the world’s second largest crude oil importer and third largest oil consumer, accounting for 5.2 percent of global consumption.
JX Nippon Oil & Energy Corp., Japan’s largest oil refiner, closed down its plants in Sendai, Sashima and Negishi following the quake. It has asked SK Innovation to take delivery of crude oil imports that were originally intended for JX NOE.
“We need to check our inventory and storage facility capacity in order to bring in such a large unexpected amount of crude oil,” said an SK Innovation official. Analysts say that weaker demand for crude oil from Japan could lead to lower oil prices.
But the shutdown of key oil refining plants in Japan may result in shortages of gasoline and diesel that would benefit Korean refiners.
“Japanese refiners represent 5.1 percent of the world’s crude processing facilities. Plant shutdowns will push up refining margins in the global market,” said Park Jae-chul, an analyst at Mirae Asset Securities Co.
In addition, Korean petrochemical producers will benefit from plant shutdowns in Japan. Cosmo Oil Co., a Japanese petrochemical firm, closed its plant in Ichihara, which has a daily processing capacity of 220,000 barrels, after a fire broke out.
The Ministry of Knowledge Economy said that the quake caused eight Japanese petrochemical firms to halt operations of their plants in Kashima, Chiba and Kawasaki.
The plant shutdowns caused a shortage of 4.58 million tons of ethylene, which accounts for 57 percent of Japan’s overall production of ethylene, the ministry said.
It will take six months at the longest for the Japanese petrochemical companies to restore their plants, the ministry said, adding that Korea will not be affected by the shortages for some time.
Meanwhile, Japanese electric companies requested an emergency swap of liquid natural gas with Korea Gas Corporation. Kogas said Japan needs LNG as an alternative fuel source. The Ministry of Knowledge Economy said it will agree to the request since Korea has sufficient LNG supplies.
