Ultra-light crude and naphtha sellers in Asia may focus on South Korea for potential sale of prompt oil supplies after a crude tanker carrying close to a million barrels of Iranian condensate caught fire over the weekend, failing to reach the country’s petrochemical complex in Daesan as planned, market sources said Monday.
An Iranian tanker, carrying around 960,000 barrels of South Pars condensate, caught fire late Saturday after a collision with another vessel off in the East China Sea. The cargo was purchased by South Korea’s Hanwha Total Petrochemical and it was scheduled for delivery to Daesan on January 8-10.
Hanwha Total said, “the company will implement its own contingency plan as it has sufficient ultra-light crude in storage units, but may need to look for some alternate feedstocks in the regional spot market for prompt delivery.”
“We have our contingency plan for backup. We have an alternative fleet and backup storage to replace it,” a spokesperson at Hanwha Total said.
“Still, we might need to look around (in the regional spot) markets to see if any prompt (condensate or naphtha) is available. It’s probably best to buy straight-run naphtha because regional condensate supply is very tight,” a company trade source said.
Industry sources said that Hanwha Total may scramble to find naphtha for the typically busy winter season as plants typically run close to their maximum capacities during early first quarter.
“Northeast Asian, especially South Korean, splitters run close to maximum capacity in winter so they will be extremely short condensate and naphtha now,” said a Singapore-based sweet crude trader.
Hanwha Total has been consistently receiving 100,000-120,000 b/d of South Pars condensate for its 180,000 b/d condensate splitter at Daesan since Iran’s return to the international market after the lifting of economic sanctions in early 2016.
Naptha Suppliers Eye an Opportunity
Some Asian oil product traders said Hanwha Total could seek some naphtha or condensate for prompt month delivery in an effort to cover its unexpected short position. The company has already emerged Monday seeking an unspecified volume of open spec naphtha for second-half February delivery, with an option to delivery in H1 February into Daesan. The tender closes January 8.
Hanwha Total typically buys around two to three cargoes of heavy full range naphtha in every half-month trading cycle, or around 100,000-150,000 mt in a single month.
Heavy full range naphtha is sought by Asian petrochemical producers to split into heavy naphtha and light naphtha, in which the latter could then be further processed into petrochemicals.
Condensate splitters in South Korea often shift to using naphtha as feedstock when condensate becomes scarce or relatively expensive. Meanwhile, regional condensate traders noted that it may be difficult to find large volumes of ultra-light crude ready for delivery into South Korea within next five to 10 days.
“You’re looking for something that can arrive within H1 January, which is difficult. For them, the only way is to buy naphtha,” said a Singapore-based condensate trader. In addition, traders said that Australian North West Shelf condensate may not be a suitable option for Hanwha Total to replace its lost South Pars barrels due to the difference in crude quality and a relatively lengthy voyage.
“South Pars is real sour oil with hefty mercaptan content. NWS is the total opposite with almost zero sulphur content. Besides, it will still take around 10 days [or more] for a NWS cargo to travel to Daesan from Dampier,” said a condensate trader at a South Korean refining company.
Traders also pointed out that prompt NWS condensate may not be available as most of the January cargoes have been secured by Indonesia.
Late last year, Indonesia’s state-run Pertamina purchased three 650,000-barrel cargoes of NWS condensate for loading in January 3-4, 15-16 and 23-24 for delivery to its Trans Pacific Petrochemical Indotama petrochemical complex in Tuban.
Sea News, January 9