Norwegian condensate flows to NE Asia grow as refiners search for South Pars alternatives

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Condensate flows from Norway to Northeast Asia have been growing in recent months as refiners there increasingly take to sampling grades from outside Asia to replace falling exports from Iran, trade sources said Monday.

In April, South Korea’s Hyundai Oilbank made its first purchase of Norway’s Ormen Lange condensate from state producer and marketer Equinor for a 700,000-barrel cargo for delivery in June, according to sources.

Shipping fixtures and S&P Global Platts trade flow software cFlow showed another cargo of Ormen Lange condensate left its loading port of Nyhamna, Norway in early June and was set to be discharged later this week at Incheon, South Korea.

South Korea’s condensate imports from Norway

It was not clear who bought that cargo, though SK Incheon Petrochem operates a 100,000 b/d condensate splitter at Incheon.

Most recently, an Aframax-sized cargo of Norway’s Snohvit condensate for delivery in August was heard sold to Hyundai Oilbank by Equinor, according to sources.

Latest data from Korea National Oil Corp. showed South Korea imported 750,000 barrels of condensate from Norway over January-May.

Both Ormen Lange and Snohvit condensate are ultra-light crude grades with extremely low sulfur.

Ormen Lange condensate has a gravity of 62.5 API and sulfur content of 0.003%, while Snohvit condensate has a gravity of 62.5 API and a sulfur content of 0.011%, according to assays from Equinor.

While 2018 is not the first time Norwegian condensate has moved to Asia — Ormen Lange condensate in previous years was sold to refiners in Southeast Asia according to sources — the grade is nonetheless a relatively new entrant in Northeast Asia.

Sources said that at least one Aframax-sized cargo of Norwegian condensate was now being delivered to Northeast Asia each month, mainly to South Korea.

Prior to this, around four to five cargoes would arrive in Asia each year, one sweet crude trader told Platts earlier.

“It’s not always the South Koreans. Sometimes the Thais take, sometimes ExxonMobil,” the trader said.

Other sources however, said that Norwegian condensate has always been moving to Asia on a regular basis, adding that it was not a viable alternative to Iran’s South Pas condensate due to quality differences.

“South Pars is not replaceable. South Pars is a sour condensate, whereas Ormen Lange condensate is very sweet,” one trader with knowledge of Equinor’s operations said.

ARBITRAGE CONDENSATE INCREASINGLY AN OPTION

The growth in flows of Norwegian condensate to Asia comes amid sharply declining exports of Iran’s South Pars condensate to Northeast Asia.

South Korea for one, imported 6.01 million barrels of crude and condensate from Iran in May, down 27% from the same period last year and down 40% from April. Sources attributed the fall mainly to lower exports of Iranian condensate.

Iran has been gradually scaling down exports of South Pars condensate as it reserves more of the grade for the phased start-up of its 360,000 b/d Persian Gulf Star refinery.

South Pars condensate previously made up 70%-80% of the baseload feedstock for Hyundai Oilbank and Hanwha Total Petrochemical’s condensate splitters before exports started to fall.

Hyundai Oilbank operates a 130,000 b/d condensate splitter and Hanwha Total a 180,000 b/d splitter, both in Daesan.

To combat the decline, Northeast Asian refiners have searched increasingly beyond Asia to make up for the loss.

Sales of African condensate to Northeast Asia have also become increasingly regular, in addition to condensate from Norway.

Apart from Equatorial Guinea’s Alba condensate and Libya’s Mellitah condensate, both of which move to Northeast Asia on a regular basis, sources said Nigeria’s Escravos condensate has also been moving to South Korea regularly since around the first quarter of this year.

Hanwha Total, for instance, was most recently heard to have bought two cargoes of the grade for delivery in August, one of which was from oil major Chevron.

“Escravos condensate comes here [Asia] once a month. It’s good enough to be fed directly to crackers, so European steam crackers used to take a lot,” a sweet crude trader said.

“But in February or March, they added a new stream so now it’s heavier and dirtier. The European steam crackers cannot take, so now it comes to Asia,” the trader added.

South Korean refinery sources previously told Platts in April that Qatari grades deodorized field condensate and low sulfur condensate will be their first choice to replace imports of South Pars condensate.

Condensate grades from Africa and Asia will follow as second-tier alternatives, while Norwegian condensates grades were being studied as an option.

(Source: Platts)

Sea News, July 25