S Korea’s S-Oil shutdowns in Ulsan after blast fuel feedstock shortage concerns
SINGAPORE (ICIS)–S-Oil’s shutdown of several plants at its Onsan refinery in Ulsan, South Korea after a fatal blast on 19 May and a government probe that would ensue are fueling concerns of a possible shortage of feedstock for neighbouring downstream operations.
The blast occurred at the refinery’s alkylation unit at about 20:50 Seoul time (13:50 GMT) on 19 May, killing one person and injuring nine others.
It happened “during the start-up process after maintenance”, S-Oil chief executive Hussain Al-Qahtani said in a televised press conference on Friday.
“We presume there was a fire in the compressor during start-up and are working closely with related authorities to find the root cause,” Al-Qahtani said.
He added that the affected alkylation unit will be shut down until the cause is identified and preventive measures are put in place.
“In the meantime, we are exploring distribution [channels] to make sure this does not cause any interruption in domestic supply of fuel products by making full use of inventory and domestic [as well as] overseas network,” S-Oil chief said.
The company halted production at the No 2 alkylation plant, along with the nearby No 2 residue fluid catalytic cracking (RFCC) unit and a paraxylene (PX) unit, at the site in the southeastern city of Ulsan following the incident, S-Oil said in a filing to the Korea Exchange on Friday.
Alkylate is used a raw material for the production of clean gasoline.
S-Oil also temporarily shut its polypropylene (PP) production process linked to the No 2 RFCC unit, the company said in the regulatory filing.
The No 2 RFCC unit at the site can produce 705,000 tonnes/year of propylene, while the PP plant has a 405,000 tonne/year capacity, according to ICIS Supply and Demand Database.
The Onsan site can produce up to 187,000 tonnes/year of ethylene.
S-Oil’s Onsan refinery also has two alkylation units – a 14,000 bbbl/day unit and a 9,000 bbl/day unit; and two PX units with a combined 1.7m tonne/year capacity, the data show.
In mid-April, the No 2 RFCC unit had a compressor issue that shut it for two days.
The damage at the Onsan site “is under investigation,” S-Oil said in the bourse filing, adding that further announcement will be made when the damage is assessed.
A government probe into the incident may take at least two weeks to be completed, an industry source said.
“There is a possibility that the partial operation suspension could be prolonged due to the investigation,” Cho Hyunryul, an analyst at Samsung Securities, said in a note.
Ethylene supply from Onsan was not affected by the 19 May blast, with S-Oil continuing to provide cargoes to term customers, according to industry sources.
Base oils production at the site has not been affected but there could be logistics or supply chain disruptions after the incident, another source said.
S-Oil’s 300,000 tonne/year propylene oxide (PO) plant at the Onsan site was running, but there are concerns that operating rates may be reduced eventually amid the government probe, market sources said.
Among petrochemical companies with manufacturing operations in Ulsan include Hanwha Solutions and Lotte INEOS Chemical.
Operations at Hanwha Solutions’ three ethylene vinyl acetate (EVA) plants with a combined 120,000 tonne/year capacity were not affected, a company source said.
“We are investigating but [there is] no clear damage yet,” the source said.
For Lotte INEOS Chemical, operations at its 210,000 tonne/year No 1 and 200,000 tonne/year No 2 vinyl acetate monomer (VAM) plants in Ulsan were unhampered, a company source said.
“But depending on government action, there may be changes on the plant operating rates,” the source said.
Focus article by Nurluqman Suratman
Additional reporting by Samuel Wong, Izham Ahmad, Heng Jun Kai, Helen Lee, Keven Zhang. Jasmine Khoo, Matthew Chong, Julia Tan and Jackie Wong