Sold 'Expensive Oil' Well... Petroleum Product Exports $33.2 Billion, Highest Growth Rate in 10 Years at 55%

Exports of High Value-Added Products Such as Gasoline and Lubricants Increase
More Than Half of Crude Oil Import Value Recovered Through Product Exports

Global Oil Demand Expected to Recover This Year
"Export Value and Volume Expected to Rise Together"

[Asia Economy Reporter Moon Chaeseok] Last year, the refining industry successfully implemented an export strategy focused on high value-added products such as gasoline and lubricants, achieving the highest export growth rate in 10 years. This success came despite a decline in refinery operating rates, thanks to a bold execution of the 'premium strategy.'

The Korea Petroleum Association announced on the 27th that the export value of petroleum products from domestic refiners including SK Energy, GS Caltex, S-Oil, and Hyundai Oilbank totaled $33.23534 billion last year. The export value increased by 54.6% compared to the previous year, marking the highest growth rate since 2011's 64.2%.

'Premium Export Strategy' Paid Off... Profitability Also Increased

The association analyzed that despite COVID-19, exports surged mainly because rising oil prices increased export unit prices and the refining industry's export strategy aligned well with market conditions. Although export volumes of major petroleum products such as diesel and jet fuel decreased by 10-16%, gasoline exports increased by 33% due to recovering global mobility demand. Lubricant exports also rose by 1.3% thanks to margin expansion. The export unit prices of gasoline and lubricants were $81.0 and $130.4 per barrel respectively, far exceeding the overall product average of $79.2.

Profitability was also high. Export profitability, calculated by subtracting crude oil import prices from petroleum product export prices, reached $9.1 per barrel, more than doubling from $3.7 the previous year. This significantly contributed to improving export structure and refining companies' business performance. Despite a 4.4% decrease in petroleum product export volume to 419.62 million barrels due to lower operating rates, strategic exports of high value-added products like gasoline and lubricants played a major role.

Crude oil import costs were also largely recovered. More than half (53.5%) of the $62.13753 billion spent on crude oil imports last year was offset by petroleum product exports ($33.23534 billion). As a result, petroleum product exports ranked 5th among major national export items announced by the Ministry of Trade, Industry and Energy, rising one position compared to 2020.

The outlook for this year’s market is also positive. Global institutions predict that the recovery in global petroleum product demand, which began in the second half of last year, will continue. The association forecasts increases in both export volume and export value. Regarding this year’s petroleum demand growth rates, the Organization of the Petroleum Exporting Countries (OPEC) projects 4.3%, the International Energy Agency (IEA) 3.4%, and the U.S. Energy Information Administration (EIA) 3.7%. Rising global economic growth rates are expected to boost exports. All three organizations anticipate demand will surpass pre-COVID 2019 levels.

However, the association expects supply uncertainty to be higher than demand recovery. Variables include production capacity concerns within the 'OPEC Plus' (OPEC+) group of major non-OPEC oil-producing countries such as Russia, as well as geopolitical instability in Europe and the Middle East. Accordingly, the association anticipates firm oil prices and strong refining margins.

Exports to Australia Up 49%... "Swift Response to Australian Production Cuts"

Based on last year’s petroleum product export volumes, China was the largest customer. The shares were China (21.5%), Japan (12.6%), Singapore (12.1%), the United States (10.3%), and Australia (10.1%).

China maintained its position as the largest export destination for six consecutive years since 2016, but after mid-June last year, the Chinese government implemented policies such as imposing consumption taxes on Light Cycle Oil (LCO), causing exports to China to decline by 28.4% compared to the previous year. Consequently, dependence on China dropped from 29% to 22%, a 7 percentage point decrease.

In contrast, exports to Australia increased by 49%. Australia’s refining capacity halved after British Petroleum (BP) and ExxonMobil shut down the Qunana refinery (producing 145 million barrels per day) in 2020 and the Altona refinery (producing 86,000 barrels per day) last year, respectively, forcing the country to rely on petroleum product imports. Domestic refiners responded swiftly to this issue, increasing export volumes to Australia.

By petroleum product, diesel accounted for the largest share at 42% of total petroleum product exports, followed by gasoline (23%), jet fuel (14%), and naphtha (7%). An association official said, "Since the second half of last year, as petroleum demand recovery became visible, domestic refiners’ operating rates have shown a gradual upward trend. This year, the refining industry will contribute to increasing national exports by diversifying export destinations and exporting high value-added products in line with global petroleum demand growth."

This content was produced with the assistance of AI translation services.