S-Oil shuts processing units after one killed, nine injured in blast

ULSAN, South Korea -- S-Oil Corp., Saudi Aramco’s refining unit in South Korea, has shut some of its production facilities in a move that will tighten gasoline supply further in Asia after a blast at its refinery complex on Thursday killed one and injured nine others.

An explosion hit the refinery’s alkylation unit at Onsan industrial park in Ulsan, 414 kilometers southeast of Seoul at approximately 8:50 p.m. local time during the startup process after maintenance work, according to S-Oil.

The third-largest refiner in the country suspended operations of its No. 2 alkylation unit and nearby processing facilities such as the No. 2 residue fluidized catalytic cracking (RFCC) unit and the No. 2 paraxylene (PX) unit, it said on Friday. RFCC is used for upgrading heavy feedstock to light products such as gasoline, while the alkylation unit produces alkylates that are blended with gasoline to boost octane levels and quality.

“The affected plant will be shut down until the root cause is identified and preventive measures are put in place,” Chief Executive Hussain A. Al-Qahtani said, apologizing during a press conference.

“In the meantime, we are exploring the best solutions to make sure this does not cause any interruption in domestic fuel product supply by making full use of our inventory as well as our domestic/overseas network.”

TO FURTHER TIGHTEN GAS SUPPLY

The shutdown is expected to tighten gasoline supply further in Asia as S-Oil is a major fuel exporter in the region, fuel market participants said.

S-Oil exported 401,000 barrels a day of refined products including gasoline in the fourth quarter of last year, far more than the 369,000 barrels a day sold at home, according to its quarterly earnings statement. It did not provide a detailed breakdown by fuel type in the overseas shipments. 

Gasoline prices in Asia rose on Friday, in line with expectations, with the Asian benchmark gasoline with 92% octane up about $5 per barrel to $137.7, according to gasoline trading sources in Singapore, Asia’s energy trading hub.

“Gasoline prices may rise further following the incident when fuel supply is already tight,” said a gasoline trader in the city-state.

South Korea’s gasoline export volume shrank to a 10-month low of 953,233 tons in April, according to customs data, contributing to the regional tight supply.

The country’s overseas sales of gasoline are likely to decline further, given the shutdown of S-Oil’s processing units.

The labor ministry requested the refiner to shut the alkylation unit while considering calls for the suspensions of other units.

S-OIL CEO APOLOGIZES

S-Oil will fully cooperate with related authorities in dealing with the incident and finding its cause, CEO Al-Qahtani said.

In apologizing for the blast, he said the company will provide full support to ensure the injured workers get the best treatment possible and the utmost care to assist in their recovery.

“I would like to express my deepest condolences and apologies to the family of the deceased man who lost his life from the incident at S-Oil Onsan Refinery,” Al-Qahtani said.

“My apologies also go out to the injured workers and local residents close to the refinery to whom we've caused discomfort.”

Write to In-Sik Ha at hais@hankyung.com
Jongwoo Cheon edited this article.