Thirst for gasoline in California gives SK big opportunity

SK Energy Co., Korea’s biggest oil refiner, may increase gasoline exports sevenfold next year, a plan that Credit Suisse Group said may boost the company’s 2009 earnings by almost 40 percent.
Monthly exports may rise to as much as 900,000 barrels from about 150,000 barrels after a residual fluid catalytic cracker starts operations, SK said in an e-mail.
The unit will be able to turn fuel oil into gasoline for potential sales to California, which has the most stringent emission standards in the United States.
SK Energy is competing with rivals including Reliance Petroleum Ltd. and Saudi Aramco to build plants that can process cheaper so-called heavy crude into higher-priced, less-polluting gasoline and diesel. Demand for cleaner-burning fuels is rising in the U.S. because of concerns over global warming and pollution.
“The ability to produce high quality, ultra-low sulfur gasoline will give SK an edge over rivals as competition intensifies,” said Victor Shum, a senior partner at industry consultant Purvin & Gertz Inc. in Singapore. “California alone burns as much gasoline in one day as Japan or China.”
Shares in SK, formed from a division of SK Corp., Asia’s fourth-largest refiner, climbed as much as 2.7 percent to 132,000 won yesterday.
The 60,000 barrel-a-day residue fluid catalytic cracker, or RFCC, is being built at SK Incheon Oil Co., SK Energy’s unit in Ulsan. The plant will be able to produce an additional 30,000 barrels a day of ultra-low sulfur gasoline that contains less than 0.001 percent sulfur.
The ability to boost output of gasoline and diesel from processing heavier varieties of oil will help boost the refiner’s earnings, Credit Suisse’s analysts Cho A-hyung and Chung Young-woo said in an Aug 1 report. The plant will be “key to the significant turnaround of SK Incheon Oil,” said the analysts.

Bloomberg