New Zealand, Australia, Japan, and the United States seek stable fuel supplies as Middle East conflict disrupts markets
SK Energy’s crude oil storage tanks at a petrochemical complex in Ulsan City. (Photo courtesy of SK Energy),
The value of Korean refining companies has been soaring since the outbreak of the war in the Middle East. Although the country does not produce a single drop of crude oil, it is emerging as a core supply line in the global supply chain, highlighted by its world-class refining and export infrastructure and its ability to provide a stable supply of petroleum products even in crisis situations.
Currently, countries with high import dependency are increasing contact with the four major domestic refiners, including SK Energy, GS Caltex, S-Oil, and HD Hyundai Oilbank, to stably secure Korean petroleum products. A representative example is when New Zealand government officials directly visited the SK Energy headquarters on May 14 to request cooperation for a stable supply of Korean petroleum products.
Currently, New Zealand procures virtually all of its petroleum products from overseas. Last year, the share of Korean products in the New Zealand petroleum product import market reached approximately 40.7%. This is because New Zealand introduced a policy banning oil and gas exploration in 2018, followed by the closure of its only domestic Marsden Point oil refinery in 2022. The plant was shut down for economic reasons as large Asian refiners in countries like Korea, Singapore, and China produced petroleum products more cheaply and efficiently.
From New Zealand’s perspective, it appears they judged it necessary to minimize the possibility of supply disruptions in a situation where they are already highly dependent on Korean petroleum products. In response, SK is reported to have conveyed its intention to do its best to ensure stable petroleum product production and supply even amid global supply chain instability, as they have maintained a long-standing supply cooperation with New Zealand.
In addition to New Zealand, major importing countries such as Australia, Japan, and the United States are successively requesting strengthened cooperation with Korean refining companies. In fact, the Japanese government delivered an opinion asking to refrain from restricting diesel exports, and the United States reportedly asked for cooperation to ensure there are no disruptions in the supply of aviation fuel. The United States relies on Korea for 68.6% of its aviation fuel imports. In particular, the Western United States (PADD 5) imports 85% from Korea. The structure suggests that as concerns over supply disruptions grow, the market’s attention inevitably turns to the Korean refining industry.
Australia is in the same situation. The Australian Department of Foreign Affairs and Trade recently revealed in an interview with a media outlet that it had received assurances from the Korean side regarding the continuous supply of petroleum products. Following this, Australia also established cooperation for maintaining a stable and reliable supply of energy resources such as diesel and LNG (liquefied natural gas) through the Korea-Australia Joint Statement on Energy and Resource Security with the Korean government.
This is because Australia also relies on imports for most of its petroleum products due to the decline of its domestic refining industry. Currently, Australia brings in about 90% of its petroleum products from Asian countries such as Korea, Japan, Singapore, and Malaysia. Korea is Australia’s largest supplier of petroleum products, holding a market share of approximately 29.1% of the total import market.
The background to the Korean refining industry receiving such requests lies in its stable production and export capabilities. The four major domestic refiners possess a refining capacity of about 3.37 million barrels per day, ranking fifth in the world. Three of the world’s top five single crude oil refineries belong to domestic refiners. As large-scale facilities are a core factor in lowering costs, their refining capacity is evaluated to be at the world’s highest level.
In particular, they are producing and exporting high value-added products based on Asia’s top-level upgrading facilities, which they have established by investing approximately 34 trillion won (approximately $23.13 billion) from 2007 to 2024. Since the Middle East crisis, they have also been focusing on stabilizing the petroleum supply chain by rapidly expanding the proportion of non-Middle Eastern crude oil imports. To lower their existing dependence on heavy crude oil from the Middle East, they are undertaking detour procurement utilizing the Port of Yanbu near the Red Sea and the Port of Fujairah, while simultaneously securing light crude oil from the United States and heavy crude oil from Canada and Ecuador.
A refining industry official said, “As global supply chain uncertainties expand, the role of refiners equipped with stable production and supply capabilities is bound to become more important,” and added, “It is in the same context that interest in the Korean refining industry has increased in the Asia-Pacific region triggered by the recent Middle East crisis.”
Jung Min-hee
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