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South Korean bank Hyundai Oilbank to sell stake in oil storage terminal to finance green energy projects

Strong points

Hyundai Oilbank to focus on blue hydrogen project

Reduce refining activities from 85% to 45% of total revenue by 2030

South Korea’s May Crude Inventories Drop 13% YoY to 40.6 Million Barrels

South Korean refiner Hyundai Oilbank will divest a majority stake in its oil storage terminal in Ulsan, on the southeast coast of the country, to help finance its green energy projects, a company official told S&P Global Platts.

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The company’s board of directors has approved a plan to sell 90 percent of Hyundai Oil Terminal’s stake to J & Private Equity Fund, the company official said.

Hyundai Oilbank will own the remaining 10% of the terminal and form a partnership with the local private equity fund, he said.

The official declined to disclose financial details of the deal, but said the 90% stake is worth around 180 billion won ($ 157 million), with the total value of the oil storage terminal estimated at 200 billion. of won.

Hyundai Oilbank has been managing and operating Hyundai’s oil terminal since December 2013, making it the first national refiner to conduct a commercial oil storage activity.

The terminal, which cost Hyundai 100 billion won, has 35 tanks that can store a total of 280,000 kiloliters of crude oil and refined petroleum products, and a dock for an oil carrier with a capacity of 50,000. tpl.

“The agreement to sell the stake in the oil storage terminal is part of Hyundai Oilbank’s efforts to reduce its refining and petroleum segment and instead focus on green energy projects such as blue hydrogen.” , the company official said.

Hyundai Oilbank plans to cut its traditional refining business to 45% of its total revenue by 2030, from 85% currently, the official said.

Hyundai Oilbank has set a target of producing 100,000 t / year of blue hydrogen by 2025, using carbon dioxide produced by the refiner as a raw material for the hydrogen. Blue hydrogen refers to hydrogen produced from fossil fuels in a process that captures carbon dioxide emissions.

In April, Hyundai Oilbank signed a memorandum of understanding with US hydrogen giant Air Products & Chemicals to use its technology to produce hydrogen from its crude oil and natural gas by-products.

The refiner is 74.13% owned by Hyundai Heavy Industries Holdings, which runs South Korea’s leading shipbuilder Hyundai Heavy Industries, while Saudi Aramco is its second largest shareholder with a 17% stake.

Hyundai Oilbank operates two CDUs with a combined capacity of 520,000 bpd at the Daesan complex on the west coast of the country.

The refiner also owns a 60% stake in Hyundai Chemical through a joint venture with local chemist Lotte Chemical, which operates a 130,000 bpd condensate separator.

Hyundai Oilbank plans to list its shares on the country’s main stock exchange next year due to favorable capital market conditions.

Stocks

Hyundai’s bold move to sell off much of its stake in the oil storage facilities came on the heels of declining South Korea’s crude inventories, while the decline in the crude market structure and refined does not bode well for the storage business, industry sources and market analysts in Seoul said.

South Korea’s crude inventories fell 12.8% year-on-year to 40.64 million barrels in May from 46.6 million a year ago, according to the latest data from the Korea National Oil Corp . Monthly stocks have averaged just over 40 million barrels so far in 2021, compared to a monthly average of 45 million barrels in 2020 and 45.8 million barrels in 2019, according to data from the KNOC.

The declining inventory trend does not represent or indicate the country’s strong demand and stock reductions. On the contrary, major refiners, fuel distributors, and trading companies generally do not see the need to source raw materials due to weak domestic demand for fuel and lower execution rates relative to current levels. ‘before the outbreak of the pandemic, according to crude oil and middle distillate traders at three South Korean refiners.

In addition, a significant decline in the crude price structure in Dubai has hampered the storage economy this year, trade sources said.

The spread between first-line and third-line crude oil swaps in Dubai was valued at $ 2.06 / bbl on July 22 in Singapore, according to data from Platts, the largest shift since December 19, 2019, when the offset was valued at $ 2.08 / bbl.

A shift in the structure of the crude market represents lower prices for month-to-month futures than the current spot price. Essentially, the backlash occurs when market participants expect future prices to be lower than fast prices, thus increasing the sense of urgency for trading companies and refiners to reduce their oil inventories to l ‘to come up.