[Anchor]

With the situation in the Strait of Hormuz remaining unstable, South Korea can no longer rely solely on Middle Eastern crude. Today (August 6), a private refinery brought in Australian crude for the first time. However, challenges still remain to be addressed.

Reporter Park Jaehyeon has the story.

[Reporter]

A 110,000-ton class oil tanker entered the North Port of Incheon this morning.

It is carrying ultra-light crude extracted from an Australian gas field by a domestic refinery that participated from the drilling stage.

The 300,000 barrels of ultra-light crude aboard this vessel will be transferred to storage facilities via pipelines before going through the refining process.

This marks the first time that ultra-light crude produced by a private company has been brought into South Korea.

[Park Jun-young / Manager, SK Innovation Communications Division: Ultra-light crude is much lighter than regular crude, making it possible to produce a variety of products such as naphtha, which is a raw material for petrochemical products, as well as aviation fuel, kerosene, and diesel...]

Normally, produced crude is sold to neighboring countries to reduce transportation costs. However, following the supply disruptions of crude oil and naphtha caused by the blockade of the Strait of Hormuz, it was decided to bring the newly produced ultra-light crude directly to South Korea.

While supply diversification is underway, the proportion of Middle Eastern crude still well exceeds 60 percent.

Middle Eastern crude is predominantly viscous heavy oil, which contains more impurities than light crude and requires advanced refining technology.

The South Korean refining industry grew by importing cheap heavy oil from the Middle East, refining it multiple times, and exporting petroleum and chemical products at higher prices.

Consequently, a significant number of facilities are optimized for refining heavy oil. Because most crude oils from North America, Europe, and Australia are light crude, importing them in large quantities is not easy.

[Kim Tae-hwan / Head of Petroleum Policy Research Department, Energy Economics Institute: When you run crude oil that is not optimized for those facilities, its economic feasibility drops. Consequently, price competitiveness would actually fall below that of products made in China or Japan.]

The industry estimates that upgrading facilities to introduce more light crude would take several months and cost anywhere from hundreds of billions to trillions of won.

Experts advise that along with supply diversification, a policy approach is also needed to encourage the refining industry to improve its facilities.

(Photo: SK Innovation) (Reported by Park Jin-ho | Video editing: Chae Chul-ho | Design: Choi Ha-neul)