With Venezuelan President Nicolás Maduro ousted by the United States, the likelihood has grown that Venezuelan crude will be released onto the global market. Expectations are rising that increased supplies of Venezuela's heavy crude could be an opportunity for Korea's refining sector, which has upgrading facilities (heavy oil cracking units), but some say it will take a long time for Venezuelan oil to reach the market, limiting short-term effects.
According to major foreign media, including the Associated Press, on the 4th local time, U.S. President Donald Trump said at a news conference after Maduro's arrest that he would deploy the world's largest U.S. oil companies to invest billions of dollars and restore Venezuela's collapsed oil infrastructure. He added that far larger volumes of oil will be sold going forward.
Venezuela has the world's largest crude reserves, but the high share of ultra-heavy crude, which has high viscosity, makes production costly. Light crude, which has low viscosity and lower sulfur and metal content, yields more high-value products such as gasoline and jet fuel when heated and has a relatively simple refining process. In contrast, heavy crude yields asphalt, kerosene, and fuel oil, making it lower quality and more expensive to process.
Saudi Arabia, Korea's largest crude supplier, also has a high share of heavy crude, but Venezuelan oil is classified as ultra-heavy, with higher viscosity and greater sulfur and metal content. Ultra-heavy crude is heavier than water and sinks in it.
According to the Korea Petroleum Association (KPA), the average upgrading ratio of Korea's four refiners—SK Energy, S-Oil, GS Caltex, and HD Hyundai Oilbank—was 30.4% in 2023. The crude upgrading ratio refers to the share of facilities that reprocess heavy crude into high value-added products such as gasoline within total crude processing capacity.
The average upgrading ratio of Korean refiners is lower than that of the United States (56.5%), the United Kingdom (49.9%), Italy (48.4%), and Japan (35.7%), but higher than China (27.3%) and Russia (24.6%). This means Korea is ahead of China and Russia in the technology to import heavy crude and extract light products using upgrading units.
For Korean refiners with heavy crude processing capacity, a large-volume release of Venezuelan oil at low prices would present a chance to boost cost competitiveness.
Yoon Jae-sung, an analyst at Hana Securities, said U.S. refiners will be able to procure cheap Venezuelan crude and cut costs, adding that in that case the Middle East will have no choice but to reduce exports to the United States and increase supplies to Asia. He said that if Venezuelan crude also flows in, Asia will have a wider range of procurement options, and argued that Korean refiners could benefit in the long term.
On the other hand, some say that even if the path opens for Venezuelan oil to reach the market, it will be difficult for Korean refiners to reap noticeable gains in a short time. Venezuela's state oil company infrastructure has effectively collapsed, so even with U.S. refiners deploying recovery crews, it will take more than a year to significantly ramp up production.
The long shipping distance between Venezuela and Korea is also cited as an obstacle. An industry official said that considering freight costs reflecting distance, importing Middle Eastern crude is the cheapest option for Korean refiners, adding that from Venezuela's perspective, selling crude to Europe would be more economical than to Asian countries.