* Says 2018 refining margins expected to stay firm on solid demand
* Considers IPO of SK Lubricants but details undecided yet (Adds details and comments from analysts’ call)
By Jane Chung
SEOUL, Jan 31 (Reuters) - South Korea’s SK Innovation , owner of the country’s largest crude oil refiner SK Energy, said on Wednesday solid demand is expected to keep refining margins firm throughout the year.
The company said in a quarterly earnings statement that tighter fuel supply availability because of planned refinery maintenance along with strong seasonal demand for middle distillate fuels like diesel and jet fuel are likely to support refining margins.
“In 2018, oil products demand are expected to be firm amid the global economic recovery,” Cha Jin-seok, head of the finance division at SK Innovation, told a call with analysts.
On Monday, S-Oil, South Korea’s third-biggest refiner, said regional refining margins were expected to remain firm in 2018 backed by healthy growth in oil demand.
For the October to December period, SK Innovation’s operating profits dipped 0.5 percent from a year ago to 845.2 billion won ($791.5 million) due to slightly lower refining margins.
Last year, SK Innovation said it would invest nearly $900 million to build a new fuel oil desulphurisation unit at its Ulsan refinery by 2020 to deal with the tighter sulphur rules for fuel on ships set by the International Maritime Organization. The new rules will come into effect by 2020.
Responding to an analyst question on the impact of the new rules on the fuel oil market, Kang Dong-soo, head of the corporate planning office at SK Energy, said that spreads between low-sulphur fuel oil and high-sulphur fuel oil should narrow after 2020 from their current level of about $26.
Additionally, the company said it is considering an initial public offering (IPO) of its lubricant oil unit, SK Lubricants Co Ltd, but the schedule and size of the IPO have not been decided yet.
In the fourth quarter of 2017, SK Innovation ran its crude distillation units at its refineries in Ulsan and Incheon at 93 percent of capacity on average, up from 83 percent over the same period in 2016, the company said in the earnings statement. SK Innovation shares fell 2.6 percent on Wednesday while the KOSPI index dropped 0.05 percent. ($1 = 1,067.9000 won) (Reporting By Jane Chung; Editing by Richard Pullin and Christian Schmollinger)