South Korea to Purchase Oil Products for State Firms in Bulk

South Korea’s government plans to buy oil products for 44,000 state organizations in bulk, seeking to boost competition among refiners and curb price increases.

The Public Procurement Service, which manages commodities for the government, will hold the first such auction on July 27 for 500 million liters (132 million gallons) or more of vehicle oil products such as gasoline and diesel, the Daejeon-based agency said in an e-mailed statement today.

The agency will reach an annual contract with the supplier that offers “the lowest price,” it said. The price will be applied to all 44,000 in the group.

South Korea’s government, wary that the current distribution structure may be limiting competition, has committed to breaking the hold on domestic fuel supplies controlled by four refiners, including SK Innovation Co. In the latest move, Samsung Total Petrochemical Co. was approved by the government to supply oil products to gas stations run by state- run Korea National Oil Corp. and the National Agricultural Cooperative Federation.

SK Innovation, GS Caltex and two other refiners controlled 98 percent of the country’s oil product sales last year, according to the statement.

The Public Procurement Service estimates it will need to buy 2.8 billion liters of oil products a year for the group. Bulk procurement will save 30 billion won ($26 million) a year, assuming sales total 4.8 trillion won, according to the statement.

Source: Bloomberg

To contact the reporter on this story: Sangim Han in Seoul at sihan@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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