* Australia expected to become top net importer of diesel in Asia
* South Korean refiners most aggressive targeting Australia
* Refiners such as GS Caltex and S-Oil have spare capacity
* Also able to make the clean-burning fuel Australia wants
By Jane Chung and Meeyoung Cho
SEOUL, April 29 South Korean oil refiners look the best placed to meet extra demand in Asia created by a series of plant closures in Australia, given they are building up capacity and produce the high-quality gasoline and diesel Australia uses.
Other major suppliers in the region of these cleaner-burning fuels include Singapore and Japan, but industry sources say South Korean refiners have been the most aggressive targeting Australia after doubling exports in the past two years.
The extra Australian demand offers a new market at time when Asia's fuel demand has weakened due to a slowdown in the economies of top fuel consumers China and India.
Singapore is the top fuel supplier to Australia, meeting about half of its imports, while South Korea accounts for nearly a fifth and Japan around 12 percent.
"But as the Australian import requirement rises, that leaves more space for Korean refiners to come in," said Alex Yap, energy consultant at FGE Singapore, adding that Korean refiners could easily meet the specifications and had the spare capacity.
Australia has seen a series of refinery closures and in some cases facilities are being converted into fuel terminals.
BP was the latest example after it said on April 2 it would shut its 102,000 barrel-per-day (bpd) plant in Brisbane by 2015, blaming competition from new mega-refineries in Asia.
Royal Dutch Shell, Chevron Corp 's Caltex Australia and Exxon Mobil Corp have also shut refineries in Australia over the last few years.
The closures mean by 2015 Australia will have only four refineries with a combined capacity of 448,500 bpd and is expected to become the largest net importer of diesel and second-largest net importer of gasoline in Asia, importing more than half of its fuel needs.
South Korea's top refiners SK Energy, GS Caltex, S-Oil Corp , and Hyundai Oilbank have been investing to boost output of fuels such as gasoline and diesel.
They are also prepared to offer fuel at a small profit margin to expand market share in Australia, according to sources at refiners with direct knowledge of the matter.
On the other hand, Japan has been closing ageing refineries and Singapore is also not in a strong position to hike exports as international oil firms have contracted much of its fuel to ship between their own refineries.
"Korean refiners have been preparing for a long time, expecting higher demand from Australia where refineries will be shifting to import terminals," said a source at S-Oil, who declined to be named as he was not authorized to speak to media.
An S-Oil spokesman declined to comment on its plans, but the firm last year renewed a term deal worth $1.7 billion to 2015 with Australian petrol and convenience store retailer United Petroleum to supply up to 531,000 tonnes per year (12,366 bpd) of gasoline and up to 334,000 tonnes per year (6,863 bpd) of diesel in addition to spot sales.
Stronger Australian demand could support weaker Asian cracks, or margins from refining a barrel of crude into fuel.
For example, margins on the low-sulphur diesel used by Australia were $18.98 a barrel, down from $21.09 a year ago, according to Reuters calculations based on the prices of 10 parts per million sulphur diesel and Dubai crude.
JUMP IN SOUTH KOREAN EXPORTS
Asian refiners have a clear advantage on shipping costs to Australia compared to regions such as Europe.
Singapore, South Korea and Japan jointly supplied 84 percent of Australia's 517,969 bpd fuel imports in the last financial year, up from 78 percent a year earlier, Australian data showed.
South Korea saw by far the biggest rise as its exports to Australia rose 60 percent to 94,816 bpd, moving ahead of Japan's 63,173 bpd although still well below Singapore's 274,770 bpd.
Japan's ability to lift exports could be limited as it shuts refineries and since it mainly exports diesel. Its refining capacity has fallen to 3.95 million bpd by the end of March, from 4.89 million bpd in April 2008. South Korea's capacity is 2.95 million bpd, while Singapore's refining capacity is 1.4 million bpd.
($1 = 1037.6000 Korean Won) (Additional reporting by Florence Tan and Lipeng Seng in SINGAPORE, and Osamu Tsukimori in Tokyo; Editing by Manash Goswami and Ed Davies)