UPDATE 1-S.Korea's S-Oil expects firm refining profits in 2017

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* Says upbeat on refining margins this year

* Expects global demand to outstrip supply in 2017

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* Sees Arab Light Crude OSP steady with last year (Adds comment, detail)

By Jane Chung

SEOUL, Feb 2 ’s S-Oil Corp expects healthy refining profits this year, buoyed by growing demand for oil products in places such as China and Southeast Asia.

The country’s third-largest oil refiner said in a quarterly earnings statement on Thursday that global oil demand would grow soundly in 2017, although the rate of increase could ease slightly from last year.

“Healthy margins are expected as 1.32 million barrels per day (bpd) of oil demand growth will outstrip an incremental net capacity increase of 574,000 bpd,” the company said, referring to the profit margin on refining barrels of crude oil.

Inventory gains and a recovery in refining margins helped S-Oil, whose top shareholder is Saudi Aramco IPO-ARMO.SE, notch up a 444 billion won ($ 386 million) profit in the last quarter of 2016, compared with a loss of 42.9 billion won the year before.

S-Oil treasurer Shin Kwan-bae said on a call with analysts that the company expected the official selling price (OSP) for Arab Light crude, supplied by Saudi Arabia, to remain steady in Asia from last year.

He said that even if Middle Eastern crude supply drops in the wake of a deal by producers to curb output, Saudi Arabia would not want to harm its market share in Asia by increasing OSPs.

A company official said S-Oil planned to carry out less scheduled maintenances this year, limiting such work to a condensate fractionation unit (CFU) and a No.2 unit. He did not give further details.

Industry sources have said S-Oil would shut down its No.1 residue hydro desulphurisation unit (RHDS) and crude oil refining unit in for about a month.

S-Oil also said on Thursday that its 2018 expansion project was on track to complete in the first half of next year.

Under the project, the company will build a residual upgrading system and an olefin production system that will churn out 405,000 tonnes of polypropylene a year, along with other products. ($ 1 = 1,151.6000 won) (Reporting by Jane Chung; Editing by Stephen Coates and Joseph Radford)

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