The Iran Project

S Korea’s Iran oil imports may fall to 3-year low in Sept: Sources

Tasnim – South Korea’s oil imports from Iran could fall to the lowest in three years in September as buyers hold back booking cargoes, hoping for a US waiver from sanctions on Iran, several sources with knowledge of the matter said.

US President Donald Trump has piled on pressure on its allies to halt Iranian oil imports after the United States withdrew from the 2015 Iran nuclear agreement. Buyers in Europe and India have already reduced imports ahead of US sanctions on Iran to be imposed from Nov. 4.

South Korea was one of the top four buyers of Iranian oil during the last sanctions and its top condensate importer.

Asian buyers are to notify the National Iranian Oil Company this week how much oil they plan to lift in August, but two of the three South Korean buyers have not submitted their nominations, said the sources who declined to be named as they are not authorized to speak to the media.

“We don’t expect to receive any guidance from the government by then,” one of the sources said, adding the company has since decided to suspend Iranian oil loadings from August, Reuters reported.

A source from a second buyer said it has no plan to lift oil in August.

“The US doesn’t want (countries) to do business with Iran, and we won’t do anything in violation of US sanctions,” he added.

A third buyer planned to suspend its term liftings after August due to the political uncertainty, a third source said.

“We have contracted Iranian condensate cargoes that will be loaded in July and August but for contracts after that period, we’re not going to sign any because we don’t know how things will turn out,” he said.

South Korea is in talks with the US government in a bid to avoid adverse impacts from the reimposition of sanctions aimed at cutting Iran out of international markets.

South Korean buyers of Iranian crude and condensate are SK Energy and SK Incheon Petrochem, which are owned by SK Innovation, Hyundai Oilbank Corp [INPTVH.UL] and its subsidiary Hyundai Chemical, and Hanwha Total Petrochemicals [SMCHE.UL].

South Korea’s Iranian oil imports peaked at 18.5 million barrels in March 2017 after the Iran nuclear deal, but dropped to 6 million barrels in May, government data showed. Imports fell to below 2 million barrels in December 2015 at the height of the last round of global sanctions on Iran, the data showed.

“Iran is under heavy pressure from the US government so it’s very hard for Iran to market their cargoes,” a fourth source said, adding that South Korean buyers may be able to ask for prompt barrels if they receive a waiver.

SK Innovation and Hyundai Oilbank said they were still waiting for the government’s guidance and could not comment on their deals.

To replace Iranian oil, South Korean refineries have bought crude from the United States, North Sea and the Mediterranean such as West Texas Intermediate Midland, Forties and CPC Blend to be processed at their plants in September, the sources said.

“Any (crude) is possible,” the first source said. “CPC is quite competitive in terms of pricing.”

For condensate, South Korean buyers could look to Qatar, Australia and Southeast Asia for substitute or buy heavy naphtha for their splitters, the sources said.

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