Iranian crude oil export to South Korea has been resumed in six months after the U.S. economic sanctions. South Korean oil refining companies’ profitability is expected to improve as the Iranian crude oil is not only cheaper than the crude oil from the other Middle Eastern countries but is mostly condensate, a type of ultra-light crude oil allowing large-quantity naphtha extraction.
An oil tanker carrying one million barrels of Iranian crude oil arrived at the Port of Incheon on Jan. 19. The oil was imported by SK Incheon Petrochem and SK Energy. Another one million barrels are scheduled to arrive at the port on Jan. 31. Two months ago, the U.S. government temporarily exempted South Korea, China and Japan from its Iranian crude oil import ban. The three countries can import crude oil from Iran until May next year.
The amount of the oil that can be imported by South Korea is estimated at 70 million barrels, which is half of the Iranian crude oil South Korea imported in 2017. Hyundai Oilbank and Hanwha Total are planning to receive the oil early next month.
The resumption is welcome news for South Korean oil and chemical companies, which underwent a rapid oil price decline along with a sluggish demand in the fourth quarter of 2018.
S-Oil, in which Saudi Arabia’s Aramco is the largest shareholder, and GS Caltex, partially owned by Chevron, are going to import no crude oil from Iran.
It remains to be seen whether crude oil imports from Iran can continue in that the United States updates its list of exempted countries every six months. An increase in the amount of the Iranian crude oil that can be imported is likely to be limited as Japan and China are calling quota equity into question.