South Korean oil refining and petrochemical companies are becoming increasingly nervous as the United States has announced that it would impose blanket sanctions on Iranian crude oil exports. At present, the companies are highly dependent on Iranian condensate and the sanctions are likely to have a significantly negative impact on their productivity and profitability.
Crude oil from Iran accounted for 8.6 percent of South Korea’s total crude oil imports in February this year, following those from Saudi Arabia, Kuwait, the United States and Iraq. Iranian condensate, which is inexpensive yet rich in naphtha, represented 50 percent of South Korea’s condensate imports that month.
Condensate is essential for petrochemical companies’ business. The price of Iranian condensate is lower by up to US$6 per barrel than those from the other regions. Hyundai Oilbank, SK Incheon Petrochem, SK Energy and Hanwha Total are currently importing crude oil from Iran and SK Incheon Petrochem, Hyundai Chemical and Hanwha Total are importing Iranian condensate.
The international oil prices skyrocketed in the wake of the news about the blanket sanctions. For example, the prices of WTI and Brent crude for delivery in May hit six-month highs at the New York Mercantile Exchange on April 22. Still, the sanctions are unlikely to lead to an oil shock in that South Korean companies have already diversified their partnerships.