South Korean refiners plan to resume buying crude from Iran in September after ironing out difficulties of a European Union embargo that restricted shipping oil imports, government and refining sources said on Wednesday.
According to industry sources, South Korean refiners, like their Chinese counterparts, have asked Iran to deliver crude on Iranian tankers, placing the responsibility on Iran for insurance, and effectively sidestepping a ban in the EU on insurers from covering Iranian shipments.
South Korea was the first major Asian consumer of Iranian crude to announce a halt in imports in July due to EU and US sanctions that aim to choke Iran’s oil income and curb its nuclear programme. The West accuses Iran of developing weapons, which Tehran denies.
The sanctions are designed to make shipping, insuring and paying for Iranian oil as difficult as possible. Along with South Korea, the other three major Asian importers – China, India and Japan – have all slashed Iranian purchases this year, earning them exemptions from US sanctions.
The resumption in exports to South Korea, previously one of Iran’s top five buyers, will offer some relief to Tehran after shipments halved from a year ago to 1.1 million barrels per day (bpd) in July due to the sanctions.
EU insurers underwrite most maritime shipping, and insurers elsewhere have been unable to offer cover for the billions of dollars in claims that could stem from a spill.
South Korean refiners and the National Iranian Tanker Company are close to finalising a deal which would allow loading to resume from September, sources said.
“Refiners have requested Iran to deliver crude, and the deal is almost reached,” Reuters quoted a government source who has direct knowledge of the matter as saying on Wednesday.
The deal would allow refiners to load crude in September, meaning the first cargo should arrive in South Korea at the end of the month or in early October, the source, who declined to be identified due to the sensitivity of the matter, told Reuters by phone on Wednesday.
Two refining sources confirmed the request had been made to NITC. SK Energy and Hyundai Oilbank are the only two South Korean refiners that import Iranian crude.
The refiners would buy volumes similar to what they did before the July stoppage, sources said. There may be some variance month by month due to the size of vessel available for imports from NITC, one refining source said.
In the first six months of 2012, South Korea’s imports of crude from Iran stood at 190,000 bpd, down 17% on the year. Imports in June were just over 176,000 bpd.
According to a Reuters report last month, Tehran offered to provide up to $1 billion of insurance cover to Iranian vessels shipping oil to South Korea.
South Korea’s economy minister, Hong Suk-woo, said in late July that imports would likely resume soon.
Iranian supplies are expected to average 1.084 million barrels a day in July, little changed from 1.094 million bpd of exports in June, Geneva-based consultancy Petrologistics said in what it called a preliminary report.