South Korea is seeking a sanctions waiver from the US to continue importing Iranian condensate, saying that it is hard to find alternative sources due to limited suppliers, a government official said Friday.
South Korea and the US held two rounds of consultations in June and July, and the two sides are likely to meet again for negotiations, according to an official at the Ministry of Trade, Industry and Energy.
"We will request the US to grant a sanctions waiver, stressing that South Korea's crude imports from Iran are mostly condensates," he told S&P Global Platts, noting that it is more difficult to find alternative condensate supply sources.
About 70% of Iranian crude brought into South Korea is condensate, and more than half of South Korea's condensate imports are from Iran because of its lower prices, the official said, noting that Iranian condensate was $2.5/b cheaper than a cargo from Qatar, which is South Korea's No. 2 condensate supplier.
In the first seven months of this year, Iranian crude imports fell 36.5% year on year to 55.79 million barrels, according to preliminary data released by the Korea Customs Service Thursday.
"We are hopeful about winning a sanctions waiver as South Korea has been sharply reducing Iranian crude imports. But it is uncertain, because the US has called for cutting down purchases of Iranian crude to zero," the MOTIE official said.
"US officials are apparently aware of the impact to regional and global economies when South Korea's economy suffers huge damage from Iran sanctions," the official said.
As US sanctions on Iran are due to kick in November 4, MOTIE held a meeting Thursday with local refiners and traders. In the meeting, the government agreed to extend financial support for companies affected by US sanctions on Iran and help them explore alternative markets, the official said.
"Continued purchase of Iranian crude is of significance to keep the won-based settlement of bilateral trade transactions alive," the official said.
South Korean refiners currently put their payments for Iranian crude into won-denominated bank accounts in Seoul, through which Iranian importers pay for the purchase of South Korean products, a legacy of the 2012 sanctions on Iran. At that time, South Korea won a US waiver by cutting Iranian crude imports by half.
Hanwha Total Petrochemical, South Korea and Asia's biggest importer of Iranian condensate, has started to cut imports from Iran, while increasing purchases from Qatar and other sources, a company official said this week.
Hanwha, which runs a 180,000 b/d condensate splitter, imported 15.92 million barrels of Iranian condensate in H1 2018, down 3.3% year on year, he said.
Hanwha used to buy some 3 million barrels a month from Iran, but has reduced the volume to under 2 million barrels since May, he added.
The decline was mainly due to the startup of new condensate splitters in Iran, but the US decision to reimpose sanctions on Iran also played a role, the official said.
Hanwha has increased condensate imports from Qatar by 150% year on year to 9.98 million barrels over January-June, and raised condensate purchases from Libya by 50% year on year to 1.57 million barrels.
SK Innovation, which runs a 100,000 b/d condensate splitter, has also been steadily slashing imports of Iranian crude and condensate, a company source said this week.
It reduced imports of Iranian grades, including condensate, by 57% year on year to 14.96 million barrels over January-June. Instead, the refiner has increased light sweet crude imports from alternative sources, such as Russia and Kazakhstan, the source said.
Hyundai Oilbank and its joint venture Hyundai Chemical, which runs a 130,000 b/d condensate splitter, have reduced their combined shipments from Iran by 25% year on year to 18.68 million barrels over January-June, a company official said.
Hyundai Chemical sharply increased condensate imports from Qatar to 7.45 million barrels for the first half of the year, compared with 2 million barrels a year earlier. The official said the company would also look at cargoes from Norway and the US.
Hyundai Oilbank would purchase more Mexican Maya and other sour and heavy grades, thanks to its improved heavy oil upgraders, which will help fill the gap left by Iran, the official said.