Wednesday 20 June 2018

Korean refiners eye more Iraq crude

Baghdad, March 1, 2014

South Korean refiners are set to import about a quarter more Iraqi term crude this year, industry sources said, as oil from other Middle Eastern suppliers is squeezed out by higher pricing or limits on Iranian supply due to sanctions.

Despite concerns about security, Iraq is still aiming for its largest annual rise in oil exports in a decade this year, and Asia's crude buyers including China and South Korea have been signing larger annual import contracts.

Iraq's Basra light grade has also been a primary replacement for Iranian crude exports, which have been cut in half over the last two years by Western sanctions aimed at Tehran's disputed nuclear programme.

On top of the term crude, which made up just over half of South Korea's Iraqi imports last year, Korean refiners say they will keep buying spot supplies from Iraq as long as prices remain competitive compared to other suppliers.

"Iraqi crude oil has good economics and ... it has been replacing Iranian crude demand as their qualities are similar. Crude oils from Qatar and Oman are too expensive," a Seoul-based refining source said.

"By how much Iraq imports can increase in the future depends on the development of sanctions on Iran," he added.

Iran's exports to its top Asia buyers surpassed 1 million barrels per day (bpd) in January, a sign its oil shipments may creep up after the implementation of an interim deal that eases some of the U.S. and EU sanctions applied over Tehran's nuclear programme.

China will increase its annual purchase of Iraqi crude by more than two-thirds next year to meet growing demand in the world's largest net oil importer, trade sources said in November.

South Korea's second-largest refiner, GS Caltex Corp , will account for most of the country's rise in Iraqi term imports, increasing its Basra light contract purchases for 2014 to 133,000 bpd, up from 100,000 bpd, industry sources said.

The biggest refiner SK Energy Co Ltd has kept its term Iraqi volumes steady at 33,000 bpd, the sources said.

The term import contracts alone will rise 25 percent to 166,000 bpd from 133,000 bpd in 2014, they said.

SK Energy and GS Caltex spokesmen declined to comment on the term contracts.

South Korea's Hyundai Oilbank Co Ltd buys Basra light in the spot market. A company source with direct knowledge of the matter said the refiner bought about 30,000 bpd on the spot market last year and will continue to do so as long as the prices remain competitive.

"Unless Iraq raises the official selling price of its crude, our purchases would continue," said a source at GS Caltex.

Iraqi crude shipped to South Korea was about $2.20 a barrel cheaper than Omani oil on average last year, according to data from the country's customs office.

State-run Korea National Oil Corp (KNOC), which manages the country's strategic oil reserves, has also started replacing some Oman with Basra light in its tanks as more refiners are using the Iraqi grade, said sources familiar with the matter.

The country's other refiner, S-Oil Corp, mainly buys crude from its major shareholder Saudi Aramco.

South Korea, the world's fifth-largest crude importer, relied on the Middle East for around 85 percent of its crude supply in 2013, although it has sharply reduced imports from Iran and Oman in favour of Iraqi oil in recent years, according to industry data.

South Korea's imports of Iraqi term and spot crude have grown to just more than 253,000 bpd last year, from about 116,800 bpd in 2008, according to South Korea customs data.

Iraq remained South Korea's fourth-biggest supplier last year, after Saudi Arabia, Kuwait and Abu Dhabi-Reuters

Tags: Iraq | Crude |

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