Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
US embargo on Iranian oil to hurt SK Incheon, Hyundai Oilbank
SK Incheon Petrochem plant / Courtesy of SK Incheon Petrochem
By Nam Hyun-woo
By Nam Hyun-woo
The scheduled U.S. announcement on ending waivers to Korea and other countries importing Iranian crude oil is expected to deal a blow to SK Incheon Petrochem, Hyundai Oilbank and other domestic petrochemical firms importing ultra-light oil from the Middle Eastern country, according to industry analysts, Monday.
The Washington Post reported that the U.S. is “set to announce that all countries will have to completely end their imports of Iranian oil or be subject to U.S. sanctions” and will “no longer grant sanctions waivers” to countries currently importing Iranian crude.
In November, the U.S. announced a ban on importing Iranian crude and gave 180-day waivers to eight countries ― Korea, China, India, Turkey, Japan, Greece, Italy and Taiwan. Of them, Greece, Italy and Taiwan have reduced their Iranian oil crude imports to zero, but Korea and four others are still importing Iranian oil.
Since then, Korean refiners have been reducing Iranian imports significantly, but petrochemical firms still have a hefty reliance on Iranian ultra-light oil, or condensate, because naphta, which is the core material for petrochemical products, is abundant in Iranian condensate and the country's oil is cheaper than that of other countries.
Currently, SK Incheon Petrochem, Hyundai Oilbank and Hanwha Total are importing Iranian condensate. Those firms refused to reveal the amount of condensate they imported from Iran, but they said roughly 51 percent of condensate imports in Korea in the first quarter last year was from Iran.
“When imports from Iran get banned, there are alternative markets such as Qatar, the U.S., Russia and other countries. However, Iranian oil had more price advantages,” a Hyundai Oilbank official said. “If Iranian crude gets banned, price hikes in other countries' crude will be inevitable.”
In January, Korea imported Iranian crude at $52.86 per barrel, which was far cheaper than $61.75 per barrel of Qatar, according to data from Korea National Oil Corporation (KNOC).
According to the data, Korea imported 11.6 million barrels of Iranian crude in March last year, which accounted for 14 percent or of Korea's total oil import that month. However, the number continued to drop to 6 million barrels in May and 2 million in August, accounting only for 2.1 percent of the total.
From September to December, the country did not import Iranian crude but resumed trading in January this year by importing 1.96 million barrels and 8.44 million barrels in February.
The state-run firm, which oversees domestic oil importers' trade, also does not provide separate numbers on Iranian condensate, but industry officials said approximately 70 percent of Iranian oil has been condensate and the volume imported from Iran in January and February were 100 percent condensate.
“One of the reasons why Korean petrochemical firms rely on Iranian condensate is the quality of Iranian oil,” an industry analyst said. “Iranian condensate's naphtha content surpasses approximately 70 percent, while that of other countries' condensate remains around 50 percent. This means domestic petrochemical firms need more oil to produce the same amount of naphtha if they use ultra-light oil from other countries.”