By Kang Seung-woo
With the United States moving toward new sanctions on Iran, oil refiners are closely watching the Korean government’s response on whether to cut or suspend crude oil imports from the country.
Currently, Hyundai Oilbank and SK Innovation are importing 20 and 10 percent of their crude oil from Iran, respectively.
The two firms said that they are now keeping a close watch on how the situation develops without seeking any countermeasures.
“We have to await the government’s response because the government said that it will try to avoid a cut or suspension of crude oil imports from Iran,” said an official of Hyundai Oilbank.
“If the government joins the sanctions, we need to find new import channels.”
An SK official also said that there is no specially-prepared plan for a new development saying, “As nothing has been decided by the Korean government, we are just closely monitoring how the conditions develop.”
Hyundai said that the possible sanctions are likely to damage the nation’s fourth-largest oil refiner.
“As we have stably imported crude oil from Iran, cutting imports would be a blow to us to an extent because we are required to take steps to change the oil import channel,” the Hyundai official said.
An industry official also said on condition of anonymity, “The unit cost of crude oil from Iran is cheaper than that of Kuwait or Saudi Arabia by $2 to $4 per barrel, so importing from other sources may negatively affect the two companies.”
Meanwhile, market watchers say that Korea’s participation in efforts by the United States and other allies to impose sanctions on Iran, blamed for its uranium-based nuclear program, can end in raising local gasoline prices.
According to the Korea National Oil Corp. (KNOC), Iran is the world’s fourth-largest crude oil exporter and Korea had bought 74.23 million barrels of crude oil from the nation as of the end of October, accounting for 9.6 percent of total oil imports worth $7.7 billion. Last year, it imported about 8.3 percent.
“A short supply during sanctions can hike oil prices,” the industry official said.
Should Iran’s crude oil exports be halted, prices could jump to $150 a barrel, observers predict.
On Dec. 1, the U.S. Senate unanimously passed a bill aimed at crippling Iran’s oil exports. The bill, which is also expected to be approved soon by the House of Representatives, prevents foreign financial institutions from doing business with the Central Bank of Iran, a key channel for Tehran’s oil exports.