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Asian refiners see uninterrupted Black Sea crude import flows for now


Urals, CPC Blend for March, April deliveries to Asia unaffected

SK Innovation keeps close watch on Black Sea ports, logistics

US, Southeast Asian crudes could replace CPC Blend, ESPO, Sokol

Asian refiners that regularly purchase Black Sea crude oil said shipments of Russian Urals and Kazakhstan's CPC Blend for delivery in March and April have not been affected by Russia's military operation in Ukraine, but the companies said they would reassess logistical risks in the Black Sea route.

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Overall, Asian refiners were broadly unfazed by the escalating tensions in Eastern Europe and targeted western sanctions against Russia as many Asian economies, excluding China, don't rely much on Russian crude oil. Southeast Asian nations hardly purchase Russian crude, while Russian flagship export grades including ESPO Blend, Sokol, Urals and Sakhalin Blend make up less than 6% of overall refinery feedstock import baskets of South Korea, India and Japan.

Still, several major South Korean and Indian refiners said the companies are keeping a close watch on the latest conflict in Ukraine as they regularly purchase small volumes of Russian Urals and Kazakhstan's light sweet CPC Blend crude.

"Urals cargoes bound for India are not affected at all and our March-April delivery shipments will be on schedule... but the latest conflict is the risk that we need to assess before committing to Q2 delivery spot purchases," said a feedstock procurement manager at an Indian refiner, who declined to have its company name identified due to the sensitive nature of international corporate trading relationships.

"There's no interruption or any kind of logistical hiccups in spot crude cargoes heading to South Korea from Black Sea terminals but we are closely monitoring all logistical matters related to Black Sea voyage," said an official at SK Innovation.

CPC Blend crude first gets delivered from production facilities to the Russian Black Sea port of Novorossiisk via the Tengiz-Black Sea pipeline that stretches over 1,500 km. The barrels would then sail through numerous maritime routes including the Black Sea, the Mediterranean, the Suez Canal, the Red Sea, the Indian Ocean and the South China Sea before reaching South Korean ports.

South Korea's SK Innovation and Hyundai Oilbank are among Asia's regular buyers of CPC Blend crude. Asia's third biggest crude importer received 32.7 million barrels of the light sweet crude in 2021, accounting for around 3% of its total refinery feedstock purchases in the year, according to data from state-run Korea National Oil Corp.

Urals crude is exported by both pipeline and sea. Seaborne deliveries are via two other major routes -- Primorsk and Ust Luga on the Baltic Sea and Novorossiisk on the Black Sea.

India's BPCL and state-run Indian Oil Corp. are regular buyers of the Russian medium sour crude.

Both BPCL and IOC declined to disclose their Urals import volumes over the past year, but the medium sour grade makes up only a small portion of their overall feedstock procurement, trading sources at the refiners with knowledge of the matter told S&P Global Platts.


Northeast Asian, as well as Indian refiners have already set up contingency plans in case the escalating tensions lead to legal, financial and administrative hurdles doing businesses with Russian oil entities, with several US, West African and Malaysian crude grades set to be included in the list of potential replacement grades for Russian crudes that the companies regularly procure.

"Russian and Black Sea crudes serve as [Asian refiners'] supplementary supply, not staple key feedstock grades, so it's not too difficult to find alternatives," the Indian refinery trading source said, indicating that Urals Blend could be replaced by most of the medium sour Middle Eastern grades, including Upper Zakum and Arab Light, while US Mars Blend crude could also substitute the Russian grade.

The major South Korean refiners indicated that any logistical hiccups in the Black Sea could lead to more light sweet US crude purchases as WTI Midland and Eagle Ford grades are likely ideal candidates to replace CPC Blend.

South Korea's crude imports form the US, mostly light sweet grades, surged to 1.966 million mt, or 14.41 million barrels, in January, more than double the 5.43 million barrels purchased from the North American supplier a year earlier, according to latest data from Korea Customs Service.

For Japan, light sweet Malaysian grades including Kimanis, Kidurong and Kikeh could swiftly replace the country's need for light sweet crudes within close proximity if Far East Russian Sokol and Sakhalin Blend crude purchases become troublesome, according to traders at two major Japanese refiners.