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South Korea's 2018 Iranian condensate imports likely to slide

South Korea's ultra-light crude imports from Iran could fall next year with major petrochemical companies and refiners in Asia's fourth biggest energy consumer securing less South Pars condensate term supply for 2018 compared to this year.

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Hanwha Total, South Korea's largest petrochemical company, sealed a term agreement with National Iranian Oil Co. to receive minimum 105,000 b/d and up to around 130,000 b/d of the Iranian condensate for loading between January 1 and December 31 next year, a company source with direct knowledge of the deal told S&P Global Platts.

In comparison, Hanwha was said to have secured at least 120,000 b/d for 2017, Platts reported previously.

"It could've been worse ... the slight fall [in 2018 term volumes] won't bother us too much ... we are quite happy to have secured at least100,000 b/d [for next year]," the source said.

The source indicated that for South Pars term barrels loading in the first quarter of 2018, the company would pay a premium of around $2.10-$2.50/b to Platts front-month Dubai assessments on an FOB basis.

It wasn't immediately clear exactly how many South Pars condensate barrels have been secured by other major South Korean condensate buyers including SK Innovation and Hyundai Chemical. Trading and procurement managers at both companies declined to comment on their respective 2018 term deals.

However, several industry and trading sources in Seoul and Singapore indicated that the two companies had probably secured 80,000-95,000 b/d each for next year, around 10% less than the 2017 contracted volumes.

In addition, the Hanwha source said that Asian term buyers may be susceptible to allocation cuts beyond the operational tolerance of 5% as Iran's own requirement for South Pars condensate will likely spike upon completion of the new condensate splitters. Tehran could also face some serious pressure to comply with the OPEC production cut agreement that was recently extended through to the end of next year.

IRANIAN CRUDE IMPORTS FALL

Asian market participants had been widely expecting South Pars condensate exports to fall next year as a slew of new Iranian condensate splitters may become operational within the next 18 months and raise the major Persian Gulf producer's own domestic requirements going forward.

Iran expects the 120,000 b/d Phase Two of the Persian Gulf Star condensates refinery to be completed by mid-2018, while Phase Three, which will take total capacity to 360,000 b/d, was expected to come online around first half of 2019.

Meanwhile, South Korean refinery sources were quick to shrug off latest reports and data pointing to a slowdown in Iran-Asia flows in recent months.

"NIOC had massive condensate supply sitting idle in storage tankers when the sanctions were lifted a couple of years ago. All of them have been cleared now so it's no surprise if exports fall," said a crude trading manager based in Seoul.

South Korea's crude oil imports from Iran fell 32.9% year on year to 1.296 million mt (9.5 million barrels or 316,667 b/d) in November, according to preliminary customs data released earlier this month. This is the first time imports from Iran have fallen in six months.

Month on month, Iranian crude and condensate imports in November were also down 28.2% from October.

According to a survey conducted by Platts, four condensate and naphtha traders at South Korean refining companies said they expected the country's imports of Iranian ultra-light crude to fall by 5-20% year on year in 2018.

Through January-October this year, South Korea imported 128.8 million barrels of Iranian crude and condensate, up more than 51% from the same period last year.

"There will be less South Pars [condensate] available next year but buyers would still be happy to get around 8-10 million barrels per month because they [have all previously] suffered [from tight supply] during the sanctions period not so long ago," said a sour crude trader at a South Korean refiner.

Meanwhile, other Northeast Asian companies including China's Unipec and Japan's JXTG Holdings were had also secured some South Pars barrels for next year, according to Singapore-based traders.

"If anything, they may have secured smaller amounts than the Koreans ... Korea is the biggest customer so if it got less, Asia overall would get less," said a sweet crude and condensates trader based in Singapore.