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South Korea to make last ditch effort to convince Washington to extend Iran waiver

Highlights

Seoul fully supports Monday's White House decision, US foreign policies

South Korean refiners capable of diversifying crude supply sources

US, Qatar, Norway among many alternative condensate supply sources

Seoul — The South Korean government plans to find ways to convince the US to consider extending the waiver to sanctions on Iran granted to Seoul, a senior government official said Tuesday, in a move that highlights the importance of Iranian crude oil for Asia's fourth biggest energy consumer.

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The White House announced Monday that the US will end all waivers from Iran sanctions when they expire May 2, essentially blocking Asia's access to abundant Iranian ultra-light crude oil.

However, Seoul remains hopeful that Washington may re-consider and possibly extend the waiver for South Korea to allow importing Iranian crude oil and condensate beyond May 2, a senior official at the Ministry of Foreign Affairs told S&P Global Platts.

"The government will use the remaining days until [the sanctions waiver expiry deadline on] May 2 to step up its diplomatic efforts to persuade the US to extend the waiver," the official said.

The government would not reject Monday's White House decision, the ForeignbMinistry official added, noting that South Korea -- one of the closest allies to the US in the Asia Pacific -- has long been keen to abide by Washington's foreign policies as Seoul requires full US support and influence in its quest to completely denuclearize North Korea and improve diplomatic and economic ties with Pyongyang.

South Korea received 8.44 million barrels of Iranian crude in February, more than a fourfold rise from 1.958 million barrels received in January, latest data from the state-run Korea National Oil Corp. showed.

However, the 10.4 million barrels received from Iran over January-February was sharply lower than 16.9 million barrels received in the same period a year earlier, the data showed.

South Korea has only resumed crude imports from Iran in January after a four-month hiatus, with Seoul fully suspending crude imports from the Persian Gulf producer in September last year due to the re-imposition of US sanctions.

About 70% of Iranian crude brought into South Korea typically consisted of South Pars condensate, and more than half of the condensate which the Asian buyer imports had been from Iran.

CRUDE SUPPLY SOURCES

The complete cut-off of Iranian crude and condensate supply from next month would not necessarily raise alarm bells among major South Korean refiners as the companies are more than capable of diversifying their feedstock supply sources, government and industry sources in Seoul said.

There would be no major crude oil supply disruptions because South Korean refiners have a strong track record of finding a wide range of feedstock supply sources, with various options available to cover the shortfall in Iranian condensate intake going forward, a senior official at The Ministry of Trade, Industry and Energy told Platts Tuesday.

In a rare move, South Korea imported more than 1.6 million barrels of Ormen Lange and Snohvit condensate from Norway in the fourth quarter last year when Asia's biggest ultra-light crude buyer completely stopped purchasing oil from Iran during September-December 2018, the KNOC data showed.

"The government and the local energy industries have maintained close consultations (to brace for the end of the waiver). The government will provide measures to support companies to import alternative feedstocks for Iranian condensate," he said.

The MOTIE official noted that South Korean refiners have sharply increased purchases of US crude and condensate to make up for the decline in Iranian oil imports in recent quarters.

South Korea imported some 28.6 million barrels of US crude over January-March, a close to a five-fold jump from 5.85 million barrels imported a year earlier. The sharp increase was mainly driven by strong demand for Eagle Ford condensate as an alternative to Iran's South Pars condensate.

"South Korea would also seek Qatari condensate as an alternative," the MOTIE official said.

South Korea can increase naphtha imports to make up for the loss of Iranian condensate as well, feedstock procurement managers at Hanwha Total previously told Platts.

"We have already increased imports of US crude while seeking various other grades from elsewhere as alternatives to Iranian oil because it was always uncertain whether the 180-day waiver would be extended," an official at South Korea's biggest refiner SK Innovation said.

-- Charles Lee, newsdesk@spglobal.com

-- Gawoon Philip Vahn, newsdesk@spglobal.com

-- Edited by Elizabeth Thang, newsdesk@spglobal.com \