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South Korea expects Saudi crude oil imports to remain stable near-term

Highlights

Government holds emergency meeting with refiners Mon

90% of Saudi crude imports under long-term contracts up to 20 years

Seoul to use strategic reserves in case of serious supply disruption

Singapore — South Korea expects Saudi Arabia to fully meet the contractual term crude oil supply at least in the near-term, a senior government official said Monday.

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There would be no major near-term impact on Saudi crude supply to South Korea, said Joo Young-joon, the Ministry of Trade, Industry and Energy's Deputy Minister for Energy and Resources, at the end of an emergency meeting.

"The Saudi Arabian government has said it would use its strategic reserves to avoid any supply disruptions," Joo added.

The MOTIE held the meeting with local refiners Monday afternoon to discuss the potential supply impact from Saturday's drone attacks on Saudi oil facilities.

"The government checked with local refiners about impacts on crude oil supplies, and we believe at the moment that there's no immediate problem in Saudi crude imports," the MOTIE said in a statement.

"There's no problem in loading of Saudi crude [in the near-term] and its export terminal is far from the attacked facilities," it said.

Some 90% of South Korea's imports of Saudi crude are under long-term contracts up to 20 years, according to the ministry.

South Korea has imported a total of 178.45 million barrels of crude from Saudi Arabia over January-July, according to latest data from state-run Korea National Oil Corp.

South Korean refiners' Saudi Arabian crude procurement volumes

STRATEGIC OIL RESERVES

However, Seoul maintained a cautious stance as South Korean refiners could potentially see their term Saudi crude volumes fall short, if the OPEC kingpin fails to recover the temporary loss of 5.7 million b/d of production for a prolonged period of time.

"If protracted, however, it could be a challenge to crude supplies because Saudi Arabia is the biggest crude supplier to South Korea," the MOTIE said, noting that the government and refiners are monitoring the situation very closely.

"South Korea would consider using its strategic oil reserve to cope with any possible disruptions of crude supply," Joo said.

South Korea holds a total of 200 million barrels of strategic reserve, including 96 million barrels of the governmental holding as of end-2018, according to the MOTIE.

Joo also said the country will also seek alternative supply sources to reduce its heavy dependence on Saudi crude.

The emergency meeting was held at the order of President Moon Jae-in to closely check the situations, so as to minimize impacts on domestic crude supplies and oil prices.

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-- Charles Lee, newsdesk@spglobal.com

-- Gawoon Philip Vahn, philip.vahn@spglobal.com

-- Edited by Nurul Darni, nurul.indriani.darni@spglobal.com