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S Korea to import around 4 mil barrels/month Iranian oil under US waiver: sources

Seoul — South Korea will be able to import around 4 million barrels/month of Iranian oil under a US sanctions waiver announced Monday, but it will also continue striving to diversify its crude and condensate supply sources, three South Korean sources familiar with the matter told S&P Global Platts Tuesday.

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Washington's decision to allow South Korea to continue importing Iranian oil may come as a relief but it would be difficult to bring in more than half the volume Seoul used to buy from the Persian Gulf producer, said crude and condensate traders at South Korean refiners.

"It may look good and sound good but the true reality is that South Korea might probably be allowed to import around two to three VLCCs of crude from Iran per month ... that's still way too little compared with 10 million barrels/month or more that used to come from Iran," said a feedstock procurement manager at a South Korean refining and petrochemical company.

South Korea imported an average12.32 million barrels/month of crude and condensate from Iran in 2017 and an average 8.34 million barrels/month over the first half of 2018, according to data from state-run Korea National Oil Corp.

South Korea's SK Innovation said Tuesday it was preparing to resume imports of South Pars condensate from Iran for early January delivery after the country secured a US sanctions waiver, but would also continue to diversity its sources of crude and condensate supply.

"We will continue diversify supply sources because the waiver is for six months, though it can be extended," a company official said. "We are looking at US and Russian light grades, among others," the official added.

SK Innovation, which has been one of South Korea's two biggest buyers of Iranian crude along with Hanwha Total, imported around 1 million/month of South Pars condensate until July, said it has not given notification on how much it can import from Iran. SK Innovation had also imported 1 million-2 million barrels of Forozarn grade from Iran until July.

About 70% of Iranian crude brought into South Korea had long been South Pars condensate, and more than half of South Korea's ultra-light crude imports typically came from Iran's South Pars gas field.

US sanctions on Iranian crude exports went back into effect Monday, although top buyers of Iranian crude were given temporary waivers until May, when they will be expected to cut their purchases significantly.

The US has given temporary waivers to China, India and Turkey -- Iran's top buyers -- as well as Japan, South Korea, Italy, Greece and Taiwan.

However, the US maintained its goal of eventually reducing Iranian crude exports to zero.

--Gawoon Philip Vahn, Charles Lee, Takeo Kumagai, newsdesk@spglobal.com --Edited by Wendy Wells, wendy.wells@spglobal.com