South Korea starts replacing Iranian condensate: Report
South Korea has reportedly started replacing condensate from Iran which has been cutting supplies to Asia because new splitters are coming online in the country.
South Korean refiner Hyundai Oilbank Corp was reported Monday to have bought its first ever cargo of the ultra light oil from Norway to replace Iranian barrels.
Other South Korean refiners plan buys from condensate suppliers other than Iran amid a tight market, Reuters reported.
While the news agency attributed the development to the threat of sanctions by US President Donald Trump, Iran’s operation of a new splitter has resulted in more volumes of South Pars condensate being kept at home.
Iran started up the second phase of its Persian Gulf Star refinery in mid-February, adding 120,000 barrels per day (bpd) of refining capacity to the existing 120,000 bpd from phase one.
The Persian Gulf Star with a capacity of 360,000 bpd is on course to become the Middle East’s biggest condensate refinery when the third phase begins operation.
The refinery uses South Pars condensate as its main feedstock. Splitters process condensate for fuel, specifically naphtha, to make petrochemicals. Naphtha is a gasolineblending component and a feedstock for plastics and other petrochemical products.
Iranian officials say the country’s policy is to reduce condensate exports and use the substance in production of value-added goods.
Last month, an official said the National Iranian Oil Company (NIOC) had cut South Pars condensate term allocations to Asia for the second quarter of the year by 25% from the first quarter to around 350,000 bpd.
Reuters, quoting South Korean sources on Monday, said NIOC had cut condensate supplies to the Asian country by 3 million barrels each month from the start of this year.
According to the report, Hyundai Oilbank bought 700,000 barrels of Ormen Lange condensate from Statoil for delivery in June.
Other South Korean buyers, including SK Energy and Hanwha Total Petrochemicals, were also looking for other condensate supplies from Australia, Qatar and Equatorial Guinea to replace Iranian oil.
“It seems many are seeking to diversify their condensate supplies because we don’t want to be caught off guard if the US imposes sanctions against Iran in May,” Reuters quoted one unnamed source as saying.
South Korea and Japan are major customers of South Pars condensate, favoring the grade for its rich naphtha yield as well as its relative cheapness to other condensate grades.
An oil tanker carrying 136,000 tonnes of Iranian condensate to South Korea sank in the East China Sea in February after collision with a cargo ship, leaving all the 32 crew on board presumably dead.