Iranian Oil Heads to Korea After Months of Trump-Induced Lockout

(Bloomberg) -- A major Iranian oil buyer that shut out supplies last year even before U.S. sanctions on the Persian Gulf state took effect is finally set to receive cargoes once again.

National Iranian Tanker Co.’s Silvia I is expected to reach South Korea -- Tehran’s third-biggest customer before it stopped purchases in August -- on Jan. 15, according to vessel-tracking data compiled by Bloomberg. The cargo could be the first of at least 14 million barrels from the Islamic Republic that will reach the nation’s shores through April.

Iranian Oil Heads to Korea After Months of Trump-Induced Lockout

Shipments are resuming after South Korea, along with some other buyers, managed to secure waivers from the U.S. to continue buying Iranian oil even after American sanctions on the Islamic Republic went into effect in early November. The exemption was critical for the North Asian country as it allowed the purchase of 200,000 barrels a day of an ultra-light oil known as condensate, which is used by several domestic refineries that are designed to process such supply.

Unlike other major buyers from Iran such as India and China, which only curbed buying from the Islamic Republic, South Korea entirely halted purchases under pressure from the U.S. Seoul’s close political and national-security ties to Washington meant it couldn’t go against the Donald Trump administration’s policy that allies must adopt a tough policy against the Persian Gulf state.

The result: South Korean buyers had to scramble for alternative supplies of condensate, reaching as far as Norway and Nigeria for cargoes. Refiners also turned to other feedstock such as naphtha and light crude, as increased exports of these varieties from the U.S. made supplies affordable.

Other Hurdles

Even after the Trump administration surprised the oil market by granting the exemptions, South Korea was unable to immediately resume purchases. They had to clear other hurdles surrounding insurance, shipping and payment before that.

Now, top refiner SK Innovation Co. is expected to receive two million barrels of Iranian South Pars condensate for arrival in January, according to traders with knowledge of the matter. Supplies could arrive in two Suezmax tankers with oil-carrying capacity of one million barrels each. Petrochemical producer Hanwha Total Petrochemical Co. has bought 12 million barrels of the oil for delivery in February to April. Details of Hyundai Oilbank Co.’s purchase plan remain unclear.

Demand for Iranian condensate has surged in the last five years after South Korean firms Lotte Chemical Corp. and Hyundai Oilbank jointly began operations at a unit known as a splitter in Daesan, while Hanwha Total brought online a new facility in the same region.

©2019 Bloomberg L.P.