S. Korea said to resume buying Iranian oil in Sept

Aug 08, 2012, 8:40 AM EDT

* Will ask Iran to deliver the crude, cover insurance risk

* Chinese, Indian buyers have also asked Iran to deliver

* Korean deal almost reached, government source says

* First cargo could arrive end September or early October

* Asia's big-four buyers take over half of Iran's exports (Updates with status of imports by China, India and Japan)

By Meeyoung Cho

SEOUL, Aug 8 (Reuters) - South Korean refiners plan toresume buying crude from Iran in September after a two-monthhiatus due to a European Union embargo that made shipping theoil difficult, government and refining sources said onWednesday.

The refiners have, like their Chinese and Indiancounterparts, asked Iran to deliver crude on Iranian tankers,government and industry sources said. This shifts theresponsibility to Iran for insurance, sidestepping a ban in theEU on insurers from covering Iranian shipments.

Iran has a major interest in keeping its crude flowing toSouth Korea, China, India and Japan because they are its topfour customers. They buy more than half of its oil exports.

They have slashed Iranian purchases this year, though, underpressure from EU and U.S. sanctions that aim to squeeze Tehran'soil income and curb its nuclear programme. The West suspectsIran wants to develop weapons, which Tehran denies.

Sources said Iran's crude exports dropped to about 1.1million barrels per day in June and July from more than 2million bpd at the start of the year. At current prices, thelower volume means the loss of some $110 million a day in exportearnings.

Japan and South Korea, Iran's third- and fourth-biggest oilbuyers, both halted imports in July as they scrambled to workout how to continue imports under the EU sanctions, which havemade it tough to ship, insure and pay for Iranian oil.

 

EU insurers underwrite most maritime shipping, and insurerselsewhere have been unable to offer cover for the billions ofdollars in claims that could stem from a spill.

The EU sanctions came into force on July 1, after new U.S.sanctions targeted at financial transactions for oil purchasestook effect in late June.

 

CLOSE TO A DEAL

South Korean refiners and the National Iranian TankerCompany (NITC) are close to finalising a deal that would allowloading to resume from September, sources said.

"Refiners have requested Iran to deliver crude, and the dealis almost reached," a government source with direct knowledge ofthe matter said.

If there's a deal allowing refiners to load crude inSeptember, the first cargo should arrive in South Korea at theend of that month or in early October, the source, who declinedto be identified due to the sensitivity of the subject, said.

Two refining sources confirmed the request had been made toNITC. SK Energy and Hyundai Oilbank are the only two SouthKorean refiners that import Iranian crude.

The refiners would buy a similar quantity of oil as they hadprior to the July stoppage, sources said. There may be somevariance month by month due to the size of vessels available forimports from NITC, one refining source said.

In the first six months of 2012, South Korea's imports ofcrude from Iran stood at 190,000 bpd, down 17 percent on theyear. Imports in June were just over 176,000 bpd.

Tehran offered to provide up to $1 billion of insurancecover to Iranian vessels shipping oil to South Korea, Reutersreported last month.

China, Iran's biggest customer, which has cut its Iran crudeimports by 21 percent in the first half of the year, has agreedfor Iran to deliver its oil to get around the EU insurance ban.

China has nominated full contract volumes for Augustdeliveries of about 520,000 bpd, about half of Iran's exports.

Refineries in India, the second-biggest buyer of Iranianoil, have also asked Iran to deliver its crude. India'sstate-run insurers can provide some limited cover for importers,although shippers have yet to use it, saying the promised coveris insufficient.

During the first half of 2012, India's purchases of Iraniancrude were steady compared with 2011, but it cut them by 18percent in June.

Japan, which cuts it first half purchases from Iran byone-third, has taken a different approach with a sovereigninsurance scheme to cover its importers. (Additional reporting by Florence Tan; Editing by Simon Webband Himani Sarkar)

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