S. Korea secures 50 mln barrels of alternative oil supplies for April: officials

South Korea secures 110 million barrels of alternative oil supplies as Hormuz closure persists

SEOUL — South Korea has secured approximately 110 million barrels of alternative crude oil supplies to replace shipments from the Middle East that have been disrupted by the effective closure of the Strait of Hormuz, according to government officials. The secured volumes include 50 million barrels for April and 60 million barrels for May, sourced from 17 countries including Saudi Arabia, the United States, the United Arab Emirates, Brazil, and Canada, as reported by Yonhap News.

Government measures to stabilize supply

The government has raised its resource security crisis alert to Level 3, the second-highest in the country's four-tier system, Yonhap reported on April 3. This decision came as the country began to experience physical disruptions in oil supply due to the prolonged Middle East conflict, as noted by the Ministry of Climate, Energy and Environment.

A crude oil swap system has been introduced, under which four major domestic refiners have submitted plans to borrow more than 30 million barrels from the national reserve, according to Deputy Minister for Trade, Industry and Resource Security Yang Ghi-wuk, who spoke at a regular briefing reported by Yonhap on April 7. The government has already signed deals to exchange 14 million barrels and plans additional swaps of around 16.5 million barrels in May, as per ministry data.

The government will fully compensate additional shipping costs linked to alternative crude imports from non-Middle Eastern regions between April and June, according to the Ministry of Trade, Industry and Resources. This compensation is estimated at 127.5 billion won (US$86.6 million), as reported by Yonhap on April 15.

Naphtha and industrial feedstock

South Korea is expected to secure up to 90 percent of its pre-war naphtha supplies for May, according to an April 28 Yonhap report. Major petrochemical companies have expanded plant operations following improvements in supply availability. The operation rate of Yeochun NCC, which had declared force majeure for some products due to naphtha shortages, increased to 65 percent by late April from 55 percent at the start of the month. Similarly, Korea Petrochemical Ind. Co. raised its rate to 72 percent from 62 percent.

To stabilize naphtha supplies, the government is injecting 674.4 billion won to cover up to 50 percent of the difference between pre-war and increased import prices for the material during April-June. Additionally, the country has secured 2.1 million tons of naphtha—equivalent to about one month of demand—from four Middle Eastern nations, including Oman and Saudi Arabia, for delivery by the end of this year.

Private sector and international cooperation

Fifteen major energy-consuming companies have voluntarily agreed to reduce their combined annual oil consumption by 956,000 barrels, which is the equivalent of 610,000 tons of oil equivalent (TOE) or 1.73 percent of their 2024 energy use, as announced at a meeting with the climate ministry on April 3.

In a separate development, Yang Gi-uk, head of the office of industry, trade and resource security at the Ministry of Trade, Industry and Energy, told reporters that Middle Eastern countries have expressed interest in using South Korea's crude oil storage facilities. "An increasing number of countries want to use South Korea's oil storage facilities," he said on April 14, as reported by Yonhap. Countries such as Saudi Arabia, the UAE, and Kuwait rely heavily on crude exports and are being affected by the Hormuz disruptions.

Emergency UAE shipments

The UAE has committed to supplying 24 million barrels of crude to South Korea, with the first 6 million barrels designated as emergency shipments. Two million barrels have already arrived in the country, and another 2 million arrived in mid-April. The remaining 2 million barrels from the first batch are scheduled for delivery in the coming weeks, according to the trade ministry on April 1. Additional volumes from international joint reserves are also being delivered.

Oil swap system expands

The government's oil swap system has seen significant uptake, with four major refiners applying to borrow over 30 million barrels, according to Yang's April 7 briefing. "Refiners have expressed interest in the oil swap system and are willing to utilize it," he said, adding that deliveries under this system are expected to reach 8 million barrels this week. The system allows companies to borrow from national reserves and return the same volume once their own imported shipments arrive.

Extended perspective

While the government has been careful to present these measures as proactive and stabilizing, the reliance on alternative sources and the potential for continued disruptions in the Middle East suggest that the country's energy security will remain a key concern in the near term. The government has said it will continue to monitor the market closely and adjust its strategy as needed.