S. Korea imports more European oil after EU-Korea FTA

By Joel Lee

The amount of European crude oil shipments to South Korea has swelled over the last five years after the EU-Korea Free Trade Agreement (FTA), diversifying the channel of supplies to the country that survives on energy imports to cover its high industrial needs.

European oil, near nil in 2009, has soared to rank at third place at 5.1 percent in first half of 2014 (H1), coming after the Middle East and Asia, data by Korea National Oil Corporation (KNOC) records.

The Middle East oil inched up from 84.4 percent to 85.2 percent in first half of 2014 (H1), solidifying top place. Asian oil was cut from 14 to 7.8 percent in the same period.

The rise in European oil comes from the eliminated 3-percent tariff, once imposed before the EU-Korea FTA provisionally came into force in July 2011.

The sharp drop in ocean freight charges in recent years lessened Korea’s dependency on Asian oil, analysts say. Increased competition between EU and the Middle East over oil exports to Asian countries, along with U.S. and EU embargo on Iranian oil import effected since 2012, also played a role.

European oil import shares by Korean companies are: GS Caltex Corporation (7.1 percent), Hyundai Oilbank Co. (6.9 percent), SK Energy Sales Co. (4.3 percent) and S-Oil Corporation (2.8 percent), among others.

“Korean government and companies have tried diversifying the source of import over the years, but the supplying superiority of Middle Eastern oil has prevented it from happening,” Moon Young-suk, researcher at Korea Energy Economics Institute (KEEI), told Yonhap News Agency (YNA).

“The oligopoly of Middle Eastern oil will break down into the future,” he added, noting the possibility of Russia and Canada as future sources.

Meanwhile, Korea and Mexico joined the European Union in pressuring Washington to ease its long-held ban on crude oil exports imposed after the Arab oil embargo of the 1970s.

Washington is easing its decades-long ban on U.S. oil exports out of mounting pressure by international companies and governments supporting free trade agreements (FTAs).

South Korean President Park Geun-hye urged a visiting U.S. delegation of lawmakers on the House of Representatives energy committee on Aug. 11 to tap into the gusher of ultra-light, sweet crude oil springing out of Texas and North Dakota, Reuters reported Monday.

Joe Barton, Republican Representative from Texas who met Park, told Reuters that lifting the ban would boost the U.S. economy as well as strengthening energy-trading partnership between the two countries.

European countries have also pressed the U.S. for energy exports as natural gas supplies from Russia have shown volatility under President Vladimir Putin.

U.S. is soon expected to surpass both Russia and Saudi Arabia as the world’s largest shale gas producer. U.S. condensate supplies are in plentiful supply because they are different from the type of crude oil the U.S. refineries have been configured to process, Reuters reported.