The Korean government has decided to fully compensate for the shipping cost differential incurred when securing crude oil from regions other than the Middle East through June. Since importing crude from non-Middle Eastern regions typically involves higher shipping costs due to longer distances, the government aims to promote diversification of oil supply sources by covering the difference compared to Middle Eastern crude.
Minister of Trade, Industry and Energy Kim Jung-kwan held a meeting on January 15 at the Coal Association Building in Jongno-gu, Seoul, with relevant ministries and representatives from the refining, petrochemical, and shipping industries to review naphtha and crude oil supply response measures, where he announced the plan. "We will completely overhaul the existing petroleum import levy refund system and provide approximately 127.5 billion won in support for non-Middle Eastern crude from April through June, covering the full shipping cost differential compared to Middle Eastern crude," Minister Kim said.
Previously, the government refunded approximately 25% of the excess shipping costs compared to Middle Eastern crude when oil was imported from the Americas, Africa, or Europe. This will now be expanded to 100% coverage. However, support will be provided within the petroleum import levy limit of 16 won per liter. This is expected to reduce the burden on domestic refiners from the shipping cost differential incurred when importing crude from regions farther than the Middle East.
Additionally, the government has decided to provide large-scale fiscal support to stabilize the supply of naphtha, a key feedstock for petrochemical products. For naphtha import contracts concluded between April and June, the government will cover 50% of the difference between pre-war prices and actual import prices. The support totals approximately 674.4 billion won, with eligible products expanded to include liquefied petroleum gas (LPG) and condensate as alternative feedstocks for naphtha, as well as basic petrochemical products such as ethylene and propylene.
"Naphtha operating rates at Yeochun NCC have recently improved, and we are steadily securing alternative supplies from various parts of the world," Minister Kim said. "For crude oil, we have also secured approximately 70% of volumes for April and May compared to last year. We will protect the daily lives of our citizens without disruption through diversification of naphtha and crude oil supply sources and securing alternative logistics networks."
