Government extends strategic petroleum reserve swap program through June amid prolonged Middle East war

Minister of Trade, Industry and Energy Kim Jung-kwan [Yonhap]
Minister of Trade, Industry and Energy Kim Jung-kwan [Yonhap]

Trade Minister Kim Jung-kwan said Tuesday that expected crude oil import volumes for August are rising steadily and that South Korea is on track to secure the mid-80 percent range of its normal supply levels by July.

Kim delivered the energy supply update at a Cabinet meeting held at Cheong Wa Dae and presided over by President Lee Jae-myung, on the 95th day since the outbreak of the Middle East war.

The remarks indicate that the bulk of the crude oil needed for August can be secured by July, a month ahead of schedule.

"Crude oil procurement for May through July stands at 86 percent of last year's level, while naphtha is at 83 percent, maintaining a stable trend," Kim said. He added that naphtha operating rates reached approximately 75 percent as of late May, approaching the prewar normal level of 80 percent.

Natural gas had also drawn concern after Qatar declared force majeure on its liquefied natural gas supply, but the government moved preemptively to address the situation. Kim said South Korea has already secured alternative volumes sufficient to cover domestic needs through the end of this year, sourced from the United States and Southeast Asia.

Some market observers had warned that a prolonged blockade of the Strait of Hormuz — stretching into the peak summer demand period — could trigger a crude oil supply crisis in August.

The International Energy Agency had also cautioned that a combination of Middle East supply disruptions and rising summer demand could push the global oil market into a danger zone in July and August.

Kim's supply update is expected to ease much of that market concern.

Kim also reported that a gas station in Jeju will be designated this week under the government's "Chakhadi Chakhan Juyuso," or "truly good gas station," program. Two stations have so far been selected three times each under the cumulative tally. Stations that reach five cumulative selections will receive the official "truly good gas station" designation, along with an exclusive mark, government commendations and other incentives.

The government also said it will extend its strategic petroleum reserve swap program — designed to reduce disruptions to crude oil supply and petroleum product output — through this month, stretching the original April–May operating period.

The decision reflects continued uncertainty over when normal navigation through the Strait of Hormuz will resume.

South Korea's Ministry of Trade, Industry and Energy said it has carried out swaps covering approximately 21 million barrels and is currently repaying them in stages.

Under the swap program, the government lends refiners petroleum from its strategic reserves once they demonstrate they have secured crude oil overseas, and recovers the equivalent volume when the alternative supply arrives domestically.

The program was introduced to bridge the time lag between refiners securing alternative crude oil and that supply actually reaching South Korea, as disruptions to Middle Eastern crude imports intensified.

The ministry also said stockpiles of raw materials for the health and medical sector — including IV bag packaging, syringes and medical gloves — are being maintained at normal inventory levels.

For IV bag packaging in particular, the government said it is working to ensure uninterrupted supply through the end of this month and is pursuing alternative sourcing options.

No supply disruptions have been detected for raw materials used in key industries such as semiconductors, automobiles and shipbuilding, including helium, hydrogen bromide and aluminum wheels.


oskymoon@heraldcorp.com