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Seoul Launches Oil Swap System to Counter Iran War Supply Disruptions

The South Korean government will operate a crude oil swap system with private companies for two months to help refineries secure alternative supplies. The move aims to minimize disruptions caused by the effective closure of the Strait of Hormuz due to the Iran war. Under the system, the government will lend from its oil reserves and later be repaid with alternative supplies secured by the firms. Four companies have applied for the program, involving a potential 20 million barrels, with an initial 2-million-barrel deal set to be signed.

Key Points: Seoul Starts Crude Oil Swap with Firms to Stabilize Supply

  • Stabilize refinery supplies
  • Postpone strategic reserve release
  • Overcome Strait of Hormuz closure
  • Secure alternative global oil sources
2 min read

Seoul to introduce crude oil swap system with private firms for supply stabilisation

South Korea introduces a crude oil swap system with private refineries to mitigate supply disruptions from the Strait of Hormuz closure.

"Since we are in a crisis, we decided to operate the system in a more flexible and responsive manner - Yang Ghi-wuk"

Seoul, March 31

The government will operate a crude oil swap system with private companies, starting Tuesday, in a bid to help oil refineries secure alternative oil supplies and minimise supply disruptions, the industry ministry said.

Under the system, set to run over the next two months, the government will lend some of its oil reserves, mostly Middle Eastern crude, to oil refineries and later restore the stock with alternative supplies secured by the companies, reports Yonhap news agency.

The system will help the companies maintain stable stock despite a delay in supplies due to the effective closure of the Strait of Hormuz due to the Iran war, while ultimately postponing the release of the government's strategic oil reserves, the last line of defence in crude oil supply, as long as possible, according to the Ministry of Trade, Industry and Resources.

"Such a system is used for currency swaps," Yang Ghi-wuk, deputy minister for trade, industry and resource security, said in a regular briefing, stressing that the government has "been very inflexible in its operation of oil reserves."

"Since we are in a crisis, we decided to operate the system in a more flexible and responsive manner to overcome the situation," added Yang.

The official said four companies have currently applied for the program, which amounts to a combined 20 million barrels of crude oil exchange, with the government planning to first sign a 2 million barrel swap deal with an unidentified firm later in the day.

The private sector is working to secure alternative oil supplies from Africa, Central Asia, North and South Americas, Australia and other regions, he added, noting that South Korea is unlikely to face actual disruptions in domestic crude oil supply until end-June, said the report.

- IANS

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Reader Comments

P
Priya S
The Iran war situation is really causing global ripple effects. 😟 Hope our government is also diversifying oil sources aggressively. We can't afford another price shock at the petrol pump!
R
Rohit P
"Very inflexible in its operation of oil reserves" - that deputy minister is being honest. Most governments are like that. Good to see a pragmatic approach during a crisis. Jugaad spirit, but at a policy level! 👍
S
Sarah B
While this is a clever short-term solution, it highlights a deeper vulnerability for import-dependent nations. The long-term answer has to be renewables and reducing fossil fuel dependence. India's push for solar is more crucial than ever.
K
Karthik V
20 million barrels is a huge swap! Shows the scale of the problem. Strait of Hormuz closure is a nightmare scenario for Asian economies. Our diplomacy in the Middle East needs to be top-notch to ensure our supplies.
M
Michael C
A respectful criticism: The article says "unlikely to face actual disruptions until end-June." That's only a 3-month buffer. What's the plan after that? This swap system just kicks the can down the road. Hope they have a more sustainable strategy in place.
N
Neha E
Good to see public-private partnership in action during a crisis. Companies

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