South Korea defers crude import taxes to aid refiners

South Korea is deferring taxes on crude imports for the next three months to help refiners and other buyers weather a slump in fuel demand caused by the Covid-19 pandemic.

Import taxes for April, May and June will be postponed, giving crude processors financial relief amid the current collapse in demand, the ministry of trade, industry and energy (Motie) said.

The tax is 16 won/litre, or $2.09/bl — potentially significant savings for an industry that is facing negative profit margins on refined fuels. The tax is equivalent to around 7-9pc of current prices for North Sea Dated and Dubai crude, the main pricing benchmarks for South Korean buyers.

Motie expects the tax deferral to save South Korea's oil importers about W900bn over the next three months. About W700bn of that would have been paid by the country's four refiners, while the rest would come from petrochemical companies and other oil importers.

Companies that buy oil from suppliers outside the Middle East already receive rebates as high as W16/l on their import taxes, as part of government efforts to diversify supplies. South Korean buyers imported nearly 3mn b/d in January-February this year, down 8.1pc from the same period last year.

By Tony Cox