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S-Oil Inks Deal with Aramco to Secure Oil Supplies

Source: Reuters 2/9/2012, Location: Middle East

S-Oil said it signed a 20-year contract to buy crude from Saudi Arabia as South Korea seeks to secure supplies and reduce dependence on Iran under pressure from the United States to halt doing business with the Islamic Republic. President Lee Myung-bak is touring Gulf producers this week to tap alternative sources to feed Asia's fourth-largest economy's energy demand. The pressure to stop dealing with Iran increased after the United States imposed fresh sanctions targeting financial institutions and trade.

Saudi Aramco owns the largest stake in S-Oil, with 35 percent, and the South Korean refiner does not buy any oil from Iran. But the agreement is an assurance to the nation almost entirely reliant on imported energy of steady supplies for its third-largest refinery. The long-term supply contract is "highly unusual" in a market where one-year supply contracts are the norm, S-Oil said in a statement.

S-Oil's refining capacity is 669,000 barrels per day (bpd) and Saudi Aramco currently supplies almost all of the crude it processes into fuels.

The contract will cover all the crude S-Oil needs for 20 years, a spokesman at the refiner said. Saudi Aramco's total annual supply volume to S-OIL is approximately 230 million barrels, the statement said. The statement and the spokesman didn't specify what terms the crude will be sold under.

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