December 6, 2018 / 10:38 AM / 9 days ago

South Korea gets its first cargo of Russia's Yamal condensate

MOSCOW, Dec 5 (Reuters) - South Korea will receive its first cargo of Russian condensate from Novatek’s new Yamal LNG project this month as it looks for alternatives to Iranian supplies that have been complicated by U.S. sanctions.

Yamal condensate is a type of light oil produced along with liquefied natural gas (LNG) and Asian customers are looking to increase purchases for the petrochemical industry.

Traders expect demand for condensate to rise towards 2020 as it allows refiners to produce low-sulphur fuels - critical in light of upcoming shipping regulations.

South Korea’s Hanwha Total Petrochemical Co Ltd will receive 74,000 tonnes of Yamal condensate in mid-December, traders said. According to the Refinitiv Eikon flows system, the vessel STI Veneto will arrive at Daesan port on Dec. 13.

“The company has bought 74,000 tonnes of Yamal condensate which will arrive in December,” a Hanwha Total spokesman told Reuters, adding future purchases of condensate from Russia would depend on market conditions.

Hanwha Total had previously increased imports of condensate from the United States and Australia for autumn delivery to replace Iranian supplies.

Novatek didn’t respond to a request for comment.

The Yamal LNG project is operated by the Yamal LNG Company, in which Russian independent gas producer Novatek holds a 50.1 percent stake, Total a 20 percent stake, China’s CNPC 20 percent and the Silk Road Fund 9.9 percent.

LUCKY COINCIDENCE

Demand for condensate in Europe, historically the primary market for Russia’s energy resources, has been hit recently by weak naphtha margins.

“Condensate sellers are desperately looking for ways to take it outside of the region,” a trader on the European market told Reuters.

Prior to the South Korean deal, two cargoes of Novatek’s condensate, amounting to about 100,000 tonnes, were sold to ENOC for delivery to the United Arab Emirates in early autumn.

Even including transport costs, it was more profitable to sell condensate to South Korea than northwest Europe, traders said. The sale was made at around minus $3 a barrel to BFOE on a CIF Rotterdam basis, compared with minus $1-1.5 a barrel CFR Yosu, they said.

The two main sources of condensate for South Korea are normally Qatar and Iran. Despite getting a waiver from the United States to buy Iranian supplies, South Korean petrochemical companies are looking for alternatives, market participants said.

Yamal condensate hit the market in January and exports are expected to reach around 621,000 tonnes this year, according to Novatek data from quarterly reports and the Refinitiv Eikon flows system.

Novatek sells all condensate from Yamal LNG via spot tenders. Yamal condensate is loaded from Russia’s northern port of Sabetta in the Karsky Sea in small tankers, which then offload it to bigger vessels at Britain’s Southwold port for delivery to Asia and the Middle East.

Next year, Yamal LNG plans to produce 1-1.2 million tonnes of condensate after it reaches capacity, according to Novatek. (Reporting by Natalia Chumakova, Olga Yagova in MOSCOW; additional reporting by Jane Chung in SEOUL; Editing by Mark Potter)

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