70% of South Korea’s crude oil imports from the Middle East are supported by the Oil Import Diversification Support Program, which subsidizes excess transportation costs when importing oil from areas outside the Middle East to reduce the country’s reliance on Middle Eastern oil. The program’s sunset date has been extended by three years until 2027.
The Ministry of Trade, Industry and Energy announced that the amendment to the Petroleum Industry Act, which contains the extension of the Oil Import Diversification Support Program sunset date and other provisions, was approved at today’s Cabinet meeting held on the 30th.
This amendment to the enforcement decree was made as a follow-up measure following the amendment of the Petroleum Industry Act, which was proclaimed on February 6.
The amendment, which will come into effect on August 7 to specify matters delegated by the law and reflect industry and expert opinions, includes provisions to promote the use of eco-friendly petroleum alternatives and ensure stability in domestic energy supply.
Considering the increasing reliance on Middle Eastern oil imports amid uncertain Middle Eastern geopolitics, the three-year extension of the Oil Import Diversification Support Program, which was originally set to end by the end of this year, has been confirmed to allow the industry to respond from a medium to long-term perspective.
South Korea’s proportion of crude oil imports from the Middle East has steadily increased from 59.8% in 2021 to 71.9% last year.
Through the Oil Import Diversification Support Program, the government refunds transportation cost overruns compared to imports of Middle Eastern oil within the petroleum import levy limit (16 won per liter).
Furthermore, the amended decree specifies the types of petroleum alternative fuels based on their raw materials, classifying petroleum alternative fuels as biofuels, renewable synthetic fuels, other petroleum alternative fuels, etc.
The Ministry of Industry and Trade stated that they plan to promptly establish necessary laws and regulations for promoting eco-friendly petroleum alternative fuels through ongoing communication with the petroleum industry and that they will work with relevant ministries to promote support policies necessary for stimulating private investment, technology development, and enhancing industrial competitiveness.
(Photo provided by the Korea National Oil Corporation, Yonhap News)