TOKYO: More Japanese refiners are likely to buy US condensate if the light oil is ruled to be not liable for customs duty, as is expected, industry and government sources said.
The United States started allowing exports of the super light oil only in the last few months, and the ruling by Japan’s customs bureau when the first cargo arrives in October is likely to give the shipment the same status as Middle East condensates.
Japanese refiners have been concerned that US condensate would be treated as an oil product subject to import duties. So far only refiner Cosmo Oil Co has decided to import the US oil, and an official with the Tokyo customs office said it would likely be ruled a crude and thus not subject to tariffs.
That means exports of the US condensate to Asia could rise as long as they are priced competitively against similar oils from suppliers such as Qatar and Iran to offset the longer voyage. Government officials have said Japan is trying to wean itself from a roughly 84 percent reliance on Middle East oil.
“I hear often that there are some oil refiners that have been keeping their hands off US condensate due to uncertainty about the issue,” said a source with a Japanese refiner who declined to be identified.
The US condensate will mostly likely be ruled customs-free, government and industry sources said, but like other crudes and condensates it will still be subject to the petroleum and coal tax of 2,540 yen per kilolitre ($3.88 per barrel).
The Tokyo customs official said, though, that there would be no final ruling on the import duty until the specifications of the first cargo were examined on its arrival in Japan.
Customs duties on oil products range from 249 yen per kilolitre for C-type fuel oil to 934 yen per kilolitre for petrol ($0.38-$1.43 per barrel).
Cosmo Oil, which is scheduled to receive a 300,000-barrel cargo of US condensate in early October, likely made the purchase on the assumption it would be treated as crude, an industry source said.
A Cosmo Oil official declined to comment.
South Korea and Japan were the first to purchase condensate from the United States after it eased its 40-year-old ban on US crude oil exports. The US softened the ban — in place since the Arab oil embargo of the 1970s — to allow energy companies to export the ultra-light oil if it has been minimally refined. Booming shale oil and gas output in the US has built up a condensate glut.
South Korea will impose no import tariff on US oil. A free trade agreement between South Korea and the United States that took effect last year means there are no imports for either crude or oil products, a government source said.
Reuters
