North Sea oil to retain Korea tariff waiver even with no-deal Brexit

North Sea crude will retain its attractiveness to South Korean buyers when the U.K. leaves the European Union following a deal between the two countries.

Seoul and London agreed to adopt an existing free trade agreement between Korea and the EU, South Korea’s trade ministry said in a statement. That means an exemption from a 3% import tariff on oil imports will continue to apply to U.K. crude. Brexit had been seen as threatening that status.

While South Korea has been a steady buyer of U.K. crude, imports fell to zero in the first four months of this year amid uncertainty over the nation’s departure from the EU. North Sea oil is also facing growing competition from other similar low-sulfur grades, including crude from American shale fields.

South Korean imports from the U.S. jumped more than fourfold in 2018 from a year earlier, while shipments from the U.K. dropped 8.1%, according to data from Korea National Oil Corp. Considering high shipping costs, the appeal of North Sea Forties crude would fall without a separate trade deal, South Korea’s biggest refiner SK Innovation Co. said in February. Hyundai Oilbank Co. recently bought two cargoes from Britain, the first such purchase this year.

Seoul and London formed a trade-working group in December 2016 to sign a separate FTA that was meant to take effect immediately after Britain exited the EU. The deal agreed on Monday has the same benefits offered by the current Korea-EU agreement, and the two nations will further strengthen cooperation in areas including agriculture, automobiles and energy, South Korea’s trade ministry said in the statement.

U.K. International Trade Secretary Liam Fox tweeted about the agreement on Monday.

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