Brexit is threatening to spoil the appeal of the UK’s crude in the world’s biggest regional oil market.
Seoul-based SK Innovation Co., an Asian buyer of North Sea Forties crude, sees a lower probability of purchases if the UK and South Korea don’t roll over an existing trade deal before Brexit.
That’s after British Business Secretary Greg Clark admitted that current agreements are unlikely to be extended before his country’s scheduled departure from the European Union on March 29.
The UK’s exit will mean the return of a 3 percent import tariff on Forties crude purchases that was waived by South Korea under a free-trade agreement with the EU since 2011.
The levy will reduce the attractiveness of North Sea oil compared with similar-quality crude from elsewhere when high shipping costs are taken into account, said SK spokeswoman Kim Wookyung.
Forties crude was already facing competition from other similar low-sulfur grades pumped around the world, including at US shale fields.
South Korea’s imports from the US quadrupled to 60.9 million barrels last year, while inbound shipments from the UK slid 8.1 percent to 31.4 million barrels, data from Korea National Oil Corp. show.
South Korea and the UK had formed a trade-working group in December 2016 to review a new FTA that was meant to take effect immediately when Britain leaves the EU.
While the new deal will at least have the same benefits offered by the current Korea-EU agreement, the two nations plan to pursue a deeper, more comprehensive trade and investment agreement, an official at Korea’s Ministry of Trade, Industry and Energy said early last year.
The UK, which benefits from about 40 free-trade agreements with 70 nations through its EU membership, has been seeking to extend them.
Combined, they account for 11 percent of British trade. Business Secretary Clark said on Tuesday that not all FTAs are expected to be concluded in time before the nation’s scheduled departure.
The admission threw into stark relief Trade Secretary Liam Fox’s old promise that the deals would be ready at “one second past midnight” after Brexit.
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