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UN security council approves North Korea oil, products sanctions

Washington (Platts)--12 Sep 2017 1256 am EDT/456 GMT


The United Nations Security Council on Monday evening passed a sanctions resolution capping crude oil and refined petroleum product exports to North Korea.

The resolution, passed unanimously by the 15-member council, is a pared-back version of one the US was pushing last week calling for a ban on crude oil exports to North Korea.

Related podcast:What would an oil embargo mean to North Korea, which produces no petroleum?

The new resolution put forward by the US on Sunday calls for a ban on all condensate and natural gas liquids to North Korea and limits exports of refined products to a total of 500,000 barrels from October 1 to December 31 and to 2 million barrels for all of 2018.

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The resolution would also bar UN members from exporting more crude to North Korea than they exported over the previous 12 months.

The resolution would allow the council to approve additional crude exports on a "case-by-case basis" if it determines that more exports are needed for the "livelihood" of the North Korean people and unrelated to the country's nuclear or ballistic missile programs or other activities barred by previous UN-backed resolutions.

The new sanctions will cut North Korea's supply of gas, diesel and heavy fuels by 55%, according to Nikki Haley, the US Ambassador to the UN.

North Korea produces no crude and has relied almost exclusively on shipments from Russia and China, mostly through aid deals. The then-Soviet Union initially supplied North Korea with either free or low-priced crude for years, and China has supplied crude to the country under a similar arrangement negotiated decades ago, according to William Brown, an adjunct professor at the Georgetown University School of Foreign Service, where he has taught courses on North Korea.

China aids North Korea by sending very small volumes of crude from the Daqing block to North Korea's 1.5 million mt/year (30,000 b/d) Ponghwa refinery through a pipeline, according to two Beijing-based senior traders with different state-owned oil companies.

The sole pipeline for crude exports is 30 km long and links China's border city of Dandong in Niaoning province with the Ponghwa refinery. China sends crude from the Daqing block in Heilongjiang province by train to Dandong. The Ponghwa refinery is configured to process only Daqing crude, according to the senior Chinese traders.

According to China's official customs data, the last crude exports to North Korea were in December 2013 at 92,223 mt, with a total of 578,002 mt (4.24 million barrels) of exports to the country that year.

After that, no crude exports to North Korea are recorded. But market sources in North Asia say North Korea currently takes about 6 million barrels/year of Chinese crude.

--Brian Scheid, brian.scheid@spglobal.com
--Takeo Kumagai, takeo.kumagai@spglobal.com
--Edited by Jason Lindquist, jason.lindquist@spglobal.com




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