Seoul: The government will begin a crude oil swap system with private companies starting Tuesday to assist oil refineries in securing alternative oil supplies and minimizing potential supply disruptions, as announced by the industry ministry.

According to Yonhap News Agency, the system is scheduled to operate over the next two months. It involves the government lending some of its oil reserves, primarily Middle Eastern crude, to oil refineries. These refineries will later replenish the government reserves with alternative supplies they secure. This initiative aims to maintain stable stock levels despite delays caused by the effective closure of the Strait of Hormuz due to the ongoing Iran war. The program also seeks to delay the release of the government's strategic oil reserves, which serve as the final line of defense in crude oil supply.

Yang Ghi-wuk, deputy minister for trade, industry and resource security, highlighted in a regular briefing that such a system is akin to currency swaps. He emphasized that the government has traditionally been inflexible in managing oil reserves. However, given the current crisis, the decision was made to operate the system with greater flexibility and responsiveness to navigate the situation effectively.

Currently, four companies have applied for the program, proposing a combined 20 million barrels of crude oil exchange. The government plans to first sign a 2 million barrel swap deal with an unidentified firm later in the day. The private sector is actively working on securing alternative oil supplies from regions including Africa, Central Asia, North and South Americas, and Australia. Yang noted that South Korea is unlikely to experience actual disruptions in domestic crude oil supply until the end of June.