* SKorea cuts volume of rebate-eligible imports to 2 mln bbls

* Move may lift demand for Brent-priced crudes

* New rule applies to imports from Americas, Africa, Europe

(Adds comment from government source)

By Meeyoung Cho

SEOUL, June 5 (Reuters) - South Korea has boosted incentives for crude oil imports from regions other than the Middle East, two energy ministry sources said, in a move that may increase demand for crudes priced off the Brent benchmark.

South Korea, the world's fifth-biggest buyer of crude oil, has been trying to cut its heavy reliance on Middle East exporters amid rising geopolitical risks in the region that has put supplies at risk.

Already, the Asian country has been forced to cut crude imports from Iran as sanctions from the West tighten in a bid to force Tehran to halt a controversial nuclear programme.

Under a revised law, which took effect on June 1, for crude oil imports from the Americas, Africa and Europe, South Korea will pay back 90 percent of the freight charge difference with Middle East suppliers if annual imports by a company reach 2 million barrels a year, down from 7 million previously.

"This law was designed to manage supply risk after we went through two oil shocks in the past. If we depend upon a certain place for supply, the oil price can also be distorted," a source at the energy ministry told Reuters.

The law, first enacted in 1982, was reviewed every three years, the source said, adding that the revision is not linked to cuts in oil supply from Iran.

South Korea imported about 56 million barrels of oil from Iran last year, nearly 6 percent of its total imports, but imports have fallen 28 percent over the first four months of this year.

BRENT BOOST

The move by South Korea could boost demand for crudes priced off international benchmark Brent.

Brent crude LCOc1 rose by more than $1 per barrel on Tuesday to a near one-week high of $103.58 as talk of South Korea's move swirled. Brent was steady at $103.26 a barrel by 0613 GMT on Wednesday.

"We still need to compare the economics of importing Forties with Middle East crudes," a South Korean oil trader said, referring to a North Sea crude grade.

"However, the possibility of North Sea arbitrage flow will grow in general in line with the government's decision to support diversification of crude sources."

Separately, South Korea plans to end a tax loophole favouring North Sea oil on July 1. At present refiners can claim a rebate on South Korea's 3 percent crude import tax, regardless of whether they actually paid the levy. ID:nL3N0CL09J

South Korea, which imports nearly all of its crude needs, imported 950 million barrels last year, of which 85 percent came from the Middle East, government data showed.

Imports from Asia were around 88 million barrels and from Europe 43.6 million barrels, with the rest from Africa and the Americas.

(Additional reporting by Florence Tan in Singapore; Writing by Manolo Serapio Jr.; Editing by Richard Pullin)

((manolo.serapio@thomsonreuters.com)(+65 6870 3884)(Reuters Messaging: manolo.serapio.thomsonreuters.com@reuters.net))

Keywords: SKOREA OIL/REBATE