Exports Iran Steps up Global Oil Participation

Editor: Lisa Saller, Lisa Saller

Iran is slowly beginning to normalize its participation in global commodity trading and shipping after the lifting of international sanctions on January 16. However, challenges remain as the vast majority of ‘primary sanctions’ applicable to US citizens and companies domiciled in the US remains in effect and they are prohibited from doing business with Iran.

Iran’s oil exports are increasing.
Iran’s oil exports are increasing.

The sanctions includes a de facto ban on the use of US dollars at any point during a transaction involving Iran, including currency conversions, which traders and refiners have said is a major impediment to signing deals.

The IEA recently reported that Iranian output had risen by 220,000 barrels per day on the month in February and was up by 300,000 b/d since the start of the year—less dramatic than the country’s leaders had predicted but still a notable increase and with a determination to kick on. Indeed, oil minister Bijan Zanganeh said last month that Iran should not be included in any production freeze until the country’s output hits 4 million b/d against the backdrop of a planned oil producers meeting on April 17 in Doha. The following is a round-up of the recent milestones in Iran’s global oil participation.

Crude Exports Double

Iran’s oil exports will reach 2 million b/d early in its new year starting March 20, according to officials, from 1 million b/d just before sanctions were lifted. Zanganeh has said the country’s oil and gas condensates exports have already exceeded 2 million b/d. Earlier, President Hassan Rouhani said condensate sales were around 200,000-300,000 b/d.

Reinsurance challenge easing

The International Group of P&I Clubs—a pool of 13 major protection and indemnity clubs which dominates the insurance of global shipping—has raised the reinsurance level for shipping Iranian crude to a maximum of $580 million per tanker from $80 million previously. Although this does not fully make up for the missing US reinsurance cover as a result of the US’ ongoing sanctions against Iran, it could be seen as sufficient for Asian buyers, such as India and South Korea, or for some European importers for their shipments of Iranian oil, sources have said. The Japanese government, meanwhile, will continue providing full insurance cover for shipping Iranian oil into the new fiscal year (April–March), a government source has said.

Asian strength

India is in talks to explore the potential for more crude oil imports from Iran, but is keen on obtaining a preferential price. South Korea’s crude imports from Iran almost doubled to 1,064,337 mt (7.8 million barrels or 269,000 b/d) in February, compared with 4.04 million barrels a year earlier, marking the second consecutive monthly increase in Iranian crude imports. Japan’s oil imports from Iran look set to increase in 2016, with local importers finalizing their fiscal-year term contracts at flat or slightly higher volumes than a year earlier, sources familiar with the matter have said.

Global footprint

Several cargoes of Iranian crude have sailed to Europe since the lifting of sanctions, data from Platts trade flow software cFlow show. All these cargoes have been bought by three buyers—Lukoil, Total and Cepsa. Greece’s Hellenic Petroleum also reached a framework agreement with the National Iranian Oil Company on January 22 and Italian refiner Saras has expressed interest in buying Iranian crude. Iran exported 5 million liters or 31,449 barrels of gasoil to Iraqi Kurdistan in the fiscal year to March 19,

* Content Source: Platts