Iran Insists On Crude Export Boost Despite Uncertainties

23 January 2016 | 18:55 Code : 1955861 General category
Iran has pledged 500,000 barrels a day of new crude exports in the next few months and 1 million barrels a day within a year to take back its share of the oil market after US, EU, and UN sanctions are removed. However, contradictory news pieces are confusing.
Iran Insists On Crude Export Boost Despite Uncertainties

Iran’s state-owned National Iranian Oil Co. is tentatively preparing a shipment of at least 1 million barrels of light crude to a Mediterranean port in the European Union around mid-February, an Iranian official said. It would be the first shipment to the EU since an embargo on Iranian oil was lifted last week as part of the end of western sanctions. Refineries in Spain, Italy, France, and Greece were best suited for the delivery, and those countries were previous buyers of Iran’s oil before sanctions, the Wall Street Journal quoted another Iranian official as saying. Iran used to sell as much as 800,000 barrels per day (bpd) to European refiners in Italy, Spain, and Greece before the sanctions over its nuclear program were imposed.

 

One destiny for Iran’s crude oil quickly emerged from the shadows. Greek Energy Minister Panos Skourletis says Greece held talks on Friday on restarting crude oil purchases from Iran. "They (Iran) are positively disposed towards and think that Greece can be the European conduit for them to re-enter the market," Skourletis told Reuters.

 

Hellenic Petroleum, Greece's biggest oil refiner, was a major buyer of Iranian crude and is estimated to owe Iran around $550-600 million for oil it bought before the sanctions but was unable to pay for when the international embargo was imposed.

 

Skourletis said the two sides agreed Hellenic Petroleum could settle its debt now that the sanctions were easing, and was optimistic a mutually acceptable deal could be reached.

 

“They said that the debt (settlement) can open the way so that our cooperation is boosted,” he said, adding Greek Prime Minister Alexis Tsipras was due to visit Iran early next month.

 

“Iran, now relieved of sanctions, insists it will boost output by an immediate 500 kb/d. Our assessment is that around 300 kb/d of additional crude could be flowing to world markets by the end of the current quarter,” International Energy Agency reported four days ago.

 

Two of Iran’s powerful allies, China and Russia, will also be willing to help the country to achieve the target. China, not only Iran’s largest trade partner but also its largest crude oil importer, seeks more when it comes to Iran. The Chinese President Xi Jinping’s visit to the Islamic Republic is expected to boost energy cooperation, according to CCTV America. A recent report published by China’s Commerce Department shows that, during the first 11 months of last year, China imported 24.36 million tons of crude oil from Iran, accounting for 8 percent of the total amount of oil imports in the world.

 

Nevertheless, it seems crude oil sales will be more difficult on the other side of the planet. An article published on Reuters on Thursday notes that European companies and trading houses are not rushing to buy Iranian oil. Their reluctance is mainly due to legal uncertainties over the lifting of sanctions that are “likely to take weeks to clarify,” Reuters reported. One in their shoes would have a lot of reasons for caution; a lack of dollar clearing, the absence of an established mechanism for non-dollar sales, insufficient clarity on ship insurance and the reluctance of banks to provide letters of credit to facilitate trade.

 

Here is where Iran expects Russia to come into play as a mediator. Iran has resorted to Russia’s oil major Lukoil, which transported Iran’s crude oil to Swiss refineries and has now reestablished relations with the Iranian Petroleum Ministry, Persian website Asre Naft reported. However, Lukoil's chief executive, Vagit Alekperov, said it was still not clear whether the company's refineries in Italy or the Netherlands were free of legal risks to buy Iranian oil. "It is all clear on the petrochemical side. We can transfer the money and buy and sell their products. On the crude side, our lawyers are looking into this," he told Reuters Television on the sidelines of the World Economic Forum in Davos.