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Iran oil sanctions impact update: Cepsa's Last Cargo; Korea to Zero

Ali Mohammadi/Bloomberg

With less than a month to go before they come into force, U.S. sanctions on Iran's oil exports have forced buyers to turn away.

By Julian Lee and Irene Garcia Perez

Petroleumworld 10 18 2018

On November 4, U.S. sanctions on Iran are due to enter into force with the aim of driving down the Persian Gulf nation's oil exports and upend the global oil market. Combined exports of crude and condensates, a light form of oil extracted from gas fields, has already dropped by around 40 percent since April, the last month before the renewed curbs were announced .

The U.S. measures require buyers to halt purchases or run the risk of being excluded from the American market and financial system. If they do scale back, then there's a risk of spiraling crude prices. President Donald Trump's national security adviser, John Bolton, said in August that waivers from sanctions on buying Iranian oil would be “few and far between.” Given that there are 18 days until the oil sanctions come into force, any relenting on that position — if it's going to happen — could happen soon. U.S. officials were in talks  earlier this month with countries that want to continue importing Iranian crude and condensate.

Meanwhile, Iran's Oil Minister Bijan Namdar Zanganeh says global oil markets face a “severe shortage” of crude in the coming months and rising prices prove that supply is already tight. No other producers can replace Iranian supply, he said on the ministry's Shana news website. Its rival across the Persian Gulf – Saudi Arabia – says that's not been the case so far.

But the looming threat of sanctions has already started to have an impact on Iran's oil business. The Islamic Republic has lost key buyers and it is having to rely more on its own fleet of tankers to carry oil to its customers, according to ship-tracking data compiled by Bloomberg. Iran has responded by keeping the sales price  for its light crude for delivery to Asia in October at the cheapest level in 14 years relative to the rival Saudi grade.

A summary of the main Iranian oil importers' reactions and positions is set out below. This story was first published in mid August. Observed flows and exports are for combined crude and condensate from tanker tracking data compiled by Bloomberg and are recorded on the date at which the vessel left the loading terminal. To calculate what that equates to as a share of each country's overall purchases, import data from the Riyadh-based Joint Organisations Data Initiative were used. 


  • Observed flow (Sept.): 533,000 b/d
  • Observed flow (Jan.-June): 675,000 b/d
  • Share of observed Iranian exports (Sept.): 31%
  • Share of observed Iranian exports (Jan.-June): 26%
  • Share of Chinese imports (Jan.-June): 7%
  • What government has said: While Beijing has agreed to not ramp up purchases from Iran, China  rejected a U.S. request to cut them , according to two officials familiar with negotiations.  China will continue to cooperate with Iran without violating international obligations, foreign ministry spokeswoman Hua Chunying said back in June. In July, China continued to pay  for Iranian crude imports in yuan. The sanctions have also presented China with an opportunity to take the lead in a project to develop Iran's biggest gas deposit after France's Total SA had to halt its operations there. State-owned China National Petroleum Corp. is now expected to take the lead on the $5 billion project to develop the South Pars Gas field.   
  • What companies have said:  Nothing, although Sinopec reportedly halved loadings of Iranian crude in September, after senior U.S. officials visited the company in Beijing and demanded “steep cutbacks.”


  • Observed flow (Sept.): 488,000 b/d
  • Observed flow (Jan.-June): 592,000 b/d
  • Share of observed Iranian exports (Sept.): 28%
  • Share of observed Iranian exports (Jan.-June): 23%
  • Share of Indian imports (Jan.-Apr.): 13%
  • What government has said: The country is currently said to be mulling a 50 percent cut in its oil imports from Iran to secure a waiver from the U.S., but was in talks a month ago with the European Union for an alternative system to make payments to Iran. 
  • What companies have said: India's oil importers plan to buy as much as 9 million barrels, or about 300,000 barrels a day of Iranian crude in November, having suggested earlier that they wouldn't purchase any, according to people familiar with the matter. Saudi Aramco is to supply around 4 million barrels of additional crude to Indian customers for November.
  • Indian Oil Corp. executive director of optimization Partha Ghosh said in September that the company has optional volumes in term contracts with other national oil companies that can compensate for curbs on crude supply from Iran. Meanwhile, IOC booked its monthly quota of about 0.8 million tons of Iranian oil for delivery in October, according to a company official. IOC Chairman Sanjiv Singh says Indian refiners are looking at various mechanisms,  including using Indian rupees, for Iran oil payments after U.S. sanctions.
  • Bharat Petroleum Corp., one of the country's largest refiners, cut its planned purchases of Iranian oil to zero in November, according to people familiar with the matter.
  • Hindustan Petroleum Corp. , the third biggest state refiner, is  unlikely to buy any more Iranian oil until India gets a waiver since its new insurance cover for its refineries would be invalidated by processing Iranian oil, according to a person familiar with the matter. The company has bought no crude from Iran since June.
  • Mangalore Refinery and Petrochemicals Ltd. said in its annual report that it's  looking at alternative sources  like Australia, West Africa and South America to supplement any reduction from the Persian Gulf nation, which supplied a quarter of its oil needs. The company will keep November oil purchases from Iran “more or less” the same as what has already been booked, says the company's Managing Director  Shri M. Venkatesh.
  • Nayara Energy Ltd.  is looking at alternatives to Iranian oil and may import from the U.S. if economically viable, CEO B. Anand said in September in New Delhi. As of early October, the company hadn't bought any Iranian oil in November, according to people familiar with the matter. 
  • Shipping data compiled by Bloomberg show India's crude oil imports from Iran edged up in September from August.

South Korea

  • Observed flow (Sept.):  0 b/d
  • Observed flow (Jan.-June): 285,000 b/d
  • Share of observed Iranian exports (Sept.): 0%
  • Share of observed Iranian exports (Jan.-June): 11%
  • Share of South Korean imports (Jan.-June): 9% 
  • What government has said:  South Korea is waiting  for an official response from the U.S. on whether its refiners can continue importing Iranian crude and condensate during the 180-day wind-down period, an official from the nation's energy ministry said in early July. Refiners haven't bought any crude or condensate from Iran since June , with the last cargo arriving in the country in July.
  • What companies have said: Refiners are turning to other suppliers of condensate to compensate for lost flows from Iran, often involving transport over much greater  distances. SK Innovation Co., the Asian country's top processor, has bought a cargo of Russian Sabetta condensate for November arrival in Incheon, according to a company spokesperson.  Refiners are also substituting condensate from Iran  with a processed fuel known as naphtha from elsewhere. SK Innovation, Hanwha Total Petrochemical Co. and Hyundai Oilbank Co. all rushed to procure supply for July and August from other suppliers.  


  • Observed flow (Sept.):  44,000 b/d
  • Observed flow (Jan.-June): 125,000 b/d
  • Share of observed Iranian exports (Sept.): 3%
  • Share of observed Iranian exports (Jan.-June): 5%
  • Share of Japanese imports (Jan.-June): 4%
  • What government has said: Japan has sought a waiver from the measures. Japan's Finance Minister Taro Aso in June  asked the U.S.  to give more clarity and reassurance to Japanese firms. Talks have continued and Japanese government officials agreed with their U.S. counterparts to continue discussions after a 3rd round of meetings was held on Sept. 10 in Washington, a foreign ministry official said.
  • What companies have said: Japan's refining industry wants the government to  “tenaciously hold talks”  with the U.S. to get a waiver on America's renewed sanctions on Iran, Takashi Tsukioka, chairman of refiner Idemitsu and of the Petroleum Association of Japan, said in July. The executive said he sees it as “unreasonable” for Japan, which did not increase significantly its purchases from Iran when sanctions were eased in 2015, to be impacted in the same way as countries that boosted Iranian oil imports. However, Japanese refiners have temporarily halted Iranian oil loadings, Tsukioka told reporters in Tokyo in September. Firms plan to follow any guidance on purchases of Iranian oil from the Japanese government after it completes talks with the U.S.
  • Japan's crude imports from Iran fell 31.7 percent year on year to  around 706,000 kiloliters, or approximately 143,000 barrels a day, in August according to data from the Ministry of Finance
  • Japanese shipping companies and major banks, such as MUFG Bank and Mizuho Bank, told oil distributors in July that they may soon halt transactions with Iran. Refiners were told that the banks won't handle transactions for Iran-related deals that were signed on or after May 8, and that those signed before that period would be dealt with “on case-by-case basis.” 
  • JXTG and Idemitsu didn't seek October-loading Iranian crude and condensate cargoes, according to people with knowledge of matter. JXTG's Senior Vice President Yasushi Onoda said in August that the company may stop imports from Iran after September-loading cargoes unless Japan gets a waiver from the U.S.
  • Cosmo Energy has no plans to buy October-loading Iranian oil cargo “for the time being”, company spokesman Tomohiro Tamura said by phone in September.
  • Fuji Oil has effectively stopped buying Iranian crude as it is becoming difficult to secure ships to transport oil exported from the Persian Gulf nation, company spokesman Takaaki Sobue said in August. Fuji hasn't made a formal decision to stop imports from Iran.

United Arab Emirates

  • Observed flow (Sept.) : 105,000 b/d
  • Observed flow (Jan.-June) : 127,000 b/d
  • Share of observed Iranian exports (Sept.): 6%
  • Share of observed Iranian exports (Jan.-June): 5%
  • What government has said: The U.A.E. is committed to abiding by the sanctions and will look for condensate supplies from countries other than Iran, Energy Minister Suhail Al Mazrouei said early October. Dubai, the U.A.E.'s trade hub, does business with Iranian merchants and purchases condensate for its refineries. There were signs of  flows from other countries  rising in July at Iran's expense. The Port of Fujairah was asked by U.A.E. customs department to require Certificate of Origin documentation with an official stamp from all tankers bringing oil to the terminal and its storage tanks. While vessels carrying Iranian oil currently aren't banned from Fujairah, that may change if the customs department decides to stop entry after U.S. sanctions come into effect.
  • What companies have said: Dubai-based Emirates National Oil Co. is trying alternatives to cargoes from the Islamic Republic, according to traders with knowledge of the matter. However, tankers laden with Iranian condensate have continued to discharge at its Jebel Ali terminal in early October.

European Union

  • Observed flow (Sept.) : 333,000 b/d
  • Observed flow (Jan.-June): 483,000 b/d
  • Share of observed Iranian exports (Sept.): 19%
  • Share of observed Iranian exports (Jan.-June): 19%
  • Share of EU imports (Jan.-June):  4%
  • What public authorities have said: The bloc is determined to preserve the Iran nuclear deal and considers that the consequences of abandoning it  could be “catastrophic,”  according to the EU foreign-policy chief Federica Mogherini. In June, she stressed that the most important challenge was to  find solutions on banking and finance to support “legitimate trade and investment.” In July, the U.S. rejected French, British and German requests to grant waivers or exemptions to companies seeking to do business in Iran. In September, Mogherini announced that the European Union, China and Russia backed a mechanism to allow “legitimate” business to continue with Iran. “In practical terms this will mean that EU member states will set up a legal entity to facilitate legitimate financial transactions with Iran, and this will allow European companies to continue trade with Iran,” she said after meeting with representatives of the other signatories: the U.K., France, Germany, Russia, China plus Iran. This will be “in accordance with European Union law, and could be opened to other partners in the world,” she added. The mechanism will be provided with a banking license “as soon as possible,” German newspaper Handelsblatt reported. However, legal sanctions experts and oil traders said the creation of a special purpose vehicle and payments channel would still leave traders buying or selling Iranian crude vulnerable to punitive actions by the U.S. Treasury Department.
  • What companies have said: The lack of clarity on the scale of the reductions sought by the Trump administration has left several customers continuing to buy Iranian crude, although some showed less interest in resuming business with Iran. France's Total SA has failed to secure a waiver from the U.S. to exempt Phase 11 of the South Pars gas field in Iran from sanctions, and has notified Iran it will withdraw from the project. “Within the U.S. legal framework, we can't work in Iran,” Total CEO Patrick Pouyanne  said in July . “It's impossible for a company like ours, and for most or even all global companies, even maybe the Chinese.” Austria's OMV AG has suspended investment projects  in Iran, but still has made no decision on imports, CEO Rainer Seele said in an interview with Tass news agency in July. Swiss lender Banque de Commerce et de Placements SA told customers that it would stop financing Iranian oil cargoes by June 30, Reuters reported. Top executives from some of the world's largest oil traders see the sanctions being enforced very strictly, removing as much as 2 million barrels a day of Iranian oil from the market.


  • Observed flow (Sept.) : 167,000 b/d
  • Observed flow (Jan.-June): 168,000 b/d
  • Share of observed Iranian exports (Sept.): 10%
  • Share of observed Iranian exports (Jan.-June): 7%
  • Share of Italian imports (Jan.-June): 14%
  • What companies have said: Iran is an important supplier to Saras SpA , but the refiner  isn't concerned about sourcing crude due to flexibility of operations, according to CEO Dario Scaffardi. The company is waiting for guidance from Italian and European authorities. Suezmax tanker Kriti Spirit, carrying Iranian crude, has been anchored at Saras's Sarroch refinery since Oct. 5.
  • Eni SpA said in May that the company has no material exposure to Iran and will not be affected by the sanctions. Tankers hauling Iranian crude continue to discharge at ports near to the company's Italian refineries, with the Suezmax New Pride calling at Taranto, Genoa and Livorno in the first week of October.


  • Observed flow (Sept.) : 100,000 b/d
  • Observed flow (Jan.-June): 119,000 b/d
  • Share of observed Iranian exports (Sept.):  6%
  • Share of observed Iranian exports (Jan.-June): 5%
  • Share of Spanish imports (Jan.-June): 9%
  • Compania Espanola de Petroleos SAU , or Cepsa, says in its IPO prospectus that it took the "final shipment" of Iranian crude in September. The Suezmax tanker Monte Udala loaded a cargo of around 1 million barrels of Iranian crude on Sept. 29, which it is due to deliver to Cepsa's Huelva refinery on Oct. 17, according to tanker tracking data compiled by Bloomberg.
  • Repsol SA  took the first spot cargo of crude from Iran's West Karoun oil region in June, 500,000 barrels of Pars crude. The last observed delivery of Iranian crude to a Repsol refinery was from the Suezmax tanker Ottoman Nobility, which discharged at Cartagena in late August, according to tanker tracking data compiled by Bloomberg.


  • Observed flow (Sept.) : 0 b/d
  • Observed flow (Jan.-June): 94,000 b/d
  • Share of observed Iranian exports (Sept.):  0%
  • Share of observed Iranian exports (Jan.-June): 4%
  • Share of French imports (Jan.-June): 9%
  • Total SA   stopped buying Iranian crude in July, Pouyanne said at the Oil & Money conference in London. The last observed delivery to France was in July.


  • Observed flow (Sept.) : 33,000 b/d
  • Observed flow (Jan.-June): 66,000 b/d
  • Share of observed Iranian exports (Sept.):  2%
  • Share of observed Iranian exports (Jan.-June): 3%
  • Share of Greek imports (Jan.-June): 14%
  • Hellenic Petroleum SA said in May it was assessing its position  and commercial arrangements following the U.S. decision. The refiner said it will “comply with the applicable international regulatory framework,” and that it didn't expect any significant effect on its operations. The last tanker carrying Iranian crude discharged at the company's Pachi, Megara terminal in June.
  • Motor Oil (Hellas) Corinth Refineries SA has continued to receive Iranian crude at its Agioi Theodoroi terminal near Corinth at a rate of around one Suezmax tanker per month, or approximately 33,000 barrels a day. The most recent tanker, the Kriti Sfakia, discharged at the end of September, according to tanker tracking data compiled by Bloomberg.


  • Observed flow (Sept.) : 133,000 b/d
  • Observed flow (Jan.-June): 182,000 b/d
  • Share of observed Iranian exports (Sept.):  8%
  • Share of observed Iranian exports (Jan.-June): 7%
  • Share of Turkish imports (Jan.-June): 48%
  • What government has said: Turkish Foreign Minister Mevlut Cavusoglu said in late June that Turkey will not take part in U.S. sanctions against Iran, according to local media reports . In a similar line to India's Foreign Minister, Turkey's former Minister of Economy Nihat Zeybekci had already  announced in June  that the U.S. decision on Iran didn't concern Turkey, and that it's not obliged to implement it unless there are United Nations sanctions. President Trump's announcement in August that he plans to double tariffs on imports of Turkish steel and aluminium will increase the likelihood that Turkey -- and its energy companies including Tupras --  won't align with the U.S.'s policy on Iran, said Bloomberg Intelligence analysts Rob Barnett and Salih Yilmaz. Turkey's imports of Iranian oil are likely to continue at similar levels despite the re-imposition of U.S. sanctions, Ehsan Khoman, head of MENA research and strategy at MUFG Bank, wrote in an Aug. 16 note. Turkey, Russia and Iran have agreed to use their local currencies for trade among themselves instead of the U.S. dollar, Anadolu Agency reported in September, citing Central Bank of Iran Governor Abdolnaser Hemati.


Original article


Story by Kevin Crowley from Bloomberg Businessweek 10 15 2018


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