Iran's bid for new crude buyers falls short in SE Asia
Thursday, 23 February 2012 | 11:00
Iran may not find new buyers for crude in Southeast Asia, hampering the OPEC producer's efforts to find alternative outlets for barrels displaced by Western sanctions, refiners and traders said.
The region is seen as a potential market for Iranian barrels. Tehran is struggling to find buyers after top consumers China, India and Japan cut purchases.
Iran has stopped sales to British and French companies in retaliation against an embargo announced by the European Union that comes into effect from July 1. The world's fifth-largest exporter said it would sell to new customers.
But Southeast Asian refiners are unwilling or unable to take in Iranian crude, either due to issues related to the sanctions or their plants' inability to process the crude, which has a higher sulphur content.
"Sanctions are a big concern for us. The guidelines from the ministry are not to purchase crude from Iran because of the U.S. sanctions, so even if we are offered Iranian crude at a big discount, we would need to get the ministry's approval to buy," said a senior executive at a Thai refiner.
The ability to pay for the crude is another issue, as sanctions also target financial institutions dealing with Iran's central bank, which is the main conduit for oil revenues, said an Indonesian crude oil trader.
"We tried last year, but the problem is payment," he said. A spokesman for Indonesian state energy firm Pertamina said it does not import Iranian crude.
Malaysia's national oil company Petronas buys 600,000 barrels of Iranian crude every quarter for its refineries, industry sources said. The company does not plan to increase the volume as very few local banks can process payments due to tighter sanctions, they said.
"Buyers in general have a force majeure clause if payment becomes an issue that cannot be managed in the future," an industry source said.
In Vietnam, the country's sole refinery, Dung Quat, can only process sweet crude, ruling it out as a potential buyer, sources said.
Southeast Asia's major economies - Indonesia, Malaysia, the Philippines, Singapore and Vietnam - consumed almost 3.5 million bpd of oil in 2010, making it the third-largest demand centre in Asia behind China and Japan, according to the BP Statistical Review of World Energy 2011.
Iran's halt to exports to British and French companies could also affect Royal Dutch Shell's refineries in Singapore and the Philippines, which process Iranian crude, industry sources said.
While the Anglo Dutch company has agreed to comply with an EU embargo on Iranian crude imports that take effect on July 1, Iran's oil ministry will have to determine whether Shell qualifies for its pre-emptive ban, a source familiar with the matter said.
"It's still not clear whether Iran's sales to Shell will be affected. The ministry will have to decide if Shell is a pure British company," he said.
Singapore imported around 20,000 barrels per day (bpd) of Iranian crude over the past year, according to industry estimates. Official data on Iranian imports to Singapore is not available.
Shell's 500,000-bpd refinery in the city-state, the oil major's largest, accounts for the biggest share of this volume, industry sources said. Shell declined to comment.
Southeast Asian buyers could indirectly benefit if Iran is forced to offer its crude at deep discounts, as it would weigh on prices of similar grades from the Middle East.
"We can have an indirect benefit if Chinese and Indians buy Iranian crude at a lower price. That will let us buy similar grade at lower prices," said the executive with the Thai refiner, which imports around 70 percent of its feedstock from the Middle East.
Iran has so far not talked about giving discounts on its sales.