Iran still able to find gasoline supplies despite Russian exit

15 April 2010

Lukoil joins a growing list of energy companies that have quit Iran

Russia’s Lukoil joined a growing list of energy companies on 8 April when it suspended gasoline sales to Iran. But the Islamic Republic has shown little sign of strain after more than a year of steadily losing its suppliers.

Lukoil, which holds some 19 per cent of Russia’s refining capacity, became the latest international oil company to bow to US pressure, halting all business dealings with Iran, including its irregular shipments of up to 250,000 barrels of gasoline though the Gulf and Caspian sea.

Iran’s gasoline suppliers
CompanyCountryDate
Suspended
VitolSwissJanuary 2010
BPUKSept 2008
RelianceIndiaMay 2009 suspends gasolines sales (but continues to import Iranian crude).
ShellUK-DutchMarch 2010 (Announcement. Last shipment was in 2009)
LukoilRussiaApril 2010
Trafigura BeheerDutch-Swiss2010
Glencore InternationalSwissJanuary 2010
Current
Independent Petroleum GroupKuwait 
TotalFrance 
PetronasMalaysia16,000 b/d
VariousChina30,000-40,000 b/d
Petroleos de VenezuelaVenezuelaSigned $800m deal in October 2009 for 20,000 b/d
Source: MEED

The company also confirmed in March that pressure from US shareholders had forced it to withdraw from the development of discoveries in Iran’s Anaran field, where it held a 25 per cent share along with Norway’s Statoil Hydro.

This follows similar announcements from Swiss traders, Glencore International and Vitol, along with Swiss-Dutch Trafigura Beheer that they have cut supplies since the beginning of 2010. UK oil major BP shipped it last cargo to Iran in September 2008. UK-Dutch Shell at the end of 2009.

India’s Reliance Industries began production at its 580,000 barrels a day (b/d) refinery at Jamnagar in the state of Gujarat in December 2008, with supplies earmarked for Iran. The company cut off petrol supplies to Iran in May last year, despite continuing to import crude oil from Iran.

Not all international oil companies have halted supplies. France’s Total continues to sell petrol to Iran, but has indicated that if UN sanctions are imposed its supplies will stop.

With no worried shareholders to placate, state-owned energy firms have proved less susceptible to US pressure. Malaysia’s Petronas has been supplying Iran on average 16,000 b/d since August 2009. Venezuela’s Petroleos de Venezuela signed an $800m deal to supply Iran with 20,000 b/d from October 2009 to help plug any shortfall in imports.

Chinese companies in particular have ignored US protests and continue to seek deals in Iran. Analysts report that Chinese companies are also currently supplying between 30,000-40,000 b/d of petrol to Iran, about a third of the country’s total requirement. The country imports around 15 per cent of its crude oil from Iran, and Tehran hopes to secure commitments from Chinese firms on a raft of new oil and gas projects.

Iran refinery capacity
YearCapacity (b/d)
19981,505,000
19991,607,000
20001,607,000
20011,607,000
20021,607,000
20031,617,000
20041,652,000
20051,652,000
20061,737,000
20071,822,000
20081,832,000
2012*3,000,000
Source: BP, MEED

Iran consumes around 440,000 barrels of petrol a day. Demand in the country has been growing at 10 per cent a year on the back of an expanding domestic automotive industry and rising vehicle imports.

The government claims it can produce 55 per cent of its needs domestically, relying on imports for the remaining 45 per cent. Tehran aims to raise refinery capacity to 3 million b/d by 2012, but progress in modernising its refineries has been slow and reliance on petrol imports is still heavy.

Long-term supply contracts with Iran are rare.  According to one Dubai-based trader, in March Iran planned to purchase more than 100,000 barrels-a-day of gasoline from the international spot market.

“There is a gasoline surplus globally right now, so someone will have gasoline to sell to Iran. Gasoline can change hands a dozen times before it reaches the end user. Unless there are UN sanctions, it is just a matter of shifting traders,” says a Dubai-based energy consultant tracking shipments to Iran.

The announcements are usually for political reasons, or to help share prices in the case of listed companies. The company may not have actually sold any volumes for some months. There is also substantial evidence that traders continue to ship gasoline to Iran, despite public announcements to the contrary.

Iran’s refinery plans
Project NameLocationCapacity (kb/d)Completion date
Caspian RefineryGolestan province3002013
Pars RefineryShiraz1202012
Hormuz RefineryWest of existing Bandar Abbas Refinery3002012
Persian Gulf Star RefineryBandar Abbas3602012 (Originally anticipated for 2010)
Khuzestan Extra Heavy Crude Oil RefineryAbadan1802012
Anahita RefineryKermanshah1502012
Shahriyar RefineryTabriz1502012
Total 1,560 
Source: MEED   

However, International pressure on Iran is growing. Russia has joined the chorus of countries demanding stiffer action against the Tehran government. While China has traditionally followed Russia’s lead on the UN Security Council, Beijing is almost certain to use its veto powers to block any stringent measures.

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