Iranian crude oil

Indian Oil Refiner Part-Owned by Iranian Company Cancels Iran Oil Imports

India’s Chennai Petroleum will stop processing Iranian crude oil from October to keep its insurance coverage once new sanctions by the United States against Iran go into effect.

New Delhi: India’s Chennai Petroleum will stop processing Iranian crude oil from October to keep its insurance coverage once new sanctions by the United States against Iran go into effect, three sources familiar with the issue said.

Iran’s Naftiran Intertrade Co Ltd, a trading arm for state-owned National Iranian Oil Co, owns a 15.4% stake in Chennai Petroleum, which has two refineries with a total combined capacity of 230,000 barrels of oil per day (bpd).

In May, US President Donald Trump pulled out of an international nuclear deal with Iran and announced new sanctions against the country, the third-largest producer among the Organisation of the Petroleum Exporting Countries (OPEC). Washington is pushing allies to cut Iranian oil imports to zero once the sanctions on the petroleum sector start up on November 4.

United India Insurance has informed Chennai Petroleum that its new annual policy that is set to take effect from October will not cover any liability related to processing crude from Iran, the three sources said. This has forced the refiner to cancel a scheduled loading of 1 million barrels in October, they said.

Indian insurers do not fall directly under the sanctions, but need to hedge their own risk on the Western reinsurance market, which will not accept Iranian exposure.

“It is quite complicated.. reinsurers are quite apprehensive about extending cover for Chennai Petroleum,” said one of the sources, who asked not to be identified because of the sensitivity of the issue.

Chennai Petroleum’s reduced demand will further cut India’s imports from Iran to about 10 million tonnes in October, lower than previous estimates reported by Reuters.

“Reinsurers have said they can not provide full 100% cover. They have agreed to provide support for only 85% cover,” said a second source, who also declined to be identified.

Chennai Petroleum, a subsidiary of the country’s biggest refiner Indian Oil Corp (IOC), has a deal to buy up to 2 million tonnes, or 40,000 bpd, of oil from Iran in the fiscal year 2018/19.

IOC imports oil on behalf of Chennai Petroleum.

Chennai Petroleum and United India Insurance did not respond to requests for comment.

With Chennai’s absence, Iran is left with just two Indian clients, Mangalore Refinery and Petrochemicals Ltd, and IOC.

State-owned refiner Hindustan Petroleum Corp has already halted purchases due to insurance problems, while Bharat Petroleum Corp boosted Iranian purchases earlier this year and expects to sharply cut Iranian flows once the sanctions take effect.

Nayara Energy is also preparing to halt Iranian imports from November, while Reliance Industries and HPCL-Mittal Energy Ltd have already stopped buying Iranian oil.

(Reuters)

Will Take ‘Strongest Action’ for Not Complying With Iran Sanctions: US

During a congressional hearing on Thursday, assistant secretary of state for economic and business affairs Manisha Singh told lawmakers that the US was prepared to take ‘strongest action’ against countries that did not cut oil imports from Iran to ‘zero’ by November.

Washington: The United States is prepared to take “strongest action” against countries and entities who are found not complying with the Iranian sanctions, including reducing to zero the purchase of crude oil from Iran, a top Trump Administration official told lawmakers.

“We are prepared to take the strongest actions possible on people who will not assist us in complying with this new range of sanctions that we are putting back into place,” Indian-American Manisha Singh, assistant secretary of state for economic and business affairs, told lawmakers during a congressional hearing on Thursday.

Responding to a question from congressman Eliot Engel, Singh said the Trump Administration has been talking to all its allies and partners and trying to convince them to fully implement the new Iranian sanctions which the US has imposed following its withdrawal from the Iranian nuclear deal.

The US has told India and other countries to cut oil imports from Iran to “zero” by November 4 or face sanctions, making it clear that there would be no waivers to anyone.

Iran is India’s third-largest oil supplier behind Iraq and Saudi Arabia. Iran supplied 18.4 million tonnes of crude oil during April 2017 and January 2018 (first 10 months of 2017-18 fiscal).

“If any of the major buyers of Iranian crude, which is China, India, Japan, South Korea, and Europe, if they refuse to sharply cut their purchases, are we really prepared to cut their banks off from the global banking system, which is the penalty under the US sanctions? Are we really prepared for that?” Engel asked.

“In response, we are prepared to take the most serious actions possible on Iran. We need to demonstrate to the Iranian regime that we will not tolerate its development of a nuclear program for illicit purposes,” Singh said.

The flawed Iran nuclear deal was determined not to be the right vehicle to address the range of Iran’s malign behaviour, she said.

“We are having conversations with our allies, and our goal is to get the purchase of Iranian crude oil down to zero by November 5. That’s a critical goal for us,” Singh said in response to question from congressman Engel.

“We are talking with all of our allies, including the countries that you mentioned, helping them to understand that the only way that we can achieve this global goal of Iran’s nuclear program not commencing is through partnership and cooperation with our allies as you have indicated,” she said.

“We are trying to explain to them that the bigger picture here is we need to work together on putting this pressure on Iran, and the sales of oil are a critical way to do that. We are prepared to take the strongest actions possible on people who will not assist us in complying with this new range of sanctions that we are putting back into place,” Singh said.

Secretary of state Mike Pompeo and treasury secretary Steven Mnuchin have directed teams from the State Department and Treasury Department to travel together, she said, adding that the team has visited over 30 countries so far and talked through with them regarding US’ withdrawal from the Iran deal.

“We’re trying to help them understand what it means for them. We are trying to engage in all kinds of diplomatic conversations to make sure that our allies don’t feel like we are going it alone. We are explaining to them that we need to work as a global community to address Iran’s range of malign behaviour,” Singh said.

“China is Iran’s top, top oil purchaser. Will they get to zero by November?” Engel followed up with another question.

“We are working will all countries, including China, to get them to zero. We’ve made it clear that unless we act as a global community, Iran’s behaviour is not going to change,” Singh said.

The Iran nuclear deal “was not going to change Iran’s behaviour. We have a new strategy, a new list of behaviours that we are going to insist that they take, and we need cooperation from the global community in order to achieve this goal,” she said.

(PTI)

China Defies US Pressure as EU Parts Ways With Iranian Oil

While European companies are walking away from Iranian oil fearing reprisals from Washington, China will use oil tankers from Iran for its purchases of that country’s crude.

Beijing/Singapore: China, seeking to skirt US sanctions, will use oil tankers from Iran for its purchases of that country’s crude, throwing Tehran a lifeline while European companies such as France’s Total are walking away due to fear of reprisals from Washington.

The United States is trying to halt Iranian oil exports in an effort to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.

China, which has cut imports of US crude amid a trade war with Washington, has said it opposes unilateral sanctions and defended its commercial ties with Iran.

On Monday, sources told Reuters Chinese buyers of Iranian oil were beginning to shift their cargoes to vessels owned by National Iranian Tanker Co (NITC) for nearly all their imports.

The shift demonstrates that China, Iran’s biggest oil customer, wants to keep buying Iranian crude despite the sanctions, which were reimposed after the United States withdrew in May from a 2015 agreement to halt Iran’s nuclear programme.

“The shift started very recently, and it was almost a simultaneous call from both sides,” said one source, a senior Beijing-based oil executive, who asked not to be identified as he is not allowed to speak publicly about commercial deals.

Tehran used a similar system between 2012 and 2016 to circumvent Western-led sanctions, which had curtailed exports by making it virtually impossible to obtain shipping insurance for business with Iran.

Iran, OPEC’s third-largest oil producer, relies on sales of crude to China, Japan, South Korea, India and the EU to generate the lion’s share of budget revenues and keep its economy afloat.

The United States has asked buyers of Iranian oil to cut imports to zero starting in November. Japan, South Korea, India and most European countries have already slashed operations.

A US State Department official said the Trump administration was aware of China‘s plans to continue commercial cooperation with Iran and emphasised that Washington was fully committed to enforcing the sanctions.

“We continue to discuss our Iran policy with Chinese counterparts and the implications of our reimposition of sanctions,” the official said, responding to the Reuters report.

French oil major Total <TOTF.PA>, previously one of the biggest European buyers of Iranian oil, has said it had no choice but to halt imports and abandon Iranian projects to safeguard its operations in the United States.

On Monday, Iranian Oil Minister Bijan Zanganeh said Total had officially left Iran’s South Pars gas project.

Total later confirmed it had notified the Iranian authorities of its withdrawal from South Pars after it failed to obtain a waiver from U.S. sanctions.

Iranian officials had earlier suggested China’s state-owned CNPC could take over Total’s stake and Zanganeh said the process to replace the French company was under way.

“As for the future of Total’s share, we have not been informed of an official CNPC position, but as we have always said, CNPC, a Chinese state-owned company, has the right to resume our participation if it decides so,” Total said in an emailed statement.

Walk away

French President Emmanuel Macron has repeatedly called for safeguarding the Iranian nuclear deal and defended the interests of EU companies in Iran.

But most European companies have conceded that they would be forced to walk away from Tehran for fear of sanctions and losing access to operations that require US dollars.

The first round of US sanctions, which included cutting off Iran and any businesses that trade with it from the US financial system, went into effect on Aug. 7.

A ban on Iranian oil purchases will start in November. Insurers, which are mainly US- or European-based, have begun winding down their Iranian business to comply with the sanctions.

To safeguard their supplies, state oil trader Zhuhai Zhenrong Corp and Sinopec Group, Asia’s biggest refiner, have activated a clause in long-term supply agreements with National Iranian OilCorp (NIOC) that allows them to use NITC-operated tankers, four sources with direct knowledge of the matter said.

The price for oil under the long-term deals has been changed to a delivered ex-ship basis from the previous free-on-board terms, meaning Iran will cover all costs and risks of delivering the crude as well as handling the insurance, they said.

In July, all 17 tankers chartered to carry oil from Iran to China were operated by NITC, according to shipping data on Thomson Reuters Eikon. In June, eight of 19 vessels chartered were Chinese-operated.

Last month, those tankers loaded about 23.8 million barrels of crude oil and condensate destined for China, or about 767,000 barrels per day (bpd). In June, the loadings were 19.8 million barrels, or 660,000 bpd.

In 2017, China imported an average of 623,000 bpd, according to customs data.

Sinopec declined to comment. A spokesperson for Nam Kwong Group, the parent of Zhenrong, declined to comment.

NIOC did not respond to an email seeking comment. An NITC spokesman said it would forward a request from Reuters for a comment to the country’s Ministry of Culture and Islamic Guidance.

It was not immediately clear how Iran would provide insurance for the Chinese oil purchases, worth some $1.5 billion a month. Insurance usually includes cover for the oil cargoes, third-party liability and pollution.