By Heesu Lee, Sharon Cho and Tsuyoshi Inajima on 11/23/2018
SEOUL, SINGAPORE TOKYO (Bloomberg) — Armed with waivers to keep importing Iranian oil without running afoul of U.S. sanctions, some of the Islamic Republic’s top customers are preparing to buy.
The exemptions mean at least some supplies from OPEC’s third-biggest producer will keep flowing into international markets, after its exports plunged almost 40% since April — the month before Washington announced the curbs. In a bid to keep customers, the state-run National Iranian Oil Co. has been offering record discounts on its crude.
Almost all major buyers of Iran’s oil had negotiated with the U.S. for the waivers, arguing that cutting purchases to zero would affect their energy industries and boost fuel costs. While the U.S. granted exemptions to eight buyers of Iranian oil, that number will effectively shrink to five by year-end and an oversupplied market in 2019 will help cut Iranian oil sales further, according to Brian Hook, State Department’s special representative for Iran.
India, China and South Korea, three of Asia’s top four buyers, got waivers allowing them to purchase a combined 860,000 bpd. The levels for Japan, Italy and Greece are yet to be confirmed. Turkey got waivers for about 60,000 per day, far less than it bought in 2017.
A summary of plans by some of Iran’s biggest oil customers and what they may buy under the waivers is set out below. This story will be updated as new information becomes available. The exemptions have been granted for 180 days, and will be reviewed toward the end of the period.
Waiver: Up to 200,000 bpd of condensate purchases before sanctions: 300,000 bpd (condensate) in 2017.
While the Asian country was the third-biggest importer of Iranian oil, it was the first major buyer to cut purchases to zero as the U.S. prepared to impose sanctions. It’s now allowed to buy as much as 200,000 bpd, though actual imports may not be that high.
Purchases must be limited to cargoes of condensate, a type of ultra-light oil that’s critical for South Korea because many of the nation’s plants are geared to process it. The country bought about 300,000 bpd of South Pars condensate from Iran in 2017.
The country may hold off purchases of Iranian condensate until March as it needs to sort out issues surrounding chartering and insurance, say people with knowledge of the matter who asked not to be identified because the information is private. South Korean companies’ oil-price negotiations with their Iranian counterparts haven’t taken place yet.
South Korea will maintain a won-based payment system with Iran, making deposits into local escrow accounts in Industrial Bank of Korea and Woori Bank. The money won’t directly go to Iran, which can only use it to buy food, medicine or other non-sanctioned goods from its customers.
Waiver: TBC Purchases before sanctions: About 160,000 bpd from Jan. through Sept. 2018.
The nation’s refiners are likely to restart imports of Iranian oil now that it’s one of the eight recipients of exemptions, Minister of Economy, Trade and Industry Hiroshige Seko told reporters this month.
As Japanese oil companies are still trying to sort out issues surrounding shipping, insurance and banking they are unlikely to lift cargoes loading in January, according to a person familiar with the matter.
Fuji Oil is still considering whether to make use of the U.S. waiver and resume imports of Iranian oil, according to its spokesman Takaaki Sobue on Nov. 19, adding that Iranian Heavy is among grades it will likely purchase.
Meanwhile, JXTG Holdings Inc., the country’s biggest refiner, said Nov. 7 that it’s still considering whether to resume purchases from the Persian Gulf state, according to Senior V.P. Yasushi Onoda.
Japanese processors halted purchases of Iranian crude in October under U.S. pressure. The Asian nation cut shipments in order to get the waiver, Finance Minister Taro Aso said Nov. 6.
Waiver: Up to 300,000 bpd purchases before sanctions: 560,000 bpd from Jan. through Oct. 2018.
The South Asian nation was one of the most vocal negotiators for an exemption from the U.S., as the government faced protests over rising fuel costs before national elections next year.
Under the exemptions, it will be allowed to import as much as 300,000 bpd. That’s under Iran’s average daily exports to the nation of about 560,000 bbl this year, and almost 450,000 bbl in 2017, shipping data compiled by Bloomberg show.
Indian state-run refiners are set to buy 1.25 million tons of Iranian oil in November and also the same volume of crude from the Persian Gulf state in December, according to Indian Oil Corp. Ltd Chairman Sanjiv Singh. The companies will make payments in rupees for the Iranian crude supply.
Waiver: 360,000 bpd purchases before sanctions: 658,000 bpd from Jan. through Sept. 2018
Asia’s largest buyer of Iranian oil is said to have resumed purchases from the Persian Gulf state following a one-month hiatus. China will begin loading Iranian crude again this month after it halted buying in October, according to people with knowledge of the matter. Payments to Iran will only be settled at a later date, they said.
The nation is allowed to import 360,000 bpd under the exemptions, according to people with knowledge of the matter. That doesn’t include oil produced by projects in the Islamic Republic in which Chinese companies have equity.
While China had bought about 658,000 bpd over the first nine months of this year, the government was said to have told at least two state oil companies to avoid purchasing the producer’s oil before the sanctions went into effect. That decision preceded a meeting between President Xi Jinping and U.S. counterpart Donald Trump and coincided with flaring trade tensions between the countries. Chinese ship owners had also stopped hauling Iranian oil.
Waiver: TBC purchases before sanctions: About 16,000 bpd from Jan. through Aug. 2018.
The chairman of Formosa Petrochemical Corp., Taiwan’s only publicly traded oil refiner, didn’t seem in too much of a rush to buy Iranian oil even though the island got a waiver.
“We don’t dare to sign any more contracts to buy Iranian crude oil after President Trump’s threat,” Chen Bao-lang said on Nov. 6. “But it’s not an issue for us, whether Taiwan got an exemption or not. It’s very easy to find alternatives.”
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