China’s Iran oil imports to rebound in December as buyers use US waivers

Sinopec resumed Iran oil imports shortly after Tehran’s biggest crude buyer received its waiver in November. (Reuters)
Updated 07 December 2018
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China’s Iran oil imports to rebound in December as buyers use US waivers

  • China’s waiver on US sanctions allows it to buy 360,000 barrels per day (bpd) of oil for 180 days
  • For November and December, Iranian Heavy crude sold to Asia has been priced at $1.25 a barrel below Saudi’s Arab Medium

Beijing/Singapore: China’s Iranian oil imports are set to rebound in December after two state-owned refiners in the world’s largest oil importer began using the nation’s waiver from US sanctions on Iran, according to industry sources.

Sinopec resumed Iran oil imports shortly after Tehran’s biggest crude buyer received its waiver in November, while China National Petroleum Corp. (CNPC) will restart lifting from its own Iranian production in December.

It was reported in November that China’s waiver on US sanctions allows it to buy 360,000 barrels per day (bpd) of oil for 180 days.

Top Chinese energy group CNPC, which has invested billions of dollars in Iranian oilfields, is ready to load its full share of production from December, said an oil executive with direct knowledge of CNPC’s Iran activities.

The executive estimated CNPC will load at least two million barrels a month from December, doubling previous levels to help compensate for cuts made before sanctions on Iran’s oil exports went into effect on Nov 5.

Before the waivers had been announced, Sinopec, Asia’s largest oil refiner, had planned to stop loading Iran oil in November, but resumed imports within days of getting the exemption, a second source said.

“We continued lifting Iranian oil in November because we received the waiver,” the second source added.

Sinopec and CNPC will likely use up the 360,000 bpd of Iranian oil imports allowed to China under the waiver.

Another source said Iranian oil is “attractively priced” versus rival supplies from the Middle East.

For November and December, Iranian Heavy crude sold to Asia has been priced at $1.25 a barrel below Saudi’s Arab Medium, a discount not seen since 2004. The source also said many Chinese refiners were geared toward processing Iranian crude grades.

At 360,000 bpd, China’s purchases would still be 45 percent less than the average 655,000 bpd imported during the January-September period.

The rise in Iranian oil supply and surging production from the United States, Russia and OPEC countries has pulled down crude oil prices by almost a third since October. Ahead of the sanctions being implemented in early November, China’s crude oil imports from Iran fell to 1.05 million tons (247,260 bpd) in October, the lowest since May 2010, Chinese customs data shows. Data from the provider Refinitiv Eikon, however, shows that 2.77 million tons of Iranian crude were discharged into Chinese ports in October, including into bonded storage tanks in Dalian.

By December, China’s Iran oil imports could reach almost 3 million tons, the Eikon data showed. A total 2.51 million tons of Iranian crude were discharged into Dalian in October and November, according to the data. Other major Iranian oil buyers, including India, South Korea and Japan, are also increasing or resuming orders.

It is still not clear whether Iran will be able to export much oil after the US sanctions waivers expire around the start of May.


Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

Updated 14 December 2018
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Libya’s National Oil against paying ‘ransom’ to reopen El Sharara field

  • Ransom payment would set dangerous precedent
  • NOC declared force majeure on exports on Monday

BENGHAZI: Libya’s state-owned National Oil Corp. (NOC) said it was against paying a ransom to an armed group that has halted crude production at the country’s largest oilfield.
“Any attempt to pay a ransom to the armed militia which shut down El Sharara (oilfield) would set a dangerous precedent that would threaten the recovery of the Libyan economy,” NOC Chairman Mustafa Sanalla said in a statement on the company’s website.
NOC on Monday declared force majeure on exports from the 315,000-barrels-per-day oilfield after it was seized at the weekend by a local militia group.
The nearby El-Feel oilfield, which uses the same power supply as El Sharara, was still producing normally, a spokesman for NOC said, without giving an output figure. The field usually pumps around 70,000 bpd.
Since 2013 Libya has faced a wave of blockages of oilfields and export terminals by armed groups and civilians trying to press the country’s weak state into concessions.
Officials have tended to end such action by paying off protesters who demand to be added to the public payroll.
At El Sharara, in southern Libya, a mix of state-paid guards, civilians and tribesmen have occupied the field, camping there since Saturday, protesters and oil workers said. The protesters work in shifts, with some going home at night.
NOC has evacuated some staff by plane, engineers at the oilfield said. A number of sub-stations away from the main field have been vacated and equipment removed.
The occupiers are divided, with members of the Petroleum Facilities Guard (PFG) indicating they would end the blockade in return for a quick cash payment, oil workers say. The PFG has demanded more men be added to the public payroll.
The tribesmen have asked for long-term development funds, which might take time.
Libya is run by two competing, weak governments. Armed groups, tribesmen and normal Libyans tend to vent their anger about high inflation and a lack of infrastructure on the NOC, which they see as a cash cow booking billions of dollars in oil and gas revenues annually.