Refiners in Asia, the destination for 65 per cent of Iran’s oil exports, are seeking alternative sources of crude in the event of a supply disruption from the world’s fourth-largest producer.
Taiwan’s Formosa Petrochemical Corp bought extra crude and naphtha cargoes, Tsao Mihn, the company president, said in a phone interview on Friday. JX Nippon Oil & Energy Corp, Japan’s biggest processor, is in talks with Saudi Arabia to replace shipments in case Iranian supplies are halted, President Yasushi Kimura told reporters yesterday in Tokyo.
The US and European Union are seeking help from Asian allies to reduce oil revenues for Iran, which is suspected of trying to develop nuclear weapons. Brent crude is poised for a 5.4 per cent gain this week after the country threatened to block the Strait of Hormuz, a transit route for a fifth of the world’s crude, in retaliation for further sanctions.
“Iranian oil is a very big deal to Asia,” said Victor Shum, a senior principal at energy consultants Purvin & Gertz Inc in Singapore. “They have to show efforts that they are really making attempts to seek alternative supplies” to show the US and Europe they are backing the sanctions, he said.
Iran exported an average of 2.53 million barrels a day in the first nine months of 2011, according to the December 13 Monthly Oil Market report from the International Energy Agency. Asia took 65 per cent of those supplies, the report said.
China purchased 550,000 barrels a day, or 22 per cent of Iran’s exports, during the period, the IEA reported. That’s followed by India’s 310,000 daily barrels, or 12 per cent of shipments. Japan bought 327,000 barrels a day, or 13 per cent, over the first nine months of last year and South Korea accounted for nine per cent, according to the IEA.
Bank sanctions
Taiwan received 4.3 per cent of its oil supplies from Iran in the first 10 months of last year, according to the website of the Asian country’s energy bureau.
Banks doing business with the Central Bank of Iran would be blocked from the US financial system under a law passed on December 31. The sanctions would curtail the ability of US allies South Korea and Japan to pay for oil imports. EU foreign ministers plan to sharpen their sanctions on Iran’s energy and banking industries at a January 30 meeting.
The Obama administration is “likely to give waivers” to those countries using the Iranian central bank to “avoid conflict with their allies,” according to a report from Facts Global Energy, a consultant based in Singapore.
Refiners in Japan and South Korea may be highlighting their search for alternative suppliers to show they are taking the sanctions seriously in order to help convince the US to grant the waivers, said Purvin & Gertz’s Shum.
The companies need “to demonstrate to the West how difficult it is,” said Shum. “This is in a way part of showing the efforts.”
Reduce imports
Some processors, including Japan’s Idemitsu Kosan Co and Taiwan’s CPC Corp, have cut the amount they buy from Iran.
CPC, Taiwan’s largest refiner, has reduced its imports to about 4.7 per cent of total purchases last year from 11 per cent in 2010, Lin Maw-Wen, the state-run refiner’s president, said by phone on Friday.
Iranian crude accounts for only about two per cent of Tokyo-based Idemitsu’s supply, so it wouldn’t have to take countermeasures in the event of an embargo, spokesman Kei Uchikawa said in a phone interview on Friday.
Cosmo Oil Co, which is partly owned by Abu Dhabi, had taken no steps to replace its Iranian crude imports, which account for 12.1 per cent of its supply, because it was waiting for guidance from the government, Katsuhisa Maeda, a spokesman for the Tokyo-based refiner, said by phone.
Geithner Visit
Japanese officials are studying how the country would respond to a curb on Iranian crude imports and are discussing the matter with their U.S. counterparts, Trade and Industry Minister Yukio Edano told reporters on Friday.
Treasury Secretary Timothy Geithner plans to hold talks on the embargo next week in Tokyo during a visit that also includes a stop in Beijing. Japan intends to express its concerns about an embargo during the discussions, Cabinet Secretary Osamu Fujimura said on Friday.
South Korea said that it would look for alternative suppliers because of the sanctions, according to a joint statement from government ministries yesterday.
SK Innovation Co., South Korea’s biggest refiner, was monitoring the situation, Chung Tae Hoon, a spokesman for the Seoul-based company, said in a phone interview. He didn’t give details about steps the company is taking.
A spokesman at Hyundai Oilbank Co., South Korea’s fourth- largest refiner, declined to comment, saying the topic is too sensitive.
Brent Rally
Brent crude futures, trading at 113.22 a barrel on Friday in London, may rally to $125 should Europe ban imports, according to Societe Generale SA. Such a move would require about 600,000 barrels a day of replacement supply from Saudi Arabia, said Mike Wittner, the bank’s head of oil market research for the Americas, in a phone interview on Jan. 4.
Saudi Arabia, the world’s largest oil exporter, will ship crude from its ports on the Red Sea if the Strait of Hormuz is blocked, Riyadh newspaper reported Dec. 31, citing an unidentified official.
