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SANCTIONS HIT INCOME

Iran loses $1bn revenue as March crude exports fall

Tokyo, March 16, 2013

Iran's crude oil exports in March may plunge by a quarter from a month earlier to the lowest since tight Western sanctions came into effect in 2012, industry sources said, squeezing income for Tehran as sanctions cast doubt over its future revenues.

The fall may result in a revenue loss of about $1 billion for Iran, according to Reuters calculations based on current oil prices, just as the country's parliament debates President Mahmoud Ahmadinejad's spending proposals.

Tight Western sanctions imposed over Tehran's disputed nuclear programme have cut oil exports by more than half over the past year, resulting in a plunge in the rial currency. The country passed a three-month stop-gap budget at the weekend.

Iran's customers will load 810,000 barrels per day (bpd) of crude in March compared with about 1.1 million bpd in February, according to an industry source with direct knowledge of the matter and a company that tracks the country's crude shipments.

Excluding Turkey, the only European buyer of Iranian crude, Tehran's top customers in Asia -- China, India, South Korea and Japan -- will load 703,000 bpd in March versus about 960,000 bpd a month earlier. The numbers are based on loading plans and the amount ultimately imported may vary.

The drop may be partly due to Indian refiners struggling to find insurance cover to process Iranian crude because of sanctions, as well as the seasonal shutdown of refining capacity elsewhere in Asia.

Europe and the United States last year introduced tough sanctions aimed at Iran's oil trade to force Tehran to the negotiating table over its nuclear programme.

Western powers suspect Iran is trying to develop the capability to build nuclear weapons under the cover of a declared civilian atomic energy programme. Iran says its uranium enrichment work is for peaceful energy only.

Oil consumption in March typically slows as northern hemisphere winter ebbs, reducing demand for heating fuel. With summer demand to run air conditioners still a few weeks away, refiners use the window to carry out annual maintenance.

Buyers of Iranian oil may have used the seasonally low-demand month to make steep cuts in purchases to ensure they qualify for U.S. sanctions exemptions granted in return for reducing oil trade with Iran and reviewed every six months.

"What we're seeing is the politics bubbling away in the background and there are some simple logistical issues that may be responsible for this trend," said Richard Gorry, managing director at JBC Asia.

"There is sizeable maintenance in Asia going on right now, which has cut crude demand in the region."

Of the four top buyers in Asia, India and South Korea may make the steepest cuts. India may lift 117,000 bpd in March versus 279,000 bpd a month ago, while South Korea may lift just 60,000 bpd compared with 143,000 bpd in February.

India's cut could be explained by insurance companies in the country telling refiners that they will not be covered if they process oil from the Islamic Republic.

The country's biggest buyer of Iranian crude, Mangalore Refinery & Petrochemicals Ltd., has said it will have to stop its purchases.

South Korea took advantage of heavy maintenance scheduled from March to June to lower purchases from Iran, sources said. It cut shipments to meet the 20 percent target cut that it had promised the United States to gain exemptions from sanctions last year.

The country stepped up imports in December and January after halting shipments in July and August last year.

SK Energy and Hyundai Oilbank, its two buyers of Iranian crude, will shut a combined 560,000 bpd of refinery capacity for planned maintenance between March and June.

"It is due to the scheduled maintenance shutdown," said an official with a South Korean refiner. "We requested Iran to deliver less oil due to the closure."

Japan's loading may drop 20 percent to 148,000 bpd from 184,000 bpd, the lowest since September.

The only outlier in the group is China, whose Iranian crude purchases are set to increase, albeit only slightly, to 379,000 bpd from 354,000 bpd, sources said.

Its January Iranian imports fell to a 10-month low and the March number is still lower than December, sources said.

Although China has voiced its opposition to unilateral sanctions outside those agreed by the United Nations, shipping delays -- along with a contract disagreement in the first quarter -- reduced its imports from Iran last year by 21 per cent to 438,448 bpd.

China may reduce its purchases by a further 5 to 10 per cent in 2013, according to preliminary indications, industry sources said. That would amount to a reduction of 20,000 to 40,000 bpd, according to Reuters calculations.-Reuters




Tags: India | Iran | Crude | Revenue | Sanctions |

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