Iran's crude exports to its biggest customer, Asia, fell by a quarter in 2012 and shipments this year are expected to drop by at least 12 percent under U.S. sanctions pressure, but ample alternative supplies will keep refiners flush with oil.
Asia's main oil buyers cut imports from Iran to an average of 1.09 million barrels per day in 2012, government and industry data shows, and planned cuts in term contracts for 2013 point to further reductions of at least 135,000 bpd.
However, experts say overall cuts would have to be deeper to secure further waivers from the U.S. sanctions that are aimed at forcing Iran to halt its nuclear programme and which have made shipping and paying for Iranian oil difficult, cutting overall exports by more than half in 2012.
From Asia, Iran lost $14 billion worth of oil exports for the year, according to Reuters calculations. Exports will remain under pressure this year as well as the United States lobbies Asian countries to further reduce purchases, even though Iranian exports last month rose to their highest since the EU imposed sanctions in July.
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An abundance of alternative supplies, mainly from the Middle East, of oil that is of similar quality to what Iran exports and stable prices mean Asian buyers will be able to easily make up for the loss in shipments from Iran.
"Thanks to the efforts of Saudi Arabia, growth of production in Iraq and the United States, I do not expect any major difficulty in terms of meeting global oil demand this year," said Fatih Birol, chief economist at the International Energy Agency which advises industrialised nations on energy policies.
The drop in Iranian exports "will not affect the market in a negative sense", he told reporters in Tokyo.
Almost all of Iran's exports flow to Asia.
Winners and Losers
Most Asian refiners have so far been unaffected by the lack of Iranian oil as they have complex processing facilities that allow them to switch from one type of crude to another. Only Sri Lanka was forced to shut its sole Iran oil-specific refinery.
A further reduction in Iranian exports may drive up costs if more and more buyers go after the same alternative crude, but that scenario is so far unlikely because of plentiful supplies.
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The top beneficiaries of Iran's reduced exports last year were Saudi Arabia, Angola, Iraq, Venezuela and Russia as these countries ramped up shipments to plug the shortfall from Iran.
Top exporter Saudi Arabia cut production by 700,000 barrels per day (bpd) in the final two months of 2012, partly because of the weak global demand outlook. The Organization of Petroleum Exporting Countries' latest report indicated world supply will comfortably outstrip demand in the first half of 2013.
"The reduction in Iranian supplies so far has not affected any of the major refiners in Asia," said Victor Shum, senior partner at IHS Purvin & Gertz in Singapore.
"Supplies are plentiful and, directionally, OPEC spare capacity is actually increasing because of the Saudi cutbacks to replace any Iranian supplies."
Iran's biggest oil customer, China, reduced imports by 21 percent to 438,448 barrels per day (bpd) in 2012, while the deepest reduction was made by Japan, which cut 40 percent of imports to 189,076 bpd.
South Korea slashed imports by 36 percent to 153,400 bpd and India reduced purchases by 1.7 percent to 315,200 bpd.
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Japan's oil imports from Iran may be about 15 percent lower this year, capped roughly at 160,000 bpd, and may possibly be cut further, said Yasushi Kimura, the chairman of JX Nippon Oil & Energy Corp, the country's top refiner.
China may reduce its purchases from Iran by a further 5 to 10 percent in 2013, industry sources said, which would amount to a reduction of 20,000-40,000 bpd.
India plans to cut oil imports from Iran by 10 to 15 percent in the next fiscal year, while South Korean refiners will cut imports of Iranian crude during the six months to May by about a fifth from a year earlier.
"If you ask me, can we cut more, yes we can cut more," said a senior official at a Japanese refiner who declined to be named because he was not authorised to talk to the media.
"And I believe Japanese refineries are configured to process other grades without cutting runs. As to why Asians import Iranian crude, it is because they are competitive."
(Additional reporting by Ramya Venugopal, Florence Tan and Randy Fabi in Singapore, Risa Maeda in Tokyo, Meeyoung Cho in Seoul, Aizhu Chen and Judy Hua in Beijing, Nidhi Verma in New Delhi; Editing by Miral Fahmy)