GO
Loading...

UPDATE 2-China needs big cuts in Iran oil imports to meet 2013 target

Chen Aizhu and Judy Hua
Monday, 21 Oct 2013 | 8:36 AM ET

* Start-up of Dragon Aromatics plant hampers progress towards unofficial target

* Dragon petrochemical plant adds 66,000 bpd of condensate to Iranian imports

* Sept Iranian crude imports 475,521 bpd, up 24 pct on year

* Jan-Sept Iranian imports 428,160 bpd, up 1.4 pct on year

(Recasts to focus on cuts China needs to make to meet 2013 target; adds quotes, details on Dragon Aromatics plant)

BEIJING, Oct 21 (Reuters) - China would need to make huge cuts in its Iranian oil imports over the last quarter of 2013 if it is to meet an unofficial target for the year and increase its chances for winning a waiver to U.S. sanctions aimed at Tehran's nuclear programme.

China and other importers of Iranian oil have to keep reducing the shipments to win waivers to the U.S. sanctions, but China's intake of Iranian oil is running 1.4 percent higher than last year through the end of September, official customs data showed on Monday.

Despite cuts in China's import of most Iranian crude grades, the start-up in July of an independent petrochemical plant that processes South Pars condensate has hampered efforts to lower the oil shipments by an unofficial target of at least 5 percent.

China's daily crude imports from Iran in September were the third-highest so far this year, highlighting the difficulty it is having in cutting the shipments.

At 475,521 barrels per day (bpd), according to the data, the Iranian oil imports were up 24 percent from the same month last year and up 9 percent from August.

"We have been making efforts to control imports from Iran in the second half of this year," said an industry source familiar with the China's import situation.

"Our Iranian oil imports are already very low. We will keep the current imports level from Iran for the rest of the year," he said.

The U.S. and EU sanctions aimed at ending Iran's nuclear programme have cut Iran's oil exports in half from pre-2012 levels and cost it billions of dollars a month in lost revenue.

While China's daily imports from Iran are running higher than last year, they are still down more than fifth from a peak of 555,200 bpd hit in 2011.

Chinese oil officials estimated late last year that domestic refiners would cut their Iran shipments at least 5 percent this year from 21.92 million tonnes, or an average 438,450 bpd for 2012, putting its maximum target for 2013 at around 416,400 bpd.

China, Iran's largest oil client, for the nine months through September bought 16.01 million tonnes of Iranian crude oil, or an average of 428,160 bpd.

That would mean China needs to limit its imports from Iran over each of the next three months to about 1.6 million tonnes or about 380,000 bpd, according to Reuters calculations, down 18 percent from the nearly 2 million tonnes imported in September.

DRAGON AROMATICS

Part of China's problem in making the necessary cuts is the start-up of the independent Dragon Aromatics petrochemical plant in southern China.

The plant, owned by a Taiwanese group, started up at the end of July and has become a regular importer of Iranian South Pars condensate, a light crude oil counted in China's crude import data.

Dragon has been taking about 2 million barrels, or about 66,000 bpd, of South Pars condensate each month for the last two months and will continue to do so through the end of the year, according to a trade official with direct knowledge of the plant's operations.

"Yes, Dragon's purchase of Iranian condensate should be the main reason for the increase," said another source involved in China oil trade.

China, India and South Korea will have their six-month waivers on the U.S. sanctions reviewed in early December, although it is not known how a potential easing of Tehran-Washington relations will impact those renewals. Japan won its most recent six-month waiver extension in early September.

Despite the election in August of moderate reformer President Hassan Rouhani, it will take time to work out any relaxation of sanctions on Iranian oil exports and banking access, the Obama administration has cautioned.

China's total September crude oil imports hit a new high of 6.25 million bpd.

The U.S. Energy Information Administration said last month that China had overtaken the United States as the world's largest net oil importer. China is expected to overtake the U.S. as the biggest outright importer of crude by 2017, according to oil consultancy Wood Mackenzie.

China also imported 553,400 bpd of Iraqi crude in September, up 179 percent from a year ago. Its imports from Iraq for the first three quarter are up more than 58 percent from the same nine months last year, an increase largely in line with market expectations.

Iraq said last week that China was seeking to increase purchases of its crude by more than two-thirds for 2014 to as much as 850,000 bpd, making Baghdad a rival versus top supplier Saudi Arabia.

(Editing by Tom Hogue)