Europe oil buyers return to Tehran to talk business

Ron Bousso and Peg Mackey
Thursday, 23 Jan 2014 | 11:21 AM ET

* Total, Eni, Saras among those to meet oil officials in Tehran

* Iran hopes to reclaim European oil market by end of 2014

* Plans further meetings in Istanbul, London

LONDON, Jan 23 (Reuters) - Major European oil buyers are queuing up to meet Iranian officials as they jostle to re-establish a strong position with Tehran in anticipation of a full lifting of Western sanctions. Even as the United States and its Western allies try to hold the line to maintain tough sanctions, executives from European oil firms - among them France's Total, Italy's Eni and independent refiner Saras - have visited Tehran in recent weeks, industry sources say, for talks with the National Iranian Oil Co (NIOC). Tehran is confident that a thaw in relations with the West has opened a door to revive suspended oil trade with Europe as early as the end of this year, sources directly involved in the talks said. "Everybody is preparing for serious negotiations with Iran, pending the removal of sanctions," a senior Iranian oil official told Reuters. "We've already had lots of interest from our traditional customers in Europe." Western oil men are unanimous in viewing contact with Iran as preliminary and stress that they would do nothing in breach of the existing sanctions regime. "The best way for companies like us to go back to Iran is to follow strictly the sanctions and push both parties to reach an agreement which will lead to the lifting of sanctions one day," Eni Chief Executive Paolo Scaroni told reporters in Davos on Thursday. In November, Iran and the West agreed to a six-month deal in which Tehran promised to scale back its nuclear programme in exchange for the suspension of some western economic sanctions. The sides began implementing the deal on Monday with hopes that it will pave the way for a broad settlement of a decade-old standoff. The accord stopped short of ending the embargo on European imports of Iranian oil. But that has not stopped Iranian and European oil executives from starting to talk. "The Iranians are eager to export and they believe it might be possible by the end of this year, provided sanctions are lifted," said a senior Western oil executive, after returning from Tehran. A team from Italian refinery Saras travelled to Tehran in December at the invitation of NIOC, a source familiar with the matter said. A spokesman from Saras declined to comment and one from Total did likewise, adding that the company continued to respect the embargo. Eni also declined comment. "The Iranians are optimistic and think things can progress quickly," said an industry source, recently in Tehran. "But that is wishful thinking on their side... They are acting as if it is a matter of days or weeks before they can start selling us crude again." Before the West tightened sanctions on Iran in mid-2012, the OPEC member supplied more than 700,000 barrels per day (bpd) - nearly a third of its overall sales - to the European Union plus Turkey. The remainder was bound for Asia.

RE-CONNECTING Since then, Iran's oil exports - restricted to Asia and Turkey - have more than halved to just over one million bpd. On top of the overtures in Tehran, Iran also plans to hold meetings with long-standing European customers in Istanbul, Turkey and London within the next several weeks. "I suspect it won't lead to anything real. They want to send optimistic signals and try to put prospective customers on the spot," an industry source who has been invited to Istanbul said. Iranian oil officials are also expected to make an appearance at the global oil industry gathering in London next month, International Petroleum Week, after keeping a low profile since sanctions started. Although a full lifting of sanctions is not expected in the short term, Iran is preparing the ground for a return to the European market. Buyers, on their part, expect competitive pricing when it does. The halting of Iranian crude imports together with reduced output from Iraq and Libya have weighed heavily on European refining profits. "The Iranians are testing the water: they're doing market scouting, which is normal," said a senior European oil executive. "We still can't import a single drop of Iranian oil, but it doesn't hurt to show a willingness to keep ties."

The table below shows the Iranian crude oil imported by companies in Europe, including Turkey, prior to the 2012 European oil embargo.

Figures in '000s of bpd are based on industry and Reuters estimates.

Customer Country Volume '11 Tupras Turkey 200 Total France 100 Shell UK/NL 100 Hellenic Greece 80 Cepsa Spain 70 Motor Oil Greece 60 Repsol Spain 30 ERG Italy 30 Iplom Italy 30 ENI Italy 20 Saras Italy 20 Total 740