Iran General NewsIran's China oil outfit battles to boost exports

Iran’s China oil outfit battles to boost exports


ImageReuters: National Iranian Oil Company (NIOC) has set up its first Beijing office to push for crude sales in China, but the world's No.4 crude exporter will have a tough job boosting volumes sharply in the absence of a refinery.

By Chen Aizhu-Analysis

ImageBEIJING (Reuters) – National Iranian Oil Company (NIOC) has set up its first Beijing office to push for crude sales in China, but the world's No.4 crude exporter will have a tough job boosting volumes sharply in the absence of a refinery.

Now China's second biggest crude supplier, Iran sold China nearly half a million barrels each day in the first four months of this year, but posted only a tepid 3-percent year-on-year rise, far below the 26-percent rally in exports from top supplier Saudi Arabia, official data shows.

But if Iran can leverage its huge domestic resources — like the $4.7 billion South Pars gas project that China's state-run CNPC has signed up to — it may have a fair chance of boosting exports to the world's No.2 consumer.

For now though, in the absence of projects like the $5 billion refinery and petrochemical venture in Fujian province that ties up Aramco and Exxon Mobil with Sinopec, Iran has struggled to boost its crude volume.

"The Saudis already have a refinery, Kuwaitis are pursuing a refinery with Sinopec. Venezuela wants a refinery with PetroChina…It's necessary for Iran to do the same to secure a long-term supply deal," said Victor Shum of consultancy Purvin & Gertz in Singapore.

NIOC quietly launched its Beijing office in early 2009, staffed with three oil marketing officials, around the same time it set up a similar outfit in India, a Chinese trader said. Tehran has warmed to the two giant Asian economies amid a standoff with the West over its nuclear ambitions.

"They don't really have that many options — they have to push for sales in Asia instead of the West because of U.S. sanctions. We don't see them as a serious competitor in China," said a trader at Saudi Aramco, which a few weeks ago started its first joint venture refinery with state refiner Sinopec Corp.

OPEC member Kuwait is also working to build a 300,000 barrel-per-day refinery and petrochemical complex with Sinopec with a goal to more than triple its crude sales from the estimated 160,000 bpd this year.

"Iran is different…It just sells crude as a commodity, without a long-term commitment, said the Chinese trader familiar with Iranian supplies.

NIOC Beijing officials were not immediately available for comment.

Iran, struggling with its own funding woes and aging domestic refining infrastructure, has failed to keep pace with its Gulf peers in investing downstream in Asia, with a long-stalled project in Indonesia its only deal.

No Chinese refinery is designed to process Iranian crude, a medium-quality grade that can be replaced by blending higher-quality light grades from West Africa with lower-quality heavy grades from exporters such as Saudi Arabia, traders said.


But this is not to say Iran's China crude sales, now accounting for 14 percent of China's total imports, will shrink, as the trade links between Tehran and Beijing are strong.

State oil trader Zhuhai Zhenrong Corp, the world's largest Iranian crude lifter by company, was established in 1994 to specialize in procuring Iranian oil.

Volume has in fact surged by nearly two thirds from about three years ago as Sinopec Corp struck a separate deal with NIOC, and since February 2009 Iran overtook Angola as China's second-largest supplier, official data have shown.

Iran's fuel oil sales to China, however, have shrunk by 45 percent in the January-April period, following a 40-percent fall in the whole of 2008, due to surging Iranian domestic demand for power.

But if Tehran can push through a slew of oil and gas deals with reserve-hungry Chinese firms — such as the pact for CNPC to develop the giant South Pars 11 Phase gas project, or the $2 billion deal in January to develop north Azadegan oilfield, China may be more inclined to sign up for long-term oil purchases.

"If they can leverage their domestic projects like the one with CNPC, maybe things will change," said the Aramco trader.

For now, many of the deals signed, including long-term gas pacts with PetroChina, CNPC's listed vehicle, and with CNOOC, are not binding agreements, in part due to U.S. sanctions on American-patented technologies.

(Editing by Jonathan Hopfner and Sambit Mohanty)

Latest news

Iran’s Regime’s New Hijab Bill Seeks to Silence Women

On May 21, Ebrahim Raisi’s government approved and sent a bill on "Chastity and Hijab" to Iran’s Parliament (Majlis)....

Iranian Opposition Condemns Release of Tehran’s Convicted Diplomat-Terrorist Assadollah Assadi

The recent prisoner exchange between Belgium and Iran, announced by the government of Oman, has sparked strong condemnation from...

World leaders call on Biden to adopt new Iran policy

In a joint letter, 109 former world leaders signed a letter calling for accountability in Iran and urging U.S....

The Unsettling Child Marriage Epidemic Sweeping Iran

The horrific scene of a man holding the severed head of his 17-year-old wife, Mona Heydari, in southwest Iran,...

How Iran’s Housing Crisis Can Trigger More Protests

Renting a home in Iran has become nearly impossible for tenants who not only have buried their dream of...

Iran’s Budget Deficit Has Doubled

In the absence of statistics from Iran’s Central Bank and despite the government's false claims that the budget for...

Must read

Iran says rise in oil stocks not due to sanctions

Reuters: An increase in Iran's stocks of crude oil...

Ahmadinejad to offer UN delegates special gift

AFP: President Mahmoud Ahmadinejad will bear gifts when he...

You might also likeRELATED
Recommended to you