An Iranian newspaper report claimed US sanctions against Iran will force UAE to shut down its Jebel Ali refinery which uses only Iranian condensate as feed. Citing diplomatic and industry sources, Tehran Times said Dubai’s national oil company may have to stop importing condensate from Iran unless Washington grants it an exemption or temporary exception from this week’s tightening of sanctions.
Sanctions announced by the US State Department officials said that financial transactions that facilitate the import of Iranian fuel are liable to a new round of measures getting effective on 28 June.
The paper quoted two UAE-based sources close to the Emirates National Oil Company (ENOC) said the UAE oil company had already applied for an exception. Washington declined to confirm or deny the report.
“I am sure they are petitioning for a temporary exemption, and this could apply for six months if not a bit longer. Thereafter, they need to find an alternative,” one industry source said.
The United Arab Emirates, one of the top OPEC oil exporters, is home to one of the biggest Iranian communities in the world and has a thriving trade across the Gulf.
Tehran Times said Dubai uses Iranian condensate at ENOC’s 120,000 barrels per day (bpd) Jebel Ali refinery that serves its domestic fuel market.
“Almost everything they put in that refinery is Iranian condensate. They would either have to shut down if they stop or find an alternative,” a Dubai industry source said.
Shipping data showed Dubai accounts for at least half of Iran’s condensate exports, which averaged 220,000 barrels per day in the first four months of the year, most of which comes from Iran’s South Pars gas field.
Industry sources told Tehran Times that ENOC enjoys a barter deal with Iran for the condensate, which makes it a potential target of US sanctions on financial transactions and financial institutions involving the Islamic Republic. The report added that any replacement would come from suppliers such as Qatar or Abu Dhabi and could be much more expensive than ENOC’s current deal and may not include the comfortable credit terms that Iran grants to ENOC.
“If ENOC’s condensate acquisition costs were to increase by $1 per barrel as a result of sanctions, for example, this would cost them $44 million per year. That’s not really significant compared to the $1.5 billion they have lost on subsidized gasoline sales in recent years,” Robin Mills, head of consultancy at Dubai-based energy consultancy Manaar.
“Perhaps more significant, given ENOC’s significant debt load, is that the Iranians were probably giving them easy credit terms on purchases, as with Greece,” he said.