Iran received a massive boost on Wednesday when two of its Asia’s four top buyers said they will keep importing crude by finding out ways around an EU ban on insuring tankers carrying Tehran’s oil.
The Japanese parliament has approved plans that will allow the government to provide insurance cover. China, on the other hand, has asked Iran to take on the risk and deliver the crude on their ships. South Korea and India, Iran’s other top Asian buyers, are also seeking active solutions.
Growing Asian economies depend heavily on oil and despite top Gulf producers vowing to boost oil supplies if they agree to halt Iranian oil imports, importers are wary given that output from other alternative suppliers such as Libya and Iraq has not stabilised.
Both Japan and China going to import as many as 620,000 barrels per day of Iranian oil next month, sources said on Wednesday. The Islamic Republic was selling around two-thirds of its crude exports, or roughly 1.45 million bpd, to these four Asian buyers a year ago.
European insurers, which cover 95% of the world’s tankers for oil spills and collisions, are set to pull their plug on insurers who deal with Iranian oil in less than two weeks, as Western countries seek to curtail Tehran’s disputed nuclear programme.
India recently won an exemption to US sanctions, has been trying without success to figure out how it will get around the EU sanctions.
South Korea is set to halt imports due to the EU insurance ban, industry sources have said.
According to government sources, South Korea like Japan, has lobbied the EU to delay or get a waiver on implementing the ban on insurers but it is not considering state guarantees.
EU Energy Commissioner Guenther Oettinger said at an industry conference a week ago that the European Union will not cancel or delay the embargo on Iranian oil tankers.
The International Energy Agency said last week that Iran’s crude exports in April and May have fallen by 1 million bpd since the end of 2011 to 1.5 million bpd and that Tehran may need to shut in production.
Sources said Unipec, the trading arm Sinopec Corp, requested Iran to deliver July-loading crude cargoes to Chinese ports. One source estimated that Sinopec will lift about 500,000 bpd for July, a level similar to the average amount the top Asian refiner bought from Iran last year.
“Short-term this may work, but that is not a long-term solution. The government needs to come up with a plan soon to coordinate on this matter,” said an industry official.
China is the only major buyer that hasn’t got an exemption from US financial restrictions on doing business with Iran.
A senior Chinese oil executive told Reuters last week that the European insurance ban would not pose a problem, and that Iran delivering the crude on its own tankers would be one of the options.
The executive also said Sinopec has since April been lifting a steady amount of Iranian oil versus last year, although for the whole of 2012 the refiner would import 16-20% less than 2011.
Japanese parliament on Wednesday approved an unprecedented law that allows Tokyo to provide cover of up to $7.6 billion for incidents involving tankers bringing Iranian oil to the country.
Japan, which is depending on fossil fuel to generate electricity after the Fukushima nuclear catastrophe, will import 120,000 bpd for both June and July, sources said, unchanged from May.
Japan’s biggest buyers of Iranian oil, Showa Shell Sekiyu KK and JX Nippon Oil & Energy Corp, are to load a total of four vessels in June, steady from May, with shipments arriving this month and next, traders said on Wednesday,
Showa Shell is Japan’s top buyer of Iran oil this month, they added. Neither company would comment on their oil dealings with Iran.
Japan’s law on covering shipments will take effect on June 27, a government official who requested anonymity said on Tuesday.
Overall crude oil imports rose about 7 percent in May from a year earlier, government data showed on Wednesday.
Iranian oil accounted for nearly 9% of Japan’s crude imports last year. Japan has reduced the flow already to comply with U.S. sanctions requiring buyers to make sizeable cuts, but wants to avoid more drastic reductions that could drive up energy import costs and hurt the world’s third-largest economy.
It is the first time Japan has sought to provide guarantees on marine shipments, an official in the country’s transport ministry, which sponsored the legislation, said earlier.