Oh Kippers, you are NOT going to believe thisApril 26, 2015 4:51
Sanctions making Europe firms review Iran oil buys
Political pressure makes renewal difficult, says source.
October 26, 2010 3:20 by Reuters
Some European oil companies are considering whether to keep buying Iranian oil in 2011, industry sources said, citing sanctions that have made financial transactions with the Islamic Republic more difficult.
Portuguese oil company Galp and another European oil firm are considering whether to continue buying Iranian oil next year, the sources said. A spokesman for Galp declined to comment on the company’s suppliers.
Galp, a relatively small buyer of Iranian crude, scaled back its purchases earlier in 2010. While a decision to restart them in 2011 has yet to be made, an industry source doubted they would be resumed.
“I find any renewal very difficult, mostly due to political pressure,” the source said.
The United Nations in June passed a fourth round of sanctions on Iran in reaction to its nuclear work. Tougher measures followed from the European Union and the United States. Tehran has denied it is seeking nuclear weapons.
While U.S. companies have long been prohibited from processing Iranian oil, firms elsewhere face no such ban. But traders say following the sanctions it is harder to pay for Iranian exports in currencies such as the euro and the dollar.
A source at a European oil company which now includes Iran as one of its main suppliers said its board would decide whether to renew purchases for 2011.
“We have some contracts up to December and at the moment we are waiting for an indication from management for next year,” said the source.
He said decisions on renewing such contracts were normally taken at a lower level in the company, but in the case of Iranian oil technical and economic factors were only part of the picture.
“The delicacy of the situation suggests a decision at a very high level. It is not simple; it is a political decision.”
Europe remains a major market for Iran and companies have been buying large volumes of its crude this year.
Data from the International Energy Agency, an adviser to 28 industrialised countries, show the amount of Iranian crude heading to IEA members in Europe surged to 1.2 million barrels per day (bpd) in July, more than double the year-earlier figure.
Italy’s imports of crude from Iran jumped in the first seven months of 2010. The buying gathered momentum just before the sanctions impact on oil and gas trade took full effect around July.
Some Italian banks are still willing to handle transactions on Iranian crude, an industry source said.
There are signs that Iranian volumes to Europe may have fallen from July’s high level.
An industry source said the amount of Iranian crude coming to Europe has declined to around 550,000 bpd so far in October, less than in September and August, while supplies to Asia have been increasing.
Among global oil companies based in Europe, Royal Dutch Shell has maintained crude trade with Iran and has received financing help from Chinese banks, a trading source said in September. BP has trimmed its exposure to Iranian crude.
Other sellers of crude to the European market could benefit from the difficulties in paying for Iranian oil. Alternative big suppliers to the region include Russia and Middle East exporters such as Iraq.
“I can imagine some buyers are trying to move to alternative grades,” said a trading source.
(Additional reporting by Andrei Khalip in Lisbon; editing by Keiron Henderson)