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Shell Sticks To Syrian Oil, Maersk Walks Away

Maersk stops deal involving Syrian fuel; Shell still planning to lift crude cargo; Markets not worried about Syrian oil loss

August 27, 2011 3:25 by



Oil major Royal Dutch Shell is planning to continue exporting Syrian oil in September despite fresh U.S. sanctions and a looming EU embargo, which have already forced at least one company to cut oil trade with the country.

Shipping fixtures showed on Thursday that Shell has chartered an 80,000 tonne vessel to lift crude from Syria’s Banias port in early September. Denmark’s A.P. Moller-Maersk , meanwhile, said it had canceled a deal to load naphtha this week.

“It is due to U.S. sanctions,” Michael Christian Storgaard, a Maersk spokesman, said on Thursday.

Shell, which at the moment would not be in breach of any sanctions if it bought the cargo to bring it to Europe, declined to comment on the shipment, saying the company always complies with international sanctions.

The Danish shipping and oil company is the first known to have stopped a deal involving Syrian oil after Washington slapped fresh sanctions on the country last week to ratchet up pressure on President Bashar al-Assad.

The European Union has also agreed to explore new sanctions against Assad in response to his five-month crackdown on pro-democracy demonstrators, in which the United Nations says 2,200 civilians have been killed.

A loss of Syrian oil exports would have far less impact than the loss of Libyan exports of 1.3 million barrels per day. Syria consumes around two-thirds of its total output of 385,000 bpd.

“Syria I think is more important in the general geopolitical picture, as if the Arab Spring then spreads to Iran or Saudi, we are going to have problems,” said Thorbjorn Bak Jensen, an analyst at Global Risk Management.

NO THANKS

The Maersk Edward was scheduled to load a cargo of naphtha this week, sold by French oil major Total to Spanish oil company Repsol .

Shell’s crude oil cargo is scheduled to load on Sept. 2 aboard the Neverland Star for delivery to the UK or European continent. Both Shell and the tanker’s operator, Italy’s Finaval Spa, declined to comment.

Shell is the operator of a joint venture, along with state run Syrian Petroleum Co. and Chinese-Indian firm CNPC-ONGC, that produces Syrian Light.

Traders said the tanker probably carries Shell’s equity oil.

Syrian Light and heavier Saudi crude are sold via monthly spot tenders mostly to European oil companies and traders. But it is not clear whether the most recent tender to sell Syrian crude for September loading has been awarded at all.

Some traders say it has become more difficult to sell Syrian crude this month in the European spot market due to the U.S. sanctions on Syria and expectations EU sanctions may follow.

SANCTIONS

The European Union is expected to tighten sanctions on the Syrian energy sector next week, although it is not clear whether the new measures would affect existing import contracts.

And while sanctions may stop the loading or delivering of oil products at Syrian ports, European oil majors may be allowed to continue operating within Syrian borders.

Even so, an embargo would be a reversal in policy after months of reluctance to take action because of concerns about the risk of damaging commercial interests.

Major European companies with joint ventures in Syria include Shell and Total . Britain’s Petrofac also operates within the territory, along with various Asian and North American firms.

Several governments have raised objections to banning the sale of refined products and equipment to Syria and whether the EU will adopt sanctions remains uncertain. Further talks among EU capitals are set for Friday, and any decision will have to be unanimous.

Syria also imports refined products including gasoline and diesel, and sanctions could affect companies selling fuel to Syria. Earlier this month, trading houses Vitol and Trafigura won tenders to supply the country with gasoline.

By Jessica Donati and Ikuko Kurahone



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