Iran to face bumpy re-en­try into global oil tanker mar­ket

Tehran seeks to re­claim spot as No 2 OPEC pro­ducer

Kuwait Times - - BUSINESS -

LON­DON: Even af­ter Western sanc­tions are lifted, Iran’s oil tanker fleet is ex­pected to face more hur­dles be­fore many of the ves­sels can start trad­ing again due to in­sur­ance hic­cups and tougher re­quire­ments over sea wor­thi­ness by po­ten­tial for­eign clients.

Iran’s main tanker op­er­a­tor NITC re­mains black­listed by the United States and Euro­pean Union since 2012, mean­ing it’s un­able to se­cure for­eign in­sur­ance or in­ter­na­tional clas­si­fi­ca­tion ser­vices, which cer­tify ships have met safety and en­vi­ron­men­tal stan­dards nec­es­sary to get ac­cess to most ports. Ira­nian me­dia has quoted NITC of­fi­cials as say­ing the group was ready­ing its re­turn to in­ter­na­tional mar­kets and was in talks with Western in­sur­ers while also look­ing to ex­pand its fleet. NITC of­fi­cials could not be reached for com­ment.

“It is fair to say that com­mer­cially they will prob­a­bly be more dif­fi­cult to fix than a ship of ... an in­de­pen­dent owner or cer­tainly a non-Ira­nian owner,” said Hugo de Stoop, chief fi­nan­cial of­fi­cer with lead­ing Bel­gium-based tanker owner Euronav. “It will take some time.” Since a July nu­clear deal with world pow­ers, Iran has re­peat­edly an­nounced plans to boost oil pro­duc­tion and ex­ports once sanc­tions are lifted to re­claim its po­si­tion as the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries’ sec­ond-largest pro­ducer.

The United States last month ap­proved con­di­tional sanc­tions waivers, al­though it cau­tioned th­ese would not take ef­fect un­til Tehran had curbed its nu­clear pro­gram. Lead­ing tanker bro­ker EA Gib­son said a num­ber of NITC’s tankers would need “to meet in­ter­na­tional stan­dards in terms of class and in­sur­ance”.

“Fur­ther­more, many units are likely to re­quire dry dock­ing (re­pairs). On this ba­sis, the process of ‘re-en­try’ will be grad­ual,” Gib­son said in a re­port. Iran’s fleet in­cludes 37 to 40 NITC su­per­tankers, known as VLCCs, each ca­pa­ble of car­ry­ing 2 mil­lion bar­rels of oil. Tanker track­ing sources es­ti­mated that Iran was cur­rently stor­ing oil - both crude and its de­riv­a­tive con­den­sate - on around 24 VLCCs ver­sus 29 ves­sels in July. Euronav’s de Stoop said eight of Iran’s su­per­tankers, cur­rently used as float­ing stor­age, were over 15 years old and were un­likely to re­join the global fleet as it would in­volve mil­lions of dol­lars in ex­tra costs. Lawyers say EU com­pa­nies are likely to face fewer lim­i­ta­tions in deal­ing with NITC than US firms, which would com­pli­cate early deals given the im­por­tance of the US fi­nan­cial sys­tem.

“Fi­nanc­ing and in­sur­ance of NITC or its ves­sels or voy­ages will present chal­lenges,” said Matthew Ores­man, coun­sel with law firm Pills­bury. “US fi­nan­cial in­sti­tu­tions will not be able to play a role and ini­tially few Euro­pean fi­nan­cial in­sti­tu­tions may be will­ing to in­sure and fi­nance th­ese trans­ac­tions ini­tially, es­pe­cially if they have had sanc­tions com­pli­ance is­sues in the past.”

Ship­ping and le­gal sources say the risk of a pos­si­ble “snap-back” in sanc­tions, if Iran does not meet its com­mit­ments, is also likely to add to cau­tion when deal­ing with NITC for now.

“If you put your­self in the shoes of a client be­fore he would ac­cept to char­ter an NITC ves­sel, he would have to think prob­a­bly twice whether there is a risk at­tached to the fact that sanc­tions could be re-im­posed,” Euronav’s de Stoop said. — Reuters

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