Iran plans to double floating storage capacity if global scrutiny affects its crude exports OIL & GAS

Iran is likely to step up its floating storage capacity by the end of the year if its exports are squeezed due to increasing scrutiny of its crude-carrying ships.

The country, which has around a 120 million barrel- capacity tanker fleet, is estimated to have utilised 30 million to 40 million barrels of capacity as floating storage as sanctions began to tighten, said Iman Nasseri, managing director for the Middle East at Facts Global Energy in London.

Iran would need 30 million to 40 million barrels of fleet capacity to continue exporting 300,000 to 500,000 bpd using its own vessels, which means the country would have to double its capacity to around 80 million barrels.

“In a scenario that Iran’s exports drop to less than 300,000 barrels per day, they could use 100 million [barrels of] capacity of their fleet for storage and utilise the remaining 20 million barrels for those vessels delivering their sales of crude and condensate,” he added.

Iran’s exports fell to below 500,000 bpd after the US cancelled waivers to eight of its top oil buyers, according to FGE. Exports have remained in the band of 300,000 and 500,000 bpd since, with the majority of shipments headed to Syria or China. Iran supplies Syria’s refinery at Baniyas with around 100,000 bpd of crude, while also taking advantage of its territorial waters as a haven for ship-to-ship transfers.

Such transfers have become increasingly common following the White House’s attempts to squeeze Iran’s exports to zero and penalise companies dealing with Iranian crude or condensate. During ship-to-ship transfers, a larger vessel loaded with Iranian crude cargoes offloads to smaller vessels that have their automatic identification system transponders off.

TankerTrackers.com, which monitors satellite data on loadings in Iran’s territorial waters, said Iranian exports fell to 500,000 bpd in May, right after the end of waivers, but figures for July picked up to around 800,000 bpd.

Mr Nasseri said that some of these loadings could be transfers to Iran’s floating storage, particularly if the cargo was condensate, for which the country does not have many purchasers.

Condensate is a by-product liquid of gas production and, it has been embargoed under sanctions enforced by the Trump administration.

Iran produces 239.5 billion cubic metres of gas, nearly all of which is absorbed domestically. The country therefore has a surplus of condensate, which cannot be offloaded easily on to the markets as buyers for the commodity are limited.

“Even the Chinese have issues with sulphur content, so they [Iran] will have to store condensate in floating storage,” said Mr Nasseri.

While China has proved a reliable off- taker for crude, allowing Iran to park millions of barrels in bonded tanks, Beijing may find its hands tied should the US, with whom it is engaged in talks to resolve an ongoing trade dispute, decide to pressure it to reduce or halt imports.

“If they come to an agreement, there will be pressure on China to cut back or eliminate Iranian crude imports,” said Giorgos Beleris, Mena oil research manager at Refinitiv.