Japan, S Korea Wary of Loading Iran Oil in Jan
TOKYO (Dispatches) - Japanese and South Korean refiners have so far resisted loading Iranian oil for January despite U.S. waivers allowing them to restart the trades amid a lack of clarity over rules for shipping insurance.
Both countries suspended imports from Iran before US sanctions snapped back November 5. If they do not load January barrels, that would leave them only about two months to load Iranian crude to ensure that any imports are delivered before their 180-day sanctions waivers from the U.S. State Department expire May 4.
Washington expects importers in eight countries with “significant reduction exemptions” to complete all Iranian oil transactions before May 5, according to a U.S. government official who spoke on condition of anonymity. The official declined to say whether the U.S. would consider additional exemptions covering May-November 2019.
“If someone takes delivery or pays for Iranian crude oil when they do not have an active SRE, that transaction would be sanctionable,” the U.S. official said.
Iran exported an estimated 1 million b/d of oil in November, down from 2.4 million b/d earlier this year, according to S&P Global Platts Analytics, which expects exports to rise to an average of 1.4 million b/d over December-April as the eight importers work through contract and logistical lags from the waivers.
At least two Japanese refiners let a January-loading nomination deadline for National Iranian Oil Co pass without nominating any barrels, sources familiar with the matter told S&P Global Platts on condition of anonymity. They said they are keeping their options to resume loadings as soon as possible. Another Japanese refiner is also looking at securing alternative supplies to Iranian oil mainly from other Middle Eastern suppliers as well as from elsewhere for January loadings, said a source familiar with the matter, while declining to elaborate whether it has nominated for Iranian supplies.
In South Korea, SK Innovation, a major buyer of Iran’s South Pars condensate, said it was making best efforts to resume imports for January delivery.
“We hope insurances and other concerns would be addressed soon so that we can bring Iranian cargoes in January,” a company official said.
But other South Korean importers of Iranian oil are not rushing to resume South Pars condensate imports from Iran amid competitive availability of naphtha as an alternative supply.
“We have imported condensate for producing naphtha for feedstock, so we can directly purchase naphtha if we face hurdles securing volumes from Iran,” said an official with Hanwha Total Petrochemicals, South Korea’s biggest importer of Iran’s South Pars condensate.
Despite the difference in means of transporting Iranian oil and the use of shipping insurance coverage used by Japanese and South Korean companies, sources familiar with the matter confirmed that both have a common concern; to clarify recent reported advice from the US Treasury department’s Office of Foreign Assets Control on Iranian oil shipping. In Japan, refiners use their registered VLCCs and government-backed shipping insurance for protection and indemnity cover, as well as using cargo and hull insurance from Japanese nonlife insurers for Iranian oil imports.
Japanese refiners, shipping and insurance companies are now concerned that their full-set of insurance for Iranian oil shipping might be incomplete as their cargo and hull cover were not part of the current sovereign guarantee, sources familiar with the matter said.
The Japanese government is currently seeking official clarifications from OFAC over the reported need for a sovereign guarantee for Iranian oil shipping, a government source said.