Iranian Oil Exports Hit Pre-Sanctions Levels As European Share Grows

Iran produced an average of 3.79mn b/d of crude in 2017, up 10.5% on 2016, with output reaching 3.83mn b/d last month. Not surprisingly export volumes are also up. Buyers of Iranian crude and condensate took just over 2.50mn b/d last year, edging above 2.47mn b/d for 2011, the year before US-led sanctions ratcheted up (see chart).

With the ending of the EU’s embargo on Iranian oil imports in January 2016, volumes have flooded back into Europe ( MEES, 26 February 2016 ). Under the embargo, key Asian buyers such as China and India kept Iran afloat as they were able to continue importing without falling foul of US sanctions through a system of waivers. Asian buyers took almost 90% of Iranian liquids during 2012-2015, with Turkey the other main buyer.

TURKEY: RECORD VOLUMES

Turkey has substantially stepped up its takings of Iranian volumes since sanctions were eased. They had dwindled from 185,000 b/d in 2011 to a low-point of 104,000 b/d in 2014 and then stayed relatively flat at 111,000 b/d in 2015. 2016 saw a noticeable 24% gain to 138,000 b/d, but latest data to November implies volumes soared 75% to around 240,000 b/d in 2017. This would put Turkey as the fourth largest buyer of Iranian liquids behind China, South Korea and India.

Chinese imports stayed broadly flat in 2017 at 622,000 b/d, just under 2016’s record 623,000 b/d. Meanwhile, India’s January-October import stats and more recent shipping data imply that it imported around 470,000 b/d in 2017, just above 2016’s record 459,000 b/d. Number three buyer South Korea too has stepped up its imports to a record 361,000 b/d last year, some 45% more than 2011’s previous record of 247,000 b/d.

Japan however fell out of the top five buyers for the first time. It had been the number two buyer of Iranian liquids as recently as 2011 and was the fourth largest client in 2016. But volumes slumped 25% year-on-year to just 170,000 b/d in 2017, as Japan’s overall imports dwindled ( MEES, 2 February ).

VOLUMES RETURN TO EUROPE

EU imports of Iranian crude more than doubled last year, from 291,000 b/d in 2016 to around 620,000 b/d in 2017.

Once the EU lifted its embargo, Greece was the early mover, with Hellenic Petroleum announcing in January 2016 that it had reached a long-term agreement to buy crude ( MEES, 29 January 2016 ). Hellenic has been taking around 75,000 b/d crude oil from Iran in 2017 to run in its three refineries, displacing large volumes of Russian sour Urals.

However, Italy emerged in 2017 as the largest European importer, taking around 200,000 b/d, four times its 48,000 b/d 2016 imports.

Indeed, January-November data implies that Iran was the second largest supplier of oil to Italy last year, behind 250,000 b/d Azerbaijan. It has usurped neighboring Iraq as the largest supplier from the Middle East; the 240,000 b/d Iraq supplied in 2016 was the largest of any country. This appears to have fallen to around 170,000 b/d in 2017, pushing Iraq down to third place.

Other major European buyers of Iranian crude are France, which regularly took more than 100,000 b/d in 2017, and Spain, which nearly doubled its imports to 80,000 b/d.

Germany entered the picture last year, taking Iranian crude for the first time in at least a decade. But it remains a smaller buyer, with Iranian volumes peaking at 43,000 b/d in March and not registering at all in December. German imports from Iran averaged 16,000 over the course of 2017.

2018 OUTLOOK

As for 2018, Asia is set to remain the key outlet for Iranian liquids, taking around 60% of total volumes. Despite the heightened geopolitical uncertainty currently surrounding Iran, the EU is unlikely to re-impose an embargo on Iranian volumes anytime soon, even if the US opts to tighten sanctions.

Overall export volumes are unlikely to rise much beyond their current figure this year, averaging around 2.5mn b/d. The delays in bringing IOCs into the Iranian oil sector ( MEES, 9 February ) mean that substantial crude production gains in 2018 are unlikely especially with Iran signed up to the Opec agreement to restrict production until end-2018 ( MEES, 9 February ).

In fact, liquids export volumes are likely to fall from current levels from the second quarter of 2018. Iran exported around 450,000 b/d of condensate in 2017, but is set to start up the delayed 120,000 b/d second phase of the Persian Gulf Star splitter next month. Oil Minister Bijan Zanganeh said last month that the facility is planned to start by the end of the current Iranian year (20 March), potentially cutting condensate exports to around 330,000 b/d.

Iranian Crude And Condensate Sales Volumes Hit Pre-Sanctions Levels In 2017 As Buyers Lifted 2.5mn B/D ('000 B/D)

SOURCE: IMPORT STATISTICS, IEA, MEES.