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UPDATE 2-China's Unipec to take less Iran oil in 2012
February 20, 2012 / 11:31 AM / 6 years ago

UPDATE 2-China's Unipec to take less Iran oil in 2012

* Unipec to take less Iran crude this year

* Scale of reduction not known

* Zhuhai Zhenrong to keep Iranian purchases unchanged (Releads, adds details)

By Chen Aizhu

BEIJING, Feb 20 (Reuters) - One of China’s two major buyers of Iranian crude has reduced the amount it will take this year although by how much was unclear, trade sources said on Monday, after expectations that China would be the buyer of last resort for Iranian crude displaced by sanctions.

Iran’s oil ministry, National Iranian Oil Co (NIOC) will sell 240,000 barrels per day (bpd) of oil to China’s state oil trader Zhuhai Zhenrong in 2012, the same volume as last year, but volumes sold to Unipec, the trading arm of China’s top refiner Sinopec Corp, will be reduced.

Under the 2011 contract, Unipec lifted 260,000 bpd day of crude from Iran.

“Zhenrong volumes will be the same but there will be some cuts to the Unipec side,” said a trading source with direct knowledge of the deals.

He declined to give more details on the depth of the reduction and pricing terms of the various contracts were also unclear.

A second source also confirmed that contract volumes to Zhenrong would be unchanged from year ago. Senior industry officials had said that Sinopec would reduce 2012 volumes.

China, the world’s second-largest oil consumer, is Iran’s largest trading partner and biggest oil client that buys up 20 percent of the Islamic Republic’s total crude exports. Iran is China’s No.3 supplier after the Saudi Arabia and Angola.

Even with any cut, China will remain a significant buyer of Iranian oil, after raising imports last year by 30 percent to a record volume of 555,000 bpd. China’s oil trade with Iran is also worth some $20 billion a year. [

Although the annual contract talks are typically concluded by January, talks between China and Iran hit a snag this year as the two haggled over credit terms, which prompted Sinopec to slash imports since January by around 285,000 bpd, or just over half of the total daily amount it imported in 2011.

Industry watchers said then that China’s move was a ploy to bolster its bargaining position with Tehran, which has been labouring under sanctions from the U.S. and the European Union.

While China has warned Tehran against any effort to acquire nuclear weapons, it has long opposed sanctions on Iran and especially unilateral ones that target Iran’s energy sector, saying that such moves would hurt energy markets.

EXPENSIVE OPTION

The European Union has banned its members from importing Iranian crude from July 1 and fresh U.S. sanctions have pressured Asian buyers Japan and South Korean to reduce imports.

China had been widely expected to take more, not less, Iranian crude to fill its voracious energy demands.

But Chinese oil officials said Iranian crude was becoming an expensive option.

“Both in terms of supply stability and economics, Iranian oil lacks the competitive edge,” a senior official had told Reuters.

“Our expectations have been raised ... Because of the sanctions, our cost of doing business with Iran has been rising, from payment settlements to tanker chartering to insurances,” said a second industry official that deals with Iranian oil.

Sinopec has finalised term contracts with other suppliers, such as leading exporter Saudi Arabia, which could fill any gap, sources said. (Writing by Fayen Wong; Editing by Ed Lane and William Hardy)

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