* LPG exports strangled though EU ban applies to natural gas
* Sanctions likely to add to rising Europe heating oil bills
* Norway's Statoil, South Korea were main buyers
By Julia Payne and Meeyoung Cho
LONDON/SEOUL, Oct 31 EU sanctions on Iran's
natural gas have unintentionally also brought its exports of
liquefied petroleum gas to a near halt, industry sources say,
starving Tehran of yet more dollar revenue and threatening to
push European winter fuel bills yet higher.
LPG, which comprises propane and butane, comes mainly from
oil rather than natural gas, but shippers and insurers are
steering clear of Iranian supplies due to uncertainty over the
scope of the new European Union sanctions.
"It's a grey area if natural gas includes LPG or not," said
one LPG trader. "Not many want to take a risk on that."
Earlier this month the EU announced tighter restrictions on
trade with Iran, adding to already comprehensive international
sanctions aimed at forcing Tehran to halt its nuclear programme.
These included a ban on importing and transporting Iranian
gas, as well as financing gas sales. Western nations suspect
Iran is trying to develop atomic weapons, something that Tehran
denies, but the gas curbs had appeared symbolic as Iran exports
none to the EU.
In reality, the measures announced by EU foreign policy
chief Catherine Ashton are already strangling Iranian LPG
exports to countries outside the bloc, notably South Korea.
Officially, the gas sanctions became binding on EU
governments from Oct. 16 but technically they do not apply to
companies until detailed legislation is prepared and issued. An
EU source said this could happen in November.
In the absence of hard and fast EU rules, Iran's LPG
customers outside the EU are acting cautiously due to the
uncertainty, with the result that shipments are drying up.
Previous U.S. and EU measures slashed Iran's crude oil
exports, hitting its hard currency earnings and contributing to
a plunge in the rial's value. The International Energy Agency
estimated its crude exports at 860,000 bpd in September, down
from 2.2 million bpd at the end of 2011.
Similar curbs on LPG will likewise hurt Tehran. Before the
sanctions, Iran exported almost four million tonnes a year,
worth over $4 billion at current market prices.
After South Korea, Norwegian energy giant Statoil
was the main buyer of Iranian LPG, industry sources said.
Company spokesman Morten Eek said Statoil had taken Iranian
LPG as repayment of debts owed by the National Iranian Oil
Company (NIOC) for completed projects on the giant South Pars
gas field and exploration on the Anaran and Khoramabad fields.
"We receive the cargo at the LPG terminals in Iran and
transport it by ship to markets outside Europe and the USA.
Cargoes of LPG serve as down payment of NIOC's debt to us," he
"We have informed the Norwegian and United States
authorities on this and we will continue the dialogue to ensure
that our activities are in accordance with the current
sanctions," Eek added, without commenting on whether Statoil
would be able to continue taking the shipments.
A source at one South Korean energy company said his firm
had stopped taking Iranian LPG since mid-October as Japanese
insurers were refusing to provide cover for the cargoes.
Japanese shipping company Phoenix Tankers is one such
company. Phoenix shipped Iranian LPG to South Korea earlier this
year on a spot basis, said Tetsutaro Kozai, a spokesman at
Mitsui OSK, the parent company of Phoenix.
"It is now up to our customers as the EU has discussed but
not yet decided if LPG is subject to sanctions," he said. "If
there is such a spot order, we'll comply with the EU's decision
and consider if we can transport safely before accepting it."
This illustrates the problems in conducting the trade, even
before the EU legislation officially comes into force.
London is the global centre for shipping insurance and with
Britain an EU member, the sanctions will paralyse cover for
Iranian gas. Likewise, shippers do not want to touch any trade
that could risk business with clients such as major oil firms.
"Now some Western majors say if a vessel has loaded in Iran
in the last three cargoes, they will not charter her," said one
Another unintended consequence is that the sanctions are
likely to push up Europeans' energy bills as winter nears.
Europe is already facing a supply crunch for heating and
diesel fuel. Germany has even started to encounter diesel and
other fuel shortages as continental refineries have cut runs due
to low crude supplies.
Europe is likely to find itself struggling for supplies of
yet another winter fuel if buyers in South Korea and elsewhere
try to make up for their loss of Iranian LPG on the open market.
"It is a game changer," said another LPG trader. "Whatever
the case, no more liftings equals massive impact on worldwide
availabilities coming into winter."
Iran has vied with Kuwait as the fourth largest LPG exporter
in the Middle East, behind Qatar, the United Arab Emirates and
Saudi Arabia, several traders said.
Propane is used for heating, in agriculture and in
petrochemicals along with butane, which in turn is also used for
cooking in many developing countries and as a winter gasoline
Iran had been exporting LPG on six or seven Very Large Gas
Carriers (VLGC) per month - between around 275,000-325,000
tonnes or nearing 4 million tonnes a year, several traders said.
South Korea was taking between two and four cargoes a month,
market sources said, and Statoil usually one per month. Together
they accounted for around two thirds of the Iranian exports.
A Kuwait-based customer, Arab Maritime Petroleum Transport
Company has also been lifting about one cargo a month from Iran,
the Korean source said.
AMPTC has been supplying LPG to Syria, according to
documents reviewed by Reuters. Tehran has backed Syrian
President Bashar al-Assad as his government fights rebels trying
to overthrow him.
BILLION DOLLAR TRADE
South Korea imported LPG worth more than $1 billion in the
first eight months of 2012, according to data from the Korea
International Trade Association. Iran provided 37 percent of its
propane imports and 22 percent of the butane.
South Korea's government has asked the EU for clarification
on the new sanctions, an official said. Another source said
imports were continuing from Iran but these may be ships which
left Iran before the EU announced the sanctions on Oct. 15.
Two LPG tankers loaded at the Iranian port of Assaluyeh
around Oct. 15. The Gas Vision tanker was heading to South Korea
and the Clipper Sun tanker, on a long term charter to Statoil,
is heading for Singapore, market sources and Reuters AIS Live
ship tracking showed.
If its imports were hit, South Korea would have no choice
but to buy LPG on the spot market.
South Korea would look for alternative supplies from Saudi
Arabia, Qatar and the UAE if it could no longer import from
Iran, a source at a buyer of Iranian LPG said. The same
suppliers have helped to fill the gap on international markets
left by the reduction in Iran's crude oil exports this year.
Three South Korean firms - E1, SK Gas
and Samsung Total - import propane and butane,