Iran to raise shipments of cleaner diesel from 2017: sources

OSLO (Reuters) - Iran is aiming to increase export volumes of cleaner diesel from next year as its refineries are upgraded, even as it cuts its reliance on imports, industry sources familiar with the matter said on Tuesday.

Iran has expanded its presence in the global oil market after international sanctions were lifted in January, aggressively marketing and increasing diesel shipments. The additional supply may add to a diesel supply glut in Asia.

Diesel exports from National Iranian Oil Company (NIOC) containing 500 parts-per-million (ppm) of sulfur will likely make up about half of its overall diesel shipments from early next year, compared with about less than 10 percent currently, one of the sources said.

It currently ships out about 500,000 tonnes of gasoil with 1 percent sulfur, or 10,000 ppm, which is mainly exported to the Middle East, with small volumes sent to Singapore, Africa and the Mediterranean, the source said, declining to be named as he was not authorized to speak with the media.

“(NIOC) is aiming to increase its low sulfur (diesel) exports and reduce the high sulfur to about 50-50 as refineries are upgrading,” he added.

The company ceased imports of gasoil from April 2015 and was balanced with its supply and demand until January when it stepped up exports of the fuel, he said.

The volumes are sold through spot and term contracts, he added, declining to reveal details of term buyers.

The 1 percent sulfur fuel is mainly used for blending or as a feedstock in secondary refining units. But, the cleaner 500 ppm sulfur diesel is used in the transport and industrial sectors in many Asian countries including Vietnam and Bangladesh.

Iran’s increase of cleaner diesel is expected to weigh on Asian gasoil margins, which are already hovering near six-year lows, traders said.

Still, as winter approaches, Iran’s gasoil exports are likely to decline over the next few months as the fuel is used in the domestic market for power generation, the source added.

Getting letters of credit is still a problem at times, though it is becoming less difficult and does not pose a major issue, said the source. While large global banks are still holding back because of legal risks, Iran has begun forging banking channels via smaller foreign institutions.

NIOC said earlier on Tuesday it will reduce its gasoline imports and condensate exports once the first phase of its Gulf refinery starts up by end-March 2017.

Reporting by Jessica Jaganathan; Editing by Christian Schmollinger