Northern Neighbors Seek Oil Swap Resumption

Northern Neighbors Seek Oil Swap Resumption Northern Neighbors Seek Oil Swap Resumption

The Caspian Sea littoral states have expressed readiness to resume crude oil swap operations, which were halted for five years, Rabi' Fallah Jelodar, the governor of the northern Mazandaran Province said, Asr-e-Eghtesad reported.

The Iranian Oil Terminals Company (IOTC) can swap up to 150,000 barrels of oil per day (bpd) from Central Asia, IOTC's managing director, Pirouz Mousavi, said Saturday. Coastal infrastructures and terminals have been constructed to increase oil swap capacity. Several private firms have also announced their interest in taking part in new oil swap projects.  

The short-term objective of the project is to enhance crude oil swap capacity, provide the needs of drilling fleets operating in the Caspian Sea, and increase IOTC's oil input capacity from the current 150,000 bpd to 500,000 bpd. In the long run, the project is aimed at raising oil swap capacity to 2.5 million bpd.

Specialized meetings were held and visits paid to the coastal infrastructure, indicating that circumstances are set to start swap operations again, Mousavi said. "Constructive arrangements were also made between the oil ministry and the ministry of foreign affairs," he added.

As one of the five Caspian littoral states, Iran borders Sea of Oman and Persian Gulf in the south, and thus could be used as a transit route for transferring energy from Caspian Sea, which has no access to international waters, to the world markets. Oil swap can be an important source of revenue as the northern neighbors with abundant hydrocarbon resources need access to major sealanes.

Lowering oil transfer costs and boosting cooperation between the regional states are among the advantages of oil swaps. In addition to generating revenues, the oil swap project saves Iran the costs of carrying 500,000 b/d of oil from south to north of the country to feed Tehran, Arak and Tabriz oil refineries.

Oil swaps between Iran and littoral states of the Caspian Sea started in 1997 for the first time. Iran imports oil from Central Asian countries to be refined at Tehran and Tabriz oil refineries and then delivers an equivalent amount of oil to the Persian Gulf.

However, a number of obstacles prevented Iran from gaining economic benefits from oil swaps, including the anti-Iran sanctions of the US, Russia’s rivalry with Iran over controlling energy export routes and political and economic instability in some regional countries.

According to reports, Iran has swapped more than 254 million barrels of oil during the 13 years swap operations were ongoing. Oil swaps have generated $880 million revenues in hard currency for the country over the said period.