South Africa Upfront to Purchase Oil

South Africa Upfront to Purchase OilSouth Africa Upfront to Purchase Oil

South Africa will be the first new customer to purchase Iranian crude, once sanctions are lifted, an Oil Ministry official said.

"As South Africa's oil terminals are owned by international giants like Royal Dutch Shell, sanctions bar us from exporting oil to them for now," Seyyed Mohsen Qamsari, National Iranian Oil Company's director for international affairs, told Shana on Wednesday.

The Iranian Oil Ministry is working tirelessly to sign preliminary agreements so as to expand its share in the global oil market, as it prepares for the removal of western sanctions.

As old and new buyers are queuing up to establish a flow of crude to their refineries, the newest country with an appetite for Iranian oil is South Africa. It signed a preliminary oil purchase agreement with the National Iranian Oil Company in anticipation of normalizing relations. The agreement is not final.

However, the sanctions are multi-layered and will take time to be removed fully. Iran is under the most stringent sanctions regime over its nuclear energy program. Tehran agreed to curb its nuclear activities in exchange for sanctions relief following intense negotiations with the six world powers—USA, Britain, France, Russia, China and Germany.

The Oil Ministry is also looking to send a delegation to South Africa in October to prepare the ground for further cooperation in the oil and gas industry, state media reported earlier this week. According to the head of National Petrochemical Company, selling hydrocarbon products and making joint ventures in the oil and gas industry will be on the delegation's agenda.


  Resumption of Trade

"Countries who used to buy oil from us want to resume their previous contracts," Qamsari said. Many oil-related sanctions were imposed by the United States and the European Union in 2012 to pile pressure on Iran over its nuclear program.

Part of the EU sanctions prohibit European firms and individuals from importing or purchasing Iranian crude oil, oil products or natural gas, assisting in the construction of oil tankers, or supplying vessels to transport or store oil or petrochemical products. European firms have recently started visiting Iran ahead of the possible lifting of sanctions to both buy oil and explore investment opportunities.

Qamsari did not give any figures, saying: "Negotiations with European buyers are in preliminary stages and we cannot give any figures for the rising demand from Europe.

"Of course, the European market has changed in the past three years, some refiners have gone out of business and some new ones have sprung up, but their executives want to buy the same amount of oil."

  The Asian Strategy

Turkey, Japan, South Korea, China and Indonesia are Iran's longstanding customers and they will continue to buy oil from Iran. New refiners in the Far East are also looking for oil.

Selling oil to Asian customers is more profitable for NIOC, as freight costs are lower compared to those for Europe. NIOC sells 60% of its oil to Asia and 40% to Europe.

Qamsari said tThis strategy will remain in place.

"Due to new technology allowing the processing of gas condensate, our market for them is expanding, mainly in the Far East," he said.