Iran Will Regain Access to SUMED Oil Pipeline

Iran Will Regain Access to SUMED Oil PipelineIran Will Regain Access to SUMED Oil Pipeline

Iran will be able to use the SUMED oil pipeline in Egypt to access the Mediterranean Sea and boost crude exports to Europe from there, Iran's deputy oil minister for international affairs said.

"An understanding has been reached for large vessels [carrying Iran's crude] to unload their cargo in [a terminal in] the Red Sea and reload it after transferring their crude through the SUMED pipeline to the Mediterranean," Amirhossein Zamaninia was quoted as saying by Shana on Tuesday.

He did not say when exports could resume through the strategically important pipeline that provides an alternative to the Suez Canal for transporting oil from the Persian Gulf to the Mediterranean.

SUMED is an oil pipeline in Egypt running from the Ain Sukhna Terminal on the Gulf of Suez to Sidi Kerir Terminal in Egypt's northern city of Alexandria on the Mediterranean Sea.

Iran's exports through Ain Sukhna and Sidi Kerir terminals came to a halt after the US and the EU intensified sanctions against it in 2012.

Following Iran's historic nuclear accord with six world powers in July, the country vowed to win back the ground it lost to rival producers in the global oil market.

Data show Iran has tightened its grip on its traditional markets such as China and India after the sanctions, but lack of access to the 320-kilometer pipeline is a potential stumbling block for Iran to break into European markets.

But despite the blockage of SUMED thus far, Iran has made some bulky shipments to Europe, albeit via international vessels.

According to Bloomberg, Iran exported more than 2 million barrels per day of crude during the first half of April, a figure calculated from tracking ships loading at Iranian export terminals. This compares with 1.45 million barrels a day in March.

  Cancelling Out Saudis

Zamaninia's statement follows a string of subversive measures by the Saudis to undermine Iran's increasing oil exports after nuclear sanctions against it were dropped in January, which allowed the country to effectively resume talks and trade with the world and expand its oil market share.

Sources said last month that Saudi Arabia was taking steps to slow Iran’s efforts at increasing oil exports by banning vessels that transport Iranian crude from entering their waters. According to reports, Iranian vessels have been restricted from entering ports in Saudi Arabia and Bahrain, a move that could hamper the voyage of Iran's crude carriers to the Red Sea and through the Mediterranean.

But things are more complicated when it comes to the oil facilities in Egypt.

The state-run Egyptian General Petroleum Corp. holds a 50% stake in the SUMED pipeline, with Saudi Arabia, Kuwait and the UAE together owning 45%.

On paper, Saudis may be able to influence their fellow Arab neighbors into blocking Iran's path to the Mediterranean, but it does not hold complete sway over the pipeline.

In a statement in November, Egypt's Petroleum Minister Tarek El Molla welcomed Iran's reentry to the crude market, saying that "they used to work with us through SUMED … used to store their crude at Ain Sukhna and Sidi Kerir."

Tehran and the kingdom have found themselves at loggerheads over a plan to freeze crude production to restore balance to an oversupplied market and help ramp up sagging prices.

Iran has insisted it is not ready to rally behind the pact before raising crude output to its pre-sanctions level of nearly 4 million barrels a day.