Oil Exports to Europe Reaching New Heights

Oil Exports to Europe  Reaching New HeightsOil Exports to Europe  Reaching New Heights

Iran will ramp up its oil exports to European customers to 600,000 barrels per day within a week, the head of the state-run National Iranian Oil Company said, as the country is inching closer to reaching its output level before western sanctions were imposed over the country's civilian nuclear program.

"We expect crude exports to Europe to reach 600,000 bpd by the end of the current [Iranian] month (ending May 20)," said Rokneddin Javadi, who is also a deputy oil minister, Mehr News Agency reported.

The statements follow Iran's extensive negotiations to resume selling oil to European companies that were mostly barred from doing business with the Middle East nation during the sanctions.

The country used to sell as much 700,000 barrels a day to Europe before sanctions.

According to Javadi, oil shipment to Russia's Lukoil, Spanish refiner Cepsa, Italy's Saras and Greece's largest refiner Hellenic Petroleum is already underway and "several more oil export deals with be finalized with European firms by summer".

The Islamic Republic exports around 2 million bpd of crude oil and 500,000 barrels of condensate—a light blend of oil found in gas fields—to Asia and Europe, the official said without giving a breakdown.

The Iranian government has said its oil output is bordering its 4-million-bpd pre-sanctions level. The International Energy Agency said in its latest report that Iran's oil output accounted for 3.56 million bpd last month.

Javadi also confirmed that NIOC is in talks on selling crude to British Petroleum, which is poised to open an office in Tehran following the improvement of Iran-UK relations.

"NIOC is close to resuming shipments to Italian oil and gas giant Eni in the near future," Javadi noted.

Eni ceased the import of Iran's crude in 2012 after western sanctions targeting Iran's nuclear program were intensified.

The official said 30-35% of Iran's total crude exports go to Europe.

The Royal Dutch Shell, Hungary's MOL and Tupras of Switzerland are also said to be joining the country's growing list of European customers.

"Iran's most important post-sanctions strategy for oil exports is to sign deals with chief consumers," Javadi said, referring to NIOC's priority in doing business with oil firms owning refineries and steering clear of brokers and middlemen.

  Glencore, Vitol Closing In

Tehran might have opted to push back small trading firms, but it has welcomed business with the world's leading traders with open arms. In February, officials of Vitol Group, a leading global energy and commodity trader, said they had already resumed imports from Iran following the January lifting of sanctions.

On Thursday, The Wall Street Journal cited Seyyed Mohsen Qamsari, NIOC's director for international affairs, as saying that Glencore PLC and Vitol Group, the world’s two largest independent oil traders, are close to signing a long-term deal for purchasing Iranian crude. Iran and the two Swiss-based companies are close to reaching separate agreements with the state-owned company, the official reportedly said.

According to Qamsari, one of the main stumbling blocks in finalizing an agreement is that NIOC wants to choose the destination of the crude that it sells Glencore and Vitol. It is not unusual for Iran’s state oil company—or those in other countries—to decide where oil traders market their crude.

Vitol has owned and operated refineries since its formation in 1966. The group holds a majority stake in a refinery and storage facility based in Fujairah, the UAE, and has a total refining capacity of 390,000 barrels a day.