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Mitsubishi Waiting for Japan Guidance on Iran Crude Contract

March 8 (Bloomberg) -- Mitsubishi Corp., Japan’s biggest trading company, is among crude oil buyers waiting for the government to decide whether the country needs to cut imports from Iran.

Mitsubishi buys Iranian crude and condensate, a light oil produced during natural-gas extraction, to supply Japanese refiners, Shunsuke Nanami, a spokesman in Tokyo, said in a phone interview yesterday. The company is waiting for an official decision on how to proceed with supply contracts amid international sanctions against the Islamic Republic, he said.

Japan plans to propose cutting Iranian crude purchases by at least 11 percent annually to gain an exemption to a U.S. law that would punish banks that do business with Iran, according to a government official Feb. 21. Refiners have been unable to renew some term contracts for 2012 until they receive direction from the Ministry of Economy, Trade and Industry.

“The discussions with the U.S. are making progress,” Yukio Edano, Japan’s trade and economy minister, said this week. “I can’t disclose the status of the ongoing discussion because the talks involve a counterparty.”

JX Nippon Oil & Energy Corp., Japan’s largest refiner by capacity, buys as much as 33,000 barrels a day of Iran’s South Pars condensates through a long-term contract with Mitsubishi, which is supplied by National Iranian Oil Co., according to two officials at both Japanese companies, who declined to be identified because the information is confidential.

Condensate Splitter

JX Nippon processes the liquids in a 63,500 barrel-a-day condensate splitter at its 189,000 barrel-a-day Kashima refinery near Tokyo, two of the officials said.

The refiner has contracts to buy as much as 83,000 barrels a day of Iranian crude, which includes the deal with Mitsubishi, according to officials from both companies. An additional 10,000 barrel-a-day supply deal with the Islamic Republic is yet to be renewed.

Mitsubishi’s Nanami declined to provide details on specific contract deals. Ghassem Mohsenian, the managing director of NIOC’s Singapore unit, was not available for comment when called at his office.

The following is a summary of Iranian crude supplies to Asian refiners in 2011 and the status of 2012 supply contracts, based on government statements, customs data, press reports, and interviews with company officials in India, Japan, China, South Korea, and Taiwan. The contracts are subject to revisions that may not be announced by the companies.

China (Imports from Iran in 2011: 557,000 barrels a day)

China is the world’s largest buyer of Iranian crude and opposes trade restrictions on Iran. The Ministry of Foreign Affairs said sanctions on its oil exports aren’t “constructive,” Xinhua News Agency reported Jan. 26.

Customs data show China’s imports in January from Iran were at the lowest level in five months as the country’s biggest buyer, China International United Petroleum & Chemical Co., known as Unipec, delayed signing a new term contract because of payment issues.

Unipec cut 2012 term contract purchases by 15 percent from the 265,000 to 280,000 barrels a day it bought in 2011.

India (Imports from Iran in 2011: 350,000 barrels a day)

India will continue to buy Iranian oil, according to statements by Oil Minister S. Jaipal Reddy, Finance Minister Pranab Mukherjee and Foreign Secretary Ranjan Mathai.

Iran has offered India extra crude supplies on revised terms as sanctions begin to tighten its circle of customers.

Mathai has said India will comply with UN sanctions but not U.S. and EU measures. The government has not asked refiners to take less crude.

Mangalore Refinery & Petrochemicals Ltd. plans to cut contract volumes for the year ending March 13 to 120,000 barrels a day, down from 143,000 barrels a day the previous year.

Essar Oil Ltd. renewed its contract to buy about 100,000 barrels a day of Iranian oil in 2012.

Hindustan Petroleum Corp. was planning to renew its 60,000 barrel a day contract with Iran.

Indian Oil Corp. was planning to renew its 30,000 barrel a day contract.

Bharat Petroleum Corp. had no plans to stop importing its 20,000 barrels a day.

Japan (Imports from Iran in 2011: 313,000 barrels a day)

Japan plans to propose cutting crude purchases from the Persian Gulf country by at least 11 percent annually from this year in order to gain an exemption to a U.S. law that would punish banks that do business with Iran, according to a government official Feb. 21.

The three largest buyers of Iranian crude are Showa Shell Sekiyu, JX Nippon and Cosmo Oil Co.

JX Nippon has renewed contracts to buy 83,000 barrels a day of Iranian crude that run from January to December. It was waiting for government direction on its 10,000 barrel a day contract that should begin in April.

Cosmo has yet to renew its Iranian oil contracts for less than 50,000 barrels a day.

Showa Shell, the largest buyer of Iran’s crude in Japan, was awaiting government direction before renewing its annual contract for almost 100,000 barrels a day that runs from April 2012 to March 2013.

Mitsubishi buys South Pars condensate from Iran to supply to Japanese refiners, including JX Nippon. The company is waiting for government direction. The contract, with a buyer’s option, is for 500,000 to 1 million barrels a month.

South Korea (Imports from Iran in 2011: 239,000 barrels a day)

The government will make a decision on cutting Iranian crude imports by the end of June. Like Japan, South Korea is seeking an exemption from U.S. sanctions.

A South Korean delegation visited the U.S. from Feb. 21 to Feb. 24 to discuss Iran sanctions. The government denied a Feb. 27 report by Yonhap News, citing unidentified officials, that it proposed to cut imports by 15 percent to 20 percent.

SK Innovation Co. and Hyundai Oilbank are the only South Korean refiners that purchase Iranian crude.

SK Innovation has already renewed its term contract that runs from January to December.

Hyundai Oilbank bought 70,000 barrels a day from Iran in 2011, about one-sixth of its total purchases.

Sri Lanka (Imports from Iran in 2011: 31,000 barrels a day)

Iran is Sri Lanka’s largest oil supplier. The country may need to buy from the spot market in the future, the finance ministry cited Treasury Secretary P.B. Jayasundera as saying in a statement Feb. 24. Iran sells oil to Sri Lanka on four months’ credit.

Taiwan (Imports from Iran in 2011: 30,000 barrels a day)

Taiwan buys less than 4 percent of its crude from Iran, according to data from the Ministry of Economic Affairs, Bureau of Energy.

CPC Corp. has renewed its 22,000 barrel a day contract that runs from January to December. The government hasn’t asked it to reduce purchases from Iran.

Formosa Petrochemical Corp. renewed its 2012 term contract. Like CPC, it has not been pressured by the government to reduce purchases.

Most refiners have annual contracts with National Iranian Oil Co. to buy a fixed volume of crude over a term that runs from either January to December or April to March.

To contact the reporters on this story: Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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