Iran’s Petrochemical, Fuel Sales Boom as Sanctions Hit Crude Exports

Date: 17 September 2021 - 22:12

News ID: ۹۴۴۷۵

LONDON (Dispatches) - Iranian fuel and petrochemical exports have boomed in recent years despite stringent U.S. sanctions, leaving Iran well placed to expand sales swiftly in Asia and Europe if Washington lifts its curbs, trading sources and officials said.
The United States imposed sanctions on Iran’s oil and gas industry in 2018 to choke off the Islamic Republic’s main source of revenues in a dispute with Tehran over its nuclear work.
The steps stymied crude exports but not sales of fuel and petrochemicals. Crude can be identified as Iranian by its grade and other features, while big oil tankers are more easily tracked via satellite.
Iran exported petrochemicals and petroleum products worth almost $20 billion in 2020, twice the value of its crude exports, oil ministry and central bank figures show. The government said in April they were its main source of revenues.
“The world is vast and the ways of evading sanctions are endless,” Hamid Husseini, board member of Iran’s Oil, Gas and Petrochemical Products Exporters’ Union in Tehran, told Reuters.
Competitive prices and Iran’s location, close to major shipping lanes, made its products attractive, he said.
There are also many more buyers of refined products than importers with refineries configured to process Iranian crude.
In addition, Iran exports some fuel by trucks to its neighbors, which involve small transactions that are tough for the U.S. Treasury to detect.
Meanwhile, Iran has positioned itself well to respond if the measures are eased. While most of the world slashed refinery throughput during the COVID-19 pandemic, Iranian gasoline exports rose 600% year on year in 2020 to 8 million tonnes, or 180,000 barrels per day (bpd), the customs administration said.
As recently as 2018, Iran had been importing gasoline.
Iran’s revenues from gasoline exports were an estimated $3 billion in 2020, Husseini said.
Iranian oil production is now about 2 million to 2.5 million bpd, with around 2 million bpd allocated to domestic refineries and roughly 500,000 bpd to exports, a source close to the oil ministry said, adding that Iran could boost crude output by 2 million bpd in two to three months if sanctions were lifted.
Until sanctions were imposed, crude exports were Iran’s main revenue source, typically exceeding 2 million bpd and reaching 2.8 million bpd in 2018.
Gasoline was delivered by truck to Afghanistan and Pakistan and shipped to the United Arab Emirates (UAE) across the Persian Gulf, a source close to Iran’s Oil Ministry said, declining to be named.
Iran resumed fuel exports to Afghanistan in August at the request of the Taliban.
Traders said Iraq and some African countries also bought Iranian gasoline, while several gasoline cargoes were shipped to Venezuela, which like Iran is a member of OPEC.
Petrochemical exports rose to 25 million tonnes in 2020 from about 20 million tonnes in 2019, an Iranian oil ministry bulletin said, while Iranian petrochemical capacity rose to 90 million tonnes a year in 2020 from 77 million tonnes in 2019. It is set to exceed 100 million tonnes in 2021.
To encourage buyers, trading sources said Iran often offered prices that would cover shipping and insurance costs, alongside the extra fees for banking transactions. Those extras had raised the cost of Iranian products by about 25%, trading sources said.
Even countries that seek to implement U.S. sanctions have sometimes struggled to halt all business with Iran.
India banned imports of Iranian urea in domestic tenders under U.S. pressure but Husseini said Iranian products were still offered via intermediaries.
Chinese firms remain the main buyer of Iranian liquefied petroleum gas (LPG), methanol, and many other products, trading sources said.
China and Iran have always followed the principles of equal, fair and win-win collaboration and work within the international legal framework, China’s Ministry of Foreign Affairs said in a statement to Reuters.
It said China is opposed to unilateral sanctions and urged the United States to remove what it deemed the “long-arm jurisdiction” of such sanctions.
“If the international sanctions were completely dropped, Iran would go back to exporting methanol to its traditional locations instead of the vast majority going into China,” said Geoff Mullett, a methanol specialist at IHS Markit, referring to other markets such as Taiwan, Japan and South Korea and Europe.
A senior analyst at IHS, April Tan, said Iranian exports were expected to rise if sanctions dropped, in particular fuel oil and liquefied petroleum gas (LPG) exports to Asia.

Iran Earn $9bn From
Petrochemicals Exports

A senior official at Iran’s National Petrochemical Company (NPC) says exports of petrochemicals were responsible for a fourth of all non-crude shipments exported from the country in the year to late March.
Hassan Abbaszadeh, who leads planning and development operations at the NPC, said on Thursday that the share of petrochemicals from Iran’s non-oil exports had risen slightly to reach 25.2% over the last calendar year.
Abbaszadeh said petrochemicals shipments had generated over $9 billion in revenues for Iran over the period, short of an annual target of 12 billion which he said was mainly because of depressed international prices caused by the spread of the coronavirus pandemic.
The official said petrochemicals have continued to be a major source of earning hard currency for the Iranian government at a time it is grappling with lower crude sales because of US sanctions.
NPC estimates suggest increased demand for Iranian petrochemicals, especially in the Asian markets, could boost revenues in the calendar year to March 2022 to nearly $14 billion.
Abbaszadeh said figures published by the Iranian customs office about trade in the five months to late August show that the NPC and its subsidiary plants could easily hit the $14-billion target in overseas sales.
He said Iran’s petchem exports could further increase in the years to come to account for 35% of a non-crude exports target of $70 billion set for 2025.
The Iranian Oil Ministry which controls the NPC estimates the worth of products manufactured in the petrochemicals sector can reach $30 billion per year by 2026 when output is expected to hit a target of 133 million metric tons per year.