Bloomberg News

Iran Fleet Seen Too Small to Sustain Oil Exports as Tankers Avoid Country

March 12, 2012

Oil exports from Iran, OPEC’s second-biggest producer, may drop because the nation’s tanker fleet is too small to carry all its cargoes as European Union sanctions cause international ship owners to avoid the country.

NITC owns 39 vessels able to carry about 70 million barrels of crude, according to its website. The fleet would be insufficient to deliver the nation’s monthly exports of about 65 million barrels because journey durations can be as long as two months, said Dag Kilen, an analyst at Fearnley Consultants A/S, a unit of Norway’s second-largest shipbroker. Sanctions already cut shipments by 300,000 to 400,000 barrels a day, Barclays Capital said March 7.

Frontline Ltd., Overseas Shipholding Group Inc. (OSG) and owners of at least 100 supertankers said a month ago they would no longer call at Iran because of an insurance ban announced Jan. 23 by the EU as part of a wider sanctions package. The prohibition, due to take full effect July 1, extends to 95 percent of the supertanker fleet because companies providing coverage must follow EU law.

“The fleet itself is not big enough to ship all the oil they are normally exporting,” Kilen said by phone March 9. “I would expect to see a decline in exports as a consequence of Iran not having a national fleet big enough to export the normal volume.”

Kharg Island

NITC commercial director Habibolah Seyedan declined to comment by phone from Tehran.

NITC owned six of the seven tankers that called last week at Kharg Island, Iran’s largest oil terminal, compared with five of eight vessels the week before, according to ship-tracking data compiled by Bloomberg. Iran’s fleet accounted for 73 percent of the port’s shipments so far this month, against 56 percent in February and 37 percent in January, the data show.

Half of the tankers booked to load at Kharg Island last month failed to complete the voyages, according to brokers, company officials and ship-tracking data. Crude traded in London is up 16 percent this year to $125.01 a barrel.

U.S. and EU leaders are tightening pressure on Iran over its nuclear program, which the government in Tehran says is for civilian purposes. Iran pumped 3.45 million barrels of oil a day last month, the least since September 2002, according to data compiled by Bloomberg. Exports averaged about 2.2 million barrels a day, the U.S. Energy Department estimates. Oil sales earned the Persian Gulf country $73 billion in 2010, accounting for about 50 percent of government revenue.

“Owners are not going because of the sanctions restrictions,” said Nikos Varvaropoulos, a Dubai-based official at Optima Shipbrokers Ltd. “This is causing a real constraint on Iranian oil shipments.”

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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