Petroliam Nasional Bhd. (PET)’s Engen unit, the biggest South African importer of Iranian crude, said it has suspended imports of oil from the Middle Eastern nation amid economic sanctions by the U.S. and the European Union.
The company has contingency supplies in place, Engen spokeswoman Tania Landsberg said in an e-mailed response to questions. Engen, which operates the country’s second-biggest refinery based in Durban and with a capacity of 135,000 barrels a day, normally buys about 80 percent of its supplies from Iran.
Engen is “under heavy pressure” to halt Iranian imports because of sanctions, Petronas Chief Executive Officer Shamsul Azhar Abbas, said in a March 30 interview. Engen has sought alternative supplies but hasn’t yet received any, he said.
President Barack Obama signed a law on Dec. 31 that denies foreign banks that do business with the Central Bank of Iran access to the U.S. financial system. The U.S. may impose penalties should a country not make “significant” reductions in Iranian crude oil purchases in the first half of this year. A South African governmental team will submit a report to cabinet by the end of May that will advise on Iran, Energy Minister Dipuo Peters said today.
Sasol Ltd., which operates the Natref refinery in partnership with Total SA in Sasolburg, south of Johannesburg, said last month that it halted crude purchases from Iran, which provided about 20 percent of supply. Refineries operated in the country by BP Plc and Chevron Corp. don’t use Iranian oil. Royal Dutch Shell Plc will comply with U.S. sanctions, CEO Peter Voser said Feb. 2.
July 1 Deadline
The European Union decided in January to stop Iranian oil imports effective July 1. The EU and U.S. are trying to pressure Iran to abandon any work it may be conducting to acquire nuclear weapons capability. Iran says that its nuclear program is strictly for civilian energy and medical research.
The South African government is working to ensure the higher cost of non-Iranian crude does not have a detrimental effect on the Engen refinery and the South African and regional economy, Nelisiwe Magubane, director general of the department of energy, said at a briefing in Pretoria today. Refineries “are struggling with low margins,” she said.
Engen’s cost to convert the refinery to handle other oil is expected to be 300 million rand ($39 million), Magubane said.
The South African governmental team report will include recommendations on whether the country should impose sanctions on Iran, and whether an application should be made for a U.S. waiver, she said.
South Africa imported 2.8 billion rand of oil from Iran in February, after no imports in January, according to data from the South African Revenue Service. The country imported 27 billion rand of crude from Iran last year, comprising 26 percent of total oil imports, it said.
About two fifths of South Africa’s supply is met from plants run by Sasol that convert coal into motor fuel.
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