Monday, August 18, 2003
Iran plays swaps to stay in Caspian oil export game
Reuters London, August 18
Iran's ambitions to control future Caspian oil export routes may have been scuppered by BP's Baku-Ceyhan (BTC) pipeline but Tehran is keeping its foot in the door by quietly boosting crude swap deals with Russian and Central Asian producers.
A 300-km (186-mile) pipeline from Iran's Caspian port of Neka to Tehran refinery is due for completion at the end of August, allowing Iran to triple its intake of Caspian crudes and compensate producers with its own oil in the Persian Gulf.
"Iran lost Round One of the race to export Caspian oil but they are still very much in the game," said Laurent Ruseckas, Caspian analyst at Cambridge Energy Research Associates (CERA).
"When Kashagan starts producing in 2007, there won't be a single export route that will be unutilised," he said, referring to the giant offshore Kazakh oilfield that sparked a race between Tehran, Moscow and Washington to control export routes from the remote Caspian basin.
While the Iranian route is unlikely to match the volumes that will be shipped via US-supported BTC, the new Neka-Tehran link will triple swap capacity to 150,000 barrels per day (bpd).
This can be upped to 350,000 bpd if extra pumping stations are added. The BTC will be able to carry over one million bpd.
Parvez Joobandi, head of documentation at Naftiran Intertrade, the Swiss-based financial arm of the National Iranian Oil Corporation said swap volumes were slowly rising and would likely cross 100,000 bpd by the end of the year.
"Producers are looking for new routes to export and swapping with Iran is a very competitive option. They can acheive a lot of cost savings," he told Reuters.
IRAN TRIES TO MAKE UP FOR SETBACK
After its initial setback, Iran renovated Neka's port and storage facilities to accommodate large tankers and more crude. Recently it ordered six 60,000-tonne oil tankers from Russia for $240 million and will receive them in the Caspian by 2005.
The pipeline was built by upgrading and reversing the flow of an old link that earlier delivered oil products from Tehran refinery to the the northern Caspian region of Iran.
Analysts say that while existing export routes are currently sufficient for Caspian oil, the scenario will change once Kashagan with reserves of nine billion barrels starts producing. Kazakhstan has said it will consider all possible export routes.
"BTC will have to ship Azerbaijan volumes too so if Iran keeps swap fees low and provides attractive terms, some of the Caspian crude at least will use the swap option," Ruseckas said.
RUSSIAN FIRMS KEY FOR NOW
Until this year, smaller Kazakh and Turkmen producers have been the main swappers. Analysts say now that until Kashagan comes on stream, Iran must concentrate on drawing Russian oil volumes. Faced with surging output and limited export capacity, Russian firms are taking a second look at the Iranian option.
The swap option could also help Russian firms get a toehold in Asia's energy-hungry markets. They can currently ship oil East only when freight rates permit and when European crude prices are lower than for competing Middle Eastern sours.
"Getting crude in the Gulf rather than the Mediteranean has an advantage as the oil can go to Asia where we can get a better price," said a spokesman for Canada's PetroKazakhstan.
Petrokazakhstan in July agreed to swap 22,000 bpd from its Kazakh Kumkol field, starting in the last quarter of 2003.
LUKOIL this year signed a deal to supply 25,000 bpd of crude by tanker to Neka, while BP-controlled Sidanco also swapped 100,000 tonnes in July, with plans for more in future.
But others, keen on ties with Washington, are keeping away. "YUKOS does not deal with regimes under US sanctions," a spokeswoman for the company said.
© Hindustan Times Ltd. 2003. Reproduction in any form is prohibited without prior permission