Multiple Asian companies reviewing Iran OSPs, Platts assessments
Return of Iranian supply still some time away: CRISIL
South Korea keen to resume South Pars condensate imports
Asian refiners and petrochemical makers have started to prepare for a possible resumption in Iranian crude imports amid growing optimism that tensions between Washington and Tehran could improve under the Biden administration, with several Asian oil companies and trading firms reviewing recent Iranian crude official selling prices and S&P Global Platts South Pars condensate price assessments.
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The Biden administration on Feb. 18 formally offered to restart negotiations with Tehran, inching the two sides closer to a deal that could see the restoration of Iran’s approximately 2.6 million b/d export capacity.
Refineries like additional supply to the markets, particularly for complex secondary units, Mitsuyasu Kawaguchi, general manager for crude oil & tanker at Cosmo Oil, said during a panel discussion at the Platts 8th Asian Refining Virtual Summit on March 4.
“On the US side, oil policy of Biden administration [towards Iran] is more accommodating to [that of ]Trump, but it’s certainly not the first priority,” he added.
Rahul Prithiani, director of CRISIL Research echoed a similar sentiment at the event.
“[There are] positive noises from the US administration clearly towards potential resumption of supplies from Iran, but I think there are lot of other milestones that will need to be achieved and it may not be a fast recovery,” he said.
“Maybe going into the middle of next year probably you will see movement and a lot of ground work that needs to be done for the Iranian supplies to come back is my sense,” he said, adding that oil demand would also have recovered somewhat by then.
At least one Asian trading house, as well as a South Korean petrochemical maker, a Thai refining entity and a Chinese refiner have recently started to track back and study the recent months’ Iranian crude OSP differentials and Platts South Pars condensate assessments to analyze the adequate market value of Iranian grades, according to trading and feedstock procurement sources at the three companies.
The sources and the companies declined to be identified due to the extremely sensitive nature of the matter that involves Iranian products.
“We have been keeping an eye on this, as Iranian crudes’ rich naphthenes and aromatics content is good for boosting refining margins in integrated complexes,” a Beijing-based trader with a state-owned oil giant told Platts.
“It’s still a big ‘if’ at this stage … but we are actively reviewing the recent past Platts assessments to stand ready to submit term and spot cargo bids to the NIOC in the ‘big if’ event the international sanctions on Tehran are called off and Iranian oil exports resume,” a source at the South Korean company said.
The source added that the company’s plant engineers have been directed to start drafting a preliminary plan to tweak the refinery configuration to process Iranian grades.
Iran’s flagship ultra-light crude South Pars condensate was assessed at a discount of $2.90/b to Dubai on March 3, Platts data showed.
NIOC raised the March Iranian Light OSP differential by 5 cents/b from February to a premium of 85 cents/b to the average of Oman/Dubai assessments in March, while it increased the price of Forozan Blend from parity in February to a premium of 15 cents/b in March.
South Pars condensate
South Korean refiners and petrochemical companies are especially keen to resume Iranian oil imports as South Pars condensate would make one of the most economical and ideal base feedstocks for petrochemical products that would support the country’s medical equipment and hygiene product manufacturing.
Due to increasing concerns over health and infection following the outbreak of the coronavirus, demand for certain petrochemical products like polypropylene and polyethylene, recorded a sharp uptick as these products are essential for making mask filters and protective medical suits and gears
As a result, South Korean refiners and petrochemical makers have been making rigorous efforts to secure a steady supply of base feedstock condensate and naphtha over the past trading cycles and increasingly, these companies see the need for the resumption of Iranian condensate trades.
The South Korean refining and downstream petrochemical industry is hopeful that tensions between the US and Iran would ease to the extent that Iranian oil and condensate could at least partially resume, enabling many Asian end-users to secure more condensate supply during the pandemic, according to a market research manager at Korea Petroleum Association based in Seoul.
South Korea had imported more than 100 million barrels/year of crude and condensate from Iran in 2016 and 2017. However, the shipments tumbled to 58.2 million barrels in 2018, 33.23 million barrels in 2019 and the country received zero cargoes from the Persian Gulf producer in 2020, according to data from state-run Korea National Oil Corp.