October 25-2013
China is buying so much oil from Iran that it is in danger of losing its exemption from sanctions, which is up for renewal in about six weeks.
China would need to make huge cuts in its Iranian oil imports in the next few weeks if it is to meet its unofficial target of cutting Iranian oil imports by 5 percent in the second half of 2013.
China’s intake of Iranian oil is running 1.4 percent higher than last year through the end of September, Reuters reported Tuesday, citing official customs data.
China has actually reduced its imports of Iranian crude, but the start-up in July of an independent petrochemical plant that processes South Pars condensate has meant that total Iranian oil imports have risen.
At 475,521 barrels per day (bpd) in September, Iranian oil imports were up 24 percent from the same month last year and up 9 percent from August.
“We have been making efforts to control imports from Iran in the second half of this year,” an industry source told Reuters. “Our Iranian oil imports are already very low. We will keep the current imports level from Iran for the rest of the year,” he said. But level imports won’t do the trick.
The US offers exemptions from sanctions in six-month increments to countries that show “significant” reductions in each six-month period from the previous period. While Washington has always avoided defining what a “significant” reduction is, an increase, such as China is now showing in this six-month period, obviously doesn’t qualify for an exemption from sanctions.
While China’s daily imports from Iran are running higher than last year, they are still down more than fifth from the peak of 555,200 bpd hit in 2011. Some in China are hoping that will allow China to qualify for a waiver.
Chinese oil officials estimated late last year that domestic refiners would cut their Iranian shipments at least 5 percent this year from 438,450 bpd for 2012, putting its maximum target for 2013 at around 416,400 bpd.
Through September, however, China had averaged 428,160 bpd for the year thus far.
That would require China to limit its imports from Iran over each of the next three months to about 380,000 bpd, according to Reuters calculations, down 18 percent from September.
China’s main problem in making the necessary cuts is the start-up of the independent Dragon Aromatics petrochemical plant in southern China.
The plant, owned by a Taiwanese group, started up at the end of July and has become a regular importer of Iranian South Pars condensate, a light oil counted in China’s crude import data.
Dragon has been taking about 66,000 bpd of South Pars condensate for the last two months and will continue to do so through the end of the year, according to a trade official.
“Yes, Dragon’s purchase of Iranian condensate should be the main reason for the increase,” another source involved in China oil trade told Reuters.
China, India and South Korea will have their six-month waivers on the US sanctions reviewed in early December.