Iran tanker firm delays oil fleet expansion as sanctions hurt
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Gulf Times - 27 June, 2012
http://gitm.kcorp.net/index.php?id=606715&news_type=Economy&lang=en

Iran's top commercial tanker operator NITC has delayed the expansion of its
oil fleet, company and industry sources said, as Western sanctions on the
Opec member's crude exports and a weak freight market hurt its ability to
turn a profit.

The delivery setback deprives Iran of much-needed capacity to store oil on
vessels at a time when Asian customers have slashed purchases by about a
fifth from last year’s 1.45mn bpd in preparation for new European Union
sanctions against Tehran.

Iran-based shipping sources said in April that Iran had been forced to
deploy more than half of its national tanker fleet to store oil at
anchorage. That proportion has since increased, trade sources say.

“It just means they (Iran) don’t have much more room for manoeuvre pretty
much going forward. There is not much additional storage on or offshore,”
said Samuel Ciszuk, a consultant at KBC Energy Economics.

The US and Europe have targeted Iran’s oil trade to pressure Tehran to halt
its disputed nuclear programme.

Washington will impose sanctions this week on financial institutions dealing
with Iran’s central bank, while Brussels will place an oil embargo on the
country’s oil trade. The EU’s measures also prohibit European insurers,
which provide cover for nearly all of the world’s tanker fleet, from doing
business with ships carrying Iranian crude.

Iranian tankers will be the main transporters of Iran’s crude to its two top
importers, China and India, once the sanctions come into effect on Sunday.

A senior NITC official told Reuters the firm has yet to take delivery of a
318,000 deadweight tonne tanker named “Safe”, the first of 12 new
supertankers the firm will manage under a $ 1.2bn contract with Chinese
shipyards. Delivery was initially scheduled for May.

“Delivery has been delayed because of the market. The market is not
attractive for any ship owner,” the NITC official said.

The Baltic Exchange’s Dirty Tanker index fell to a 17-month low of 660
points on Monday, down nearly 30% in the last six months and hit by a glut
of and slowing global oil demand growth, which has battered bottom lines.

Industry officials said the delay in delivery of the vessel was also due to
Western sanctions, which have made it difficult for Iran to sell its crude.

“With their (Iran’s) export capacity being reduced, they (NITC) probably do
not want to take delivery of them right now because they may find it
difficult to trade them and for people to accept their cargoes and get the
vessels insured,” said a senior ship industry official. “They (NITC) might
also have financing problems to pay for the delivery instalments.”

NITC has settled loans owed to French bank BNP Paribas this year, which
industry sources said was close to $ 1bn.

It was not clear when NITC will take the tanker, capable of carrying 2mn
barrels of crude, nor whether delivery of the other vessels will also be
delayed.

Another seven very large crude carriers (VLCCs) are scheduled for delivery
by the end of this year from two Chinese shipyards, and the remaining four
are expected to be commissioned by the end of 2013.

A senior official at China CSSC Holding’s Waigaoqiao Shipbuilding Co Ltd,
which has finished constructing NITC’s new supertanker, said yesterday he
was unaware of the delays.

The National Iranian Tanker company, now known as NITC, lost its ship
insurance cover from European providers last year due to earlier sanctions.
It secured alternative cover mainly in Asia and also in Iran from privately
owned Kish P&I and has said it has $ 1bn in cover to keep its existing
39-strong tanker fleet on the water.

Iranian oil exports this month have dropped to between 1.2mn and 1.3mn bpd,
a decline of as much as 1mn bpd from last year, as customers in Asia and
Europe stop or scale back purchases, industry sources say.

Of that, China and India will take around 700,000 bpd in July, according to
industry sources.
“It seems it will only be handful of clients pretty much if you talk about
term contracts who will be buying...with actual production rates going down.
They will have to very quickly adjust in the coming one or two months,” said
KBC’s Ciszuk.