Factbox: Sanctions on Iran’s oil sector

(GNN) - Iran and world powers reached a framework agreement on Thursday on curbing Iran's nuclear program for at least a decade.

The tentative agreement clears the way for talks on a future settlement that would allay Western fears that Iran was seeking to build an atomic bomb and in return lift economic sanctions on the Islamic Republic. They will remain in place until a final deal is reached.

The sanctions have halved Iran's oil exports to just over 1 million barrels per day since 2012 and hammered its economy.

A complex range of restrictions has been imposed on Iran over several decades, starting with initial measures in 1979 after Iranian students stormed the U.S. Embassy in Tehran.

The major oil-related sanctions have been imposed by the United States and European Union to pile pressure on Iran over its nuclear program.

The U.S. Congress and the executive branch of the EU have both targeted Iran's oil sector with layers of sanctions that could take time to remove fully even after any deal is struck.

Here is a summary of the measures.

U.S. SANCTIONS

Americans are prohibited from trading directly or indirectly with Iran’s oil sector, the government of Iran and individuals connected to the oil sector or in any financing of it. U.S. companies are also prevented from investing in Iran’s oil and gas industries or trading with them.

U.S. sanctions can also target financial institutions that engage in transactions with state-owned National Iranian Oil Company and its subsidiary Naftiran Intertrade Company.

Companies or individuals who breach the sanctions could face significant fines, asset freezes, the risk of being cut off from the U.S. dollar banking system or even be blacklisted themselves.

EU SANCTIONS

The EU has also imposed sanctions prohibiting trade with Iran’s oil sector. This includes any business with the whole of the country’s energy sector or government agencies related to it and any investments with the industry.

EU sanctions also prohibit European firms and individuals from importing or purchasing Iranian crude oil, petroleum products or natural gas and assisting in the construction of oil tankers as well as supplying vessels used to transport or store oil or petrochemical products.

SHIPPING AND INSURANCE

Iran’s oil sector also faces hurdles over the transportation of oil and insuring cargoes.

EU and U.S. sanctions have blacklisted Iran’s shipping sector, including its top tanker owner NITC, meaning U.S. and European companies are prohibited from trading with it.

NITC is Iran’s main transporter of oil. The country’s top port operator Tidewater Middle East Co is also sanctioned, which has complicated shipments from export terminals.

Iran is also prohibited from securing services from international ship classification firms, which verify safety and environmental standards for vessels and are vital to insurance and port access for ships.

JOINT PLAN OF ACTION

Under an initial agreement with Iran reached in November 2013, known as the Joint Plan of Action (JPOA), and rolled over subsequently until June 30, 2015, both the U.S. and EU relaxed some measures on Iran.

This allowed the Islamic Republic access to some of its frozen oil revenues abroad and a modest easing of restrictions on oil sales to top importers including China and India.

The JPOA had provided Iran with some sanctions relief, including a temporary easing on insurance cover for permitted trades. However, ship insurers remain wary of extending cover on those trades due to concerns they may face sanctions if any claims are made and the claims process extends beyond the current expiry of temporary measures on June 30, 2015.

(Reuters)(Writing by Jonathan Saul; Editing by Angus MacSwan)

Petroleum products: #PSO willing to buy but won’t heed to Byco’s condition

#GNN - #KARACHI: #Pakistan State #Oil (PSO) stands ready to buy #petroleum products from the troubled Byco refinery but it cannot do that at the cost of piling burden on its already leveraged books, officials told Media.

Byco International Incorporated’s (BII) 120,000 barrels per day (bpd) oil refinery has run intermittently since commercial production started earlier this year because of financial constraints and difficulty to find market for its key high speed diesel (HSD) products.

“PSO has no issues with Byco. We just want reliable supply and that’s all,” said a senior official of the state-run petroleum marketing giant. “But Byco wants us to give them letter of credits (LCs), which they can use to import crude oil. That proposition appears difficult.”

PSO has a monthly limit of around Rs100 billion to borrow from banks to import petroleum products like HSD and furnace oil. Extending that would require government intervention and consent of the State Bank of Pakistan, the official added.

Being a government entity, PSO faces minimal risk of default and banks would easily raise the credit limit for the company to accommodate Byco. But that seems unlikely now as the government plans to use PSO’s balance sheet, which reflects annual sales revenue of over Rs1.2 trillion, to import liquefied natural gas (LNG) from next year.

BII has built country’s largest oil refinery and petrochemical complex with an investment of around $600 million. The sheer size of the refinery requires at least 3 tankers with 70,000 tons of crude oil to be imported every month. That means financing lines of Rs15 billion to Rs16 billion.

PSO buys petroleum products from local refineries on a 30-day credit, paying for the products after a month. In essence, Byco wants to use the LCs from PSO as assurance to convince banks to finance its own crude oil imports.

Byco’s refinery, located in Hub, Balochistan, has faced difficulty in taking diesel to customers, most of which are based in Punjab and further north. Initially when the refinery was being set up, BII hoped to use Asia Petroleum Limited’s (APL) 82-kilometre long pipeline to move diesel to Port Qasim. But negotiations with the APL sponsors did not materialise.

The APL pipeline is used to supply furnace oil to Hub Power Company’s 1,300 megawatts (MW) power project, which is Byco refinery’s next-door neighbour. APL charges $12 per ton to transport that furnace oil from the port. Byco says it couldn’t have matched that.

As an alternative, the company came up with a plan to ferry diesel from its refinery to Port Qasim from where it could be pumped upcountry through cross country white oil pipeline. HSD makes up 40% of the refinery’s output.

Byco has a single point mooring (SPM) facility, a floating jetty connected with storage tanks with a 15km long pipeline, which allow ships to take and offload oil without coming to the shore.

The company has already retrofitted the facility with pumping machines to pump diesel into the ships. A tanker will be hired to move the cargo. The entire operation from filling 50,000-ton tanker, shipping it to Port Qasim and then offloading it will take three-and-a-half days.

BII estimates that it will cost around 70 paisa per litre to take diesel from the refinery to Port Qasim and this amount should be covered under the inland freight equalisation margin (IFEM), a central pool of funds used to keep price of petroleum products same across the country.

However, government has yet to give a nod for recovering this cost from IFEM.

Some industry people also say that there is a strong lobby within PSO that favours purchase of HSD from Kuwait Petroleum Company (KPC) instead of Byco.  But a senior PSO official denied the allegation and said that it was the government, which has forbidden it to disturb import volumes of 2.7 million to 3 million tons of HSD from KPC.

“As a matter of fact, before we were locking orders for 2014 with KPC, we asked Byco for their supply schedule but they didn’t provide any confirmation.”

Published in GNN, Tribune, August 7th, 2014.

Shell cuts stake in Brazil oil project with $1 billion sale to Qatar

A Shell logo is seen at a petrol station in London January 31, 2013.

(GNN) - Oil firm Royal Dutch Shell (RDSa.L) is selling a stake in a Brazilian oil project to Qatar Petroleum International (QPI) for $1 billion, in line with this year's plan to ramp up disposals.

Shell said on Wednesday it was selling 23 percent of the Parque das Conchas or BC-10 project off the coast of Brazil, leaving it with a 50 percent interest. It will continue to operate the 50,000 barrels of oil per day project.

Earlier in January Shell sold a stake in a gas project in Western Australia for $1.14 billion as part of its drive to improve return on investment, days after it had issued a shock profit warning for the fourth quarter.

Analysts and shareholders said the company's weak results would push the world's number-three investor-controlled energy firm to keep a tighter control on costs after it said 2013 capital expenditure would peak at about $45 billion.

Shell had already said last October that it would significantly step up disposals in 2014 to keep cash flowing in.

Recent media reports have suggested the company's divestments could total $15 billion this year, equivalent to around 6.5 percent of its $228 billion market capitalization.

QPI, the global arm of Qatar Petroleum, which is the world's largest liquefied natural gas exporter, has to date undertaken only limited expansion overseas but the Gulf state's energy minister told Reuters in October that QPI wants to expand its reach.

Shell, which said the Brazilian disposal was subject to regulatory approval by that country's authorities, is due to release its fourth-quarter results on Thursday.

Shares in the company closed at 2,123.5 pence on Tuesday.(GNN)(Reuters)(GNN INT)

(Reporting by Sarah Young; editing by Kate Holton and Paul Sandle)