Iran, China on deal for crude oil supply

Iran has reached an agreement with China’s state oil traders for 2012 crude oil supply contracts, with shipments supplied to Unipec to be reduced from 2011, while volumes to Zhuhai Zhenrong Corporation will remain unchanged from a year ago, trade sources said on Monday. China and Iran have stumbled on a 2012 supply deal as two sides haggled over prices and credit terms, prompting Sinopec Corporation to slash imports since January by around 285,000 barrels per day (bpd), or just over half of the total daily amount it imported in 2011. The agreement will pave the way for China, the largest buyer of Iranian crude, to resume oil shipments and would provide a lifeline to Tehran, which is battling the harshest sanctions from the US and an oil embargo from the 27-member European Union. Oil is a pillar part of Iran’s export revenues and an important lifeline for its increasingly isolated economy.  Tehran has little refining capacity and must import about 40 per cent of its gasoline needs for domestic consumption. “Zhenrong volumes will be the same but there will be some cuts to the Unipec side,” said a trading source with direct knowledge of the deals. He declined to give more details on the reduction. Contract A second source also confirmed that contract volumes to Zhenrong would be unchanged from year ago, while senior industry officials have previously said that Sinopec Corp, the parent of Unipec, would reduce 2012 volumes. Under the 2011 contract, Zhenrong lifted 240,000 barrels per day of crude from Iran’s oil ministry, National Iranian Oil Co (NIOC). Of that, 200,000 bpd went to Sinopec refineries and the rest going to PetroChina, China’s No.2 refiner. Unipec bought 260,000 bpd of crude oil from NIOC in 2011. One of the sources said imports of Iranian crude could see a spurt in March and April as both parties make up for volumes that were lost earlier this year due to the commercial dispute. Following sharp cuts in Iranian imports in January and February, Sinopec has snapped up additional barrels from Australia to Russia to West Africa to fill the gap, traders have said. It has also raised imports from Saudi Arabia, China’s top supplier. China, the world’s second-largest oil consumer, is Iran’s largest trading partner and biggest oil client that buys up 20 per cent of the Islamic Republic’s total crude exports. Iran is China’s No.3 supplier after the Saudi Arabia and Angola.