SINGAPORE: Iran is seeking to store at least 2 million barrels of crude oil for at least six months in Southeast Asia but is struggling to find hosts due to international sanctions, industry sources familiar with the storage negotiations said on Thursday.
The world’s fifth-largest oil exporter, under Western pressure to cease its nuclear program, has been talking to commercial storage operators in Singapore over the past month, sources said.
National Iranian Oil Co (NIOC) met with Singapore authorities last month to discuss the possibility of taking space at the Jurong Rock Caverns, a 9.5 million-barrel underground oil storage facility that is due to start operations in 2013, said government agency JTC Corporation, the project’s developer.
"We have been meeting many industry players for the Jurong Rock Caverns recently, and (the Iranians) were one of them," a JTC Corporation spokeswoman said on Thursday.
No deal was struck at the meeting, said sources familiar with the discussions.
The state oil company has also been speaking to other storage operators in Singapore and Malaysia, industry sources said.
"Yes, this is an interesting commercial proposition but unfortunately this is not the kind of business we can engage in at the moment," a senior industry source familiar with commercial storage operations in Singapore said.
"It is complicated because of geo-politics and pressure coming in from the United States and the European Union."
Iran, like other Middle East producers, has been battling hard to hold onto its market share in Asia as it faces increasing competition from alternative supply sources such as Russia’s ESPO Blend crude.
International sanctions have made financing trade with Iran more difficult, so its crude sales in Asia have suffered more than some of its Middle Eastern rivals.
Reliance Industries did not renew a contract to import crude oil from Iran for financial year 2010, sources familiar with the deal said in April.
In 2007 Iran signed a Memorandum of Understanding (MOU) with China to develop a strategic storage facility, but the project has yet to take off, sources familiar with the MOU said.
Storages Crucial
Storage gives producers a staging post from which they can meet variations in demand more quickly than would be possible if supply comes via tanker from the Middle East.
Saudi Arabia and the United Arab Emirates have expanded their storage volumes in Northeast Asia over the past 12-15 months.
"If you look at it they are just trying to get close to the demand centres, nothing different from what the Saudis are doing now," a senior Asia-based crude trader said.
"If you don’t have your oil here in Asia now, you’re going to lose out… immediately your main competition is the Russians."
The Russian Far East ESPO export terminal is near Northeast Asian consumers to meet demand for additional cargoes from the region’s refiners.
Since its market entry in late 2009, medium-sweet ESPO crude has competed directly with Middle East grades such as Abu Dhabi Murban.
