Oil traders targeting Iran for $1 billion in gas sales

DUBAI (Bloomberg) -- Iran will need to import about 20% more gasoline to meet pent-up demand in the first year after economic sanctions are lifted, creating a market for some $1 billion in fuel sales from abroad, according to traders and analysts.

The nation with the world’s fifth-largest crude reserves may need to buy about 50,000 bpd of gasoline if sanctions are removed in early 2016 as expected, say analysts at consultants Facts Global Energy, IHS Inc. and Energy Aspects Ltd. With its refineries running at full capacity and unable to raise output for at least another year, Iran now imports 41,000 bpd, or about 9% of the gasoline it uses.

Iran was the Persian Gulf region’s biggest gasoline buyer before world powers imposed sanctions over its nuclear program, and it may need to import even more -- as much as 70,000 bpd, according to two traders in the Middle Eastern market who asked not to be identified because they’re not authorized to speak to the media. The traders expressed doubts that Iran would open planned new refineries on schedule and said it will depend on imports for at least two to three more years.

Improving Economy

“Once sanctions are lifted and the domestic economy in Iran improves, demand will likely rise and that’s going to raise imports,” Victor Shum of IHS said by phone on Sept. 30 from Singapore. “It will be good for existing, export-oriented refineries to see the Iranian market opening up.”

Iran will need to import about $1 billion of gasoline next year, a calculation based on potential purchases of 50,000 bpd and regional prices compiled by Bloomberg. The government agreed in July to a deal limiting its nuclear program in return for a lifting of sanctions, which have restricted oil companies and traders from doing business with the country.

Iran’s gasoline imports slumped to almost zero in 2012 from more than 100,000 bpd before 2010, figures from the Joint Organizations Data Initiative show. The drop coincided with tighter curbs by the U.S. and European Union on trade in refined products. The Iranian government responded by trimming fuel subsidies to damp demand and ordering petrochemical plants to produce gasoline.

The country will see an unprecedented level of economic development over the next six months even as sanctions remain in place, Iranian President Hassan Rouhani said on state television Monday. Seeking to attract investment in expanding oil production, the country will hold a conference in Tehran next month to outline new contracts for developing its crude and natural-gas deposits, the state-run Islamic Republic News Agency reported this week, citing Oil Minister Bijan Namdar Zanganeh.

Imports Cut

The country imports less than half the amount of gasoline it bought prior to sanctions, said Shahrokh Khosravani, deputy managing director of National Iranian Oil Refining & Distribution Co., according to an Aug. 31 report by the Oil Ministry’s Shana news service.

Iran may boost gasoline purchases to 50,000 to 75,000 bpd after sanctions are removed, Shum said. Richard Mallinson, an analyst at Energy Aspects in London, forecasts imports at between 30,000 and 50,000 bpd, while Salar Moradi, a London-based analyst at FGE, sees purchases at about 50,000 bpd.

Officials at Tehran-based National Iranian Oil Co., which oversees Iran’s oil-products trade and refining industry, didn’t reply to phone calls and e-mails for comment.

With its refineries planning expansions to make more fuel, Iran will produce a gasoline surplus as early as the end of 2016, FGE Chairman Fereidun Fesharaki said on Oct. 6 at a conference in London.

The country is building a 360,000 bpd refinery called Persian Gulf Star that state-run National Iranian Oil says will make Iran a net exporter of gasoline. The plant at the port of Bandar Abbas was to start operating this year. The Islamic Republic News Agency reported Sept. 7 that the facility is now scheduled to begin in 2016. Moradi of FGE forecasts the refinery’s first phase will start as late as the end of next year, with its remaining two phases pushed off until the end of 2017.

Persian Gulf Star, whenever it becomes operational, “will change the gasoline balance in Iran,’’ Moradi said.