Tuesday, July 23, 2019

Iran is squirrelling millions of barrels of crude oil in Chinese ports to avoid breaching US sanctions

A China Ocean Shipping Company (Cosco) vessel seen at a port in Zhoushan, Zhejiang province, China May 9, 2019. The Iranian tanker Marshal Z is said to have unloaded its cargo of fuel oil at the port. — Reuters pic
A China Ocean Shipping Company (Cosco) vessel seen at a port in Zhoushan, Zhejiang province, China May 9, 2019. The Iranian tanker Marshal Z is said to have unloaded its cargo of fuel oil at the port. — Reuters pic

  • Iran is squirreling away millions of barrels of oil in storage tanks at Chinese ports, avoiding a breach of US sanctions while providing its biggest buyer with a ready supply of crude.
  • The oil has been placed in "bonded storage," Bloomberg said, meaning it hasn't cleared customs so isn't subject to sanctions.
  • China received about 12 million barrels of Iranian oil from January through May, but only 10 million barrels cleared customs.
Iran is squirreling away millions of barrels of oil in storage tanks at Chinese ports, avoiding a breach of US sanctions while providing its biggest buyer with a ready supply of crude to tap if supply is disrupted or sanctions are lifted.

The Trump administration strengthened sanctions on purchases of Iranian oil in May when it ended exemptions for China, Japan, and other countries. The restrictions are intended to wipe out the Middle-Eastern nation's oil exports and force it to strike a deal that limits its nuclear activities and military actions.

However, Iran has continued to ship large amounts of crude oil to China, where they're placed in "bonded storage," according to people familiar with Chinese ports who were interviewed by Bloomberg. The fuel doesn't pass through Chinese customs, meaning it's not reflected in national import data and therefore avoids sanctions. 

China received about 12 million barrels of Iranian crude from January through May, significantly more than the 10 million barrels that cleared customs during that period, according to Bloomberg.

The secretive flow shows no sign of slowing. A dozen oil carriers and tankers owned by the state-run National Iranian Oil Company — with a combined capacity of more than 20 million barrels of oil — are traveling towards China or waiting off its coast, according to Bloomberg's ship-tracking data. Most of the oil already in the storage tanks is owned by Iran, but some of it represents payment to Chinese entities that have invested in Iran, Bloomberg said.

Both Iran and China benefit from the arrangement. Iran has a safe place to keep its crude, sparing it from having to use its tankers as floating storage and freeing them up for other shipments. Meanwhile, Chinese refiners have a stockpile they can quickly tap if global supply is disrupted or sanctions end.

Friday, July 19, 2019

Radical de-carbonisation implications for shipping - study

The de-carbonisation of global energy supplies to address climate change will have radical implications for the global shipping industry, said a new report.
If the Paris Agreement goals are met, the fossil fuel cargo base that shipping serves would undergo an aggressive and prolonged transformation, analyst MSI said.
The consequences for shipping markets of a major shift in energy consumption away from hydrocarbons and towards renewables and biofuels is the subject of a report prepared by MSI on behalf of the European Climate Foundation.
“Whilst some sectors of the shipping industry, such as containerships, would be virtually unscathed, those for which hydrocarbons comprise a significant proportion of - or all - the cargo mix would undergo decades of falling demand,” said MSI Director, Stuart Nicoll. “The results, detailed in the report, would be multi-decade declines in fleet capacity, earnings and asset prices across the affected sectors. Shipowners would be forced to slash new ordering and scrap uneconomic vessels.”
MSI’s shipping market modelling systems enable analysis of how changes in energy demand will affect inter-regional commodity trade flows, and the associated shift in required shipping capacity, industry earnings and asset prices, across all segments of the shipping industry.
The analysis projects two demand frameworks – ‘Reduction’ and ‘Reference’ – designed to provide broad narrative and structure to long-term global energy demand.
Global energy consumption in the ‘Reduction’ scenario is largely based on projections made for pathways consistent with limiting warming to 1.5 deg C above pre-industrial levels, as described in the IPCC SR1.5 report.
The ‘Reference’ scenario is designed to provide a comparison to ‘Reduction’. Although it describes a more limited change in the global energy consumption profile, ‘Reference’ still incorporates substantial restraints on future energy consumption.
The more extreme’ Reduction’ scenario is the focus of the report, under which fossil fuel demand sees radical decline over the next three decades. By 2050 world coal consumption falls by 80%, oil consumption halves, and gas demand drops by about a quarter.
“The energy transition from fossil fuels to renewables means that investors in shipping and ports are exposed to substantial financial risks, which have not been adequately assessed before,” co-author Tim Smith, MSI’s Director, Oil and Tanker Markets, added. “Those in the industry who believe that that global commitments to cut carbon emissions will be achieved need to prepare for radical transition that this implies. Vessel selection will be critical, and divestment from sectors with the greatest exposure to fossil fuels may prove the only way to profitably navigate the changing landscape.”
This report will be further analysed in the July/August issue of ‘Tanker Operator Magazine’.

Thursday, July 18, 2019

African Crude For This Ill-Fated Refinery Heads To Canada

Crude oil on its way from Africa to the United States, destined for an ill-fated refinery that plans to close its doors permanently in Pennsylvania, is being diverted to other places, according to Reuters sources.

The 335,000-barrel-per-day , which will close permanently on Monday, used 43.1 million barrels of African oil last year. Only the Phillips 66 refinery in New Jersey imported more oil from Africa.

The oil currently being diverted is a one-million-barrel shipment of Nigerian crude oil, which is now headed into storage in Canada, Reuters said, citing Kpler, which also shows a million barrels of crude idling in nearby waters.

But even more crude has been diverted away from the refinery and to new buyers, according to Refinitiv Eikon data, and at a “heavy” discount, Reuters added.

The United States purchased 4.1 million barrels of Nigerian crude oil in April, the last month for which the Energy Information Administration published data.

Pennsylvania decided not to pour money into saving the largest refinery on the Eastern seaboard after a couple of explosions in June took it offline. Pennsylvania’s decision to let the refinery wither on the vine was multifaceted, citing not just safety concerns but “competitive challenges against more modern refineries that would be extremely costly and difficult to overcome,” a spokesman for Pennsylvania’s governor said at the time.

The 1300-acre, 145-year-old refinery is a near dinosaur, went through bankruptcy proceedings in 2018, citing its financial failings due to the federal Renewable Fuels Standard Policy and a lack of access to cheap domestic crude oil, among other factors.

The closure of the Pennsylvania refinery will cut US refining capacity by 2% to 18.46 million bpd, according to Reuters calculations of government data.

By Julianne Geiger for Oilprice.com

Iran Says Its Revolutionary Guard Seized Foreign Oil Tanker In Strait Of Hormuz

Iran says its military seized a foreign oil tanker in the Strait of Hormuz. In this 2018 photo, a boat from the Iranian Revolutionary Guard's naval force is seen in the Persian Gulf, near the strait.
Jon Gambrell/AP 
Iran says that its Islamic Revolutionary Guards Corps Navy has seized a foreign-flagged oil tanker in the Persian Gulf, alleging that the ship was smuggling 1 million liters (264,000 gallons) of fuel. Iranian state news outlets report that the ship had a crew of 12 aboard.

The vessel was seized south of Larak Island in the Strait of Hormuz, according to the state-run IRNA news agency. The island sits less than 20 miles off the Iranian mainland, south of Bandar Abbas.

As quoted by Iran's semiofficial Fars news outlet, the Iranian military said in a statement Thursday that the tanker was on its way "to deliver the smuggled fuel received from the Iranian dhows to foreign ships in farther areas but it failed thanks to the IRGC Naval forces' vigilance."

Without naming the tanker, the military says it has a cargo capacity of 2 million liters — making it a small vessel when compared to supertankers that can carry 2 million barrels of oil.

The elite military force's statement did not describe the condition or whereabouts of the crew, saying only that Iranian authorities are studying the case. It also added that the Revolutionary Guard Corps "denied claims that it has seized any other foreign ship as claimed by the foreign media in the last several days."

The ship was seized on Sunday, Iran says. While it did not name the vessel, U.S. media outlets and maritime news sites have identified it as the MT Riah, a small Panama-flagged tanker that went missing in the Strait of Hormuz around midnight Saturday, according to ship-tracking data. According to the Vesseltracker website, the tanker has been missing since it "turned off its AIS" — its automatic identification system transponders.

News of the at-sea seizure comes one day after another semiofficial Iranian news site, ISNA, quoted an Iranian Foreign Ministry spokesman saying that Iran had "rescued" a foreign oil tanker in the Persian Gulf, taking it to shore for repairs.

In recent months, the Riah frequently traveled between ports of the United Arab Emirates. As the Associated Press reports, "An Emirati official had told the AP the small oil tanker made no distress call before switching off its tracker."

The seizure adds another layer of complexity to Iran's standoff with the U.S. — and its insistence that European countries that signed a landmark nuclear deal in 2015 keep their promise to ease economic sanctions, despite U.S. withdrawal from the pact.

The Strait of Hormuz is the world's most important strategic chokepoint for oil transport, according to the U.S. Energy Information Administration. The agency says that last year, the strait was the conduit for 21% of the world's crude oil and other petroleum products.

In recent weeks, oil tankers have been the targets of attacks, tense standoffs and interdictions.
Two weeks ago, a British marine force helped seize an Iranian tanker in the Strait of Gibraltar, on the grounds that it was believed to be carrying oil from Iran to Syria — a violation of European sanctions.

In retaliation for that confiscation, a former Revolutionary Guard commander said, Iran should seize a British oil tanker. And last week, it seemed that Iran's navy tried to do just that, as the U.K.'s defense ministry announced it had foiled an attempt by three Iranian ships to divert a British oil tanker. Iran denied being involved.

That back-and-forth followed a claim last month by the U.S., which accused Iran of attacking two tankers in the Gulf of Oman using magnetic mines.

Wednesday, July 17, 2019

Chevron oil spill dumps nearly 800,000 gallons of crude, water in California canyon

800,000 Gallons of Oil and Water Spilled by Chevron in California 
 In this May 10, 2019 photo provided by the California Department of Fish and Wildlife's Office of Spill Prevention and Response, oil flows at a Chevron oil field in Kern County, Calif. Nearly 800,000 gallons of oil and water has seeped from the ground since May. (California Department of Fish and Wildlife's Office of Spill Prevention and Response via AP)

Chevron crews have begun to clean up a massive and ongoing oil spill in California after nearly 800,000 gallons of oil and water were dumped into a canyon near Bakersfield in May.

The company recently revealed that 794,000 gallons of water and oil have leaked out of the ground where Chevron uses steam injection to extract oil in the large Cymric Oil Field about 35 miles west of Bakersfield.

Spokeswoman Veronica Flores-Paniagua told The Associated Press on Friday that the latest flow has stopped and officials have now begun the process of cleaning up the affected areas.

According to the California Department of Fish and Wildlife’s Office of Spill Prevention, the cleanup and ultimate investigation into what caused the oil flow were somewhat delayed as officials had to ensure there were no dangerous fumes or sinkholes that could trap workers or heavy equipment.
It is not yet clear what caused the spill but officials say it is not near any waterway and has not significantly affected wildlife. Around 70 percent of the fluid is water, meaning that around 240,000 gallons of oil were spilling out.

The state has issued Chevron a notice of violation ordering it to stop steam injections around the spill. The company also increased its production of oil from wells in the area. Both actions are intended to relieve underground pressure that may be forcing the mix of oil and water to the surface.

The process of steam injection softens the thick crude so it can flow more readily.

Environmental groups said the Chevron spill is another sign of weakened regulations under an embattled California agency. Gov. Gavin Newsom this week fired the head of the state's oil and gas division over a recent increase in hydraulic fracturing permits and amid a conflict-of-interest investigation of other division employees.

Chevron will pay for the cleanup while California state officials will oversee the process.

The Associated Press contributed to this report.