Japan oil companies not thirsty for Iran crude
TOKYO -- Japanese oil companies are cautious about increasing imports of Iranian crude oil despite Tehran's hopes to boost exports following the lifting of economic sanctions earlier this year.
The U.S. and Europe lifted an economic embargo in January in exchange for Tehran's agreeing to curtail its nuclear program. Since then, Iran's crude oil output has gradually been climbing to where it was before. The country now pumps 3.6 million barrels a day. Countries such as China and India, whose demand for oil is still growing, are increasing their purchases of Iranian oil.
Even after the European Union tightened sanctions in 2012, Japan continued to import oil from Iran. The Japanese government set up a new system to compensate Japanese oil importers for losses resulting from accidents involving tankers carrying Iranian oil. Such losses are usually covered by private reinsurers. For this fiscal year, the government raised the maximum compensation per tanker to slightly over 900 billion yen ($8.92 billion) from around 800 billion yen the previous year. The number of tankers covered by the framework was increased from 15 to 19.
Since last summer, when negotiations for sanctions relief began moving forward, Japan has been preparing to increase Iranian oil imports. But despite the government backing, imports from Iran have not grown as strongly as expected. According to Japan's economy and trade ministry, imports rose 11% year on year to 950,000 kiloliters in January when the sanctions were lifted. But growth slowed sharply to 1% in February and turned negative in March. In April, imports were down 70% from the previous year.
"Compared with other types of oil ... [Iranian crude oil] is not price-competitive," said Masanobu Hamada, a manager at JX Nippon Oil & Energy, a Japanese oil importer.
Another obstacle is the remaining U.S. sanctions. Generally, insurance companies insure tankers salilng through the Persian Gulf and the oil they carry. But the remaining sanctions, such as a ban on settlement in dollars for Iranian trade, limits the ability of insurers to offload risk by buying reinsurance.