China's Sinopec Corp is importing around 90,000 barrels a day of a super light crude from Iran, 40 percent more than previously reported, although a refinery deal attached to the oil supply pact has stalled, Reuters reported with reference to sources.
Sinopec is taking the South Pars condensate from National Iranian Oil Company (NIOC) under a term deal started in January, a main factor behind the near 50-percent rebound in China's crude oil imports from Iran in the first half from year-ago levels .
The volume is 40 percent larger than the annual supply of 24 million barrels reported earlier, industry sources with direct knowledge of the deal said.
The deal to supply the super light crude, an ideal feedstock to make petrochemicals and worth $3 billion a year, was part of a broader alliance the two national oil firms clinched under which Asia's largest refiner would upgrade and build refineries in Iran.
"The deal was for Sinopec to use the condensate proceeds to upgrade several Iranian oil plants such as Arak, Isfahan and Abadan as well as one or two new ones under a seven-year deal," said one source.
But the companies have not yet finalised a deal on the refinery side of cooperation, six months after the condensate started to flow to Chinese refineries. It was not clear why.
"We don't know what the problem was at the refinery side. The two deals are supposed to be executed simultaneously," said the official.
Iran shipped about 15 million barrels of condensate from its giant South Pars gas project to at least three Sinopec refineries -- Tianjin, Zhenhai and Maoming -- where the light crude oil is used to feed ethylene crackers.
The condensate, making up 16 percent of China's total crude imports from Iran, helped bolster China's Iranian oil purchases to about 540,000 bpd between January and June.
Sources said the refinery deal was between NIORDC, the refining and marketing arm of NIOC, and Sinopec Engineering Inc (SEI), while the crude agreement was lined up with Sinopec's trading arm Unipec.
Officials at Sinopec declined to comment.
OIL FOR REFINERY
Iran is keen to boost its dilapidated refining sector so that it can become self-sufficient in gasoline or even an exporter.
The world's fifth-largest crude exporter has long depended on imported gasoline to meet over a third of its consumption. It has curbed domestic demand by slashing subsidies and raising pump prices, but traders say it is still importing.
The condensate deal is a recent example of China and Iran trying to creatively push cooperation in the refining sector, as outright financing by state-owned banks or companies came under tighter U.S. scrutiny, industry officials say.
Iran already faces sanctions-related oil payment problems with India, its second-largest oil customer after China, and has billions of its petrodollars trapped in South Korea.
The Middle East nation has been hit by U.S.-led sanctions designed to halt an alleged nuclear weapons programme. Iran says it is developing nuclear power.
Citing a source close to Sinopec, a Beijing-based industry website (www.petromm.com) reported in January that Sinopec won a tender to upgrade Iran's Arak and Shazand refinery at a total cost of 2.168 billion euro ($3.07 bln).
Sinopec is also working with NIOC to start pumping 20,000-bpd of crude from the Yadavaran oilfield, the Iranian Oil Ministry said in July.