Iran oil terminal offers Japan priority deals as a ‘thank you’ for support

Business Materials 14 September 2016 16:09 (UTC +04:00)

The Persian Gulf’s biggest oil terminal, located on Iran’s Kharg Island, is appealing for greater Japanese trade. Officials say they plan to reward Japan for its support during the years of sanctions with priority in deals and investment, Japan Times reported.

Only 1½ hours by air from Tehran, huge oil tankers swing into view as they lie anchored off the coast. Some vessels are waiting for a berth, while others are transferring petrochemical products from ship to ship.

When petrochemical storage tanks on Kharg Island are full, Iran stores the products in tankers. Pre-loading them also helps it to sell them faster.

Ships loaded at Kharg Island currently have to travel to the United Arab Emirates to refuel, but authorities have decided to upgrade the facility to let tankers refuel and load simultaneously.

“We are ready to refuel Japanese oil tankers as the first priority in Kharg during loading. This can remove the risk of the refueling of fully loaded tankers in UAE, on top of frugality in time and reducing extra expenses, including parking,” said Gholamhossein Gherami, operations and export manager of the Kharg oil terminal.

Iran’s oil terminals and oil fields can be spotted by their high towers emitting orange flames from burned natural gas, a byproduct of the extraction of oil. Iran hopes in future to divert the gas to other purposes, using Japanese technology.

“Natural gas coming from oil fields can be refined and sold as a new petrochemical product — an area for Japanese investors to have more participation in Iran’s oil fields,” Ghermai said.

Kharg has six major facilities, including the oil and petrochemical refinery, and its population of 15,000 has helped make it the largest oil terminal in Persian Gulf.

The terminal became operational in the early 1960s and now handles more than 90 percent of Iran’s crude oil exports.

It has not been plain sailing.

Eight years of war between Iran and Iraq in the 1980s left Kharg oil terminal damaged by attacks. Still in Kharg’s western dock and a few meters from where Japanese tankers berth, a burned-out South Korean tanker is kept afloat as a memorial to the impact of war.

During the years of sanctions, which targeted Iran’s nuclear activities, Kharg’s oil exports halved.

But Pirooz Mousavi, who heads the nation’s oil terminals, said Iran has invested more than $1.5 billion over the past decade in upgrades to the Kharg oil terminal and, after sanctions were lifted, it hit its record of loading 8 million barrels of crude oil into nine tankers in less than 48 hours at Kharg.

Now that sanctions have been lifted, Iran hopes to increase crude oil production and to export more than 2.5 million barrels per day.

“Japanese companies will have a firm position in the future of oil business with Iran and nothing can make a gap between Iran and Japan,” Mousavi said.

Kharg oil terminal has two main docks — one in the east for small ships and tankers and one in the west, suitable for supertankers including the largest types.

Oil terminal officials say Japanese supertankers always berth at the west dock and, during the time of sanctions, Japan was the only country to use this dock to transfer oil with its own tankers.

During U.N. Security Council sanctions and those from Western nations, which negatively affected the Iranian oil industry since 2010, international insurance companies refused coverage for oil tankers that called in to Iran and the country had to supply its major customers — China and India — with Iranian tankers. However, Japan accepted the insurance risks and continued to use its own vessels.

“We never forget our friends from the time of sanctions,” Mousavi said. “As we expect the increase in Japan for Iran’s crude oil we feel more commitment to be a better host for Japan. Iran is interested in having Japan as the first priority for investing in oil terminals rather than others.”

He added, Japan has a lot to offer in a wide range of areas.

“Iran is seeking Japan’s experience and high technology to protect the sea environment and both countries can start the cooperation by investing in refining oil sludge,” he said.

Oil terminal figures show that China, India and Japan are now the top three buyers of Iran’s crude oil, several months after sanctions were lifted. Under sanctions, Japan was in fourth place after South Korea.

Iran plans to present various projects for its energy sector in the near future in a bid to lure investment from foreign companies.

However, several factors may weigh on investment decisions.

A Japanese gas and oil industry source cited poor relations between Iran and its neighbors such as Saudi Arabia, remaining sanctions by the United States and the slow reform of Iran’s financial sector. The source added, the Iranian presidential election next year could be a further concern.

Japanese companies also have bitter memories of working the Iranian oil and petrochemical industries in the past.

A multibillion-yen petrochemical project by Iran-Japan Petrochemical Co. came to an end in 1991 without ever getting off the ground due to the prolonged Iran-Iraq war.

And more recently, Japanese oil company Inpex Corp., which had a 75 percent stake in a development project in the Azadegan oil field in southwestern Iran, one of the world’s largest, was forced to withdraw from the project in 2010 amid tightening U.S. sanctions.

The Japanese government is ready for a new approach. It lifted sanctions on Iran in January and signed a bilateral investment pact in February in a bid to help Japanese companies do business there amid intensifying competition for access to Iran.

Also in February, the government-backed Japan Bank for International Cooperation and Nippon Export and Investment Insurance pledged a credit line of up to $10 billion.

“Iran is grateful to Japan for the allocation of the $10 billion credit line and we are sure that this action by Japan will lead to the blossoming of the two countries’ financial ties,” Deputy Foreign Minister Abbas Araghchi said.