China Renews Iran Oil Deal with Steady Volume’

BEIJING: China, the world’s largest buyer of Iranian crude oil, has renewed its annual import pacts for 2011, keeping volumes steady at some 460,000 barrels per day (bpd), two sources told Reuters.

China’s commitment to keep volumes firm comes as six world powers prepare to persuade Iran to rein in its nuclear programme at talks on Friday, although there is little expectation of a major breakthrough.

Iran’s nuclear standoff with the West has escalated in the past year, with the United Nations imposing new sanctions and Western states rejecting a revised proposal for Iran to swap some of its fuel abroad as too little, too late.

The renewal of China’s import pact is also good news for Iran because its second-biggest oil buyer, India, is locked in a payment dispute with the Islamic Republic over the south Asian nation’s crude imports of around 400,000 bpd and as Japan has scaled back further Iranian oil buys.

Two sources with direct knowledge of the deals said Chinese state trader Zhuhai Zhenrong Corp, which buys more Iranian crude than any other company, had agreed with National Iranian Oil Co (NIOC) to buy 240,000 barrels per day in 2011.

Sinopec Corp , Asia’s top refiner and the country’s ultimate dominant processor of Iranian oil, separately agreed to take 220,000 bpd of oil from NIOC for this year, a volume steady with last year.

“No change in volume, no change in the grades of oil supplies. All is the same as last year,” said the source, referring to the Zhenrong-NIOC agreement.

However, as China, the world’s biggest oil user after the United States, looks poised to raise its total crude imports at double-digit pace this year, a flat Iranian volume means Iran’s share in China’s oil purchases will become smaller.

China has been raising imports from Saudi Arabia, the world’s No.1 oil exporter, and also from West Africa’s Angola and more recently, Latin American suppliers Venezuela and Brazil, both of which were spurred by massive loan-for-oil deals Beijing signed up in 2009.

Chinese refiners are likely to ramp up imports from Saudi Arabia by 11 percent to hit the one million bpd mark this year, industry officials told Reuters in November, just a touch less than the kingdom ships to its top customer, the United States.

China’s government this month gave environmental clearance to Venezuela’s first refinery in China, paving the way for final state approval for the $8.7 billion venture which will process oil from the Latin Amercian exporter. Beijing’s state oil traders have all along said unattractive prices for the relatively poor quality Iranian oil were to blame for the deep import cuts recorded in the first half of 2010, a factor that outweighed political pressure from a fourth round of UN sanctions slapped on Iran in June for its nuclear activity.

Iran supplied about 9 percent of China’s total crude imports last year when total Chinese crude purchases surged 17.5 percent, shrinking from a figure of 11.3 percent in the previous year, Chinese customs data showed .

China, already importing close to 55 percent of the crude oil it refines, is forecast to raise imports to 8 million bpd in 2020, two-thirds more than it imported last year, top energy firm CNPC’s research arm said on Thursday.

Unless Iran makes its oil prices more attractive versus competing supplies from the rest of the Middle East or South American exporters, it may be hard for the OPEC member to boost its share in the rapidly expanding Chinese market.

China’s Iranian crude imports fell by nearly a third in the first half of 2010 from the year-earlier level, but started to claw back the third spot since June.

Zhuhai Zhenrong supplies the bulk of the 240,000-bpd oil to refineries run by Sinopec Corp and a small amount of roughly 20,000 bpd to PetroChina , China’s second-largest refiner.