Japanese refiners have stepped up efforts to get an additional force majeure clause included in Iranian crude oil contracts that could be invoked if tankers cannot call on Iran‘s ports to lift barrels because of the loss of insurance cover, sources close to the matter told Platts Thursday.
The latest move comes as Japanese refiners are trying to conclude term contracts with the National Iranian Oil Company starting in April.
Negotiations have already been delayed and nominations for April supplies are now due to be submitted by March 5, sources said.
Japanese buyers, which normally conclude their Iranian crude contracts in February, have not been able to complete their term contracts as they wait for what the sources said are guidelines from the government on the outcome of talks between the government and the US.
Japan is seeking an exemption from US sanctions that would exclude any company or country dealing with Iran’s central bank from the US financial system by agreeing to reduce its imports of Iranian crude oil.
The EU sanctions not only forbid the import and transportation of Iranian oil, but also ban insurance cover for vessels carrying Iranian cargoes. And because of pooling arrangements for reinsurance between the various Protection and Indemnity clubs around the world, the sanctions will have an impact on non-EU shipping.
Reports so far about the talks under way with Washington suggest that Tokyo may agree to cut its oil imports from Iran by 10-20% from a 2011 level of 310,000 b/d to ensure that Japanese banks are not excluded from the US financial system. Iran was the fourth-largest supplier of crude to Japan last year.
Japanese refiners, the main buyers of Iranian oil in Japan, are now also concerned with the possibility that they may be unable to lift Iranian crude oil if shipowners cannot get insurance cover for voyages to Iran when EU sanctions come into effect on July 1, the sources said.
Japanese shipping sources said the EU sanctions on insurance provision for tankers carrying Iranian crude oil have become a matter of concern for both oil companies and shipowners.
A chartering source at a Japanese oil company said that “every oil company” in Japan that wants to renew its term contract with Iran in April “wanted a force majeure clause” inserted to cover the shipping ban.
“They have sent this to NIOC but there has been no reply [so far],” the source said, referring to the National Iranian Oil Company.
The chartering source said the Japanese companies want to insert a clause stating that “if shipowners cannot call” on Iranian ports and “the cargo cannot be lifted,” then force majeure can be invoked.
The sources said that at least one Japanese buyer of Iranian oil may not submit a nomination for April supplies because of uncertainty about the impact of the EU insurance ban and the negotiations with Washington.–Takeo Kumagai, firstname.lastname@example.org –Pradeep Rajan, email@example.com
- Iran stops oil sales to British, French companies (mb50.wordpress.com)
- EU firms renew Iran oil deals to win sanction reprieve (mb50.wordpress.com)
- Iranian Sanctions to Limit Japanese Insurance Club’s Coverage on Oil Tankers (gcaptain.com)
- India ships will lose insurance due to Iran sanctions, may look to China – Reuters (reuters.com)
- Sanctions on Iran disrupting global oil supplies – US Department of Energy (rt.com)
- Iran ‘to accept gold for its oil’ (bbc.co.uk)
Sterling Resources Ltd. has declared Force Majeure on its Midia and Pelican Blocks in the Black Sea after the Company has been unable to undertake Petroleum operations for reasons outside of its control.
In early 2011, after extensive and lengthy efforts, the Company finally obtained from the relevant Governmental authorities the environmental and drilling permits necessary for operations on the Midia and Pelican Blocks. The National Agency of Mineral Resources (“NAMR”) has given approval to a 2011 work program based on which Sterling is obligated to undertake certain offshore activities which include the drilling of 2 offshore wells, acquiring 1,050 linear kilometers of 2D seismic and undertaking investigations and studies to bring the Ana and Doina discoveries forward for development.
However, in July 2009 the Romanian Parliament passed a law requiring construction permits for certain offshore activities. Sterling has sought clarification of this requirement from relevant authorities, as the activities contemplated under the 2011 work program clearly appear to have aspects that will require a construction permit. It is Sterling’s view that, after having received responses from certain relevant governmental authorities, that the authorities are currently unable or unwilling to provide construction permits for offshore oil and gas activities.
The effect of this situation, which the Company views as political in nature, is to render it impossible for the Company to undertake Petroleum Operations at the present time. Sterling has thus issued a notice to NAMR, stating that the total lack of clarity on the applicable procedure and authority for issuance of construction permits constitutes an event of Force Majeure under the Concession Agreement.
Under the terms of the Concession Agreement NAMR must, within 15 days of this notification, either agree with the invocation of Force Majeure, the effect of which would be to extend the duration of the Concession Agreement, or reject the Company’s invocation putting the two parties into a dispute resolution procedure which could ultimately be decided in international arbitration.
Mike Azancot, Sterling’s Chief Executive Officer, said: “Despite this unfortunate situation we look forward to working with the NAMR and other Romanian authorities to find a resolution that will allow the Company to fulfill its obligations, preserve its rights and ultimately achieve success for the Company and the people of Romania. With a satisfactory resolution achieved, we are hopeful that we can advance our plans to undertake further exploration on these very prospective blocks and bring Ana and Doina to production within 3 years. This will bring significant benefits to Romania in terms of greater energy self-sufficiency, the likely award of construction and oil service contracts to local companies, and encouraging a wide range of companies to explore offshore Romania.”
Sterling Resources Ltd. is a Canadian-listed international oil and gas company headquartered in Calgary, Alberta with assets in the United Kingdom, Romania, France and the Netherlands. The shares are listed and posted for trading on the TSX Venture Exchange under the symbol “SLG”.