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Philip J. Crowley
Assistant Secretary, Bureau of Public Affairs

Washington, DC
October 15, 2010

Deputy Secretary Steinberg announced on September 30 that four European energy companies — ENI, Statoil, Shell, and Total — have withdrawn from Iran. These actions, now complemented by INPEX are further evidence that sanctions are having a major impact on Iran. The United States remains committed to a diplomatic solution that resolves the international community’s concerns regarding Iran’s nuclear program. We will continue to work with our partners to pursue a dual track strategy of engagement and pressure to achieve this objective.

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Source: Reuters Africa

October 9, 2010

TEHRAN – Iran’s OPEC governor said oil prices were “nominal” and the crude market was oversupplied, the Students News Agency ISNA reported on Saturday.

“The prices of oil in the market which stood between $70 to $80 … are nominal and not real … There is an oversupply in the oil market consequently some countries are stockpiling oil or its derivatives,” Mohammad Ali Khatibi told ISNA.

“If we compare the current prices with the prices a few years ago, the real prices will stand at a maximum of $50 a barrel.”

Oil prices CLc1 have recovered from just above $30 a barrel in December 2008 and are trading above the $70-$80 range OPEC has said is acceptable for consumers and producers.

Khatibi also said some OPEC members believed prices were still “very low”.

The Organization of the Petroleum Exporting Countries (OPEC) meets to review oil output policy in Vienna on Oct. 14.

The 12-member producer group has held its supply target steady since announcing a record output cut in December 2008.

Though official policy is unchanged, members’ compliance with output targets slid to as low as 50 percent this year from 80 percent in April 2009. In the last two months, compliance has risen slightly and reached 57 percent in September. (Reporting by Ramin Mostafavi, Writing by Parisa Hafezi; Editing by Ron Popeski)

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By Raj Rajendran

Source: Bloomberg

October 5, 2010

Japanese sanctions against Iran, the second-largest oil producer in the Middle East after Saudi Arabia, may reduce crude exports from the Persian Gulf nation by 25 percent, according to Nomura International.

“Recent Japanese sanctions against Iran could force oil exports to below 1.5 million barrels a day in the near term from 2 million barrels a day currently, negatively affecting global supply while helping push oil prices higher,” the unit of Japan’s largest brokerage said in a note today.

Japan said Sept. 3 it is suspending new oil and gas investments in Iran and freezing the assets of 88 organizations and 24 individuals in its latest round of sanctions. Inpex Corp., Japan’s biggest energy explorer, said Oct. 1 that it is considering withdrawing from the Azadegan oil project in Iran.

Iran is under sanctions by the United Nations and the U.S. for its refusal to stop enriching uranium to possible weapons- grade capability. Expanded U.S. sanctions on Iran and businesses active there have prompted Royal Dutch Shell Plc, France’s Total SA, Italy’s Eni SpA and Norway’s Statoil ASA to stop investing in the country.

“We reckon oil production capacity will likely decline by 15% from 2010-15, compared with Iran’s pre-sanction target of 35% growth,” Nomura said in a Sept. 30 note, when it first wrote on the theme. “Also, gas production is unlikely to go as planned, forcing Iran to abandon all of its liquefied natural gas plans.”

Nomura estimates that Iranian crude production will decline from a pre-sanction target of 5.3 million barrels a day to 3.34 million barrels by 2015, below the current production capacity of 3.93 million.

Inpex, which won rights to the Iranian oil field in 2004, cut its stake to 10 percent from 75 percent in October 2006 partly because of Iran’s nuclear program. Japan’s trade ministry owns 18.9 percent of Inpex.

–Editors: Alex Devine, Stephen Cunningham.

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By Kadhim Ajrash and Nayla Razzouk

Source: Bloomberg BusinessWeek

October 4, 2010

Iraq raised its estimate of national crude oil reserves to 143.1 billion barrels, Oil Minister Hussain Al-Shahristani said today, overtaking Iran as home to the world’s fourth-largest petroleum deposits.

The 24 percent increase in estimated reserves lifts Iraq past neighboring Iran, which has 137.6 billion barrels, while leaving it behind Saudi Arabia, Canada and Venezuela. Iraq last estimated its oil reserves at 115 billion barrels, in 2001.

“This is great news for the Iraqi people, and we will relay it to the Organization of Petroleum Exporting countries,” Shahristani said at a news conference at the oil ministry in Baghdad. “The new figure for the reserves is not final. Iraq will carry out studies and reveal new numbers every year. We expect more increases.”

Iraq’s oil reserves previously ranked fifth in size, according to BP Plc’s Statistical Review of World Energy, which compiles official government figures. Canada’s reserves include vast deposits of oil sands, while Venezuela raised its estimates by around 70 percent in 2008, according to BP.

The revised Iraqi estimate does not include oil in the country’s semi-autonomous Kurdish region, as Kurdish authorities did not provide the ministry with details about reserves they control, Shahristani said.

‘Potential of Iraq’

The government may hope to use the augmented reserves figure “to show the potential of Iraq” to foreign investors, said Ahmed Jiyad, an Iraq specialist at the Centre for Global Energy Studies, a London-based consulting firm. It may also want to use the higher estimate to strengthen Iraq’s case for a large production quota within OPEC, he said in a telephone interview from Norway.

Iraq, a founding member of OPEC, does not currently have a quota for crude production. Falah al-Amri, the head of the country’s State Oil Marketing Company, suggested that future quota calculations might have been a factor in the revision.

“The new figure will help advance Iraq’s position within OPEC,” al-Amri told reporters in Baghdad.

Iraq depends on oil for the bulk of the foreign currency earnings it needs to rebuild the economy. The country currently produces about 2.4 million barrels of crude a day, according to Bloomberg estimates. The government wants to more than double output and hopes to pump 12 million barrels a day within as little as six years.

Upgrading Facilities

To achieve this goal, the country will need to boost production at oil fields and upgrade installations that have suffered from decades of conflict, sanctions and a lack of investment.

Rumaila and other fields in southern Iraq contain 71 percent of Iraq’s revised reserves, or an estimated 125.5 billion barrels, according to the oil ministry. Northern fields including those near the city of Kirkuk hold 20 percent of the nation’s crude, while central Iraq accounts for the remaining 9 percent.

Seven so-called “super-giant” fields contain 73 percent of Iraq’s total reserves, according to the ministry.

To raise output, the government awarded a dozen service contracts last year to international oil companies including Exxon Mobil Corp. and OAO Lukoil. The two licensing rounds were the first held since the U.S-led invasion that toppled the regime of Saddam Hussein in 2003.

Estimate ‘Not Random’

The new reserves estimate was “not random,” Shahristani said. “It came from in-depth studies by the ministry of oil and the international companies with which we have signed contracts in the first and second rounds.” He noted that officials paid particular attention to updating estimates for the West Qurna 1, West Qurna 2 and Al-Zubair fields, where Exxon Mobil, Lukoil and Eni SpA hold respective contracts.

The amount of oil contained in the 66 fields discovered so far in Iraq totals 505.4 billion barrels, but only 143.1 billion barrels of these reserves can be extracted, Shahristani said.

In a further step to develop Iraq’s energy resources, the government plans on Oct. 20 to hold its first auction of contracts to develop natural gas. Italy’s Eni and Mitsubishi Corp. of Japan are among 13 companies registered to bid to develop the Akkas, Mansouriya and Siba gas fields, Abdul Hadi al-Hassani, vice chairman of the oil and gas committee of the country’s parliament, said on Sept. 27.

The government aims also to modernize and enlarge export and storage facilities for crude. Officials want to build two offshore pipelines to increase export capacity in southern Iraq and plan new pipelines to link oil fields in the south with others in the north, said Thamir Ghadhban, chairman of the prime minister’s advisory committee, speaking at a conference in Istanbul on Sept. 27.

Iraq and Turkey agreed last month to a 15-year extension of their arrangement to export Iraqi crude by pipeline through the Turkish terminal of Ceyhan on the Mediterranean Sea.

–Editors: Bruce Stanley, Stephen Cunningham

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By Risa Maeda and Osamu Tsukimori

Source: Reuters India

October 3, 2010

*Inpex not on U.S. list for Iran-related sanctions -minister

*Follows U.S. statement on European oil majors

*Oil majors say still have some dealings with Iran

TOKYO – Japan’s top oil explorer Inpex Corp may pull out of an oilfield project in Iran, joining other global firms in abandoning activities there to avoid U.S. sanctions, trade minister Akihiro Ohata said on Friday.

Inpex, in which Japan’s government holds a 19 percent stake, has not been named either on a list of firms targeted for U.S. sanctions against Iran for its nuclear plans or on another list of firms excluded from the sanctions, Ohata told reporters.

“Inpex is considering things including a withdrawal based on its own management judgement,” the minister said.

“I want to respect their business decision and refrain from interfering in the matter.”

A U.S. official said on Thursday France’s Total, Norway’s Statoil, Italy’s ENI and Royal Dutch Shell will abandon their Iranian activities to avoid U.S. sanctions designed to pressure Tehran over its nuclear programme.

However, all four firms said on Friday they would maintain some dealings with Iran

The West fears Iran’s nuclear activities are designed to create weapons while Tehran says its are for peaceful purposes.

Japan imposed additional sanctions on Iran last month, following the United States and European Union in pressuring Tehran despite Tokyo’s reliance on oil imports from the country.

Inpex has been weighing a withdrawal from the giant Azadegan oilfield project to avoid harming its business. It has a 10 percent stake in the project.

The company would have problems raising funds from U.S. financial institutions and its global development projects could be hindered if it was subject to U.S. sanctions. Analysts have said a 10 percent stake would allow Inpex to buy up to 50,000 bpd, a fraction of the nearly 4 million bpd that Japan consumes.

But losing Azadegan would hurt Tokyo’s efforts to lift the share its companies’ production overseas to the equivalent of 40 percent of the country’s oil imports by 2030.

OPPORTUNITY FOR CHINA?

Ohata said Inpex was not among companies named as subject to sanctions or among four firms named as not subject to sanctions. “We keep a close eye on the situation. We are relieved that Inpex is not on the sanctions list,” he added.

Japan’s government is the biggest shareholder in Inpex, with an 18.9 percent stake in the trade minister’s name, even after a recent multibillion dollar share sale.

Azadegan was OPEC-member Iran’s biggest oil find in 30 years when announced in 1999, with oil-in-place of 26 billion barrels and recoverable resources then estimated at about 6 billion barrels. It is believed to cost at least $2 billion to develop.

The field started partial output in 2008, with peak output estimated at 260,000 bpd. Inpex has said it has so far invested about 12.4 billion yen ($148.5 million) in Azadegan.

Asked if India’s state-run explorer Oil and Natural Gas Corp would consider a similar move, chairman R. S. Sharma said: “Our view cannot be different from the view of sovereign government, we will go by whatever the government says”.

Junior Indian oil minister Jitin Prasada told lawmakers in August that ONGC Videsh Ltd, the overseas investment arm of ONGC, has been asked to seek a legal view on the impact of U.S. and UN economic sanctions on investment opportunities in Iran.

ONGC Videsh holds exclusive exploration rights for Iran’s offshore Farsi block. ONGC and Indian Oil Corp each own 40 percent in the Farsi block, and Oil India Ltd holds the rest.

Another ONGC official said the firm had exploration rights and have submitted the report to the Iranians. “They have yet to respond to us, whether we will get the development rights or not.”

Iran has also offered Indian firms a 40 percent stake in the development phase of its largest gas field, the South Pars Phase 12 project, for 6 million tonnes of liquefied natural gas (LNG), but there has been no further progress on this.

India’s Essar Oil Ltd had planned to develop the Azadegan field but abandoned it under U.S. pressure. Pull-outs could open the way for Chinese firms to expand further.

“I believe the withdrawal of the U.S.-centric oil firms will allow the Chinese oil giants to expand their investment footprints in Iran, one of the few frontiers still left with vast oil/gas resources, and the political risk has to be the necessary evil,” said Hong Kong-based Gordon Kwan, head of regional energy research at Mirae Asset Global Investments.

Spokesmen in China for CNOOC’s listed unit and for CNPC were not immediately available for comment due to a national holiday. China National Petroleum Corp (CNPC), the country’s top energy group, clinched a deal this year to develop phase 11 of the South Pars gas project and expand its operations in Iran.

CNPC is already in a deal to develop Iran’s North Azadegan oilfield into a 120,000-bpd field at a cost of at least $2 billion. China’s Sinopec Group reached a $2 billion deal to develop Iran’s Yadavaran oilfield in December 2007.

(Additional reporting by Nidhi Verma in NEW DELHI, Rebekah Kebede in PERTH; Florence Tan in SINGAPORE, Joseph Chaney and Wee Sui Lee in HONG KONG; Writing by Ramthan Hussain; Editing by Michael Urquhart and Anthony Barker)

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By John Pomfret

Source: The Washington Post

September 30, 2010

The United States announced Thursday that four of Europe’s five biggest oil companies would end their energy investments in Iran, a significant advance in the Obama administration’s efforts to pressure the Iranian government to enter negotiations over its alleged nuclear weapons program.

At the same time, U.S. officials said they were working to pressure China and other countries to bar their companies from filling the vacuum created by the departing Europeans.

Deputy Secretary of State James P. Steinberg said Royal Dutch Shell, based in Britain and the Netherlands; France’s Total; Eni of Italy; and the Norway-based Statoil had committed to no further investments in Iran.

“These companies have provided assurances they will stop or are taking significant verifiable steps to stop their activity in Iran,” Steinberg said. He also announced that the United States was slapping sanctions on a subsidiary of an Iranian oil company in Switzerland.

Steinberg’s announcement marked the first public actions since the United States tightened sanctions against Iran on July 1 ,when President Obama signed the Comprehensive Iran Sanctions, Accountability and Divestment Act into law. Since enhanced U.N. sanctions were authorized against Iran in June, the United States, the European Union, Japan, South Korea, Canada, Norway and Australia have passed legislation further targeting Iran’s economy and energy sector. Iran says its nuclear program is entirely peaceful.

Among the other moves announced Thursday, the State Department said European and Kuwaiti firms along with Russia’s Lukoil, India’s Reliance and Turkey’s Turpras have stopped or promised to stop selling gasoline and other refined products to Iran. British Petroleum and Shell said they are no longer supplying jet fuel to Iran Air. And Lloyd’s of London announced it would not insure or reinsure petroleum shipments going into Iran.

While Iran’s president, Mahmoud Ahmadinejad, has said the effect of the sanctions so far has been “pathetic,” Steinberg contended they had begun to bite.

“We have pretty good indications,” he said, “that whether it’s in the financial sector, whether it’s in shipping and transportation, that these measures are increasingly having a significant impact on Iran. There’s no question that . . . their ability to do business is being hindered in lots of different ways.”

The four European oil companies are not the only ones committing to ending investment in Iran. Japanese officials said earlier this week that the Japanese oil giant Inpex was readying an announcement that it, too, would halt its investments in Iran’s largest onshore energy project, the Azadegan oil fields. Japan obtains one-fourth of its oil from Iran. U.S. officials had threatened to place Inpex on a sanctions watch list if the firm did not end its business in Iran.

Steinberg also announced that the State Department would begin investigating other oil companies that had not committed to winding up their Iranian investments. Among those companies, sources said, are China’s oil firms, such as the China National Offshore Oil Co., China National Petroleum and Sinopec.

Robert Einhorn, a senior U.S. official, has been in Beijing this week with a delegation from the Treasury and State departments to persuade China not to engage in, as Steinberg put it, “backfill.”

Asked specifically about China, Steinberg replied: “Without mentioning specific countries or companies, we have made clear to all of . . . our international partners that we are strongly discouraging” those companies from increasing their investments in Iran while other firms back out. Japanese officials have told their U.S. counterparts that they are particularly concerned that as Inpex exits the Azadegan oil field, Chinese companies will step into the breach.

Iran is China’s third-biggest supplier of oil, after Angola and Saudi Arabia. Chinese state-owned oil companies have signed memorandums committing to invest more than $100 billion in Iran’s energy sector over the past few years, although only a small fraction of those funds have been invested.

Chinese companies have a history of moving in on projects that Western and Japanese firms have left dangling. In June 2009, China National Petroleum signed a $5 billion contract with National Iranian Oil to develop the massive South Pars gas field, after the Iranians accused French oil producer Total of delaying the project. And last year China National Petroleum reportedly agreed to invest around $2 billion to develop the South Azadegan fields in place of Inpex, which had cut its share.

In a letter to Secretary of State Hillary Rodham Clinton on Tuesday, Sens. Charles E. Schumer (D-NY) and John Kyl (R-Ariz.) pushed for sanctions against three Chinese companies for continuing to do business with Iran.

Some diplomats questioned whether the United States has the stomach to sanction major Chinese companies given the sensitive nature of Washington’s relations with Beijing. The Obama administration is focused on trying to convince China to allow its currency to appreciate against the dollar. Ties with China’s military, which have been suspended for months, are only just resuming. And, diplomats said, there are questions about whether the threat of U.S. sanctions would actually worry China’s oil giants. They have little business in the United States. One of the firms active in Iran, the China National Offshore Oil Corp., or CNOOC, was stopped from buying the U.S. oil firm Unocal in 2005.

“The goal here is not to impose sanctions for sanctions’ sake but to end companies from doing business with Iran,” Steinberg said.

However, he added, “if we conclude that that cannot be done and under the requirements of the law that we need to impose sanctions, we will do it.”

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By Ladanne Nasseri

Source: Bloomberg

September 30, 2010

Iran exported its first domestically produced gasoline to neighboring Iraq, Ali Asghar Arshi, the National Iranian Oil Co.’s director of international affairs, told the state-run Mehr news agency.

Iran says it has countered sanctions that target its historic need to import gasoline and can now produce more than enough of the fuel.

Iran’s Oil Ministry said two days ago that it has exported its first load of gasoline, adding yesterday that four more shipments would soon be made.

The Persian Gulf country, the second-largest oil producer in the Middle East after Saudi Arabia, previously relied on imports for as much as 40 percent of its gasoline as it lacked the refining capacity to meet consumption.

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By BENOIT FAUCON And SPENCER SWARTZ

Source: The Wall Street Journal

September 28, 2010

LONDON—Iran said Tuesday it has started exporting domestically produced gasoline, drawing skepticism from oil-industry experts but representing Tehran’s latest show of defiance amid international sanctions aimed at curbing its nuclear ambitions.

Iran, one of the world’s largest oil producers, has in the past year relied on imported gasoline to meet 40% of its domestic consumption, because of a lack of refining capacity. Amid Iran’s standoff with the West over its nuclear program, Washington and allied governments have considered those gasoline imports a vulnerability. Earlier this year, the U.S. enacted sanctions aimed at punishing international firms involved in the trade.

Iranian imports have plummeted recently, but Iranian officials have put on a brave face. Tehran has been rationing gasoline use. This year, officials inaugurated the conversion of at least two petrochemical plants into gasoline-producing facilities.

Ali Ashgar Arshi, the international affairs director at the National Iranian Oil Co., said Tuesday that the shipment was the first of several Iran expects to sell to global markets. He said the exports reflect Iran’s success in coping with sanctions, especially the U.S. measures.

“Iran has achieved self-sufficiency in production of gasoline,” he said, according to the Iranian oil ministry’s official web site, Shana. Mr. Arshi also said countries have emerged that are willing to ship Iran gasoline despite the new U.S. measures.

The statements echo a defiant tone set by Iranian President Mahmoud Ahmadinejad and other top officials, who have said a fresh wave of international sanctions have only made Iran stronger, by making it more self-sufficient. Some Western officials, however, have said the sanctions are starting to bite.

Iran this summer said it is scrapping for now some of its liquefied-natural-gas export plans. That ended years of Iran touting the sector as a national priority. Iranian officials publicly didn’t say sanctions played a role, but Western energy firms have a stranglehold on key LNG technology, making it difficult to bring into the country amid tighter sanctions.

Meanwhile, gasoline imports dropped 75% between March and August, according to one oil-shipping expert.

Iranian officials privately acknowledge the sanctions are hurting the country’s energy sector. Using petrochemical plants to churn out gasoline for domestic use is more expensive than producing other products that could be more profitably exported. And the petrochemical plants need maintenance and parts, which are harder to come by amid the fresh sanctions.

“It’s a survival economy,” said one Iranian oil-industry official.

Outside experts questioned whether the exports announced Tuesday were really domestically produced. Petrochemical plants can be reconfigured to make a low-grade gasoline, but the quality isn’t likely high enough to fetch decent prices overseas.

The exports announced Tuesday could be foreign-produced products that have been kept in stock, said Fereidun Fesharaki, an Iranian oil specialist at Singapore-based FACTS Global Energy.

Whether the gasoline is domestically produced or not, exports are “not sustainable,” Mr. Fesharaki said.

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By Jonathan Saul and Randy Fabi

Source: Reuters/Fox Business

September 23, 2010

LONDON/SINGAPORE – OPEC-member Iran hasreduced the amount of crude stored at sea in the past threemonths but still has as much as 20 million barrels anchoredoffshore, shipping and industry sources said.

The Islamic Republic typically struggles to sell its crudeduring summer months, when refiners are looking for lightercrudes to make more gasoline. This year, Western sanctions aimedat stymieing financial transactions that underpin trade havemade its crude an even tougher sell.

The volume of crude in floating has steadily declined fromaround 33 million barrels in late July, and is half of its peakof more than 40 million barrels in June.

Wide-ranging international sanctions implemented this yearhave excluded crude oil sales, but Western-allied powers haveincreased political pressure on countries to trade less withIran.

“There is a sense that Iran is becoming gradually moreisolated,” a shipping source said. “They certainly have not runoff their floating as briskly as they have done in the past.”

Iran’s idle oil supplies are costing Tehran hundreds ofmillions of dollars in lost revenue.

While shipping sources all agreed Iran was still storingmillions of barrels of oil at sea, they gave varying estimatesthat Iran was using between seven and 10 tankers for storage.

According to Reuters calculations, eight VLCCs loaded witheither crude or fuel oil have been anchored offshore in theMiddle East for more than a month.

Iran has been storing straight-run fuel oil on VLCCs for atleast three months, in an unprecedented move prompted by China’spoor feedstock demand and financing difficulties faced by buyersdue to Western sanctions, industry sources said this month.

Still, an official at private Iranian tanker operator NITCsaid none of its vessels was storing Iranian crude or condensateon tankers at the moment.

SLOW DECLINE

Iran has managed to reduce more than half of its floatingstorage stocks since its peak of up to 25 tankers in June, thehighest build up of Iranian crude at sea since 2008. The tankersare mainly very large crude carriers (VLCCs), which can eachhold up to 2 million barrels of crude oil.

The amount of Iranian oil stored at sea may fall furtherahead of the northern hemisphere’s winter season, analysts said.Demand for its sour crude usually picks up at the end of theyear as refineries churn out more heating oil and diesel.

“Iran’s floating storage is not a new phenomenon,” saidDaniel Gerber with Swiss-based tanker tracker Petro-Logistics.

“A similar trend has emerged in previous years but thisyear’s sanctions have created complications, despite notdirectly targeting Iran’s crude oil sales.”

The sanctions, imposed in July by the United States andEuropean Union, make it harder for traders to obtain insuranceor pay for Iranian exports in currencies such as the euro andthe dollar.

The U.S. sanctions have aimed to squeeze the IslamicRepublic’s imports of petroleum products.

“Financial transactions have become a key challenge for oilbuyers in deals with the National Iranian Oil Co,” said VijayMukherji, senior consultant at EMC.

Iran has no onshore storage for oil produced at the offshoreSoroush and Nowruz oilfields, and always keeps some crude onfloating storage off its Gulf coast.

U.S. refiners have long been prohibited from processingcrude under sanctions, but refiners elsewhere face no such ban.

(Additional reporting by Luke Pachymuthu in Singapore;Editing by William Hardy)

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Source: United Press International (UPI)

September 20, 2010

TEHRAN — Iran stopped placing orders for gasoline from external markets last month, the country’s oil minister announced.

Iranian Oil Minister Masoud Mir Kazemi said that with domestic refineries churning out more gasoline, his country no longer needed to place orders with overseas suppliers.

“We have not placed an order for the purchase of gasoline for one month,” he was quoted by the semiofficial Mehr News Agency as saying.

The United States and the European Union in July followed the U.N. Security Council by imposing sanctions on Iran that target the country’s energy sector.

Western allies believe Iran is working on the technology needed to make a nuclear weapon, though Tehran maintains its intentions are peaceful.

Iran sits on some of the largest oil and gas reserves in the world, though its refining capacity inhibits full utilization.

Kazemi this month said, however, that domestic refining capacity had increased to the point that Iran was self-sufficient in gasoline.

The Iranian Oil Ministry said gasoline production was up to 17.5 million gallons per day under a plan meant to reduce foreign dependency.