Japan’s Showa Shell cuts Iran oil imports, renews deal-sources
By Osamu Tsukimori
TOKYO, April 18 (Reuters) – Japan’s top buyer of Iranian crude Showa Shell Sekiyu KK has renewed its annual oil purchase deal with Iran but cut the volume in line with other Japanese refiners to comply with U.S. sanctions, trade sources said on Wednesday.
The cuts come even after the United States in March exempted Japan and 10 other EU nations from sanctions due to take effect in July because they have significantly cut purchases of Iranian oil. Soon after receiving the exemption, Finance Minister Jun Azumi said Japan would continue to cut imports of Iranian oil.
The United States and European Union have stepped up measures to reduce Iran’s oil trade, stemming the flow of petrodollars to Tehran in a bid to force it to halt a nuclear program the West suspects is intended to produce weapons.
Showa Shell’s cuts will come in addition to the 60,000 barrels per day (bpd) of cuts trade sources say Japan’s refiners and trading houses had made in April. That is already around 18.5 percent of Japan’s total Iranian crude imports in the first two months of the year of 322,900 bpd.
A spokesman for Showa Shell, which imported about 100,000 barrels per day from Iran in the past financial year, declined to comment.
The exact reduction in Showa Shell’s contract volume was unclear, the sources said. The refiner had been discussing a cut with the National Iranian Oil Company (NIOC) of around 15-20 percent to last year’s contract volume of 100,000 bpd, one source said.
That would be in line with the cut in volume of around 15-22 percent in the second half of last year that helped win Japan its waiver to the U.S. sanctions.
Showa Shell said in a statement last month the company would respect the agreement between Japan and the United States and reduce its Iran imports in line with that.
The contract renewal came after Iran agreed to include a clause in contract terms that released Japanese buyers from any penalty if international sanctions prevent them from taking delivery of Iranian oil, sources said.
The force majeure clause, usually limited to exempting buyers and sellers from liability due to fires, accidents and natural calamities, was widened to include sanctions.
Difficulty finding insurers to underwite shipments of Iranian crude are threatening to curtail Japan’s imports even more. Financial sanctions on Iran have also made it tough for buyers to pay for Iran’s oil.
With the renewal, Showa Shell has resumed lifting Iranian crude this week, and a cargo was set to arrive in Japan in early May, two industry sources said.
Royal Dutch Shell is the biggest shareholder in Showa Shell, holding 35 percent. Saudi Arabia’s state oil giant Saudi Aramco holds 15 percent.
Shell’s Chief Executive Peter Voser said in early March that the company would stop buying Iranian crude within weeks. Showa Shell says it operates independently from Shell.
(Reporting by Osamu Tsukimori; Writing by Manash Goswami; Editing by Richard Pullin and Simon Webb)