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BP Purchases First Iranian Oil Since Post Sanctions

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Iran’s state-owned oil company sold condensate to BP for the first time since sanctions were lifted in January, marking the country’s re-emergence as one of the world’s top suppliers of crude oil and NGLs.

National Iranian Oil Co. will supply South Pars condensate to BP for loading between September and October, said an NIOC official, asking not to be identified because of internal policy. The shipment may be used by one of BP’s own refineries or resold to other users, the official said by phone. A London-based spokeswoman for BP declined to comment on the deal when contacted by phone.

The sale is a milestone for OPEC’s third-largest producer, which has been ravaged by sanctions targeting its nuclear program. Iran has vowed to recover its lost market share by restoring its crude oil output to pre-sanctions levels of slightly over 4 MMbpd. The country also wants to revitalize its refining and petrochemical industries to improve the quality of fuel sold on the domestic market and wean itself off imported oil products.

BP’s purchase comes at a time when the availability of condensate from the Middle East looks set to fall. The startup later this month of Qatar’s 146,000 bpd Ras Laffan splitter unit, which makes refined products such as naphtha, will reduce supplies, said Tushar Tarun Bansal, director at Ivy Global Energy, an industry consultant in Singapore. The unit will refine Deodorized field condensate, one of the two main export grades from Qatar.

The Organization of Petroleum Exporting Countries last month agreed to reduce crude oil production to a range of 32.5 MMbpd to 33 MMbpd, boosting oil prices the most in more than five months. The limits, agreed for the first time in eight years, on individual countries would likely be set in November and do not include supplies of condensates. Also, Iran is among countries that secured an exemption from any curbs to their production.

“With upcoming winter season, which sees high runs seasonally in December and January, coupled with the possibility of OPEC cuts in the November meeting, going long on Iranian condensate barrels is a good value proposition overall,” said Bansal.

Iran is also working with traders such as Trafigura Group, which lifted a cargo of Iranian Heavy in June in an attempt to expand its reach into the Chinese independent refining market. Royal Dutch Shell shipped a cargo of Iranian crude to Europe in July, while France’s Total was the first oil major to resume purchases of Iranian oil in February this year.

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