Sinopec, world’s largest oil refiner, wary of secondary US sanctions on Iranian crude importers

South China Morning Post – China imported 31 million tonnes of crude from Iran last year, and some of state-backed refiner’s plants are designed especially to process Iranian crude

The price of oil will rise if trade in Iranian crude is halted as a result of US sanctions, China Petroleum and Chemical (Sinopec), the world’s largest oil refiner said on Monday. The company has refineries especially designed to process oil from Iran, the world’s fifth-largest producer.

“If global trading of Iranian oil is stopped, the impact on oil prices is obvious … [and] it will hurt our commercial interests,” Huang Wensheng, Sinopec’s vice-president and company secretary, told the media on Monday, a day after the company unveiled a record high interim profit. “We are very concerned and have been communicating with relevant authorities in a bid to avoid potential risk,” he said.

The state-backed refiner processed 239 million tonnes (about 1.7 million barrels of oil) last year, of which more than 85 per cent was imported. Some of its refineries, built many years ago, are designed especially to process Iranian crude, and such plants have long-term supply contracts with Tehran, said Huang.

The Trump Administration announced in May it would withdraw the US from a nuclear deal struck between Iran and six world powers three years ago aimed at limiting Tehran’s nuclear capabilities in exchange for the lifting of some sanctions. Washington will reimpose sanctions against Tehran on November 4, and wants other countries to stop importing Iranian oil by then.

Companies that continue to trade with Iran could be at risk of being locked out of the US market and banking system under so-called secondary sanctions.

“Iranian exports have fallen for the third consecutive month, and we expect this drop to continue sharply in the coming months, as sanctions come into effect,” Sanford Bernstein, a senior analyst at Nick Green, said this month.

“Opec’s spare capacity is likely to be insufficient to fill the possible supply shortage from Iran and other disruptions, potentially leading to rising oil prices,” said Bernstein.

China imported 31 million tonnes of crude from Iran last year, making up 7.4 per cent of its total fuel imports.

Shares in Sinopec surged by 5.1 per cent on Monday to close at HK$7.9 after it declared an interim dividend 60 per cent higher than last year’s. The company unveiled a 51.8 per cent year-on-year increase in net profit to 42.4 billion yuan (US$6.2 billion) for the year’s first-half.