Iran ships 'off radar' as Tehran conceals oil sales

Tehran's ships disable tracking systems to avoid scrutiny; Asia most likely destination for Iranian oil, traders say.

April 13, 2012 20:52
4 minute read.
Iranian crude oil supertanker

Iranian crude oil supertanker 370. (photo credit: REUTERS/Tim Chong)


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LONDON - Iran is concealing the destination of its oil sales by disabling tracking systems aboard its tanker fleet, making it difficult to assess how much crude Tehran is exporting as it seeks to counter Western sanctions aimed at cutting its oil revenues.

Most of Iran's 39-strong fleet of tankers is now "off-radar" after Tehran ordered captains in the National Iranian Tanker Co (NITC) to switch off the black box transponders that are used in the shipping industry to monitor vessel movements, oil industry, trading and shipping sources said.

"Iran, helped by its customers, is trying to obfuscate as much as possible," said a senior executive at a national oil company that has done business with Iran.

And Iran may have countered a reported reduction in its oil sales in March by offering big discounts in the form of free freight, finance and insurance and generous credit terms, the sources said.

Europe's July 1 oil embargo, and US and European financial sanctions against Iran's nuclear program have seen Tehran's oil sales drop to most Western destinations and drawn promises from some Asian buyers that they will cut pruchases.

But cheap, covert sales may have curbed or even reversed the reduction in shipments, the sources say.

Discretion is paramount.

Ship captains steering NITC supertankers have switched off recognition systems and customers are keeping business strictly under wraps.

"People are being very secretive right now. They are not talking about this on email, Yahoo or mobile," said the head of a crude oil desk at a top oil trading houses.

A Reuters' survey of the Iranian fleet via the ship tracking system AIS (Automatic Identification System) Live shows only seven of its 25 very large crude carriers are still operating on-board transponders, allowing computers to track vessels.

Only two of NITC's nine smaller Suezmax size tankers now have their tracking systems in operation, shipping sources say.

"NITC oil tankers are going to operate in stealth mode," said a shipping official, who declined to be identified.

Under normal circumstances, tankers would generally not turn off their tracking systems, which were introduced to improve safety at sea and allow marine authorities to locate vessels.

Ships are obliged by international law to have a satellite tracking device on board when traveling at sea. However, a ships' master has the discretion to turn off the device on safety grounds with the permission on the vessel's flag state.

Some tankers turned off their trackers to avoid detection last year during the Libyan civil war in order to trade with the Gaddafi government.

As sanctions make it harder to pay for and ship oil from Iran, it is increasingly difficult to gauge how much is moving out of the country's main terminal at Kharg Island.

Iran's Oil Minister, Rostam Qasemi, has said Tehran's crude exports are steady at last year's rate of 2.2 million barrels per day. But that has been hard to square with tanker tracker data and market intelligence.

Expert opinion is that Iran's visible crude oil sales fell to about 1.9 million bpd in March.

These calculations are backed by some of the best oil industry forecasters in the business including the International Energy Agency and Geneva-based Petrologistics, the respected tanker tracking consultant which monitors global oil shipments.

New estimates for April put Iranian exports down by as much as 500,000 bpd from last year.

The trouble is there is no hard evidence that Iran's oil production has actually fallen or that it is going into storage.

Millions of barrels of Iranian oil that were in storage in Iranian tankers a few weeks ago now seem to have disappeared, ship tracking data shows.

So where is it going? Has it been re-routed, has production been shut in or is the oil being stored somewhere else? Is it all being stored at sea?

"It's the million-dollar question - the billion-dollar question even," a senior executive in Asia at a large oil trading house said.

The hunt is getting more complicated as OPEC's second biggest producer comes up with a range of tactics to avoid scrutiny.

"Some big Asian companies may be taking oil on Iranian ships provided they switch off the transponders," said another European shipping industry source.

A trader in Singapore said Iran has managed to sell all the crude stored on half a dozen vessels floating off Singapore earlier in the year. The buyers were mainly Chinese and South Korean.

Given the lack of visibility of NITC's fleet, it will become increasingly difficult to measure floating storage. Industry sources say parts of the fleet were storing up to 12 million barrels of crude in March. That has now disappeared.

An NITC official, contacted by Reuters, declined to comment. NITC have declined to give press interviews for several weeks.

Tehran is about to have greater flexibility in disguising the locations for oil sales. NITC will take delivery of the first of 12 new supertankers to be delivered from China in May. .

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