Iran Bolsters Oil Tanker Fleet as Sanctions Noose Tightens

Iran has taken delivery of several new oil tankers in recent weeks as it relies more on its own fleet capacity to help sustain crude export shipments in the face of western sanctions.

Existing U.S. and EU measures have already reduced Iran's oil exports by more than half from pre-sanction levels of about 2.2 million barrels per day (bpd), costing the Islamic Republic billions of dollars in lost revenue a month.

Foreign shipping companies, fearing a loss of western business, have refused to do business with Iran, putting the onus on its main tanker operator, NITC.

Data from publisher IHS Maritime shows that four supertankers, each with a maximum carrying capacity of 2 million barrels, joined NITC's fleet between May and the end of July. Another three entered service with NITC earlier this year.

"Iran needs those ships, especially as there are so few owners now who want to be seen transporting Iranian oil," said an oil tanker market source, who confirmed the deliveries.

"Having more tankers gives Iran more flexibility to store oil at sea and trade. They need to keep their oil fields running and get cargoes out somehow."

NITC officials did not respond to requests for comment.

All the vessels were part of a $1.2 billion order agreed in 2009 with two Chinese shipyards for 12 new supertankers.

The latest additions boost NITC's supertanker fleet to 37 vessels with a maximum carrying capacity of 64 million barrels. It also has 14 small crude oil tankers with another 12.5 million barrels in capacity.

"NITC has had to operate in a parallel world to stay ahead of the heat they face. It must be getting harder logistically for them to manage their shipment schedules," another tanker market source said.

NITC is blacklisted by the West and has used various tactics to dodge attention including changing the names of its tankers and their flags as well as carrying out ship-to-ship oil transfers onto non-Iranian vessels to conceal sales, trade and maritime intelligence sources say.

China remains Iran's top oil client. Sanctions have pushed other buyers to reduce contract volumes, which could leave Iran with surplus crude.

IHS Maritime estimated that at least eight to 10 NITC supertankers are storing Iranian oil at the moment, broadly unchanged since May. Up to another six tankers could also be providing storage, it said.

"Some of the tankers have switched their AIS trackers off for a long period, so they are effectively lost from being tracked," said Richard Hurley, a senior analyst at IHS Maritime.

NEW SANCTIONS THREAT

The tankers are located at anchorages adjacent to key oil terminals, "which is useful for storage", he said.

"We are seeing the core of that fleet being there for two to three months and some of them for even longer."

Other shipping sources gave estimates that 10 to 13 Iranian VLCCs are being used for floating storage.

NITC also has been hit by sanctions on ship insurance, which could limit any benefit from increasing its fleet.

Tehran recently offered to underwrite insurance for vessels - amounting to $1 billion per incident - to keep oil exports to India flowing.

But European industry sources say it is unclear how the Iranians could pay any claims, because sanctions prevent banks from channelling cash out of the country.

"$1 billion is not something that you can get at that quickly," said Hugo Wynn-Williams, chairman of leading transport insurance group Thomas Miller. "I remain sceptical."

Last week the U.S. House of Representatives passed a bill that would cut Iran's oil exports by another 1 million barrels per day over a year to nearly zero. The bill still must pass the Senate and be signed by President Barack Obama to become law.

"Additional sanctions on Iranian oil would force Iran to place even greater reliance both on its domestic fleet and financial industry including insuring its own tankers," said Mehdi Varzi, a former official at the state-run National Iranian Oil Co, who now runs an energy consultancy in the UK.

"Iran is surviving rather than thriving."

By Jonathan Saul; editing by Jane Baird (C) Reuters 2013.