BEIJING (Reuters) - Iran is set to supply 50 percent more condensate to Chinese state trader Zhuhai Zhenrong Corp under a renewed one-year supply contract for the light crude, two people with direct knowledge of the matter said on Friday.
The deal for the National Iranian Oil Company (NIOC) to ship 100,000 barrels per day (bpd) of condensate from August was made before Thursday’s framework agreement to curb Iran’s nuclear programmes in exchange for ultimately dropping sanctions.
China is Iran’s largest oil client and the renewed contract could lift its overall crude imports from the Islamic republic to above 600,000 bpd later this year, higher than the average pre-sanction rate of about 555,000 bpd.
Iran, once OPEC’s second-largest exporter, is expected to try to sell more oil to Asian consumers such as China and India before a final nuclear deal due in June, which Tehran hopes will lift Western sanctions that have curbed its oil exports by more than half and crippled its economy.
Thursday’s accord with six world powers could eventually allow Tehran to reclaim lost ground in global oil markets, but that is likely to occur only from 2016 given the time needed to verify Iran is complying with the restrictions to its nuclear activities.
One of the sources with knowledge of the condensate deal said it was agreed about two weeks ago and had been raised from 2 million barrels per month to 3 million barrels.
A Zhuhai Zhenrong spokeswoman declined to comment on the renewal, but said NIOC had sought to raise supplies to Zhenrong from the second half of 2015.
The condensate, a byproduct from Iran’s South Pars gas project, would go to independent petrochemicals producer Dragon Aromatics. Dragon is set to expand its condensate splitter by nearly 40 percent this month, said the second source, who also has knowledge of the petrochemical plant’s operations.
Dragon’s condensate splitter, in the Chinese city of Zhangzhou, processes the Iranian oil into liquefied petroleum gas and naphtha, which feeds a paraxylene complex.
The splitter’s capacity will be raised to 137,000 bpd by the end of April from 100,000 bpd, said the second source, who noted that while Iranian condensate is relatively cheap it contains a high level of sulfide that makes it less attractive to use.
Calls to Dragon Aromatics’ parent company went unanswered.
Crude imports by Iran’s four biggest buyers - China, India, Japan and South Korea - though down on-year, bounced back to average 1.02 million bpd in February, a two-month high, government and tanker-tracking data showed.
A source at a South Korean refiner that imports oil from Iran said it was closely watching developments on the nuclear deal between Tehran and the world powers, although there were further steps to take before more crude would be available.
“It is definitely a good signal and if the sanctions are fully lifted, we will consider increasing crude imports from Iran,” said the source.
Additional reporting by Meeyoung Cho in SEOUL; Editing by Ed Davies and Tom Hogue