Oil trade with Iran thrives, discreetly

The Wall Street Journal


FUJAIRAH, United Arab Emirates—An oil tanker named Front Page, chartered by Royal Dutch Shell PLC, left this port on March 17 and reported it was going to another U.A.E. port, then on to Saudi Arabia, ship-tracking data show.

But the tracking information reveals that Front Page also made an unreported stop—to the coast of Iran. There it loaded Iranian oil, according to records obtained by oil traders and shipping sources.

The incident, some oil-industry experts say, is an example of how some companies these days are hiding their business dealings with Iran, even when they are perfectly legal because they aren't subject to any sanctions.

Another oil tanker that stopped in Iran in March, which oil traders say was chartered by Total SA of France, turned off its tracking transponder throughout the visit, according to ship-tracking data.

Spokesmen for Shell and Total declined to comment.

None of the current sanctions proposals in the United Nations or the U.S.—including the latest ones agreed to this week by the U.S., Russia and China—would target Iran's oil-export business, which generates about half of its government revenues. Doing so, experts say, likely would drive up the commodity's price world-wide and result in higher gasoline prices in the U.S., of as much as $1 more a gallon, even though the U.S. doesn't import any Iranian oil.

U.S. officials also fear that targeting Iranian crude could wreak havoc on the recession-ravaged economies of allies like Japan, which last year imported about 421,000 barrels of Iranian crude a day, just behind China and India.

As a result, companies like Shell and BP PLC continue to do a brisk business buying Iranian oil products. BP declined to comment.

"Everyone buys from the Iranians—governments, states, other companies," says Mark Ware, a spokesman for Vitol Group, an energy-trading company that continues to deal in Iranian crude and is one of the few companies willing to talk about it. "It's not subject to any legislation."

Still, given all the controversy over Iran's nuclear program, many companies decline to discuss their Iranian oil purchases.

Companies like Shell and BP have said they have stopped selling gasoline to Iran. But they rarely mention that they continue to buy crude or other Iranian oil products, which generally is a much larger and more lucrative business than gasoline deliveries.

Iran only imports about 100,000 barrels of gasoline a day. The country currently exports about 2 million barrels of oil a day—down from about 2.6 million in 2008.

"It's something they [companies] just don't want to advertise because of the stigma," says Lucian Pugliaresi, president of Energy Policy Research Foundation, Inc., an industry and government-funded research organization in Washington.

One tanker industry executive speculated that Shell might want to disguise its Iranian purchases so as not to suggest that the gasoline it sells in the U.S. is refined from Iranian oil, which would violate U.S. law.

Shell is one of the biggest oil-product sellers in the U.S. According to its 2009 annual report, Shell sold 1.33 million barrels a day of gasoline, diesel and other fuel products there. There is no evidence that any of Shell's U.S. products are sourced from Iran.

The information involving the Shell and Total-chartered tankers was obtained from ship-tracking data supplied by IHS Fairplay, a British provider of maritime information to the global shipping industry, and other records.

Given the proprietary and secretive nature of the business, it remains unclear how often oil companies try to conceal their trips to Iran, and whether they do it in part because of safety considerations.

The United Nation's International Maritime Organization says a ship's tracking transponder "should always be in operation" unless it would jeopardize a vessel's safety, such as in waters frequented by pirates.

According to records at the port of Fujairah in the U.A.E., which services about 80 tankers a day, Front Page arrived on March 16 and left the next day. Like all large ships, the tanker is required under an international convention to operate electronic equipment known as an Automatic Identification System that broadcasts information about its location, destination and other data. According to the regulations, the destination is "to be manually entered at the start of the voyage and kept up to date as necessary."

Data from the ship's AIS equipment picked up by satellites show the tanker listed its next destination as Jebel Dhanna, another U.A.E. port. It arrived there on March 18 and spent the night.

For the next four days, it continued to report its destination as Jebel Dhanna. But on March 19, it left the port, crossed the Persian Gulf and, on March 20, anchored off the Iranian coast near Asalouyeh, the site of an oil-and-gas development zone, according to its position coordinates. The tanker remained there for the next two days.

According to records obtained by oil traders and shipping sources, Front Page loaded an unknown quantity of an Iranian oil product called South Pars condensate, or light crude, which can be refined into gasoline.

The vessel reported that the water line of its hull dropped three meters by the time it left on March 22, further evidence that it took on cargo.

As it left the coast of Iran, AIS data show Front Page changed its destination to Ras Tanurah, a major oil port in Saudi Arabia. It arrived there on March 23.

An official with Frontline Ltd., a Bermuda-based company that charters the tanker to Shell, declined to comment.

In the case of the Total-chartered vessel, an Iranian-owned tanker named Saveh, AIS data show it reported its destination as Kharg Island, an Iranian oil-export terminal, on Feb. 28. But the satellites stopped picking up signals from the ship from the afternoon of March 1 to the morning of March 3.

According to records obtained by oil traders and shipping sources, on March 2, during the AIS blackout, Saveh loaded 100,000 metric tons of Iranian light crude oil and 34,000 metric tons of Iranian heavy crude oil.

An official with National Iranian Tanker Co., which owns Saveh and charters it to international companies, said, "It's a profitable and legal business."




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