Oil tanker owners are cushioning the impact of Iranian trade restrictions by shipping crude over greater distances to some of Asia’s biggest economies, the founder of Nordic American Tankers Ltd. said on Wednesday.
Chief Executive Herbjorn Hansson said Western sanctions on doing business with Iran had led to an increase in oil shipments from West African countries to energy-hungry China and India -longer routes that generate bigger revenues for shipping firms.
Tanker demand is expressed in “ton-miles,” the amount of oil transported in tankers multiplied by the distance over which the oil is moved.
“It takes more (ton-miles) to ship oil from West Africa to China than from Iran to China,” Hansson said in an interview. “I would not overestimate the impact of the sanctions on Iran.”
Western sanctions were introduced last year to choke off funding for Iran’s nuclear program. As part of these sanctions, the United States requires buyers of Iranian crude oil to reduce imports or face exclusion from the U.S. financial system.
India, the second-largest buyer of Iranian crude, is set to halt all crude imports from the Islamic republic because insurance companies have said they would no longer cover the refineries that process this oil.
Industry sources say China, the biggest buyer of Iranian crude, is expected to cut imports by up to 10 percent this year, following a 21 percent drop in 2012 due to a contract dispute and shipping problems caused by the sanctions.
“They need to find oil from other places,” Norwegian-born Hansson, 65, told Reuters by telephone from Oslo. Along with his family, he owns 5.7 percent of Bermuda-based Nordic American.
The company’s 20 tankers are moving largely between China and India and Angola, Nigeria and the Middle East, Hansson said.
Asian oil imports from oil-producing countries in West Africa are expected to rise slightly to 1.68 million barrels per day in March from the previous month, according to data based on traders’ ship tracking compiled by Reuters.
(Editing by Robin Paxton, Reuters; Additional editing by CM. This is an abbreviated version of a longer Reuters article which was published in full on Insurance Journal, a CM sister publication.)