Japan's ENEOS could resume Iran oil imports 2-3 months after nuclear deal: chairman

Japan's largest refiner ENEOS could resume Iranian oil imports around two to three months after seeing agreement reached on a nuclear deal and the lifting of sanctions, ENEOS Holdings Chairman Tsutomu Sugimori said Feb. 17.

Speaking to reporters in his role as president of the Petroleum Association of Japan, Sugimori said ENEOS would not be able to resume Iranian oil imports immediately because of such issues as insurance and making shipping arrangements.

"Although we cannot resume [the imports] immediately, there is a possibility of resuming it in about two to three months," Sugimori told an online press conference.

ENEOS has not yet started preparations to resume Iranian oil imports, which were pending the Iran nuclear deal, he said.

"Once reaching agreement, [Iranian oil] will be a choice for our crude oil procurements, and that's when we start our consideration," Sugimori said.

Asked about the timing of the lifting of Iranian oil sanctions, Sugimori said he expects to see the nuclear deal and the lifting sanctions around the same time given the sanctions impact.

"Without the lifting, there will be no deal because the current sanctions are weighed heavily," Sugimori said. "In that sense, we expect to see clarity on both [nuclear deal and lifting sanctions] around the same time."

The lifting of Iranian oil sanctions would also contribute to increasing oil supply in phases in the market by up to 2 million b/d, Sugimori said.

Advanced talks

Iranian nuclear talks, the latest of which kicked off in Vienna on Feb. 8, seemed closer than ever to a deal after Iran's top negotiator Ali Bagheri Kani said on Twitter Feb. 16 that US and Iran were nearing an agreement.

Earlier in the day, US State Department spokesperson Ned Price said the two sides were in the "very final stages" of negotiations.

The Joint Comprehensive Plan of Action of 2015 set restrictions on Iran's nuclear program in exchange for relief from US sanctions. The Trump administration reimposed sanctions on Iran's oil, petrochemicals, shipping and other sectors in 2018.

Talks to revive the JCPOA stalled mid-2021 but restarted in December.

Japan suspended its Iranian oil imports in May 2019, after briefly resuming inflows in February for the first time in four months, after the US declined to extend its 180-day sanctions waiver beyond early May.

Japan's 2019 Iranian oil imports totaled 17.1 million barrels, down 63.2% from 46.51 million barrels in 2018, according to Ministry of Economy, Trade and Industry data.

Russian supply

Amid standoff between Moscow and the West over Ukraine, Japanese refiners are relatively relaxed about securing alternative barrels to Russian crude oil in the event of sanctions against Russia, Sugimori said.

"In the case of Japan, Russian [crude oil ] accounts for average of around 4% in the country's procurements," Sugimori said. "As most of these are bought on a spot basis, we see it is possible to secure alternative barrels from various other countries for the 4% spot share."

"However, price will significantly increase considering situations, where Russian crude oil to be expelled, although it is possible to make alternative procurements."

While noting impact from potential sanctions by Europe and the US would vary, Sugimori said: "If [the sanctions] go as far as the dollar suspension in finance, it would have significant impact on crude oil and LNG trades."

Japan's crude oil imports from Russia accounted for 4% of the total imports of 2.48 million b/d in 2021, with the Middle East supplying 92% of the annual imports, according to the Ministry of Finance data.

The Russian LNG imports accounted for 9% of Japan's total imports of 74.32 million mt in 2021, according to the MOF data.

US President Joe Biden has vowed to impose "swift and severe consequences" on Russia if it attacks Ukraine, including financial sanctions to restrict foreign capital and export controls to block US software and technologies.

Other options include banning Russia from dollar trades and blocking access to the international financial messaging service SWIFT, both of which analysts see as less likely because they would have massive consequences for energy markets and the global economy.