Gasoline ban against Iran doubtful, but could change trade flows

Singapore (Platts)--24Jan2006

A worldwide ban on the export of gasoline to Iran as suggested by a US
senator last week would be hard to implement, Asian traders polled by Platts
said Tuesday. However, if implemented successfully, such sanctions could
potentially change gasoline trade flows, market sources said.

     Indiana Senator Evan Bayh (Democrat) last Thursday said he intended to
introduce a non-binding resolution calling on the international community to
ban the export of gasoline to Iran and to enact a comprehensive ban on arms
sales to Iran, in an effort to stop the country's recent attempts to restart
its nuclear program. 

     "Such sanctions are near impossible (to monitor)," a trader remarked.
     Iran imports about 180,000 b/d of gasoline at an estimated cost of around
$4-bil to $4.5-bil annually. Asia provides about 10-15 medium-range or
MR-sized cargoes a month of premium high-octane gasoline to Iran via third
parties, sources estimated. Close to half of this comes from Indian refiners,
owing to their proximity to the Persian Gulf. Iran procures the remaining
needs from Europe and its immediate neighbors. 

     If the sanctions stick, Asia could see an oversupply, leading to weaker
fundamentals, a market source cautioned. The regions that could absorb some of
the extra volumes would be the Middle East and Africa, where domestic
consumption is rising, sources said.  

     Iran's Achilles' heel is its aging refineries and refining capacity that
is not able to keep pace with domestic consumption. The country operates nine
refineries with a total crude run of 1.48-mil b/d. Tehran plans to build five
new refineries in the near term and would need around $17-bil investment on
its older refineries to fully meet domestic products demand, a senior official
at the National Iranian Oil Refining and Distribution Co said in Tokyo last
week.  
     The sanctions, meanwhile, could benefit the US by prising open the
East-West arbitrage opportunities, a market source said. 

     In 2005, the US imported an average of 16-mil bbl of finished motor
gasoline from OPEC countries while Asia's biggest exporters--India, China,
South Korea and Singapore--exported a combined 3.3-mil bbl, according to data
from the US Energy Information Administration. 

     The US plans to introduce five fuel specification changes this year. The
EIA has said two changes in particular--the ultra-low sulfur diesel and the
removal of oxygenate MTBE from reformulated gasoline--would have the greatest
impact on the market.

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