April 1, 2012

Petronas to find alternatives to Iranian crude oil

Reported by Bloomberg on 02/04/12, Petroliam Nasional Bhd (PETRONAS), Malaysia’s state oil company, is struggling to find alternatives to Iranian crude for its South African refinery as sanctions against the Persian Gulf nation tighten, its chief executive officer said.

Petronas’s Engen unit, which operates South Africa’s second-biggest refinery, is getting about 65,000 barrels a day of crude from Iran, said Datuk Shamsul Azhar Abbas. South Africa is working to ensure that the plant, located in Durban, remains open to secure fuel supply and protect jobs, the country’s energy minister, Dipuo Peters, said March 21.

“We are under heavy pressure now because of the sanctions,” Shamsul said in an interview in Kuala Lumpur. “We are trying to look for alternative crude.” While Petronas has been discussing alternative supplies with other countries including Saudi Arabia for “months,” it has received “none,” he said.

Refiners from Japan to Turkey to India are seeking to replace imports from the world’s fourth-largest producer amid economic sanctions put in place by the US and the European Union since November.

While Petronas has been buying crude from the spot market as an alternative, it has faced difficulties in securing a “firm” long-term replacement to Iranian oil for the Durban plant, Shamsul said. The South African government is in talks with the US to resolve the issue and the company is waiting for the outcome, he said.

South Africa has consulted with Malaysia, Angola, Saudi Arabia, the US and Iran on how they are approaching the sanctions. No decision has been taken and state departments will present a response on the issue to the cabinet in May, South Africa’s department of energy said March 29.

“That refinery is responsible for supplying products to South Africa to a tune of over 40 per cent,” Shamsul said. “South Africa depends very much on this old lady to get the product supplies.”

The Engen refinery, known as Enref, has a capacity of 125,000 barrels a day. South Africa has six refineries, according to the South African Petroleum Industry Association. The country imports 95 per cent of its oil from the Middle East and Africa.

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