Iran Ready to Increase Oil Swap to 500,000 bpd

Iran is ready to ramp up oil swap capacity after receiving the first batch of crude oil from the Caspian Sea in seven years for swapping through the Persian Gulf, the director of Iranian Oil Pipeline and Telecommunications Company said.

"We are prepared to swap 400,000-500,000 barrels of crude oil per day, if new agreements are signed," Seyyed Hamid Hosseini was also quoted as saying by IRNA on Friday.

Iran reportedly swapped as much as 130,000 barrels of crude oil per day and received $1 in transit costs for each barrel under a swap contract with four international companies before a decision to unilaterally end operations in 2010 under the administration of former president, Mahmoud Ahmadinejad.

Iran resumed oil swap earlier this month after a seven-year hiatus. Oil and gas company Dragon Oil, owned by Dubai-based Emirates National Oil Company, shipped an oil cargo from Turkmenistan to Neka Port in northern Iran on August 3 for swapping through the Persian Gulf, marking the first such operation by Iran since 2010.

Dragon used to ship the crude it produces from offshore development in Turkmenistan to Neka and receive crude produced by Iran at Kharg Island in the Persian Gulf. The Russian-flagged VF Tanker-20 discharged around 6,500 tons (around 7 million liters) of Turkmen-origin crude oil at the port of Neka on August 3.

Two other crude consignments were offloaded on August 9-10, with nine more scheduled to be offloaded at Neka Port by the end of this month, IRNA said.

According to port officials, Neka can store 250 million liters (1.57 million barrels) of oil and derivatives, but less than 10% of that capacity are currently in use. The forthcoming cargoes are forecast to increase the port's crude storage to 84 million liters, or one-third of the total capacity.

Pipeline Network

Iran transfers oil and petroleum products from the north to refineries in Tehran and Tabriz using a network of pipelines stretching over 600 kilometers in what otherwise would have required nearly 900 tanker trucks per month.

"Removing these fuel trucks from the roads plays an important step toward lessening traffic and road accidents," Hosseini added.

According to reports, one of the prerequisites of conducting crude oil swaps is ensuring that incoming cargoes meet the quality of Iranian crude oil equivalent.

Oil swap can be an important source of revenue, as northern neighbors with abundant hydrocarbon resources need access to the sea in the south.

Oil Minister Bijan Namdar Zanganeh has made it clear that the government of President Hassan Rouhani is pushing to resume swap operations with northern neighbors.

Iran is willing to resume swapping oil and gas from Caspian Sea littoral states, provided Russia, Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan equally take measures and cooperate with Iran in this regard.