Iran claims end to gasoline imports despite shortfall

Iran's president said this week that the country no longer needs to import gasoline to meet domestic demand, thanks to a renewed push by the authorities to curb fuel consumption. But refinery outages and continued fuel smuggling cast serious doubt on those claims.

President Masoud Pezeshkian said that "fuel conservation and management measures" had ended the country's need for gasoline imports, saving it $12bn/yr.

The measures Pezeshkian referenced rest largely on a tiered pricing system that Tehran has tightened in stages since December, cutting subsidised allocations and raising prices for the heaviest users (see table). The latest change, introduced in early September, doubled the price of gasoline bought above the subsidised quota to 100,000 rials/l ($0.04/l) from IR50,000/l.

The higher prices do appear to have curbed consumption. Domestic demand has fallen to around 134mn l/d this month from about 144mn l/d in August-September, according to state-owned products distributor NIOPDC.

Part of the decline reflects a shift towards compressed natural gas (CNG). Daily CNG consumption rose to 16.7mn m³ in October from 14.7mn m³ in August, displacing an estimated 2mn l/d of gasoline demand, according to Iranian officials.

At the same time, domestic gasoline production increased. Output averaged 135mn l/d in late August and early September, according to official figures, up from an average of 122mn l/d in the first five months of the Iranian year, corresponding to late March to late August.

The increase resulted from higher refinery runs and reconfiguration projects, NIORDC head Mohammad-Sadegh Azimifar said last month. These included sending surplus naphtha from the Persian Gulf Star (PGS) condensate splitter to underused gasoline units at the 375,000 b/d Isfahan, 220,000 b/d Tehran and 110,000 b/d Tabriz refineries.

Even at those elevated levels, production remained about 10mn l/d below peak summer demand of 145mn l/d, although it would have broadly matched current demand. Refinery outages, however, have since reduced production capacity.

An explosion at the 700,000 b/d Abadan refinery in late September cut gasoline production capacity to about 8mn l/d from 11mn l/d, with repairs expected to take at least two months. The disruption added to broader supply losses, including at the 55,000 b/d Lavan refinery, which lost about half of its 3mn l/d gasoline capacity after it was hit on the first day of the US-Iran ceasefire in April, forcing other plants to raise runs.

Iran also continues to face a chronic smuggling problem, with subsidised fuel diverted to neighbouring countries where prices are significantly higher.

Tehran has responded by introducing identity checks for motorists using emergency fuel cards at filling stations. The cards previously allowed anonymous purchases and accounted for 40-45pc of refuelling transactions, well above the government's 5pc ceiling.

But Iranian officials estimate that around 25mn l/d of petroleum products continue to be smuggled across the country's borders, with diesel accounting for most of the illicit trade.

Limited options

Iran also has little scope to raise gasoline production further.

Feedstock availability is already under pressure following damage sustained during the early stages of the US-Iran war to facilities linked to the South Pars gas field, which supplies condensate to PGS. And two new splitters, the South Adish and Mehr Persian Gulf units, are not expected to start operations before the end of the Iranian year in March at the earliest.

Against that backdrop, market participants say Iran still needs to import between three and seven Medium Range (MR) gasoline cargoes a month to cover its near-term supply gap. This is equivalent to around 0.9mn-2.1mn bl/month, or 4.7mn-11mn l/d.

But sanctions and the US naval blockade imposed on Iran since July make those volumes difficult to secure. Market participants say some gasoline is being transferred between vessels off Shinas, Oman, before US-sanctioned tankers carry it through the strait of Hormuz to Iran.

The trade, however, is constrained by a shortage of ships willing to take part in the transfers and deal with sanctioned tankers serving Iranian ports, one shipbroker said.

By Rithika Krishna