Rosneft to Start Supplying Gasoline to Iran through Azerbaijan

Rosneft in 2017 may start to supply gasoline to Iran. By this time Petrocas, in which the state-owned company owns 49%, is planning to build a logistics terminal via the South Caucasian corridor, said Turan referring to RBC.

Petrocas Energy Group, 49% of which Rosneft acquired for $ 144 million in January 2015, plans to start supplying gasoline and diesel fuel to the Iranian ports of Neka and Anzali through its own oil terminal in the Georgian port of Poti. This was said to RBC by CEO Petrocas Energy Group Vano Nakaidze, which was confirmed by the majority shareholder David Yakobashvili (owns 51%).

According to Nakaidze, the capacity of the terminal in Poti is about 3 million tons of oil products a year. It is now loaded by 1-1.5 million tons. Through this terminal is the delivery of light oil products to Armenia (80% of consumption in the country), Azerbaijan and Georgia. In Poti there are also special containers for storing gasoline. Towards the Caspian Sea, to transport oil products to Iran, fuel will be transported by rail to the ports of Azerbaijan, including Baku, and from there by tanker across the Caspian Sea to the ports of Iran, said the top manager.

In order to enter the Iranian market and supply at least 1 million tons of gasoline per year, Petrocas plans to expand the terminal: to purchase tanks and special railway cars for oil transportation, build railways and infrastructure for mooring supersize tankers, as well as overload product tankers in the Caspian Sea, said RBC's co-owner David Yakobashvili. He estimates the investment in such upgrades in $ 100-200 million and claims that the company has its own means.

According to Nakaidze, Iran's market is planned to master 3 million tons per year since 2017, delivered via Poti, of which about 1 million tons of gasoline will be exported to Iran, and the rest of the oil products will be purchased from Turkmenistan and Kazakhstan to supply to Europe. According to Nakaidze, at least half of the planned fuel supplies to Iran (0.5 million tons) will be provided by its partner company - Rosneft (Iran is not among the major buyers of state-owned petroleum products, as it follows from the statements).

 "If our plans to create a route to Iran via the South Caucasus corridor are fruitful, Petrocas will take into account the desire of Rosneft to enter the Iranian market with its fuel," said Yakobashvili. From Kazakhstan and Turkmenistan via the South Caucasus corridor it will be possible to import petroleum products and crude oil available for sale in Europe, he added.

The Press Secretary of Rosneft Mikhail Leontiev did not comment on Rosneft’s interest to enter the Iranian market for the sale of gasoline. In December 2015 the head of Rosneft Igor Sechin met with the Iranian Oil Minister Bijan Zanganeh to discuss investment projects in the country (oil and gas projects), said Russian Energy Minister Alexander Novak.

RBC was unable to get a comment from the representative of the Ministry of Oil of Iran. In mid-June, Zanganeh said the country produced more than 3.8 million barrels of oil per day, of which about 2 million barrels were exported. Despite this, the gasoline shortage persists in the country. Iran plans to build five refineries to increase the amount of crude oil from 1.85 million to 3.2 million barrels a day by 2020 to reduce its dependence on imported gasoline, Bloomberg was told by the Managing Director of the National Iranian Oil Refining & Distribution Abbas Kazemi on 13 June. Investments in construction of new plants Kazemi did not call, noting that the modernization of existing refineries will require $ 14 billion of investment. Yakobashvili doubts that Iran in such a short time will manage to solve the problem of gasoline shortage: “Sanctions against Iran have not been completely removed, and they cannot build those plants without western equipment.”

As of March 2016 gasoline consumption in Iran amounted to about 70 million liters per day, of which 9 million liters (or about 6.8 thousand tons) were imported, Bloomberg reported with reference to the National Iranian Oil Products Distribution Co. Thus, in annual terms, about 2.5 million tons are imported, and it accounts for about 13% of the domestic consumption.

Iran does have a shortage of gasoline, but to carry oil from Russia even through the South Caucasus corridor is expensive and logistically difficult, the analyst Valery Nesterov from Sberbank CIB notes. "The terminal is located in Poti on the Black Sea and the ports receiving cargo in Iran are in the Caspian Sea. As a result, it requires reloading from a tanker to another tanker and transportation by rail: fail at any stage of the chain is reflected in the terms of delivery to the consumer," said the expert.

Nakaidze argues that the logistics supply of light petroleum products, using ports and railway is profitable to Petrocas and for several years it was tested in the supply of oil products from Europe to Armenia and Afghanistan.

Turan notes the most realistic and effective route of gasoline supplies to Iran could be the railway corridor North-South, which should start in 2017. -12D-