Caspian oil swaps with Iran to grow fivefold by year-end
Caspian crude oil swaps from Kazakhstan and Turkmenistan through Iran are expected to increase fivefold to 120,000
bpd by the end of the year, President of Switzerland-based trading house and crude shipping company Vitol, Ian Taylor
said on 5 July. Mr Taylor added that the amount could quickly increase to around 370,000 bpd, though Vitol isn't the
only shipper handling the crude swaps.
Oil companies have long eyed the Iranian route as a quick and cheap solution to get crude oil out of the landlocked Caspian region, but have been hampered by US sanctions, which prohibit trade with Iran. Instead, the US has supported costly and complicated pipeline routes that bypass Russia to the north and Iran to the south.
Crude swaps are a relatively simple and cheap way of exporting oil without investing in big infrastructure projects
such as pipelines, as the oil is only shipped a short distance and the receiving country hands over the same amount
at an export point. Under the swaps agreement, Iran takescrude oil from Central Asian producers through the port of
Neka for its northern refineries in exchange for Iran's Persian Gulf crude, which is easily exported to other
Currently, the Kazakh oil is tankered across the Caspian from the port of Aktau and Turkmen output is piped across the border to Iran.
Vitol has been instrumental in putting together a $ 150 mm pre-finance package, mainly backed by BNP Paribas, to fund
construction and modification work on the Neka terminal in Iran and two refineries to facilitate the crude oil import
from Central Asia. China Petroleum & Chemical Corp, or Sinopec (SNP), will be carrying out the construction of
the port facilities at Neka and expansion of the Tehran and Tabriz refineries to adjust for the different quality of
Caspian crude, Taylor said.
The Neka terminal is projected to have a capacity of 370,000 bpd by December 2002 and the pipeline to the refineries will have an initial capacity of 120,000 bpd, increasing to 370,000 bpd within six months.
Most of the companies shipping their oil through Vitol for the past year are either state oil companies or other
producers working in the region, but not US oil companies due to the sanctions against Iran.
Iran charges a swap fee of $ 16 per ton for Turkmen crude and $ 13 per ton for Kazakh crude as well as making some adjustments for quality differentials.