Japanese refiner Cosmo Oil is looking at the possibility of buying more crude from Iran once sanctions on the Islamic republic are lifted and is also "actively" looking into crude imports from the US, company president Hisashi Kobayashi told Platts in an interview Tuesday.
Speaking to Platts on the sidelines of a New Year reception hosted by the Petroleum Association of Japan in Tokyo, Kobayashi said economics will be key for any increase in the refiner's Iranian crude oil imports and imports from the US, but added that "it is possible" it will increase crude imports from Iran in 2016 after the lifting of sanctions.
Kobayashi said the Iranians had asked Cosmo Oil to increase volumes on a term basis but added that any additional imports from the country would be on a spot basis.
"We do not intend to increase our imports [from Iran] on a term basis abruptly," Kobayashi said.
Kobayashi said that Cosmo Oil is likely to renew sometime soon its annual term contract with Iran for the April 2016-March 2017 period at the same volume as the previous year.
He declined to comment on Cosmo Oil's current and prospective Iranian crude import volumes.
Tightened sanctions in effect since mid-2012 have capped Iran's crude exports at about 1 million b/d of crude because of volume restrictions imposed on Tehran's customers by the United States.
Iran has said it will be able to increase exports by 500,000 b/d immediately upon the lifting of sanctions and by a further 500,000 b/d over the following six months to take export volumes back towards pre-2012 levels of 2.2-2.3 million b/d.
Past records show that Cosmo Oil has been one of the more experimental refiners in Japan when it comes to crude imports from diverse suppliers.
It was one of most active Japanese refiners last year buying Kazakhstan's light sweet CPC Blend crude, as well as Mexico's Isthmus crude.
In October 2014, Cosmo Oil became the first Japanese refiner to import US shale condensate when it took a 300,000-barrel cargo at its Yokkaichi refinery in central Japan.
US CRUDE IMPORTS
Commenting on the prospects of crude imports from the US, where a 40-year-old ban on exports has just been lifted, Kobayashi said: "Current [market] conditions are bad."
He noted that US benchmark WTI is currently at a strong premium to Dubai crude, which makes it uneconomical for Japanese refiners to import US crudes.
But Kobayashi said that if Dubai moved back to a premium of around $1.50/barrel to WTI, there would be opportunities.
"We are actively considering [US crude imports] as the diversification of crude supply sources will also be in line with national policy," Kobayashi said.
The premium of March WTI to March cash Dubai stood at $5.84/barrel at the Singapore close on Monday. This represents a significant change in the spread between the two regions benchmarks.
High levels of domestic crude production in the US coupled with a ban on exports of crude had put pressure on WTI.
This pressure has however eased since the US lifted crude export restrictions put in place 40 years ago.
The export policy change was a provision included in a massive government spending bill President Barack Obama signed into law on December 18.
In 2015 second-month WTI averaged a $1.37/b discount to front-month Dubai. In contrast, the same spread stood at a $4.03/b discount in 2014, according to Platts data.
Cosmo Oil last year began preparations for US crude imports even before the US lifted export restrictions and has concluded that it may be able to process WTI and Light Louisiana Sweet crudes at its refineries following laboratory analysis of the US grades.
"We have tested all of the possible US grades but we will still need to see compatibility of the grades with other crudes," said Kobayashi, adding that the company is looking at buying US crudes on a co-loading basis with other companies in Japan and South Korea on VLCCs or jointly co-loading with other crudes from Latin America on Suezmax tankers.
Platts data show LLS and WTI delivered to Japan, which is heavily reliant on crude supplies from the Middle East, would typically command a slight premium to Saudi grade Arab Light.
LLS and WTI are highly sought after in the US market for their high gasoline yield and, increasingly, their comparably high distillate yield.
For example, both crudes yield a higher percentage of gasoline and ULSD than Arab Light in a US Gulf Coast cracking or coking setup, according to Turner, Mason & Co yield formulas.
