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  Last Update:  03 April 2012 15:37  GMT                                      Volume. 11395

Japan refiners decide to continue buying Iran oil
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Tokyo (Platts)-- Japanese refiners have secured additional force majeure clauses to be included in Iranian crude oil contracts that could be invoked if sanctions prevent or limit execution of the contracts, sources close to the matter told Platts.
 
Most of Japan's annual crude deals with the National Iranian Oil Company run from April and refiners are currently working on contracts for the upcoming year.
 
This development, which will also be applied retroactively to contracts concluded in January, means that Japanese buyers of Iranian oil will be able to invoke force majeure if, for example, they cannot find vessels to lift Iranian crude because of the loss of insurance cover, sources said.
 
They added that Japanese buyers would have to give advance notice of 30 days to NIOC if they wanted to invoke force majeure.
  
NIOC has told the Japanese buyers that the force majeure could be invoked if the buyers face "limitations for the execution of the contract as a result of the relevant countries' law, regulations or guidance," said one source.
 
NIOC officials could not be reached for comment.
 
The European Union decided on March 23 to allow EU insurers to provide protection and indemnity cover for shipments of Iranian crude oil until the end of June, providing temporary relief to Asian shippers.
 
Tokyo has welcomed the EU move on P&I cover but plans to continue to press Brussels to allow cover to continue after July 1.
 
Japanese shippers, however, may still find it difficult to load Iranian oil once refiners have new term deals in place with Iran, Platts reported March 27.
 
Japanese refiners normally tie up their supply deals in February and volumes start to flow in April. But the uncertainty over how the EU measures will affect Japanese shipping insurance has contributed to delays in signing contracts.
 
EU sanctions agreed in January and modified March 23 now allow third party and environmental liability insurance for tankers carrying oil from Iran until the end of June. Other forms of insurance are also exempt if they relate to contracts signed before March 24, when the new version of the sanctions came into force. This means that new contracts for insurance covering damage to a ship's hull or its cargo may not be allowed after March 24 under the EU's rules.
 
"All insurance for ships carrying Iranian oil is prohibited with the exemption of insurance related to third party and environmental insurance (until July 1) and in relation to the execution of prior contracts," the EU said March 27.
 
This potential loss of reinsurance cover for cargo and hull damage is worrying shipowners as well as charterers.
 
In a relevant development, Japan secured March 20 an exemption from U.S. financial sanctions in return for reduced purchases of crude from the Islamic Republic and refiners are now understood to be reducing their imports of Iranian crude by some 15-20% for the year ahead. The exemption means that Japanese banks will have continued access to the U.S. financial system.
 
Japan imported 310,000 b/d of Iranian crude last year, when Iran was the country's fourth-biggest supplier.
 

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