0435 GMT July 24, 2019
China sourced around a fifth of its LPG – used as cooking fuel, in cigarette lighters and to make plastic – from the US before Beijing slapped a 25-percent tariff on the gas last August as the trade tussle heated up.
Buyers then turned to Iran, which accounted for around a third of imports in April, before President Donald Trump blocked all energy exports from the country in May.
But some Chinese customers are still buying from Iran, according to Kpler SAS. Based on ship-tracking data, the Paris-based data intelligence firm estimates that at least five supertankers loaded Iranian LPG in May and June that was destined for China.
That would equate to around $100 million of the gas, according to Bloomberg calculations.
“They’ve started using a variety of techniques to hide their activity,” Ilya Niklyaev, an LPG analyst at Kpler, said in an interview. “Like switching off transponders as well as intentionally signaling wrong destinations and indicating loading ports in Qatar, Saudi Arabia or the UAE.”
Tankers carrying Iranian oil and gas are famous for masking their journeys by turning off satellite locator beacons, a technique known as going dark, and transferring fuel between ships to hide the origin of the cargo.
LPG tanker Sea Dolphin sailed into the Persian Gulf between Iran and Qatar with empty tanks on May 17, and then turned off its beacon, Kpler said in a June 6 note. It turned the locator back on May 26, indicating its tanks were now full, and headed toward the Maldives, where it again went dark.
Another ship, the Pacific Yantai, loaded its tanks near where the Sea Dolphin had stopped, and then set sail toward China, according to Kpler. Bloomberg ship-tracking data confirms the movements of the two vessels and shows the Pacific Yantai appearing to drop off a partial cargo at Ningbo on June 14.
Chinese refiners may also be circumventing American sanctions to import Iranian oil, with FGE saying in a note last week that it expects some degree of non-compliance.
China probably isn’t complying with US sanctions on Iranian crude, US Deputy Energy Secretary Dan Brouillette said Friday, adding that he didn’t have any hard evidence to show this.
LPG is an important export for Iran. Some 83 percent of the country’s 507,000 barrels a day of oil product shipments in 2017 were LPG and fuel oil, according to Energy Information Administration data. That compared with 2.5 million barrels a day of crude and condensate exports.
China took 346,000 tons, or 80 percent, of Iran’s LPG exports in May, Kpler estimated. If the cargoes loaded before the end of the US waivers on May 2 they may not have been in contravention of the sanctions.
Iran is likely to export a total of 400,000-500,000 tons in June with at least eight supertankers set to load the fuel in coming weeks, Kpler said in the note. Three supertankers have loaded LPG from Iran in June, of which at least one is headed for China, it said.