Sasol Limited : South Africa Still Seeking Way Round EU Sanctions On Iran
06/13/2012| 12:30pm US/Eastern
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By Devon Maylie
JOHANNESBURG--South Africa's department of energy said Wednesday that it continues to engage with the European Union to find a way to work around the sanctions against Iran, which prohibit countries from importing oil from there, after South Africa received an exemption this week from the U.S. sanctions on the Islamic republic.
South Africa relies on Iran to provide about 25% of annual crude oil imports.
Under the new U.S. sanctions that take affect July, foreign financial institutions doing business with Iran's central bank for the purpose of energy purchases stand to be barred from U.S. financial markets.
South Africa said it had applied for an exemption from the U.S. sanctions because it said they hurt the long-term sustainability of South Africa's refining sector due to increases in both the capital and operational costs to alter the crude mixes for the respective refineries and thus threatened supply in the country.
"The EU sanctions against Iran still remain a hurdle," South Africa's department of energy said. "Unlike the U.S., the EU legislation does not give provision for any exception."
The energy department said the country must still seek to reduce oil imports from Iran even under the exemption from the U.S. and said it's in discussions with other suppliers. Last month, the country said it wanted to buy more oil from Nigeria.
Exemptions are given to countries that the administration determines have sufficiently reduced, or agreed to reduce, their consumption of Iranian oil. Along with South Africa, the U.S. granted exemptions Monday to India, South Korea, Turkey, Taiwan, Sri Lanka and Malaysia.
A number of South African buyers said they have stopped purchases in the face of possible sanctions from the U.S. and Europe. Engen Ltd., which has the Malaysian national oil company as its biggest shareholder, said it suspended imports, without giving details on a timeline, or what alternative sources it is getting.
South Africa's department of energy said Engen was the biggest importer of Iranian crude and that it will cost the company 300 million rand ($36.3 million) to adjust its refinery to alternative supplies.
South Africa's Sasol Ltd. (SSL), the world's largest coal-to-motor-fuel producer, said it stopped buying Iranian crude oil and is sourcing more Arabian crude in its place. Sasol relied on Iranian oil imports for about 20% of its crude requirement, or 12,000 barrels a day, at its Natref refinery.
Write to Devon Maylie at devon.maylie@dowjones.com
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