US sanctions will see Iran burning more “dirty” fuel: report

Iran’s move towards cleaner-burning natural gas is likely to go into reverse, with the country burning more heavy fuel oil, as a result of US sanctions and new global shipping rules, according to a forecast by Iain Mowat of consultant Wood Mackenzie Ltd.

Power plants and other industrial facilities will burn more than 200,000 barrels a day of highly polluting fuel oil next year, double the amount Iran used in 2018, reported Bloomberg, citing the report.

Iran surplus of fuel oil has increased since the US reimposed sanctions last year.

Those sanctions also prevent Iran from importing the equipment it would need to refine the heavy oil product into less-polluting products like gasoline and, and in any case, building refineries would take time.

Bloomberg said that the situation would deteriorate further once the new International Maritime Organization sulphur cap is introduced at the beginning of next year. As commercial ships and power stations are the two main sources of demand for fuel oil, the new IMO rules will leave Iran little choice but to burn more fuel in its power stations. Iranians “will have no choice but to dump it at whatever low price they can get for it, cut back on refining or use it themselves,” said Robin Mills, CEO of Dubai-based consultant Qamar Energy. He added that Iran was “a prime candidate” for flouting the next year’s IMO rules, by using high-sulphur fuel oil in its own fleet.

Iran’s government has said that it wants to build new refineries to process fuel oil into other products. Meanwhile, Iran’s storage facilities for oil and fuel are filling up fast. Because the government prefers to reserve precious spare storage capacity for higher-value products such as condensate, it can’t accumulate surplus fuel oil for long, Mills said.

Iran’s use of fuel oil to produce electricity had been falling since 2013 and had since fallen sharply, with consumption down by 75% in the Iranian year ending March 2018.