Iran directs an old tanker to Kharg Island. There's no room for oil storage.

Iran has directed a tanker to Kharg Island Nasha, a unit built in 1996 which for years remained empty on the anchorage. According to oil transport analysts, her movement may mean that Tehran is increasingly having trouble storing raw material after US export restrictions.

The old tanker went out to the main export terminal.

The NASHA super tanker IMO 9079107 was built in 1996 as a very large oil tanker (VLCC) with a capacity of approximately 2 million barrels. Over the past years, he has remained empty at an anchor in the Kharg Island region – the most important export point for Iranian oil.

According to ship traffic monitoring companies, the unit was recently re-routed to the terminal area. The oil tanker movement quickly saw international media and oil transport analysts.

The rate of its movement is unusual. The unit is moving so slowly that voyage, which would normally last about 36 hours, extended to about four days. In practice, this means that the tanker has not been prepared for normal operation but rather has an emergency function.

Kharg Island under pressure of limited exports

Kharg Island is responsible for approximately 90% of Iranian oil exports. After the blockade was introduced in the Ormuz Strait, exports declined sharply – the number of cargo-receiving ships decreased to individual units while the extraction continues.

According to operational data, about 13 million barrels of free storage capacity remained at the time the blockade started. At the same time, oil flows remain at around 1.1 million barrels per day.

In practice, this means very limited storage possibilities. At the current rate of raw material supply, the supply of available space may be exhausted within a dozen days of the start of export restrictions.

A floating warehouse instead of new export opportunities

In this situation, the targeting of a NASHA tanker in the terminal area should be considered as an attempt to increase available storage capacity. A unit with a capacity of about 2 million barrels can be used as a floating oil warehouse, which gives only a few dozen hours extra time for Further extraction.

In parallel, Iran is trying other logistics solutions. Among them are:

• ship-to-ship transhipments in Southeast Asian waters,
• Ship movements with AIS disabled,
• use of units belonging to the "shadow float",
• attempts to return tankers sanctioned by waters controlled.

According to analytical data, the number of units associated with Iran that have attempted to circumvent restrictions since mid-April has reached several dozen. However, it is still not enough to pick up the amount of oil that is still coming from the mining fields into the export system.

Risk of reducing mining

If available storage capacities are exhausted, the only possibility will be to reduce the production. It's a process much more complex than just stopping the installation.

In the case of part of the deposits, long-term cessation of extraction may lead to deterioration of the deposit parameters, which translates into a fall in productivity in the future. The estimates quoted in industry analyses indicate that in the extreme scenario, the permanent loss of production capacity may reach several hundred thousand barrels per day.

A visible signal of an increasing problem

Addressing a 30-year-old tanker to the role of a floating warehouse is not a systemic action, but rather an ad hoc measure. In practice, it shows that storage infrastructure and export opportunities have been under severe pressure.

From the energy market perspective, such activities are often considered as a signal that a country exporting oil enters a critical phase – when any additional day of operation of mining installations requires improvised logistics solutions.

In this case Old tanker does not solve the lack of storage space for oil. It can only briefly increase available storage capacity and delay the decision to limit production.

Source: Shanaka Anslem Perera