Japan's JX cuts 2014 Iran term crude import 27 pct -source

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* JX cuts to help Japan reduce 2014 Iran imports by 11 pct

* Cuts come as JX cuts contract volumes from other suppliers

By Osamu Tsukimori

TOKYO, March 14 (Reuters) - Japan's biggest refiner JX Nippon Oil & Energy has cut its annual crude contract with Iran by 27 percent, an industry source said, a move that will likely keep at bay any potential U.S. pressure over oil shipments from the Islamic republic.

Under the November deal that eased some of the sanctions directed at Tehran's nuclear programme, top oil clients China, India, Japan and South Korea were to keep their imports near end-2013 levels of an aggregate 936,000 barrels per day (bpd).

Together, though, the four took 1.25 million bpd in January, with increases in China and India outweighing on-year reductions from Japan and South Korea.

Indian government sources said this week that refiners there will have to cut their oil purchases by nearly two-thirds from first-quarter levels after a U.S. energy official reminded them that Iranian import volumes were not to rise.

That was the first clear sign of U.S. intolerance to higher exports from Iran, and came after India's January intake of Iranian crude doubled to 412,000 bpd from the previous month.

JX Nippon Oil & Energy, a unit of JX Holdings Inc, opted to cut its 2014 contract for crude from Iran to 53,000 bpd, from 73,000 bpd last year, said a source familiar with the matter who declined to be identified.

The cut was in keeping with reductions to contracts from other crude suppliers such as Saudi Arabia that come as Japan's domestic demand weakens and refiners close down crude units, said the source.

JX has cut its refining capacity nearly 600,000 bpd over the last five years due to Japan's shrinking home market and a government efficiency mandate.

"Iran crude is relatively expensive and JX is likely to reduce crude processing by about 3 percent this year, so I think JX cut Iran volumes considering those factors," said Osamu Fujisawa, an independent oil economist.

The reduction amounts to an annual loss of around $800 million for Iran at current prices, according to Reuters calculations.

The cuts of 20,000 bpd were slightly more than expected, with the source saying in September that JX would cuts its 2014 imports from Iran to around 60,000 bpd.

JX spokesmen declined to comment, citing confidentiality agreements with Iran.

Japan reduced Iranian imports by 6.2 percent to 177,414 bpd last year, compared with a 0.9 percent decline in total oil imports.

Even if other Japanese buyers lifted the same volumes from Iran this year as last year, the nation's imports would fall to 157,414 bpd, down 11 percent on year.

Tough measures introduced by Western powers in 2012 slashed Iranian oil exports by more than half, before an agreement on Nov. 24 eased some sanctions and allowed access to $4.2 billion in frozen oil payments in return for steps by Tehran to curtail its uranium enrichment activities.

Tehran denies claims from Washington and other Western capitals that its nuclear programme is aimed at building an atomic weapon, saying it is for power generation.

OTHER REFINERS

Other Japanese buyers of Iranian oil, which sign annual supply contracts starting in April, are likely to have already begun renewal negotiations, but the agreements may not come until later this month or next month, sources said.

The other companies include the refiners Showa Shell Sekiyu , Cosmo Oil Co and Idemitsu Kosan Co.

It is not yet known if the other Japanese refiners plan to reduce their contractual volumes or hold them level.

(Editing by Aaron Sheldrick and Tom Hogue)

FILED UNDER: Energy

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