“Asian countries not applying the embargo could buy the Iranian oil at a discount and sell cheap refined products back to us,” Piero De Simone, general manager of Unione Petrolifera, said in an interview with Bloomberg.
“Italy already risks the closure of five refineries and at a European level we’re talking about 70 possible shut downs.”
The European Union this week agreed to ban oil imports from Iran starting in July. The policy comes as refiners fight overcapacity and falling fuel demand. Petroplus Holdings AG, which has five plants across Europe, declared insolvency after banks called in loans.
While European refiners should replace Iranian imports with expensive oil, De Simone says he is concerned Asian refiners will use cheap Iranian crude to undercut competitors.
“The Iranians will have to unload their production somewhere and I’m sure they’ll find buyers,” he said.
“The last thing we need is more unfair competition. Either we do something at a European level or we risk a precipitous end similar to Petroplus’s for many European refineries.”
Italy, Spain and Greece combined accounted for about 68 percent of EU imports from Iran in 2010, European Commission data show, with Italy getting about 13 percent of its oil from Iran, according to Unione Petrolifera statistics.
De Simone said smaller and older plants which specialize in the heavy kind of oil Iran provides will be the hardest hit. Italy currently has production capacity of about 103 million tons of fuel a year, while internal demand is around 74 million tons, he said, a gap equal to about four or five small refineries.
“What we’ll likely see over time is that only the large refineries, particularly the ones able to make diesel which is increasingly in demand will survive, and it still won’t be easy,” he said.