OREANDA-NEWS. April 20, 2012. China's Sinopec Shanghai Petrochemicals has processed no Iranian crude this year, a top official said, after its parent company cut imports from the Islamic Republic in a dispute over annual contract terms.

China, the world's second-largest oil consumer, is Iran's top crude importer, buying 20 percent of the Islamic Republic's exports. Iran is China's No. 3 oil supplier after the Saudi Arabia and Angola.

Last year, Sinopec Shanghai refined about 22,000 barrels per day of Iranian oil, accounting for about 10 percent of its total throughput of 220,000 bpd, Ye Guohua, the company's chief financial officer, told reporters at an earnings briefing.

"Originally, our plan was to use the same amount of Iranian crude this year as last year," Sinopec Shanghai's chairman, Rong Guangdao, said. "We import our crude through other companies such as Sinopec Group. But we have not received a single cargo of Iranian crude this year."

Sinopec Shanghai would be cautious about processing Iranian crude for the rest of the year due to the political sensitivities associated with imports from Tehran and to ensure supply security as sanctions make trading difficult with Tehran.

"Iranian crude currently is a rather sensitive subject. The U.S. is imposing sanction on Iran's oil export," Ye said. "This year, we will continue to be cautious about Iranian crude imports."

China, India, Japan and South Korea are the four biggest buyers of Iranian crude in Asia, and all of them have cut imports as the United States and Europe tighten sanctions to force the Islamic Republic to abandon its nuclear programme. That is making it hard for refiners to find shippers, insurers to underwrite trade and banks to clear payments.

China's Unipec, the trading arm of top Asian refiner Sinopec, and Zhuhai Zhenrong slashed imports from Iran by nearly half in the first quarter because of differences over terms of annual contracts.

From April, Unipec will start taking the same volumes it did last year, which effectively means a reduction of about 14 percent in annual imports.

China, Japan and South Korea have together cut imports from Tehran by 22 percent, or 279,000 bpd, to 940,000 bpd, in the first two months of the year, according to data compiled by Reuters.

China's crude imports from Iran fell 21.5 percent in the first two months to 395,000, according to customs data.

Of the total amount of crude the company processed last year, 52 percent was from the Middle East, nearly 20 percent from Africa, 11.6 percent from China, 9.69 percent from Russia, 5.7 percent from Latin America and the remaining from Indonesia.

"Iranian crude accounts for a relatively small portion of crude we use so we can easily find a substitute," Ye said.

The company's net profit plunged to 956 million yuan last year from 2.77 billion yuan in 2010 due to heavy refining losses as a result of China's control of domestic oil products prices and surging international crude prices.

The company also said petrochemical demand was hurt by a slowdown in China's property and automobile markets last year.