* Iran ordered boost in oil output after sanctions lifted
* European firms want governments to take lead on legal
issues
* Market players see European firms resuming imports this
year
By Dmitry Zhdannikov
DAVOS, Switzerland, Jan 21 (Reuters) - European companies
and trading houses are not rushing to buy Iranian oil because of
legal uncertainties over the lifting of sanctions that are
likely to take weeks to clarify.
A lack of dollar clearing, the absence of an established
mechanism for non-dollar sales, insufficient clarity on ship
insurance and the reluctance of banks to provide letters of
credit to facilitate trade are all giving cause for caution.
Iran used to sell as much as 800,000 barrels per day (bpd)
to European refiners in Italy, Spain and Greece before sanctions
over its nuclear programme were imposed. European markets have
since then been inundated with extra oil from Saudi Arabia,
Russia and Iraq.
Iran ordered a 500,000-bpd increase in oil output, of which
200,000 bpd will go to Europe, after the nuclear-related
international sanctions were lifted on Saturday. But many
European firms are wary of violating other sanctions that were
imposed by the United States and have not been lifted.
Russian oil major Lukoil's LKOH.MM chief executive, Vagit
Alekperov, said it was still not clear whether the company's
refineries in Italy or the Netherlands were free of legal risks
to buy Iranian oil.
"It is all clear on the petrochemical side. We can transfer
the money and buy and sell their products. On the crude side,
our lawyers are looking into this," he told Reuters Television
on the sidelines of the World Economic Forum in Davos.
Marco Dunand, chief executive of Swiss trading house
Mercuria, also believes Iranian oil imports into Europe remain
complicated.
"As a European citizen, I can probably trade it again
provided I don't use U.S. dollars. But then if you use a
euro-dollar conversion, does it become a grey (uncertain) zone?"
he said.
Dunand said a lot of additional explanatory work needed to
be done by European governments on how ship insurance and
banking would now work before imports to Europe resume.
An executive from a European firm which was a big buyer of
Iranian oil before the sanctions were imposed said it could take
weeks to clear up many aspects.
"Up until Monday, banks and ship insurers were simply
refusing to have any conversations about this," he said.
Another senior oil executive at the Davos meeting said his
firm would eventually resume imports from Iran but was still
exercising caution due to a lack of clarity.
OLD CUSTOMERS
Market players, however, expect that companies which bought
Iranian crude before the sanctions - such as Royal Dutch/Shell
RDSa.L , Total TOTF.PA , Eni ENI.MI , Hellenic Petroleum and
traders such as Vitol and Glencore GLEN.L - will resume
purchases at some point later this year.
Iran has stored 40 million barrels of crude in tankers and
has said it is keen to regain its former customers, even as oil
prices keep falling due to global oversupply.
After the initial export boost, Iran hopes to raise output
further - by as much as 1 million bpd within a year - and
attract more investments from oil majors in the future.
Lukoil's Alekperov said he believed it would take five to
seven years for Iran to boost output significantly and that this
would happen only if the Islamic Republic put the right
legislation in place to compete for investments.
"All of Iran's oil-producing equipment needs to be
modernised, its oil fields require investment... Unfortunately,
Iran has not come up with the legislation yet... They need to
make a competitive offer," he said.
Iran would in effect be competing for investment with
producers such as Mexico and Norway which are looking to develop
new fields, he said.
Total and Eni have also said they would invest in Iran only
if Tehran offered attractive terms materially different from its
previous buy-back schemes or Iraq's servicing contracts, which
made many companies no money.
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Oil major's stock performance in 2016 http://link.reuters.com/fud33w
Iran's crude oil production http://link.reuters.com/fud33w
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(Editing by Alexander Smith and Timothy Heritage)