A GROWING fleet of ageing gas carriers is ferrying record amounts of propane and butane from Iran, skirting US sanctions meant to stymie Tehran’s revenues from petroleum and petrochemical exports.

While scrutiny of Iran’s energy trade tends to focus on oil exports and the dark fleet* of veteran tankers servicing that trade, its outflows of propane and butane have grown at a far faster pace in recent years.

Indeed, Iran’s exports of crude oil and condensates have increased substantially over the past four years and have recovered considerably since sanctions were reimposed in 2018 by the Trump administration.

However, exports of Iranian oil remain below pre-sanctions levels, according to data from tanker trackers at lobbying group United Against Nuclear Iran, known as UANI.

By contrast, its exports of liquefied petroleum gas — primarily propane and butane — more than doubled from 2018 to 2023, data from energy consultancy Facts Global Energy, known as FGE, shows.

According to FGE’s Middle East managing director, Dr Iman Nasseri, Iran exported about 11m metric tonnes of liquid petroleum gas by sea in 2023 — more than 5m mt over 2018 levels. He projects total exports will increase a further 600,000 mt this year.

The clandestine nature of Iran’s energy sector makes tracking cargo flows notoriously challenging, and estimates tend to vary between trackers. FGE’s Nasseri says he combines market intelligence with ship tracking data to reach his figures. Data from commodities and analytics data provider Vortexa suggests Iran’s LPG exports were closer to 9m mt in 2023, but the trend of surging exports is clear across datasets, nonetheless.

Most of Iran’s LPG exports are bound for China, where appetite for propane and butane has grown in recent years. Vortexa data shows China’s LPG imports  nearly doubled between 2016 and 2023 to over 30m mt.

The demand growth was driven by expanded petrochemical capacity, namely propane dehydrogenation plants, while big discounts on Iranian LPG increased its allure.

“China’s LPG import demand has primarily been driven by its ambitious addition of propane dehydrogenation plants, known as PDH, and ethylene crackers, and to a lesser extent, its residential, industrial, and commercial demand,” Serena Huang, head of Asia-Pacific analysis at Vortexa, explained.

“China boasts the largest PDH capacity of 17mt per year as of end 2023.”

This increased petrochemical feedstock demand has been fed almost entirely by an increase in Iranian exports, and incremental US volumes, FGE’s Nasseri said. 

Meanwhile, Iranian production of natural gas liquids grew alongside gas output from the South Pars field, where nearly 90% of Iran’s export originate, according to Nasseri.

Phase 11 of the South Pars field started last August and has reportedly reached 11m cubic metres of production, Vortexa’s Huang said. It is expected to continue increasing its production through this year.

China is Iran’s most enthusiastic buyer for both oil and LPG. According to Vortexa, about 91% of propane and butane that left Iran by sea between 2022 and 2023 made its way to China, while UANI says China accounted for roughly 80% of Iran’s seaborne oil exports during that period.

LPG’s smaller role in filling up Iran’s coffers perhaps may explain why it appears to receive less scrutiny than Tehran’s oil trade. It is also much easier to obfuscate the origin of LPG cargoes.

“An LPG cargo is an LPG cargo; you cannot tell if it came from Oman or Iran,” Nasseri explained. That is different from crude or condensates, where the origin is distinguishable, at least until it’s blended with other grades.

“Once someone changes the certificate of origin, no one can ever tell where the LPG came from.”

There were at least 49 gas carriers, totalling 1.75m dwt, shipping Iranian LPG in 2020, including vessels loading cargo through ship-to-ship transfers, according to Vortexa and Lloyd’s List Intelligence data.

Those figures grew to 77 ships of some 3m dwt by the end of last year. Panama currently flags the majority of ships that lifted Iranian LPG in 2023, although at least five of the VLGCs that were involved in the trade last year have switched flags recently to Cook Islands.

Accurately calculating Iran’s revenue from oil sales is notoriously tricky, but UANI estimates Iran’s sales of crude and condensates generated more than $90bn since January 2021.

Just like oil, Iranian LPG is sold at a discount to compensate for the risk and hassle borne by the buyer. These discounts also played a key role in expanding Iran’s exports to China.

A June 2023 FOB contract from Iran’s Kangan refinery — leaked by dissident website WikiIran alongside a trove of documents related to sanctioned petrochemical broker Triliance — shows the producer was offering refrigerated LPG cargoes at discounts of $90.5 per tonne vs the Saudi Aramco Contract Price, for a total quantity of 260,000-352,000 metric tonnes. That translates to between six and eight voyages for VLGCs carrying 44,000 mt of propane and butane.

At the beginning of 2021, sellers were offering discounts of $130-$170 per tonne for pressurised cargoes and $30-70 per tonne for refrigerated cargoes, Nasseri said. These have increased as far as $420 per tonne for pressurised and over $100 per tonne for refrigerated cargoes in 2022, facilitating a surge in exports.

“That’s when you see Iranian exports jump by over 2m mt,” he explained. “Before that, Iran was only exporting around 5m mt. Those discounts created new markets for them.”

Discounts narrowed last year before expanding again towards its end, according to Nasseri. They entered 2024 at about $160 and $70 per tonne for pressurised and refrigerated cargoes respectively.

Nasseri estimates Iran’s LPG exports generated about $6bn in revenue last year based on total volume shipped and the average price, although he caveated that as a rough estimate. Overall, Iran exported about $65bn of oil, condensates, products, and LPG last year, he estimates, implying the latter constituted about 9.2% of revenues.

Layers of obfuscation

Much like the fleet carrying its crude exports, corporate structures behind ships in the Iranian gas carrier fleet are opaque and ownership is difficult to determine. The vessels routinely employ deceptive shipping practices, like manipulating their Automatic Identification System, to conceal loadings in Iran.

A vast expansion of Iran’s “middlemen” networks, who get a cut off the cargo discounts and help obfuscate the LPG’s origins, was instrumental to the export surge, Nasseri said.

Similarly, the Iran-trading fleet grew through Iranian entities acquiring ships using offshore intermediaries and fronts, masking the true beneficial ownership and connections to Iran. Some of this growth also came from shipowners with a healthy risk appetite who are willing to employ older ships on sanctioned trades.

Beyond the use of deceptive practices, the fleet ferrying Iranian LPG also has a shoddy safety record, illustrated by a disproportionate representation in port state control inspections.

There were 72 detentions of LPG carriers in all PSC inspections between 2022-2023, according to Lloyd’s List Intelligence data. Despite accounting for a fraction of the global LPG carrier fleet, 22 of the gas carriers that carried Iranian LPG during that period accounted for 31 detentions, or about 43% of all detentions globally.

Meanwhile, the fleet is also older than the global average. While LPG carriers can work safely for longer than tankers, it is highly unlikely that an oil and gas major would charter an LPG carrier of more than 20 years of age.

The 77 gas carriers that lifted LPG from Iran last year average just over 25 years of age, according to data from Vortexa and Lloyd’s List Intelligence, while the median age is 27.

In November, a Lloyd’s List investigation exposed a fleet of more than a dozen gas carriers plying those trades linked to a UK restaurateur.

The most senior vessel in the fleet was the 1972-built White Purl (IMO: 7230666), which went ablaze off the coast of Assaluyeh, Iran, in August last year at the tender age of 51. The crew was able to escape unharmed, local media reported.

Ahead of the casualty, White Purl spoofed its AIS to indicate it was near the island of Abu Musa, hundreds of miles from where it anchored off Assaluyeh.

The veteran LPG carrier was sent to scrap in October, ending its unusually long career.

The aforementioned UK-linked fleet carried nearly 5.8m mt of propane and butane between 2022 and 2023, accounting for about 34.5% of Iran’s exports, according to Vortexa.

One vessel, the 2000-built, Danuta I (IMO: 9193721),was especially prolific over the period, shipping almost 900,000 mt of Iranian propane and butane.

Lloyd’s List Intelligence data show the vessel most recently spoofed its AIS location between February 11-20, signalling it was off Sharjah, UAE.

Documents leaked by WikiIran provide a glimpse into the obfuscation efforts behind Iran’s LPG trades. Invoices and letters of indemnity show how sanctioned Iranian entities use offshore shell companies to conceal ownership of vessels and origin of cargoes. 

For instance, demurrage invoices for the VLGC Gas Leader (IMO: 9114581) were drafted and sent to buyers by PGPICC employees but the letterheads were of Hong Kong-based companies with bank accounts in China. PGPICC was sanctioned by the US in 2019.

Emails concerning payments often carried warnings against using the Swift banking system for USD transactions.

“In no circumstances, buyers should not use the Swift payment system and the remittance should be conducted only through domestic and NRA accounts,” emails sent by PGPICC employees cautioned.

It continued: “For foreign companies that have opened accounts in the Chinese banks, when they want to transfer funds in domestic or NRA accounts, they should have a legal address in China and they should not use the Swift payment system for the remittance.”

* Lloyd’s List defines a tanker as part of the dark fleet if it is aged 15 years or over, anonymously owned and/or has a corporate structure designed to obfuscate beneficial ownership discovery, solely deployed in sanctioned oil trades, and engaged in one or more of the deceptive shipping practices outlined in US State Department guidance issued in May 2020. The figures exclude tankers tracked to government-controlled shipping entities such as Russia’s Sovcomflot, or Iran’s National Iranian Tanker Co, and those already sanctioned.

Download our explainer on the different risk profiles of the dark fleet here