Oil companies poised for deals in Iran
PARIS, March 4 (UPI) -- In what are seen as new, emerging blows to U.
S. government efforts to block large-scale oil investments in Iran, Western
European, British and Canadian oil companies are on the verge of signing
multi-billion dollar oil and gas deals in Tehran.
Industry and diplomatic sources say if deals now in the final stages
of negotiation go through, U.S. oil companies seeking business in Iran
will be left handicapped and on the sidelines, possibly for several more
years.
John Lichtblau, president of the New York-based Petroleum Industry Research
Foundation, said Washington had no support at home or abroad for its policy
of isolating Iran by prohibiting energy investments there.
``The victims are American oil companies and their related business,''
he told United Press International. He and oil company executives predict
there won't be good news for U.S. oil companies until the Iran- Libya Sanctions
Act that seeks to isolate Iran expires in 2001.
Meantime, some 30 companies from nearly 20 countries, mainly in the
European Union but also in Asia and Latin America, have submitted proposals
for oil and gas development in Iran.
At least one project for offshore oil development involving British
and Canadian companies may be signed shortly, probably before the end of
this month.
A senior London-based executive of Britain's independent Premier Oil,
who is also the leader of the project worth about $200 million, said today
that signing with Iran was imminent. He added that the deal would involve
developing the offshore Balal oil field to produce as much as 40,000 barrels
of oil daily. Neither Premier nor its partner, Canada's Bow Valley Energy,
seem worried about how Washington might react.
In Calgary, Dinesh Dattani, Bow's vice president for finance, said ``we
are a small company, with no U.S. interests, and we are proceeding in Iran
as quickly as we can,'' adding that everyone in the industry was monitoring
Washington's reaction to the agreement signed in Tehran on Monday, the
second involving a large French oil company.
The most recent agreement with the National Iranian Oil Company commits
France's oil company Elf Aquitaine and Italy's ENI to redevelop the large
offshore Dorood oil field in the Persian Gulf. The goal over 10 years is
to raise its reserves from 600 million barrels of oil to 1.5 billion barrels,
while substantially raising daily output. Elf's Iranian subsidiary will
be the operator with a 55 percent stake in the joint venture. The company
estimates the total cost of the project at around $998 million, including
capital expenditures of $540 million, financial charges and payments to
the consortium.
Despite a warning Tuesday by a U.S. State Department spokesman that
the agreement might lead to sanctions under the Iran-Libya Sanctions Act,
which prohibits any company from investing more than $20 million in either
country's energy sector, not only Elf but other non-U.S. oil companies
told UPI they are planning to defy the U.S. law. Some of the companies
contacted in the past few days said they were counting on a waiver from
the Clinton administration, arguing that Washington had no right to apply
its laws to non-American companies based abroad, and that one waiver for
a French oil company had already been granted.
``We have been told, and are confident, that we can expect the same
treatment as Total,'' France's other large oil company, said Thomas Saunders,
a Paris-based Elf spokesman. He was referring to an agreement reached last
May between the European Union and the Clinton administration that allowed
Total and its Russian and Malaysian partners to implement a $2 billion
contract for gas exploration that had been signed in 1997, also in defiance
of the U.S. law.
But following long and difficult negotiations, the administration granted
a waiver on sanctions against Total, the operator, after EU leaders agreed
to cooperate with Washington in helping curb possible Iran-led terrorism
and in preventing Iran from acquiring weapons of mass destruction.
That agreement still holds and thus the French-Italian consortium should
also be granted a waiver, along with other non-American companies preparing
to sign deals, diplomatic and industrial officials in EU countries and
North America told UPI. Other companies that have submitted proposals for
developing Iran's oil and gas fields include Royal Dutch Shell, BP Amoco,
both with predominant British shareholding, and Los Angeles-based Arco.
Some awards involving non-U.S. companies are expected to be announced
by March 20, the end of the Iranian year, according to the Petroleum Intelligence
Weekly newsletter, published in New York. There is widespread industry
speculation that Shell will be among them, supported by Iran's moderate
President Mohammad Khatami, who views the contracts as a way of bringing
in badly-needed oil revenues while boosting Iran's role as a major oil
producer. BP recently opened a Tehran office, industry sources said.
Despite the current low level of world oil prices -- Iran's light crude
has been selling at about $6.50 a barrel on the spot market -- companies
say deals in Iran make business sense. According to industry analysts,
the recent collapse of energy demand in Asia seems to have bottomed, while
strong economic growth, particularly in the United States and to a lesser
degree in Europe, means that the world oil glut will shrink substantially,
meaning a potentially profitable market for Iranian oil.
Given the relatively low costs of developing oil and gas in Iran, the
PIW newsletter reports that it offers high rates of return even at current
oil prices, averaging an estimated 20 percent annually at the Balal field
and between 13 percent and 18 percent at the Dorood field. Companies are
being paid through buyback contracts that reimburse companies for supplying
capital and technology in the form of crude oil or gas.
Meantime, although U.S.-Iranian relations have improved slightly since
President Khatami was elected two years ago, the sanctions law is still
on the books, while some hard-line Iranians remain hostile.
``The deal (signed with Elf and ENI) is yet another success for Iran
in boosting political and economic relations with other countries and defeat
for the White House to isolate our country through sanctions,'' an Iranian
state radio commentator said earlier this week.
Meantime in Washington, the State Department has repeatedly said it
remains ``strongly opposed'' to oil and gas investments in Iran, that the
Elf-ENI deal will be carefully examined, and that a waiver was by no means
automatic.
Administration sources have indicated that sanctions may still be applied
to Elf, because, unlike Total, it has substantial oil and chemical interests
in some 50 locations in the United States that would be vulnerable to possible
punitive action under the law.
If Washington were to move against Elf or ENI, it would trigger immediate
protests from the French government and the European Commission in Brussels,
the EU's executive body, and possible retaliation against U.S. interests
in the 15-nation EU area, diplomatic sources said.
``I don't believe any of us in the EU want a new trade war over Iran,
'' a senior French official said, adding ``we notified the State Department
of what Elf was doing beforehand, believing firmly that improving economic
and cultural links is by far the best way to stabilize the situation in
Iran.''
Links
