US oil companies to sit out rush to Iran

OREANDA-NEWS. July 16, 2015. US oil companies will remain sidelined as their foreign competitors queue up to do business in a post-sanctions Iran.

While the US' secondary, "nuclear-related" sanctions imposed on Iran will be suspended sometime after 15 December under a comprehensive nuclear agreement reached between Iran and global powers. That means the US will no longer threaten to impose sanctions on the banks in countries that buy Iranian oil.

But the US trade embargo on Iran will remain in place. US sanctions imposed because of concerns over alleged support of terrorism or human rights abuses likewise will continue.

"US persons and banks will still be, generally, prohibited from all dealings with Iranian companies, including investing in Iran, facilitating third country trade with Iran," a senior US administration official said yesterday.

The trade embargo will be eased slightly to allow US companies to import food and carpets and to enable US companies to ship aircraft and parts to Iran. But restrictions on the US energy sector will continue.

The nuclear agreement does not "appear to end sanctions barring US investment in Iran's oil sector, nor does it seem to end sanctions that would allow US refiners to buy Iranian crude," research firm ClearView Energy Partners said in a report.

US secretary of state John Kerry yesterday acknowledged that US companies will be at a disadvantage to their foreign counterparts.

"With respect to companies that want to rush to do business in Iran, it is absolutely true that because of the embargo by the US, American companies will not be part of that rush – unless specifically exempted, and very few are," Kerry said.

Kerry said that is an issue that Congress will have to consider, over time, changing. But animosity toward Iran always runs high on Capitol Hill, and skepticism over the nuclear agreement is dominating sentiment there now.

So prospects appear remote that lawmakers will remove the trade embargo anytime in the near or medium-term.

US oil companies reacted cautiously to the announcement. Chevron said it is "reviewing the agreement to fully understand its implications for the energy industry and the company. In the meantime, we remain in strict compliance with existing US and international laws and regulatory frameworks that govern commercial activity with Iran."

Shell, Total, Italy's Eni, Russian firm Lukoil and China's state-owned CNPC have been among Iran's early suitors.

The prize for international majors is compelling. Iran's proven crude, condensate and NGLs reserves total 157.8bn bl as at the end of 2014, according to the BP Statistical Review, the fourth largest in the world.

The nuclear deal has given new impetus for US producers' call for Washington to lift its decades-old restrictions on US crude exports.

"We are assessing how this development might impact US oil and gas companies relative to the global markets in which they operate," said ConocoPhillips, one of the companies that is part of the Producers for American Crude Oil Exports group lobbying to lift the export ban. Oil major ExxonMobil did not respond to email seeking comment.

During the nuclear talks, Iran's oil exports have been limited to 1mn-1.1mn b/d, down from 2.5mn b/d before the sanctions were imposed. But Iranian oil minister Bijan Namdar Zanganeh has said that with the lifting of sanctions his country will be able to ramp up production quickly. Iran produced 2.85mn b/d in June, tied with the UAE as Opec's third largest oil producer.

Industry trade group the American Petroleum Institute said the agreement "brings into sharp focus the importance of preserving America's competitive position as the world's top oil and gas producer. By lifting our own self-imposed sanctions, we can give US producers the same access to global markets."