The Strategist

US allows Iran to extract gas in the North Sea

10/10/2018 - 15:46

The US Office of Foreign Assets Control (OFAC) has licensed British companies BP and Serica to develop the large Rhum gas field in the North Sea, in which 50% is owned by the National Oil Company of Iran (NIOC). Now the British can work with the NIOC to develop the field without fear of US sanctions. However, in accordance with the sanctions regime, the funds owed to the Iranian side will be credited to a special account, which cannot be used until the sanctions are lifted.

Olav Gjerstad
Olav Gjerstad
British Serica Energy announced obtaining the license from OFAC. The company clarified that OFAC assured BP and Serica that development of the large gas field Rhum together with the Iranian NIOC, which owns 50% of it, will not entail American sanctions. This applies both to the actual British operations of BP and Serica, and to the activities of their US divisions. The OFAC license is valid until October 31, 2019 and may subsequently be renewed upon request from the UK side. According to Platts, the provisional license for a period up to November 4 was issued by the Americans last week.

The Rhum field is located 400 km off the coast of Scotland at a depth of 110 m. It was discovered in 1977; 50% of the field are owned by BP, and 50% - by the National Oil Company of Iran. Recoverable reserves amount to 23 billion cubic meters, gas production began in 2005, planned production is 8.5 million cubic meters per day. Gas supplies from the Rhum field account for 3% of all gas supplies to the UK. From 2012 to 2014, due to US sanctions against Iran, the field was already forced to suspend its operation. In November 2017, Cerica signed an agreement on the purchase of a BP share in the Rhum field. The transaction is expected to be closed by November 30 of the current year.

However, until the US removes sanctions against Iran, the Asian country will not be able to get money from selling gas from the Rhum field. In accordance with the sanctions regime, the Iranian share will be transferred to a special account that Iran will not be able to use until the sanctions are lifted. Serica Energy notes that “in accordance with the US sanctions, neither the Iranian National Oil Company nor its divisions will be able to receive economic profit from development of the Rhum field in a specified period. In addition, in the agreed period, the Iranian oil company will not have any decision-making authority with respect to this field. ”