Monday, January 24, 2005
BP rules out gas deals with Iran
James Boxell/ Kevin Morrison / London January 24, 2005
Any deal could prove to be offensive to the US and against its own interests.
BP has ruled itself out of any oil and gas deals with Iran because they would be “offensive” to the US government. The comments from Browne, the British oil group’s chief executive, came as George W Bush committed the US to ridding the world of undemocratic governments and in the same week that Condoleezza Rice, his new secretary of state, described Iran as an “outpost of tyranny”.
The US is BP’s biggest market by far in terms of sales and many of its assets are held in the country.
In an interview with Bloomberg Television, Browne said: “To do business with Iran at the moment would be offensive to the United States and therefore against BP’s interests. We are very heavily influenced by our American position.”
His comments were delivered during a period when some of the world’s biggest listed oil companies are exploring ways to win better access to resource-rich Middle East states to maintain reserves and production into the next decade.
Many traditional heartlands of the international oil companies are maturing and the industry’s recent exploration record has been poor.
However, Browne has argued that BP has enough opportunities for investment. The company is also helped by its joint venture in Russia, TNK-BP, which produces almost 1m barrels of oil a day.
Other western oil groups have ignored US sanctions and signed deals with Iran. Royal Dutch/Shell, the Anglo-Dutch energy group, France’s Total and Italy’s Eni are all active in the country.
However, western companies are unhappy with deal terms in Iran, because its constitution insists ownership of the fields remains with the government.
Under these “buy-back” deals, companies are repaid for capital investment and earn a profit once the field starts producing, before handing it back.
Western executives are critical because the deals are short-term and they like to extract more value over the life of a field.
However, companies are keen to maintain a presence in Iran in case they can win more favourable access in future.
A senior executive at a company active in the country said: “If the western companies don’t do it then the Chinese and Indians will.”
India and Iran recently signed a preliminary agreement, unofficially estimated to be worth $40 billion, that committed India to importing liquefied natural gas and developing two Iranian oil fields and a gas field.
Iran and China signed a deal that commits Sinopec, the Chinese state-owned oil group, to buying 250 million tonnes of LNG over 30 years and gives it a half stake in the Yadavaran oil field.