By Benoit Faucon and Sarah Kent
LONDON -- Royal Dutch Shell PLC on Wednesday said it had signed
an agreement with Iran's state oil company to explore future
projects, signaling that giant energy companies are unlikely to be
deterred by President-elect Donald Trump's pledge to undo the Iran
nuclear deal.
Shell is the largest company to wade back into Iran since the
U.S. and other world powers lifted sanctions in January in exchange
for Tehran putting strict limits on its nuclear program. The
British-Dutch firm follows France's Total SA, which last month
signed a $4.8 billion deal to develop a large natural-gas field in
Iran and now is negotiating an oil deal.
Wednesday's agreement could help open a new chapter in the
turbulent history of Iran's oil sector, which has been marked by
waves of nationalizations and successive sanctions. Shell halted
most of its activities in Iran in 2010.
Shell, Total and other companies looking to bet again on Iran
face potential risks from an incoming Trump administration. Mr.
Trump has called the Iran nuclear pact a "disaster" and "the worst
deal ever negotiated." He has vowed to renegotiate it or pull out
altogether.
The president-elect has aggressively confronted corporate
decision makers, singling out companies that plan to move jobs to
Mexico and on Tuesday calling out Boeing Co. for apparent cost
overruns in building a new Air Force One jet.
That hasn't fazed Western companies even outside the energy
industry, which also have stepped up efforts to return to Iran
since Mr. Trump's election.
Last month, French aircraft manufacturer Airbus Group SE got the
Obama administration to back the export of more than 100 jetliners
to Iran. On Friday, Faurecia SA, an affiliate of French automotive
giant Groupe PSA, signed two joint ventures to make car parts with
Iranian companies.
Mr. Trump's transition team didn't respond to requests for
comment on Wednesday.
American companies remain largely prohibited from doing business
in Iran because the U.S. government still bans many transactions in
dollars with the country. Separate U.S. sanctions on Iran over
terrorism, human rights and weapons have impeded investment. In
addition, foreign oil companies are concerned with the terms Iran
wants to impose on joint projects.
Iran has complained that the remaining U.S. restrictions have
made European companies too cautious about returning and have
stunted the flow of foreign investment expected from the nuclear
deal. Until the Shell and Total deals, few big energy companies had
made any commitments in Iran.
Iranian President Hassan Rouhani has intensified a push to sign
deals with high-profile companies since Mr. Trump's victory to
bolster his own chances in presidential election in May next year,
said Roozbeh Aliabadi, managing partner at Global Growth Advisors,
who advises foreign companies investing in Iran.
"They are desperately looking for success stories," Mr. Aliabadi
said. The Rouhani "administration is pushing for big names to be
vocal about their interest for Iran without demanding an immediate
commitment to invest."
The scope of Shell's deal remains unclear. A Shell spokesman
said the firm and the National Iranian Oil Co. signed a memorandum
of understanding to "further explore areas of potential
cooperation." The agreement is nonbinding and doesn't come with an
investment commitment, unlike Total's deal.
Earlier on Wednesday, the Iranian oil ministry said it and Shell
were examining agreements to develop two large oil fields that
could give a big boost to the country's output. Shell didn't
confirm those talks.
Shell has said it would proceed with caution as it mulls
re-entering Iran.
Saying that Iran has "fantastic resources," Shell CEO Ben van
Beurden told The Wall Street Journal last month that the company
would "only want to take significant investment risk if we see
reasonable stability of [Iran's] legal status and -- equally
important -- we will only engage in projects that do make economic
sense."
Both Total and Shell have substantial American operations. That
means they must be mindful of U.S. policies. But their recent moves
suggest the companies believe they can build ties with Iran and
handle any fallout with the incoming Trump administration.
Speaking to reporters last week, Arnaud Breuillac, Total's head
of exploration and production, said he was "not particularly"
worried about a Trump administration impeding his company's Iran
plans. The comments came after Mr. Breuillac met Iran's oil
minister Bijan Zanganeh in Vienna.
Shell's announcement comes a week after the Organization of the
Petroleum Exporting Countries agreed to cut production in a move to
rebalance global oil supply in line with demand. Oil prices have
surged since the deal, lifting hopes of a sustained oil market
rally and new investment in the beleaguered energy industry.
Iran's oil ministry said Shell was interested in developing the
South Azadegan and Yadavaran oil fields and the Kish gas field. The
two oil fields are among the largest oil discoveries of the past 20
years, said Homayoun Falakshahi, Middle East research analyst at
energy consulting firm Wood Mackenzie.
Azadegan is the largest field in Iran. Combined, the two fields
have recoverable resources of 8.2 billion barrels -- the equivalent
of 15% of the proved crude reserves in the U.S.
Shell will have stiff competition for those fields. State-owned
China Petroleum & Chemical Corp., known as Sinopec, already
operates Yadavaran and is negotiating the second phase of
development there. Total is also studying South Azadegan.
Even trickier, Shell or any other company selected to develop
those fields would likely have to become partners with local
Iranian oil companies. A unit of the hard-line Iranian
Revolutionary Guard is vying for South Azadegan, and Shell would
likely run afoul of current U.S. sanctions if it partners with the
corps.
"As in all cases, we will comply with all relevant laws," a
Shell spokesman said.
Shell was among a handful of Western oil companies to re-enter
Iran as the nation opened its oil sector to foreign companies back
in the 1990s, more than a decade after the country had kicked them
out following the Islamic Revolution. Moves to expand investment
were ultimately stymied by tightening sanctions.
Shell's interest in Iran comes at a time when the oil giant is
retrenching in other regions. The company is in the midst of a $30
billion divestment plan that could see it exit as many as 10
countries, completing a transformation into a liquefied-natural-gas
and deepwater-production behemoth following its acquisition of BG
Group earlier this year.
Inti Landauro contributed to this article
Write to Benoit Faucon at benoit.faucon@wsj.com and Sarah Kent
at sarah.kent@wsj.com
(END) Dow Jones Newswires
December 07, 2016 15:49 ET (20:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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