ARCO AND SUN AGREE TO SETTLE IRANIAN CLAIMS

ARCO and Sun Co. Inc. have agreed to separate settlements totaling almost $261 million that resolve their claims over oil field assets expropriated by Iran in 1978-80.

The agreements are subject to approval by the Iran-U.S. claims tribunal at The Hague. The tribunal was set up in 1981 to resolve foreign claims to assets nationalized by the government of Ayatollah Khomeini following the fall of the Shah of Iran as a result of the 1978-79 Iranian revolution.

The settlements are seen as the latest steps Iran has taken to normalize relations with the U.S., notably through petroleum related deals.

Last year Iran's National Iranian Oil Co. (NIOC) resumed oil sales to the U.S. after it signed agreements for supply of 110,000 b/d to Coastal Corp.'s Aruba refinery and almost 20,000 b/d of heavy crude to Mobil Oil Corp. (OGJ, May 6, 1991, Newsletter). The U.S. Treasury Department, during Operation Desert Storm's push to expel Iraqi forces from occupied Kuwait, in January 1991 relaxed its total embargo on crude imports from Iran by allowing U.S. companies to apply for special import licenses.

ARCO SETTLEMENT

ARCO is to receive $130.45 million in the fourth quarter as settlement of its last remaining dispute with the Iranian government and NIOC over seized assets.

In this last case, the dispute centered on interests ARCO and its ARCO Exploration Inc. unit held in offshore oil operations of Lavan Petroleum Co. (Lapco) in Iran. Lapco, a joint venture of four U.S. oil companies and NIOC, operated Sasan oil field, which at the time produced about 200,000 b/d.

ARCO, Sun, Unocal Corp., and Murphy Oil Corp., each held 12.5% interest in Lapco, with NIOC holding the remaining 50%. Unocal and Murphy settled with Iran and NIOC in 1986 for about $36 million each.

Those interests and other rights and assets ARCO had in Iran were expropriated in 1978-80. Three ARCO subsidiaries filed claims for the losses with the tribunal.

In one case, the tribunal awarded $18 million to Anaconda Iran Inc. but still must decide what if any damages should be awarded regarding Iran's counterclaim in the case.

In the second, ARCO received $9 million in December 1990 in a settlement of disputed oil interests.

SUN SETTLEMENT

Sun also is to receive $130.45 million in the fourth quarter to resolve all disputes with Tehran and NIOC over expropriation of production interests in Iran after the revolution.

The settlement resolves claims and counterclaims Sun pressed before the tribunal on behalf of its Sun International Ltd. and Iranian Sun Oil Co. subsidiaries. Sun estimated the payment will boost fourth quarter income by about $115 million after taxes.

BACKGROUND

Two agreements signed at Algiers in January 1981 established a means for settling claims between Iran and the U.S., including setting up the tribunal with binding arbitration power (OGJ, Jan. 26, 1981, p. 118).

In all, the tribunal has awarded more than $2 billion in claims.

Several thousand claims were filed, with oil company claims among the biggest and about $7.6 million paid to the first 12 claimants (OGJ, Nov. 22, 1982, Newsletter). The first substantial single claim award by the tribunal was $15 million paid to Reading & Bates Drilling Co. and its London insurers for a confiscated jack up rig (OGJ, Feb. 6, 1984).

Among other significant petroleum related claims, the tribunal awarded:

Chevron Corp. and subsidiary Gulf Oil Corp. $115 million for interests they held in a 14 company group operating as Oil Services Co. of Iran (OGJ, Jan. 27, 1986, Newsletter).
Kuwait Petroleum Corp.'s Santa Fe International Corp. unit $19 million (OGJ, Mar. 10, 1986, p. 37)..
Phillips Petroleum Co. Iran $55 million plus interest for its one-sixth interest in two offshore oil fields (OGJ, July 10, 1989, p. 31). A later settlement of $92 million, net of a counterclaim by Iran for oil Phillips lifted under contract, settled all the company's claims and counterclaims (Jan. 29, 1990, p. 34).
Amoco Corp. $600 million to settle all claims stemming from seizure of assets in 1978-79 (OGJ, June 25, 1990, p. 32).
NIOC a settlement of $13 million from Mobil Oil Corp. for crude liftings net of Mobil's claims for expropriated onshore interests (OGJ, Dec. 3, 1990, p. 40).