Shell Exploration BV raised the hackles of the US Department of State (DOS) with the announcement of an $800 million redevelopment deal with Iran.
Washington's Iran-Libya Sanctions Act (ILSA) of 1996 requires the department to impose sanctions on any company that invests more than $20 million in Iran or Libya.
A Shell official told OGJ that DOS is launching an investigation into the Shell-National Iranian Oil Co. deal and that the process is expected to take "some time."
On Nov. 14, Shell signed an agreement with NIOC to redevelop the Soroosh and Nowrooz oil fields, which lie in shallow waters 80 km west of Kharg Island in the Persian Gulf.
A DOS official told Reuters that, while it will take time to decide whether to impose sanctions, the administration can waive sanctions or postpone a decision pending consultations with the company.
Precedent
There is a precedent for waiving sanctions: TotalFina SA secured development projects in Iran's South Pars and Sirri fields in the face of US concerns (OGJ, Oct. 6, 1997, p. 31).
Like TotalFina, Shell has been negotiating with Iran in the period since the US imposed sanctions. The company's understanding, after consulting the British and Dutch governments and the European Union, is that ILSA is not applicable.
The Shell official added that US subsidiary Shell Oil Co. would have no involvement with the NIOC deal and would not provide either capital or expertise for the project.
Meanwhile, according to DOS official, the fact-finding process could take months; then the department would make a recommendation to Sec. of State Madeleine Albright, who then could decide on 90 days of consultations with the company: "In short, nothing happens for a long time."
Yet work in Soroosh and Nowrooz is slated to begin immediately, and the project team is already being assembled. Meanwhile, Shell is studying Iranian Caspian Sea exploration prospects in a joint venture with Lasmo PLC, London, and NIOC; holds a crude oil purchasing agreement with NIOC; and has submitted a proposal for the South Pars Phases IV and V developments.
Development plan
Soroosh and Nowrooz were brought into production in 1967 and 1970, respectively, but were both damaged extensively in 1983 during the Iran-Iraq war.
Soroosh was shut in but Nowrooz currently produces 5,000 bo/d. Shell aims to begin early production from Soroosh after redevelopment in autumn 2001 and full production from both fields 2 years later.
The fields will be redeveloped jointly. In Nowrooz, Shell will install a production platform and separate wellhead and quarters platforms, while in Soroosh, it will install two production platforms, two separate wellhead platforms, and a quarters platform. The new production platforms will be tied back to a floating storage unit to enable exports of crude by shuttle tanker.
Soroosh has estimated reserves of 500 million bbl of oil and Nowrooz reserves are estimated at 550 million bbl. Shell intends to raise production from Soroosh and Nowrooz to 100,000 bo/d and 90,000 bo/d, respectively.
