The Bush administration has received a shock when Shell struck an important deal to help Iran for developing a major gas field. The US State Department has reportedly stated that the US authorities will take a look at the controversial agreement that could lead to a multi-billion investment in Iran. The recent deal has grossly ignored the growing pressure from George Bush to isolate Iran. However, this deal is vital for Royal Dutch Shell as it is struggling to thrust momentum to its business as the company was recently forced to hand over a very important and huge Russian reserves at Sakhalin.
Shell has confirmed that it has finally reached an agreement on various aspects of its Persian LNG project located around South Pars field. However, it further clarified that it is still a year away from a final decision for whether to go ahead with the multi-billion project to build a liquefied natural gas terminal with a capacity of producing 8m tones a year. Therefore, implementation of the upstream service agreement is subjected to the final decision to proceed with the project.
The Shell has decided to take this bold move after its core rival BP has confirmed its unwillingness to invest in Iran. BP has preferred to remain away due to the international political climate is not conducive for an investment.
It is a known fact that the U.S. has mounted pressure on non-US companies in the past not to invest in Iran. Experts are of the view that it would be difficult for oil companies to continue operations in both Iran and the U.S. Shell and its Spanish partner in the deal Repsol have field in the U.S. Under the newly signed agreement both the companies having 25 percent stake each while rest of the stakes being hold by National Iranian Oil Company.
According to the US rules, President George Bush can take action against non-US companies investing in Iran’s energy sector. Nevertheless, there are concerns over an extra-territorial trade dispute and the threat of further alienating allies. As of now, following this ground no foreign companies have been punished to so far under the Iran Libya Sanctions Act and the Iran Freedom Support Act.
The Bush administration hinted that if there ff there is an investment more than a certain amount, as specified in US law, then their lawyers will examine the deal and the policymakers would evaluate if the government can take any step. The value of the project is still not been confirmed however experts have suggested that it could be worth $10 billion.
