Serica, BP remain committed to Rhum deal despite U.S. sanctions against Iran
UK-based Serica Energy and oil major BP remain fully committed to completing the transfer of operatorship over the Rhum field in the UK North Sea despite reimposed U.S. sanctions towards Iran. Meanwhile, BP has decided to delay its well intervention plans until the situation is clarified.
The Rhum field is currently co-owned by BP and National Iranian Oil Company (NIOC) but BP’s ownership, as well as operatorship, is expected to be transferred to Serica later this year. BP and NIOC have a 50% interest in the field each.
To remind, on November 21, 2017, Serica announced its agreement to purchase interests in the Bruce, Keith and Rhum fields in the UK North Sea from BP. These fields together produce up to 5% of the UK’s indigenous gas production.
Following the U.S. Government’s announcement on May 8 of its withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and the reintroduction of wider U.S. sanctions on Iran and certain transactions with Iranian entities, Serica Energy started evaluating the implications of this decision on its transaction with BP.
On Tuesday, May 22 Serica said: “Both BP and Serica remain fully committed to completion of the transaction, which is expected in the third quarter of 2018. Progress on the transition arrangements, under which Serica will take over from BP as operator of the fields on completion of the transaction, is on schedule.”
As a result of the interest held by NIOC, Rhum operations are affected by U.S. sanctions and, in particular, the new sanctions regime announced by the U.S. government on May 8.
Certain services in support of Rhum field operations are currently provided under authorizations obtained from the U.S. Office of Foreign Assets Control (OFAC). The current OFAC license issued to BP enabling the provision of goods, services and support by certain U.S. persons, expires on September 30, 2018. Applications have been submitted to OFAC by BP and Serica for a renewed license beyond that date. Meetings are scheduled to take place with OFAC in the next few weeks, Serica stated.
The U.S. decision to reinstate the sanctions is expected to result in a change of U.S. policy in respect of the granting of OFAC licenses. Serica is working closely with BP and IOC to evaluate the potential impact of the changes. This includes seeking appropriate dispensation from the U.S. authorities where possible and where required to ensure ongoing operations. Serica noted it is working closely with and has support from the UK authorities on all aspects.
Well intervention work delayed
As part of the evaluation process, BP, as the current operator of the Rhum field, has been reviewing operations scheduled to take place during the transition period, prior to the implementation of the new U.S. sanctions. These include work to re-complete the Rhum R3 well, which was due to start this week.
However, BP has now decided to defer the beginning of work on R3 while the position relating to U.S. sanctions is being clarified.
Serica said that together with BP it is committed to resolving the issue of U.S. sanctions as they apply to Rhum with a view to enabling a timely completion of the BKR transaction in the third quarter of 2018.
The deferral of work on the R3 well, pending resolution of the sanctions position, is not expected to impact the long-term recovery of Rhum reserves, nor the completion of the BKR Transaction.
Mitch Flegg, Serica’s Chief Executive, commented:”As a British company working to maximize the full recovery of Britain’s gas reserves in line with OGA and UK Government policy, we will be working with our partners and the UK Government to identify measures, acceptable to the U.S. authorities, to protect safe and efficient Rhum operations and ensure maximum economic recovery of reserves from this valuable UK resource. We are receiving full support from all the relevant UK authorities in these efforts.
“All aspects of completing the BKR transaction remain on track: an Aberdeen office has been identified; key staff are being recruited by Serica; and the transition process of moving operational staff and contracts from BP to Serica is well advanced. All parties are working to see a successful completion.”
EU keeping the deal in place
It is worth mentioning that the EU representatives of the Iran nuclear agreement, while disappointed by the U.S. move, are still committed to keeping the nuclear deal, and the economic cooperation with Iran, in place. The EU has also started working on means to protect the interest of the EU companies investing in Iran.
As previously reported by Offshore Energy Today, Iran’s oil minister Bijan Zangeneh does not expect the country’s oil exports to be hurt by the recently reimposed U.S. sanctions if the EU sticks to its promises to keep the nuclear deal alive.
Total won’t risk losing US financing
While the EU is working to help its alleviate the U.S. sanctions impact on the EU companies doing business in Iran, French oil major Total last week said it would stop all operations on the development of the giant South Pars Phase 11 gas project in Iran, due to the U.S. decision, unless it is granted a waiver.
Total does not want to risk the loss of financing in dollars by US banks for its worldwide operations.
New Iran strategy
In a statement on Monday the U.S. Secretary of State Mike Pompeo announced a new Iran strategy. Reiterating the reasons for the U.S. withdrawal from the deal, Pompeo said that the mechanisms for inspecting and verifying Iran’s compliance with the deal were simply not strong enough.
He said:”Following our withdrawal from the JCPOA, President Trump has asked me to achieve these goals on Iran. We’ll pursue those goals along several lines of effort.
“First, we will apply unprecedented financial pressure on the Iranian regime. The leaders in Tehran will have no doubt about our seriousness.
He noted: “This sting of sanctions will be painful if the regime does not change its course from the unacceptable and unproductive path it has chosen to one that rejoins the league of nations. These will indeed end up being the strongest sanctions in history when we are complete.”
Pompeo continued: “Second, I will work closely with the Department of Defense and our regional allies to deter Iranian aggression.”
“Third, we will also advocate tirelessly for the Iranian people. The regime must improve how it treats its citizens. It must protect the human rights of every Iranian. It must cease wasting Iran’s wealth abroad.
“We ask that our international partners continue to add their voice to ours in condemning Iran’s treatment of its own citizens.”
Offshore Energy Today Staff