The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

Ratings update: South Pars, Iran

A decision tool for senior executives and investors, Critical Resource’s LicenseSecure™ model assesses the likely level of political and stakeholder risk (or the health of the ‘socio-political license to operate’) for resource projects. This ratings update provides a rapid, overview of a new or updated asset in the LicenseSecure ratings database, with a focus on projects in the news.

Please note that the ratings below are provisional, based in part on open source analysis and are not from client projects. (Full LicenseSecure analyses are in-depth, involve extensive intelligence gathering and are confidential.)

In the case of South Pars, this particular rating is based on a scenario of sanctions against Iran being progressively lifted and the entrance of an international oil company as a project partner.

Key development

  • International oil company interest in re-engaging in Iran comes hot on the heels of the July 14 accord on Iran’s nuclear programme, which raises the prospect of banking and trade sanctions on Iran being lifted towards the end of 2015. Iran has outlined plans for oil and gas projects worth $185 billion by 2020, and has been courting officials from a number of European oil and gas companies – including Total and Shell – in the aftermath of the nuclear agreement. Iran plans to hold a major oil and gas conference in London this December which is likely to attract significant attention.
  • The South Pars / North Dome field (shared between Iran and Qatar) provides particularly rich pickings. The Iranian portion is estimated to contain some 14 TCM of gas reserves. Total halted work on an LNG plant at the South Pars gas field in 2009, following the US adoption of economic sanctions against the country.

Evaluation

  • Although Iran is emerging from decades of international isolation, and remains deeply intertwined in the complex and volatile power struggles playing out in the Middle East, there are reasons to be upbeat over Iran’s political stability – at least compared with other traditional destinations for oil-related investment in the region such as Iraq.
  • However companies will need to tread carefully. There is still a chance that the nuclear agreement could unravel: a potential Republican victory in next year’s US presidential election, as well as elections in Iran in 2016, could lead to a renewed hardening of Western-Iranian relations.
  • Even if economic sanctions are lifted, the threat of legal action against companies operating in Iran remains. Under the auspices of the US Anti Terrorism Act (which can be brought by any US plaintiff) companies can be liable for doing business with entities associated in the past with terrorism. $18bn has already been awarded in US courts to plaintiffs against Iran on this basis, and there are concerns that efforts could be made to enforce those awards against any companies which establish links there. At the very least, rigorous due diligence will be a must: the Revolutionary Guards – a branch of Iran’s armed forces, whose special branch the Qods Force has also been linked to past terrorist acts – are alleged to control hundreds of the local suppliers from which foreign oil companies would likely need to procure services.

 

Recent LicenseSecure ratings

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