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Serica sanguine on Iran sanctions

The firm's historic links to Iran are in the spotlight as US sanctions resume

Serica Energy is one of the firms seemingly punching above its weight in the North Sea as it seeks to acquire BP's stakes in the mature Bruce, Keith and Rhum (BKR) fields development. The acquisition would give it operatorship of a 5% share of UK gas production.

Serica's chief executive, Mitch Flegg, told Petroleum Economist the company's agility as a smaller player with a tight focus on just a handful of assets gives it an advantage. It can delay cessation of production longer than would have been possible under the operatorship of BP, which has bigger fish to fry elsewhere.

The snag is that a subsidiary of the National Iranian Oil Company owns a 50% stake in the Rhum field, which means that the asset could fall foul of tougher sanctions on Iran, announced last month by President Donald Trump. If it does, then any companies and personnel working there risk being barred from work in the US or with US institutions-a move that would effectively halt its development.

Thus far, the Iranian stake—which dates back four decades to the days of the shah—has been regarded by the US as passive, and has been granted the necessary US Office of Foreign Assets Control (OFAC) license. However, with the new tougher line against Tehran, most new work on BKR is on hold—including that on a well BP had planned to drill. The companies are waiting to see if the OFAC license is extended at its next renewal, due at the end of September.

Flegg said in mid-June that the timetable for completing the acquisition, which is due to take place after the OFAC renewal, remained in place. The company was ensuring it had contingencies in place for all eventualities, but remained confident that the license renewal would be forthcoming without the need for a major restructuring of the deal.

"There is huge political will to keep us. We've got no indication that on either side of the Atlantic they want to punish us because of the historical relic of an Iranian partner," he said.

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