BP, in Iran-sanctions spotlight, shuts UK Rhum field
Rhum will remain shut in, BP says, "pending clarification from the UK Government on certain aspects of the new EU regulations concerning restrictive measures against Iran"
BP HAS shut-in production at its central North Sea Rhum gasfield, which it runs as a 50:50 joint venture with Iranian Oil UK (IOC UK), a subsidiary of National Iranian Oil Company (NIOC). The decision came in the wake of this year's EU resolution to impose sanctions on companies doing business with Iran (PE 8/10 p5).
BP's decision, a response to European sanctions, will put other companies cooperating with Iranian companies – even outside of Iran – under the spotlight. The Rhum joint venture was flagged up in the US in June, at a time when anti-BP sentiment was running high and the company was under extreme scrutiny because of the Deepwater Horizon disaster.
Analysts expect revelations of widespread European exposure to the sanctions, with the energy, financial and telecoms sectors most likely to be affected.
John Solomon, an analyst at World Check, a consultancy, says sanctions against Iran – which Western governments fear is building nuclear weapons – will spread and the degree of scrutiny will intensify. "Governments are not going to show up at this party with water guns. They're going to show up with sledgehammers."
Companies are now realising they will have to conduct hard due diligence on exactly who they are doing business with before touching a contract, he says. "The liability threshold has been lowered to 'should have known'."
There may also be supply implications with the shuttering of Rhum. In the first half of this year, the field (in North Sea Block 3/29) produced around 212m cubic feet (cf) a day, representing just under 2% of peak UK gas demand. It holds estimated recoverable reserves of 0.8 trillion cf. With the UK moving into winter, it is an inauspicious time to be slicing producing fields from supply. British Gas Trading, one of the country's largest gas distributors, has already planned a price hike of around 7% for its customers.
But, so far, removing Rhum has had no impact on prices, says Patrick Heather, an energy-markets consultant. UK temperatures are above average, storage levels across north-western Europe are in good shape and there's an ample supply of liquefied natural gas arriving in UK terminals, he says. "For Rhum's shut in to have any effect, conditions would have to be sharp on the weather and supply fronts."
However, while BP awaits clarification on what to do with Rhum, the UK government will be keen to see gas flows from the field resume, and will be looking for a compromise. At worst, says Heather, BP will have to buy out its Iranian partner.
IOC UK, which was formed in 1971, says its presence in the North Sea came about because of the strong relationship that had developed between NIOC and BP in the course of business in Iran. The country's oil was at the lifeblood of the Anglo Persian Oil Company, which became British Petroleum in the mid 1950s. The Rhum joint venture was formed in 1972, the gas discovery was made in 1977, and first gas was tied back to BP's Bruce platform in 2005.