Shell Defies US Pressure And Signs £5bn Iranian Gas Deal

Oil giant Royal Dutch Shell has reported record annual profits of $25.36bn (£12.94bn) for 2006. Strong operations in the US and growth in deep water gas production off Nigeria helped boost the fortunes of Europe's second-biggest oil company. Shell's surging annual earnings meant the Anglo-Dutch giant generated earnings of almost £1.5m an hour. Here's one of the reasons they are raking it in...

Taken from The Guardian, January 29, 2007
By Terry Macalister

Shell has signed an important deal to help Iran develop a major gas field, ignoring growing pressure from George Bush to isolate the country for being part of what he alleges is an "axis of evil".The Anglo-Dutch group, which is struggling to bring more momentum to its business after being forced to hand over vital Russian reserves at Sakhalin island to the Kremlin, confirmed it had finally reached agreement on various aspects of its "Persian LNG" - liquefied natural gas - project centred on the South Pars gas field.

Shell insisted last night it was still a year away from a final decision on whether to proceed with the multi-billion-dollar project to build a liquefied natural gas terminal capable of handling 8m tonnes a year. "We have signed an upstream service agreement as part of our work to assess the feasibility of the project," a spokeswoman said, referring to the production deal.

"Implementation of the upstream service agreement is subject to taking a final decision to proceed with the midstream LNG project."

The move is a bold one by Shell because its arch-rival BP has declared itself unwilling to invest in Iran at a time when the international political climate surrounding the country is so forbidding.

The United Nations has imposed limited sanctions on Iran to stop it enriching uranium and Washington is pushing for harsher sanctions against a programme it believes is aimed at building an atom bomb - an accusation Tehran rejects.

Washington has increased pressure on non-US companies in the past year not to invest in Iran and some analysts believe it could be hard for oil companies to maintain operations in both Iran and the United States, where Shell and its Spanish partner Repsol both have fields.

Fadel Gheit, oil analyst with the Oppenheimer & Co brokerage in New York, said Shell was right to proceed in Iran. "This is very positive for the company because those that get in at an early stage will be rewarded. They are clearly willing to ignore Bush because he is coming to the end of his presidency and when he goes everything could change."

On Sunday, Gholamhossein Nozari, head of the state-owned National Iranian Oil Company, told Iran's student news agency ISNA that Iran had signed an initial deal worth $10bn (£5bn) with Repsol and Shell to produce liquefied natural gas from the South Pars field.

The Shell spokeswoman said the upstream side of the project would be developed under a buyback agreement. Shell and Repsol would build the production facilities, which would be owned and operated by an Iranian company. Shell and Repsol would be paid back their costs plus a pre-agreed profit.

Separately yesterday, Shell agreed to sell its Los Angeles refinery to Texan oil firm Tesoro in a deal worth nearly $2bn.