Iran seeks IOC deals as Trump looks to undermine JCPOA
Monday, Aug 21, 2017
Iran has added Austria and Norway to oilfield developments as part of its strategy to avoid US President Trump’s plan to roll back JCPOA and engineer regime change. Simon Watkins reports from Jask

WHAT: Iran has rushed to sign more deals with European oil majors to mitigate the risk of further sanctions.

WHY: President Trump is upping the ante on Iran and NBI understands he is serving up alternative deals to companies doing business there to bring about regime change.

WHAT NEXT: Tehran will hope that the deals signed with European companies will carry sufficient political weight to counter Trump’s efforts.

Interviews carried out by NewsBase Intelligence (NBI) suggest that a plan is being worked on by the Administration of US President Donald Trump to present a new proposal to the UN Security Council early next year that will prompt the abandonment of the Joint Comprehensive Plan of Action (JCPOA).

This is based specifically on Iran’s ballistic missile tests instead of its nuclear programme, and as a precursor to regime change in the Islamic Republic.

“The key difference in the new proposal will be the sole focus on ballistic missile tests rather than a nuclear programme because the missile tests are obvious and easily proved. Whether Iran is enriching uranium for nuclear weapons is a matter of debate and virtually impossible to prove,” a senior oil and gas industry source who works closely with both Iran’s Petroleum Ministry and key European governments told NBI last week.

“Iran sees its best defence as continuing to sign as many deals as possible with as many companies from different European countries because these companies can lobby their governments to stop the rolling back of the JCPOA deal and some of the bigger ones also have major lobbying capabilities in the US, especially in terms of funding presidential campaigns,” the source added.

The full extent of Washington’s plans regarding Iran was only revealed outside a tight circle of Trump advisers during the President’s visit to France on July 13. “Trump brought only one folder with him to his meetings with [French President Emmanuel] Macron: the Iran file,” said the source.

The Iran file
“At the meetings, Trump made it absolutely clear that the US had compiled a list of every company in the world that was either working with Iran already or had signed deals in the energy sector – which is the first priority, as the mainstay or Iran’s economy – with Iran,” the source said.

This included companies which had signed any type of deal, including letters of intent (LoIs), “with a value of US$100 million and over. These companies would be given two options. Option one is that the deals with Iran would be replaced with deals with US allies in the region – Saudi Arabia, Qatar, Kuwait and the UAE – at the same level of value or greater.”

The second option is “and this is exactly what was said – that ‘post [regime] change’, these deals [with the old regime] would go ahead under the new [regime] framework,” the source added.

The source told NBI: “It was also stated that the US ‘has a high level of confidence’ that it can get the backing of three out of the four other Permanent Members of the UN Security Council aside from the US itself – that is, Great Britain, Russia and France. It is even ‘optimistic’ about getting China on board, because the US was able to do so for exactly the same type of proposal used in the last couple of weeks against North Korea, also based on missile testing specifically.”

Once the Israelis had followed the US in to see Macron, apparently the French President agreed that if such testing of real ballistic missiles was proven from now, then the US would have France’s backing in the UN.

Almost exactly the same type of ‘offer that can’t be refused’ was spelt out to Russia, when US Secretary of State Rex Tillerson had a lengthy meeting just over a week ago with Russia’s Minister of Foreign Affairs, Sergei Lavrov, in Manila. This was the first conversation between the two since the US imposed further sanctions on Russia around two weeks ago.
“The same basic strategy was laid out, but Tillerson added a couple of extra points aimed at leveraging the Russian vote on the [UN] Security Council in particular,” the source said.

NBI understands that the first was that “in addition to compensatory deals being given to Russian firms that ended their involvement in Iran within a two-year grace period – just like was given to the Europeans in 2007 – the existing sanctions on Russia would also be reduced”; the second was that if the companies did not comply “then the US would impose a US$2 billion fine on Gazprom and then increase sanctions against Russia as a whole as well”, said the source.

When directly asked to comment on these findings, a senior spokeswoman for the White House told NBI: “Yeah, that’s about right.”

Deal time
Faced with this, Iran has decided that its best course of action is to continue to sign deals with IOCs, especially those from Europe.

“Europe is the focus, because many of the biggest firms there have big lobbying power both in European governments and the government in the US and because the Europeans have broadly gone their own way ever since it was revealed by Edward Snowden that the US was widely spying on European leaders,” the source told NBI.

“This distrust of the US in Europe is particularly true of Germany’s [Chancellor] Angela Merkel who, as a child of the Stasi-dominated East Germany, has a particular hatred for this type of activity,” the source added.

“This is why a key focus of Iran within Europe is getting Germany, together with the fact that Germany was the ‘plus one’ in the P5+1 deal but also because Germany remains the de facto leader of the European Union,” the source said.

Within this context, Iran’s inclusion of Austria’s OMV to develop the Band-e-Karkheh oilfield and Norway’s DNO to develop Changuleh makes sense.
“Iran has already signed deals with the biggest IOCs in Europe, like Total and Royal Dutch Shell in the West and Gazprom and LUKOIL in the East, so it is looking to get other Western European countries involved to add to arrangements with firms from Italy, Spain, etc.,” the source told NBI.

In OMV’s case, the memorandum of understanding (MoU) signed recently marks a return to the site, having originally begun operations there in 2001 before withdrawing owing to the ramping up of sanctions.

Located 20 km northwest of Ahvaz, the provincial capital of Khuzestan, the field is 50 km long and 5 km wide, and is estimated to contain around 4.5 billion barrels of crude oil in place (OIP), from which the early phase production is expected to come in at around 7,500 bpd before rising to at least 20,000 bpd in the first phase.

Although part of the West Karoun group of fields, Band-e-Karkheh is unusual in that it is not shared with Iraq, and it is also predicted to yield a lot more higher-quality oil than until recently had been anticipated.

“Originally, BP was to have been involved but it said that the oil quality was relatively low and that the costs of refining it would be relatively high. But since then new studies have shown that, in fact, the oil is of a much better quality and that consequently, the costs associated with processing it will be around 35% less than first thought,” the source added.

The re-emergence of Norway’s DNO, in the meantime, is also a function of Iran’s strategy of casting its net far and wide, in addition to which it further benefits in Tehran’s view from not being a full member of the EU.

This means that it is not necessarily bound by any increase in EU sanctions that may come as a result of the current US plan.

Last week saw the company submit the result of its feasibility studies on the Changuleh oilfield in western Iran to the National Iranian Oil Co. (NIOC), following the signing of an MoU in November.

Discovered in 1999 but never developed, Changuleh is estimated to hold more than 2 billion barrels of OIP. According to the company’s managing director, Bjoern Dale, it is therefore a perfect fit with DNO’s low-cost, fast-track development strategy and its fractured carbonate reservoir experience in the Kurdistan region of Iraq that can be easily applied and leveraged in Iran.

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