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Shell looking to return to gas projects in Iran post sanctions: CFO

London — Shell is interested in returning to conventional gas projects in Iran if international sanctions on the oil and gas-rich country are lifted as expected later this year, the company's financial chief Simon Henry said Thursday.

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But the oil major is not expecting any quick, easy deals under Iran's new planned contract terms and significant returns from any upstream projects are likely to be years away, he said.

"For us...it's a huge gas province so it would be good to be there -- in conventional gas -- at the right terms where the risk-rewards are shared, at least to an extent, with us," Henry said on the sidelines of a press conference in London.

Shell was one of a number of global oil majors which held talks in Iran in recent months to discuss business cooperation with the OPEC producer ahead of the expected lifting of international sanctions on Tehran.


Shell, which has previously helped to develop Iran's South Pars project, the world's largest gas field, is interested in returning to Iran "in the fullness of time," Henry said, adding that he also understands that Iran would like companies such as Shell to invest.

"The Iranians are damn good negotiators," Henry said. "Anybody [who] thinks that we are going to suddenly swan in and end up with great contracts that make a difference within 12 months...I think is a little naive. It's not going to be easy, it will take time," he said. "This is probably a 30-40 year play, it's not about the next two or three years."

CRUDE DEBT

Iran, which has the world's second biggest gas reserves behind Russia, hopes to attract top international oil companies to its upstream sector to help it develop its vast reserves which total about 157 billion barrels of oil and 1,200 Tcf of gas once sanctions are lifted.

Iran's Deputy Oil Minister Amir Hossein Zamaninia told a Vienna conference last week the country has identified nearly 50 oil and gas projects totaling $185 billion to be entered into by 2020.

BP CEO Bob Dudley this week said he is also planning to look for upstream opportunities in Iran after sanctions are lifted, but is unclear what Tehran's intentions are for its new oil contracts.

As part of its talks with Iran earlier this year, Shell discussed its debt of around $2 billion to the National Iranian Oil Company for crude lifted in early 2012 but not paid for due to the imposition of sanctions.

Henry said the company must wait for sanctions on Iran to be lifted before Shell can pay off the outstanding debt.

European sanctions on Iranian oil came into force on June 28, 2012.

CONTRACT TERMS

Shell ceased upstream activities and suspended new business developments in Iran in 2010.

Two years previously it pulled out of the development of phase 13 of the giant South Pars project in the Persian Gulf, saying it could not meet the Iranian requirements to develop the block quickly.

In 1999, Shell also signed an $800-million deal for redevelopment of the offshore Soroush and Nowruz oil fields in the Persian Gulf.

Without referring to the South Pars deal, Henry noted that under previous upstream contracts in Iran there had been a "slight imbalance" in the risk- reward sharing between the government and the foreign partners.

Oil majors have complained about terms of Iran's previous service contracts, know as "buyback" deals, citing long-winded negotiations, low rates of return, penalty clauses and the linkage of upstream contracts to LNG projects.

Shell has been shifting more of its upstream portfolio to gas projects in recent years and plans to consolidate its position as the world's leading LNG industry player when it completes the acquisition of the UK's BG Group by early 2016.

--Robert Perkins, robert.perkins@platts.com
--Edited by Jonathan Dart, jonathan.dart@platts.com