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Final condition met for continued operation of UK's Rhum gas field, 50%-owned by Iran's NIOC

London — Revenues generated from the UK's Rhum gas field to the benefit of Iran's state-owned NIOC -- a 50% partner in the project -- will be held in escrow, thereby meeting the final condition of a license to operate afforded by the US Office of Foreign Assets Control (OFAC), future Rhum operator Serica Energy said Monday.

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In early October, OFAC issued a license to current operator BP allowing it to continue operating until the end of October 2019 on the condition that IOC -- a wholly-owned NIOC subsidiary -- will see its revenues from Rhum held in escrow while US sanctions against Iran -- which came back into effect Monday -- are in place.

"These arrangements [...] ensure that neither IOC nor any direct or indirect parent company of IOC will derive any economic benefit from the Rhum field during that period," Serica said.

Rhum and the linked Bruce field are important to UK gas output, producing at around 5 million-6 million cu m/d -- the equivalent of 1.8-2.2 Bcm/year -- according to UK government data, representing as much as 6% of UK gas production and 3% of UK gas consumption.

"Completion of the arrangements required under the OFAC license is an important step in the efforts which all interested parties have been making to ensure that the contribution these fields make to UK energy supply is safeguarded and the value of the reserves assured," Serica CEO Mitch Flegg said in a statement.

US approval on Rhum had been in doubt because the asset is 50% owned by the NIOC subsidiary.

Rhum was closed completely due to international sanctions against Iran from late 2010 until November 2014 when it resumed production having won the first exemption allowing its restart before the sanctions against Tehran were lifted in January 2016.

BHP DEAL

The OFAC approval was also required for Serica to complete its acquisition of BP's stake in Rhum and the stakes held by BP and Total in the related Bruce and Keith fields.

Serica said Monday it had now also agreed to buy further interests in the Bruce and Keith fields held by BHP Billiton.

Under the deal, Serica UK will buy a 16% stake in Bruce and a 31.8% interest in Keith under the same terms as Serica agreed to buy out BP and Total.

Serica said it would pay GBP1 million ($1.3 million) for the stakes, plus a share of future cashflow from the assets to BHP.

Together with the previously announced purchases from BP and Total, Serica will own 50% of Rhum, 94.25% of Bruce and 91.67% of Keith.

"This acquisition, in addition to the previously announced transactions with BP and Total, place us in an even better position to unlock increased value from the assets and benefit from economies of scale," Flegg said.

He said the deals represented a "major transformation" for Serica in becoming one of the leading UK independent offshore operators and producers in the North Sea.

--Stuart Elliott, stuart.elliott@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com