The Wall Street Journal: U.S. May Probe Shell Gas Deal

Investment in Iran
Likely Exceeds Limit
Set by Sanctions Law
By IAN TALLEY
January 31, 2007

WASHINGTON — The U.S. will likely investigate whether Royal Dutch Shell PLC’s upstream services agreement for a $4.3 billion liquefied-natural-gas project in southern Iran violates its sanctions laws, a State Department spokesman said.

U.S. law bars companies from doing more than $20 million a year in business with Iran, and since the project is likely to exceed that, State Department spokesman Scott McCormack said he “was sure” the government “will take a look at this particular deal.”

Shell announced the project, which is being developed with Spanish oil company Repsol YPF SA and is at the feasibility stage, over the weekend.

“If there is an investment greater than a certain amount, as specified under U.S. law, then our folks, our lawyers take a look at it and the policymakers take a look at it and see if there’s any further steps that we, as a government, take,” Mr. McCormack said.

He said he wouldn’t speculate whether the government would take any further action.

A Shell spokesman said the company “is not going to engage in speculation” regarding the possible probe.

He said the company remains committed to helping Iran develop its oil and gas potential. He said the company “is assessing a feasibility study” and “will make a final investment decision in around a year.”

Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, relies on oil for almost 60% of its revenue, and undermining development of its energy sector is seen as one way of putting pressure on the regime to stop its alleged nuclear-weapons program.

Analysts say Congress will increasingly pressure the administration to apply sanctions as a diplomatic alternative to a military strike. According to several Congressional aides, more sanctions legislation focusing on foreign oil companies investing in Iran is expected to be proposed this session.

The Washington-based research and consulting firm Conflict Securities Advisory Group estimates that there are more than 20 companies currently in violation of the U.S. sanctions on Iran.

–Benoit Fauçon contributed to this article.

Write to Ian Talley at [email protected]

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