Royal Dutch Shell plc .com http://royaldutchshellplc.com News and information on Royal Dutch Shell Plc. Wed, 01 Apr 2015 22:10:48 +0000 en-US hourly 1 http://wordpress.org/?v=4.1.1 Here’s why Obama is approving Arctic drilling again http://royaldutchshellplc.com/2015/04/01/heres-why-obama-is-approving-arctic-drilling-again/ http://royaldutchshellplc.com/2015/04/01/heres-why-obama-is-approving-arctic-drilling-again/#comments Wed, 01 Apr 2015 19:03:49 +0000 http://royaldutchshellplc.com/?p=75714 Screen Shot 2014-04-04 at 09.38.42Screen Shot 2015-01-29 at 13.58.27

WASHINGTON, APRIL 1 | BY TIMOTHY GARDNER

(Reuters) – For a leader who has made fighting climate change a priority, President Barack Obama’s decision to approve Royal Dutch Shell’s return to oil and gas exploration off Alaska was seen by many environmentalists as a contradiction.

On Tuesday, his administration upheld a 2008 Arctic lease sale, clearing an important hurdle for Shell. The Interior Department will now consider the company’s drilling plan, which could take 30 days. But Shell, which has already spent about $6 billion exploring the Arctic, expects to return to polar waters this summer and is already moving oil rigs to Alaska.

Meanwhile, environmentalists pointed to Shell’s mishaps in the region in 2012 when a massive rig ran aground and the company was fined for pollution, raising questions about Obama’s decision:

Isn’t Obama opposed to oil extraction in sensitive areas?

While his administration has championed renewable energy, Obama has never disavowed the need for oil and gas in the U.S. energy mix. His approach has been to balance new regulations on high-carbon industries with an appreciation for the economic benefits of the domestic oil and gas boom.

To counter critics, Obama can point to his January proposal to prohibit drilling on 1.4 million acres of the Alaska National Wildlife Refuge. In addition, drilling offshore Alaska is in relatively shallow waters and would need less pressure than deepwater drilling in the Gulf of Mexico, home to the 2010 BP Deepwater Horizon oil spill.

The special U.S. envoy to the Arctic, Robert Papp, said this week that Shell understands the importance of taking necessary precautions after its Kulluk rig ran aground in 2012. “They should be OK,” Papp said.

With global crude prices low, why is Shell going to a remote region in search of hard-to-extract oil and gas?

While oil prices have fallen by more than half since last summer, offshore Arctic drilling may not produce substantial new reserves for decades – when onshore shale deposits may start to wane.

The fracking revolution in North Dakota and Texas has led to the highest U.S. oil output since the early 1970s, but nobody knows how long shale will continue to produce at high rates.

“The trick of Arctic energy development is that the time horizons are extraordinary long, some 10 to 30 years from when companies start these complex deals to even seeing when those resources would get to market,” said Heather Conley, an analyst at the Center for Strategic and International Studies.

Shell will conduct tests to see how much oil and gas are in the Chukchi and Beaufort Seas. The Arctic is estimated to contain about 20 percent of the world’s undiscovered oil and gas, 34 million barrels of oil in U.S. waters alone. Only Russia has bigger deposits. The National Petroleum Council, a group led by oil companies that advises the Energy Department, said in an assessment of Arctic potential last week that the region will boost U.S. energy security. (bit.ly/1Fe08jp)

Won’t this add to carbon emissions at the same time Washington is trying to get the world to cut them?

If fracking in the continental United States declines, the government could argue that it is simply replacing barrels it used to produce elsewhere. The Arctic also has a lot of gas that is lower in emissions when burned. Depending on how markets shape up, energy companies could be drilling for more gas than oil in the Arctic.

Could Obama be acting for strategic reasons?

Other countries are present in the Arctic. Russia is exploring its northern waters, although Western sanctions have forced Shell competitor Exxon Mobil to withdraw from partnerships there. China and India are also interested in joining partnerships to drill in the Arctic.

But the United States has a major infrastructure advantage: Due to a decline of Alaskan oil output, the Trans Alaskan pipeline is only operating at 25 percent of capacity and could serve as a conduit for new oil finds. “The Alaska pipeline would be ecstatic to get another customer,” said Lou Pugliaresi, president of the Energy Policy Research Foundation, noting that the Russian Arctic’s lack of infrastructure could make projects slower to develop.

(Reporting by Timothy Gardner; Editing by Bruce Wallace and Leslie Adler)

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Goodluck Jonathan and the missing $20bn http://royaldutchshellplc.com/2015/04/01/goodluck-jonathan-and-the-missing-20bn/ http://royaldutchshellplc.com/2015/04/01/goodluck-jonathan-and-the-missing-20bn/#comments Wed, 01 Apr 2015 15:29:20 +0000 http://royaldutchshellplc.com/?p=75709 Screen Shot 2015-04-01 at 16.18.24

ARTICLE BY TIM COCKS AND JOE BROCK PUBLISHED 1 April 2015 BY THE RAND DAILY MAIL OF SOUTH AFRICA

Between $10.8-billion and $20-billion of oil revenue was unaccounted for over a period of 19 months

“Sanusi’s concerns around the first of these mechanisms centre on the 2011 sale by Royal Dutch Shell of its interests in five oil fields.” 

ARTICLE

In late 2013, Nigeria’s then central bank governor Lamido Sanusi wrote to President Goodluck Jonathan claiming that the state oil company had failed to remit tens of billions of oil revenues it owed the state.

After the letter was leaked to Reuters and a local news site, Jonathan publicly dismissed the claim and replaced Sanusi, saying the banker had mismanaged the central bank’s budget. A Senate committee later found Sanusi’s account lacked substance.

Sanusi has since become Emir of Kano, the country’s second highest Islamic authority, and has smoothed over relations with the president. He declined to discuss his earlier assertions. Before he was sacked, though, the central banker submitted to Nigeria’s parliament more than 300 pages of documentation in support of his claim. Reuters has reviewed that dossier, which offers one of the most comprehensive studies of waste, mismanagement and what Sanusi called “leakages” of cash in Nigeria’s oil industry. Detailed here, the dossier includes oil contracts, confidential government letters, private presidential correspondence and legal opinions.

Sanusi’s letter and documents do not state whether he thinks the money was stolen or lost through mismanagement. Nor did he make allegations of illegal acts against any specific individuals or entities. Both corruption and bad governance are perennial problems in Africa’s most populous nation, and central issues in the election.

Nigeria’s oil industry accounts for around 95% of the country’s foreign exchange earnings. If Nigeria continued to leak cash at the rate described in his letter to the president, Sanusi said at the time, the consequences for the economy would be disastrous. Specifically, the failure of state-owned Nigerian National Petroleum Corporation “to remit foreign exchange to the Federation Account in a period of rising oil prices has made our management of exchange rates and price stability … extremely difficult,” he wrote. “The central bank of Nigeria is always blamed for high rates of interest,” but “given these leakages, the alternative is a devalued currency … and financial instability.”

That is exactly what has happened. As oil prices have plummeted to around $55 a barrel, half their level at the beginning of 2014, Sanusi’s successor Godwin Emefiele has devalued the naira, Nigeria’s currency, by 8%, and raised interest rates for the first time in more than two years.

Nigerian foreign exchange reserves are down around 20% on a year ago, while the balance in the country’s oil savings account has fallen from $9-billion in December 2012 to $2.5-billion at the start of this year, even though oil prices were buoyant over much of that period. Finance Minister Ngozi Okonjo-Iweala told reporters at a press conference in November that a significant portion of that money was distributed to the powerful governors of Nigeria’s 36 states instead of being saved for a rainy day.

Nigerians are rarely shocked by stories of billions going unaccounted for, or ending up with politically powerful individuals. Africa’s largest oil producer has for years consistently ranked towards the bottom of Transparency International’s Corruption Perceptions Index.

Sanusi handed his documents to a parliamentary inquiry set up last February to investigate the assertion in his letter that billions of dollars in oil revenue had not reached the central bank. He told the inquiry that state oil group NNPC had made $67-billion worth of oil sales in the previous 19 months. Of that, he said, between $10.8-billion and $20-billion was unaccounted for.

A spokesman for the president declined to comment on the specific contents of Sanusi’s dossier. He referred to a statement made at the time the banker was pushed out. It said the government “remains committed to ensuring integrity and accountability and discipline in every sector of the economy … And indeed we look forward to a situation whereby Mr. Sanusi will continue to assist the legislature in their investigations.”

Those investigations include a “forensic audit” of the oil industry set up by Okonjo-Iweala. The audit was given to Jonathan on February 2 and he said he would hand it on to Nigeria’s auditor general. NNPC said on February 5 it had received a copy of the audit, before it was made public. The firm said the audit cleared it of wrongdoing, although it found NNPC owed the government $1.48-billion for a separate shortfall.

A spokesman for NNPC rejected Sanusi’s allegations and referred Reuters to last August’s Senate inquiry. The inquiry expressed satisfaction that most of the money not remitted was withheld for legitimate reasons. But it urged the NNPC to remit $700-million that the committee said it could not account for.

Diezani Alison-Madueke, the oil minister who oversees NNPC, did not respond to a request for comment. She told the inquiry at the time that the correct sum for money not remitted was $10.8-billion, which was to pay for subsidies.

The NNPC has consistently said it did nothing wrong. The oil company said last year that Sanusi’s allegations came from his “misunderstanding” of how the oil industry works. The central bank is “a banking outfit … how will they understand petroleum engineering issues?” then managing director Andrew Yakubu asked journalists. “They are not auditors.”

Sanusi’s claims were seen by some Nigerians as part of the historic tensions between the country’s mostly Christian south and poorer, mostly Muslim north. Jonathan and oil minister Alison-Madueke are Christians from the oil-producing Niger Delta in the south. Sanusi is a Muslim from the country’s north, as is Muhammadu Buhari, a former military ruler of Nigeria who is the main presidential candidate running against Jonathan. The two regions have historically taken it in turns to hold the presidency. Since 2009, though, Jonathan has broken with this tradition.

Sanusi has said any notion there were religious or ethnic politics behind his allegations is absurd. He has declined to be interviewed since becoming the Emir of Kano.

But last April, two months after he was sacked but before he took on his new role, Sanusi told Reuters he worried that the sheer quantities of cash going missing were “unsustainable”.

“You are taking what doesn’t belong to you and transferring it to private hands,” he told Reuters. “The state is captive to vested interests.”

NO-BID CONTRACTS

Sanusi’s documents identify three key mechanisms through which Nigeria has allegedly allowed middlemen to channel oil funds away from the central bank. Among the recipients, Sanusi alleges, are government officials and high-flying society figures.

The three mechanisms are: contracts awarded non-competitively to two companies that did not supply services but sub-contracted the work; a kerosene subsidy that doesn’t help the people it is meant to; and a series of complex, opaque “swap deals” that might be short-changing the state.

Sanusi’s concerns around the first of these mechanisms centre on the 2011 sale by Royal Dutch Shell of its interests in five oil fields. The blocks were majority-owned by NNPC. The government, keen to end the domination of the oil industry by foreign oil majors, had been encouraging Shell and others to sell to local firms.

Shell sold its interest in the fields to companies in Poland and Britain. But the new owners did not get the same rights Shell had. To promote local control, the NNPC gave the right to operate the fields to its own subsidiary, the Nigerian Petroleum Development Company (NPDC).

Without soliciting bids, the NPDC signed “strategic partnership agreements” worth around $6.6-billion with two other local firms to manage them.

One firm, Seven Energy, signed for three fields; another, Atlantic Energy, for two.

Seven Energy was co-founded in 2004 by Kola Aluko, an oil trader and Christian southerner. Aluko also co-owned Atlantic with another southerner, former oil trader Jide Omokore. Atlantic was incorporated the day before it signed the deals.

Geneva-based Aluko is a high-profile member of Nigeria’s elite. He owns a fleet of supercars, including a Ferrari 458 GT2 that he races with Swiss team Kessel Racing. He also owns a $50-million yacht, according to Forbes magazine, and divides his time between a $40-million home in Los Angeles, an $8.6-million duplex on Fifth Avenue in New York, and homes in Abuja and Geneva. A colleague describes him as a “work hard, play harder kind of guy. He’s extravagant. That’s just his style”.

Aluko, whose stake in Seven is now minimal, did not respond to emailed questions.

Omokore has also become rich from oil and gas. Forbes has estimated annual revenue at another of his companies, Energy Resources Group, at $400-million. His jet-setting lifestyle is a regular feature in the local press. Omokore could not be reached for comment.

Reuters has reviewed the contracts the firms signed with NPDC. They give Seven Energy 10% of profits in the three oil blocks it operates, while Atlantic gets 30% of profits in its two blocks. The contracts also show that, unlike Shell, neither firm pays royalties, profit tax or duties to the state.

Both companies quickly sub-contracted production work to other operators, according to Sanusi’s submission to parliament and several market sources. The companies did not disclose terms of these contracts.

Atlantic does not publish accounts, but Seven’s 2013 annual report shows its deal with NPDC helped its revenue more than triple to $345-million.

In May 2013, Nigeria’s parliament threatened to investigate the NPDC contracts because they were not issued through competitive tender. But the NNPC argued no tender was needed because the contracts involved no sale of equity in the oil fields; the probe did not go ahead.

Sanusi did not accuse Seven and Atlantic of any illegalities, but he did question why the NPDC chose those companies. His report said the deals’ only purpose seemed to be “acquiring assets belonging to the federation (state) and transferring the income to private hands.”

Asked about this, NNPC referred to the Senate report, which found that no-bid partnership agreements are not new. It also said that “it may be good policy to encourage indigenous players by giving them greater participation”, but called for such deals “to be conducted in a transparent and competitive manner”.

Seven did not comment. It says on its website its agreement with NPDC pre-dated the Jonathan administration and included an allowance for taxes. The company says it has invested more than $500-million, more than doubled production from its three blocks, and paid $48.8-million in taxes in 2013. Atlantic did not comment.

KEROSENE SUBSIDIES

The second mechanism Sanusi’s report identifies as problematic is a decades-old state subsidy provided to retailers of kerosene, the fuel most Nigerians use for cooking.

Nigeria lacks the refining capacity to make kerosene, so imports it instead. The government then sells the kerosene to retailers at a cheaper price than the import price. This subsidy is meant to make kerosene affordable for the poor. In reality, though, retailers have long hiked prices so consumers pay much more than official levels.

In June 2009, Jonathan’s predecessor, Umaru Yar’Adua, ordered a halt to the scheme on the grounds that it was not working. But the subsidies carried on regardless. The NNPC told parliament last February that it still deducts billions of dollars a year from its earnings to cover it.

In his report, Sanusi called the kerosene subsidy a “racket” that lines the pockets of private kerosene retailers and NNPC staff. The report estimated the cost of the subsidy at $100-million a month. It said kerosene retailers — there are hundreds of them around the country — routinely charged customers much higher prices than the government pays to import the fuel.

Sanusi’s report included an analysis of kerosene prices across Nigeria’s 36 states over two years. It found that the government buys kerosene at 150 naira per litre from importers and then sells it to retailers at just 40 naira per litre. Sanusi’s analysis found consumers pay an average of 170-200 naira per litre, and sometimes as much as 270 naira.

“The margin of 300% to 500% over purchase price is economic rent, which never got to the man on the street,” Sanusi wrote.

NNPC said in a statement last year that it can’t force retailers to sell kerosene at the subsidised price.

SWAP DEALS

The third mechanism Sanusi identified involves other types of refined petroleum products, such as gasoline. Like kerosene, these are also imported. Nigeria is Africa’s biggest oil producer but it depends on imports for 80% of its fuel needs because its refining capacity is tiny.

To pay for the imported products, Nigeria barters its crude oil. Sanusi’s dossier focuses on these barter exchanges, which are known as “swap deals.” The idea is that importers who bring in refined fuel worth a given amount receive an “equivalent value” in crude oil.

How that equivalent value is determined is unclear. Sanusi said he was uncertain how much, if anything, is lost in these deals. But he expressed concern at the sheer value of oil that changes hands and the lack of oversight. His report estimated that between 2010 and 2011, traders involved in swap deals effectively bartered 200 000 barrels of crude a day — worth nearly $20-million at average crude prices over the period — for a loosely determined equivalent value in refined products. It is impossible to tell, he said, if all the refined products were delivered, let alone if the terms were fair.

“It was clear to us that these transactions … were not properly structured, monitored and audited,” he wrote.

Sanusi wrote in his report that mismanagement and “leakages” of cash in the industry cost Nigeria billions of dollars a year.

Since the price of oil has fallen by around half since the start of 2014, such losses are even more significant. As it approaches elections, Nigeria faces plummeting oil revenues and a lack of buffers to shield the economy. Construction projects are on hold and the government is struggling to pay its sizeable workforce.

Multiple scandals in the oil sector since Jonathan took power have boosted the popularity of his rival, former military leader Muhammadu Buhari. Remembered by some for deposing a civilian government in a 1983 coup and trampling  on civil liberties, the sandal-wearing general often promises to “free Nigeria from corruption”.

Jonathan, too, says he will “clean up” Nigeria. By using technology and strengthening institutions, “I will solve the problem of corruption in this country”, he told a crowd in Ibadan in January.

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Dutch court hears challenge over Groningen gas production http://royaldutchshellplc.com/2015/04/01/dutch-court-hears-challenge-over-groningen-gas-production/ http://royaldutchshellplc.com/2015/04/01/dutch-court-hears-challenge-over-groningen-gas-production/#comments Wed, 01 Apr 2015 15:04:18 +0000 http://royaldutchshellplc.com/?p=75703 Screen Shot 2015-03-11 at 09.20.55Screen Shot 2015-01-29 at 13.58.27

Dutch court refuses to halt Groningen gas production

THE HAGUE, APRIL 1

By Toby Sterling

(Reuters) – A Dutch judge on Wednesday refused to order a production halt at Europe’s biggest gas field, Groningen, where extraction is causing earthquakes, dealing a blow to opponents of government policy.

Production from the field was temporarily reduced in February after the Dutch Safety Board warned of possible dangers. A decision on the request for a quick ruling by the country’s Council of State by citizens’ groups from Groningen is expected within two weeks.

But Judge Thijs Drupsteen said he would give the public a sneak preview of his position: “I’m not planning to order the production decision 100 percent stopped.”

That demand was made by rights groups during a heated public court session.

The Groningen field is operated by state-owned Gasunie and output jointly exploited by the government and a joint venture between Royal Dutch Shell and Exxon Mobil called NAM (Nederlandse Aardolie Maatschappij).

The groups’ suit challenges a decision by Economic Affairs Minister Henk Kamp to set 2015 production from Groningen at 39.4 billion cubic metres (bcm) of gas, down from 42.5 bcm in 2014.

One of 40 complainants, Nette Kruzenga, asked the judge to halt production immediately, saying Kamp’s decision was “faulty in terms of procedure and in terms of judgment.”

That was countered by Hans Besselink, a Ministry of Economic Affairs official, who said “further reduction of gas from Groningen could lead to millions of households in the Netherlands and surrounding countries … left without gas.”

The judge agreed: “In my opinion, that would be such a far-reaching decision that people outside would say ‘now they’ve gone crazy.’ I don’t think I can take responsibility for that.”

Much of Wednesday’s debate focused on production at Loppersum, where the risk of earthquakes is greatest and production has already been cut by 80 percent, and Eemskanaal, where there are vulnerable dikes.

Drupsteen asked questions about the feasibility of further reducing or stopping production at the two sites, but no decision was announced.

The frequent production-linked earthquakes in Groningen have not hurt anyone, but have caused billions of euros of damage to homes and buildings.

In his later ruling, Drupsteen could instruct Kamp to review or even scrap his February decision to cut production levels to 33 bcm. More likely, he could make recommendations for Kamp, who is due to announce a new decision in July.

(Editing by Anthony Deutsch, Jason Neely and David Evans)

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Shelling Out Sweeteners http://royaldutchshellplc.com/2015/04/01/shelling-out-sweeteners/ http://royaldutchshellplc.com/2015/04/01/shelling-out-sweeteners/#comments Wed, 01 Apr 2015 14:57:23 +0000 http://royaldutchshellplc.com/?p=75700 Screen Shot 2015-02-17 at 13.58.15By John Donovan

The Irish satirical website broadsheet.ie has published an extensive article about Shell sponsored corruption in Ireland involving gifts (bribes) of up to €900,000 in value.  

The website has published two key items; an invoice sent to Shell E&P Ireland by its agent OSSL for £30,000 worth of alcohol supplied to named senior police officers and a transcript of a covertly recorded 42 minute meeting between OSSL and its Dublin solicitor when the alcohol was mentioned over 60 times.

The solicitor in question Mr Marc Fitzgibbon, attended multiple high level meetings with Shell when the supposedly non-existent alcohol was freely discussed. 

Shell has acknowledged receipt of the OSSL invoice raised years after the alcohol was supplied. It should be a simple matter for the police or tax authorities to investigate whether the invoice is legitimate.

If it is not legitimate and is being used to demand payment from Shell under false pretences, then OSSL directors should be charged accordingly.

If it is legitimate, then the police officers named on the invoice should be dealt with accordingly.

I cannot understand how five investigations have been carried out – two by the Garda, two by Shell and one thus far by the GSOC – without the legitimacy of the all important invoice being investigated, with one or other of these two possible outcomes emerging.

Either it is fake, in which case OSSL directors should be charged, or it is legitimate, in which case a huge cover-up has clearly taken place in all previous investigations.

It has be one the other.

Broadsheet.ie article (containing multiple links)

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Can Iran Attract Foreign Investments By Oil Majors Such As BP And Shell plc? http://royaldutchshellplc.com/2015/04/01/75695/ http://royaldutchshellplc.com/2015/04/01/75695/#comments Wed, 01 Apr 2015 14:29:49 +0000 http://royaldutchshellplc.com/?p=75695 Screen Shot 2015-03-22 at 17.56.43

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By: MICHEAL KAUFMANPublished: Apr 1, 2015 at 8:34 am EST

Recently, Iran has been exposed to numerous sanctions by the West over concerns that the country was developing a nuclear project. However, talks between the US and Iran have started over a new nuclear deal. If the deal is successful, then sanctions are expected to ease off and Western energy companies are expected to return to the country.

According to Bloomberg, the discovery of oil in 1908 in the country laid the foundations for the development of the British oil major, BP plc (ADR) (NYSE:BP). An oil consultant in Iran, Nader Sultan said: “You look at the history of the oil companies, and that history is Iran.”

With the ease off in these sanctions, BP, Royal Dutch Shell plc (ADR) (NYSE:RDS.A), Total SA (ADR) (NYSE:TOT), and Eni SpA (ADR) (NYSE:E) would be looking forward to return to the country. Iran currently holds 10% of the world’s reserves and is ranked fourth after Saudi Arabia, Venezuela, and Canada. This shows that energy companies see Iran with a lot of upside potential.

The sanctions for Iran along with its war with Iraq have been detrimental for the energy industry. Ten years ago, the country had a daily production of 4.5 million barrels, but it has gone down to 2.8 million barrels per day. Therefore, the foreign investments by the major energy companies are bound to benefit the country in terms of production.

However, the return of foreign companies to the country would not be straightforward. As reported by Bloomberg, an analyst at Manaar Energy Consulting, Robin Mills, said: “The international oil companies want to come back to Iran, but only if the conditions are right.”

With little to no foreign investment, Iran has failed to develop its gas reserves. This is primarily due to the country not possessing the sophisticated techniques and technology required to maintain these reserves. The country also requires technology to develop liquefied natural gas (LNG) plants. Thus, the return of foreign investment to Iran remains its top priority.

As per Bloomberg, a former official of the White House, Jason Bordoff, has indicated that Iran has a tough job ahead of boosting its output. According to his estimates, the country requires investments of around $50-100 billion to increase production. He also indicated that the contract terms were important in attracting and maintaining foreign investments. He pointed out the fact that many European oil majors started leaving the company even before the sanctions, mainly due to the contract terms.

The companies complained that the contract terms offered lower returns. However, Iran’s oil minister, Bijan Namdar Zangeneh, has indicated and assured companies that the new terms called the “Iran Petroleum Contract” would be better than the previous terms.

According to Bloomberg, many consultants and lawyers indicated the terms to be far better than the previous terms. Former head of Eni SpA Leonardo Maugeri said: “Zanganeh knows the problem and the new formula he is designing is much more favorable.”

However, some other oil consultants were hopeful and felt the global environment has changed rapidly and that Iran would have to consider a lot of other factors. Moreover, crude oil prices since June 2014 have fallen over 50% due to which profit margins have declined substantially for energy companies, which is why they are looking to invest in countries that offer better returns.

Meanwhile, investments are now open to Mexico for the first time since 1938 and Iran would also have to compete with countries such as Iraq for foreign investments. As a result, the country would have to carefully assess and offer terms suitable to attract foreign investments.

Get more BP research by Bidness Etc

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