Royal Dutch Shell Plc  .com Rotating Header Image Big Shell Iran deal could bring U.S. sanctions

Officials say they will likely review Shell’s deal with Spain’s Repsol to develop Iran’s biggest natural gas field.

January 29 2007: 5:41 PM EST

WASHINGTON (Reuters) — A preliminary multibillion-dollar deal to develop a giant Iranian natural gas field signed by Royal Dutch Shell would likely trigger a review by U.S. officials to see if it requires sanctions, a State Department official said on Monday.

Shell on Monday said it signed a deal with Iran in conjunction with Spain’s Repsol to develop South Pars, the OPEC member’s biggest natural gas field, despite growing U.S. pressure not to invest in Iran.
U.S. officials at some point would likely review the deal to see if sanctions should be triggered by the Iran-Libya Sanctions Act, State Department spokesman Sean McCormack told reporters at a press briefing.

“The U.S. has on the books various laws with respect to investment in the Iranian oil and gas sector,” McCormack said.

“The people who deal with those laws on a daily basis in their application I’m sure will take a look at this particular deal,” he said.

Shell said it was still a year away from a final decision on whether to proceed with the project.

The Iran sanctions measure, which took effect in 1995, requires the government to impose sanctions on foreign companies that invest more than $20 million a year in Iran’s energy sector.

However, no companies have actually been sanctioned by the law, according to U.S. congressional researchers.

The State Department spokesman declined to comment whether Shell’s deal will actually trigger sanctions.

“I’m not even going to begin to try to speculate in terms of the application of the law,” McCormack said.

The Clinton administration decided to waive the law after finding that a $2 billion contract signed in 1997 by France’s Total (Charts), Russia’s Gazprom and Malaysia’s Petronas violated its provisions, citing “national interest” concerns.

South Pars is Iran’s largest energy project, according to the Energy Information Administration, and has attracted more than $15 billion in investment. Sales from the field could earn Iran up to $11 billion a year over 30 years, according to Iran Oil Ministry figures cited by the EIA.

Iran has the world’s second-largest natural gas reserves behind Russia.

Meanwhile, key lawmakers have warned that they would insist that the Bush administration invoke sanctions on China if Beijing pursues an agreement to develop Iranian gas fields.

The two countries in December announced a preliminary deal, believed worth $16 billion, for China to invest in Iran’s North Pars natural gas field.

“The administration needs to enforce the Iran Sanctions Act to make sure that companies that invest in Iran’s energy sector pay a painful price in relations with the United States,” said Democratic Rep. Tom Lantos of California, new chairman of the House Foreign Affairs Committee, at a recent hearing.

Shares of Shell (Charts) closed down 1.0 percent on the New York Stock Exchange Monday.

Major oil producers have taken a big hit over the last month. Shell is down 4.6 percent, while Exxon Mobil (Charts) is down 4.48 percent. Chevron (Charts) has fallen 2.7 percent, while BP (Charts) has declined 6.4 percent. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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