Oil & Gas industry gear up for Iran market re-entry
Oil and gas companies must safeguard against bribery and sanctions risks as they prepare for re-entry into the Iranian energy market, say regulatory experts at legal firm Pinsent Masons.
In January the EU granted ‘limited, temporary and targeted relief’ on a range of financial and trade sanctions imposed in 2010 and 2012 designed to curtail the Iran’s nuclear programme.
Further relaxation of trade sanctions which target the petrochemical and oil and gas sectors are expected when the sanctions are renewed on 20 June.
The move could be a significant turning point for the energy sector and the UK’s security of domestic energy supply, amid increasing concerns that Russian petrochemicals exports will be hit by more stringent trade sanctions due to the Crimean crisis.
Energy and regulatory specialist at Pinsent Masons, Tom Stocker, said: “Companies have been preparing for re-entry to Iran over recent months, which is rich with natural resources and was once one of the key providers of petrochemicals to the European markets.
“At such a pivotal time for our domestic energy supply and global resources, energy companies are assessing alternative access to oil and gas markets as the threat of sanctions on Russia becomes a genuine concern.
“Iran re-entry could improve our security of supply and for oil gas service companies to develop significant opportunities, but there are significant risks as companies will need to seek third party engagements to pursue operations in Iran.
“As the market opens up there may an increased expectancy from some individuals looking to cash in and any company moving in will be exposed to substantial risk of bribery.
“Also, a number of Iranians will remain subject to assets freezes so there is a need to check the extent of the sanctions that remain in place and to carry out ‘know your customer’ checks and due diligence on third party agents and intermediaries. Having in place contracts with anti-bribery and sanctions compliance clauses is also a must.”
In addition to a range of trade sanctions imposed by the US in 2010, the EU banned the import, purchase and transport of Iranian crude oil as well the construction of oil tankers for the country. For the European oil and gas industry the move was seen as a crippling blow which relied heavily on Iran for substantial reserves of natural gas.
Stocker added that successful re-entry of European headquartered companies could be hindered by the more stringent US sanctions which apply to any organisation financed by EU-banks which use the US financial markets.
“There is a need to check both EU and US sanctions before pressing on with any opportunity relating to Iran. It won’t be ‘full steam ahead’ come 20 June,” he warned.
“A considerable number of international oil and gas outfits will need to be mindful of the complex and stringent US sanctions and will need to implement measures to ensure essential financing is not suspended.”