Last week Minnesota Governor Tim Pawlenty said that Essar, which recently bought a steel company in his state, had promised to abide by U.S. law and that it was backing away from developing a multi-billion dollar oil refinery in Iran.
U.S. companies are prohibited by law from working in Iran and long-standing sanctions allow Washington it to punish foreign companies that invest more than $20 million in the OPEC member’s energy sector, although this is rarely put into practice.
Total SA, ENI and Royal Dutch Shell have had major investments there, although Tehran’s most recent deals have been with big state-owned oil companies in Asia.
“We are present in the U.S. Whether that presence in (the) U.S. prevents us from investing in the energy sector in Iran under the sanctions act, we are examining (the) legal position on this,” Raj K. Varma, the company’s chief executive for business development oil and gas, told Reuters.
Essar and Iran had agreed in late-October to start building an $8 billion, 300,000 barrels per day (bpd) refinery in southern Iran early next year, the first foreign-owned downstream investment there, company officials told Reuters in October.
That news came just two days after privately held Essar — a conglomerate with interests from telecoms to construction — sealed its deal to buy Minnesota Steel LLC for $1.65 billion.
In late October, Washington tightened its long-standing sanctions on Iran in a fresh attempt to pressure the Islamic Republic to cease its uranium-enrichment programme that could be used to develop nuclear weapons.
Industry officials say Western sanctions and the rising political tension has made investment more difficult in Iran, and French President Nicolas Sarkozy has warned Total against pursuing a major liquefied natural gas deal there.
But many oil companies, particularly those in Asia less susceptible to Western pressure, are keen to help Tehran boost output from the world’s second-largest oil and gas reserves.
Last year Iran launched a five-year plan to expand and upgrade its refineries to 3.0 million bpd from 1.6 million bpd, aiming to end its reliance on imported gasoline. (Reporting by Nidhi Verma, writing by Luke Pachymuthu in Singapore, editing by Jonathan Leff and Ramthan Hussain)
