Monday, January 24, 2005

Bloomberg.com: U.K.

Bloomberg.com: U.K.: "BP Avoids Iran Because of U.S. Sanctions, Browne Says (Update2)
Jan. 21 (Bloomberg) -- BP Plc, the world's second-largest publicly traded oil company, will avoid doing business in Iran because of U.S. sanctions, focusing instead on Russia, Africa and the Gulf of Mexico, Chief Executive John Browne said.

London-based BP is the biggest oil and gas producer in the U.S., a country that forbids its corporations from doing business with Iran, holder of the world's second-largest oil reserves. The U.S. says Iran wants to build nuclear weapons and calls Iran a sponsor of terrorism, a charge that Iran denies.

``To do business with Iran at the moment would be offensive to the United States, and therefore against BP's interests,'' Browne, 56, said in an interview yesterday at the company's headquarters. ``We're very heavily influenced by our American position.''

BP, with origins in the Anglo-Persian Oil Co. formed in 1909, was kicked out of the country in the 1970s, when Middle East countries nationalized their oil industries. After spending almost $100 billion on acquisitions, including Amoco Corp. and Atlantic Richfield Co., BP gets almost half of its revenue from the U.S. Most of its growth is coming in Russia.

The company is taking a first step to renew links with neighboring Iraq through a study of the nation's southern oil fields. Browne also said he isn't now seeking large acquisitions, because high oil prices inflate asset values, so takeovers would not be ``a winning move.''

Trouble Spot

U.S. relations with Iran, and opportunities there for BP, worsened after the attacks of Sept. 11, 2001, on New York and the Pentagon, where 15 of 19 hijackers were from Saudi Arabia. Iran was never accused in the plot. Browne said the attacks of Sept. 11 ``changed everything,'' and he hasn't held any discussions with Iran since then.

Relations are worsening. U.S. Vice President Dick Cheney yesterday said on MSNBC television that Iran is ``at the top of the list'' of potential trouble spots because its nuclear program and support for terrorist groups threaten to undermine stability in the Middle East.

The absence of BP leaves more room for other non-U.S. companies in Iran. Royal Dutch/Shell Group, based in London and The Hague, is developing Iran's offshore Soroush oil field. Paris- based Total SA exploited a phase of the South Pars natural gas deposit, the world's biggest. Japan's Inpex Corp. agreed last year to spend $2.5 billion to develop Iran's Azadegan field.

Buyback Projects

The Iran policy marks a reversal from past talks. BP had been seeking to help develop Iran's Bangestan field, where three deposits contain about 5.1 billion barrels of oil.

BP was in any case unhappy with Iran's favored investment route, so-called buybacks, whereby foreign companies operate a project in Iran to cover their costs and earn a profit before being forced to hand the project back to the Iranian state.

``You can't plan for the long term in this area,'' Browne said. ``When we were talking to Iran some time ago, we were trying to explore other ways.''

Browne has authorized BP to analyze oil reservoirs in southern Iraq, where most of the nation's exports are now flowing to the Persian Gulf because of violence in the north. The assessments will be done from outside of Iraq.

With the first elections since the 2003 toppling of President Saddam Hussein nine days away, there has been no letup in sabotage and terrorist attacks, much of it directed against the hundreds of miles of oil pipelines that crisscross Iraq.

`Not a Soldier'

``For a company like BP it is not the right moment to physically go into Iraq, the real issue is the security of our personnel,'' Browne said. ``People joined BP to do oil and gas, not to be a soldier.''

During the next 12 months, BP will study the Rumaila oil field, the country's largest by production, and hand its findings, for free, to the Iraqi Ministry of Oil to help the country decide how best to maximize output. U.K.-based Exploration Consultants Ltd., assisted by Shell, is conducting a similar study of the northern, Kirkuk field.

BP shares were down 1.5 pence at 511 pence as of 12:37 p.m. in London. BP last year rose 12 percent, beating Shell Transport & Trading Co.'s 6.9 percent advance though behind Exxon Mobil Corp.'s 25 percent jump.

``We want to help Iraq build its oil and gas business, if the circumstances are right,'' Browne said. ``We want to participate in it. Step one is to do the study for Iraq.''

Browne said the preparatory work is no guarantee that BP will get oil concessions if and when the country decides to allow foreign companies to develop its oil and gas resources.

``However keen we are, the question is how keen will the then- existing government of Iraq be to have us in,'' he said. That will depend, he said, on what BP can do for Iraq ``that they cannot otherwise do as a nation. That is a discussion that will continue for some time.''

Browne said that this decade may be the years of $30 a barrel oil, after lower prices during the 1990s limited investment in new production capacity and refineries.

To contact the reporter on this story:
Stephen Voss in London sev@bloomberg.net
John Dawson in London hepburn@bloomberg.net

To contact the editors on this story:
Tim Coulter in London at tcoulter@bloomberg.net"

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