Trump could derail European oil giants’ return to Iran

by WorldTribune Staff, November 15, 2016

Donald Trump’s pledge to scrap the Iran nuclear deal may lead Europe’s major oil companies to reconsider returning to Iran’s energy sector.

With the Trump administration in place, European energy firms looking to develop Iran’s massive oil and gas reserves face the risk that he will snap sanctions back in place that penalize companies that invest in Iran’s oil and gas sector.

a Trump administration "may not be so magnanimous" when it comes to Iran's nuclear compliance.
A Trump administration “may not be so magnanimous” when it comes to Iran’s nuclear compliance.

“I think it will give them pause before going back in there, because the contract terms aren’t great,” said Helima Croft, head of commodities strategy at RBC Capital Markets. “It’s not the easiest place to do business. So you have to choose between Iran and the U.S. — I still think you’re picking the U.S.”

France’s Total announced last week it would lead a consortium that includes the China National Petroleum Corporation to develop Iran’s South Pars gas field.

Other European firms told CNBC they are interested in the Iranian market but are waiting until the investment outlook becomes clearer.

Iran’s oil production has grown steadily over the last year to about 3.7 million barrels per day following the lifting of sanctions.

“Iran has ramped up. Iran is back to pre-sanctions levels, but can Iran do much more without foreign investment? And this is where the Trump election becomes very, very important,” Croft told CNBC’s “Power Lunch” on Nov. 14.

RBC capital markets noted last week that Trump could refuse to certify that Iran is compliant with the terms of the nuclear deal. Iran has twice exceeded limits on the amount of heavy water it is allowed to possess, though the U.S. energy secretary and State Department have said Iran has immediately sought to correct the problem.

RBC, however, said a Trump administration “may not be so magnanimous” and could use a technical violation to re-institute sanctions.

Iran has the world’s second largest natural gas reserves and its fourth largest deposits of crude oil.