economics

March 15, 2010

Shell Halts Gasoline Sales to Iran Company Is Latest European Energy Firm to Act as U.S. Considers Sanctions

Filed under: Uncategorized — ktetaichinh @ 11:09 pm
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Royal Dutch Shell PLC said it has stopped gasoline sales to Iran, becoming the latest European energy company to scale back ties with Tehran as the threat of tougher U.S. sanctions against the country looms larger.

The moves come as U.S. legislators consider steps to punish companies supplying petroleum products to Iran as part of an effort to pressure the country to abandon its uranium-enrichment program.

[shell0310] Getty Images

Iran is a big oil producer, but it has little capacity to turn its crude into refined products like gasoline.

Shell joins a growing list of companies cutting ties to Iran. Earlier this week, Ingersoll-Rand PLC said it had prohibited its subsidiaries from selling products to customers in Iran. Caterpillar Inc., Huntsman Corp., General Electric Co. and the German conglomerate Siemens AG have also sought to reduce their exposure to Iran.

In the energy arena, companies such as Glencore International AG and Trafigura Beheer BV have recently halted gasoline shipments. Another big European independent trader, Vitol Holding BV, said that as of the beginning of 2010 it was no longer participating in tenders to supply refined products to Iran

PM Report: Pressure Grows on Iran

9:26Royal Dutch Shell becomes the latest company to stop doing business with the government of Iran. WSJ’s Jerry Seib joins the News Hub for a look at the growing pressure on Tehran, including threats of tougher sanctions. Plus, Grainne McCarthy on what’s behind the spike in oil prices.

BP PLC sent its last cargo of gasoline to Iran some 18 months ago. Shell sent its last gasoline shipment to Iran in 2009.

Total SA, another fuel-product shipper to Iran, has said it will halt petroleum sales to Iran if the U.S. approves any measures turning its requests into law. The French company didn’t respond to requests for comment. U.S. companies have basically been legally barred from doing business with Iran for years.

Iran is the world’s fourth-largest oil producer, but because of factors like past underinvestment, it has little refining capacity and is forced to import as much as 40% of the refined products it needs at a cost of several billion dollars a year.

Some observers doubt that a halt in petroleum sales will have much impact. “Several other players are more than willing to supply gasoline, and Iran’s reported stocks on hand would be enough to potentially handle several months’ demands with no additional imports,” consultancy PFC Energy said in a report.

Associated PressIran is a big oil producer, but it doesn’t have the capacity to turn much of its crude into products like gasoline. Above, traffic on a Tehran street.

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SHELL_CORP

China, a big recipient of Iranian oil, is one of the countries that have shown no sign of halting shipping of petroleum products to Iran.

Existing shippers could also sell petroleum products to Iran and hide the deliveries’ origin.

Although logistically challenging, gasoline can also be trucked in to Iran from neighboring states. It is unclear whether such countries as Azerbaijan, a U.S. and European ally, would sign off on that.

Sanctions also won’t affect Iran’s oil exports. The country is a large oil exporter to Europe.Ingersoll disclosed its new policy on sales to Iran in a letter to the lobbying group United Against Nuclear Iran. The group has also targeted Shell and other U.S. and European companies with business in Iran. It has written to Shell calling on it to disclose the full extent of its business in Iran and complained about the company to the Securities and Exchange Commission.

UANI said that it applauded Shell’s decision to stop gasoline sales to Iran but that Shell should sever all business ties with the Islamic Republic. “This is an encouraging first step but they must do more,” said the group’s head, Mark Wallace, who was an ambassador-level diplomat to the United Nations during the Bush administration. He said Shell’s ties to Iran’s hydrocarbon industry remained “problematic” and made the company “toxic for investors.”

Shell has only a small presence in Iran: It operates a lubricants-marketing business and advises China Petroleum & Chemical Corp., or Sinopec, on the big Yadavaran oilfield project.

In 2008 Shell entered the Persian LNG, a liquefied natural-gas project in the northern Persian Gulf. Shell says it won’t decide whether to proceed with that project until all the commercial and engineering work is complete.

The company declined to comment on whether it would divest itself of its holdings in Iran. But a spokesman insisted that the company was in compliance with disclosure and listing obligations and that “any accusations to the contrary are misleading.”

He added that Shell would comply if there is an international agreement on further trade sanctions against Iran.

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