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Iran sanctions may force BP to shut down North Sea gas field

28 March 2013

BP said on March 26 it may decide to shut down the Bruce natural gas field in the UK North Sea earlier than planned unless a way is found to restart production at the adjoining Rhum field, which is shut down because of sanctions against Iran.

Without the inclusion of gas from Rhum, which could more than double the combined output of the fields, BP said it does not make commercial sense to keep running the older Bruce field, a BP spokesman said. BP shut down production at Rhum in November 2010 due to Western sanctions that prohibit financial transactions with one of the field's joint owners, which is a unit of the National Iranian Oil Company.

Early decommissioning of any North Sea field would be a blow to the UK government, which has recently implemented a raft of tax breaks in an effort to bolster the country's energy security by keeping ageing offshore oil and gas facilities operating. BP's warning comes just days after UK gas prices surged due to unseasonably cold weather, and unexpected production and pipeline outages.

Bruce, which started producing in 1993, is currently scheduled for decommissioning in the early 2020s, BP said. It produces 20,000 barrels of oil equivalent a day, two-thirds of which is gas. Production started in 2005 at Rhum, which is connected to the Bruce platform via a sub-sea pipeline. Rhum was producing around 30,000 barrels of oil equivalent a day of natural gas when it was closed, BP said.

Dow Jones says that a solution to the Iran sanctions problem would not be without precedent. Last year, UK and European Union officials convinced the US to ensure that any new sanctions against Iran should exempt the $20 billion BP- led natural gas project, Shah Deniz, in the Caspian Sea off the coast of Azerbaijan. Another unit of the National Iranian Oil Company has a 10% stake in the project. Europe sees Shah Deniz as vital to diversifying gas supplies so the region is not too dependent on Russian imports.

France's Total, Australia's BHP Billiton and Japanese trading house Marubeni are also shareholders in Bruce. Bruce is located about 340 kms northeast of Aberdeen.

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