Fuel for Thought: Trump, Schlumberger and Iran

Iran's list of 29 companies qualified to bid for its upstream tenders contains just one "American" company, Schlumberger, the world's largest oilfield services firm.

It is a bold gamble by Schlumberger on many levels, not least because of the uncertainty about how the new Donald Trump White House will view future dealings with Iran.

During much of the presidential campaign, president-elect Trump was highly critical of the deal struck by the Barack Obama administration to restrict Iran's nuclear programme in exchange for allowing it to export crude oil freely and begin to attract companies back to the country to help rehabilitate its ailing industry.

As with many issues, Mr Trump's views have subsequently been all over the place on Iran and it is not clear who will have his ear and what advice he might be getting. Will his proposed defence secretary, James "Mad Dog" Mattis, who has made hawkish remarks on Iran, hold sway? Or might Rex Tillerson, the former ExxonMobil chief executive who is Trump's pick for secretary of state, argue for maintaining the status quo with Iran and push for US companies to compete for a slice of Iran's business?

Schlumberger, despite being hit with a US$233 million fine for breaching Iran (and Sudan) sanctions the year before last, was the first and so far only company headquartered in the US to agree in principle to deal with Iran, to work in the country's Khouzestan province.

The Iranian list has none of the US majors, such as Exxon Mobil or Chevron, and BP – which is London-headquartered, but majority-owned by US shareholders, NYSE listed, and with a large portion of its operations there – has explicitly ruled itself out of Iran for now.

Indeed, while Royal Dutch/Shell – which is on Iran’s qualified companies list – is not an American company, like BP it has huge financial and operational exposure to the US and would be taking as much of a chance in Iran as Schlumberger.

Schlumberger may still think of itself as not quite American. Though its top executives, including its chief executive Paal Kibsgaard, operate out of its headquarters in Sugar Land, Texas (near Houston), and it is NYSE listed, Schlumberger is technically incorporated in Curaçao, Netherlands Antilles, and its origins are European. “Schlumberger does not have a ‘nationality’ that describes its culture, but operates in a truly global fashion throughout the world,” the company says of itself.

Still, neither it nor Shell nor any other company with substantial US exposure would want to risk sanctions if the Trump administration takes a hard line.

Curiously, Shell last year cut back in Iraq and has been rumoured to be looking to sell down assets further there. It also pulled out of a gas deal in Abu Dhabi and has ruled itself out of bidding for the major onshore oil concession there, driven partly by the fact it is going through a $30 billion asset sale as part of its integration with BG.

A move into Iran by Shell – as well as Schlumberger – would be a major statement of intent, especially if the sanctions status is still in limbo.

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