The announcement last month by Foreign Affairs Minister Stéphane Dion lifting most sanctions restricting Canadian entities from participating in oil and gas activities in Iran has generated a great deal of discussion in Canada’s oil and gas industry.
The implementation of these changes on February 5 was widely welcomed by both the Canadian, and the international, oil and gas industry. With oil prices near their lowest point in the last decade, the world’s energy industry has been watching Iran, with its low finding and development (F&D) costs, very closely.
This update (see link below) examines the effect of recent changes to Canadian sanctions laws, reviews the anticipated terms of the long-awaited Iran Petroleum Contract (the IPC) and provides recommendations for both service companies and E&P companies that are interested in examining opportunities in Iran. Please note that while the amendments have significantly eased sanctions against Iran, in line with the EU’s amendments, it is important to remember there are still strict US sanctions against Iran that could affect business if a company has an affiliate in the US.
Following the hostage crisis of 1979 the United States and later the United Nations, Canada and the European Union, imposed a series of sanctions on Iran. These have been amended and refined over the past 30 years, but prohibitions preventing Canadian companies and persons from becoming involved in the Iranian oil and gas industry have been a part of Canada’s sanctions law for years.
On February 5, 2016, Canada amended its Special Economic Measures (Iran) Regulations in recognition of progress being made by Iran under the Joint Comprehensive Plan of Action. Of significance for this update, these amendments now permit the Canadian oil and gas industry to resume some activities in Iran.
As of February 5, 2016, the general embargo on Canadian imports from Iran and Canadian exports into Iran has been lifted.
Of importance to the Canadian energy sector, the prohibition against transferring, providing, or disclosing “technical data” to Iran or to any person in Iran that is required for specific applications, including producing petrochemicals, and transporting crude oil or petroleum or petroleum substances, has been lifted. Similarly the prohibition against drilling and mineral surveying and exploration has also been lifted. Finally, the prohibitions against providing financial or other services to Iran or a person in Iran in respect of the import, purchase, acquisition or shipment of natural gas, crude oil, petroleum or petrochemical products, have been removed.
There are still certain exceptions after the general embargo was lifted. There remains a prohibition on sales or shipment of goods listed in Schedule 2 of the regulations, as well as the prohibition against transferring, providing, or disclosing “technical data” in relation to goods listed in Schedule 2. (Schedule 2 is a list of 41 goods with a description of each.) There is a range of goods included in the list, such as autoclaves, HEPA filters, high-speed cameras, riot gear, and certain precious metals.
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