US issues interim license for provision of services to BP's Rhum natural gas field

Authorities in the US have granted BP an interim license -- valid until November 4 -- for the UK major to use certain US services at its Rhum gas field in the UK North Sea.

BP told S&P Global Platts last week that Rhum could continue to produce even without the US license to operate, following uncertainty around whether Rhum would be forced to close if the US Office of Foreign Assets Control (OFAC) failed to renew the license before its expiry at the end of September.

Rhum is co-owned by a subsidiary of Iran's state-owned NIOC, meaning it could become subject to renewed US sanctions against Tehran that snap back into place on November 5.

According to UK-listed Serica Energy, which is looking to buy BP's stake in the field, the interim license is a positive sign that it will be able to complete the transaction.

"Serica welcomes the new license which ensures that production from the Rhum field can continue," Serica CEO Mitch Flegg said.

"Discussions with OFAC and other parties regarding longer term arrangements to protect this valuable UK asset are continuing and all parties are working towards a successful conclusion," Flegg said.

While BP has said that Rhum can produce without the OFAC permit, Serica would be unable to complete the deal to buy BP's 50% stake in Rhum and the UK major's stakes in the neighboring Bruce and Keith fields without it.

"We are encouraged by the issuance of this interim license," Flegg said.

UK GAS OUTPUT

Rhum and the linked Bruce field produce at around 5 million-6 million cu m/d -- the equivalent of around 2 Bcm/year -- according to UK government data, representing as much as 6% of UK gas production and 3% of UK gas consumption.

The loss of Rhum for the winter would add to an already tight UK gas market, which has seen NBP day-ahead prices trading at around Eur30/MWh -- the highest sustained level since 2013.

Over the past few years, Rhum has been given a license by the OFAC to use certain US services, technology and personnel at Rhum despite Iran being under various levels of US sanctions.

Rhum was closed completely due to international sanctions against Iran from late 2010 until November 2014 when it resumed production having won the first exemption allowing its restart before the sanctions against Tehran were lifted in January 2016.

source: S & P Global Platts